<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 2, 1998
Charles E. Smith Residential Realty, Inc.
---------------------------------------------
(Exact name of registrant as specified in its
charter)
Maryland 1-13174 54-1681655
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(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
2345 Crystal Drive, Arlington, Virginia 22202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 920-8500
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
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Item 5. Other Events.
On December 2, 1998, the Board of Directors of the Company authorized
and declared a distribution of one right (a "Right") for each of its outstanding
shares of common stock, par value $.01 per share ("Common Stock"). The
distribution is payable as of December 14, 1998 (the "Record Date") to holders
of record of the Common Stock on that date. Each Right entitles the registered
holder thereof to purchase from the Company one one-thousandth of a share of
Series D Junior Participating Preferred Stock, par value $.01 per share, of the
Company (the "Series D Preferred Stock") at an initial purchase price of $108.00
(the "Purchase Price"), subject to certain adjustments. The description and
terms of the Rights will be set forth in a Rights Agreement, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and
First Union National Bank, as rights agent (the "Rights Agent").
The form of Rights Agreement between the Company and First Union
National Bank, as Rights Agent, specifying the terms of the Rights, which
includes (i) the form of Articles Supplementary for the Series D Junior
Participating Preferred Stock (Exhibit A thereto), (ii) the form of Summary of
Rights to Purchase Series D Junior Participating Preferred Stock (Exhibit B
thereto) and (iii) the form of Rights Certificate (Exhibit C thereto), is
attached hereto as an exhibit and incorporated herein by reference. The
following description of the Rights is qualified by reference to such exhibit.
Initially the Rights will not be exercisable, certificates will not be
sent to shareholders, and the Rights will automatically trade with the Common
Stock.
The Rights, unless earlier redeemed or exchanged by the Board of
Directors, become exercisable upon the close of business on the day (the
"Distribution Date") which is the earlier of (i) the tenth day following the
first public announcement (or, if the tenth day after such announcement occurs
before the Record Date, the close of business on the Record Date) that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired beneficial ownership or voting control of 15% or more of the
outstanding Common Stock of the Company or (ii) the tenth business day (or, if
the tenth day after such announcement occurs before the Record Date, the close
of business on the Record Date, or such later date as may be determined by the
Board of Directors prior to such time as any person or group of affiliated or
associated persons becomes an Acquiring Person) after the date of the
commencement or public announcement of a person's or group's intention to
commence a tender or exchange offer the consummation of which would result in
the acquisition of beneficial ownership or voting control of 15% or more of the
Company's outstanding Common Stock (even if no Common Stock is actually acquired
pursuant to such offer). Prior to these events, the Rights will not be
exercisable, will not be represented by a separate certificate, and will not be
transferable apart from the Common Stock, but instead will be evidenced, with
respect to any of the Common Stock certificates outstanding as of the Record
Date, by such Common Stock certificate itself. An Acquiring Person does not
include (A) the Company, (B) any subsidiary of the Company or (C) any employee
benefit plan of the Company or of any subsidiary of the Company, or any person
holding Common Stock for or pursuant to the terms of any such plan. Subject to
certain limitations set forth in more detail in the Rights Agreement, the
beneficial ownership requirements set forth in the Rights Agreement will not
apply to certain Exempt Shares (as such term is defined in the Rights Agreement)
held by Security Capital (as such term is defined in the Rights Agreement).
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Until the Distribution Date (or earlier redemption, exchange or
expiration of the Rights), new certificates for Common Stock issued after the
Record Date will contain a legend incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption, exchange or
expiration of the Rights), the surrender or transfer of any Common Stock
outstanding as of the Record Date also will constitute the transfer of the
Rights attaching to such Common Stock. As soon as practicable following the
Distribution Date, if any, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date, and such separate Rights
Certificates alone will evidence the Rights from and after the Distribution
Date.
The Rights will expire at the close of business on December 13, 2008
(the "Final Expiration Date"), unless earlier redeemed or exchanged by the
Company as described below.
The number of one one-thousandths of a share of Series D Preferred
Stock issuable upon exercise of the Rights is subject to certain adjustments
from time to time in the event of a share distribution on, or a subdivision,
combination or reclassification of, the Series D Preferred Stock. The Purchase
Price for the Rights is subject to adjustment in certain events.
Unless the Rights are earlier redeemed or exchanged, in the event that
a person or group of affiliated or associated persons becomes an Acquiring
Person, the Rights Agreement provides that each holder of record of a Right,
other than the Acquiring Person (whose Rights will thereupon become null and
void), will thereafter have the right to receive, upon payment of the Purchase
Price, that number of shares of Common Stock having a market value at the time
of the transaction equal to two times the Purchase Price.
In addition, unless the Rights are earlier redeemed or exchanged, in
the event that after a person or a group of affiliated or associated persons
becomes an Acquiring Person the Company were to be acquired in a merger or other
business combination (in which any shares are changed into or exchanged for
other securities or assets) or more than 50% of the assets or earning power of
the Company and its subsidiaries (taken as a whole) were to be sold or
transferred in one or a series of related transactions, the Rights Agreement
provides that proper provision will be made so that each holder of record of a
Right, other than the Acquiring Person (whose rights will thereupon become null
and void), will from and after such date have the right to receive, upon payment
of the Purchase Price, that number of shares of common stock of the acquiring
company having a market value at the time of such transaction equal to two times
the Purchase Price.
The Rights Agreement provides that, notwithstanding any provision of
the Rights Agreement to the contrary, no Right will be exercisable for a number
of shares of Common Stock that would cause the ownership limit set forth in the
Company's Articles of Incorporation (or any successor document) to be exceeded.
At any time after any person or group of affiliated or associated
persons becomes an Acquiring Person, the Board of Directors may issue Common
Stock in exchange for the Rights (other than Rights owned by the Acquiring
Person which will have become
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null and void), in whole or part, at an exchange ratio of one share of Common
Stock per Right (subject to adjustment).
The Rights Agreement provides that the Company may pay cash in lieu of
issuing fractional shares upon exercise or redemption of the Rights.
At any time on or prior to the earlier of (i) the close of business on
the tenth day after a public announcement that a person or group of affiliated
or associated persons has become an Acquiring Person (or, if the tenth day after
such announcement occurs before the Record Date, the close of business on the
Record Date, or such later date as may be authorized by the Board of Directors),
or (ii) the close of business on the Final Expiration Date, the Company may
redeem the Rights in whole, but not in part, at a price of $.005 per Right
("Redemption Price"), payable at the election of the Company in cash, Common
Stock or other consideration determined to be appropriate by the Board of
Directors. Following the effective time of the action of the Board of Directors
authorizing redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of the Rights will be to receive the
Redemption Price.
For as long as the Rights are then redeemable, the Company may amend
the Rights in any manner, including an amendment to extend the time period in
which the Rights may be redeemed; however, the Company cannot amend the Rights
with respect to the Redemption Price, the Final Expiration Date, the number of
one one-thousandths of a share of Series D Preferred Stock for which a Right is
exercisable or the Purchase Price. At any time when the Rights are not then
redeemable, the Company may amend the Rights in any manner that does not
materially adversely affect the interests of holders of the Rights as such.
Until a Right is exercised, the holder, as such, will have no rights as
a shareholder of the Company, including, without limitation, the right to vote
or to receive distributions.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group of affiliated or associated persons
that attempts to acquire the Company on terms not approved by the Board of
Directors. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors since the Rights may be redeemed
by the Company at $.005 per Right at any time until the close of business on the
tenth day (or such later date as described above) after a person or group has
obtained beneficial ownership or voting control of 15% or more of the voting
shares.
The Board of Directors has approved certain amendments to the
partnership agreement of Charles E. Smith Residential Realty L.P. to provide
certain rights to limited partners in the event any Rights are ever exercised.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
99.1 Form of Rights Agreement between Charles E. Smith Residential
Realty, Inc. and First Union National Bank, as Rights Agent.
The Rights Agreement includes (i) the form of Articles
Supplementary for the Series D Junior Participating Preferred
Stock (Exhibit A thereto), (ii) the form of Summary of Rights
to Purchase Series D Junior Participating Preferred Stock
(Exhibit B thereto) and (iii) the form of Rights Certificate
(Exhibit C thereto).
99.2 Form of Letter to Shareholders.
99.3 Press Release dated December 2, 1998.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
Date: December 8, 1998 By: /s/ W. D. MINAMI
---------------------------------------
Name: W. D. Minami
Title: Senior Vice President and
Chief Financial Officer of the
Registrant
By: /s/ STEVEN E. GULLEY
---------------------------------------
Name: Steven E. Gulley
Title: Vice President and Controller of
the Registrant
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description Page
- ------ ------------------- ----
<S> <C> <C>
99.1 Form of Rights Agreement between Charles E. Smith E-1
Residential Realty, Inc. and First Union National Bank,
as Rights Agent. The Rights Agreement includes (i)
the form of Articles Supplementary for the Series D Junior
Participating Preferred Stock (Exhibit A thereto), (ii) the form of
Summary of Rights to Purchase Series D Junior Participating
Preferred Stock (Exhibit B thereto) and (iii) the form of Rights
Certificate (Exhibit C thereto).
99.2 Form of Letter to Shareholders. E-2
99.3 Press Release dated December 2, 1998. E-3
</TABLE>
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Exhibit 99.1
FORM OF PROPOSED
RIGHTS AGREEMENT
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
and
FIRST UNION NATIONAL BANK
as Rights Agent
RIGHTS AGREEMENT
dated as of December __, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. CERTAIN DEFINITIONS.......................................................................1
SECTION 2. APPOINTMENT OF RIGHTS AGENT...............................................................7
SECTION 3. ISSUE OF RIGHTS CERTIFICATES..............................................................7
SECTION 4. FORM OF RIGHTS CERTIFICATES...............................................................9
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.........................................................10
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND
EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED,
DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.............................................11
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE;
EXPIRATION DATE OF RIGHTS.................................................................12
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS
CERTIFICATES..............................................................................14
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL
STOCK.....................................................................................15
SECTION 10. SERIES D PREFERRED STOCK RECORD DATE......................................................16
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS................................................................17
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR
NUMBER OF SHARES..........................................................................26
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER...................................................................26
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES...................................................29
SECTION 15. RIGHTS OF ACTION..........................................................................31
SECTION 16. AGREEMENT OF RIGHTS HOLDERS...............................................................31
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER...............................................................................32
SECTION 18. DUTIES OF RIGHTS AGENT....................................................................32
SECTION 19. COMPENSATION AND INDEMNIFICATION OF THE
RIGHTS AGENT..............................................................................35
SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
RIGHTS AGENT..............................................................................36
SECTION 21. CHANGE OF RIGHTS AGENT....................................................................36
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES.......................................................38
SECTION 23. REDEMPTION................................................................................38
SECTION 24. EXCHANGE..................................................................................39
SECTION 25. NOTICE OF CERTAIN EVENTS..................................................................40
SECTION 26. NOTICES...................................................................................41
SECTION 27. SUPPLEMENTS AND AMENDMENTS................................................................42
SECTION 28. SUCCESSORS................................................................................43
</TABLE>
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<TABLE>
<S> <C>
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD,
ETC.......................................................................................43
SECTION 30. BENEFITS OF THIS AGREEMENT................................................................43
SECTION 31. SEVERABILITY..............................................................................44
SECTION 32. GOVERNING LAW.............................................................................44
SECTION 33. COUNTERPARTS..............................................................................44
SECTION 34. DESCRIPTIVE HEADINGS......................................................................44
SECTION 35. LIMITATION OF OWNERSHIP...................................................................44
</TABLE>
EXHIBITS
EXHIBIT A Form Articles Supplementary of Charles E. Smith Residential
Realty, Inc. Classifying and Designating A Series of Preferred
Stock as Series D Junior Participating Preferred Stock and Fixing
Distribution and Other Preferences and Rights of such Series
EXHIBIT B Form of Summary of Rights
EXHIBIT C Form of Rights Certificate
ii
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RIGHTS AGREEMENT
Rights Agreement, dated as of December __, 1998 (this "Agreement"), between
CHARLES E. SMITH RESIDENTIAL REALTY, INC., a Maryland corporation (the
"Company"), and FIRST UNION NATIONAL BANK (the "Rights Agent").
