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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 (Date of earliest event reported): June 5, 1997 (June 2, 1997)
PHYSICIAN RELIANCE NETWORK, INC.
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(Exact name of registrant as specified in its charter)
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Texas 0-24872 75-2495107
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
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Two Lincoln Centre, Suite 900
5420 LBJ Freeway
Dallas, Texas 75240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 392-8700
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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On June 2, 1997, the Board of Directors of Physician Reliance Network, Inc.
(the "Company") declared a dividend of one Stock Purchase Right (a "Right") per
share of the Company's Common Stock, no par value per share (the "Common
Stock"), outstanding on June 16, 1997 (the "Record Date"). A Right will also
accompany each share of the Company's Common Stock issued following the Record
Date. Each Right, when it first becomes exercisable, entitles the holder to
purchase from the Company one-hundredth of one share of Series One Junior
Preferred Stock, no par value per share (the "Series One Junior Preferred
Stock"), at an initial exercise price of $60.00 per one-hundredth of one share
(the "Exercise Price"), subject to adjustment. The terms and conditions of the
Rights are set forth in a Rights Agreement, dated as of June 2, 1997 (the
"Rights Agreement"), between the Company and Harris Trust and Savings Bank, as
Rights Agent (the "Rights Agent"), a copy of which is filed herewith as an
Exhibit.
Item 7. Financial Statements, Pro Forma Information and Exhibits.
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(c) Exhibits:
(4) Rights Agreement, dated as of June 2, 1997, between Physician
Reliance Network, Inc. and Harris Trust and Savings Bank, as
Rights Agent, which includes as exhibits the form of Rights
Certificate and the Summary of Rights Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHYSICIAN RELIANCE NETWORK, INC.
Date: June 3, 1997 By: /s/ George P. McGinn, Jr.
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George P. McGinn, Jr.
Executive Vice President, General Counsel, and
Secretary
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EXHIBIT INDEX
NO. EXHIBIT
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4 Rights Agreement, dated as of June 2, 1997,
between Physician Reliance Network, Inc. and
Harris Trust and Savings Bank, as Rights Agent,
which includes as exhibits, the form of Rights
Certificate and the Summary of Rights Agreement.
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PHYSICIAN RELIANCE NETWORK, INC.
and
HARRIS TRUST AND SAVINGS BANK
RIGHTS AGENT
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RIGHTS AGREEMENT
DATED JUNE 2, 1997
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TABLE OF CONTENTS
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Section 1. Certain Definitions....................................................................1
Section 2. Appointment of Rights Agent............................................................6
Section 3. Issuance of Rights Certificates........................................................6
Section 4. Form of Rights Certificates............................................................8
Section 5. Countersignature and Registration......................................................9
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates.........................................10
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights.........................11
Section 8. Cancellation and Destruction of Rights Certificates...................................13
Section 9. Reservation and Availability of Capital Stock.........................................14
Section 10. Preferred Stock Record Date...........................................................16
Section 11. Adjustment of Exercise Price, Number and Kind of Shares or Number of Rights...........16
Section 12. Certificate of Adjusted Exercise Price or Number of Shares............................24
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..................24
Section 14. Fractional Rights and Fractional Shares...............................................28
Section 15. Rights of Action......................................................................29
Section 16. Agreement of Rights Holders...........................................................30
Section 17. Rights Certificate Holder Not Deemed a Shareholder....................................31
Section 18. Concerning the Rights Agent...........................................................31
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Section 19. Merger or Consolidation or Change of Name of Rights Agent.............................32
Section 20. Duties of Rights Agent................................................................32
Section 21. Change of Rights Agent................................................................35
Section 22. Issuance of New Rights Certificates...................................................36
Section 23. Redemption............................................................................36
Section 24. Exchange..............................................................................37
Section 25. Notice of Certain Events..............................................................39
Section 26. Notices...............................................................................40
Section 27. Supplements and Amendments............................................................40
Section 28. Determinations and Actions by the Board of Directors, etc.............................42
Section 29. Successors............................................................................42
Section 30. Benefits of this Agreement............................................................42
Section 31. Severability..........................................................................42
Section 32. Governing Law.........................................................................43
Section 33. Counterparts..........................................................................43
Section 34. Descriptive Headings..................................................................43
Signatures............................................................................................. 41
Exhibit A. Form of Rights Certificate.......................................................... A-1
Exhibit B. Summary of Rights Agreement......................................................... B-1
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of the Second day of June, 1997 (the
"Agreement"), between Physician Reliance Network, Inc., a Texas corporation (the
"Company"), and Harris Trust and Savings Bank (the "Rights Agent").
