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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
ASSOCIATED ESTATES REALTY CORPORATION.
(Exact name of registrant as specified in charter)
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Ohio 34-1747603
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(State or other jurisdiction (IRS employer
of incorporation) identification no.)
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5025 Richmond Heights, Ohio 44143-1467
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(Address of principal executive offices) (Zip code)
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If this form relates to the registration of a If this form relates to the registration of a
class of securities pursuant to Section 12(b) class of securities pursuant to Section 12(g)
of the Exchange Act and is effective pursuant of the Exchange Act and is effective pursuant
to General Instruction A. (c), please check the to General Instruction A.(d), please check the
following box. _X_ following box. ___
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Securities Act registration statement file number to which this form relates: Not applicable
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(If applicable)
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Securities to be registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which each class is
to be so registered to be registered
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Preferred Share Purchase Rights New York Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
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Item 1. Description of Registrant's Securities to be Registered.
On January 6, 1999, the Board of Directors of Associated Estates Realty
Corporation, an Ohio corporation (the "Company"), adopted a Shareholder Rights
Agreement (the "Rights Agreement"). The following description of the Rights does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, including the exhibits thereto, which are incorporated herein
by reference.
Pursuant to the Rights Agreement, the Board of Directors declared a
dividend distribution of one Preferred Share Purchase Right (a "Right") for each
outstanding common share, without par value, of the Company (the "Common
Shares") to shareholders of record as of the close of business on January 29,
1999 (the "Record Date"). In addition, one Right will automatically attach to
each Common Share issued between the Record Date and the Distribution Date (as
hereinafter defined). Each Right entitles the registered holder thereof to
purchase from the Company a unit (a "Unit") consisting of one one-thousandth of
a Class B Series I Cumulative Preferred Share, without par value (the "Preferred
Shares"), at a cash exercise price of $40.00 per Unit (the "Exercise Price"),
subject to adjustment.
Initially, the Rights are not exercisable and are attached to and trade
with the Common Shares outstanding as of, and all Common Shares issued after,
the Record Date. The Rights will separate from the Common Shares and become
exercisable upon the earlier of (i) the close of business on the 10th calendar
day following the first public announcement that a person or a group of
affiliated or associated persons has acquired beneficial ownership of 15% or
more of the outstanding Common Shares (an "Acquiring Person") (the date of that
announcement, the "Share Acquisition Date"), or (ii) the close of business on
the 10th business day following the commencement of a tender offer or exchange
offer that would result, upon its consummation, in a person or group becoming
the beneficial owner of 15% or more of the outstanding Common Shares (the
earlier of (i) and (ii), the "Distribution Date"). The Rights Agreement exempts
from the definition of Acquiring Person any person who the Board of Directors
determines acquired in excess of 15% of the Common Shares inadvertently, if that
person promptly divests itself of enough Common Shares to reduce the number of
shares beneficially owned by that person to below the 15% threshold.
Until the Distribution Date (or the earlier redemption, exchange or
expiration of the Rights): (i) the Rights will be evidenced by the Common Share
certificates and will be transferred with and only with those Common Share
certificates, (ii) new Common Share certificates issued after the Record Date
will include a notation incorporating the Rights Agreement by reference, and
(iii) the surrender for transfer of any certificate for Common Shares will also
constitute the transfer of the Rights associated with the Common Shares
represented by that certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on January 6, 2009, unless previously redeemed
or exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Right Certificates
will be mailed to holders of record of Common Shares as of the close of business
on the Distribution Date and, thereafter, the separate Right Certificates alone
will represent the Rights. Except as otherwise determined by the Board of
Directors, only Common Shares issued prior to the Distribution Date will be
issued with Rights.
If a Share Acquisition Date occurs, proper provision will be made so
that each holder of a Right (other than an Acquiring Person or associates or
affiliates thereof, whose Rights will become null and void) thereafter has the
right to receive upon exercise that number of Units having a market value of two
times the exercise price of the Right (that right being referred to as the
"Subscription Right"). If, at any time following the Share Acquisition Date: (i)
the Company consolidates with, or merges with and into,
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any Acquiring Person or any associate or affiliate thereof, and the Company is
not the continuing or surviving corporation, (ii) any Acquiring Person or any
associate or affiliate thereof consolidates with the Company, or merges with and
into the Company and the Company is the continuing or surviving corporation of
that merger and, in connection with that merger, all or part of the Common
Shares are changed into or exchanged for stock or other securities of any other
person or cash or any other property, or (iii) 50% or more of the Company's
assets or earning power is sold, mortgaged or otherwise transferred, each holder
of a Right will thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a market value equal to two times the
exercise price of the Right (that right being referred to as the "Merger
Right"). Each holder of a Right will continue to have the Merger Right whether
or not that holder has exercised the Subscription Right, but Rights that are or
were beneficially owned by an Acquiring Person may (under certain circumstances
specified in the Rights Agreement) become null and void.
At any time after a Share Acquisition Date occurs, the Board of
Directors may, at its option, exchange Common Shares or Units for all or any
part of the then outstanding and exercisable Rights at an exchange ratio of one
Common Share or one Unit per Right. However, the Board of Directors generally
will not be empowered to effect that exchange at any time after any person
becomes the beneficial owner of 50% or more of the Common Shares.
The Exercise Price payable, and the number of Units or other securities
or property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a share dividend on, or a
subdivision, combination or reclassification of, the Preferred Shares, (ii) if
holders of the Preferred Shares are granted certain rights or warrants to
subscribe for Preferred Shares or convertible securities at less than the
current market price of the Preferred Shares, or (iii) upon the distribution to
holders of the Preferred Shares of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to in (i) and (ii)).
With certain exceptions, no adjustment in the Exercise Price will be
required until cumulative adjustments amount to at least 1% of the Exercise
Price. The Company is not obligated to issue fractional Units. If the Company
elects not to issue fractional Units, in lieu thereof an adjustment in cash will
be made based on the fair market value of the Preferred Shares on the last
trading date prior to the date of exercise.
The Rights may be redeemed in whole, but not in part, at a price of
$0.01 per Right (payable in cash, Common Shares or other consideration
considered appropriate by the Board of Directors) by the Board of Directors only
until the earliest of (i) the close of business on the calendar day after the
Share Acquisition Date, or (ii) the expiration date of the Rights Agreement.
Immediately upon any action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and thereafter the only right of the holders
of Rights will be to receive the redemption price.
The Rights Agreement may be amended by the Board of Directors in its
sole discretion until the Distribution Date. After the Distribution Date, the
Board of Directors may, subject to certain limitations set forth in the Rights
Agreement, amend the Rights Agreement only to cure any ambiguity, defect or
inconsistency, to shorten or lengthen any time period, or to make changes that
do not adversely affect the interests of Rights holders (excluding the interests
of an Acquiring Person or associates or affiliates thereof).
Until a Right is exercised, the holder will have no rights as a
shareholder of the Company (beyond those as an existing shareholder), including
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to shareholders or to the Company, shareholders may,
depending upon the circumstances, recognize taxable income if the Rights become
exercisable for Units, other securities of the Company or other consideration,
or for common shares of an acquiring company.
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The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in a transaction not approved by the Board of Directors of the Company. The
Rights should not interfere with any merger or other business combination
approved by the Board of Directors of the Company, since the Rights Agreement
may be amended prior to the Distribution Date, as described above, and the
Rights may be redeemed until the calendar day after a Share Acquisition Date,
as described above.
Item 2. Exhibits
Exhibit 1 Rights Agreement
Exhibit 2 Certificate of Amendment to the Company's Second Amended and
Restated Articles of Incorporation, as amended
Exhibit 3 Form of Right Certificate (filed as Exhibit B to the Rights
Agreement)
Exhibit 4 Summary of Rights to Purchase Preferred Shares (filed as
Exhibit C to the Rights Agreement)
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
ASSOCIATED ESTATES REALTY CORPORATION
Date: January 25, 1999 By: /s/ Jeffrey I. Friedman
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Jeffrey I. Friedman
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit 1 Rights Agreement
Exhibit 2 Certificate of Amendment to the Company's Second Amended and
Restated Articles of Incorporation, as amended
Exhibit 3 Form of Right Certificate (filed as Exhibit B to the Rights
Agreement)
Exhibit 4 Summary of Rights to Purchase Preferred Shares (filed as
Exhibit C to the Rights Agreement)
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EXHIBIT 1
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SHAREHOLDER RIGHTS AGREEMENT
between
ASSOCIATED ESTATES REALTY CORPORATION
and
NATIONAL CITY BANK,
as Rights Agent
Dated as of
January 6, 1999
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TABLE OF CONTENTS
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Section 1. Certain Definitions...............................................................................1
Section 2. Appointment of Rights Agent.......................................................................5
Section 3. Issue of Right Certificates.......................................................................6
Section 4. Form of Right Certificates........................................................................7
Section 5. Countersignature and Registration.................................................................8
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates........................................................................9
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights....................................10
Section 8. Cancellation and Destruction of Right Certificates...............................................12
Section 9. Reservation and Availability of Preferred Shares.................................................12
Section 10. Preferred Share Record Date......................................................................13
Section 11. Adjustment of Exercise Price, Number and Kind of Shares or Number of Rights......................14
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.......................................21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.............................22
Section 14. Fractional Rights and Fractional Shares..........................................................25
Section 15. Rights of Action.................................................................................25
Section 16. Agreement of Right Holders.......................................................................26
Section 17. Right Certificate Holder Not Considered a Shareholder............................................26
Section 18. Concerning the Rights Agent......................................................................27
Section 19. Merger or Consolidation or Change of Name of Rights Agent........................................27
Section 20. Duties of Rights Agent...........................................................................28
Section 21. Change of Rights Agent...........................................................................30
Section 22. Issuance of New Right Certificates...............................................................31
Section 23. Redemption.......................................................................................31
Section 24. Exchange.........................................................................................32
Section 25. Notice of Certain Events.........................................................................33
Section 26. Notices..........................................................................................34
Section 27. Supplements and Amendments.......................................................................35
Section 28. Successors.......................................................................................35
Section 29. Determinations and Actions by the Board of Directors.............................................35
Section 30. Benefits of this Agreement.......................................................................36
Section 31. Severability.....................................................................................36
Section 32. Governing Law....................................................................................36
Section 33. Counterparts.....................................................................................36
Section 34. Descriptive Headings.............................................................................36
Section 35 Interpretation; Absence of Presumption...........................................................36
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EXHIBITS
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Exhibit A Form of Certificate of Amendment to the Second Amended and
Restated Articles of Incorporation
Exhibit B Form of Right Certificate
Exhibit C Summary of Rights to Purchase Preferred Shares
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SHAREHOLDER RIGHTS AGREEMENT
THIS SHAREHOLDER RIGHTS AGREEMENT (the "Agreement"), dated as
of January 6, 1999, is made between Associated Estates Realty Corporation, an
Ohio corporation (the "Company"), and National City Bank, a national banking
association (the "Rights Agent").
RECITALS:
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WHEREAS, the Board of Directors of the Company (the "Board of
Directors") desires to provide shareholders of the Company with the opportunity
to benefit from the long-term prospects and value of the Company and to ensure
that shareholders of the Company receive fair and equal treatment in the event
of any proposed takeover of the Company;
WHEREAS, effective as of January 6, 1999, the Board of
Directors (i) authorized and declared a dividend distribution of one Right (as
defined herein) for each Common Share (as defined herein) of the Company
outstanding as of the close of business on January 29, 1999 (the "Record Date"),
and (ii) authorized the issuance of one Right for each Common Share issued
(whether originally issued or sold from the Company's treasury) between the
Record Date and the earlier of the Distribution Date or the Expiration Date (as
defined herein), with each Right initially representing the right to purchase
one one-thousandth of a Class B Series I Cumulative Preferred Share, without par
value, of the Company having the rights, powers and preferences set forth in the
Company's Second Amended and Restated Articles of Incorporation, as amended, and
in Exhibit A hereto, upon the terms and subject to the conditions hereinafter
set forth (the "Rights");
WHEREAS, the Company desires to appoint the Rights Agent to
act as rights agent hereunder, in accordance with the terms and conditions
hereof;
NOW, THEREFORE, in consideration of the premises and the
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" means any Person (as defined herein)
who, together with all Affiliates (as defined herein) and Associates (as defined
herein) of such Person, is the Beneficial Owner (as defined herein) of 15% or
more of the Common Shares then outstanding, but does not include (i) the
Company, (ii) any Subsidiary (as defined herein) of the Company, (iii) any
employee benefit plan or compensation arrangement of the Company or of any
Subsidiary of the Company or (iv) any Person holding Common Shares organized,
appointed or established by the Company or by any Subsidiary of the Company for
or pursuant to the terms of any employee benefit plan or compensation
arrangement described in Section 1(a)(iii) (the Persons described in clauses (i)
through (iv) above are referred to herein as "Exempt Persons").
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Notwithstanding the foregoing, no Person will become an
"Acquiring Person" as a result of an acquisition by the Company of Common Shares
that, by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person from below 15% to 15% or more
of the Common Shares then outstanding; however, if a Person becomes a Beneficial
Owner of 15% or more of the Common Shares then outstanding by reason of share
purchases by the Company and, after those share purchases are made, becomes the
Beneficial Owner of any additional Common Shares (other than pursuant to a share
split, share dividend or similar transaction) and immediately thereafter is the
Beneficial Owner of 15% or more of the Common Shares then outstanding, then that
Person will be an "Acquiring Person."
