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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report: July 24, 1997
Date of earliest event reported: June 30, 1997
ASSISTED LIVING CONCEPTS, INC.
(Exact name of registrant as specified in its charter)
Nevada 1-13498 93-1148702
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
9955 S.E. Washington Street, Suite 201
Portland, OR 97216
(Address of principal executive offices) (Zip Code)
(503) 252-6233
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
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Item 5. Other Events
Stock Split
On June 12, 1997, the Board of Directors (the "Board") of Assisted
Living Concepts, Inc. (the "Company"), declared a two-for-one stock split on the
Company's Common Stock. The record date for the stock split was June 30, 1997,
and the stock split occurred immediately prior to the dividend of the Rights
pursuant to the Rights Agreement described below. On July 10, 1997,
shareholders of record on the record date will be sent a share certificate
representing the additional shares of Common Stock to which they are entitled.
The Common Stock will being trading on a split-adjusted basis on the American
Stock Exchange on July 10, 1997.
Rights Agreement
On June 12, 1997, the Board declared a dividend of one preferred share
purchase right (each a "Right" and collectively the "Rights") on each
outstanding share of the Company's common stock, $0.01 par value per share (the
"Common Stock"), payable to shareholders of record on June 30, 1997. Each Right
will entitle the holder thereof after the Rights become exercisable and until
June 30, 2007 (or the earlier redemption, exchange of termination of the
Rights), to buy one one-hundredth of a share of Series A Junior Participating
Preferred Stock (the "Preferred Stock") at an exercise price of $54.00, subject
to certain antidilution adjustments (the "Purchase Price"). The Rights will be
represented by the Common Stock certificates and will not be exercisable or
transferable apart from the Common Stock until the earlier of (i) the tenth day
after the public announcement that a Person (defined as any individual or
entity) or group has become an Acquiring Person (a Person who has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the Common
Stock) or (ii) the tenth day after a Person or group commences, or announces an
intention to commence, a tender or exchange offer, the consummation of which
would result in the beneficial ownership by a Person or group of 15% or more of
the Common Stock (the earlier of (i) and (ii) is referred to herein the
"Distribution Date"). Prior to the Distribution Date, the Board has the power,
under certain circumstances, to postpone the Distribution Date. Separate
certificates representing the Rights will be mailed to holders of the Common
Stock as of the Distribution Date. The Rights will first become exercisable on
the Distribution Date, unless earlier redeemed or exchanged, and may then begin
trading separately from the Common Stock. The Rights will at no time have any
voting rights.
In the event that a Person becomes an Acquiring Person (except
pursuant to certain cash offers for all outstanding Common Stock approved by the
Board) or if the Company were the surviving corporation in a merger and its
Common Stock were not changed or exchanged, each holder of a Right, other than
Rights that are or were acquired or beneficially owned by the Acquiring Person
(which Rights will thereafter be void), will thereafter have the right to
receive upon exercise that number of shares of Common Stock having a market
value of two times the then-current exercise price of one Right. With certain
exceptions, in the event that (i) the Company were acquired in a merger or other
business combination transaction in which the Company is not the surviving
corporation or its Common Stock is changed or exchanged (other than a merger
which follows certain cash offers for all outstanding Common Stock approved by
the Board) or (ii) more than 50% of the Company's assets or earning power were
sold, proper provision shall be made so that each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise thereof, that
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number of shares of common stock of the acquiring company which at the time of
such transaction would have a market value of two times the then-current
exercise price of one Right.
At any time after a Person has become an Acquiring Person and prior to
the acquisition of 50% or more of the then-outstanding Common Stock by such
Acquiring Person, the Board may cause the Company to acquire the Rights (other
than Rights owned by an Acquiring Person which have become void), in whole or in
part, in exchange for that number of shares of Common Stock having an aggregate
value equal to the excess of the value of the Common Stock issuable upon
exercise of a Right after a Person becomes an Acquiring Person over the Purchase
Price.
The Rights are redeemable at $0.01 per Right prior to the first date
of public announcement that a Person or group has become an Acquiring Person.
Prior to the expiration of the period during which the Rights may be redeemed,
the Board has the power, under certain circumstances, to extend the redemption
period. The Rights will expire on June 12, 2007 (unless earlier redeemed or
exchanged). American Stock Transfer & Trust Company is the Rights Agent. Under
certain circumstances set forth in the Rights Agreement, the decision to redeem
or to lengthen or shorten the redemption period shall require the concurrence of
a majority of the Continuing Directors (as defined below).
The term "Continuing Directors" means any member of the Board who was
a member of the Board prior to the time that any Person becomes an Acquiring
Person, and any person who is subsequently elected to the Board if such person
is recommended or approved by a majority of the Continuing Directors.
Continuing Directors do not include an Acquiring Person, or an affiliate or
associate of an Acquiring Person, or any representative of the foregoing.
The Purchase Price payable, and the number of shares 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 or purchase the 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, cash, securities or assets (excluding regular
periodic cash dividends at a rate not in excess of 125% of the last regular
periodic cash dividend theretofore paid, or in case regular periodic dividends
have not theretofore been paid, at a rate not in excess of 50% of the average
net income per share of the Company for the four quarters ended immediately
prior to the payment of such dividend, or dividends payable in the Preferred
Stock) or of subscription rights or warrants (other than those referred to
above). No adjustments in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price.
As of June 30, 1997, after giving effect to the stock split described
above, there were 11,043,512 shares of Common Stock outstanding. One Right is
being distributed to shareholders of the Company for each share of Common Stock
owned of record by them on June 30, 1997 after giving effect to the stock split
described above. As long as the Rights are attached to the Common Stock, the
Company will issue one Right with each new share of Common Stock so that all
such shares will have attached Rights. The Company has reserved 800,000 shares
of Preferred Stock for issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board,
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except pursuant to an offer conditioned on a substantial number of Rights being
acquired. The Rights should not interfere with any merger or other business
combination approved by the Board prior to the time that a Person or group has
become an Acquiring Person, as the Rights may be redeemed by the Company at
$0.01 per Right prior to such time.
The Rights Agreement dated as of June 12, 1997, between the Company
and the Rights Agent specifying the terms of the Rights, and the form of a
letter to be sent to the holders of the Common Stock explaining the Rights, are
attached hereto as exhibits and are incorporated herein by reference. The
foregoing description of the Rights is qualified by reference to such exhibits.
Item 7. Exhibits.
1. Rights Agreement dated as of June 12, 1997, between Assisted
Living Concepts, Inc. and American Stock Transfer & Trust Company,
as Rights Agent.
2. Form of Letter to the holders of Assisted Living Concepts, Inc.
Common Stock.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASSISTED LIVING CONCEPTS, INC.
Date: July 24, 1997 By: /s/ Stephen Gordon
---------------------------
Name: Stephen Gordon
Title: Chief Administrative Officer,
Chief Financial Officer and
Secretary
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EXHIBIT INDEX
1. Rights Agreement dated as of June 12, 1997, between Assisted living
Concepts, Inc. and American Stock Transfer & Trust Company, as Rights
Agent, which includes the form of Certificate of Resolution Establishing
Designations, Preferences and Rights of Series A Junior Participating
Preferred Stock of Assisted Living Concepts, Inc. as Exhibit A, the form of
Right Certificate as Exhibit B and the Summary of Rights to Purchase
Preferred Shares as Exhibit C.
2. Form of Letter to the holders of Assisted Living Concepts, Inc. Common
Stock.
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EXHIBIT 1
================================================================================
ASSISTED LIVING CONCEPTS, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Rights Agent
Rights Agreement
Dated as of June 12, 1997
================================================================================
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RIGHTS AGREEMENT
----------------
Rights Agreement dated as of June 12, 1997, between ASSISTED LIVING
CONCEPTS, INC., a Nevada corporation (the "Company"), and AMERICAN STOCK
TRANSFER & TRUST COMPANY, as Rights Agent (the "Rights Agent").
RECITALS
--------
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted this Rights Agreement and has authorized and declared a dividend of one
preferred share purchase right (a "Right") for each Common Share (as defined in
Section 1.6) of the Company outstanding at the close of business on June 30,
1997 (the "Record Date") and has authorized and directed the issuance of one
Right (subject to adjustment as provided herein) with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date and the Final Expiration Date (as such terms are defined
in Sections 3.1 and 7.1), each Right initially representing the right to
purchase one one-hundredth (subject to adjustment) of a share of Series A Junior
Participating Preferred Stock (the "Preferred Shares") of the Company having the
rights, powers and preferences set forth in the form of Certificate of
Designation attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth; PROVIDED, HOWEVER, that Rights may be issued
with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the Expiration Date in accordance with Section
22.
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 Rights
-------------------
Agreement, the following terms have the meanings indicated:
1.1 "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
of the Company then outstanding, but shall not include (i) an Exempt Person (as
such term is hereinafter defined) or (ii) if, as of the date hereof, any Person
is the Beneficial Owner of 15% or more of the Common Shares outstanding (an
"Existing Holder"), such Existing Holder shall not be or become an "Acquiring
Person" unless and until such time as such Existing Holder shall become the
Beneficial Owner of one or more additional Common Shares of the Company (other
than pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or subdivision
of the outstanding Common Shares), unless, upon becoming the Beneficial Owner of
such additional Common Shares, such Existing Holder is not then the Beneficial
Owner of 15% or more of the Common Shares then outstanding. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the Common Shares of the Company then
outstanding; PROVIDED, HOWEVER, that if a Person shall become the Beneficial
Owner of 15% or more of the Common Shares of the Company then outstanding solely
by reason of share purchases by the Company and shall, after such share
purchases by the Company, become the Beneficial Owner of any additional Common
Shares of the Company, then such Person shall be deemed to be an "Acquiring
Person." Notwithstanding the foregoing, if the Board of Directors of the
Company determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
Section 1.1, has become such inadvertently, and without any intention of
changing or influencing control of the Company, and such Person divests as
promptly as practicable a sufficient number of Common Shares so that such Person
would no longer be an Acquiring Person, as defined
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pursuant to the foregoing provisions of this Section 1.1, then such Person shall
not be deemed to be or have become an "Acquiring Person" at any time for any
purposes of this Agreement. For all purposes of this Agreement, any calculation
of the number of Common Shares outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding Common
Shares 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 Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date hereof.
1.2 "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Rights Agreement.