R E C I T A L S
WHEREAS, on June 2, 1997 (the "Rights Dividend Declaration Date"), the
Board Directors of the Company (the "Board") authorized and declared a
distribution of one Right (as defined in Section 1 hereof) for each share of the
Company's common stock, no par value per share ("Common Stock"), outstanding on
the Record Date (as defined in Section 1 hereof), subject to the execution of
this Agreement, and authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant hereto) with respect to each share of Common
Stock issued between the Record Date and the earlier of the Exercisability Date
(as defined in Section 3(a) hereof) or the Expiration Date (as defined in
Section 7(a) hereof), each Right initially representing the right to purchase,
upon the terms and subject to the conditions hereinafter set forth, one
one-hundredth of one share of Series One Junior Preferred Stock, no par value
per share (the "Preferred Stock"), having the relative rights, preferences, and
limitations set forth in the Company's Articles of Incorporation (the
"Articles");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "Acquiring Person" means (i) any Person which (or which, together with
all its Affiliates and Associates) shall be the Beneficial Owner of 18% or more
of the shares of Common Stock then outstanding, or (ii) any Adverse Person.
Notwithstanding the foregoing, (x) the term "Acquiring Person" shall not include
the Company, any Subsidiary of the Company, any employee benefit plan maintained
by the Company or any of its Subsidiaries, any trustee or fiduciary with respect
to such plan acting in such capacity, Texas Oncology, P.A. (alone and together
with its Affiliates and Associates), or Merrick H. Reese (alone and together
with his Affiliates and Associates); and (y) no Person shall become an
"Acquiring Person" as the result of (A) the acquisition of Common Stock (or
other securities convertible into shares of Common Stock or other rights with
respect to Common Stock) directly from the Company, or (B) an acquisition of
Common Stock by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
(alone or together with all Affiliates and Associates) to 18% or more of the
shares of Common Stock then outstanding; provided, however, that if a Person
(together with its Affiliates and Associates) becomes the Beneficial Owner of
18% or more of the Common Stock then outstanding by reason of share purchases by
the Company, and
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such Person (or an Affiliate or Associate) subsequently becomes the Beneficial
Owner of any additional Common Stock, then such Person shall be deemed to be an
"Acquiring Person."
(b) "Adverse Person" means any person declared by the Board to be an
Adverse Person after (i) a determination by the Board that such Person, alone or
together with its Affiliates and Associates, has become the Beneficial Owner of
10% or more of the shares of Common Stock then outstanding; and (ii) a
determination by the Board, after reasonable inquiry and investigation
(including such consultation, if any, with such persons as such directors shall
deem appropriate), that:
(A) such Beneficial Ownership by such Person is intended to, is
reasonably likely to, or will either cause the Company to repurchase the
Common Stock beneficially owned by such Person or cause pressure on the
Company to take action or enter into a transaction or series of
transactions that would provide such Person with short-term financial gain
under circumstances where the Board determines that the best long-term
interests of the Company and its shareholders, but for the actions and
possible actions of such Person, would not be served by taking such action
or entering into such transactions or series of transactions at that time;
or
(B) such Beneficial Ownership is causing or reasonably likely to cause
a material adverse impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's ability to
maintain its competitive position) on the business or prospects of the
Company;
provided, however, that the Board may not declare a Person to be an Adverse
Person if such person was the Beneficial Owner of 10% or more of the Common
Stock outstanding on the Close of Business on the day prior to the date of this
Agreement, or if, prior to the time that such Person acquired 10% or more of the
Common Stock, such Person provided to the Board a written statement of such
Person's acquisition of such Common Stock, together with any other information
reasonably requested of such Person by the Board, and the Board, based on such
statement and reasonable inquiry and investigation (including such consultation,
if any, with such persons as the directors shall deem appropriate), determines
to notify and notifies such Person in writing that it will not declare such
Person to be an Adverse Person; and provided, further, that the Board may
expressly condition in any manner a determination not to declare a Person an
Adverse Person on such conditions as the Board may select, including, without
limitation, that such Person shall not acquire more than a specified amount of
Company stock and/or that such Person shall not take actions inconsistent with
the purposes and intentions disclosed by such Person in the statement provided
by such Person to the Board. In the event that the Board should at any time
determine, upon reasonable inquiry and investigation (including consultation
with such persons as the directors shall deem appropriate), that such Person has
not met or complied with any condition specified by the Board, the Board may at
any time thereafter declare such Person to be an Adverse Person. No delay or
failure by the Board
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to declare a Person to be an Adverse Person shall in any way waive or otherwise
affect the power of the Board subsequently to declare a Person to be an Adverse
Person.