In addition, notwithstanding the foregoing, a Person is not an
"Acquiring Person" if the Board of Directors determines that a Person who would
otherwise be an "Acquiring Person," inadvertently acquired the Common Shares
that would otherwise make the Person an "Acquiring Person," if that Person as
promptly as practicable divests a sufficient number of Common Shares so that
that Person is a Beneficial Owner of less than 15% of the Common Shares then
outstanding.
(b) "Adjustment Shares" has the meaning set forth in Section
11(a)(ii).
(c) "Affiliate" and "Associate" have the respective meanings
ascribed to those terms in Rule 12b-2 of the General Rules and Regulations (the
"Rules") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement, but no Person who is a
director or officer of the Company will be considered an Affiliate or an
Associate of any other director or officer of the Company solely as a result of
his or her position as a director or officer of the Company.
(d) A Person is the "Beneficial Owner" of, and is considered
to "beneficially own," any securities:
(i) which that Person or any of that Person's
Affiliates or Associates, directly or indirectly, beneficially owns (as
determined pursuant to Rule 13d-3 of the Rules under the Exchange Act,
as in effect on the date of this Agreement);
(ii) which that Person or any of that Person's
Affiliates or Associates, directly or indirectly, has:
(A) the right to acquire (whether that right
is exercisable immediately or only after the passage of time
or upon the satisfaction of any conditions or both) pursuant
to any agreement, arrangement or understanding (whether or not
in writing) (other than customary agreements with and between
underwriters and selling group members with respect to a bona
fide public offering of securities) or upon the exercise of
conversion rights, exchange rights, rights (other than the
Rights), warrants, options, or otherwise; however, a Person
will not be considered the "Beneficial Owner" of, or to
"beneficially own," (1) securities tendered pursuant to a
tender or exchange offer made by or on behalf of
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that Person or by or on behalf of any of that Person's
Affiliates or Associates until those tendered securities are
accepted for purchase or exchange; (2) securities issuable
upon exercise of Rights at any time prior to the occurrence of
a Triggering Event; or (3) securities issuable upon exercise
of Rights from and after the occurrence of a Triggering Event,
which Rights were acquired by that Person or by any of that
Person's Affiliates or Associates prior to the Distribution
Date or pursuant to Section 3(a), Section 11(a)(i) or Section
22; or
(B) the right to vote pursuant to any
agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," any
security under this clause (B) if the agreement, arrangement
or understanding to vote that security (1) arises solely from
a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with,
the Rules under the Exchange Act, and (2) is not also then
reportable by that Person on Schedule 13D or Schedule 13G
under the Exchange Act (or any comparable or successor
report); or
(C) the right to dispose of pursuant to any
agreement, arrangement or understanding (whether or not in
writing) (other than customary arrangements with and between
underwriters and selling group members with respect to a bona
fide public offering of securities); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which that Person or any of that Person's Affiliates or Associates
has any agreement, arrangement or understanding (whether or not in
writing) (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering
of securities) for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in Section 1 (d)(ii)(B)) or
disposing of any securities of the Company; however, (1) no Person
engaged in business as an underwriter of securities will be considered
the Beneficial Owner of any securities acquired through that Person's
participation as an underwriter in good faith in a firm commitment
underwriting until the expiration of 40 days after the date of that
acquisition, and (2) no Person who is a director or an officer of the
Company will be considered, as a result of his or her position as
director or officer of the Company, the Beneficial Owner of any
securities of the Company that are beneficially owned by any Exempt
Person or by any other director or officer of the Company.
(e) "Business Day" means any day other than a Saturday, a
Sunday, or a day on which banking institutions in the City of Cleveland, Ohio or
the City of New York, New York are authorized or obligated by law or executive
order to close.
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(f) "Close of Business" on any date means 5:00 P.M.,
Cleveland, Ohio time, on that date, but if that date is not a Business Day, it
means 5:00 P.M., Cleveland, Ohio time, on the next succeeding Business Day.
(g) "Common Shares" means the Common Shares, without par
value, of the Company or any other shares of capital stock of the Company into
which the Common Shares are reclassified or changed.
(h) "Common Stock," when used with reference to any Person
other than the Company organized in corporate form, means: (i) the capital stock
or other equity interest in that Person with the greatest voting power, (ii) the
equity securities or other equity interest having power to control or direct the
management of that Person, or (iii) if that Person is a Subsidiary of another
Person, the capital stock, equity securities or equity interest described in
clauses (i) and (ii) in the Person or Persons which ultimately control the
first-mentioned Person and which have outstanding any such capital stock, equity
securities or equity interest; "Common Stock," when used with reference to any
Person not organized in corporate form, means units of beneficial interest that
(x) represent the right to participate generally in the profits and losses of
that Person (including without limitation any flow-through tax benefits
resulting from an ownership interest in that Person) and (y) are entitled to
exercise the greatest voting power of that Person or, in the case of a limited
partnership, have the power to remove or otherwise replace the general partner
or partners.
(i) "Current Value" has the meaning set forth in Section
1l(a)(iii).
(j) "Distribution Date" has the meaning set forth in Section
3(a).
(k) "Exercise Price" has the meaning set forth in Section
4(a).
(l) "Expiration Date" and "Final Expiration Date" have the
respective meanings set forth in Section 7(a).
(m) "Fair Market Value" means the value of any securities or
other property determined in accordance with Section 11(d).
(n) "Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, business trust, government or political subdivision, unincorporated
organization, or any other association or entity, and includes, without
limitation, an unincorporated group of persons who, by formal or informal
agreement, have taken any action with a common purpose, as well as any syndicate
or group that may be considered a single "person" under Section 14(d)(2) of the
Exchange Act.
(o) "Preferred Shares" means the Class B Series I Cumulative
Preferred Shares, without par value, of the Company having the rights and
preferences set forth in the Exhibit A.
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(p) "Preferred Share Equivalents" has the meaning set forth in
Section 11(b).
(q) "Principal Party" has the meaning set forth in Section
13(b).
(r) "Redemption Price" has the meaning set forth in Section
23.
(s) "Section 11(a)(ii) Event" has the meaning set forth in
Section 11(a)(ii).
(t) "Section 11(a)(ii) Trigger Date" has the meaning set forth
in Section 11(a)(iii).
(u) "Section 13 Event" means any event described in clause
(x), (y) or (z) of Section 13(a).
(v) "Spread" has the meaning set forth in Section 1l(a)(iii).
(w) "Share Acquisition Date" means the date of the first
public announcement (which for purposes of this definition includes, without
limitation, the issuance of a press release or the filing of a
publicly-available report or other document with the Securities and Exchange
Commission or any other governmental agency) that a Person has become an
Acquiring Person, whether that public announcement is made by the Company or
otherwise.
(x) "Subsidiary" of any Person means each entity of which that
Person is the direct or indirect general partner or as to which that Person,
directly or through one or more intermediary entities or Persons, has the right,
in the absence of any contingencies, to elect a majority of the board of
directors or other governing body or as to which that Person has the right to
receive 50% or more of the economic value of any business or other activity in
which that entity is engaged.
(y) "Substitution Period" has the meaning set forth in Section
11(a)(iii).
(z) "Triggering Event" means any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 are, prior to the Distribution Date,
also the holders of the Common Shares) in accordance with the terms and
conditions set forth herein, 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. If the Company appoints one or more
Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights
Agents will be as the Company determines.
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Section 3. ISSUE OF RIGHT CERTIFICATES.
(a) From the date of this Agreement until the earlier of (i)
the Close of Business on the tenth calendar day after the Share Acquisition
Date, or (ii) the Close of Business on the tenth Business Day after the date a
tender or exchange offer by any Person, other than an Exempt Person, is first
"published or sent or given" within the meaning of Rule 14d-4(a) of the Exchange
Act, or any successor rule, if, upon consummation thereof, that Person would be
the Beneficial Owner of 15% or more of the Common Shares then outstanding
(including any date after the date of this Agreement and prior to the issuance
of the Rights) (the earliest of (i) and (ii), the "Distribution Date"): (x) the
Rights will be evidenced (subject to Section 3(b)) by the certificates for the
Common Shares registered in the names of the holders of the Common Shares (which
certificates for Common Shares will be considered 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 Common
Shares. As soon as practicable after the Distribution Date, the Rights Agent
will, at the Company's expense, send by first-class, insured, postage prepaid
mail, to each record holder of the Common Shares as of the Close of Business on
the Distribution Date, at the address of such holder shown on the records of the
Company or the Company's transfer agent, one or more certificates, in
substantially the form of Exhibit B (the "Right Certificates"), evidencing one
Right for each Common Share of the Company so held, subject to adjustment as
provided herein. If an adjustment in the number of Rights per Common Share of
the Company has been made pursuant to Section 11(o), the Company may make the
necessary and appropriate rounding adjustments (in accordance with Section
14(a)) at the time of distribution of the Right Certificates, so that Right
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. After the Close of Business on the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) With respect to certificates for the Common Shares issued
prior to the Close of Business on the Record Date, the Rights will be evidenced
by those certificates for the Common Shares on or until the Distribution Date
(or the earlier redemption, expiration or termination of the Rights), and the
registered holders of the Common Shares shall also be the registered holders of
the associated Rights. Until the Distribution Date (or the earlier redemption,
expiration or termination of the Rights), the transfer of any of the
certificates for the Common Shares outstanding prior to the close of business on
the date of this Agreement will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate.
(c) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares in
substantially the form of Exhibit C to each record holder of Common Shares as of
the Close of Business on the Record Date, at the address of such holder shown on
the records of the Company.
(d) Certificates for all Common Shares issued after the Record
Date, but prior to the earlier of the Distribution Date or the redemption,
expiration or termination of the Rights, will be considered also to be
certificates for Rights, and will bear a legend (in addition to any
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other legends required by law or by the Company's governing documents),
substantially in the form set forth below:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Shareholder Rights
Agreement between Associated Estates Realty Corporation, an
Ohio corporation (the "Company"), and National City Bank, a
national banking association, as rights agent (the "Rights
Agent"), dated as of January 6, 1999 (the "Rights Agreement"),
the terms of which are incorporated by reference herein and a
copy of which is on file at the principal offices of the
Company and the stock transfer administration office of the
Rights Agent. The Company will mail a copy of the Rights
Agreement without charge to the holder of this certificate
within five days after receipt of a written request therefor.
Under certain circumstances, as set forth in the Rights
Agreement, the Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. The Company may redeem the Rights at a redemption
price of $0.01 per Right, subject to adjustment, under the
terms of the Rights Agreement. Under certain circumstances,
Rights issued to or held by Acquiring Persons or by any
Affiliates or Associates thereof (as defined in the Rights
Agreement), and any subsequent holder of such Rights, may
become null and void. The Rights are not exercisable, and are
void so long as held, by a holder in any jurisdiction where
the requisite qualification to the issuance to such holder, or
the exercise by such holder, of the Rights in such
jurisdiction has not been obtained.
The Rights associated with the Common Shares represented by certificates
containing the foregoing legend will be evidenced by those certificates alone
until the Distribution Date (or the earlier redemption, expiration or
termination of the Rights), and the transfer of any of those certificates will
also constitute the transfer of the Rights associated with the Common Shares
represented by those certificates. If the Company purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with those Common Shares will be considered canceled and
retired so that the Company is not entitled to exercise any Rights associated
with the Common Shares that are no longer outstanding. The failure to print the
foregoing legend on any certificate representing Common Shares or any defect
therein will not affect in any manner whatsoever the application or
interpretation of Section 7(e).
Section 4. FORM OF RIGHT CERTIFICATES.
(a) The Right Certificates (and the forms of election to
purchase shares and of assignment and certificate to be printed on the reverse
of such certificates) will be substantially in the form of Exhibit B hereto and
may have any marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may consider appropriate and as
are not inconsistent with this Agreement, or as may be required to comply with
any applicable law, rule or regulation or with any rule or regulation of any
stock exchange on which the Rights may from time to time be listed, or to
conform to customary usage. The Right Certificates will be in a machine
printable format and in a form reasonably satisfactory to the Rights Agent.
Subject to Sections 11 and 22, the Right Certificates, whenever distributed,
will be
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dated as of the Record Date, will show the date of countersignature, and on
their face will entitle the holders thereof to purchase such number of one
one-thousandths of a Preferred Share as are set forth therein at the price set
forth therein (the "Exercise Price"), but the number of such shares and the
Exercise Price are subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 that represents Rights beneficially owned by (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
regarding the transferred Rights, the Common Shares associated with such Rights
or the Company or (B) a transfer that the Board of Directors, in its sole
discretion, has determined is part of a plan, arrangement or understanding that
has as a primary purpose or effect the avoidance of Section 7(e); and any Right
Certificate issued pursuant to Section 6, Section 11 or Section 22 upon
transfer, exchange, replacement or adjustment of any other Right Certificate
referred to in this sentence, will have deleted therefrom the second sentence of
the existing legend on such Right Certificate and in substitution therefor will
contain the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or an Associate of an Acquiring Person
(as those terms are defined in the Rights Agreement). This
Right Certificate and the Rights represented hereby may become
null and void under certain circumstances as specified in
Section 7(e) of the Rights Agreement.