1.3 A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Rights Agreement);
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (A) the right to acquire (whether
such right is exercisable immediately, or only after the passage of time,
compliance with regulatory requirements, fulfillment of a condition or
otherwise) pursuant to any agreement, arrangement or understanding, whether
or not in writing (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, (w) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person
or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, (x) securities which such
Person has a right to acquire upon the exercise of Rights at any time prior
to the time that any Person becomes an Acquiring Person, (y) securities
issuable upon exercise of Rights from and after the time that any Person
becomes an Acquiring Person if such Rights were acquired by such Person or
any of such Person's Affiliates or Associates prior to the Distribution
Date or pursuant to Section 3.1 or Section 22 hereof (the "Original
Rights") or pursuant to Section 11.9 or Section 11.15 with respect to an
adjustment to Original Rights or (z) securities which such Person or any of
such Person's Affiliates or Associates may acquire, does or do acquire or
may be deemed to have the right to acquire, pursuant to any merger or other
acquisition agreement between the Company and such Person (or one or more
of his Affiliates or Associates) if such agreement has been approved by the
Board of Directors of the Company prior to such Person's becoming an
Acquiring Person; or (B) the right to vote pursuant to any agreement,
arrangement or understanding (whether or not in writing); PROVIDED,
HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security under this clause (B) if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance
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with, the applicable rules and regulations of the Exchange Act and (2) is
not also then reportable 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 respect to
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a
bona fide public offering of securities), whether or not in writing, for
the purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in the proviso to Section 1.3(ii)(B)) or disposing of
any securities of the Company; PROVIDED, HOWEVER, that no Person who is an
officer, director or employee of an Exempt Person shall be deemed, solely
by reason of such Person's status or authority as such, to be the
"Beneficial Owner" of, to have "Beneficial Ownership" of or to
"beneficially own" any securities that are "beneficially owned" (as defined
in this Section 1.3), including, without limitation, in a fiduciary
capacity, by an Exempt Person or by any other such officer, director or
employee of an Exempt Person.
1.4 "Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of Oregon are authorized or
obligated by law or executive order to close.
1.5 "close of business" on any given date shall mean 5:00 p.m.,
Oregon time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 p.m., Oregon time, on the next succeeding
Business Day.
1.6 "Common Shares" when used with reference to the Company shall
mean the shares of common stock, par value $0.01 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such other Person or, if such Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such first-mentioned
Person, and which has issued and outstanding such capital stock, equity
securities or equity interest.
1.7 "Continuing Director" shall mean (i) any member of the Board,
while such Person is a member of the Board, who is not an Acquiring Person, or
an Affiliate or Associate of an Acquiring Person, or an employee, director,
representative, nominee or designee of any Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board prior to the time that any
Person becomes an Acquiring Person or (ii) any Person (during such period in
which such Person is a member of the Board) who, after the time that any Person
becomes an Acquiring Person, becomes a member of the Board and who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or an
employee, director, representative, nominee or designee of an Acquiring Person
or of any such Affiliate or Associate, if such Person's nomination for election
or election to the Board is recommended or approved by a majority of the
Continuing Directors.
1.8 "Exempt Person" shall mean the Company, any Subsidiary (as such
term is hereinafter defined) of the Company or any employee benefit plan of the
Company or of any Subsidiary of the Company or any entity or trustee holding
shares of capital stock of the Company for or pursuant to the terms of any such
plan, in its capacity as an agent or trustee for any such plan.
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1.9 "Person" shall mean any individual, partnership, joint venture,
limited-liability company, firm, corporation, unallocated association, trust or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
1.10 "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, the filing of a report pursuant to Section 13(d) of the Exchange Act
or pursuant to a comparable successor statute) by the Company or an Acquiring
Person that an Acquiring Person has become such or that discloses information
which reveals the existence of an Acquiring Person or such earlier date as a
majority of the Board shall become aware of the existence of an Acquiring
Person.
1.11 "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, of record or beneficially, directly or indirectly,
by such Person.
1.12 A "Trigger Event" shall be deemed to have occurred upon any
Person becoming an Acquiring Person.
1.13 The following terms shall have the meanings ascribed to such
terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Adjustment Shares 11.1.2
Board Recitals
common stock equivalent 11.1.3
Company Preamble
current per share market price 11.4
Current Value 11.1.3
Distribution Date 3.1
equivalent preferred stock 11.2
Exchange Act 1.1
Exchange Consideration 27
Existing Holder 1.1
Expiration Date 7.1
Final Expiration Date 7.1
Nasdaq 9
Original Rights 1.3
Preferred Shares Recitals
Principal Party 13.2
Purchase Price 4
Record Date Recitals
Redemption Date 7.1
Redemption Price 23.1
Right Recitals
Right Certificate 3.1
Rights Agent Preamble
Security 11.4
Spread 11.1.3
Substitution Period 11.1.3
</TABLE>
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<TABLE>
Term Section
---- -------
<S> <C>
Summary of Rights 3.2
Trading Day 11.4
</TABLE>
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, shall prior to the Distribution Date also be
the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable. In the event the Company appoints one or more co-Rights Agents, the
respective duties of the Rights Agent and any co-Rights Agent shall be as the
Company shall determine. Contemporaneously with such appointment, if any, the
Company shall notify the then acting Rights Agent or co-Rights Agents thereof.
Section 3. Issuance of Right Certificates.
------------------------------
3.1 Rights Evidenced by Share Certificates. Until the earlier of (i)
--------------------------------------
the tenth day after the Shares Acquisition Date or (ii) the tenth business day
after the date of the commencement of, or first public announcement of the
intent of any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company or any
entity holding shares of capital stock of the Company for or pursuant to the
terms of any such plan, in its capacity as an agent or trustee for any such
plan) to commence, a tender or exchange offer the consummation of which would
result in any Person becoming the Beneficial Owner of Common Shares aggregating
15% or more of the then outstanding Common Shares of the Company (the earlier of
(i) and (ii) being herein referred to as the "Distribution Date," (x) the Rights
(unless earlier expired, redeemed or terminated) will be evidenced (subject to
the provisions of Section 3.2) by the certificates for Common Shares registered
in the names of the holders thereof (which certificates for Common Shares shall
also be deemed to be Right Certificates) and not by separate certificates, and
(y) the Rights (and the right to receive certificates therefor) will be
transferable only in connection with the transfer of the underlying Common
Shares. The preceding sentence notwithstanding, prior to the occurrence of a
Distribution Date specified as a result of an event described in clause (ii) (or
such later Distribution Date as the Board may select pursuant to this sentence),
the Board may postpone, one or more times, the Distribution Date which would
occur as a result of an event described in clause (ii) beyond the date set forth
in such clause (ii). Nothing herein shall permit such a postponement of a
Distribution Date after a Person becomes an Acquiring Person. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign and the Company (or, if requested, the Rights
Agent) will send, by first-class, postage-prepaid mail, to each record holder of
Common Shares as of the close of business on the Distribution Date (other than
an Acquiring Person or any Associate or Affiliate of any Acquiring Person), at
the address of such holder shown on the records of the Company, one or more
certificates for Rights, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right (subject to adjustment as provided herein)
for each Common Share so held. As of the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
3.2 Summary of Rights. On the Record Date or as soon as practicable
-----------------
thereafter, the Company will send or cause to be sent a copy of a Summary of
Rights to Purchase Preferred Shares, in substantially the form attached hereto
as Exhibit C (the "Summary of Rights"), by first-class, postage-prepaid mail, to
each record holder of Common Shares as of the close of business on the Record
Date at the address of such holder shown on the records of the Company. With
respect to certificates for
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Common Shares outstanding as of the close of business on the Record Date, until
the Distribution Date (or the earlier Expiration Date), the Rights will be
evidenced by such certificates for Common Shares registered in the names of the
holders thereof together with a copy of the Summary of Rights and the registered
holders of the Common Shares shall also be registered holders of the associated
Rights. Until the Distribution Date (or the earlier Expiration Date), the
surrender for transfer of any certificate for Common Shares outstanding at the
close of business on the Record Date, with or without a copy of the Summary of
Rights, shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby.
3.3 New Certificates After Record Date. Certificates for Common
----------------------------------
Shares which become outstanding (whether upon issuance out of authorized but
unissued Common Shares, issuance out of treasury or transfer or exchange of
outstanding Common Shares) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date, shall have impressed, printed,
stamped, written or otherwise affixed onto them the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement between Assisted Living Concepts,
Inc. (the "Company") and American Stock Transfer & Trust Company, dated as
of June 12, 1997, as the same may be amended from time to time (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
Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. The Company will mail to the
holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. AS DESCRIBED IN THE RIGHTS
AGREEMENT, RIGHTS WHICH ARE OWNED BY, TRANSFERRED TO OR HAVE BEEN OWNED BY
ACQUIRING PERSONS OR ASSOCIATES OR AFFILIATES THEREOF (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) SHALL BECOME NULL AND VOID AND WILL NO
LONGER BE TRANSFERABLE.
With respect to such certificates containing the foregoing legend, until the
Distribution Date (or the earlier Expiration Date), the Rights associated with
the Common Shares represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificates,
except as otherwise provided herein, shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed cancelled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.
Notwithstanding this Section 3.3, the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and
--------------------------
the forms of election to purchase shares, certification and assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Rights
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange or trading system on which the Rights may from time to time be
listed or quoted, or to conform to usage. Subject to the terms and conditions
hereof, the Right Certificates, whenever issued,
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shall be dated as of the Record Date, and shall show the date of
countersignature by the Rights Agent, and on their face shall entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share as shall be set forth therein at the price per one one-hundredth of a
Preferred Share set forth therein (the "Purchase Price"), but the number of such
one one-hundredths of a Preferred Share and the Purchase Price shall be subject
to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates
---------------------------------
shall be executed on behalf of the Company by its Chairman of the Board of
Directors, the Chief Executive Officer, President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be attested by the Secretary or any
Assistant Secretary of the Company, either manually or by facsimile signature.
The Right Certificates shall be countersigned, either manually or by facsimile
signature, by an authorized signatory of the Rights Agent, but it shall not be
necessary for the same signatory to countersign all of the Right Certificates
hereunder. No Right Certificate shall be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates, the certificate
number of each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
- ---------------------------------------------------------------------
to the provisions of Section 7.5, Section 11.1.2 and Section 14, at any time
after the close of business on the Distribution Date, and at or prior to the
close of business on the earlier of the Redemption Date or the Final Expiration
Date, any Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11.1.2 or that
have been exchanged pursuant to Section 27) may be transferred, split up or
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up or combine or exchange any Right Certificate shall make such
request in writing delivered to the Rights Agent, and shall surrender, together
with any required form of assignment and certificate duly completed, the Right
Certificate or Right Certificates to be transferred, split up or 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 Right
Certificate or Right Certificates until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Right Certificate or Right Certificates 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 countersign and
deliver to the person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may
7
<PAGE>
require payment from the holders of Right Certificates of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up or combination or exchange of such Right Certificates.