(c) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
to "beneficially own," any securities:
(i) of which such Person or any of such Person's Affiliates or
Associates is considered to be a "beneficial owner" under Rule 13d-3 of the
General Rules and Regulations under the Exchange Act (the "Exchange Act
Regulations") as in effect on the date hereof; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," any security under this subparagraph (i) as a result of an agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given
in response to a proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the Exchange Act and the
Exchange Act Regulations, and (B) is not reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report);
(ii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate of such other Person) with
which such Person (or any of such Person's Affiliates or Associates) has
any agreement, arrangement or understanding (whether or not in writing) for
the purpose of acquiring, holding, voting (except pursuant to a revocable
proxy as described in the provision to subparagraph (i) of this paragraph
(d)) or disposing of such securities (other than customary agreements with
and between underwriters and selling group members with respect to a bona
fide public offering of securities); or
(iii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time or upon
the satisfaction of conditions) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise;
provided, however, that under this paragraph (d), a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," (x) 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, (y) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (z)
securities issuable upon
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exercise of Rights from and after the occurrence of a Triggering Event, which
Rights were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Exercisability Date or pursuant to Section 3(a) or
Section 22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original Rights.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a person's
Beneficial Ownership of securities of the Company, shall mean the number of
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(e) "Board" has the meaning set forth in the Recitals.
(f) "Business Day" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in Texas are authorized or obligated by law or
executive order to close.
(g) "Close of Business" on any given date means 5:00 P.M., Dallas, Texas
local time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M., Dallas, Texas local time, on the next succeeding
Business Day.
(h) "common stock" of any Person other than the Company means such Person's
capital stock with the greatest voting power, or, if such Person shall have no
capital stock, the equity securities or other equity interest having power to
control or direct the management of such Person.
(i) "Common Stock" means the shares of common stock, no par value per
share, of the Company or, in the event of a stock split or reverse stock split
with respect to such shares of Common Stock, the shares of Common Stock of the
Company resulting from such stock split or reverse stock split.
(j) "Continuing Director" means any Person who is a member of the Board,
while such Person is a member of the Board, who is not an Acquiring Person, or
an Affiliate or Associate of an Acquiring Person, or a nominee or representative
of an Acquiring Person or of an Acquiring Person's Affiliate or Associate, and
who (i) was a member of the Board prior to the date of this Agreement, or (ii)
becomes a member of the Board after the date of this Agreement if such Person's
nomination for election to the Board is recommended or approved by a majority of
the Continuing Directors.
(k) "Exercisability Date" has the meaning set forth in Section 3(a) hereof.
(l) "Exercise Price" has the meaning set forth in Section 7(b) hereof.
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(m) "Expiration Date" has the meaning set forth in Section 7(a) hereof.
(n) "Final Expiration Date" has the meaning set forth in Section 7(a)
hereof.
(o) "Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange
Act.
(p) "Record Date" means June 16, 1997.
(q) "Redemption Date" has the meaning set forth in Section 7(a) hereof.
(r) "Right" means one of the stock purchase rights created hereunder.
(s) "Rights Certificate" has the meaning set forth in Section 3(a) hereof.
(t) "Rights Dividend Declaration Date" has the meaning set forth in the
Recitals.
(u) "Section 11(a)(ii) Event" means any event described in Section
11(a)(ii) hereof.