The Company shall give notice to the Rights Agent promptly after it becomes
aware of the existence and identity of any Acquiring Person or any Associate or
Affiliate thereof. The Company shall instruct the Rights Agent in writing of the
Rights that should be so legended. The failure to print the foregoing legend on
any such Right Certificate or any defect therein will not affect in any manner
whatsoever the application or interpretation of the provisions of Section 7(e).
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates will be executed on behalf of the
Company by its Chairman of the Board of Directors, or its President or any Vice
President and by its Treasurer or any Assistant Treasurer, or by its Secretary
or any Assistant Secretary, either manually or by facsimile signature. The Right
Certificates will be manually countersigned by an authorized signatory of the
Rights Agent and will not be valid for any purpose unless so countersigned, and
such countersignature upon any Right Certificate will be conclusive evidence,
and the only evidence, that such Right Certificate has been duly countersigned
as required hereunder. In case any officer of the Company who has signed any of
the Right Certificates ceases to be such officer
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of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, those Right Certificates, nevertheless, may be
countersigned by an authorized signatory of the Rights Agent, and issued and
delivered by the Company with the same force and effect as though the person who
signed such Right Certificates had not ceased to be a proper officer of the
Company; and any Right Certificates may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Right Certificate,
is a proper officer of the Company to sign such Right Certificate, although at
the date of the execution of this Agreement was not a proper officer of the
Company.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at one of its offices designated as the appropriate
place for surrender of Right Certificates upon exercise or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF
RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
(a) Subject to Section 4(b), Section 7(e) and Section 14, at
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the Expiration Date, any Right Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Right Certificate or Certificates, entitling the registered holder to purchase a
like number of one one-thousandths of a Preferred Share (or following a
Triggering Event, Preferred Shares, Common Shares, cash, property, equity
securities, debt securities, or any combination thereof) as the Right
Certificate or Certificates surrendered then entitled such holder to purchase
and at the same Exercise Price. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Certificates to be transferred, split up, combined or exchanged, with the
form of assignment and certificate duly executed, at the office or offices of
the Rights Agent designated for that purpose. Neither the Rights Agent nor the
Company is obligated to take any action whatsoever with respect to the transfer
of any such surrendered Right Certificate until the registered holder has
completed and signed the certificate contained in the form of assignment on the
reverse side of that Right Certificate and has provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company reasonably requests. Thereupon
the Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14,
countersign and deliver to the Person entitled thereto a Right Certificate or
Certificates, as the case may be, as so requested. The Company may require
payment by the registered holder of a Right Certificate of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security satisfactory to them, and
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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
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; EXERCISE PRICE; EXPIRATION DATE
OF RIGHTS.
(a) Subject to Section 7(e), the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Exercise Price for the total number of
one one-thousandths of a Preferred Share (or other securities, cash or other
assets, as the case may be) for which the surrendered Rights are then exercised,
at or prior to the earlier of (i) the Close of Business on January 6, 2009 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed in
accordance with Section 23, and (iii) the time at which such Rights are
exchanged in accordance with Section 24 (the earlier of (i), (ii) and (iii), the
"Expiration Date"). Except as set forth in Section 7(e) and notwithstanding any
other provision (except Section 7(e)) of this Agreement, any Person who prior to
the Distribution Date becomes a record holder of Common Shares may exercise all
of the rights of a registered holder of a Right Certificate with respect to the
Rights associated with such Common Shares in accordance with the provisions of
this Agreement, as of the date such Person becomes a record holder of Common
Shares.
(b) The Exercise Price for each one one-thousandth of a
Preferred Share that can be purchased upon the exercise of a Right is initially
$40.00, is subject to adjustment from time to time as provided in Section 11 and
Section 13, and is payable in lawful money of the United States of America in
accordance with Section 7(c) below.
(c) As promptly as practicable following the Distribution
Date, the Company shall deposit with a corporation, trust, bank or similar
institution in good standing organized under the laws of the United States of
America or any State of the United States of America, that is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by a federal or state authority (such institution is
hereinafter referred to as the "Depositary Agent"), certificates representing
the Preferred Shares that may be acquired upon exercise of the Rights, and the
Company shall cause such Depositary Agent to enter into an agreement pursuant to
which the Depositary Agent shall issue receipts representing interests in the
Preferred Shares so deposited. Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase and the certificate on
the reverse side thereof duly executed, accompanied by payment of the Exercise
Price for the shares to be purchased and an amount equal to any applicable
transfer tax (as determined by the Rights Agent) in cash, or by certified check
or bank draft payable to the order of the Company, the Rights Agent shall,
subject to Section 20(k), thereupon promptly (i) requisition from the Depositary
Agent (or make available, if the Rights Agent is the Depository Agent)
depository receipts or certificates for the
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number of one one-thousandths of a Preferred Share to be purchased and the
Company hereby irrevocably authorizes the Depositary Agent to comply with all
such requests, (ii) requisition from the Company the amount of cash, if any, to
be paid in lieu of issuance of fractional shares in accordance with Section 14,
(iii) promptly after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt promptly deliver such cash to or upon the order
of the registered holder of such Right Certificate. If the Company is obligated
to issue other securities (including Common Shares) of the Company, pay cash or
distribute other property pursuant to Section 11(a), the Company will make all
arrangements necessary so that such other securities, cash or other property are
available for distribution by the Rights Agent, if and when appropriate. The
payment of the Exercise Price may be made in cash or by certified or bank check
payable to the order of the Company, or by wire transfer of immediately
available funds to the account of the Company (if notice of such wire transfer
is given to the Rights Agent by the holder of the related Right).
(d) If the registered holder of any Right Certificate
exercises less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised will be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to Section 14.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event or
Section 13 Event, any Rights beneficially owned by (i) an Acquiring Person or
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any Associate or Affiliate of an
Acquiring Person) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming an Acquiring Person and receives those Rights pursuant
to either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in that Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights, the Common Shares associated
with such Rights or the Company, or (B) a transfer that the Board of Directors,
in its sole discretion, has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), will be null and void without any further action and no holder of
such Rights will have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company will use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) are complied with, but will have no liability to any holder of
Right Certificates or other Person as a result of its failure to make any
determination with respect to an Acquiring Person or any Affiliate or Associate
of an Acquiring Person or any transferee of any of them hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company is obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered holder
has (i) completed and signed the certificate contained in the form of
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election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided all additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES.
All Right Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange will, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, will be canceled by it, and no Right
Certificates will be issued in lieu thereof except as expressly permitted by any
provision 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 Right Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent shall deliver all canceled Right
Certificates to the Company.
Section 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES.
(a) The Company shall cause to be reserved and kept available
out of its authorized and unissued Preferred Shares or any authorized and issued
Preferred Shares held in its treasury, a number of Preferred Shares that will be
sufficient to permit the exercise in full of all outstanding and exercisable
Rights. Upon the occurrence of any event resulting in an increase in the
aggregate number of Preferred Shares issuable upon exercise of all outstanding
Rights in excess of the number then reserved, the Company shall make appropriate
increases in the number of Preferred Shares so reserved.
(b) The Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all Preferred Shares issued or
reserved for issuance to be listed, upon official notice of issuance, upon the
principal national securities exchange, if any, upon which the Common Shares are
listed or, if the principal market for the Common Shares is not any national
securities exchange, to be eligible for quotation in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or any successor
thereto or other comparable quotation system.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii), or as soon as required by law following the Distribution
Date, as the case may be, a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause that
registration statement to become effective as soon as practicable after such
filing, and (iii) cause that registration statement to remain effective (with a
prospectus that at all times meets the requirements of the Securities Act) until
the earlier of (A) the date as of which the Rights are no longer exercisable for
such securities, or (B) the Expiration Date. The Company will also take any
action that is appropriate to ensure compliance with the securities or "blue
sky" laws of the various states in connection with the exercisability of the
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Rights. The Company may temporarily suspend, for a period of time not to exceed
ninety (90) days after the date determined in accordance with 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 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 when the suspension is no longer in effect, in each case with
prompt written notice to the Rights Agent. Notwithstanding any provision of this
Agreement to the contrary, the Rights are not exercisable in any jurisdiction
unless the requisite qualification in that jurisdiction has been obtained.
(d) The Company shall take all actions as may be necessary to
ensure that all Preferred Shares delivered upon the exercise of the Rights are,
at the time of delivery of the certificates or depositary receipts for such
shares (subject to payment of the Exercise Price), duly issued, validly
authorized, fully paid and nonassessable.
(e) The Company shall pay when due and payable any and all
federal and state transfer taxes and charges that may be payable in respect of
the issuance or delivery of the Right Certificates or of any certificates for
Preferred Shares upon the exercise of Rights. The Company is not, however,
required to pay any transfer tax that may be payable in respect of any transfer
or delivery of Right Certificates to a person other than, or in respect of the
issuance or delivery of securities in a name other than that of, the registered
holder of the Right Certificates evidencing Rights surrendered for exercise or
to issue or deliver any certificates for securities in a name other than that of
the registered holder upon the exercise of any Rights until such tax has been
paid (any such tax being payable by the holder of such Right Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. PREFERRED SHARE RECORD DATE. Each Person in whose
name any certificate for Preferred Shares is issued upon the exercise of Rights
will for all purposes be considered to have become the holder of record of the
Preferred Shares represented thereby on, and that certificate will be dated, the
date upon which the Right Certificate evidencing those Rights was duly
surrendered and payment of the Exercise Price (and any applicable transfer
taxes) was made; however, if the date of that surrender and payment is a date
upon which the Preferred Share transfer books of the Company are closed, that
Person will be considered to have become the record holder of such shares on,
and that certificate will be dated, the next succeeding Business Day on which
the Preferred Share transfer books of the Company are open, but if delivery of
Preferred Shares is delayed pursuant to Section 9(c), that Person will be
considered to have become the record holder of those Preferred Shares only when
those shares first become deliverable. Prior to the exercise of the Right
evidenced thereby, the holder of a Right Certificate is not entitled to any
rights of a shareholder of the Company with respect to shares for which the
Rights are exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and will not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. ADJUSTMENT OF EXERCISE PRICE, NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS. The Exercise Price, the number and kind of shares
covered by each Right, and
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the number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a)(i) If the Company at any time after the date of
this Agreement (A) declares a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivides the outstanding
Preferred Shares, (C) combines the outstanding Preferred
Shares into a smaller number of shares or (D) issues any
shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company
is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section 7(e), the
Exercise Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if
such Right had been exercised immediately prior to such date
and at a time when the Preferred Share transfer books of the
Company were open, such holder would have owned upon such
exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification, but in
no event may the consideration to be paid upon the exercise of
a Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of the
Right. If an event occurs that would require an adjustment
under both Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) will be in
addition to, and will be made prior to, any adjustment
required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24, if any Person, alone or
together with its Affiliates and Associates, becomes an
Acquiring Person (a "Section 11(a)(ii) Event"), then promptly
following that occurrence, proper provision shall be made so
that each holder of a Right, except as provided in Section
7(e), thereafter has a right to receive, upon exercise thereof
at the then current Exercise Price in accordance with this
Agreement, such number of Preferred Shares of the Company as
equals the result obtained by (x) multiplying the then current
Exercise Price by the number of one one-thousandths of a
Preferred Share for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event,
whether or not such Right was then exercisable, and dividing
that product by (y) 50% of the Fair Market Value (as defined
herein) of one one-thousandth of a Preferred Share (determined
in accordance with Section 11(d)) on the date of the
occurrence of that Section 11(a)(ii) Event (such number of
shares being referred to as the "Adjustment Shares").
(iii) In lieu of issuing any Preferred Shares in
accordance with Section 11(a)(ii), the Company, acting by
resolution of the Board of Directors, may, and if the number
of Preferred Shares which are authorized by the Company's
Second
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Amended and Restated Articles of Incorporation, as amended (or
other instrument governing its corporate affairs), but not
outstanding or reserved for issuance for purposes other than
upon exercise of the Rights is not sufficient to permit the
exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) of this Section 11(a), the
Company, acting by resolution of the Board of Directors,
shall: (A) determine the excess of (X) the value of the
Adjustment Shares issuable upon the exercise of a Right (the
"Current Value") over (Y) the Exercise Price attributable to
each Right (such excess being referred to as the "Spread") and
(B) with respect to all or a portion of each Right (subject to
Section 7(e)), make adequate provision to substitute for the
Adjustment Shares, upon payment of the applicable Exercise
Price, (1) cash, (2) a reduction in the Exercise Price, (3)
Preferred Share Equivalents which the Board of Directors has
deemed to have the same value as Preferred Shares, (4) debt
securities of the Company, (5) other assets of the Company or
(6) any combination of the foregoing which, when added to any
Preferred Shares issued upon such exercise, has an aggregate
value equal to Current Value, with such aggregate value
determined by the Board of Directors based upon the advice of
a nationally recognized investment banking firm selected by
the Board of Directors; but if the Company has not made
adequate provision to deliver the value determined in
accordance with clause (B) above within 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 deliver, upon surrender of a
Right for exercise and without requiring payment of the
Exercise Price, Preferred Shares (to the extent available) and
then, if necessary, cash, which shares and cash have an
aggregate value equal to the Spread. If the Board of Directors
determines in good faith that it is likely that sufficient
additional Preferred Shares could be authorized for issuance
upon exercise in full of the Rights, the 30-day period set
forth above may be extended to the extent necessary, but not
to more than 90 days after the Section 11(a)(ii) Trigger Date,
in order that the Company may seek shareholder approval for
the authorization of such additional shares (that period, as
it may be extended, the "Substitution Period"). To the extent
that the Company determines that some action must be taken
pursuant to the first or second sentence of this Section
11(a)(iii), the Company (x) shall provide, subject to Section
7(e), that such action will 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 or to decide the
appropriate form of distribution to be made pursuant to that
first sentence and to determine the value thereof. On any such
suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been
temporarily suspended and another public announcement when the
suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of a Preferred Share will be the
Fair Market Value (as determined pursuant to Section 11(d)) of
a Preferred Share on the Section 11(a)(ii)
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Trigger Date and the value of any Preferred Share Equivalent
will be considered to have the same value as a Preferred Share
on that date.