Subject to the provisions of Section 11.1.2, at any time after the
Distribution Date and prior to the Expiration Date, upon receipt by the Company
and the Rights Agent of evidence reasonably satisfactory to them of the loss,
theft, destruction or mutilation of a Right Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to them,
and, at the Company's request, reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Right Certificate if mutilated, the Company will
make and deliver a new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights.
- ------
7.1 Exercise of Rights. Subject to Section 11.1.2 and except as
------------------
otherwise provided herein, the registered holder of any Right Certificate may
exercise the Rights evidenced thereby in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase and certification on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price for the
total number of one one-hundredths of a Preferred Share (or other securities,
cash or other assets) as to which the Rights are exercised, at or prior to the
time (the "Expiration Date") that is the earliest of (i) the close of business
on June 12, 2007 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 (the "Redemption Date"), (iii) the
closing of any merger or other acquisition transaction involving the Company
pursuant to an agreement of the type described in Sections 1.3(ii)(A)(2) and 13,
at which time the Rights are deemed terminated, or (iv) the time at which the
Rights are exchanged as provided in Section 27.
7.2 Purchase Price. The Purchase Price for each one one-hundredth of
--------------
a Preferred Share pursuant to the exercise of a Right shall initially be $54.00,
shall be subject to adjustment from time to time as provided in Sections 11, 13
and 26 and shall be payable in lawful money of the United States of America in
accordance with Section 7.3.
7.3 Payment Procedures. Upon receipt of a Right Certificate
------------------
representing exercisable Rights, with the form of election to purchase and
certification duly executed, accompanied by payment of the aggregate Purchase
Price for the shares to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Right Certificate in
accordance with Section 9, by certified or cashier's check or money order
payable to the order of the Company, the Rights Agent shall thereupon promptly
(i)(A) requisition from any transfer agent of the Preferred Shares (or make
available, if the Rights Agent is the transfer agent) certificates for the
number of Preferred Shares 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 Preferred Shares
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one one-hundredths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs the depositary agent to comply with all such requests,
(ii) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of the issuance of fractional shares in accordance with Section 14,
(iii) promptly after receipt of such
8
<PAGE>
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder and (iv) when appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate. In the event that the Company is obligated to
issue other securities of the Company, pay cash and/or distribute other property
pursuant to Section 11.1.3, the Company will make all arrangements necessary so
that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate.
7.4 Partial Exercise. In case the registered holder of any Right
----------------
Certificate shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14.
7.5 Full Information Concerning Ownership. Notwithstanding anything
-------------------------------------
in this Rights Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with respect to a registered
holder of Rights upon the occurrence of any purported exercise as set forth in
this Section 7 unless the certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise shall have been duly completed and signed by the registered holder
thereof and the Company shall have been provided with 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 Right Certificates. All
--------------------------------------------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Right Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. The
---------------------------------------------
Company covenants and agrees that from and after the Distribution Date it will
cause to be reserved and kept available out of its authorized and unissued
Preferred Shares (and, following the occurrence of a Trigger Event, out of its
authorized and unissued Common Shares or other securities or out of its shares
held in its treasury) the number of Preferred Shares (and, following the
occurrence of a Trigger Event, Common Shares and/or other securities) that will
be sufficient to permit the exercise in full of all outstanding Rights.
So long as the Preferred Shares (and, following the occurrence of a
Trigger Event, Common Shares and/or other securities) issuable upon the exercise
of Rights may be listed on any national securities exchange or traded in the
over-the-counter market and quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") (including the National
Market or Small Cap Market) the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed or admitted to trading on such exchange or quoted
on Nasdaq upon official notice of issuance upon such exercise.
9
<PAGE>
From and after such time as the Rights become exercisable, the Company
shall use its best efforts, if then necessary to permit the issuance of
Preferred Shares upon the exercise of Rights, to register and qualify such
Preferred Shares under the Securities Act and any applicable state securities or
"Blue Sky" laws (to the extent exemptions therefrom are not available), cause
such registration statement and qualifications to become effective as soon as
possible after such filing and keep such registration and qualifications
effective until the earlier of the date as of which the Rights are no longer
exercisable for such securities and the Expiration Date. The Company may
temporarily suspend, for a period of time not to exceed 90 days, the
exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act (if required) shall have been declared effective.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (and, following the
occurrence of a Trigger Event, Common Shares 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 nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all Federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares (or Common Shares 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 which may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or delivery of
certificates for the Preferred Shares (or Common Shares and/or other securities,
as the case may be) in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue or
deliver any certificates for Preferred Shares (or Common Shares 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 shall have been paid
(any such tax being payable by the holder of such Right Certificate at the time
of surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name
----------------------------
any certificate for Preferred Shares (or Common Shares 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 the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Shares (or Common
Shares 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 Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote or to receive dividends or other distributions,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
10
<PAGE>
Section 11. Adjustment of Purchase Price, Number of Shares or Number
--------------------------------------------------------
of Rights. The Purchase Price, the number of Preferred Shares or other
- ---------
securities or property purchasable upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.
11.1 Post Execution Events.
---------------------
11.1.1 Corporate Dividends, Reclassifications, Etc. In the event the
-------------------------------------------
Company shall at any time after the date of this Rights Agreement (A) declare
and pay a dividend on the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares into a smaller number of shares or (D) issue any shares of its
capital stock in a reclassification of the shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11.1, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Shares transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; PROVIDED, HOWEVER, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. If an event occurs which would require an
adjustment under both Section 11.1.1 and Section 11.1.2, the adjustment provided
for in this Section 11.1.1 shall be in addition to, and shall be made prior to,
the adjustment required pursuant to, Section 11.1.2.
11.1.2 Acquiring Person Events; Trigger Events. Subject to Sections
---------------------------------------
23.1 and 27 of this Rights Agreement, in the event that
(A) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Rights Agreement,
directly or indirectly, shall merge into the Company or otherwise combine
with the Company and the Company shall be the continuing or surviving
corporation of such merger or combination and the Common Shares of the
Company shall remain outstanding and not be changed into or exchanged for
stock or other securities of any other Person or the Company or cash or any
other property, or
(B) a Trigger Event occurs,
then, from and after the first occurrence of such event, each holder of a Right,
except as provided below, shall thereafter have a right to receive, upon
exercise thereof at a price per Right equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for which a
Right is then exercisable (without giving effect to this Section 11.1.2), in
accordance with the terms of this Rights Agreement and in lieu of Preferred
Shares, such number of Common Shares as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one one-
hundredths of a Preferred Share for which a Right is then exercisable (without
giving effect to this Section 11.1.2) and (y) dividing that product by 50% of
the current per share market price of the Common Shares (determined pursuant to
Section 11.4) on the first of the date of the occurrence of, or the date of the
first public announcement of, one of the events listed above in this Section
11.1.2 (the "Adjustment Shares"); PROVIDED, HOWEVER, that if the transaction
that would otherwise give rise to the
11
<PAGE>
foregoing adjustment is also subject to the provisions of Section 13, then only
the provisions of Section 13 shall apply and no adjustment shall be made
pursuant to this Section 11.1.2; PROVIDED, FURTHER, that nothing contained in
this Section 11.1.2 shall limit or otherwise diminish the power of the Board to
postpone the Distribution Date pursuant to Section 3.1; PROVIDED, FURTHER, that
the Purchase Price and the number of Adjustment Shares shall thereafter be
subject to further adjustment as appropriate in accordance with to Section 11.6
hereof. Notwithstanding the foregoing, upon the occurrence of either of the
events listed above in this Section 11.1.2, any Rights that are or were acquired
or beneficially owned by (1) an Acquiring Person or any Associate or Affiliate
thereof, (2) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such or
(3) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of this Section 11.1.2, and subsequent
transferees, shall become void without any further action, and any holder
(whether or not such holder is an Acquiring Person or an Associate or Affiliate
of an Acquiring Person) of such Rights shall thereafter have no right to
exercise such Rights under any provision of this Rights Agreement or otherwise.
The Company shall not enter into any transaction of the type described in this
Section 11.1.2 if at the time of such transaction there are any rights,
warrants, instruments or securities outstanding or any arrangements which, as a
result of the consummation of such transaction, would eliminate or substantially
diminish the benefits intended to be afforded by the Rights. From and after the
Trigger Event, no Right Certificate shall be issued pursuant to Section 3 or
Section 6 that represents Rights that are or have become void pursuant to the
provisions of this paragraph and any Rights Certificates delivered to the Rights
Agent that represents Rights that are or have become void pursuant to the
provisions of this paragraph shall be cancelled.
The Company shall use all reasonable efforts to ensure that the
provisions of this Section 11.1.2 are complied with, but shall have no liability
to any holder of Right Certificates or other Person as a result of its failure
to make any determinations with respect to any Acquiring Person or its
Affiliates, Associates or transferees hereunder.
11.1.3 Insufficient Shares. The Company may at its option substitute
-------------------
for a Common Share issuable upon the exercise of Rights in accordance with the
foregoing Section 11.1.2 a number of Preferred Shares or fraction thereof such
that the current per share market price of one Preferred Share multiplied by
such number or fraction is equal to the current per share market price of one
Common Share. In the event that upon the occurrence of one or more of the
events listed in Section 11.1.2 above there shall not be sufficient Common
Shares authorized but unissued, or held by the Company as treasury shares, to
permit the exercise in full of the Rights in accordance with the foregoing
Section 11.1.2, the Company shall take all such action as may be necessary to
authorize additional Common Shares for issuance upon exercise of the Rights,
PROVIDED, HOWEVER, that if the Company determines that it is unable to cause the
authorization of a sufficient number of additional Common Shares, then, in the
event the Rights become exercisable, the Company, with respect to each Right and
to the extent necessary and permitted by applicable law and any agreements or
instruments in effect on the date hereof to which it is a party, shall: (A)
determine the excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value"), over (2) the Purchase Price (such
excess is referred to herein as the "Spread") and (B) with respect to each Right
(other than Rights which have become void pursuant to Section 11.1.2), make
adequate provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Preferred Shares or
12
<PAGE>
other equity securities of the Company (including, without limitation, shares,
or fractions of shares, of preferred stock which by virtue of having dividend,
voting and liquidation rights substantially comparable to those of the Common
Shares, the Board has deemed in good faith to have substantially the same value
as Common Shares) (each such share of preferred stock or fractions of shares of
preferred stock constituting a "common stock equivalent")), (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 a nationally recognized
investment banking firm selected in good faith by the Board; PROVIDED, HOWEVER,
that if the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within 30 days following the first occurrence of
one of the events listed in Section 11.1.2 above, then the Company shall be
obligated to deliver, to the extent necessary and permitted by applicable law
and any agreements or instruments in effect on the date hereof to which it is a
party, upon the surrender for exercise of a Right and without requiring payment
of the Purchase Price, Common Shares (to the extent available) and then, if
necessary, such number or fractions of Preferred Shares (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors of the Company
shall determine in good faith that it is unlikely that sufficient additional
Common Shares could be authorized for issuance upon exercise in full of the
Rights, such 30 day period may be extended and re-extended to the extent
necessary, but not more than 90 days following the first occurrence of one of
the events listed in Section 11.1.2 above, in order that the Company may seek
stockholder approval for the authorization of such additional shares (such
period as it may be extended is referred to herein as the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the second and/or third sentences of this Section 11.1.3, the
Company (x) shall provide that such action shall apply uniformly to all
outstanding Rights and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended as
well as a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11.1.3, the value of a Common Share shall
be the current per share market price (as determined pursuant to Section 11.4)
on the date of the first occurrence of one of the events listed in Section
11.1.2 above and the value of any "common stock equivalent" shall be deemed to
have the same value as the Common Shares on such date. The Board may, but shall
not be required to, establish procedures to allocate the right to receive Common
Shares upon the exercise of the Rights among holders of Rights pursuant to this
Section 11.1.3.