(v) "Section 13 Event" means any event described in clause (x), (y) or (z)
of Section 13(a) hereof.
(w) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
(x) "Subsidiary" means, with reference to any Person, any corporation of
which an amount of voting securities sufficient to elect at least a majority of
the directors of such corporation is beneficially owned, directly or indirectly,
by such Person, or otherwise controlled by such Person.
(y) "Triggering Event" means any Section 11(a)(ii) Event or any Section 13
Event.
Section 2. Appointment of Rights Agent.
The Company hereby appoints the Rights Agent to act as agent for the
Company 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.
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Section 3. Issuance of Rights Certificates.
(a) Until the earlier of:
(i) the Close of Business on the tenth Business Day after the Stock
Acquisition Date, and
(ii) the Close of Business on such date as a majority of the Board
shall determine, which date shall follow the commencement of a tender offer
(as determined by reference to Rule 14d-2(a) under the Exchange Act) or
exchange offer by any Person, if upon consummation thereof such Person
would become an Acquiring Person provided, however, that with respect to
any such action by the Board as to such a determination, such determination
may be made only if (A) there are Continuing Directors then in office and
(B) the Board makes such determination with the concurrence of a majority
of the Continuing Directors then in office (the earlier of (i) and (ii)
above being the "Exercisability Date"),
the Rights:
(x) will be evidenced (subject to the provisions of paragraph (b) of
this Section 3) by the certificates for shares of Common Stock registered
in the names of the holders thereof as of and subsequent to the Record Date
(which certificates for shares of Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and
(y) will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company).
As soon as practicable after the Exercisability Date, the Rights Agent will send
at the expense of the Company by first-class, postage prepaid mail, to each
record holder of shares of Common Stock as of the Close of Business on the
Exercisability Date, at the address of such holder shown on the records of the
Company, a certificate for Rights, substantially in the form of Exhibit A
attached hereto (the "Rights Certificate"), evidencing one Right for each share
of Common Stock so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per share of Common Stock has been
made pursuant to Section 11 hereof, then at the time of distribution of the
Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Exercisability
Date, the Rights will be evidenced solely by such Rights Certificates.
(b) On the Record Date or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights Agreement, in substantially the form
attached hereto as Exhibit B (the
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"Summary of Rights"), by first-class, postage prepaid mail, to each record
holder of Common Stock as of the Close of Business on the Record Date at the
address of such holder shown on the records of the Company. With respect to
certificates for Common Stock outstanding as of the Record Date, until the
earlier of the Exercisability Date, the Expiration Date and the Final Expiration
Date (as such terms are defined in this Section 3 and in Section 7 hereof), the
Rights will be evidenced by such certificates for Common Stock registered in the
names of the holders thereof (together with a copy of the Summary of Rights).
Until the earlier of the Exercisability Date, the Expiration Date and the Final
Expiration Date, the surrender for transfer of any certificate for Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Stock represented thereby.
(c) Rights shall, without any further action, be issued in respect of all
shares of Common Stock which are issued (including any shares of Common Stock
held in treasury) after the Record Date but prior to the earlier of the
Exercisability Date and the Expiration Date. Certificates representing such
shares of Common Stock issued after the Record Date shall bear the following
legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN THE RIGHTS AGREEMENT BETWEEN PHYSICIAN
RELIANCE NETWORK, INC. (THE "COMPANY") AND HARRIS TRUST AND SAVINGS BANK
(THE "RIGHTS AGENT") DATED AS OF JUNE 2, 1997 (THE "RIGHTS AGREEMENT"), THE
TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE STOCK TRANSFER
ADMINISTRATION OFFICE OF THE RIGHTS AGENT. UNDER CERTAIN CIRCUMSTANCES, AS
SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY
SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE.
THE COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE
RIGHTS AGREEMENT, AS IN EFFECT ON THE DATE OF MAILING, WITHOUT CHARGE
PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD
BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE
OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT),
WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT
HOLDER, MAY BECOME NULL AND VOID.