WHEREAS, on December 2, 1998 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend of one
preferred share purchase right (a "Right") for each share of Common Stock (as
defined herein) of the Company outstanding at the Close of Business (as defined
herein) on the Record Date (as defined herein), and has authorized the issuance
of one Right with respect to each share of Common Stock of the Company issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribution Date (as defined herein), each Right
initially representing the right to purchase one one-thousandth of a share of
Series D Junior Participating Preferred Stock of the Company having the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms or conditions of
redemption set forth in the form of Articles Supplementary of Board of Directors
Classifying and Designating a Series of Preferred Stock as Series D Junior
Participating Preferred Stock and Fixing Distribution and Other Preferences and
Rights of such Series attached hereto as Exhibit A, upon the terms and subject
to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "Acquiring Person" shall mean any Person (as defined herein) who
or which, together with all Affiliates and Associates (as such terms are defined
herein) of such Person, shall be the Beneficial Owner (as defined herein) of 15%
or more of the shares of Common Stock then outstanding, but shall not include:
(i) the Company;
(ii) any Subsidiary of the Company; or
(iii) any employee benefit plan of the Company or any Subsidiary
of the Company, or any Person holding shares of Common Stock
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for or pursuant to the terms of any such plan to the extent, and only to
the extent, of such shares so held.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person"
as the result of an acquisition of shares of Common Stock by the Company which,
by reducing the number of shares of Common Stock outstanding, increases the
proportionate number of shares of Common Stock beneficially owned by such Person
to 15% or more of the shares of Common Stock of the Company then outstanding;
provided, however, that if a Person shall become the Beneficial Owner of 15% or
more of the Common Stock of the Company then outstanding by reason of share
purchases by the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional shares of Common Stock of the
Company, then such Person shall be deemed to be an "Acquiring Person" if such
Person is then the Beneficial Owner of 15% or more of the Common Stock then
outstanding. Notwithstanding the foregoing, if the Board of Directors of the
Company determines in good faith that a Person who would otherwise be an
"Acquiring Person", as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an "Acquiring Person", then such Person shall not
be deemed an "Acquiring Person" for any purposes of this Agreement unless and
until such Person shall again become an "Acquiring Person".
(b) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
(c) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act (as defined herein).
(d) "Agreement" shall mean this Rights Agreement as originally executed or
as it may from time to time be supplemented or amended pursuant to the
applicable provisions hereof.
(e) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether
or not in writing), or upon the exercise of conversion rights,
exchange rights, other rights (other than these Rights), warrants or
options, or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own", (A)
securities tendered
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pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; or (B)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant
to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose
of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act),
including 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 subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a revocable proxy
given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and (B) is not
also then reportable by such Person on Schedule 13D under the Exchange
Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of
this paragraph (e)) or disposing of any voting securities of the
Company;
provided, however, that nothing in this paragraph (e) shall cause a Person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition. Notwithstanding
anything contained in this paragraph (e), a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own" any Exempt Shares.
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(f) "Board" shall mean the Board of Directors of the Company.
(g) "Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking or trust institutions in the State of New York are
authorized or obligated by law or executive order to close.
(h) "Close of Business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
(i) "Common Stock" when used with reference to the Company shall mean the
shares of common stock, par value $.01 per share, of the Company. "Common Stock"
when used with reference to any Person other than the Company shall mean the
class of capital stock with the greatest aggregate voting power, or the class of
equity securities or other equity interests having power to control or direct
the management, of such Person.
(j) "Company" shall mean Charles E. Smith Residential Realty, Inc., a
Maryland corporation.
(k) "Distribution Date" shall mean the earlier of (i) the Close of Business
on the tenth day after the Stock Acquisition Date (or, if the tenth day after
the Stock Acquisition Date occurs before the Record Date, the Close of Business
on the Record Date), or (ii) the Close of Business on the tenth Business Day
(or, if such tenth Business Day occurs before the Record Date, the Close of
Business on the Record Date), or such specified or unspecified later date on or
after the Record Date as may be determined by action of the Board prior to such
time as any Person becomes an Acquiring Person, after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company or any employee benefit plan of the Company or of any Subsidiary of the
Company or any Person holding shares of Common Stock for or pursuant to the
terms of any such plan) is first published or sent or given within the meaning
of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if
upon consummation thereof, such Person would be the beneficial owner of 15% or
more of the outstanding shares of Common Stock.
(m) "Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) hereof.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, as in effect on the date of this Agreement.
(o) "Exchange Date" shall have the meaning set forth in Section 7(a)
hereof.
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(p) "Exempt Shares" shall mean, as to Security Capital Preferred Growth
Incorporated and any of its Affiliates and Associates controlled, directly or
indirectly, by Security Capital Group Incorporated (collectively, "Security
Capital") and any other Person that Beneficially Owns shares of Series A
Cumulative Convertible Redeemable Preferred Stock ("Series A Preferred Shares")
or shares of Common Stock on the Rights Dividend Declaration Date solely by
reason of Security Capital's Beneficial Ownership of Series A Preferred Shares
on the Rights Dividend Declaration Date, (i) in the event (a) Security Capital
or such other Person shall have acquired shares of Common Stock upon the
conversion of Series A Preferred Shares strictly in accordance with and
consistent with the provisions and limitations set forth in the Series A
Preferred Stock Purchase Agreement dated as of May 15, 1997 between Security
Capital Preferred Growth Incorporated and the Company (including, without
limitation, the Waiver of Ownership Limitations set forth in Exhibit D attached
thereto) and the Series A Preferred Articles Supplementary (as defined therein),
(b) such shares of Common Stock so acquired have been continuously since such
acquisition beneficially owned by Security Capital or such other Person and (c)
such shares of Common Stock so acquired and so beneficially owned represent 15%
or more of the shares of Common Stock at any time outstanding, then the portion
of such shares of Common Stock that represents in excess of 15% of the
outstanding shares of Common Stock, and (ii) shares of Common Stock acquired by
Security Capital or such other Person as a result of a stock dividend, stock
distribution or other recapitalization, in respect to Exempt Shares only,
whereby any Common Stock received by such Person is substantially proportional
to the amount of Common Stock owned by such Person prior to such transaction and
where such Common Stock is beneficially owned (without giving effect to the last
sentence of Section 1(e)) by such Person continuously thereafter. For purposes
of the determination of Exempt Shares, any shares of Common Stock sold,
transferred or otherwise disposed of shall be deemed to have been from Exempt
Shares, if any. Any disputes arising pursuant to this definition shall be
definitively and conclusively resolved by the Board, in its sole discretion.
(q) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(r) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(s) "Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
(t) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
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(u) "Purchase Price" shall have the meaning set forth in Section 4(a) and
11(a)(ii) hereof.
(v) "Record Date" shall mean the close of business on December 14, 1998.
(w) "Redemption Period" shall have the meaning set forth in Section 23(a)
hereof.
(x) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
(y) "Rights Agent" shall mean First Union National Bank.
(z) "Rights Certificate" shall have the meaning set forth in Section 3(d)
hereof.
(aa) "Rights Dividend Declaration Date" shall mean the close of business on
December 2, 1998.
(bb) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.
(cc) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(dd) "Section 13 Event" shall mean any event described in clauses (x), (y)
or (z) of Section 13(a) hereof.
(ee) "Securities Act" shall mean the Securities Act of 1933, as amended and
as in effect on the date of this Agreement.
(ff) "Series D Preferred Stock" shall mean shares of Series D Junior
Participating Preferred Stock of the Company.
(gg) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
(hh) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(ii) "Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
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(jj) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interests is owned, directly or indirectly, by such Person, or is
otherwise controlled by such Person.
(kk) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ll) "Summary Rights" shall have the meaning set forth in Section 3(a)
hereof.
(mm) "Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.
(nn) "Triggering Event" shall mean 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 hereof,
shall prior to the Distribution Date also be the holders of the Common Stock) in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable.
SECTION 3. ISSUE OF RIGHTS CERTIFICATES.
(a) As promptly as practicable following the Record Date, the Company will
send or deliver a copy of a Summary of Rights to Purchase Series D Preferred
Stock, in substantially the form attached hereto as Exhibit B (the "Summary of
Rights"), to each record holder of Common Stock as of the Close of Business on
the Record Date at the address of such holder shown on the records of the
Company. With respect to certificates for shares of Common Stock outstanding as
of the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates for the Common Stock and the registered holders of the Common
Stock shall also be the registered holders of the associated Rights. Until the
Distribution Date (or the earlier Expiration Date or Final Expiration Date), the
transfer of any certificate representing shares of Common Stock in respect of
which Rights have been issued shall also constitute the transfer of the Rights
associated with the shares of Common Stock represented thereby.
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(b) Rights shall be issued in respect of all shares of Common Stock issued
(whether originally issued or from the Company's treasury) after the Record Date
but prior to the earlier of the Distribution Date or the Expiration Date or the
Final Expiration Date. Rights shall also be issued to the extent provided in
Section 22 in respect of all shares of Common Stock which are issued (whether
originally issued or from the Company's treasury) after the Distribution Date
and prior to the Expiration Date. Certificates representing such shares of
Common Stock shall also be deemed to be certificates for Rights, and shall bear
the following legend (in addition to any other legends that may be required):
This Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Charles E.
Smith Residential Realty, Inc., a Maryland corporation (the
"Corporation") and First Union National Bank (the "Rights Agent"),
dated as of December __, 1998 (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of the Corporation.
Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no
longer be evidenced by this Certificate. The Corporation will mail to
the holder of this Certificate a copy of the Rights Agreement as in
effect on the date of mailing without charge after receipt of a
written request therefor.
Under certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an Acquiring
Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become null and
void. The Rights shall not be exercisable, and shall be null and void
so long as held, by a holder in any jurisdiction where the requisite
qualification of the issuance to such holder, or the exercise by such
holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any such certificate shall also constitute the transfer of the Rights
associated with the Common Stock represented thereby.
(c) Until the Distribution Date (i) the Rights will be evidenced (subject
to the provisions of paragraph (a) of this Section 3) by the certificates for
Common Stock registered in the names of the holders thereof (which certificates
for Common
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Stock shall also be deemed to be Rights Certificates) and not by separate Rights
Certificates, and (ii) the Rights will be transferable only in connection with
the transfer of the underlying shares of Common Stock (including a transfer to
the Company).
(d) As soon as practicable after the Distribution Date, the Rights Agent
upon notification thereof will send by first-class, insured, postage prepaid
mail, to each record holder of Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a rights certificate, in substantially the form of Exhibit C hereto
(the "Rights Certificate"), evidencing one Right for each share of Common Stock
so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Common Stock has been made
pursuant to Section 11 hereof, at the time of distribution of the Rights
Certificates, the Company shall make necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Right Certificates.
(e) Notwithstanding anything to the contrary set forth herein, if a timely
and proper exercise of a conversion right with respect to any Series A Preferred
Shares is delivered to the Company on or prior to the Distribution Date, the
shares of Common Stock issuable upon exercise of such conversion right shall be
deemed to have been issued prior to the Distribution Date, and any holder of a
share of Common Stock issued upon such exercise of such right shall be entitled
to receive the same number of Rights per share of Common Stock as if such holder
were a record holder of Common Stock as of the Close of Business on the
Distribution Date as provided in Section 3(d), even if issuance of shares of
Common Stock upon such exercise of such right occurs after the Distribution
Date.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall be substantially the same
as Exhibit C hereto and may have such marks of identification or designation and
such legends, summaries or endorsements printed thereon as the Company may deem
appropriate, and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever issued, shall be dated as of the Record Date, and on
their face shall entitle the holders thereof to purchase such number of one
one-thousandths of a share of Series D Preferred Stock as shall be set forth
therein at the price set forth therein (such
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exercise price per one one-thousandth of a share, the "Purchase Price"), but the
amount and type of securities purchasable upon exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(d) or Section 22
hereof 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 such Associate or Affiliate) 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 such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Board has determined is part of
an agreement, arrangement or understanding which has as a primary purpose or
effect avoidance of Section 7(e) hereof and any Rights Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this sentence,
shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Rights Agreement.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the Company by
its President, a Vice-President or the Chairman of the Board and countersigned
by the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer, in each case either manually or by facsimile signature, and have
affixed thereto the Company's seal or a facsimile thereof. The Rights
Certificates shall be countersigned, either manually or by facsimile signature,
by the Rights Agent and shall not be valid for any purpose unless so
countersigned (but it shall not be necessary for the same signatory to
countersign all of the Rights Certificates hereunder). In case any officer of
the Company who shall have signed any of the Rights Certificates shall cease to
be such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent,
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and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office or at offices designated as the appropriate
place for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE
OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED,
LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the earlier of the Expiration Date or Final
Expiration Date, any Rights Certificate or Certificates may be transferred,
split up, combined or exchanged for another Rights Certificate or Certificates,
entitling the registered holder to purchase a like number of one one-thousandths
of a share of Series D Preferred Stock (or following a Triggering Event, Common
Stock, other securities, cash, or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent designated for such purpose. Neither
the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have properly completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that
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may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
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 Rights Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed, or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE;
EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly and properly executed, to the
Rights Agent at the office of the Rights Agent designated for such purpose,
together with payment of the Purchase Price for each one one-thousandth of a
share of Series D Preferred Stock (or other securities, cash or other assets, as
the case may be) as to which the Rights are exercised, at or prior to the
earlier of (i) the close of business on December 13, 2008 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
hereof, (iii) the time at which such Rights are exchanged (the "Exchange Date")
as provided in Section 24 hereof, or (iv) the time at which the Rights expire
pursuant to Section 13(d) hereof (the earliest of (i), (ii), (iii) and (iv)
being herein referred to as the "Expiration Date").
(b) Each Right shall entitle the registered holder thereof to purchase one
one-thousandth of a share of Series D Preferred Stock, and the Purchase Price
for each one one-thousandth of a share of Series D Preferred Stock pursuant to
the exercise of a Right shall initially be $108.00, and shall be subject to
adjustment from time to time as provided in Sections 11 and 13 hereof and shall
be payable in lawful money of the United States of America in accordance with
paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly and properly
executed, accompanied by payment, with respect to each Right so exercised, of
the Purchase
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Price per one one-thousandth of a share of Series D Preferred Stock
(or Common Stock, other securities, cash or other assets, as the case may be) to
be purchased and an amount equal to any applicable transfer tax or governmental
charge in cash, or by certified check, cashier's check or bank draft payable to
the order of the Company, the Rights Agent shall, subject to Section 18(k)
hereof, thereupon promptly (i) (A) requisition from any transfer agent of the
shares of Series D Preferred Stock (or make available, if the Rights Agent is
the transfer agent) certificates for the total number of one one-thousandths of
a share of Series D Preferred Stock to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or
(B) if the Company shall have elected to deposit the total number of shares of
Series D Preferred Stock issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a share of Series D Preferred
Stock as are to be purchased (in which case certificates for the shares of
Series D Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary to comply with such request, (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 Rights Certificate, registered in such name or names
as may be designated by such holder and (iv) after receipt thereof, promptly
deliver such cash, if any, to or upon the order of the registered holder of such
Rights Certificate. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) 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
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<PAGE>
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Board has determined is part of
an agreement, arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e), shall become null and void without
any further action, and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to ensure
that the provisions of this Section 7(e) and Section 4(b) hereof are complied
with, but shall have no liability to any holder of Rights Certificates or other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
properly completed and signed the certificate contained in the form of election
to purchase set forth on the reverse side of the Rights Certificate surrendered
for such exercise, and (ii) provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or to any
of its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Rights Certificates to the Company, or shall, at the written
request of the Company, destroy such canceled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
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SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Series D Preferred
Stock (and following the occurrence of a Triggering Event, out of its authorized
and unissued shares of Common Stock and/or other securities or out of its
authorized and issued shares held in its treasury), the number of shares of
Series D Preferred Stock (and, following the occurrence of a Triggering Event,
shares of Common Stock and/or other securities) that, as provided in this
Agreement, including Section 11(a)(iii) hereof, will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) In the event the shares of Series D Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
upon the exercise of Rights become listed on any national securities exchange,
the Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all such shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with this Agreement, or
as soon as is required by law following the Distribution Date, as the case may
be, a registration statement under the Securities Act with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities, and (B) the Expiration Date. The Company
also shall take such action as may be appropriate under, or to ensure compliance
with, the securities or "blue sky" laws of the various states in connection with
the exercisability of the Rights. The Company may temporarily suspend, for a
period of time not to exceed ninety (90) days after the date set forth in clause
(i) of the first sentence of this Section 9(c), the exercisability of the Rights
in order to prepare and file such registration statement and permit it to become
effective. In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Upon any suspension of
exercisability of Rights referred to in this Section 9(c), the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall
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not be exercisable and shall be null and 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 shall not
have been obtained or be obtainable, or the exercise thereof shall not be
permitted under applicable law or a registration statement shall not have been
declared effective.
(d) Subject to Section 11(a)(iii) hereof, the Company covenants and agrees
that it will take all such action as may be necessary to ensure that all one
one-thousandths of a share of Series D Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and non-assessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates or of
any certificates for a number of one one-thousandths of a share of Series D
Preferred Stock (or Common Stock and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be required to pay
any transfer tax or charge which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance or
delivery of certificates for a number of one one-thousandths of a share of
Series D Preferred Stock (or Common Stock and/or other securities, as the case
may be) in a name other than that of, the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of one one-thousandths of a share of Series D
Preferred Stock (or Common Stock and/or other securities, as the case may be) in
a name other than that of the registered holder upon the exercise of any Rights
until any such tax or charge shall have been paid (any such tax or charge being
payable by the holder of such Rights Certificate at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax or
charge is due.
SECTION 10. SERIES D PREFERRED STOCK RECORD DATE.
Each Person in whose name any certificate for a number of one
one-thousandths of a share of Series D Preferred Stock (or Common Stock and/or
other securities, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of such
fractional shares of Series D Preferred Stock (or Common Stock and/or other
securities, as the case may be) represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes and charges) was made; provided, however, that if the
date of such surrender and payment is a date upon
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which the Series D Preferred Stock (or Common Stock and/or other securities as
the case may be) transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such shares (fractional or otherwise)
on, and such certificate shall be dated, the next succeeding Business Day on
which the Series D Preferred Stock (or Common Stock and/or other securities as
the case may be) transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND
KIND OF SHARES OR NUMBER OF RIGHTS.
The Purchase Price, the number and kind of shares covered by each Right and
the number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Series D Preferred Stock payable in
shares of Series D Preferred Stock, (B) subdivide the outstanding Series D
Preferred Stock, (C) combine the outstanding Series D Preferred Stock into a
smaller number of shares or (D) issue any shares of its capital stock in a
reclassification of the Series D Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification, and the number and kind of
shares of Series D Preferred Stock or the number and kind of shares of capital
stock issuable on such date, as the case may be, shall be proportionately
adjusted so that the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the aggregate adjusted Purchase Price then
in effect necessary to exercise a Right in full, the aggregate number and kind
of shares of Series D Preferred Stock or the number and kind of shares of
capital stock, as the case may be, which, if such Right had been exercised
immediately prior to such date and at a time when the Series D Preferred Stock
(or other capital stock, as the case may be) transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination, or reclassification. If an
event occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
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(ii) Subject to Sections 23 and 24 of this Agreement, in the event that any
Person, alone or together with its Affiliates and Associates, shall, at any time
after the Rights Dividend Declaration Date, become an Acquiring Person, unless
the event causing such Person to become an Acquiring Person is (x) a Section 13
Event or (y) an acquisition of shares of Common Stock pursuant to a cash tender
offer made pursuant to Section 14(d) of the Exchange Act for all outstanding
shares of Common Stock (other than shares of Common Stock beneficially owned by
the Person making the offer or by its Affiliates or Associates) at a price and
on terms determined by at least two-thirds of the Board, after receiving advice
from one or more investment banking firms, to be (a) fair to stockholders
(taking into account all factors which such members of the Board deem relevant
including, without limitation, prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed to realize maximum
value) and (b) otherwise in the best interests of the Company and its
stockholders, then promptly after the date of occurrence of a Section 11(a)(ii)
Event, proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof and payment of an amount equal to the then
current Purchase Price in accordance with the terms of this Agreement, in lieu
of a number of one one-thousandths of a share of Series D Preferred Stock, such
number of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the then number
of one one-thousandths of a share of Series D Preferred Stock for which a Right
was or would have been exercisable immediately prior to the first occurrence of
a Section 11(a)(ii) Event, whether or not such Right was then exercisable, and
(y) dividing that product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement except to the extent set forth in Section 13 thereof)
by 50% of the current market price per share of Common Stock (determined
pursuant to Section 11(d) hereof) on the date of such first occurrence (such
number of shares, the "Adjustment Shares").