11.2 Dilutive Rights Offering. In case the Company shall fix a record
------------------------
date for the issuance of rights, options or warrants to all holders of Preferred
Shares entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Preferred Shares (or securities having
the same rights, privileges and preferences as the Preferred Shares ("equivalent
preferred stock")) or securities convertible into Preferred Shares or equivalent
preferred stock at a price per Preferred Share or per share of equivalent
preferred stock (or having a conversion or exercise price per share, if a
security convertible into or exercisable for Preferred Shares or equivalent
preferred stock) less than the current per share market price of the Preferred
Shares (as determined pursuant to Section 11.4) 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 Preferred Shares
and shares of equivalent preferred stock outstanding on such record date plus
the number of Preferred Shares and shares of equivalent preferred stock which
the aggregate offering price of the total number of Preferred Shares and/or
shares of equivalent preferred stock to be offered (and/or the aggregate initial
conversion price
13
<PAGE>
of the convertible securities so to be offered) would purchase at such current
per share market price and the denominator of which shall be the number of
Preferred Shares and shares of equivalent preferred stock outstanding on such
record date plus the number of additional Preferred Shares and/or shares of
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible);
PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right. 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 binding on the Rights Agent
and the holders of the Rights. Preferred Shares and shares of equivalent
preferred stock owned by or held for the account of the Company or any
Subsidiary of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustments 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.
11.3 Distributions. In case the Company shall fix a record date for
-------------
the making of a distribution to all holders of the Preferred Shares (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness, cash, securities or assets (other than a regular periodic cash
dividend at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or a dividend payable in
Preferred Shares (which dividend, for purposes of this Agreement, shall be
subject to the provisions of Section 11.1.1(A) hereof)) or convertible
securities, or subscription rights or warrants (excluding those referred to in
Section 11.2), the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the current per
share market price of the Preferred Shares (as determined pursuant to Section
11.4) 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) of the portion of the cash, assets, securities or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to one Preferred Share and the denominator of which shall be
such current per share market price of the Preferred Shares (as determined
pursuant to Section 11.4); PROVIDED, HOWEVER, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be issued
upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
11.4 Current Per Share Market Value.
------------------------------
11.4.1 General. For the purpose of any computation hereunder, the
-------
"current per share market price" of any security (a "Security" for the purpose
of this Section 11.4.1) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date;
PROVIDED, HOWEVER, that in the event that the current per share market price of
the Security is determined during any period following the announcement by the
issuer of such Security of (i) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares or
(ii) any subdivision, combination or reclassification of such Security, and
prior to the expiration of 30 Trading
14
<PAGE>
Days after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, then, and in each
such case, the "current per share market price" shall be appropriately adjusted
to reflect the current market price per share equivalent of such Security. 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 American Stock Exchange or, if the Security is not
listed or admitted to trading on the American Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by Nasdaq or such other system then in use, or, if on any
such date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board. If on any such date no
such market maker is making a market in the Security, the fair value of the
Security 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 Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day. If the
Security is not publicly held or not so listed or traded, "current per share
market price" shall mean the fair value per share as determined in good faith by
the Board or, if at the time of such determination there is an Acquiring Person,
by a majority of the Continuing Directors then in office, or if there are no
Continuing Directors, by a nationally recognized investment banking firm
selected by the Board, which shall have the duty to make such determination in a
reasonable and objective manner, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
11.4.2 Preferred Shares. Notwithstanding Section 11.4.1, for the
----------------
purpose of any computation hereunder, the "current per share market price" of
the Preferred Shares shall be determined in the same manner as set forth above
in Section 11.4.1 (other than the last sentence thereof). If the current per
share market price of the Preferred Shares cannot be determined in the manner
described in Section 11.4.1, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares occurring
after the date of this Rights Agreement) multiplied by the current per share
market price of the Common Shares (as determined pursuant to Section 11.4.1).
If neither the Common Shares nor the Preferred Shares is publicly held or so
listed or traded, "current per share market price" of the Preferred Shares shall
mean the fair value per share as determined in good faith by the Board, or, if
at the time of such determination there is an Acquiring Person, by a majority of
the Continuing Directors then in office, or if there are no Continuing
Directors, by a nationally recognized investment banking firm selected by the
Board, which shall have the duty to make such determination in a reasonable and
objective manner, which determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes. For purposes of
this Agreement, the "current per share market price" of one one-hundredth of a
Preferred Share shall be equal to the "current per share market price" of one
Preferred Share divided by 100.
11.5 Insignificant Changes. No adjustment in the Purchase Price shall
---------------------
be required unless such adjustment would require an increase or decrease of at
least 1% in such price. Any adjustments which by reason of this Section 11.5
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
15
<PAGE>
cent or to the nearest one-hundred thousandth of a Preferred Share or the
nearest one-thousandth of a Common Share or other share or security, as the case
may be.
11.6 Shares Other Than Preferred Shares. If as a result of an
----------------------------------
adjustment made pursuant to Section 11.1, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Sections 11.1
through 11.3, inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with
respect to the Preferred Shares shall apply on like terms to any such other
shares.
11.7 Rights Issued Prior to Adjustment. 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-hundredths of a Preferred Share purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
11.8 Effect of Adjustments. Unless the Company shall have exercised
---------------------
its election as provided in Section 11.9, upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11.2 and 11.3, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Preferred Share (calculated to the nearest one-hundred
thousandth of a Preferred Share) obtained by (i) multiplying (x) the number of
one one-hundredths of a Preferred 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.
11.9 Adjustment in Number of Rights. The Company may elect on or
------------------------------
after the date of any adjustment of the Purchase Price to adjust the number of
Rights, in substitution for any adjustment in the number of one one-hundredths
of a Preferred Share 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-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days later
than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11.9, the Company may, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in substitution
and replacement for the Right Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price)
16
<PAGE>
and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.
11.10 Right Certificates Unchanged. Irrespective of any adjustment
----------------------------
or change in the Purchase Price or the number of one one-hundredths of a
Preferred Share issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the Purchase Price per
share and the number of one one-hundredths of a Preferred Share which were
expressed in the initial Right Certificates issued hereunder.
11.11 Par Value Limitations. Before taking any action that would
---------------------
cause an adjustment reducing the Purchase Price below one one-hundredth of the
then par value, if any, of the Preferred Shares or other shares of capital 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 nonassessable Preferred
Shares or other such shares at such adjusted Purchase Price.
11.12 Deferred Issuance. 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 issuing to the holder of any Right exercised after
such record date of the Preferred Shares and other capital stock or securities
of the Company, if any, issuable upon such exercise over and above the Preferred
Shares and other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect prior to such
adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event requiring such
adjustment.
11.13 Reduction in Purchase Price. Anything in this Section 11 to
---------------------------
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any consolidation or subdivision
of the Preferred Shares, issuance wholly for cash of any of the Preferred Shares
at less than the current market price, issuance wholly for cash of Preferred
Shares or securities which by their terms are convertible into or exchangeable
for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares
or issuance of rights, options or warrants referred to hereinabove in this
Section 11, hereafter made by the Company to holders of its Preferred Shares
shall not be taxable to such stockholders.
11.14 Company Not to Diminish Benefits of Rights. The Company
------------------------------------------
covenants and agrees that after the earlier of the Shares Acquisition or the
Distribution Date it will not, except as permitted by Section 23, 26 or 27, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will substantially diminish
or otherwise eliminate the benefits intended to be afforded by the Rights.
11.15 Adjustment of Rights Associated with Common Shares.
--------------------------------------------------
Notwithstanding anything contained in this Agreement to the contrary, in the
event that the Company shall at any time after the date hereof and prior to the
Distribution Date (i) declare or pay any dividend on the outstanding Common
Shares payable in Common Shares, (ii) effect a subdivision or consolidation of
the outstanding Common Shares (by reclassification or otherwise than by the
payment of dividends payable in Common Shares) or (iii) combine the outstanding
Common Shares into a greater or lesser number of Common Shares, then in any such
case, the number of Rights associated with each Common Share then outstanding,
or issued
17
<PAGE>
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction, the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event. The adjustments
provided for in this Section 11.15 shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 or 13, the
- ------
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25.