(b) If the Company fixes a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after that record date) to
subscribe for or purchase Preferred Shares (or securities having the same or
more favorable rights, privileges and preferences as the Preferred Shares
("Preferred Share Equivalents")) or securities convertible into Preferred Shares
or Preferred Share Equivalents at a price per Preferred Share or per Preferred
Share Equivalent (or having a conversion price per share, if a security
convertible into Preferred Shares or Preferred Share Equivalents) less than the
Fair Market Value (as determined pursuant to Section 11(d)) per Preferred Share
on that record date, the Exercise Price to be in effect after that record date
will be determined by multiplying the Exercise Price in effect immediately prior
to that record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on that record date, plus the number of Preferred
Shares which the aggregate offering price of the total number of Preferred
Shares or Preferred Share Equivalents to be offered (and the aggregate initial
conversion price of the convertible securities to be so offered) would purchase
at that Fair Market Value and the denominator of which shall be the number of
Preferred Shares outstanding on that record date, plus the number of additional
Preferred Shares and Preferred Share Equivalents to be offered for subscription
or purchase (or into which the convertible securities to be so offered are
initially convertible), but in no event will the consideration to be paid upon
the exercise of a Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of the Right. If the
subscription price may be paid in a consideration part or all of which is in a
form other than cash, the value of such consideration will be the Fair Market
Value thereof determined in accordance with Section 11(d). Preferred Shares
owned by or held for the account of the Company will not be considered
outstanding for the purpose of any such computation. Those adjustments will be
made successively whenever any such record date is fixed; and if any such rights
or warrants are not so issued, the Exercise Price will be adjusted to be the
Exercise Price that would then be in effect if the applicable record date had
not been fixed.
(c) If the Company fixes a record date for the making of a
distribution to all holders of Preferred Shares (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash (other
than a regular periodic cash dividend), assets (other than a dividend payable in
Preferred Shares, but including any dividend payable in capital stock other than
Preferred Shares) or convertible securities, subscription rights or warrants
(excluding those referred to in Section 11(b)), the Exercise Price to be in
effect after that record date will be determined by multiplying the Exercise
Price in effect immediately prior to that record date by a fraction, the
numerator of which will be the Fair Market Value (as determined pursuant to
Section 11(d)) of one one-thousandth of a Preferred Share on that record date,
less the Fair Market Value (as determined pursuant to Section 11(d)) of the
portion of the cash, assets or evidences of indebtedness to be so distributed or
of such convertible securities, subscription rights or warrants applicable to
one one-thousandth of a Preferred Share and the denominator of which will be the
Fair Market Value (as determined pursuant to Section 11(d)) of one one-
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thousandth of a Preferred Share, but in no event will the consideration to
be paid upon the exercise of a Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of the Right.
Those adjustments will be made successively whenever any such record date is
fixed, and if any such distribution is not so made, the Exercise Price will
again be adjusted to be the Exercise Price that would be in effect if the
applicable record date had not been fixed.
(d) For the purpose of this Agreement, the "Fair Market Value"
of any Preferred Share, Common Share or any other share or any Right or other
security or any other property will be determined as provided in this Section
11(d).
(i) In the case of a publicly-traded stock or other
security, the Fair Market Value on any date will be the
average of the daily closing prices per share of such stock or
per unit of such other security for the 30 consecutive Trading
Days (as defined herein) immediately prior to such date;
however, if the Fair Market Value per share of any share of
stock is determined during a period following the announcement
by the issuer of such stock of (x) a dividend or distribution
on such stock payable in shares of such stock or securities
convertible into shares of such stock or (y) any subdivision,
combination or reclassification of such stock, and prior to
the expiration of the 30 Trading Day period 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 Fair Market
Value will be properly adjusted to take into account
ex-dividend trading. The closing price for each day will be
the last sale price, regular way, or, if 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 securities 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 such security is listed
or admitted to trading; or, if not listed or admitted to
trading on any national securities exchange, the last quoted
price (or, if not so quoted, the average of the last quoted
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 no bids for such security are 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 such security selected by the Board of Directors. If
on any such date no market maker is making a market in such
security, the Fair Market Value of such security on such date
will be determined reasonably and with utmost good faith to
the holders of the Rights by the Board of Directors, but if at
the time of such determination there is an Acquiring Person,
the Fair Market Value of such security on such date will be
determined by a nationally recognized investment banking firm
selected by the Board of Directors, which determination will
be described in a statement filed with the Rights Agent and
will be binding on the Rights Agent and the holders of
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<PAGE> 20
the Rights. The term "Trading Day" means a day on which the
principal national securities exchange on which such security
is listed or admitted to trading is open for the transaction
of business or, if such security is not listed or admitted to
trading on any national securities exchange, a Business Day.
(ii) If a security is not publicly held or not so
listed or traded, "Fair Market Value" means the fair value per
share of stock or per other unit of such security, determined
reasonably and with utmost good faith to the holders of the
Rights by the Board of Directors, but if at the time of such
determination there is an Acquiring Person, the Fair Market
Value of such security on such date will be determined by a
nationally recognized investment banking firm selected by the
Board of Directors, which determination will be described in a
statement filed with the Rights Agent and will be binding on
the Rights Agent and the holders of the Rights.
(iii) In the case of property other than securities,
the Fair Market Value thereof will be determined reasonably
and with utmost good faith to the holders of Rights by the
Board of Directors, but if at the time of such determination
there is an Acquiring Person, the Fair Market Value of such
property on such date will be determined by a nationally
recognized investment banking firm selected by the Board of
Directors, which determination will be described in a
statement filed with the Rights Agent and will be binding upon
the Rights Agent and the holders of the Rights.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Exercise Price will be required unless that adjustment would
require an increase or decrease of at least 1% in the Exercise Price, but any
adjustment that by reason of this Section 11(e) is not required to be made will
be carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 11 will be made to the nearest cent or to the
nearest hundred-thousandth of a Common Share or ten-millionth of a Preferred
Share, as the case may be, or to such other figure as the Board of Directors
considers appropriate. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 must be made no later than the
earlier of (i) three (3) years from the date of the transaction that mandates
that adjustment or (ii) the Expiration Date.
(f) If as a result of any provision of Section 11(a) or
Section 13(a), the holder of any Right becomes entitled to receive any shares of
capital stock of the Company other than Preferred Shares, thereafter the number
of such other shares so receivable upon exercise of any Right will be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Section 11(a), (b), (c), (d), (e), (g) through (k) and (m), inclusive, and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares
will apply on like terms to any such other shares.
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<PAGE> 21
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Exercise Price hereunder will evidence the right to
purchase, at the adjusted Exercise Price, the number of one one-thousandths of a
Preferred Share (or other securities or amount of cash or combination thereof)
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company has exercised its election as provided
in Section 11(i), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 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 Exercise Price, that number of one one-thousandths of
a Preferred Share (calculated to the nearest one ten-millionth) obtained by (i)
multiplying (x) the number of one one-thousandths of a Preferred Share for which
a Right may be exercisable immediately prior to this adjustment by (y) the
Exercise Price in effect immediately prior to such adjustment of the Exercise
Price and (ii) dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment of the Exercise Price.
(i) The Company may elect on or after the date of any
adjustment of the Exercise Price to adjust the number of Rights, in substitution
for any adjustment in the number of Preferred Shares purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights will be exercisable for the number of one one-thousandths of a
Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one
hundred-thousandth) obtained by dividing the Exercise Price in effect
immediately prior to adjustment of the Exercise Price by the Exercise Price in
effect immediately after adjustment of the Exercise 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 Exercise Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders are entitled after
such adjustment. Right Certificates to be so distributed shall be issued,
executed and countersigned in the manner provided for herein (and may bear, at
the option of the Company, the adjusted Exercise Price) and shall be registered
in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Exercise
Price or the number of one one-thousandths of a Preferred Share issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Exercise Price
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<PAGE> 22
per share and the number of shares which were expressed in the initial Right
Certificates issued hereunder without prejudice to any adjustment or change.
(k) Before taking any action that would cause an adjustment
reducing the Exercise Price below the then stated value, if any, of the number
of one one-thousandths of a Preferred Share issuable upon exercise of the
Rights, the Company shall take any corporate action that may, in the opinion of
its counsel, be reasonably necessary in order that the Company may validly and
legally issue duly authorized, validly issued, fully paid and nonassessable
Preferred Shares at the adjusted Exercise Price.
(l) In any case in which this Section 11 requires that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the number of one one-thousandths of a Preferred Share or 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 Preferred Share and other capital stock
or securities of the Company, if any, issuable upon such exercise on the basis
of the Exercise Price in effect prior to such adjustment; however, the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Exercise Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in their good faith judgment a majority
of the Board of Directors shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Shares, issuance wholly for cash
of any Preferred Shares at less than Fair Market Value, issuance wholly for cash
of Preferred Shares or securities which by their terms are convertible into or
exchangeable for Preferred Shares, share dividends or issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of the Preferred Shares, shall not be taxable to such
shareholders.
(n) The Company shall not, at any time after the Distribution
Date and so long as the Rights have not been redeemed pursuant to Section 23 or
exchanged pursuant to Section 24, (i) consolidate with (other than with a
Subsidiary of the Company in a transaction which complies with the last sentence
of this Section 11(n)), (ii) merge with or into, 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 50% or more of the
assets or earning power of the Company and its Subsidiaries taken as a whole, to
any other Person or Persons (other than the Company or any of its Subsidiaries
in one or more transactions each of which complies with the last sentence of
this Section 11(n)) if (x) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or other
instruments outstanding or agreements or arrangements 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 a Person who
constitutes, or would constitute, the "Principal Party" for the purposes of
Section 13(a) have received a distribution of
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<PAGE> 23
Rights previously owned by such Person or any of its Affiliates and Associates;
however, this Section 11(n) shall not affect the ability of any Subsidiary of
the Company to consolidate with, merge with or into, or sell or transfer assets
or earning power to, any other Subsidiary of the Company. The Company further
covenants and agrees that after the Distribution Date it will not, except as
permitted by Section 23 or Section 27, take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably foreseeable that
such action will substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
(o) Notwithstanding anything in this Agreement to the
contrary, if the Company at any time after the date of this Agreement and prior
to the Distribution Date (i) declares or pays any dividend on the outstanding
Common Shares payable in Common Shares or (ii) effects a subdivision,
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-thousandths of a Preferred Share purchasable after such event
upon proper exercise of each Right will be determined by multiplying the number
of one one-thousandths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately prior to such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (B) each
Common Share of the Company outstanding immediately after such event will have
issued with respect to it that number of Rights which each Common Share of the
Company outstanding immediately prior to such event had issued with respect to
it. The adjustments provided for in this Section 11(o) will be made successively
whenever any such dividend is declared or paid or any such subdivision,
combination or consolidation is effected.
(p) The exercise of Rights under Section 11(a)(ii) will only
result in the loss of rights under Section 11(a)(ii) to the extent so exercised
and will not otherwise affect the rights of holders of Right Certificates under
this Rights Agreement, including rights to purchase securities of the Principal
Party following a Section 13 Event that has occurred or may thereafter occur, as
set forth in Section 13. Upon exercise of a Right Certificate under Section
11(a)(ii), the Rights Agent shall return such Right Certificate duly marked to
indicate that such exercise has occurred.
Section 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER
OF SHARES. Whenever an adjustment is made as provided in Section 11 or Section
13, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Shares and the Common Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate (or, if prior to the
Distribution Date, to each holder of a certificate representing Common Shares)
in accordance with Section 26. The Rights Agent will be fully protected in
relying on any such certificate and on any adjustment contained therein and will
not be considered to have knowledge of any such adjustment unless and until it
has received such certificate.
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Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER.