(iii) The Company may at its option substitute for a share of Common Stock
issuable upon the exercise of Rights in accordance with the foregoing
subparagraph (ii) such number or fractions of shares of Series D Preferred Stock
having an aggregate market value equal to the current per share market price of
a share of Common Stock. In the event that the number of shares of Common Stock
which is authorized by the Company's Articles of Incorporation, as amended from
time to time, 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), the Board
shall, to the extent permitted by applicable law and to the extent permitted by
any material agreements or material instruments then in effect to which the
Company is a party, (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2) the
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Purchase Price (such excess, the "Spread"), and (B) with respect to each Right
(subject to Section 7(e) hereof), make adequate provision to substitute for some
or all of the Adjustment Shares, upon exercise of a Right and payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Common Stock or other equity securities of the Company (including, without
limitation, shares, or units of shares, of Series D Preferred Stock which the
Board has deemed to have the same value as shares of Common Stock) (such shares
of equity securities being herein called "Stock Equivalents"), (4) debt
securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board based upon the advice of an
investment banking firm selected by the Board; provided, however, if the Company
shall not have made adequate provision to deliver value pursuant to clause (B)
above within thirty (30) days following the later of (x) the first occurrence of
a Section 11(a)(ii) Event and (y) the date on which the Company's right of
redemption pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company
shall be obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock (to the
extent available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread.
If, upon the occurrence of a Section 11(a)(ii) Event, the Board shall
determine in good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of the
Rights, then if the Board so elects, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares (such
period, as it may be extended, the "Substitution Period"). To the extent that
action is to be taken pursuant to the preceding provisions of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all outstanding Rights, and (y) may suspend
the exercisability of the Rights until the expiration of the Substitution Period
in order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to the first sentence of
this Section 11(a)(iii) and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes
of this Section 11(a)(iii), the value of the Common Stock shall be the current
market price (as determined pursuant to Section 11(d) hereof) per share of the
Common Stock on the Section 11(a)(ii) Trigger Date and the value of any Stock
Equivalent shall be deemed to have the same value as the Common Stock on such
date. The Board may, but shall not be required to, establish procedures to
allocate
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the right to receive shares of Common Stock upon the exercise of the Rights
among holders of Rights pursuant to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Series D Preferred Stock entitling them
(for a period expiring within forty-five (45) calendar days after such record
date) to subscribe for or purchase Series D Preferred Stock (or shares having
the same preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms or conditions or
redemption as the shares of Series D Preferred Stock ("Equivalent Preferred
Stock") or securities convertible into Series D Preferred Stock at a price per
share of Series D Preferred Stock or per share of Equivalent Preferred Stock (or
having a conversion price per share of Series D Preferred Stock, if a security
convertible into Series D Preferred Stock) less than the current per share
market price of the Series D Preferred Stock (as defined in Section 11(d)) on
such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Series D Preferred Stock outstanding on such record date,
plus the number of shares of Series D Preferred Stock which the aggregate
offering price of the total number of shares of Series D Preferred Stock and/or
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which shall be the number
of shares of Series D Preferred Stock outstanding on such record date, plus the
number of additional shares of Series D Preferred Stock and/or Equivalent
Preferred Stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes. Shares of Series D Preferred Stock owned by or held for the account of
the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Series D Preferred Stock (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 quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Series D Preferred Stock, but
including any dividend payable in stock other than Series D Preferred Stock), or
subscription rights or warrants (excluding those referred to in Section 11(b)),
the Purchase Price
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<PAGE>
to be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the current per share market price of the Series
D Preferred Stock (as defined in Section 11(d)) on such record date, less the
fair market value (as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Series D Preferred Stock and the denominator of which
shall be such current per share market price of the Series D Preferred Stock.
Such adjustment shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the Purchase Price shall
again be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current market
price" of the Common Stock on any date shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the 30 consecutive
Trading Days (as defined herein) immediately prior to but not including such
date, and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the "current market price" per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices per share of Common
Stock for the ten (10) consecutive Trading Days immediately following but not
including such date; provided, however, that in the event that the current
market price of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (i) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into such Common Stock (other than the Rights), or (ii)
any subdivision, combination or reclassification of such Common Stock, and prior
to the expiration of the requisite thirty (30) Trading Day or ten (10) Trading
Day period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market price" shall
be appropriately adjusted to take into account ex-dividend trading. The closing
price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common Stock
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System or such
other system then in use, or, if on any such
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<PAGE>
date the shares of Common Stock are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the shares of Common Stock selected by the
Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith by
the Board shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business, or, if
the shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the term "Trading Day" shall mean a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking or trust institutions in the
State of New York are not authorized or obligated by law or executive order to
close. If the Common Stock is not publicly held or not listed or traded,
"current market price" shall mean the fair value per share as determined in good
faith by the Board, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current market
price" per share of Series D Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in clause (i) of this Section
11(d) (other than the last sentence thereof). If the current market price per
share of Series D Preferred Stock cannot be determined in the manner provided
above or if the Series D Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section 11(d), the "current
market price" per share of Series D Preferred Stock shall be conclusively deemed
to be an amount equal to 1,000 (as such number may be appropriately adjusted for
such events as stock splits, stock dividends and recapitalizations with respect
to the Common Stock occurring after the date of this Agreement) multiplied by
the current market price per share of the Common Stock. If neither the Common
Stock nor the Series D Preferred Stock is publicly held or so listed or traded,
"current market price" per share of the Series D Preferred Stock shall mean the
fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. For all purposes of this Agreement, the
"current market price" of one one-thousandth of a share of Series D Preferred
Stock shall be equal to the "current market price" of one share of Series D
Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in such price; provided,
however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a share of Common Stock or
other share or one one-millionth of a share of Series D Preferred Stock, as the
case may be.
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Notwithstanding the first sentence of this Section 11(e), an adjustment required
by this Section 11 shall be made no later than the earlier of (i) three years
from the date of the transaction which requires such adjustment or (ii) the
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than Series
D Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Series D Preferred Stock
contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and
the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Series
D Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Series D Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Series D Preferred Stock (calculated to the nearest one
one-millionth) obtained by (i) multiplying (x) the number of one one-thousandths
of a share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-thousandths of a share of Series D Preferred Stock issuable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a share of Series D Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record
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date for the adjustment, and, if known at the time, the amount of the adjustment
to be made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates have been
issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a share of Series D Preferred Stock issuable
upon the exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per one
one-thousandth of a share and the number of one one-thousandths of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then-par value, if any, of the number of one
one-thousandths of a share of Series D Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and non-assessable such number of one one-thousandths
of a share of Series D Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of one one-thousandths of a share of Series D Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-thousandths of a share of Series D Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares
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(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that the Board in its sole discretion shall determine to be advisable
in order that any (i) consolidation or subdivision of the Series D Preferred
Stock, (ii) issuance wholly for cash of any shares of Series D Preferred Stock
at less than the current market price, (iii) issuance wholly for cash of shares
of Series D Preferred Stock or securities which by their terms are convertible
into or exchangeable for Series D Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to hereinabove in this Section
11, hereafter made by the Company to holders of its Series D Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger, sale or transfer there are any rights, warrants or
other instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger, sale or transfer, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 27 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the
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outstanding shares of Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, the number of Rights associated
with each share of Common Stock then outstanding, or issued or delivered
thereafter but prior to the Distribution Date, shall be proportionately
adjusted so that the number of Rights thereafter associated with each share of
Common Stock following any such event shall equal the result obtained by
multiplying the number of Rights associated with each share of Common Stock
immediately prior to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of Common Stock outstanding immediately following the occurrence of
such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR
NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts and computations accounting for such
adjustment, (b) promptly file with the Rights Agent and with each transfer agent
for the Series D Preferred Stock and the Common Stock a copy of such certificate
and (c) mail or deliver a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 25
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of any adjustment unless and until it shall have received such
certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER
OF ASSETS OR EARNING POWER.
(a) Subject to Section 23 of this Agreement, in the event that, following
the Stock Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), and the Company shall not be the continuing or surviving corporation of
such consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or
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a series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case (except as may be contemplated by
Section 13(d) hereof), proper provision shall be made so that: (i) each holder
of a Right, except as provided in Section 7(e) hereof, shall, upon the
expiration of the Redemption Period (as defined in Section 23(a)), thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, non-assessable and freely tradable
shares of Common Stock of the Principal Party (as defined herein), not subject
to any liens, encumbrances, rights of first refusal or other adverse claims, as
shall be equal to the result obtained by (1) multiplying the then current
Purchase Price by the number of one one-thousandths of a share of Series D
Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
one one-thousandths of a share of Series D Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and (2) dividing that product (which product, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by 50% of the current
market price per share of the shares of Common Stock of such Principal Party on
the date of consummation of such Section 13 Event (or the fair market value on
such date of other securities or property of the Principal Party, as provided
for herein); (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof (other than Sections 11(a)(ii)
and 11(a)(iii)) shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) and Section 11(a)(iii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y)
of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
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Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to
such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized shares of its
Common Stock which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of any such Section 13 Event, the
Principal Party will:
(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,
and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the
Expiration Date;
(ii) 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;
(iii) use its best efforts to obtain any necessary regulatory
approvals in respect of the securities purchasable upon exercise
of outstanding Rights; and
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(iv) use its best efforts, if such Common Stock of the Principal
Party shall be listed or admitted to trading on the New York
Stock Exchange or on another national securities exchange, to
list or admit to trading (or continue the listing of) the Rights
and the securities purchasable upon exercise of the Rights on the
New York Stock Exchange or such securities exchange, or, if the
securities of the Principal Party purchasable upon exercise of
the Rights shall not be listed or admitted to trading on the New
York Stock Exchange or a national securities exchange, to cause
the Rights and the securities purchasable upon exercise of the
Rights to be reported by such other system then in use.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a) hereof.