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 such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
- -------------
13.1 Certain Transactions. In the event that, from and after the
--------------------
first occurrence of a Trigger Event, directly or indirectly, (A) the Company
shall consolidate with, or merge with and into, any other Person and the Company
shall not be the continuing or surviving corporation, (B) any Person shall
consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of the Company or any other
Person or cash or any other property, or (C) the Company shall sell, exchange,
mortgage or otherwise transfer (or one or more of its Subsidiaries shall sell,
exchange, mortgage or otherwise transfer), in one or more transactions, assets
or earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons,
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right (except as provided in Section 11.1.2 and as otherwise
provided herein) shall thereafter have the right to receive, upon the exercise
thereof at a price per Right equal to the then current Purchase Price multiplied
by the number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Trigger Event (as
subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and
11.12), in accordance with the terms of this Rights Agreement and in lieu of
Preferred Shares or Common Shares, such number of validly authorized and issued,
fully paid, non-assessable and freely tradeable Common Shares of the Principal
Party (as such term is hereinafter defined) not subject to any liens,
encumbrances, rights of first refusal or other advise claims, as shall be equal
to the result obtained by (x) multiplying the then current Purchase Price by the
number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Trigger Event (as
subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and
11.12) and (y) dividing that product by 50% of the then current per share market
price of the Common Shares of such Principal Party (determined pursuant to
Section 11.4) on the date of consummation of such consolidation, merger, sale or
transfer; PROVIDED, that the price per Right so payable and the number of Common
Shares of such Principal Party so purchasable shall thereafter be adjusted in
accordance with Section 11.6 by reason of such subsequent events covered thereby
occurring in respect of such Principal Party after the occurrence of such
consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
18
<PAGE>
merger, sale or transfer, all the obligations and duties of the Company pursuant
to this Rights Agreement; (iii) the term "Company" shall thereafter be deemed to
refer to such Principal Party; and (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
its Common Shares in accordance with Section 9) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights; PROVIDED,
that, upon the subsequent occurrence of any consolidation, merger, sale or
transfer of assets or other extraordinary transaction in respect of such
Principal Party, each holder of a Right shall thereupon be entitled to receive,
upon exercise of a Right and payment of the Purchase Price as provided in this
Section 13.1, such cash, shares, rights, warrants and other property which such
holder would have been entitled to receive had such holder, at the time of such
transaction, owned the Common Shares of the Principal Party receivable upon the
exercise of a Right pursuant to this Section 13.1, and such Principal Party
shall take such steps (including, but not limited to, reservation of shares of
stock) as may be necessary to permit the subsequent exercise of the Rights in
accordance with the terms hereof for such cash, shares, rights, warrants and
other property. The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there are any
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights. The Company shall not consummate any such consolidation, merger, sale
or transfer unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement confirming
that the requirements of this Section 13.1 and Section 13.2 shall promptly be
performed in accordance with their terms and that such consolidation, merger,
sale or transfer of assets shall not result in a default by the Principal Party
under this Agreement as the same shall have been assumed by the Principal Party
pursuant to this Section 13.1 and Section 13.2 and providing that, as soon as
practicable after executing such agreement pursuant to this Section 13, the
Principal Party will:
(1) prepare and file a registration statement under the
Securities Act, if necessary, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, use its
best efforts to cause such registration statement to become effective as
soon as practicable after such filing and use its best efforts to cause
such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the Expiration
Date and similarly comply with applicable state securities laws;
(2) use its best efforts, if the Common Shares 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 Common Shares of the Principal Party 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 receivable upon
exercise of the Rights to be authorized for quotation on Nasdaq or on such
other system then in use;
(3) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act; and
19
<PAGE>
(4) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Shares of the Principal Party subject to
purchase upon exercise of outstanding Rights.
In case the Principal Party has provision in any of its authorized
securities or in its certificate of incorporation or by-laws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue (other than to holders of Rights pursuant
to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, Common Shares or
common stock equivalents of such Principal Party at less than the then current
market price per share thereof (determined pursuant to Section 11.4) or
securities exercisable for, or convertible into, Common Shares or common stock
equivalents of such Principal Party at less than such then current market price,
or (ii) providing for any special payment, taxes or similar provision in
connection with the issuance of the Common Shares of such Principal Party
pursuant to the provisions of Section 13, then, in such event, the Company
hereby agrees with each holder of Rights that it shall not consummate any such
transaction unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
that the provision in question of such Principal Party shall have been canceled,
waived or amended, or that the authorized securities shall be redeemed, so that
the applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.
The Company covenants and agrees that it shall not, at any time after
the Trigger Event, enter into any transaction of the type described in clauses
(A) through (C) of this Section 13.1 if (i) at the time of or immediately after
such consolidation, merger, sale, transfer or other transaction 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, (ii) prior to, simultaneously with or
immediately after such consolidation, merger, sale, transfer or other
transaction, the shareholders of the Person who constitutes, or would
constitute, the Principal Party for purposes of Section 13.2 shall have received
a distribution of Rights previously owned by such Person or any of its
Affiliates or Associates or (iii) the form or nature of organization of the
Principal Party would preclude or limit the exercisability of the Rights. The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
13.2 Principal Party. "Principal Party" shall mean:
---------------
(i) in the case of any transaction described in (A) or (B) of
the first sentence of Section 13.1: (i) the Person that is the issuer of
the securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the
Common Shares of which have the greatest aggregate market value of shares
outstanding, or (ii) if no securities are so issued, (x) the Person that is
the other party to the merger, if such Person survives said merger, or, if
there is more than one such Person, the Person the Common Shares of which
have the greatest aggregate market value of shares outstanding or (y) if
the Person that is the other party to the merger does not survive the
merger, the Person that does survive the merger (including the Company if
it survives) or (z) the Person resulting from the consolidation; and
(ii) in the case of any transaction described in (C) of the first
sentence in Section 13.1, the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions, or, if each Person that is a party to
such transaction or transactions receives the same portion of the assets or
earning power so
20
<PAGE>
transferred or if the Person receiving the greatest portion of the assets
or earning power cannot be determined, whichever of such Persons is the
issuer of Common Shares having the greatest aggregate market value of
shares outstanding; PROVIDED, HOWEVER, that in any such case described in
the foregoing clause (A) or (B) of this Section 13.2, if the Common Shares
of such Person is not at such time or has not been continuously over the
preceding 12-month period registered under Section 12 of the Exchange Act,
then (1) if such Person is a direct or indirect Subsidiary of another
Person the Common Shares of which is and has been so registered, the term
"Principal Party" shall refer to such other Person, or (2) if such Person
is a Subsidiary, directly or indirectly, of more than one Person, the
Common Shares of all of which is and has been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares
outstanding, or (3) if such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in clauses (1) and (2)
above shall apply to each of the owners having an interest in the venture
as if the Person owned by the joint venture was a Subsidiary of both or all
of such joint venturers, and the Principal Party in each such case shall
bear the obligations set forth in this Section 13 in the same ratio as its
interest in such Person bears to the total of such interests.
13.3 Approved Acquisitions. Notwithstanding anything contained
---------------------
herein to the contrary, in the event of any merger or other acquisition
transaction involving the Company pursuant to a merger or other acquisition
agreement between the Company and any Person (or one or more of such Person's
Affiliates or Associates) which agreement has been approved by the Board prior
to any Person becoming an Acquiring Person, this Rights Agreement and the rights
of holders of Rights hereunder shall be terminated in accordance with Section
7.1.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
14.1 Cash in Lieu of Fractional Rights. The Company shall not be
---------------------------------
required to issue fractions of Rights or to distribute Right Certificates which
evidence fractional Rights (except prior to the Distribution Date in accordance
with Section 11.15). In lieu of such fractional Rights, there shall be paid to
the registered holders of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole Right. For the purposes of
this Section 14.1, 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
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the American Stock Exchange or, if the Rights are not listed or
admitted to trading on the American Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board. 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.
21
<PAGE>
14.2 Cash in Lieu of Fractional Preferred Shares. The Company shall
-------------------------------------------
not be required to issue fractions of Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share) upon
exercise or exchange of the Rights or to distribute certificates which evidence
fractional Preferred Shares (other than fractions which are integral multiples
of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-hundredth of a Preferred Share may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
PROVIDED, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Company shall
pay to the registered holders of Right Certificates at the time such Rights are
exercised or exchanged as herein provided an amount in cash equal to the same
fraction of the current per share market price of one Preferred Share (as
determined in accordance with Section 14.1) for the Trading Day immediately
prior to the date of such exercise or exchange.
14.3 Cash in Lieu of Fractional Common Shares. The Company shall not
----------------------------------------
be required to issue fractions of Common Shares or to distribute certificates
which evidence fractional Common Shares upon the exercise or exchange of Rights.
In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share (as
determined in accordance with Section 14.1) for the Trading Day immediately
prior to the date of such exercise or exchange.
14.4 Waiver of Right to Receive Fractional Rights or Shares. 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 or exchange
of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of
----------------
this Rights Agreement, except the rights of action given to the Rights Agent
under Section 18, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce this Rights Agreement, and may institute and maintain any suit,
action or proceeding against the Company to enforce this Rights Agreement, or
otherwise enforce or act in respect of his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Rights 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 Rights Agreement and shall be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person (including, without limitation, the
Company) subject to this Rights Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by
--------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
22
<PAGE>
(b) as of and after the Distribution Date, the Right
Certificates are transferable only on the registry books of the Rights
Agent if surrendered at the office of the Rights Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of transfer
with all required certifications completed; and
(c) the Company and the Rights Agent may deem and treat the
Person in whose name the Right Certificate (or, prior to the Distribution
Date, the associated Common Shares certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Right Certificates or the
associated Common Shares certificate made by anyone other than the Company
or the Rights Agent) for all purposes whatsoever, and neither the Company
nor the Rights Agent shall be affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
-------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay
---------------------------
to the Rights Agent reasonable compensation for all services rendered by it
hereunder in accordance with a fee schedule to be mutually agreed upon 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 Rights Agreement and the exercise and performance of its duties hereunder.
The Company also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability, or expense, incurred without negligence,
bad faith or willful misconduct on the part of the Rights Agent, for anything
done or omitted by the Rights Agent in connection with the acceptance and
administration of this Rights Agreement, including the costs and expenses of
defending against any claim of liability arising therefrom, directly or
indirectly.
The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Rights Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares or the Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. Any corporation or limited liability company into which the Rights Agent
or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation or limited liability company resulting from any
merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any corporation or limited liability company succeeding to
the corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent
23
<PAGE>
under this Rights Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto, PROVIDED that such
corporation or limited liability company would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21. In case at the time
such successor Rights Agent shall succeed to the agency created by this Rights
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this Rights
Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Rights Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
20.1 Legal Counsel. The Rights Agent may consult with legal counsel
-------------
selected by it (who may be legal counsel for the Company), and the opinion of
such counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
20.2 Certificates as to Facts or Matters. Whenever in the
-----------------------------------
performance of its duties under this Rights Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board of Directors, the
Chief Executive Officer, the President, the Chief Financial Officer, any Vice
President, the Treasurer, the Secretary or any Assistant Treasurer or Assistant
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Rights Agreement in reliance
upon such certificate.
20.3 Standard of Care. The Rights Agent shall be liable hereunder
----------------
only for its own negligence, bad faith or willful misconduct.
20.4 Reliance on Rights Agreement and Right Certificates. The Rights
---------------------------------------------------
Agent shall not be liable for or by reason of any of the statements of fact or
recitals contained in this Rights Agreement or in the Right 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.
20.5 No Responsibility as to Certain Matters. The Rights Agent shall
---------------------------------------
not be under any responsibility in respect of the validity of this Rights
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution of any
24
<PAGE>
Right Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition contained
in this Rights Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11.1.2) or any adjustment required
under the provisions of Sections 3, 11, 13, 23 or 27 or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after actual notice of
any such change or adjustment); nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any Preferred Shares or other securities to be issued pursuant to this Rights
Agreement or any Right Certificate or as to whether any Preferred Shares will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
20.6 Further Assurance by Company. 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 Rights
Agreement.