(a) If, following the Share Acquisition Date, directly or
indirectly, (x) the Company consolidates with, or merges with and into, an
Acquiring Person (or any Affiliate or Associate of an Acquiring Person), and the
Company is not the continuing or surviving corporation of such consolidation or
merger, (y) an Acquiring Person (or any Affiliate or Associate of an Acquiring
Person) consolidates with the Company, or merges with and into the Company and
the Company is the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares are changed into
or exchanged for stock or other securities of an Acquiring Person (or of any
Affiliate or Associate of an Acquiring Person) or cash or any other property, or
(z) the Company sells, mortgages or otherwise transfers (or one or more of its
Subsidiaries sells, mortgages or otherwise transfers), in one transaction or a
series of related transactions, assets or earning power aggregating 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to an Acquiring Person (or to any Affiliate or Associate of an Acquiring
Person), then, and in each such case, the Company shall cause proper provision
to be made so that: (i) each holder of a Right, except as provided in Section
7(e), has the right to receive, upon the exercise thereof at the then current
Exercise Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid and nonassessable shares of freely
tradeable Common Stock of the Principal Party (as defined herein), free and
clear of rights of call or first refusal, liens, encumbrances, transfer
restrictions or other adverse claims, as are equal to the result obtained by (1)
multiplying the then current Exercise Price by the number of one one-thousandths
of a Preferred Share for which a Right is exercisable immediately prior to the
first occurrence of a Section 13 Event, and dividing that product by (2) 50% of
the Fair Market Value (determined pursuant to Section 11(d)) per share of the
Common Stock of such Principal Party on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such Principal Party is thereafter
liable for, and assumes, by virtue of such consolidation, merger, sale, mortgage
or transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" thereafter refers to such Principal Party,
it being specifically intended that Section 11 apply to such Principal Party;
and (iv) such Principal Party takes such steps (including, but not limited to,
the reservation of a sufficient number of shares of its Common Stock to permit
exercise of all outstanding Rights in accordance with this Section 13(a) and the
making of payments in cash or other securities in accordance with Section
11(a)(iii)) in connection with such consummation as may be necessary to assure
that the provisions hereof are thereafter applicable, as nearly as reasonably
may be, in relation to the shares its Common Stock thereafter deliverable upon
the exercise of the Rights.
(b) "Principal Party" means:
(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 Common
Shares are converted in such merger or consolidation, or, if
there is more than one such issuer, the issuer of Common Stock
that has the highest aggregate Fair Market Value (determined
pursuant to Section 11(d)), and if no
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<PAGE> 25
securities are so issued, the Person that is the other party
to the merger or consolidation, or, if there is more than one
such Person, the Person the Common Stock of which has the
highest aggregate Fair Market Value (determined pursuant to
Section 11(d)); and
(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, or, if each Person that is a party to such
transaction or transactions receives the same portion of the
assets or earning power transferred pursuant to such
transaction or transactions or if the Person receiving the
largest portion of the assets or earning power cannot be
determined, that Person the Common Stock of which has the
highest aggregate Fair Market Value (determined pursuant to
Section 11(d));
but 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 12-month period registered
under Section 12 of the Exchange Act ("Registered Common Stock"), or such Person
is not a corporation, and such Person is a direct or indirect Subsidiary or
Affiliate of another Person who has Registered Common Stock outstanding,
"Principal Party" refers to such other Person; (2) if the Common Stock of such
Person is not Registered Common Stock or such Person is not a corporation, and
such Person is a direct or indirect Subsidiary of another Person but is not a
direct or indirect Subsidiary of another Person which has Registered Common
Stock outstanding, "Principal Party" refers to the ultimate parent entity of
such first-mentioned Person; (3) if the Common Stock of such Person is not
Registered Common Stock or such Person is not a corporation, and such Person is
directly or indirectly controlled by more than one Person, and one or more of
such other Persons has Registered Common Stock outstanding, "Principal Party"
refers to whichever of such other Persons is the issuer of the Registered Common
Stock having the highest aggregate Fair Market Value (determined pursuant to
Section 11(d)); and (4) if the Common Stock of such Person is not Registered
Common Stock or such Person is not a corporation, and such Person is directly or
indirectly controlled by more than one Person, and none of such other Persons
has Registered Common Stock outstanding, "Principal Party" refers to whichever
ultimate parent entity is the corporation having the greatest stockholders'
equity or, if no such ultimate parent entity is a corporation, "Principal Party"
refers to whichever ultimate parent entity is the entity having the greatest net
assets.
(c) The Company shall not consummate any consolidation,
merger, sale or transfer referred to in Section 13(a) unless prior thereto (x)
the Principal Party has 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 (y) the
Company and each Principal Party and each other Person who may become a
Principal Party as a result of such consolidation, merger, sale or transfer
shall have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in Section 13(a) and (b) and further providing
that, as soon as practicable after the date of any consolidation, merger, sale
or transfer of assets mentioned in Section 13(a), the Principal Party at its own
expense will:
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<PAGE> 26
(i) prepare and file a registration statement under
the Securities Act with respect to the Rights and the
securities purchasable upon exercise of the Rights on an
appropriate form, cause such registration statement to become
effective as soon as practicable after such filing and cause
such registration statement to remain effective (with a
prospectus that at all times meets the requirements of the
Securities Act) until the Expiration Date;
(ii) qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the
blue sky laws of such jurisdictions as may be necessary or
appropriate;
(iii) list (or continue the listing of) the Rights
and the securities purchasable upon exercise of the Rights on
a national securities exchange or to meet the eligibility
requirements for quotation on NASDAQ; and
(iv) 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.
(d) If the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or other
instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue (other than to holders of
Rights pursuant to this Section 13), in connection with, or as a consequence of,
the consummation of a transaction referred to in this Section 13, Common Stock
of such Principal Party at less than the then current Fair Market Value
(determined pursuant to Section 11(d)) or securities exercisable for, or
convertible into, Common Stock of such Principal Party at less than such Fair
Market Value, or (ii) providing for any special payment, tax or similar
provisions in connection with the issuance of the Common Stock of such Principal
Party pursuant to the provisions of this Section 13, then, in such event, the
Company shall not consummate any such transaction unless prior thereto the
Company and such Principal Party have executed and delivered to the Rights Agent
a supplemental agreement providing that that provision of such Principal Party
has been canceled, waived or amended, or that the authorized securities will be
redeemed, so that that provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.
This Section 13 will similarly apply to successive mergers or
consolidations or sales or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
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<PAGE> 27
(a) The Company is not required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(o), or to
distribute Right Certificates which evidence fractional Rights. If the Company
elects not to issue such fractional Rights, the Company shall pay, in lieu of
such fractional Rights, to the registered holders of the Right Certificates with
regard to which such fractional Rights would otherwise be issuable, an amount in
cash equal to the same fraction of the Fair Market Value of a whole Right, as
determined pursuant to Section 11(d).
(b) The Company is not required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share). In lieu of fractional Preferred Shares that are not integral multiples
of one one-thousandth of a Preferred Share, the Company may pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the Fair
Market Value of one one-thousandth of a Preferred Share. For purposes of this
Section 14(b), the Fair Market Value of one one-thousandth of a Preferred Share
shall be determined pursuant to Section 11(d) for the Trading Day immediately
prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights
expressly waives the holder's right to receive any fractional Right 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, other than rights of action vested in the Rights Agent
pursuant to Sections 18 and 20, are vested in the respective registered holders
of the Right Certificates (or, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares), without
the consent of the Right Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Shares), may, in such
registered holder's own behalf and for such registered holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his right to exercise
the Right evidenced by such Right Certificate in the manner provided in such
Right Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and are 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 are entitled to recover the reasonable costs and expenses,
including attorneys' fees, incurred by them in any action to enforce this
Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
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<PAGE> 28
(a) prior to the Distribution Date, each Right will be
transferable only simultaneously and together with the transfer of Common
Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer;
(c) subject to Sections 6(a) and 7(f), the Company and the
Rights Agent may deem and treat the person in whose name a Right Certificate
(or, prior to the Distribution Date, the associated certificate representing
Common Shares) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated certificate representing Common Shares made
by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and, subject to the last sentence of Section 7(e), neither the
Company nor the Rights Agent shall be affected by any notice to the contrary;
and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent will have any liability to
any holder of a Right or other Person as the 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 obligations; however, the Company must use its reasonable
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. RIGHT CERTIFICATE HOLDER NOT CONSIDERED A
SHAREHOLDER. No holder, as such, of any Right Certificate is entitled to vote,
receive dividends or be considered for any purpose a holder of Preferred Shares
or any other securities of the Company that may at any time be issuable on the
exercise of the Rights represented thereby, nor will anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate has been exercised in accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent such
compensation as is agreed to in writing between the Company and the Rights Agent
for all services rendered by it
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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 gross negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights Agent
in connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability
arising therefrom, directly or indirectly. This Section 18(a) will survive the
expiration of the Rights and the termination of this Agreement.
(b) The Rights Agent is protected and will incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Right Certificate
or certificate representing Common Shares, Preferred Shares, or other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed and executed by the proper Person or Persons.
(c) The Rights Agent will not be liable for consequential
damages under any provision of this Agreement or for any consequential damages
arising out of any act or failure to act hereunder.
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 is a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, will 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, if such corporation would be eligible for
appointment as a successor Rights Agent under Section 21. If at the time such
successor Rights Agent succeeds to the agency created by this Agreement, any of
the Right Certificates have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver the Right Certificates so countersigned; and if at that time
any of the Right Certificates have not been countersigned, any successor Rights
Agent may countersign such Right Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
those Right Certificates will have the full force provided in the Right
Certificates and in this Agreement.
(b) If at any time the name of the Rights Agent is changed and
at such time any of the Right Certificates have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and if at that time any of the
Right Certificates have not been countersigned, the Rights Agent may countersign
such Right Certificates either in its prior name or in its changed name; and in
all
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such cases such Right Certificates will have the full force provided in the
Right Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent
undertakes the duties and obligations expressly imposed by this Agreement upon
the following terms and conditions, by which the Company and the holders of
Right Certificates, by their acceptance thereof, are bound:
(a) The Rights Agent may consult with legal counsel selected
by it (who may be legal counsel for the Company), and the opinion of that
counsel will 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 considers it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of Fair Market Value) be proved or established by the Company
prior to taking or suffering any action hereunder, that fact or matter (unless
other evidence in respect thereof is herein specifically prescribed) may be
considered to be conclusively proved and established by a certificate signed by
a person believed by the Rights Agent to be the Chairman of the Board of
Directors, the President, a Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company and delivered
to the Rights Agent. Any such certificate will be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under this
Agreement in reliance upon such certificate.
(c) The Rights Agent will be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.
(d) The Rights Agent is not liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or required to verify the
same, but all such statements and recitals are and will be considered to have
been made by the Company only.
(e) The Rights Agent is not under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereon); nor is it responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor is it
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e)) or any adjustment required under
Section 11, Section 13 or Section 24(c) or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of a certificate describing any
such adjustment furnished in accordance with Section 12); nor is it responsible
for any determination by the Board of Directors of the Fair Market Value of the
Rights or Preferred Shares; nor will it
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by any act hereunder be considered to make any representation or warranty as to
the authorization or reservation of any Common Shares or Preferred Shares to be
issued pursuant to this Agreement or any Right Certificate or as to whether any
Common Shares or Preferred Shares will, when so issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company 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 this
Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any person believed
by the Rights Agent to be the Chairman of the Board of Directors, the President,
a Vice President, the Secretary, an Assistant Secretary, the Treasurer or an
Assistant Treasurer of the Company, and is authorized to apply to such officers
for advice or instructions in connection with its duties, and it will 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. Any application by the Rights
Agent for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by the
Rights Agent under this Agreement and the date on or after which that action
will be taken or such omission will be effective. The Rights Agent will not be
liable for any action taken by, or omission of, the Rights Agent in accordance
with a proposal included in such application on or after the date specified in
such application (which date may not be less than five Business Days after the
date any officer of the Company actually receives such application, unless any
such officer has consented in writing to an earlier date) unless, prior to
taking any such action (or the effective date in the case of an omission), the
Rights Agent has received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, 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 the Rights
Agent under this Agreement. Nothing herein precludes 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.
(j) No provision of this Agreement requires 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 are reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
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(k) If, with respect to any Right 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) or clause
(2) thereof, the Rights Agent shall not take any further action with respect to
such requested exercise or 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 by
first class mail. The Company may remove the Rights Agent or any successor
Rights Agent (with or without cause) upon thirty (30) days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Shares and Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent resigns or is removed or otherwise becomes incapable
of acting, the Company shall appoint a successor to the Rights Agent. If the
Company fails to make such appointment within a period of thirty (30) days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit that
holder's Right Certificate for inspection by the Company), then the incumbent
Rights Agent or the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
must be (a) a corporation organized and doing business under the laws of the
United States of America or of the State of Ohio (or of any other state of the
United States of America so long as such corporation is authorized to do
business as a banking institution in the State of Ohio), in good standing, which
is authorized under such laws to exercise stock transfer or corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an Affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent will be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares and the Preferred Shares, and mail
a notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, will not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES.
Notwithstanding any provision of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in any form as may be approved by its Board of Directors to
reflect any adjustment or change in the Exercise Price per share and the number
or kind or class of shares or other securities or property purchasable under the
Right Certificates made in
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accordance with this Agreement. In addition, in connection with the issuance or
sale of Common Shares following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereafter issued by the Company, and (b) may, in any
other case, if considered necessary or appropriate by the Board of Directors,
issue Right Certificates representing the appropriate number of Rights in
connection with such issuance or sale; however, (i) no such Right Certificate
will be issued if, and to the extent that, the Company will be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the person to whom such Right Certificate
would be issued, and (ii) no such Right Certificate will be issued if, and to
the extent that, appropriate adjustments otherwise have been made in lieu of the
issuance thereof.
Section 23. REDEMPTION.