(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if (i) such transaction is consummated with a Person or Persons
(or a wholly owned subsidiary of any such Person or Persons) who acquired shares
of Common Stock pursuant to a cash tender offer for all outstanding shares of
Common Stock which complies with the provisions of Section 11(a)(ii) hereof,
(ii) the price per share of Common Stock offered in such transaction is not less
than the price per share of Common Stock paid to all holders of Common Stock
whose shares were purchased pursuant to such cash tender offer and (iii) the
form of consideration being offered to the remaining holders of shares of Common
Stock pursuant to such transaction is the same as the form of consideration paid
pursuant to such cash tender offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights except
prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of the whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing
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price for any day shall be the last sale price, or, in case no such sale takes
place on such day, the average of the high bid and low asked prices, in either
case as reported by the New York Stock Exchange or, if the Rights are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading, or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board. If on any such date no such market
maker is making a market in the Rights the fair value of the Rights on such date
as determined in good faith by the Board shall be used. In the event the Rights
are listed or admitted to trading on a national securities exchange, the closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the high bid and low asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to the national securities exchange on
which the Rights are listed or admitted to trading.
(b) The Company shall not be required to issue fractions of shares of
Series D Preferred Stock (other than fractions which are integral multiples of
one one-thousandth of a share of Series D Preferred Stock) upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Series
D Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Series D Preferred Stock). In lieu of fractional
shares of Series D Preferred Stock that are not integral multiples of one
one-thousandth of a share of Series D Preferred Stock, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one one-thousandth of a share of Series D Preferred
Stock. For purposes of this Section 14(b), the current market value of one
one-thousandth of a share of Series D Preferred Stock shall be one
one-thousandth of the closing price of a share of Series D Preferred Stock (as
determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) Following the occurrence of one of the events specified in Section 11
giving rise to the right to receive Common Stock, Stock Equivalents or other
securities upon the exercise of a Right, the Company shall not be required to
issue fractions of shares of Common Stock, Stock Equivalents or other securities
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock, Stock Equivalents or other securities. In
lieu of fractional shares of Common Stock, Stock Equivalents or other securities
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock, Stock
Equivalents or other securities. For purposes of this Section 14(c), the current
market value of one share of Common
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Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
SECTION 15. RIGHTS OF ACTION.
All rights of action in respect of this Agreement, except the rights of
action vested in the Rights Agent pursuant to Section 18 and Section 19 hereof,
are vested in the respective registered holders of the Rights Certificates (and,
prior to the Distribution Date, the registered holders of the Common Stock); and
any registered holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, in his own behalf and for his own benefit, enforce, and
may institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of, the obligations hereunder of any Person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS.
Every holder of a Right by accepting the same consents and agrees with the
Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office of
the Rights Agent designated for such purposes, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate form of assignment and
the certificate contained therein duly completed and executed;
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(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the Person in whose name the Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be affected by any notice to the contrary; and
(d) Notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree, judgment or ruling (whether interlocutory or final) 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 government authority, prohibiting
or otherwise restraining performance of such obligation; provided, however, the
Company must use its best efforts to have any such order, decree or ruling
lifted or otherwise overturned as soon as possible.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER.
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the Series D
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
SECTION 18. DUTIES OF RIGHTS AGENT.
The Rights Agent undertakes only the duties and obligations expressly
imposed by this Agreement upon the following terms and conditions, by all of
which
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the Company and the holders of Rights Certificates, by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent, and the
Rights Agent shall incur no liability, for or in respect of any action taken or
omitted by it in good faith and in accordance with such advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering or omitting to take any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any person believed by the Rights Agent to be any one of
the Chairman of the Board, President, Chief Executive Officer, a Vice President,
the Treasurer or the Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization to the Rights Agent, and the
Rights Agent shall incur no liability, for or in respect of any action taken,
omitted or suffered in good faith by it under the provisions of this Agreement
in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith, or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent is serving as an administrative agent and shall not be
under any responsibility in respect of, the validity of any provision of this
Agreement or the execution and delivery of this Agreement (except the due
execution hereof by the Rights Agent) or in respect of the validity or execution
of any Rights Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition contained
in this Agreement or in any Rights Certificate; nor shall it be responsible for
any change in the exercisability of the Rights (including the Rights becoming
null and void pursuant to Section 7(e) hereof) or any adjustment required under
any of the provisions hereof or responsible for the manner, method, or amount of
any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act
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hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or shares of Series D
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or shares of Series D
Preferred Stock will, when so issued, be validly authorized and issued, fully
paid and non-assessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed by the Rights Agent to be any one of the Chairman of the
Board, the President, Chief Executive Officer, a Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken, omitted to be taken or suffered to be taken by
it in good faith in accordance with instructions of any such officer or for
any delay in acting while awaiting instructions. Any application by the
Rights Agent for written instructions from the Company may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken,
suffered or omitted by the Rights Agent under this Agreement and the date on
or after which such action shall be taken or suffered or such omission shall
be effective. The Rights Agent shall not be liable for any action taken or
suffered by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the
date any officer of the Company actually receives such application, unless
any such officer shall have 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 shall have received written instruction in
response to such application specifying the action to be taken, suffered or
omitted.
(h) The Rights Agent and any stockholder, affiliate, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other Person or legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable
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for any act, default, neglect, or misconduct of any such attorneys or agents or
for any loss to the Company resulting from any such act, default, neglect, or
misconduct; provided, however, the Rights Agent was not grossly negligent in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been properly completed or indicates an affirmative response to clause 1 and/or
2 thereof, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
(l) The Rights Agent undertakes only the express duties and obligations
imposed on it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent.
SECTION 19. COMPENSATION AND INDEMNIFICATION OF THE
RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent, its officers, employees, agents and directors for,
and to hold each of them harmless against, any loss, liability, or expense,
incurred without gross negligence, bad faith or willful misconduct on the part
of the Rights Agent, for any action taken, suffered or omitted by the Rights
Agent or such other indemnified party in connection with the acceptance and
administration of this Agreement and the exercise of its duties hereunder,
including but not limited to the costs and expenses of defending against any
claim of liability in the premises. The indemnity provided for hereunder shall
survive the expiration of the Rights and the termination of this Agreement.
(b) The Rights Agent shall be authorized and protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement or the exercise of its
duties hereunder in reliance upon any Rights Certificate or certificate for
Common Stock or for other
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securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons.
(c) Anything in this Agreement to the contrary notwithstanding, in no event
shall the Rights Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Rights Agent has been advised of the likelihood of such loss or damage
and regardless of the form of the action unless such loss or damage results from
the gross negligence, bad faith or willful misconduct of the Rights Agent.
SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF NAME
OF RIGHTS AGENT.
(a) Any Person into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any Person resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any Person succeeding to the shareholder services
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof.
(b) In case at any time the name of the Rights Agent shall be changed and
at any such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
SECTION 21. CHANGE OF RIGHTS AGENT.
(a) The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon thirty (30) days' notice in
writing mailed to the Company and to each transfer agent of the Common Stock and
the Series D Preferred Stock by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. The Company may remove the
Rights Agent or any successor Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each
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transfer agent of the Common Stock and Series D Preferred Stock by registered
or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor
to the Rights Agent. If the Company shall fail to make such appointment
within a period of thirty (30) days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Rights
Certificate (who shall, with such notice, submit his Rights Certificate for
inspection by the Company), then the registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (i) a Person organized
and doing business under the laws of the United States or of the State of
Maryland or New York (or of any other state of the United States so long as
such Person is authorized to do business in the State of Maryland or New
York), in good standing, having an office in the State of Maryland or New
York which is authorized under such laws to exercise corporate trust power
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 $100 million or (ii) an Affiliate of such a
Person described in clause (a). After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as
if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Stock and the Series D Preferred
Stock, and mail a notice thereof in writing to the registered holders of the
Rights Certificates. Failure to give any notice provided for in this Section
21, however, or any defect therein, shall not affect the legality or validity
of the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
(b) In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
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SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change in the Purchase Price per share and the number or kind of
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date (other than upon exercise of a Right) and prior
to the redemption or expiration of the Rights, the Company (a) shall, with
respect to shares of Common Stock so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
SECTION 23. REDEMPTION.
(a) The Board may, at its option, at any time during the period commencing
on the Rights Dividend Declaration Date and ending on the earlier of (i) the
Close of Business on the tenth day following the Stock Acquisition Date (or, if
the Stock Acquisition Date shall have occurred prior to the Record Date, the
Close of Business on the tenth day following the Record Date), as such period
may be extended or shortened in the discretion of the Board (the "Redemption
Period") or (ii) the Close of Business on the Final Expiration Date, cause the
Company to redeem all but not less than all the then outstanding Rights at a
redemption price of $.005 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"); provided, however, that, if the Board
authorizes redemption of the Rights or a change in the Redemption Period on or
after the time a Person becomes an Acquiring Person, then such authorization
shall require the concurrence of two-thirds of the Board. If, following the
occurrence of a Stock Acquisition Date and following the expiration of the
Company's right of redemption hereunder (i) a Person who is an Acquiring Person
shall have transferred or otherwise disposed of a number of shares of Common
Stock in one transaction or series of transactions, not directly or indirectly
involving the Company or any of its Subsidiaries, which did
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not result in the occurrence of a Triggering Event such that such Person is
thereafter a Beneficial Owner of 10% or less of the outstanding shares of Common
Stock, (ii) there are no other Persons, immediately following the occurrence of
the event described in clause (i), who are Acquiring Persons, and (iii) the
Board, by a vote of two-thirds of the Board, shall so approve, then the
Company's right of redemption shall be reinstated and thereafter be subject to
the provisions of this Section 23. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event or a Section 13 Event until such time as
the Company's right of redemption hereunder has expired. The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock (based on the
current market price of the Common Stock at the time of redemption) or any other
form of consideration deemed appropriate by the Board.
(b) Immediately upon the action of the Board ordering the redemption of the
Rights, evidence of which shall have been filed with the Rights Agent, and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. Promptly after the action of the Board
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights by
mailing such notice to all such holders at 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 Stock. 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.
SECTION 24. EXCHANGE.
(a) The Board may, at its option, at any time after any Person becomes an
Acquiring Person, exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become null and void pursuant
to the provisions of Section 11(a)(ii) or Section 7(e) hereof) for shares of
Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio").
(b) Immediately upon the action of the Board 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 shall terminate
and the only right thereafter of a holder of such Rights shall be to receive
that number of shares of Common Stock equal to the number of such Rights held by
such holder
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multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of Common Stock for Rights
will be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 11(a)(ii) or Section 7(e) hereof) held by each holder
of Rights.