20.7 Authorized Company Officers. The Rights Agent is hereby
---------------------------
authorized and directed to accept instructions with respect to the performance
of its duties hereunder from any one of the Chairman of the Board of Directors,
the Chief Executive Officer, the President, the Chief Financial Officer, any
Vice President, the Treasurer, the Secretary or any Assistant Treasurer or
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties under this Rights Agreement, and it
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer or for any delay in
acting while waiting for these 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 or omitted by the
Rights Agent with respect to its duties or obligations under this Rights
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable to the
Company for any action taken by, or omission of, the Rights Agent in accordance
with a proposal included in any such application on or after the date specified
therein (which date shall not be less than three business days after the date
any such officer actually receives such application, unless any such officer
shall have consented in writing to an earlier date) unless, prior to taking of
any such action (or the effective date in the case of omission), the Rights
Agent shall have received written instructions in response to such application
specifying the action to be taken or omitted.
20.8 Freedom to Trade in Company Securities. The Rights Agent and
--------------------------------------
any stockholder, director, officer or employee of the Rights Agent may buy, sell
or deal in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Rights Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity
for the Company or for any other legal entity.
20.9 Reliance on Attorneys and Agents. The Rights Agent may execute
--------------------------------
and exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for any act, omission, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, omission, default, neglect or misconduct,
PROVIDED that reasonable care was exercised in the selection and continued
employment thereof.
25
<PAGE>
20.10 Incomplete Certificate. If, with respect to any Rights
----------------------
Certificate surrendered to the Rights Agent for exercise or transfer, the
certificate contained in the form of assignment or the form of election to
purchase set forth on the reverse thereof, as the case may be, has not been
completed to certify the holder is not an Acquiring Person (or an Affiliate or
Associate thereof), the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting with the
Company.
20.11 Rights Holders List. At any time and from time to time after
-------------------
the Distribution Date, upon the request of the Company, the Rights Agent shall
promptly deliver to the Company a list, as of the most recent practicable date
(or as of such earlier date as may be specified by the Company), of the holders
of record of Rights.
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under this
Rights Agreement upon 30 days' notice in writing mailed to the Company and to
each transfer agent of the Common Shares and/or Preferred Shares, as applicable,
by registered or certified mail. Following the Distribution Date, the Company
shall promptly notify the holders of the Right Certificates by first-class mail
of any such resignation. The Company may remove the Rights Agent or any
successor Rights Agent upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Shares and/or Preferred Shares, as applicable, by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the resigning, removed, or incapacitated Rights Agent shall
remit to the Company, or to any successor Rights Agent designated by the
Company, all books, records, funds, certificates or other documents or
instruments of any kind then in its possession which were acquired by such
resigning, removed or incapacitated Rights Agent in connection with its services
as Rights Agent hereunder, and shall thereafter be discharged from all duties
and obligations hereunder. Following notice of such removal, resignation or
incapacity, the Company shall appoint a successor to such Rights Agent. If the
Company shall fail to make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of the State of New
York (or any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the State of New York) in
good standing, having an office in the State of New York, which is authorized
under such laws to exercise stock transfer or corporate trust powers and is
subject to supervision or examination by Federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $10 million. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and/or Preferred Shares, as applicable, and, following the
Distribution Date, mail a notice thereof in writing to the registered holders of
the Right Certificates. Failure to give any notice provided for in this Section
21, however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
26
<PAGE>
Section 22. Issuance of New Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Rights Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by the Board to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Rights Agreement. In addition, in connection with the
issuance or sale of Common Shares following the Distribution Date and prior to
the Expiration Date, the Company (a) shall, with respect to Common Shares so
issued or sold pursuant to the exercise of stock options or under any employee
plan or arrangement, granted or awarded as of the Distribution Date, or upon
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 Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; PROVIDED, HOWEVER, that (i) no
such Right 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
Right Certificate would be issued, (ii) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof and (iii) at the time of a
determination by the Board to cause the Company to issue a Right Certificate
under clause (b) above, there must be Continuing Directors then in office and
any such determination shall require the approval of at least a majority of such
Continuing Directors.
Section 23. Redemption.
----------
23.1 Right to Redeem. The Board may, at its option, at any time
---------------
prior to a Trigger Event, redeem all but not less than all of the then
outstanding Rights at a redemption price of $0.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend, recapitalization or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price in Common Shares (based on the "current per
share market price," as determined pursuant to Section 11.4, of the Common
Shares at the time of redemption), cash or any other form of consideration
deemed appropriate by the Board. The redemption of the Rights by the Board may
be made effective at such time, on such basis and subject to such conditions as
the Board in its sole discretion may establish. Notwithstanding anything
contained in this Rights Agreement to the contrary notwithstanding, the Rights
shall not be exercisable following a transaction or event described in Section
11.1.2 prior to the expiration or termination of the Company's right of
redemption hereunder.
23.2 Redemption Procedures. Immediately upon the action of the Board
---------------------
ordering the redemption of the Rights (or at such later time as the Board may
establish for the effectiveness of such redemption), and without any further
action and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. The Company shall promptly give public
notice of such redemption; PROVIDED, HOWEVER, that the failure to give, or any
defect in, any such notice shall not affect the validity of such redemption.
The Company shall promptly give, or cause the Rights Agent to give, notice of
such redemption to the holders of the then outstanding Rights by mailing such
notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption shall state the
method by which the payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may redeem, acquire or purchase
for value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or
27
<PAGE>
in Section 27, and other than in connection with the purchase, acquisition or
redemption of Common Shares prior to the Distribution Date.
Section 24. Notice of Certain Events. In case the Company shall
------------------------
propose at any time after the earlier of the Shares Acquisition Date and the
Distribution Date (a) to pay any dividend payable in stock of any class to the
holders of Preferred Shares or to make any other distribution to the holders of
Preferred Shares (other than a regular periodic cash dividend at a rate not in
excess of 125% of the rate of the last regular periodic cash dividend
theretofore paid or, in case regular periodic cash dividends have not
theretofore been paid, at a rate not in excess of 50% of the average net income
per share of the Company for the four quarters ended immediately prior to the
payment of such dividends, or a stock dividend on, or a subdivision, combination
or reclassification of the Common Shares), or (b) to offer to the holders of
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, or (c) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of out standing Preferred Shares), or (d) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person (other than pursuant to
a merger or other acquisition agreement of the type described in Section
1.3(ii)(A)(z)), or (e) to effect the liquidation, dissolution or winding up of
the Company, or (f) to declare or pay any dividend on the Common Shares payable
in Common Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares), then, in each such case, the Company shall give to the Rights
Agent and to each holder of a Right Certificate, in accordance with Section 25,
a notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, dis tribution 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 Preferred Shares and/or Common
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (a) or (b) above at least 10 days prior
to the record date for determining holders of the Preferred Shares for purposes
of such action, and in the case of any such other action, at least 10 days prior
to the date of the taking of such proposed action or the date of participation
therein by the holders of the Preferred Shares and/or Common Shares, whichever
shall be the earlier.
In case any event set forth in Sections 11.1.2 or 13 of this Rights
Agreement shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to the Rights Agent and to each holder of a Right
Certificate, in accordance with Section 25, a notice of the occurrence of such
event, which notice shall describe the event and the consequences of the event
to holders of Rights under Sections 11.1.2 and 13, and (ii) all references in
this Section 24 to Preferred Shares shall be deemed thereafter to refer to
Common Shares and/or, if appropriate, other securities.
Notwithstanding anything in this Rights Agreement to the contrary,
prior to the Distribution Date a filing by the Company with the Securities and
Exchange Commission shall constitute sufficient notice to the holders of
securities of the Company, including the Rights, for purposes of this Rights
Agreement and no other notice need be given.
28
<PAGE>
Section 25. Notices. Notices or demands authorized by this Rights
-------
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Assisted Living Concepts, Inc.
9955 S.E. Washington Street, Suite 201
Portland, Oregon 97216
Attention: Corporate Secretary
Subject to the provisions of Sections 21 and 24, any notice or demand authorized
by this Rights Agreement to be given or made by the Company or by the holder of
any Right Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Corporate Trust Department
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate (or,
prior to the Distribution Date, to the holder of any certificate representing
Common Shares) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 26. Supplements and Amendments. For so long as the Rights
--------------------------
are then redeemable, the Company may in its sole and absolute discretion, and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Rights Agreement in any respect without the approval of any
holders of Rights or Common Shares. From and after the time that the Rights are
no longer redeemable, the Company may, and the Rights Agent shall, if the
Company so directs, from time to time supplement or amend this Rights Agreement
without the approval of any holders of Rights (i) to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (ii) to shorten or lengthen any
time period hereunder (which shortening or lengthening, after the time a Person
becomes an Acquiring Person, shall be effective only if there are Continuing
Directors and shall require the approval of at least a majority of such
Continuing Directors) or (iii) to make any other changes or provisions in regard
to matters or questions arising hereunder which the Company may deem necessary
or desirable, including but not limited to extending the Final Expiration Date;
PROVIDED, HOWEVER, that no such supplement or amendment shall adversely affect
the interests of the holders of Rights as such (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person), and no such supplement or
amendment may cause the Rights again to become redeemable or cause this Rights
Agreement again to become amendable other than in accordance with this sentence;
PROVIDED FURTHER, that the right of the Board to extend the Distribution Date
shall not require any amendment or supplement hereunder. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
26, the Rights Agent shall execute such supplement or amendment. Without
limiting the foregoing, at any time prior to such time as any Person becomes an
Acquiring Person, the Company and the Rights Agent may amend this Agreement to
lower the thresholds set forth in Sections 1.1 and 3.1 to not less than the
greater of (i) any percentage greater
29
<PAGE>
than the largest percentage of the outstanding Common Shares then known by the
Company to be beneficially owned by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any
Subsidiary of the Company, or any entity holding Common Shares for or pursuant
to the terms of any such plan) and (ii) 10%. Notwithstanding anything herein to
the contrary, any supplement or amendment to this Rights Agreement, after the
time that a Person becomes an Acquiring Person shall require the affirmative
vote of a majority of the Continuing Directors.
Section 27. Exchange.