With respect to certificates representing shares of Common Stock (whether or not
such certificates include the foregoing legend), until the earlier of the
Exercisability Date and the Expiration Date, (i)
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the Rights associated with the shares of Common Stock represented by such
certificates shall be evidenced by such certificates alone, (ii) registered
holders of the shares of Common Stock shall also be the registered holders of
the associated Rights, and (iii) the transfer of any of such certificates shall
also constitute the transfer of the Rights associated with the shares of Common
Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase
Preferred Stock and of assignment to be printed on the reverse thereof) shall
each be substantially in the form of Exhibit A attached hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or any rule or regulation thereunder or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall
entitle the holders thereof to purchase such number of one one-hundredth of a
share of Preferred Stock as shall be set forth therein at the price per share
set forth therein (the "Exercise Price"), but the amount and type of securities,
cash or other assets that may be acquired upon the exercise of each Right and
the Exercise Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant hereto that represents Rights
that are beneficially owned by:
(i) an Acquiring Person or any Affiliate or Associate of an Acquiring
Person,
(ii) a transferee of an Acquiring Person (or of any such Affiliate or
Associate) which becomes a transferee after the Acquiring Person becomes
such, or
(iii) a transferee of an Acquiring Person (or of any such Affiliate or
Associate) which becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and which receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Affiliate or Associate) to holders of equity interests
therein, or to any Person with whom such Acquiring Person (or Affiliate or
Associate) has any continuing agreement, arrangement or understanding
regarding the transferred Rights, shares of Common Stock, or the Company,
or (B) a transfer which a majority of the Board has determined to be part
of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of Section 7(e) hereof, and any Rights Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in
this sentence,
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shall, upon the written direction of a majority of the Board, contain (to
the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
The provisions of Section 7(e) of this Rights Agreement shall be operative
whether or not the foregoing legend is contained on any Rights Certificate.
Section 5. Countersignature and Registration.
(a) Rights Certificates shall be executed on behalf of the Company by its
Chairman of the Board, Chief Executive Officer, President, any Vice President,
or Treasurer and shall be attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Rights Certificates
may be manual or facsimile. The Rights Certificates shall be countersigned by
the Rights Agent, by manual signature (or by facsimile signature if permitted by
law) of an authorized officer, and no Rights Certificate shall be entitled to
any benefit under this Agreement or be valid for any purpose unless so
countersigned. A Rights Certificate bearing the manual or facsimile signatures
of individuals who were the proper officers of the Company at the actual date of
execution of such Rights Certificate shall bind the Company, notwithstanding
that such individuals or any of them ceased to hold such offices prior to the
countersignature of such Rights Certificate or did not hold such offices at the
date of execution of this Rights Agreement. Such countersignature upon any
Rights Certificate shall be conclusive evidence, and the only evidence, that
such Rights Certificate has been duly countersigned as required hereunder.
(b) Following the Exercisability Date, the Rights Agent will keep or cause
to be kept, at its office designated as the appropriate place for surrender of
Rights Certificates upon exercise or transfer, books for registration and
transfer of the Rights Certificates issued hereunder. Such books shall show the
name and address of each holder of a Rights Certificate, the number of Rights
evidenced on its face by each Rights Certificate, and the certificate number and
date of each Rights Certificate.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.
(a) Subject to the provisions of Sections 4(b), 7(e) and 14 hereof, at any
time after the Close of Business on the Exercisability Date, and at or prior to
the Close of Business on the
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Expiration Date, any Rights Certificate or Certificates may be transferred,
split up, combined, or exchanged for another Rights Certificate or Certificates
entitling the registered holder to purchase a like number of one one-hundredth
of a share of Preferred Stock (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitle such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent and shall execute and surrender the Rights Certificate or
Certificates to be transferred, split up, combined or exchanged at the office of
the Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment set forth on the reverse side of such Rights Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
or former Beneficial Owner (or Affiliates or Associates thereof) of the Rights
represented by such Rights Certificate as the Company shall reasonably request;
whereupon the Rights Agent shall, subject to the provisions of Sections 4(b),
7(e) and 14 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
(b) If a Rights Certificate shall be mutilated, lost, stolen or destroyed,
upon request by the registered holder of the Rights represented thereby, there
shall be issued, in exchange for and upon cancellation of the mutilated Rights
Certificate, or in substitution for the lost, stolen or destroyed Rights
Certificate, a new Rights Certificate, in substantially the form of the prior
Rights Certificate, of like tenor and representing the equivalent number of
Rights; provided, however, that a new Rights Certificate shall be issued only
upon reimbursement to the Company or the Rights Agent (as the case may be) of
all reasonable expenses incidental thereto, if such reimbursement is requested
by the Company or the Rights Agent; and provided further, that, in the case of
loss, theft or destruction of a Rights Certificate, a new Rights Certificate
shall be issued only upon receipt of evidence satisfactory to the Company and
the Rights Agent of such loss, theft or destruction and, if requested by the
Company or the Rights Agent, indemnity or security reasonably satisfactory to
the Company or the Rights Agent (as the case may be).