(c) In the event that there shall not be sufficient Common Stock 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 all such
action as may be necessary to authorize additional shares of Common Stock for
issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional shares would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole share of Common Stock. For
the purposes of this paragraph (d), the current market value of a whole share of
Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the Distribution
Date (i) to pay any dividend payable in stock of any class to the holders of
Series D Preferred Stock or to make any other distribution to the holders of
Series D Preferred Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings) or (ii) to offer to the holders of Series D
Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Series D Preferred Stock or shares of stock of any class or
any other securities, rights or options, or (iii) to effect any reclassification
of its Series D Preferred Stock (other than a reclassification involving only
the subdivision of outstanding Series D Preferred Stock), or (iv) to effect any
consolidation or merger into or with, or to effect any sale or other transfer
(or to permit one or more of its subsidiaries to effect any sale or other
transfer), in one or more transactions, of more than 50% of the assets or
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earning power of the Company and its subsidiaries (taken as a whole) to, any
other Person, or (v) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Series D Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Series D
Preferred Stock for purposes of such action and in the case of any such other
action, at least twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
shares of Series D Preferred Stock whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any such
case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the occurrence of such event which shall specify
the event and the consequences of the event to holders of Rights under Section
11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Series D
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate other securities.
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 Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
2345 Crystal Drive, 10th Floor
Arlington, Virginia 22202
Attention: Robert D. Zimet
---------------------------------
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
FIRST UNION NATIONAL BANK
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1525 West W.T. Harris Blvd., 3C3, NC-1153
Charlotte, North Carolina 28288-1153
Attention: Shareholder Services Group
---------------------------------
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to any such holder at the address of such holder as shown on the
registry books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS.
Prior to the Distribution Date and subject to the penultimate sentence
of this Section 27, the Company may, and the Rights Agent shall, if the
Company so directs, supplement or amend any provision of this Agreement
without the approval of any holders of certificates representing shares of
Common Stock. From and after the Distribution Date and subject to the
penultimate sentence of this Section 27, the Company may, and the Rights
Agent shall at any time and from time to time, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of
Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen
any time period hereunder or (iv) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person or an Affiliate or Associate of
any such Person); provided, however, that this Agreement may not be
supplemented or amended (A) to lengthen a time period relating to when the
Rights may be redeemed at such time as the Rights are not then redeemable,
(B) to lengthen any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of any such Person) or (C) to change any rights or
duties of the Rights Agent under this Agreement without the prior approval of
the Rights Agent (which approval shall not be unreasonably withheld and shall
be conclusively evidenced by the Rights Agent's execution of any such
supplement or amendment). Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment. Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall
be made which changes the Redemption Price, the Final Expiration Date, the
number of one one-thousandths of a share of Series D Preferred Stock for
which a Right is exercisable or the Purchase Price; provided, however, that
at any time prior to the Distribution Date, the Company may amend this
Agreement to increase the Purchase Price. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the
interests of the holders of shares of Common Stock.
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SECTION 28. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD,
ETC.
For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board (with, where specifically provided for herein,
the concurrence of two-thirds of the Directors) shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board (with, where specifically provided for herein,
the concurrence of two-thirds of the Directors) or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including without limitation a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board (with, where specifically provided for herein, the
concurrence of two-thirds of the Directors) in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other Persons, and (y) not subject any director to any liability
to the holders of the Rights.
SECTION 30. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, registered holders of Common Stock).
43
<PAGE>
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 shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board determines in its good faith
judgment that severing the invalid language from this Agreement would materially
and adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the Close of Business on the tenth day following the date of such
determination by the Board.
SECTION 32. GOVERNING LAW.
This Agreement, each Right and each Rights Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of Maryland
and for all purposes shall be governed by and construed in accordance with laws
of such State.
SECTION 33. COUNTERPARTS.
This Agreement may be executed in any number of counterparts. It shall not
be necessary that the signature of or on behalf of each party appears on each
counterpart, but it shall be sufficient that the signature of or on behalf of
each party appears on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of or on behalf of all of the
parties.
SECTION 34. DESCRIPTIVE HEADINGS.
Descriptive headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.
SECTION 35. LIMITATION OF OWNERSHIP.
Notwithstanding anything to the contrary in this Agreement, a Person's
ability to acquire shares of Series D Preferred Stock and/or Common Stock of the
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Company under this Agreement shall be limited to only such number of shares of
Series D Preferred Stock and/or Common Stock, as the case may be, as would not
cause any such Person or any other Person (taking into account the attribution
rules of the Internal Revenue Code) to exceed the ownership limits set forth in
the Articles of Incorporation of the Company.
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
ATTEST: CHARLES E. SMITH RESIDENTIAL
REALTY, INC.
By: By:
-------------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: FIRST UNION NATIONAL BANK
By: By:
-------------------------------- --------------------------------
Name: Name:
Title: Title:
46
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EXHIBIT A
Series D Junior Participating Preferred Stock
ARTICLES SUPPLEMENTARY
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
----------------------------
Articles Supplementary of Charles E. Smith Residential Realty, Inc.
Classifying and Designating a Series of
Preferred Stock as
Series D Junior Participating
Preferred Stock and
Fixing Distribution and Other Preferences
and Rights of Such Series
----------------------------
Dated as of December __, 1998
<PAGE>
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
----------------------------
Articles Supplementary of Charles E. Smith Residential Realty, Inc.
Classifying and Designating a Series of
Preferred Stock as
Series D Junior Participating
Preferred Stock and
Fixing Distribution and Other Preferences
and Rights of Such Series
----------------------------
Charles E. Smith Residential Realty, Inc., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland pursuant to Section 2-208 of the Annotated Code of Maryland
that:
FIRST: Pursuant to authority granted by the Amended and Restated
Articles of Incorporation of the Corporation, the Board of Directors on December
2, 1998 adopted a resolution designating and classifying 72,980 unissued and
unclassified shares of capital stock as Series D Junior Participating Preferred
Stock.
SECOND: The following is a description of the Series D Junior
Participating Preferred Stock, including the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption thereof:
Section 1. Number of Shares and Designation. This class of
preferred stock shall be designated as Series D Junior Participating Preferred
Stock and the number of shares which shall constitute such series shall not be
more than 72,980 shares, par value $0.01 per share, which number may be
increased or decreased from time to time by resolution of the Board of Directors
and by the filing of articles supplementary in accordance with the Maryland
General Corporation Law; provided, that no decrease shall reduce the number of
shares of Series D Junior Participating Preferred Stock to a number less than
the number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series D Junior Participating Preferred Stock.
Section 2. Definitions. For purposes of the Series D Junior
Participating Preferred Stock, the following terms shall have the meanings
indicated:
"Adjustment Number" shall have the meaning set forth in Section
6(A).
"Average Market Value" shall have the meaning set forth in Section
8.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series D
Preferred Shares.
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"Business Day" shall mean any day other than a Saturday, Sunday or
a day on which state or federally chartered banking institutions in New
York City, New York are not required to be open.
"Common Stock" shall mean the shares of common stock, par value
$0.01 per share, of the Corporation.
"Common Adjustment" shall have the meaning set forth in Section
6(A).
"Parity Shares" shall have the meaning set forth in Section 5(A).
"Quarterly Dividend Payment Date" shall mean the 15th day (or if
such day is not a Business Day, the next Business Day thereafter) of
February, May, August and November of each year; commencing February
15, 1999.
"Rights Declaration Date" shall mean December 2, 1998.
"Senior Preferred Stock" shall mean preferred stock of the
Corporation ranking prior and superior to the shares of Series D
Preferred Stock with respect to dividends and distributions of the
Corporation.
"Series D Junior Liquidation Preference" means an amount per
Series D Preferred Share equal to $108,000.
"Series D Preferred Shares" shall mean the shares of Series D
Junior Participating Preferred Stock.
Section 3. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders
of any Senior Preferred Stock (or any similar stock) of the
Corporation, the holders of shares of Series D Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for payment of dividends, quarterly
dividends payable in cash on the Quarterly Dividend Payment Date,
commencing on the first Quarterly Dividend Payment Date after first
issuance of a share or fraction of a share of Series D Preferred Stock,
in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $10.00 or (b) subject to the provision for adjustment
hereinafter set forth, one thousand (1,000) times the aggregate per
share amount of all cash dividends, and one thousand (1,000) times the
aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions (other than a dividend payable in shares of
Common Stock of the Corporation, or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise)) declared on
the Common Stock, since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series D Preferred Stock. In the event the Corporation shall at any
time after December 2, 1998 (the "Rights Declaration Date") (i) declare
or pay any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each
such case the amount to which holders of shares of Series D Preferred
Stock were entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by
a
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<PAGE>
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series D Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on any Common
Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $10.00 per share on the Series D Preferred
Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series D Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares
of Series D Preferred Stock, unless the date of issue of such shares is
prior to the record date set for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for
the determination of holders of shares of Series D Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series D Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among
all such shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of Series D
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than
60 days prior to the date fixed for the payment thereof.
Section 4. Voting Rights. The holders of Series D Preferred Shares
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series D Preferred Stock shall entitle the holder
thereof to one thousand (1,000) votes on all matters submitted to a
vote of the stockholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of shares of
Series D Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided by law, the holders of
shares of Series D Preferred Stock and the holders of shares of Common
Stock and any other stock of the Corporation having general voting
rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
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<PAGE>
(C) Except as set forth herein, holders of Series D
Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 5. Certain Restrictions.
(A) Whenever dividends or distributions payable on the
Series D Preferred Stock as provided in Section 3 are not paid,
thereafter and until such dividends and distributions, whether or not
declared, on shares of Series D Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, or redeem or purchase or otherwise acquire
for consideration any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series D Preferred Stock; or
(ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) (the "Parity Shares") with the Series D Preferred
Stock, except dividends paid ratably on the Series D
Preferred Stock and all such Parity Shares on which dividends
are payable in proportion to the total amounts to which the
holders of all such shares are then entitled; or
(iii) redeem or purchase or otherwise acquire for
consideration shares of any Parity Shares, provided that the
Corporation may at any time redeem, purchase or otherwise
acquire shares of any such Parity Shares in exchange for
shares of any stock of the Corporation ranking junior (either
as to dividends or upon dissolution, liquidation or winding
up) to the Series D Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series D Preferred Stock, or any
Parity Shares, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 5, purchase or otherwise acquire such
shares at such time and in such manner.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, no distribution shall be
made to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series
D Preferred Stock unless, prior thereto, the holders of shares of
Series D Preferred Stock shall
4
<PAGE>
have received (i) $108,000 per share, plus (ii) any unpaid dividends
and distributions accrued and unpaid thereon, whether or not declared,
to the date of such payment (the "Series D Junior Liquidation
Preference"). Following the payment of the full amount of the Series D
Junior Liquidation Preference, no additional distributions shall be
made to the holders of Series D Preferred Stock unless, prior thereto,
the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series D Junior Liquidation Preference by (ii) 1,000
(as appropriately adjusted as set forth in subparagraph (C) below to
reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in
clause (ii) immediately above as so adjusted being referred to as the
"Adjustment Number"). Following the payment of the full amount of the
Series D Junior Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series D Preferred Stock and
Common Stock, respectively, holders of Series D Preferred Stock and
holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to one (1) with respect to such Series D
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series D Junior
Liquidation Preference and the liquidation preferences of all other
series of preferred stock, if any, which rank on a parity with the
Series D Preferred Stock, then such remaining assets shall be
distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences. In the event, however,
that there are sufficient assets available to permit payment in full of
the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment Number
in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, Etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series D Preferred Stock shall at the same time be similarly exchanged or
changed into such stock or securities, cash and/or any other property in an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to one thousand (1,000) times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged. In the event
the Corporation shall at any time after the Rights Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series D
Preferred Stock (as previously adjusted, if any prior adjustment has occurred)
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares
5
<PAGE>
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. Redemption at the Option of the Board of Directors.