--------
27.1 Exchange of Common Shares for Rights. The Board may, at its
------------------------------------
option, at any time after the occurrence of a Trigger Event, exchange Common
Shares for all or part of the then outstanding and exercisable Rights (which
shall not include Rights that have become void pursuant to the provisions of
Section 11.1.2) by exchanging at an exchange ratio of one Common Share per Right
that number of Common Shares having an aggregate value equal to the Spread (with
such value being based on the current per share market price (as determined
pursuant to Section 11.4) on the date of the occurrence of a Trigger Event) per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such amount per Right being
hereinafter referred to as the "Exchange Consideration"). Notwithstanding the
foregoing, (i) the Board shall not be empowered to effect such exchange at any
time after any Acquiring Person shall have become the Beneficial Owner of 50% or
more of the Common Shares then outstanding and (ii) the Board shall not be
empowered to effect an exchange for more than that number of Rights for which
there are sufficient Common Shares authorized but unissued, or held by the
Company as treasury shares, to permit the exchange for Rights. From and after
the occurrence of an event specified in Section 13.1, any Rights that therefore
have not been exchanged pursuant to this Section 27.1 shall thereafter be
exercisable only in accordance with Section 13 and may not be exchanged pursuant
to this Section 27.1. The exchange of the Rights by the Board may be made
effective at such time, on such basis and with such conditions as the Board in
its sole discretion may establish.
27.2 Exchange Procedures. Immediately upon the action of the Board
-------------------
ordering the exchange for any Rights pursuant to Section 27.1 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 one Common Share. 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 shall state the method by which the exchange of the Common Shares
for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than the Rights which
have become void pursuant to the provisions of Section 11.1.2) held by each
holder of Rights.
27.3 Insufficient Shares. The Company may at its option substitute,
-------------------
and, in the event that there shall not be sufficient Common Shares issued but
not outstanding or authorized but unissued to permit an exchange of Rights for
Common Shares as contemplated in accordance with this Section 27, the Company
shall substitute to the extent of such insufficiency, for each Common Share that
would otherwise be issuable upon exchange of a Right, a number of Preferred
Shares or fraction thereof (or equivalent preferred stock, as such term is
defined in Section 11.2) such that the current per share market
30
<PAGE>
price (determined pursuant to Section 11.4) of one Preferred Share (or
equivalent preferred share) multiplied by such number or fraction is equal to
the current per share market price of one Common Share (determined pursuant to
Section 11.4) as of the date of such exchange.
Section 28. Successors. All the covenants and provisions of this
----------
Rights Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Benefits of this Rights Agreement. Nothing in this
---------------------------------
Rights Agreement shall be construed to give to any Person or corporation other
than the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim under this Rights Agreement; but this Rights
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares).
Section 30. Determinations and Actions by the Board. The Board shall
---------------------------------------
have the exclusive power and authority to administer this Rights Agreement and
to exercise the rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Rights Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Rights Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Rights Agreement (including, without limitation, a determination to redeem or
not redeem the Rights or amend this Rights Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) that are done or
made by the Board in good faith, shall (x) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Rights, as such, and all other
parties, and (y) not subject the Board to any liability to the holders of the
Rights.
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Rights 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 Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 32. Governing Law. This Rights Agreement and each Right
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Nevada and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Rights Agreement may be executed in
------------
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Heading. Descriptive headings of the several
-------------------
Sections of this Rights Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
[signature page to follow]
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement
to be duly executed as of the day and year first above written.
ASSISTED LIVING CONCEPTS, INC.
By ___________________________
Name:
Title:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By ____________________________
Name:
Title:
S-1
<PAGE>
EXHIBIT A
---------
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
ASSISTED LIVING CONCEPTS, INC.
(Pursuant to Section 78.195 of the
Nevada Revised Statutes)
_____________________________
Assisted Living Concepts, Inc., a corporation organized and existing under
the laws of the State of Nevada (hereinafter called the "Company"), hereby
certifies that the following resolution was adopted by the Board of Directors of
the Company as required by Section 78.195 of the Nevada Revised Statutes at a
meeting duly called and held on June 12, 1997.
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Company (hereinafter called the "Board of Directors" or the
"Board") in accordance with the provisions of the Articles of Incorporation, the
Board of Directors hereby creates a series of Preferred Stock, par value $0.01
per share (the "Preferred Stock"), of the Company and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be ________. Such number of shares may be increased or decreased by
resolution of the Board of Directors; PROVIDED, that no decrease shall reduce
the number of shares of Series A 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 Company convertible
into Series A Preferred Stock.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any
shares of any class or series of stock of the Company ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the
holders of shares of Series A Preferred Stock, in preference to the
A-1
<PAGE>
holders of Common Stock, par value $0.01 per share (the "Common Stock"), of
the Company, and of any other stock ranking junior to the Series A
Preferred Stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 or (b)
subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Company shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section 2
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series A Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
A-2
<PAGE>
Section 3. Voting Rights. The holders of shares of Series A Preferred
-------------
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the
Company. In the event the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Series A Preferred Stock and the holders
of shares of Common Stock and any other capital stock of the Company having
general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Company shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Company may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for
shares of
A-3
<PAGE>
any stock of the Company ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series A Preferred
Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking
on a parity with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation, dissolution or winding up of the Company,
voluntary or otherwise, no distribution shall be made (1) to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have
received an amount per share (the "Series A Liquidation Preference") equal
to $100 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such
payment, provided that the holders of shares of Series A Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of shares of Common
Stock, or (2) to the holders of shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Company shall at
any time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision, combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common
Stock outstanding
A-4
<PAGE>
immediately after such event and the denominator of which is the number of
shares of Common Stock that are outstanding immediately prior to such
event.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquidation preferences of all other classes and series of stock of
the Corporation, if any, that rank on a parity with the Series A Preferred
Stock in respect thereof, then the assets available for such distribution
shall be distributed ratably to the holders of the Series A Preferred Stock
and the holders of such parity shares in proportion to their respective
liquidation preferences.
(C) Neither the merger or consolidation of the Corporation into or
with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the
meaning of this Section 6.
Section 7. Consolidation, Merger, etc. In case the Company shall enter
--------------------------
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
-------------
not be redeemable by the Company.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect to
----
the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, junior to all series of any other class of the
Company's Preferred Stock, except to the extent that any such other series
specifically provides that it shall rank on a parity with or junior to the
Series A Preferred Stock.
Section 10. Amendment. At any time any shares of Series A Preferred Stock
---------
are outstanding, the Articles of Incorporation of the Company shall not be
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least two-
thirds of the outstanding shares of Series A Preferred Stock, voting separately
as a single class.
Section 11. Fractional Shares. Series A Preferred Stock may be issued in
-----------------
fractions of a share that shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
A-5
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Company by its Chairman of the Board this ___ day of June, 1997.
______________________________
Wiliam McBride III
Chairman of the Board
Attest:
______________________
Stephen Gordon
Secretary
A-6
<PAGE>
EXHIBIT B
---------
[Form of Right Certificate]
Certificate No. R-___ _______ Rights
NOT EXERCISABLE AFTER JUNE 12, 2007 OR EARLIER IF NOTICE OF REDEMPTION OR
EXCHANGE IS GIVEN OR IF THE COMPANY IS MERGED OR ACQUIRED PURSUANT TO AN
AGREEMENT OF THE TYPE DESCRIBED IN SECTION 1.3(ii)(A)(2) OF THE RIGHTS
AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.01 PER RIGHT, AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
-------------
CIRCUMSTANCES (SPECIFIED IN SECTION 11.1.2 OF THE RIGHTS AGREEMENT), RIGHTS
---------------------------------------------------------------------------
BENEFICIALLY OWNED BY OR TRANSFERRED TO AN ACQUIRING PERSON (AS DEFINED IN
--------------------------------------------------------------------------
THE RIGHTS AGREEMENT), OR ITS AFFILIATES OR ASSOCIATES, OR ANY SUBSEQUENT
-------------------------------------------------------------------------
HOLDER OF SUCH RIGHTS WILL BECOME NULL AND VOID AND WILL NO LONGER BE
---------------------------------------------------------------------
TRANSFERABLE. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE HELD OR HAVE
------------
BEEN HELD BY A PERSON WHO IS OR WAS AN ACQUIRING PERSON OR AN ASSOCIATE OR
AFFILIATE OF AN ACQUIRING PERSON OR A NOMINEE THEREOF. THIS RIGHT
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY HAVE BECOME NULL AND VOID AS
SPECIFIED IN SECTION 11.1.2 OF THE RIGHTS AGREEMENT.]/1/
-
Right Certificate
ASSISTED LIVING CONCEPTS, INC.
This certifies that , or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of June 12, 1997, as the same may be amended from
time to time (the "Rights Agreement"), between Assisted Living Concepts, Inc., a
Nevada corporation (the "Company"), and American Stock Transfer & Trust Company,
as Rights Agent (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date and prior to 5:00 P.M. (Oregon time) on June 12,
2007, at the offices of the Rights Agent, or its successors as Rights Agent,
designated for such purpose, one one-hundredth of a fully paid, nonassessable
share of Series A Junior Participating Preferred Stock, par value $0.01 per
share (the "Preferred Shares") of the Company, at a purchase price of $54.00 per
one one-hundredth of a Preferred Share, subject to adjustment (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase and certification duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-hundredths of a
Preferred Share which may be purchased upon exercise thereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
________, 1997 based on the Preferred Shares as constituted at such date.
Capitalized terms used in this Right Certificate without definition shall have
the meanings ascribed to them in the Rights
- ------------------------
/1/ The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
B-1
<PAGE>
Agreement. As provided in the Rights Agreement, the Purchase Price and the
number of Preferred Shares which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal offices of the Company and the
Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the offices of the Rights Agent designated for such purpose, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of one one-hundredths of a Preferred Share as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Board of
Directors may, at its option, (i) redeem the Rights evidenced by this Right
Certificate at a redemption price of $0.01 per Right or (ii) exchange Common
Shares for the Rights evidenced by this Certificate, in whole or in part.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions of Preferred Shares which
are integral multiples of one one-hundredth of a Preferred Share, which may, at
the election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
If any term, provision, covenant or restriction of the Rights
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 the Rights Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
This Right Certificate shall not be valid or binding for any purpose
until it shall have been countersigned by the Rights Agent.
[Signature page follows]
B-2
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _______________.
Attest: ASSISTED LIVING CONCEPTS, INC.
By _________________________ By ____________________________
Name: Name:
Title: Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY, as Rights Agent
By _____________________________
Authorized Signature
B-3
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _________________________________________
hereby sells, assigns and transfers unto
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
Rights evidenced by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
__________________________ Attorney, to transfer the within Right Certificate on
the books of the within-named Company, with full power of substitution.
Dated: __________________
_________________________
Signature
Signature Guaranteed:
____________________________
Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended.
________________________________________________________________________________
The undersigned hereby certifies that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are
not beneficially owned by and are not being assigned to an Acquiring Person or
an Affiliate or an Associate thereof; and
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate thereof.