(a) The Board of Directors may, at its option, redeem all but
not less than all of the then outstanding Rights at a redemption price of $0.01
per Right, appropriately adjusted to reflect any dividend declared or paid on
the Common Shares in Common Shares or any subdivision or combination of the
outstanding Common Shares or similar event occurring after the date of this
Agreement (such redemption price, as adjusted from time to time, being
hereinafter referred to as the "Redemption Price"). The Rights may be redeemed
only until the earliest to occur of (i) 5:00 P.M., Cleveland, Ohio time, on the
calendar day after the Share Acquisition Date or (ii) the Final Expiration Date.
(b) Immediately upon the action of the Board of Directors
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights will 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 the Rights Agent and to all such holders at
their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the Transfer Agent
for the Common Shares. Any notice that is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or Section 24 or in
connection with the purchase of Common Shares prior to the Distribution Date.
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(c) The Company may, at its option, pay the Redemption Price
in cash, Common Shares (based on the Fair Market Value of the Common Shares as
of the time of redemption) or any other form of consideration considered
appropriate by the Board of Directors.
Section 24. EXCHANGE.
(a) The Board of Directors may, at its option, at any time on
or after the occurrence of a Section 11(a)(ii) Event, exchange all or part of
the then outstanding and exercisable Rights (which will not include Rights that
have become void pursuant to the provisions of Section 7(e)) for Common Shares
at an exchange ratio of one Common Share of the Company per Right, appropriately
adjusted to reflect any share split, share dividend or similar transaction
occurring after the date hereof (that exchange ratio, the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors is not empowered to effect
such exchange at any time after any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares.
(b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights will terminate and the only right thereafter of a holder of such
Rights will be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give notice of any such exchange in accordance with Section 26,
but the failure to give, or any defect in, such notice will not affect the
validity of such exchange. The Company promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice that is mailed in
the manner herein provided will be considered given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of the Common Shares for Rights will be effected and, in the event
of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange will 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))
held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute Preferred Shares (or Preferred Share Equivalents)
for Common Shares exchangeable for Rights, at the initial rate of one
one-thousandth of a Preferred Share (or Preferred Share Equivalents) for each
Common Share, as appropriately adjusted to reflect adjustments in the economic
rights of the Preferred Shares pursuant to the terms thereof, so that the
fraction of a Preferred Share delivered in lieu of each Common Share will have
the same economic rights as one Common Share.
(d) If the Company elects to make any exchange pursuant to
this Section 24 and, at the time of that exchange, there are not sufficient
Common Shares or Preferred Shares (or Preferred Share Equivalents) issued but
not outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take
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all actions as may be necessary to authorize additional Common Shares or
Preferred Shares (or Preferred Share Equivalents) for issuance upon exchange of
the Rights.
(e) The Company will not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. If the Company elects not to issue those fractional Common Shares, the
Company shall pay, in lieu of those fractional Common Shares, to the registered
holders of the Right Certificates with regard to which those fractional Common
Shares would otherwise be issuable, an amount in cash equal to the same fraction
of the Fair Market Value of a whole Common Share of the Company. For the
purposes of this paragraph (e), the Fair Market Value of a whole Common Share of
the Company shall be the closing price of a Common Share of the Company (as
determined pursuant to the second sentence of Section 11(d)(i)) for the Trading
Day immediately prior to the date of exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) If the Company proposes at any time after the Distribution
Date (i) to pay any dividend payable in shares of any class to the holders of
Preferred Shares or to make any other distribution to the holders of Preferred
Shares (other than a regular periodic cash dividend), or (ii) to offer to the
holders of Preferred Shares rights or warrants to subscribe for or to purchase
any additional Preferred Shares or shares of capital stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), or (iv) to effect any
consolidation or merger into or with, or to effect any sale, mortgage or other
transfer (or to permit one or more of its Subsidiaries to effect any sale,
mortgage or other transfer), in one transaction or a series of related
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person (other than a
Subsidiary of the Company in one or more transactions each of which is not
prohibited by the last sentence of Section 11(n)), or (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
then in each such case, the Company shall give to each holder of a Right
Certificate and to the Rights Agent, in accordance with Section 26, a notice of
that proposed action, that specifies the record date for the purposes of that
share dividend, distribution of rights or warrants, or the date on which that
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares or Preferred Shares, if any record
date is to be fixed, and that 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 Preferred Shares for purposes of that
action, and in the case of any other similar action, at least twenty (20) days
prior to the date of the taking of that proposed action or the date of
participation therein by the holders of the Common Shares or Preferred Shares,
whichever is earlier; but no notice shall be required pursuant to this Section
25 if any Subsidiary of the Company effects a consolidation or merger with or
into, or effects a sale or
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other transfer of assets or earnings power to, any other Subsidiary of the
Company in a manner not inconsistent with the provisions of this Agreement.
(b) If any Section 11(a)(ii) Event occurs, then the Company
shall as soon as practicable thereafter give to each registered holder of a
Right Certificate and to the Rights Agent, in accordance with Section 26, a
notice of the occurrence of that event, which will specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii).
Section 26. NOTICES. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company will be sufficiently given or made if sent by
first-class mail, postage prepaid, facsimile transmission or by nationally
recognized overnight courier addressed (until another address is filed in
writing with the Rights Agent) as follows:
Associated Estates Realty Corporation
5025 Swetland Court
Richmond Heights, Ohio 44143
Attention: Corporate Secretary
Telephone No.: (216) 261-5000
Facsimile No.: (216) 797-8719
Subject to Section 21, any notice or demand authorized by this Agreement to be
given or made by the Company or by the holder of any Right Certificate to or on
the Rights Agent will be sufficiently given or made if sent by first-class mail,
postage prepaid, facsimile transmission or by nationally-recognized overnight
courier addressed (until another address is filed in writing with the Company)
as follows:
National City Bank
Corporate Trust Administration
629 Euclid Avenue, Suite 635
Cleveland, Ohio 44114
Attention: J. Dean Presson, Vice President
Telephone No.: (216) 575-2644
Facsimile No.: (216) 575-2649
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or, prior to
the Distribution Date, to the holder of any certificate representing Common
Shares) shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to that holder at the address of that holder as shown on the
registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the
Distribution Date, the Company and the Rights Agent will, if the Company so
directs, supplement or amend any provision of this Agreement as the Company may
deem necessary or desirable without the approval of any holders of certificates
representing Common Shares. From and after the
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Distribution Date, the Company and the Rights Agent will, if the Company so
directs, supplement or amend this Agreement without the approval of any holder
of Right Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereof in any manner
which the Company may deem necessary or desirable and which will not adversely
affect the interests of the holders of Right Certificates (other than an
Acquiring Person or any Affiliate or Associate of an Acquiring Person); however,
from and after the Distribution Date 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 the time the Rights are
not redeemable or (B) any other time period unless that lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and the benefits
to, the holders of Rights (other than an Acquiring Person or any Affiliate or
Associate of an Acquiring Person). Upon the delivery of a certificate from an
appropriate officer of the Company that states that the proposed supplement or
amendment is in compliance with this Section 27, the Rights Agent shall execute
the proposed supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights will be considered coincident with the
interests of the holders of Common Shares. Notwithstanding any other provision
hereof, the Rights Agent's consent must be obtained regarding any amendment or
supplement pursuant to this Section 27 that alters the Rights Agent's rights or
duties.
Section 28. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent will
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF
DIRECTORS. For all purposes of this Agreement, any calculation of the number of
Common Shares outstanding at any particular time, including for purposes of
determining the particular percentage of the outstanding Common Shares of which
any Person is the Beneficial Owner, will be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the Rules under the Exchange Act as in effect
on the date hereof. The Board of Directors has the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board of 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 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 of Directors in
good faith will (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 any
member of the Board of Directors to any liability to the holders of the Rights
or to any other person.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement will be construed to give to any person or corporation other than the
Company, the Rights Agent and the
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registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement is for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, registered holders of the Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement will remain in
full force and effect and will in no way be affected, impaired or invalidated;
but notwithstanding anything in this Agreement to the contrary, if any term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors determines in its good
faith judgment that severing the invalid language from the Agreement would
adversely affect the purpose or effect of the Agreement, the right of redemption
set forth in Section 23 will be reinstated and will not expire until the Close
of Business on the tenth day following the date of that determination by the
Board of Directors.
Section 32. GOVERNING LAW. This Agreement, each Right and each
Right Certificate issued hereunder will be considered to be a contract made
under the laws of the State of Ohio and for all purposes will be governed by and
construed in accordance with the laws of that State applicable to contracts to
be made and to be performed entirely within Ohio.
Section 33. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each counterpart will for all purposes be
considered to be an original, and all counterparts will together constitute but
one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and will
not control or affect the meaning or construction of any of the provisions of
this Agreement.
Section 35. INTERPRETATION; ABSENCE OF PRESUMPTION.
(a) For the purposes hereof, (i) words in the singular include
the plural and vice versa and words of one gender shall be held to include the
other gender as the context requires, (ii) the terms "hereof," "herein," and
"herewith" and words of similar import, unless otherwise stated, refer to this
Agreement as a whole (including all of the Exhibits hereto) and not to any
particular provision of this Agreement, and Section, paragraph, and Exhibit
references are to the Sections, paragraphs and Exhibits in and to this Agreement
unless otherwise specified, (iii) the word "including" and words of similar
import when used in this Agreement mean "including, without limitation," unless
otherwise specified, and (iv) the word "or" shall not be exclusive, but means
"and/or."
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<PAGE> 39
(b) This Agreement will be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 40
IN WITNESS WHEREOF, this Agreement has been executed in one or
more counterparts by or on behalf of each of the parties hereto as of the date
first above written.
ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
By: /s/ Jeffrey I. Friedman
Name: Jeffrey I. Friedman
Title: President and Chief Executive Officer
NATIONAL CITY BANK, a national
banking association, as Rights Agent
By: /s/ J. Dean Presson
Name: J. Dean Presson
Title: Vice President
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<PAGE> 41
EXHIBIT A
FORM OF
CERTIFICATE OF AMENDMENT
TO THE
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ASSOCIATED ESTATES REALTY CORPORATION
Jeffrey I. Friedman, President and Chief Executive Officer,
and Martin A. Fishman, Secretary, of Associated Estates Realty Corporation, an
Ohio corporation (the "Company"), do hereby certify that at a meeting of the
Board of Directors of the Company held on January 6, 1999, the following
resolution to amend the Second Amended and Restated Articles of Incorporation,
as amended, of the Company was adopted pursuant to the authority granted by
Section 1701.70(B)(1) of the Ohio Revised Code:
RESOLVED, that the Second Amended and Restated Articles of
Incorporation, as amended, of the Company be, and they hereby are, amended by
adding at the end of Division A-2 of Article FOURTH a new Section 6 that reads
as follows:
SECTION 6. CLASS B SERIES I CUMULATIVE PREFERRED SHARES.
A. DESIGNATION AND AMOUNT. Of the 3,000,000 authorized Class B
Shares, 400,000 are designated as a series designated as "Class B Series I
Cumulative Preferred Shares" (the "Series I Preferred Shares"). The Series I
Preferred Shares have the express terms set forth in this Division as being
applicable to all Class B Shares as a class and, in addition, the following
express terms applicable to all Series I Preferred Shares as a series of
Preferred Shares. The number of Series I Preferred Shares may be increased or
decreased by resolution of the Board of Directors and by the filing of a
certificate of amendment pursuant to the provisions of the General Corporation
Law of the State of Ohio stating that such increase or reduction has been so
authorized; however, no decrease shall reduce the number of Series I Preferred
Shares to a number less than that of the Series I Preferred Shares then
outstanding plus the number of Series I Preferred Shares issuable upon exercise
of outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Company.
B. DIVIDENDS AND DISTRIBUTIONS.
(1)(a) Subject to the rights of the holders of any series of
preferred shares (or any similar shares) ranking prior to the Series I
Preferred Shares with respect to dividends, the holders of Series I
Preferred Shares, in preference to the holders of Common Shares and of
any other junior shares, will be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the fifteenth day
of March, June, September and December in each
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<PAGE> 42
year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a Series I Preferred Share or fraction
thereof, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $1.00 or (b) subject to the provisions for
adjustment hereinafter set forth, 1,000 times the aggregate per share
amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all noncash dividends or other
distributions other than a dividend payable in Common Shares or a
subdivision of the outstanding Common Shares (by reclassification or
otherwise), declared on the Common Shares after the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, after the first issuance of any
Series I Preferred Share or fraction thereof. The multiple of cash and
noncash dividends declared on the Common Shares to which holders of the
Series I Preferred Shares are entitled, which is 1,000 initially but
which will be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Dividend Multiple." If the Company at
any time after January 6, 1999 (the "Rights Declaration Date"): (i)
declares or pays any dividend on the Common Shares payable in Common
Shares, or (ii) effects a subdivision or combination or consolidation
of the outstanding Common Shares (by reclassification or otherwise than
by payment of a dividend in Common Shares) into a greater or lesser
number of Common Shares, then in each such case the Dividend Multiple
thereafter applicable to the determination of the amount of dividends
that holders of Series I Preferred Shares are entitled to receive will
be the Dividend Multiple applicable immediately prior to that event
multiplied by a fraction, the numerator of which is the number of
Common Shares outstanding immediately after that event and the
denominator of which is the number of Common Shares that were
outstanding immediately prior to that event.