The outstanding shares of Series D Preferred Stock may be redeemed as a whole,
but not in part, at any time, or from time to time, at the option of the Board
of Directors, at a cash price per share equal to 105 percent of (i) the product
of the Adjustment Number times the Average Market Value (as such term is
hereinafter defined) of the Common Stock, plus (ii) all dividends which on the
redemption date are payable on the shares to be redeemed and have not been paid,
earned or declared and a sum sufficient for the payment thereof set apart,
without interest. The "Average Market Value" is the average of the closing sale
prices of the Common Stock during the 30 day period immediately preceding the
date before the redemption date on the Composite Tape for New York Stock
Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934, as amended, on which such stock is listed,
or, if such stock is not listed on any such exchange, the average of the closing
sale prices with respect to a share of Common Stock during such 30 day period,
as quoted on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the fair market value of the Common Stock as determined by the Board
in good faith.
Section 9. Shares To Be Retired. Any shares of Series D Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of preferred stock of the Corporation and may be reissued as part of a
new series of preferred stock to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on issuance set
forth herein, or reclassified as Common Stock or other stock of the Corporation
as provided in the Corporation's Articles of Incorporation.
Section 10. Ranking. Notwithstanding anything contained herein to
the contrary, the Series D Preferred Stock shall rank junior to all other series
of the Corporation's preferred stock as to voting rights, the payment of
dividends and the distribution of assets in liquidation, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. The Articles of Incorporation of the
Corporation shall not be further amended, nor shall an Articles Supplementary be
filed or amended, in any manner which would materially alter or change the
powers, preferences or special rights of the Series D Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least a
majority of the outstanding shares of Series D Preferred Stock, voting
separately as a class.
Section 11. Fractional Shares. Series D Preferred Stock may be
issued in fractions of a share which shall entitle the holders, in proportion to
such holders' fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series D Preferred Stock.
[Page Break Intentionally Inserted]
6
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be duly executed by its President and attested by its Secretary
this __ day of December, 1998.
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
By:
--------------------------------------
By: Ernest A. Gerardi, Jr.
Its: President
I, Robert D. Zimet, Secretary, hereby acknowledge on behalf of Charles
E. Smith Residential Realty, Inc. that the foregoing Articles Supplementary are
the corporate act of said corporation under the penalties of perjury.
Attest:
- -----------------------------
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EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE
SERIES D JUNIOR PARTICIPATING PREFERRED STOCK
On December 2, 1998, the Board of Directors of CHARLES E. SMITH
RESIDENTIAL REALTY, INC. (the "Company") declared a dividend distribution of one
right ("Right") for each outstanding share of common stock (the "Common Stock")
of the Company. The distribution is payable to stockholders of record on
December 14, 1998. Each Right, when exercisable, entitles the registered holder
to purchase from the Company one one-thousandth of a share of Series D Junior
Participating Preferred Stock ("Preferred Stock") at a price of $108.00 per one
one-thousandth share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and FIRST UNION NATIONAL BANK, as Rights
Agent (the "Rights Agent").
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates evidencing
the Rights will be distributed. The Rights will separate from the Common Stock
and a distribution of Rights Certificates (as defined below) will occur upon the
earlier to occur of (i) 10 days following a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date") or (ii) 10
business days (or such later date as the Board of Directors may determine)
following the commencement of a tender offer or exchange offer the consummation
of which would result in the beneficial ownership by a person of 15% or more of
the outstanding shares of Common Stock (the earlier of such dates being called
the "Distribution Date"). For purposes of the Rights Agreement, in certain
limited circumstances, certain shares of Common Stock may be treated as Exempt
Shares.
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates, and will be transferred with and only with the Common
Stock certificates, (ii) new Common Stock certificates issued after December 14,
1998 upon transfer or new issuance of the Common Stock will contain a notation
incorporating the Rights Agreement by reference, and (iii) the surrender for
transfer of any certificates for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on December 13, 2008, unless earlier redeemed or
exchanged by the Company as described below. The Rights will not be exercisable
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 has not
been obtained or is not obtainable.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and, thereafter, the separate Rights Certificates alone will
evidence the Rights. Except as otherwise determined by the Board of Directors,
only shares of Common Stock issued prior to the Distribution Date will be issued
with Rights.
In the event that a Person becomes the beneficial owner of 15% or more
of the then outstanding shares of Common Stock (except, among other things,
pursuant to an offer for all outstanding shares of Common Stock which the Board
of Directors determine to be fair to and otherwise in the best interests of the
Company and its stockholders), each holder of a Right will, after the end of a
redemption period referred to below, have the right (subject to the ownership
limit and other ownership restrictions contained in the Company's Articles of
Incorporation) to exercise the Right by purchasing, for an amount equal to the
Purchase Price, Common Stock (or, in certain circumstances, cash, property or
other securities of the Company) having a value equal to two times
<PAGE>
such amount. Notwithstanding any of the foregoing, following the occurrence of
the events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of the events set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
For example, at a Purchase Price of $108 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following an event
set forth in the preceding paragraph would entitle its holder to purchase $216
worth of Common Stock (or other consideration, as noted above) for $108.
Assuming that the Common Stock had a per share value of $27 at such time, the
holder of each valid Right would be entitled to purchase eight shares of Common
Stock for $108.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger which follows an offer described in the second preceding paragraph), or
(ii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall, after the expiration of the redemption period
referred to below, have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the Purchase Price of the
Right (e.g., common stock of the acquiring company having a value of $216 for
the $108 Purchase Price).
At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group which have become
void), in whole or in part, at an exchange ratio of one share of Common Stock
per Right (subject to adjustment).
The Purchase Price payable, and the number of one one-thousandths of a
share of Preferred Stock or other securities or property issuable, upon exercise
of the Rights are subject to adjustment from time to time to prevent dilution
(i) in the event of a stock dividend on, or a subdivision, combination or
reclassification of the Preferred Stock, (ii) upon the grant to holders of the
Preferred Stock of certain rights or warrants to subscribe for Preferred Stock
or convertible securities at less than the current market price of the Preferred
Stock or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares will be issued (other than fractions
which are integral multiples of one one-thousandth of a share of Preferred
Stock) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Stock on the last trading date prior to the date
of exercise.
In general, the Board of Directors of the Company, may cause the
Company to redeem the Rights in whole, but not in part, at any time during the
period commencing on December 14, 1998, and ending on the tenth day following
the Stock Acquisition Date, as such period may be extended or shortened by the
Board of Directors (the "Redemption Period") at a price of $.005 per Right
(payable in cash, Common Stock or other consideration deemed appropriate by the
Board of Directors). Under certain circumstances set forth in the Rights
Agreement, the decision to redeem the Rights will require the concurrence of
two-thirds of the Board of Directors. After the Redemption Period has expired,
the Company's right of redemption may be reinstated if an Acquiring Person
reduces his beneficial ownership to 10% or less of the outstanding shares of
Common Stock in a transaction or series of transactions not involving the
Company and there are no other Acquiring Persons. Immediately upon the action of
the Board of Directors of the Company ordering redemption of the
2
<PAGE>
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.005 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be subject to federal taxation to stockholders or to the Company, stockholders
may, depending upon the circumstances, recognize taxable income in the event
that the Rights become exercisable for Common Stock (or other consideration) of
the Company or for common stock of the acquiring company as set forth above.
* * *
3
<PAGE>
EXHIBIT C
[Form of Rights Certificate]
Certificate No. R- Rights
-------- -------
NOT EXERCISABLE AFTER DECEMBER 13, 2008 OR EARLIER IF REDEEMED OR
EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE BOARD OF DIRECTORS OF THE COMPANY, AT $.005 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF ANY SUCH PERSON (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE
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 SHALL NOT HAVE BEEN
OBTAINED OR BE OBTAINABLE. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.] */
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER AND OWNERSHIP PRIMARILY FOR THE PURPOSE OF THE
CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT
TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. SUBJECT TO
CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE
CORPORATION'S ARTICLES OF INCORPORATION, NO PERSON MAY BENEFICIALLY OWN
SHARES OF CAPITAL STOCK OF THE CORPORATION IN EXCESS OF 9.8 PERCENT IN
NUMBER OR VALUE OF THE
- ----------
*/ The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
OUTSTANDING CAPITAL STOCK OF THE CORPORATION. SEPARATE RESTRICTIONS SET
FORTH IN ARTICLE VIII OF THE ARTICLES OF INCORPORATION OF THE
CORPORATION APPLY TO RESTRICT THE PERMISSIBLE CONSTRUCTIVE OWNERSHIP OF
SHARES OF CAPITAL STOCK. ANY PERSON WHO BENEFICIALLY OWNS OR ATTEMPTS
TO BENEFICIALLY OWN SHARES OF CAPITAL STOCK IN EXCESS OF THE ABOVE
LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION, ANY SHARES OF
CAPITAL STOCK SO HELD MAY BE SUBJECT TO MANDATORY REDEMPTION OR SALE IN
CERTAIN EVENTS, CERTAIN PURPORTED ACQUISITIONS OF SHARES OF CAPITAL
STOCK IN EXCESS OF SUCH LIMITATIONS SHALL BE VOID AB INITIO, AND ANY
SHARES OF CAPITAL STOCK PURPORTED TO BE ACQUIRED OR BENEFICIALLY OWNED
IN EXCESS OF SUCH LIMITATION WILL BE AUTOMATICALLY CONVERTED INTO AND
EXCHANGED FOR SHARES OF EXCESS STOCK. EXCESS STOCK HAS LIMITED ECONOMIC
RIGHTS, NO DIVIDEND RIGHTS AND NO VOTING RIGHTS. A PERSON WHO ATTEMPTS
TO BENEFICIALLY OWN SHARES OF CAPITAL STOCK IN VIOLATION OF THE
OWNERSHIP LIMITATIONS SET FORTH IN SECTION 8(B) OF THE ARTICLES OF
INCORPORATION OF THE CORPORATION SHALL HAVE NO CLAIM, CAUSE OF ACTION,
OR ANY OTHER RECOURSE WHATSOEVER AGAINST A TRANSFEROR OF SUCH SHARES.