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights.
(a) At any time after the Exercisability Date and prior to the earlier of
(i) the Close of Business on June 2, 2007 (the "Final Expiration Date"), or (ii)
the time at which the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date") (the earlier of (i) and (ii) being the "Expiration Date"),
the registered holder of any Rights Certificate may, subject to the provisions
of Section 7(e) hereof, exercise the Rights evidenced thereby in whole or in
part upon surrender of
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the Rights Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the Rights Agent at
the office of the Rights Agent designated for such purpose, together with
payment of the aggregate Exercise Price (as hereinafter defined) for the total
number of one one-hundredth of a share of Preferred Stock (or, following a
Triggering Event, other securities, cash or other assets, as the case may be)
for which such surrendered Rights are then exercisable.
(b) The purchase price for each one one-hundredth of a share of Preferred
Stock upon exercise of the Rights initially shall be $60, and subject to
adjustment from time to time as provided in the next sentence and in Sections 11
and 13(a) hereof (such purchase price, as so adjusted, being the "Exercise
Price"), and shall be payable in accordance with paragraph (c) below. Anything
in this Agreement to the contrary notwithstanding, in the event that, at any
time after the date of this Agreement and prior to the Exercisability Date, the
Company shall (i) declare a dividend on the Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock; then, in
any such case, each share of Common Stock outstanding following such dividend,
subdivision, combination or reclassification shall continue to have a Right
associated therewith, and the Exercise Price following any such event shall be
proportionately adjusted to equal the result obtained by multiplying the
Exercise Price immediately prior to such event by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event. The adjustment provided for in the
preceding sentence shall be made successively whenever such a dividend is
declared or such a subdivision, combination or reclassification is effected.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment in the manner described below, with respect to each Right
so exercised, of the Exercise Price for the one hundredth of a share of
Preferred Stock (or, following a Triggering Event, other securities, cash or
other assets, as the case may be) to be purchased thereby, and of an amount
equal to any applicable transfer tax required to be paid by the holder in
accordance with Section 6 hereof or evidence satisfactory to the Company of
payment of such tax), the Rights Agent shall, subject to Section 20(j) hereof,
thereupon promptly:
(i) requisition from the transfer agent for the Preferred Stock
certificates for such total number of one one-hundredth of a share of
Preferred Stock as are to be purchased, and the Company will direct the
transfer agent to comply with such request;
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(ii) requisition from the Company the amount of cash, if any, to be
paid in lieu of fractional shares in accordance with Section 14 hereof;
(iii) after receipt of such Preferred Stock certificates, cause the
same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated
by such holder; and
(iv) after receipt of such cash, if any, deliver the same to or upon
the order of the registered holder of such Rights Certificate.
In the event that the Company is obligated to issue other securities of the
Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The payment of the Exercise Price (as
such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in
cash or by certified or bank check or bank draft payable to the order of the
Company. The Company reserves the right to require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
(d) In the event of an exercise of the Rights by a holder pursuant to
Section 11(a)(ii) hereof, the Rights Agent shall return such Rights Certificate
to the registered holder thereof after imprinting, stamping, or otherwise
indicating thereon that the rights represented by such Rights Certificate no
longer include the rights provided by Section 11(a)(ii) of the Rights Agreement.