(b) Notwithstanding anything else contained in this paragraph
(1), the Company shall, out of funds legally available for that
purpose, declare a dividend or distribution on the Series I Preferred
Shares as provided in this paragraph (1) immediately after it declares
a dividend or distribution on the Common Shares (other than a dividend
payable in Common Shares); but if no dividend or distribution has been
declared on the Common Shares during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series I Preferred
Shares shall nevertheless accrue on such subsequent Quarterly Dividend
Payment Date.
(2) Dividends will begin to accrue and be cumulative on
outstanding Series I Preferred Shares from the Quarterly Dividend Payment Date
next preceding the date of issue of such Series I Preferred Shares, unless the
date of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares will begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series I Preferred Shares entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends will begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends will not bear
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<PAGE> 43
interest. Dividends paid on the Series I Preferred Shares in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares will be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix in accordance
with applicable law a record date for the determination of holders of Series I
Preferred Shares entitled to receive payment of a dividend or distribution
declared thereon, which record date will be not more than such number of days
prior to the date fixed for the payment thereof as may be allowed by applicable
law.
C. REACQUIRED SHARES. Any Series I Preferred Shares purchased
or otherwise acquired by the Company in any manner whatsoever will be retired
and canceled promptly after the acquisition thereof. All such shares will upon
their cancellation become authorized but unissued preferred shares and may be
reissued as part of a new series of Class B Preferred Shares to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
D. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the Company,
no distribution may be made (x) to the holders of shares ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series I
Preferred Shares unless, prior thereto, the holders of Series I Preferred Shares
shall have received an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
plus an amount equal to the greater of (1) $1,000.00 per share or (2) an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 1,000 times the aggregate amount to be distributed per share
to holders of Common Shares, or (y) to the holders of shares ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series I Preferred Shares, except distributions made ratably on the Series I
Preferred Shares and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. If the Company at any time after the
Rights Declaration Date (i) declares or pays any dividend on Common Shares
payable in Common Shares, or (ii) effects a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or otherwise
than by payment of a dividend in Common Shares) into a greater or lesser number
of Common Shares, then in each such case the aggregate amount per share to which
holders of Series I Preferred Shares were entitled immediately prior to such
event under clause (x) of the preceding sentence will be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Company with
or into any other corporation or corporations, nor the sale or other transfer of
all or substantially all of the assets of the Company, will be considered to be
a liquidation, dissolution or winding up of the Company within the meaning of
this paragraph D.
E. CONSOLIDATION, MERGER, ETC. If the Company shall enter into
any consolidation, merger, combination or other transaction in which the Common
Shares are
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<PAGE> 44
exchanged for or changed into other shares, stock or securities, cash or any
other property, then in any such case the Series I Preferred Shares will at the
same time be similarly exchanged or changed in an amount per share (subject to
the provision for adjustment hereinafter set forth) equal to 1,000 times the
aggregate amount of shares, stock, securities, or other property, as the case
may be, into which or for which each Common Share is changed or exchanged, plus
accrued and unpaid dividends, if any, payable with respect to the Series I
Preferred Shares. If the Company at any time after the Rights Declaration Date
(i) declares or pays any dividend on Common Shares payable in Common Shares, or
(ii) effects a subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise than by payment of a dividend in
Common Shares) into a greater or lesser number of Common Shares, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of Series I Preferred Shares will be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
F. REDEMPTION. The Series I Preferred Shares are not
redeemable, but the foregoing does not limit the ability of the Company to
purchase or otherwise deal in the Series I Preferred Shares to the extent
otherwise permitted hereby and by law.
G. AMENDMENT. The Second Amended Articles of Incorporation of
the Company, as amended, may not be amended in any manner that would materially
alter or change the powers, preferences or special rights of the Series I
Preferred Shares so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding Series I Preferred Shares,
voting separately as a class.
H. FRACTIONAL SHARES. Series I Preferred Shares may be issued
in whole shares or in any fraction of a share that is one one-thousandth
(1/1,000th) of a share or any integral multiple of such fraction, which will
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and have
the benefit of all other rights of holders of Series I Preferred Shares. In lieu
of fractional shares, the Company may elect to make a cash payment as provided
in that certain Rights Agreement dated as of January 6, 1999, between the
Company and National City Bank, a national banking association, as rights agent,
for fractions of a share other than one one-thousandth (1/1,000th) of a share or
any integral multiple thereof.
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Page A-4
<PAGE> 45
IN WITNESS WHEREOF, we have executed this instrument in one or
more counterparts as of January ____, 1999.
ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
-------------------------------------
Jeffrey I. Friedman,
President and Chief Executive Officer
-------------------------------------
Martin A. Fishman, Secretary
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Page A-5
<PAGE> 46
EXHIBIT B
FORM OF RIGHT CERTIFICATE
Certificate No. R- ___________Rights
NOT EXERCISABLE AFTER JANUARY 6, 2009 OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF ASSOCIATED ESTATES
REALTY CORPORATION, AN OHIO CORPORATION (THE "COMPANY") AT $0.01 PER RIGHT ON
THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS AGREEMENT BETWEEN THE COMPANY AND
NATIONAL CITY BANK, A NATIONAL BANKING ASSOCIATION, AS RIGHTS AGENT, DATED AS OF
JANUARY 6, 1999 (THE "RIGHTS AGREEMENT"). THE COMPANY WILL MAIL A COPY OF THE
RIGHTS AGREEMENT WITHOUT CHARGE TO THE HOLDER OF THIS CERTIFICATE WITHIN FIVE
DAYS AFTER THE RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHT AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
RIGHT CERTIFICATE
-----------------
This certifies that or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Shareholder
Rights Agreement dated as of January 6, 1999 (the "Rights Agreement") between
Associated Estates Realty Corporation, an Ohio corporation (the "Company"), and
National City Bank, a national banking association, as rights agent (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as defined in the Rights Agreement) and prior to the close of business on
January 6, 2009 at the office or offices of the Rights Agent, or its successors
as Rights Agent, designated for that purpose, one-thousandth of a fully paid,
nonassessable Class B Series I Cumulative Preferred Share, without par value
(the "Preferred Shares"), of the Company, at a purchase price of $____ per one
one-thousandth of a Preferred Share (the "Exercise Price"), upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
and the related Certificate duly executed. The number of Rights evidenced by
this Right Certificate (and the number of shares that may be purchased upon
exercise thereof) set forth above, and the Exercise Price per share set forth
above, are the number and Exercise Price as of __________, _____, based on the
Preferred Shares as constituted at that date.
Upon the occurrence of a Section 11(a)(ii) Event (as defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Person (as those terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or
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Page B-1
<PAGE> 47
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of a Person who, after such transfer, became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person, such Rights will become null
and void and no holder hereof will have any right with respect to such Rights
from and after the occurrence of that Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Exercise Price and
the number of Preferred Shares or other securities that may be purchased upon
the exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are incorporated by reference herein and made a part hereof and to
which Rights Agreement reference is made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, 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 principal office of the
Company and the designated office of the Rights Agent. The Company will mail a
copy of the Rights Agreement without charge to the holder of this certificate
within five days after the receipt of a written request therefor.
This Right Certificate, with or without other Right
Certificates, upon surrender at the office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Right Certificate or
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Preferred Shares as the Rights evidenced by
the Right Certificate or Certificates surrendered entitled such holder to
purchase. If this Right Certificate is exercised in part, the holder is entitled
to receive upon surrender hereof another Right Certificate or Certificates for
the number of whole Rights not exercised. If this Right Certificate is exercised
in whole or in part pursuant to Section 11(a)(ii) of the Rights Agreement, the
holder is entitled to receive this Right Certificate duly marked to indicate
that such exercise has occurred as set forth in the Rights Agreement.
Under certain circumstances, subject to the provisions of the
Rights Agreement, the Board of Directors at its option may exchange all or any
part of the Rights evidenced by this Certificate for the Company's common
shares, without par value (the "Common Shares"), or Preferred Shares at an
exchange ratio (subject to adjustment) of one Common Share for one
one-thousandth of a Preferred Share per Right.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Board of Directors at its
option at a redemption price of $0.01 per Right (payable in cash, Common Shares
or other consideration considered appropriate by the Board of Directors).
The Company is not obligated to issue fractional shares upon
the exercise of any Right or Rights evidenced hereby (other than fractions that
are integral multiples of one one-
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<PAGE> 48
thousandth of a Preferred Share, which may, at the election of the Company, be
evidenced by depositary receipts). If the Company elects not to issue such
fractional shares, in lieu thereof a cash payment will be made, as provided in
the Rights Agreement.
No holder of this Right Certificate, as such, is entitled to
vote or receive dividends or be considered for any purpose the holder of
Preferred Shares, Common Shares or any other securities of the Company that may
at any time be issuable on the exercise hereof, nor will anything contained in
the Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate have been exercised as provided in the Rights Agreement.
This Right Certificate will not be valid or obligatory for any
purpose until it has been countersigned by an authorized signatory of the Rights
Agent.
WITNESS the facsimile signature of the proper officers of the Company.
Dated as of _________________, ____.
ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
By:____________________________________
Name:__________________________________
Title:_________________________________
Countersigned:
National City Bank, a national
banking association
By:___________________________________
Name:_________________________________
Title:________________________________
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Page B-3
<PAGE> 49
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED_____________hereby sells, assigns and transfers
unto____________________________________________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint as attorney-in-fact, to transfer
the Right Certificate on the books of the within-named Company, with full power
of substitution.
Dated:____________,________ _________________________
Signature
Social Security or other
identifying taxpayer number of transferee:
______________________________________
Signature Guaranteed:
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Page B-4
<PAGE> 50
CERTIFICATE
(Applicable to Form of Assignment)
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ]
are not being transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ]did [ ] did not directly or indirectly acquire
the Rights evidenced by this Right Certificate from any Person who is, was or
became an Acquiring Person or an Affiliate or Associate of any such Person.
Dated:____________,_____ ____________________________
Signature
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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Page B-5
<PAGE> 51
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate)
To Associated Estates Realty Corporation:
The undersigned hereby irrevocably elects to exercise
___________ Rights represented by this Right Certificate to purchase the
Preferred Shares issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of:
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
Please insert social security
or other identifying taxpayer number:______________________
If such number of Rights are not all of the Rights evidenced
by this Right Certificate or if the Rights are being exercised pursuant to
Section 11(a)(ii) of the Rights Agreement, a new Right Certificate for the
balance of such Rights shall be registered in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
Please insert social security
or other identifying taxpayer number:_______________________
Signature Guaranteed:
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Page B-6
<PAGE> 52
CERTIFICATE
(Applicable to Form of Election to Purchase)
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ]did [ ] did not directly or indirectly acquire
the Rights evidenced by this Right Certificate from any Person who is, was or
became an Acquiring Person or an Affiliate or Associate of any such Person.
Dated:_______________,____ __________________________
Signature
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
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Page B-7
<PAGE> 53
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On January 6, 1999, the Board of Directors of Associated Estates Realty
Corporation, an Ohio corporation (the "Company"), adopted a Shareholder Rights
Agreement (the "Rights Agreement"). A copy of the Rights Agreement has been
filed with the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A. A copy of the Rights Agreement, including
Exhibit A thereto, is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement.
SUMMARY OF THE RIGHTS
- ---------------------
Pursuant to the Rights Agreement, the Board of Directors declared a
dividend distribution of one Preferred Share Purchase Right (a "Right") for each
outstanding common share, without par value, of the Company (the "Common
Shares") to shareholders of record as of the close of business on January 29,
1999 (the "Record Date"). In addition, one Right will automatically attach to
each Common Share issued between the Record Date and the Distribution Date (as
hereinafter defined). Each Right entitles the registered holder thereof to
purchase from the Company a unit (a "Unit") consisting of one one-thousandth of
a Class B Series I Cumulative Preferred Share, without par value (the "Preferred
Shares"), at a cash exercise price of $40.00 per Unit (the "Exercise Price"),
subject to adjustment.
Initially, the Rights are not exercisable and are attached to and trade
with the Common Shares outstanding as of, and all Common Shares issued after,
the Record Date. The Rights will separate from the Common Shares and become
exercisable upon the earlier of (i) the close of business on the 10th calendar
day following the first public announcement that a person or a group of
affiliated or associated persons has acquired beneficial ownership of 15% or
more of the outstanding Common Shares (an "Acquiring Person") (the date of that
announcement, the "Share Acquisition Date"), or (ii) the close of business on
the 10th business day following the commencement of a tender offer or exchange
offer that would result, upon its consummation, in a person or group becoming
the beneficial owner of 15% or more of the outstanding Common Shares (the
earlier of (i) and (ii), the "Distribution Date"). The Rights Agreement exempts
from the definition of Acquiring Person any person who the Board of Directors
determines acquired in excess of 15% of the Common Shares inadvertently, if that
person promptly divests itself of enough Common Shares to reduce the number of
shares beneficially owned by that person to below the 15% threshold.