ALL CAPITALIZED TERMS IN THIS LEGEND HAVE THE MEANINGS DEFINED IN THE
CORPORATION'S ARTICLES OF INCORPORATION, A COPY OF WHICH, INCLUDING THE
RESTRICTIONS ON TRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS.
2
<PAGE>
Rights Certificate
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
This certifies that ____________________, or its registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of December ___, 1998 (the "Rights Agreement"),
between CHARLES E. SMITH RESIDENTIAL REALTY, INC., a Maryland corporation (the
"Company"), and FIRST UNION NATIONAL BANK (the "Rights Agent"), to purchase from
the Company at any time prior to December 13, 2008 at the office or offices of
the Rights Agent designated for such purpose, or its successors as Rights Agent,
one one-thousandth of a fully paid, non-assessable share of Series D Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred Stock")
of the Company, at a purchase price of $108.00 per one one-thousandth share (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and related Certificate duly executed. The
number of Rights evidenced by this Rights Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number and Purchase Price as of
____________ __, ____, based on the Preferred Stock as constituted at such date,
and are subject to adjustment upon the happening of certain events as provided
in the Rights Agreement.
From and after the occurrence of an event described in Section
11(a)(ii) of the Rights Agreement, the Rights evidenced by this Rights
Certificate beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined in the Rights
Agreement), which the Board of Directors, in their sole discretion, determine is
or was involved in or caused or facilitated, directly or indirectly (including
through any change in the Board of Directors), such Section 11(a)(ii) Event,
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, concurrently with or after such transfer, became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person shall become null and void
and no holder hereof shall have any right with respect to such Rights from and
after the occurrence of such Section 11(a)(ii) Event.
The Rights evidenced by this Rights Certificate shall not be
exercisable, and shall be 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 shall not have been
obtained or be obtainable.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to
3
<PAGE>
modification and adjustment upon the happening of certain events, including
Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights 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 above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Right Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of one one-thousandths of a share of Preferred Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.005 per Right at any time prior to the earlier of the close of
business on (i) the tenth day following the Stock Acquisition Date (as such time
period may be changed in the discretion of the Board of Directors pursuant to
the Rights Agreement), and (ii) the Final Expiration Date (as defined in the
Rights Agreement). Under certain circumstances set forth in the Rights
Agreement, the decision to redeem shall require the concurrence of two-thirds of
the Board of Directors. After the expiration of the redemption period, the
Company's right of redemption may be reinstated if an Acquiring Person reduces
his beneficial ownership to 10% or less of the outstanding shares of Common
Stock in a transaction or series of transactions not involving the Company, and
such reinstatement is approved by the Company's Board of Directors.
At any time after a person becomes an Acquiring Person, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by
such Acquiring Person which have become void), in whole or in part, at an
exchange ratio of one share of Common Stock per Right (subject to adjustment).
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples
4
<PAGE>
of one one-thousandth of a share of Preferred Stock, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
[Page Break Intentionally Inserted]
5
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of: ,
------------ ---- ------
ATTEST: CHARLES E. SMITH RESIDENTIAL
REALTY, INC.
By: By:
---------------------------- --------------------------
Name: Name:
Title: Title:
COUNTERSIGNED:
FIRST UNION NATIONAL BANK
By:
----------------------------
Name:
Title:
6
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Rights Certificate.)
FOR VALUE RECEIVED
____________________________________________________________
hereby sells, assigns and transfers unto
_______________________________________
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: ,
------------ ---- ------
-----------------------------------
Signature
Signature Guaranteed:
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate / / is / / is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Person (as such terms are defined pursuant to
the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
/ / did / / did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: ,
------------ ---- ------
-----------------------------------
Signature
Signature Guaranteed:
<PAGE>
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to exercise Rights represented
by the Rights Certificate.)
To:
----------------------------
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Please insert social security
or other identifying number:
-----------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Please insert social security
or other identifying number:
-----------------------------
- ---------------------------------
Dated: ,
------------ ---- ------
-----------------------------------
Signature
Signature Guaranteed:
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate / / are / / are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
/ / did / / did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: ,
------------ ---- ------
-----------------------------------
Signature
Signature Guaranteed:
<PAGE>
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit 99.2
[LETTERHEAD OF CHARLES E. SMITH RESIDENTIAL REALTY, INC.]
December __, 1998
Dear Fellow Shareholder:
Your Board of Directors is pleased to announce that on December 2,
1998, it adopted a Shareholder Rights Plan to further protect your rights and
investment in Charles E. Smith Residential Realty, Inc. More than 2,000
publicly-traded companies, including over 60 real estate investment trusts,
have also adopted rights plans similar to the Plan adopted by the Board of
Directors. The Plan augments other deterrents currently in place designed to
protect all shareholders of the Company against hostile acquirors who may
seek to gain control of the Company through coercive or unfair tactics,
without paying all shareholders a full and fair price, or without providing
the Company's Board of Directors a real opportunity to determine the future
of the Company and to protect the value of your investment. It has not been
adopted in response to any current acquisition proposal. The rights are not
intended to and will not prevent a fair and equitable takeover of the
Company, but they will cause a substantial dilution to the holdings of any
person or group that attempts to acquire the Company in a manner or on terms
not approved by the Board of Directors.
In furtherance of this Plan, the Board has authorized and declared a
special distribution of "rights" on its outstanding shares of common stock.
The enclosed summary describes the principal features of the Plan, including
the terms of the rights. This summary contains important information and we
urge you to read it carefully and keep it with your share records. As
explained in further detail in the summary, the rights will become
exercisable if, and only if, certain future events occur, and you do not need
to take any action now with respect to your shares.
The distribution of these rights will not in any way affect the
financial strength of the Company or interfere with its business plans. The
distribution will not change the way in which you can currently trade the
Company's shares, nor will it be dilutive of your interest in the Company or
change reported financial results. While the distribution of the rights will
not be taxable either to you or to the Company, shareholders may, depending
on their individual circumstances, recognize taxable income should the rights
become exercisable.
While the Board is aware that some believe that such rights plans
may deter legitimate acquisition proposals, it carefully
<PAGE>
considered these arguments and concluded that they were speculative and did
not justify denying shareholders the protection which the Plan will afford
against abusive takeover tactics.
Our overriding objective is to preserve and enhance the Company's
value for all shareholders. In declaring the rights distribution, your Board
of Directors has expressed its confidence in the Company's future and its
determination that you be given every opportunity to participate fully in
that future.
Very truly yours,
- -------------------------------------- --------------------------------------
Robert H. Smith Robert P. Kogod
Co-Chairman of the Board of Directors Co-Chairman of the Board of Directors
and Co-Chief Executive Officer and Co-Chief Executive Officer
<PAGE>
Exhibit 99.3
NEWS RELEASE
Charles E. Smith Residential Realty, Inc. / GRAPHIC /
FOR IMMEDIATE RELEASE Contact: Media-John Kurtz
December 2, 1998 (703) 769-1153
Investors-Greg Samay
(703) 769-1029
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
ANNOUNCES SHAREHOLDER RIGHTS PLAN
ARLINGTON, VA -- Charles E. Smith Residential Realty, Inc. (NYSE:
SRW), one of the country's leading residential REITs, announced today that
its Board of Directors has adopted a Shareholder Rights Plan in which certain
stock purchase rights have been granted as a distribution to holders of
shares of Common Stock held of record as of the close of business on December
14, 1998.
The Rights Plan, which is similar to plans adopted by more than 2,000
publicly-traded companies and many other real estate investment trusts, is
designed to deter coercive or unfair takeover tactics. The Company's adoption of
the Rights Plan is intended to protect the rights of its shareholders and is not
in response to any acquisition proposal. The Rights Plan will assist the Board
of Directors in dealing with any future actions taken by hostile entities which
attempt to deprive the Company and its shareholders of the opportunity to obtain
the most attractive price for their shares.
In implementing the Rights Plan, the Board has declared a distribution
of one Right for each share of the Company's outstanding Common Stock. Each
Right initially would entitle the holder thereof to purchase 1/1,000th of a
share of Preferred Stock for $108. One one-thousandth of a share of Preferred
Stock is intended to be approximately the economic equivalent of one share of
Common Stock. The Rights will expire on December 13, 2008.
At the time of adoption of the Rights Plan, the Rights are neither
exercisable nor traded separately from the Common Stock. The Rights will be
exercisable only if a person or group in the future becomes the beneficial owner
of 15% or more of the
<PAGE>
Common Stock or announces a tender or exchange offer which would result in its
ownership of 15% or more of the Common Stock.
Ten days after a public announcement that a person has become the
beneficial owner of 15% or more of the Common Stock, each holder of a Right,
other than that 15% owner, would be entitled to purchase $216 worth of Common
Stock of the Company for the exercise price of $108 (one-half of the
then-current market price) for each Right held. If, after a person has become
the beneficial owner of 15% or more of the Common Stock, the Company is
acquired in a merger or 50% or more of the Company's assets, including the
assets held by Charles E. Smith Residential Realty L.P. and any subsidiaries
of the Company, are sold in one or more related transactions, each Right
would entitle the holder thereof to similarly purchase common stock of the
acquiring company at half of the then-current market price of the acquiring
company's common stock.
At any time after a person or group of persons becomes the
beneficial owner of 15% or more of the Common Stock, the Board of Directors
may exchange one share of Common Stock for each Right, other than Rights held
by that 15% owner.
The Board of Directors generally may redeem the Rights at any time
until ten days following the public announcement that a person or group of
persons has acquired beneficial ownership of 15% or more of the outstanding
Common Stock. The redemption price is $0.005 per Right.
The Board of Directors also has approved certain amendments to the
Partnership Agreement of Charles E. Smith Residential Realty L.P., its
operating partnership, to provide anti-dilution purchase rights to minority
limited partners in the event any Rights are ever exercised or exchanged.
Details of the Rights Plan will be mailed to all shareholders of the
Company.
Charles E. Smith Residential Realty, Inc. is a self-managed real estate
investment trust listed on the New York Stock Exchange (SRW). The Company and
its subsidiaries and affiliates own, acquire, develop and manage multi-family
residential properties and also provide a full range of real estate services to
other property owners. The Company owns a portfolio of approximately 20,000
apartment units, has nearly 3,400 units under construction (including units
subject to pre-purchase agreements) and manages an additional 3,500+ units for
other owners. The total market capitalization of Charles E. Smith Residential
Realty (including its Operating Partnership) is approximately $1.9 billion.
Investor information, including press releases about Charles E. Smith
Residential Realty is available on the Company's Web site at
http://www.smithreit.com, and also through PR Newswire "News on Call" by fax at
800-758-5804, ext. 101271, or at http://www.prnewswire.com.
2