In addition, in the event that the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing the Rights remaining unexercised (and, if some of the
Rights exercised were exercised pursuant to Section 11(a)(ii), indicating by
imprint, stamp or otherwise the number of Rights remaining which continue to
include rights provided by Section 11(a)(ii)) shall be issued by the Rights
Agent and delivered to, or upon the order of, the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by any of the Persons described below shall be null and void without any
further action, and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise:
(i) an Acquiring Person or an Affiliate or Associate of an Acquiring
Person;
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(ii) a transferee of an Acquiring Person (or of any such Affiliate or
Associate) which becomes a transferee after the Acquiring Person becomes
such; or
(iii) a transferee of an Acquiring Person (or of any such Affiliate or
Associate) which becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and which receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Affiliate or Associate) to holders of equity interests
therein, or to any Person with whom such Acquiring Person (or Affiliate or
Associate) has any continuing agreement, arrangement or understanding
regarding the transferred Rights, shares of Common Stock, or the Company,
or (B) a transfer which a majority of the Board has determined to be part
of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e).
The Company shall use all reasonable efforts to ensure that the provisions of
this Section 7(e) and Section 4(b) hereof are complied with, but shall have no
liability to any holder of Rights or any other Person as a result of its failure
to make any determination under this Section 7(e) or such Section 4(b) with
respect to an Acquiring Person or its Affiliates, Associates or transferees.
(f) Notwithstanding anything in this Agreement or any Rights Certificate to
the contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise by such registered holder unless such registered holder
shall have (i) completed and executed the certificate following the form of
election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner or former Beneficial Owner (or Affiliates or
Associates thereof) of the Rights represented by such Rights Certificate as the
Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by this Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel and retire,
any Rights Certificates acquired by the Company otherwise than upon the exercise
thereof. The Rights Agent shall deliver all canceled Rights Certificates to the
Company, or, at the written request of the Company, shall destroy such canceled
Rights Certificates and, in such case, shall deliver a certificate of
destruction thereof to the Company.
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Section 9. Reservation and Availability of Capital Stock.
(a) The Company shall (i) at all times prior to the Expiration Date cause
to be reserved and kept available out of its authorized and unissued shares of
Preferred Stock, or any authorized and issued shares of Preferred Stock held in
its treasury, the number of shares of Preferred Stock that, as provided in this
Agreement, including, without limitation, Section 11(a)(iii) hereof, will be
sufficient to permit the exercise in full of all outstanding Rights; and (ii) at
all times following the occurrence of a Section 11(a)(ii) Event, shall so
reserve and keep available a sufficient number of any other securities that may
be required to permit the exercise in full of the Rights pursuant to this
Agreement.
(b) The Company shall use its best efforts:
(i) as soon as practicable following (A) the occurrence of a Section
11(a)(ii) Event and a determination by the Company in accordance with
Section 11(a)(iii) hereof of the consideration to be delivered by the
Company upon exercise of the Rights or (B) if so required by law, the
Exercisability Date, to file a registration statement (the "Registration
Statement") on an appropriate form under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities that may be
acquired upon exercise of the Rights;
(ii) to cause the Registration Statement to become effective as soon
as practicable after the date of such filing (such date being the
"Registration Date");
(iii) to cause the Registration Statement to remain effective (and to
include a prospectus complying with the requirements of the Securities Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for the securities covered by the Registration Statement, and
(B) the Expiration Date; and
(iv) as soon as practicable following the Registration Date, to take
such action as may be required to ensure that any acquisition of securities
upon exercise of the Rights complies with any applicable state securities
or "blue sky" laws.
The Company may temporarily suspend the exercisability of the Rights, for a
period of time not to exceed ninety (90) days after the date set forth in
subclause (A) or (B), whichever applies, of clause (i) of the first sentence of
this Section 9(b) in order to prepare and file such Registration Statement and
permit it to become effective. Upon any such suspension of exercisability, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended and, upon termination of such suspension,
the Company shall issue a public announcement stating that the suspension is no
longer in effect. In addition, if the Company shall determine that a
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<PAGE> 18
Registration Statement is required following the Exercisability Date, the
Company may temporarily suspend the exercisability of the Rights until such time
as such Registration Statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained, the exercise thereof shall not be permitted under
applicable law, or a Registration Statement, as described above, shall not have
been declared effective.
(c) The Company shall take such action as may be necessary to ensure that
all one one-hundredth of a share of Preferred Stock (and, following the
occurrence of a Triggering Event, any other securities) that may be delivered
upon exercise of Rights shall be, at the time of delivery of the certificates
for such securities, duly and validly authorized and issued, and fully paid and
nonassessable.