Until the Distribution Date (or the earlier redemption, exchange or
expiration of the Rights): (i) the Rights will be evidenced by the Common Share
certificates and will be transferred with and only with the Common Share
certificates, (ii) new Common Share certificates issued after the Record Date
will include a notation incorporating the Rights Agreement by reference, and
(iii) the surrender for transfer of any certificate for Common Shares
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Page C-1
<PAGE> 54
will also constitute the transfer of the Rights associated with the Common
Shares represented by that certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on January 6, 2009, unless previously redeemed
or exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Right Certificates
will be mailed to holders of record of Common Shares as of the close of business
on the Distribution Date and, thereafter, the separate Right Certificates alone
will represent the Rights. Except as otherwise determined by the Board of
Directors, only Common Shares issued prior to the Distribution Date will be
issued with Rights.
If a Share Acquisition Date occurs, proper provision will be made so
that each holder of a Right (other than an Acquiring Person or associates or
affiliates thereof, whose Rights will become null and void) thereafter has the
right to receive upon exercise that number of Units having a market value of two
times the exercise price of the Right (that right being referred to as the
"Subscription Right"). If, at any time following the Share Acquisition Date: (i)
the Company consolidates with, or merges with and into, any Acquiring Person or
any associate or affiliate thereof, and the Company is not the continuing or
surviving corporation, (ii) any Acquiring Person or any associate or affiliate
thereof consolidates with the Company, or merges with and into the Company and
the Company is the continuing or surviving corporation of that merger and, in
connection with that merger, all or part of the Common Shares are changed into
or exchanged for stock or other securities of any other person or cash or any
other property, or (iii) 50% or more of the Company's assets or earning power is
sold, mortgaged or otherwise transferred, each holder of a Right will thereafter
have the right to receive, upon exercise, common stock of the acquiring company
having a market value equal to two times the exercise price of the Right (that
right being referred to as the "Merger Right"). Each holder of a Right will
continue to have the Merger Right whether or not that holder has exercised the
Subscription Right, but Rights that are or were beneficially owned by an
Acquiring Person may (under certain circumstances specified in the Rights
Agreement) become null and void.
At any time after a Share Acquisition Date occurs, the Board of
Directors may, at its option, exchange Common Shares or Units for all or any
part of the then outstanding and exercisable Rights at an exchange ratio of one
Common Share or one Unit per Right. However, the Board of Directors generally
will not be empowered to effect that exchange at any time after any person
becomes the beneficial owner of 50% or more of the Common Shares.
The Exercise Price payable, and the number of Units or other securities
or property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a share dividend on, or a
subdivision, combination or reclassification of, the Preferred Shares, (ii) if
holders of the Preferred Shares are granted certain rights or warrants to
subscribe for Preferred Shares or convertible securities at less than the
current market price of the Preferred Shares, or (iii) upon the distribution to
holders of the Preferred Shares of
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<PAGE> 55
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to in (i) and
(ii)).
With certain exceptions, no adjustment in the Exercise Price will be
required until cumulative adjustments amount to at least 1% of the Exercise
Price. The Company is not obligated to issue fractional Units. If the Company
elects not to issue fractional Units, in lieu thereof an adjustment in cash will
be made based on the fair market value of the Preferred Shares on the last
trading date prior to the date of exercise.
The Rights may be redeemed in whole, but not in part, at a price of
$0.01 per Right (payable in cash, Common Shares or other consideration
considered appropriate by the Board of Directors) by the Board of Directors only
until the earliest of (i) the close of business on the calendar day after the
Share Acquisition Date, or (ii) the expiration date of the Rights Agreement.
Immediately upon any action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and thereafter the only right of the holders
of Rights will be to receive the redemption price.
The Rights Agreement may be amended by the Board of Directors in its
sole discretion until the Distribution Date. After the Distribution Date, the
Board of Directors may, subject to certain limitations set forth in the Rights
Agreement, amend the Rights Agreement only to cure any ambiguity, defect or
inconsistency, to shorten or lengthen any time period, or to make changes that
do not adversely affect the interests of Rights holders (excluding the interests
of an Acquiring Person or associates or affiliates thereof).
Until a Right is exercised, the holder will have no rights as a
shareholder of the Company (beyond those as an existing shareholder), including
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to shareholders or to the Company, shareholders may,
depending upon the circumstances, recognize taxable income if the Rights become
exercisable for Units, other securities of the Company or other consideration,
or for common shares of an acquiring company.
DESCRIPTION OF PREFERRED SHARES
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The Preferred Shares that may be acquired upon exercise of the Rights
will not be redeemable and will generally rank on par with any other outstanding
preferred shares of the Company. Each Unit will have a preferential quarterly
dividend of the greater of (i) $.001 per Unit and (ii) an amount equal to any
higher dividend per share declared on the Common Shares.
If the Company liquidates, each holder of a Unit will receive a
preferred liquidation payment equal to the greater of (i) $1.00 per Unit and
(ii) an amount equal to the amount distributed on each Common Share.
The Preferred Shares have the right to vote together as a class on
certain limited matters (including voting rights that arise upon the nonpayment
of dividends and the right to vote on a merger of the Company into another
entity), but the Preferred Shares do not vote with the
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Common Shares on matters presented to the holders of the Common Shares
(including the election of directors).
On any merger, consolidation or other transaction in which Common
Shares are exchanged, each Unit will be entitled to receive the per share amount
paid in respect of each Common Share.
The rights of holders of the Preferred Shares to dividends and upon
liquidation, and in connection with mergers and consolidations, are protected by
customary anti-dilution provisions.
Because of the nature of the Preferred Shares' dividend and liquidation
rights, the economic value of each Unit issuable upon the exercise of a Right
should approximate the economic value of a Common Share.
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<PAGE> 1
EXHIBIT 2
CERTIFICATE OF AMENDMENT
TO THE
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ASSOCIATED ESTATES REALTY CORPORATION
Jeffrey I. Friedman, President and Chief Executive Officer,
and Martin A. Fishman, Secretary, of Associated Estates Realty Corporation, an
Ohio corporation (the "Company"), do hereby certify that at a meeting of the
Board of Directors of the Company held on January 6, 1999, the following
resolution to amend the Second Amended and Restated Articles of Incorporation,
as amended, of the Company was adopted pursuant to the authority granted by
Section 1701.70(B)(1) of the Ohio Revised Code:
RESOLVED, that the Second Amended and Restated Articles of
Incorporation, as amended, of the Company be, and they hereby are, amended by
adding at the end of Division A-2 of Article FOURTH a new Section 6 that reads
as follows:
SECTION 6. CLASS B SERIES I CUMULATIVE PREFERRED SHARES.
A. DESIGNATION AND AMOUNT. Of the 3,000,000 authorized Class B
Shares, 400,000 are designated as a series designated as "Class B Series I
Cumulative Preferred Shares" (the "Series I Preferred Shares"). The Series I
Preferred Shares have the express terms set forth in this Division as being
applicable to all Class B Shares as a class and, in addition, the following
express terms applicable to all Series I Preferred Shares as a series of
Preferred Shares. The number of Series I Preferred Shares may be increased or
decreased by resolution of the Board of Directors and by the filing of a
certificate of amendment pursuant to the provisions of the General Corporation
Law of the State of Ohio stating that such increase or reduction has been so
authorized; however, no decrease shall reduce the number of Series I Preferred
Shares to a number less than that of the Series I Preferred Shares then
outstanding plus the number of Series I Preferred Shares issuable upon exercise
of outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Company.
B. DIVIDENDS AND DISTRIBUTIONS.
(1)(a) Subject to the rights of the holders of any series of
preferred shares (or any similar shares) ranking prior to the Series I
Preferred Shares with respect to dividends, the holders of Series I
Preferred Shares, in preference to the holders of Common Shares and of
any other junior shares, will be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the fifteenth day
of March, June, September and December in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a
<PAGE> 2
Series I Preferred Share or fraction thereof, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 or (b)
subject to the provisions for adjustment hereinafter set forth, 1,000
times the aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all noncash
dividends or other distributions other than a dividend payable in
Common Shares or a subdivision of the outstanding Common Shares (by
reclassification or otherwise), declared on the Common Shares after the
immediately preceding Quarterly Dividend Payment Date, or, with respect
to the first Quarterly Dividend Payment Date, after the first issuance
of any Series I Preferred Share or fraction thereof. The multiple of
cash and noncash dividends declared on the Common Shares to which
holders of the Series I Preferred Shares are entitled, which is 1,000
initially but which will be adjusted from time to time as hereinafter
provided, is hereinafter referred to as the "Dividend Multiple." If the
Company at any time after January 6, 1999 (the "Rights Declaration
Date"): (i) declares or pays any dividend on the Common Shares payable
in Common Shares, or (ii) effects a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or
otherwise than by payment of a dividend in Common Shares) into a
greater or lesser number of Common Shares, then in each such case the
Dividend Multiple thereafter applicable to the determination of the
amount of dividends that holders of Series I Preferred Shares are
entitled to receive will be the Dividend Multiple applicable
immediately prior to that event multiplied by a fraction, the numerator
of which is the number of Common Shares outstanding immediately after
that event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to that event.
(b) Notwithstanding anything else contained in this paragraph
(1), the Company shall, out of funds legally available for that
purpose, declare a dividend or distribution on the Series I Preferred
Shares as provided in this paragraph (1) immediately after it declares
a dividend or distribution on the Common Shares (other than a dividend
payable in Common Shares); but if no dividend or distribution has been
declared on the Common Shares during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series I Preferred
Shares shall nevertheless accrue on such subsequent Quarterly Dividend
Payment Date.
(2) Dividends will begin to accrue and be cumulative on
outstanding Series I Preferred Shares from the Quarterly Dividend Payment Date
next preceding the date of issue of such Series I Preferred Shares, unless the
date of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares will begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series I Preferred Shares entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends will begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends will not bear
interest. Dividends paid on the Series I Preferred Shares in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares will be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may
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<PAGE> 3
fix in accordance with applicable law a record date for the determination of
holders of Series I Preferred Shares entitled to receive payment of a dividend
or distribution declared thereon, which record date will be not more than such
number of days prior to the date fixed for the payment thereof as may be allowed
by applicable law.
C. REACQUIRED SHARES. Any Series I Preferred Shares purchased
or otherwise acquired by the Company in any manner whatsoever will be retired
and canceled promptly after the acquisition thereof. All such shares will upon
their cancellation become authorized but unissued preferred shares and may be
reissued as part of a new series of Class B Preferred Shares to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
D. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the Company,
no distribution may be made (x) to the holders of shares ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series I
Preferred Shares unless, prior thereto, the holders of Series I Preferred Shares
shall have received an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
plus an amount equal to the greater of (1) $1,000.00 per share or (2) an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 1,000 times the aggregate amount to be distributed per share
to holders of Common Shares, or (y) to the holders of shares ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series I Preferred Shares, except distributions made ratably on the Series I
Preferred Shares and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. If the Company at any time after the
Rights Declaration Date (i) declares or pays any dividend on Common Shares
payable in Common Shares, or (ii) effects a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or otherwise
than by payment of a dividend in Common Shares) into a greater or lesser number
of Common Shares, then in each such case the aggregate amount per share to which
holders of Series I Preferred Shares were entitled immediately prior to such
event under clause (x) of the preceding sentence will be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
Neither the consolidation of nor merging of the Company with
or into any other corporation or corporations, nor the sale or other transfer of
all or substantially all of the assets of the Company, will be considered to be
a liquidation, dissolution or winding up of the Company within the meaning of
this paragraph D.
E. CONSOLIDATION, MERGER, ETC. If the Company shall enter into
any consolidation, merger, combination or other transaction in which the Common
Shares are exchanged for or changed into other shares, stock or securities, cash
or any other property, then in any such case the Series I Preferred Shares will
at the same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 1,000
times the aggregate amount of shares, stock, securities, or other property, as
the
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<PAGE> 4
case may be, into which or for which each Common Share is changed or exchanged,
plus accrued and unpaid dividends, if any, payable with respect to the Series I
Preferred Shares. If the Company at any time after the Rights Declaration Date
(i) declares or pays any dividend on Common Shares payable in Common Shares, or
(ii) effects a subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise than by payment of a dividend in
Common Shares) into a greater or lesser number of Common Shares, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of Series I Preferred Shares will be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
F. REDEMPTION. The Series I Preferred Shares are not
redeemable, but the foregoing does not limit the ability of the Company to
purchase or otherwise deal in the Series I Preferred Shares to the extent
otherwise permitted hereby and by law.
G. AMENDMENT. The Second Amended Articles of Incorporation of
the Company, as amended, may not be amended in any manner that would materially
alter or change the powers, preferences or special rights of the Series I
Preferred Shares so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding Series I Preferred Shares,
voting separately as a class.
H. FRACTIONAL SHARES. Series I Preferred Shares may be issued
in whole shares or in any fraction of a share that is one one-thousandth
(1/1,000th) of a share or any integral multiple of such fraction, which will
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and have
the benefit of all other rights of holders of Series I Preferred Shares. In lieu
of fractional shares, the Company may elect to make a cash payment as provided
in that certain Rights Agreement dated as of January 6, 1999, between the
Company and National City Bank, a national banking association, as rights agent,
for fractions of a share other than one one-thousandth (1/1,000th) of a share or
any integral multiple thereof.
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IN WITNESS WHEREOF, we have executed this instrument in one or
more counterparts as of January 19, 1999.
ASSOCIATED ESTATES REALTY
CORPORATION, an Ohio corporation
/s/ Jeffrey I. Friedman
Jeffrey I. Friedman,
President and Chief Executive Officer
/s/ Martin A. Fishman
Martin A. Fishman, Secretary
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