Dated: __________________
_________________________
Signature
B-4
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To: ASSISTED LIVING CONCEPTS, INC.
The undersigned hereby irrevocably elects to exercise __________________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights (or such other securities or property
of the Company or of any other Person which may be issuable upon the exercise of
the Rights) and requests that certificates for such shares be issued in the name
of:
____________________________________________________________
(Please print name and address)
____________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number: ___________________
____________________________________________________________
(Please print name and address)
____________________________________________________________
Dated: __________________
______________________________
Signature
Signature Guaranteed:
_______________________________
Signatures must be guaranteed by an "eligible guarantor institution" as defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended.
B-5
<PAGE>
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
beneficially owned by and are not being assigned to an Acquiring Person or an
Affiliate or an Associate thereof; and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Right
Certificate from any person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate thereof.
Dated:_______________
________________________
Signature
________________________________________________________________________________
NOTICE
------
The signature in the foregoing Form of Assignment and Form of Election to
Purchase must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment
or Form of Election to Purchase is not completed, the Company will deem the
beneficial owner of the Rights evidenced by this Right Certificate to be an
Acquiring Person or an Affiliate or Associate hereof and such Assignment or
Election to Purchase will not be honored.
B-6
<PAGE>
EXHIBIT C
---------
As described in the Rights Agreement, Rights which are held by
--------------------------------------------------------------
or have been held by an Acquiring Person or Associates or Affiliates
--------------------------------------------------------------------
thereof (as defined in the Rights Agreement) and certain transferees
--------------------------------------------------------------------
thereof shall become null and void and will no longer be transferable.
----------------------------------------------------------------------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On June 12, 1997 the Board of Directors (the "Board") of Assisted Living
Concepts, Inc. (the "Company") declared a dividend of one Right for each share
of common stock, $0.01 par value (the "Common Shares"), of the Company
outstanding at the close of business on June 30, 1997 (the "Record Date"). As
long as the Rights are attached to the Common Shares, the Company will issue one
Right (subject to adjustment) with each new Common Share so that all such shares
will have attached Rights. When exercisable, each Right will entitle the
registered holder to purchase from the Company one one-hundredth of a share of
Series A Junior Participating Preferred Stock (the "Preferred Shares") at a
price of $54.00 per one one-hundredth of a Preferred Share, subject to
adjustment (the "Purchase Price"). The description and terms of the Rights are
set forth in a Rights Agreement, dated as of June 12, 1997, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and
American Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the Common
Shares (an "Acquiring Person") or (ii) ten business days (or such later date as
may be determined by action of the Board of Directors prior to such time as any
person or group of affiliated persons becomes an Acquiring Person) following the
commencement or announcement of an intention to make a tender offer or exchange
offer the consummation of which would result in the beneficial ownership by a
person or group of 15% or more of the Common Shares (the earlier of (i) and (ii)
being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificate together with a copy of this Summary of
Rights.
The Rights Agreement provides that until the Distribution Date (or
earlier redemption, exchange, termination or expiration of Rights), the Rights
will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the close of business on the Record Date
upon transfer or new issuance of the Common Shares, with or without such
notation or a copy of this Summary of Rights, will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date
(or earlier redemption, exchange, termination or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares, with or without
such notation or a copy of this Summary of Rights, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on June 12, 2007, subject to the Company's right to extend such date
(the "Final Expiration Date"), unless earlier redeemed or exchanged by the
Company or terminated.
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Each Preferred Share purchasable upon exercise of the Rights will be
entitled, when, as and if declared to a minimum preferential quarterly dividend
payment of $1.00 per share but will be entitled to an aggregate dividend of 100
times the dividend, if any, declared per Common Share. In the event of
liquidation, dissolution or winding up of the Company, the holders of the
Preferred Shares will be entitled to a minimum preferential liquidation payment
of $100 per share (plus any accrued but unpaid dividends) but will be entitled
to an aggregate payment of 100 times the payment made per Common Share. Each
Preferred Share will have 100 votes and will vote together with the Common
Shares. Finally, in the event of any merger, consolidation or other transaction
in which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share. Preferred Shares will
not be redeemable. These rights are protected by customary antidilution
provisions. Because of the nature of the Preferred Share's dividend,
liquidation and voting rights, the value of one one-hundredth of a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares or convertible
securities at less than the current market price of the Preferred Shares or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness, cash, securities or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Preferred Shares (which dividends will be subject to the adjustment described in
clause (i) above)) or of subscription rights or warrants (other than those
referred to above).
In the event that a Person becomes an Acquiring Person or if the Company
were the surviving corporation in a merger with an Acquiring Person or any
affiliate or associate of an Acquiring Person and the Common Shares were not
changed or exchanged, each holder of a Right, other than Rights that are or were
acquired or beneficially owned by the Acquiring Person (which Rights will
thereafter be void), will thereafter have the right to receive upon exercise
that number of Common Shares having a market value of two times the then current
Purchase Price of the Right. In the event that, after a Person has become an
Acquiring Person, (i) the Company were acquired in a merger or other business
combination transaction or more than 50% of its assets or earning power were
sold, proper provision shall be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value of two times the then current Purchase Price of the Right.
At any time after a Person becomes an Acquiring Person and prior to the
earlier of one of the events described in the last sentence of the previous
paragraph or the acquisition by such Acquiring Person of 50% or more of the
outstanding Common Shares, the Board of Directors may cause the Company to
exchange the Rights (other than Rights owned by an Acquiring Person which will
have become void), in whole or in part, for Common Shares at an exchange rate of
one Common Share per Right (subject to adjustment).
No adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price. No
fractional Preferred Shares or Common Shares will be issued (other than
fractions of Preferred Shares which are integral multiples of one one-hundredth
of
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a Preferred Share, which may, at the election of the Company, be evidenced by
depository receipts), and in lieu thereof, a payment in cash will be made based
on the market price of the Preferred Shares or Common Shares on the last trading
date prior to the date of exercise.
The Rights may be redeemed in whole, but not in part, at a price of $0.01
per Right (the "Redemption Price") by the Board at any time prior to the time
that an Acquiring Person has become such. The redemption of the Rights may be
made effective at such time, on such basis and with such conditions as the Board
in its sole discretion may establish. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company beyond those as an existing stockholder,
including, without limitation, the right to vote or to receive dividends.
Any of the provisions of the Rights Agreement may be amended by the Board
for so long as the Rights are then redeemable, and after the Rights are no
longer redeemable, the Company may amend or supplement the Rights Agreement in
any manner that does not adversely affect the interests of the holders of the
Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Current Report on Form 8-K. A copy of
the Rights Agreement is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.
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EXHIBIT 2
Assisted Living Concepts, Inc.
9955 S.E. Washington Street, Suite 201
Portland, Oregon 97216
June 30, 1997
To Our Stockholders:
On June 12, 1997, the Board of Directors (the "Board") of Assisted
Living Concepts, Inc. (the "Company") declared a two-for-one stock split on the
Company's Common Stock and adopted a Shareholder Rights Plan (the "Plan") that
is intended to protect your interests in the event you and the Company are
confronted with coercive takeover tactics.
The record date for the stock split is June 30, 1997 and the stock
split will occur immediately prior to the dividend distribution of Rights
pursuant to the Plan, as described below. On July 10, 1997, shareholders of
record on the record date will be sent a share certificate representing the
additional shares of Common Stock to which they are entitled. The Common Stock
will begin trading on a split-adjusted basis on the American Stock Exchange on
July 10, 1997.
The Plan provides for a dividend distribution of Rights to purchase
shares of a newly created series of the Company's Preferred Stock. Under certain
circumstances, the Rights could become exercisable to purchase the Company's
Common Stock (the "Common Stock"), or securities of an acquiring entity, at one-
half market value. The Rights may be exercised only if certain events occur. You
are now the owner of one Right for each share of Common Stock you own. The Plan
has been adopted in order to strengthen the ability of the Board to protect your
interests.
We are attaching a summary description that outlines the principal
features of the Plan, and we urge you to read the summary carefully. This
letter reviews our reasons for issuing the Rights.
NO ACTION BY STOCKHOLDERS IS REQUIRED OR PERMITTED AT THIS TIME, AND
NO MONEY SHOULD BE SENT TO THE COMPANY. THE RIGHTS WILL AUTOMATICALLY ATTACH TO
THE SHARES OF COMMON STOCK YOU HOLD AND WILL TRADE WITH THEM. SEPARATE RIGHT
CERTIFICATES WILL BE SENT TO STOCKHOLDERS ONLY IF A PERSON OR GROUP ACQUIRES 15%
OR MORE OF THE OUTSTANDING COMMON STOCK OR MAKES A TENDER OFFER FOR 15% OR MORE
OF THE COMMON STOCK. CERTIFICATES FOR COMMON STOCK ISSUED AFTER JUNE 30, 1997
WILL CONTAIN A REFERENCE TO THE PLAN, BUT THERE IS NO NEED TO SEND IN YOUR
CERTIFICATES TO HAVE THIS REFERENCE ADDED.
The Rights are not being distributed in response to any specific
effort to acquire control of the Company. The Rights are designed to protect
stockholders in the event of an unsolicited attempt to acquire the Company,
including through an accumulation of Common Stock in the open market, a partial,
two-tier or inadequate tender offer that does not treat all stockholders equally
and other abusive takeover tactics which the Board believes are not in the best
interests of stockholders. These tactics unfairly pressure stockholders, squeeze
them out of their investment without giving them any real choice and deprive
them of the full value of their Common Stock. We consider these Rights to be a
valuable means of protecting both your right to retain your equity investment in
the Company and the full value of that investment, while not foreclosing a fair
acquisition bid for the Company.
The Rights are not intended to prevent a takeover of the Company and
will not do so. They are designed to deal with the possibility of unilateral
actions by hostile acquirors that could deprive
<PAGE>
Assited Living Concepts, Inc.
June 30, 1997
Page 2
the Board and stockholders of the Company of their ability to determine the
Company's destiny and obtain the highest price for their Common Stock.
Adoption of the Plan should not by itself affect any prospective
acquiror who is willing to make an all-cash offer at a full and fair price or
who is willing to negotiate with the Board. The Plan certainly will not
interfere with a merger or other business combination transaction approved by
the Board.
The issuance of the Rights has no dilutive effect, will not affect
reported earnings per share and is not taxable to the Company or to you.
Stockholders may, under certain circumstances, recognize taxable income if the
Rights become exercisable.
Our overriding objective is to continue building value for the
Company's stockholders, and we feel that the Plan will assist in that effort.
Sincerely,
Keren Brown Wilson
Chief Executive Officer and President