(d) So long as the shares of Preferred Stock (and, after the occurrence of
a Triggering Event, shares of Common Stock and any other securities) issuable
upon the exercise of the Rights may be listed on any national securities
exchange, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be listed on such exchange upon official notice of issuance upon such exercise.
(e) The Company may pay or may require the Rights holder to pay any
documentary, stamp or transfer tax imposed in connection with the issuance or
delivery of the Rights Certificates or certificates for shares of Preferred
Stock (or, following the occurrence of a Triggering Event, any other securities
or other assets) upon the exercise of Rights. The Company shall not be required
to issue or deliver any certificates for shares of Preferred Stock (or any other
securities, cash or assets, as the case may be) to or in the name 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 Rights Certificate
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date.
Each Person in whose name any certificate for a number of one one-hundredth
of a share of Preferred Stock (or, following the occurrence of a Triggering
Event, other securities) is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of such fractional shares
of Preferred Stock or other securities represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Exercise 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 Stock (or
other securities) transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such securities fractional or
otherwise on, and such certificate
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shall be dated as of, the next succeeding Business Day on which the Preferred
Stock (or other securities) transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a shareholder of the Company with respect
to securities for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions, or
to exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Exercise Price, Number and Kind of Shares or
Number of Rights.
The Exercise Price, the number and kind of securities covered by each
Right, and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) (i) In the event that the Company, at any time after the date of
this Agreement, shall (A) declare a dividend on the Preferred Stock payable
in shares of Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Exercise Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of
Preferred Stock or other capital stock, as the case may be, issuable on
such date upon exercise of the Rights, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive, upon payment of the Exercise Price then in effect, the aggregate
number and kind of shares of Preferred Stock or other capital stock, as the
case may be, which, if such Right had been exercised immediately prior to
such date, 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 if the record date for any such
dividend, subdivision, combination or reclassification shall occur prior to
the Exercisability Date, the Company shall make an appropriate adjustment
to the Exercise Price in lieu of adjusting (as described above) the number
of shares of Preferred Stock (or other capital stock, as the case may be)
issuable upon exercise of the Rights. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement, in the event that any
Person shall become an Acquiring Person, other than pursuant to any
transaction set forth in Section
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13(a) hereof, then, promptly following the occurrence of such event (a
"Section 11(a)(ii) Event"), proper provision shall be made so that each
holder of a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have, and proper provision shall be made so that each such
holder shall have, the right to receive, upon exercise thereof at a price
equal to the then current Exercise Price in accordance with the terms of
this Agreement, in lieu of a number of one one-hundredth of a share of
Preferred Stock, such number of shares of Common Stock as shall equal the
result obtained by (x) multiplying the then current Exercise Price by the
number of one one-hundredth of a share of Preferred Stock for which a Right
was potentially exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event (such that if the Right was potentially exercisable
for one one-hundredth of one share of Preferred Stock immediately prior to
such Section 11(a)(ii) Event, the Exercise Price would be multiplied by
one), and dividing that product by (y) 50% of the current market price (as
determined pursuant to Section 11(d) hereof) per share of the Common Stock
on the date of the first occurrence of a Section 11(a)(ii) Event (such
number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock which are
authorized by the Company's Articles but are not outstanding and are not
reserved for issuance for purposes other than upon exercise of the Rights
are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall:
(A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value")
over (2) the Exercise Price (such excess being the "Spread"); and
(B) with respect to each Right, make adequate provision to
substitute for the Adjustment Shares, upon payment of the applicable
Exercise Price, (1) cash, (2) a reduction in the Exercise Price, (3)
other equity securities of the Company, (such other equity securities
being referred to as "capital stock equivalents"), (4) debt securities
of the Company, (5) other assets, or (6) any combination of the
foregoing, such substituted items having an aggregate value equal to
the Current Value, where such aggregate value has been determined by a
majority of the Board of Directors after receiving advice from a
nationally recognized investment banking firm;
provided, however, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30)
days following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant
to Section 23(a) expires (the later of (x) and (y) being referred to herein
as the "Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon
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the surrender for exercise of a Right and without requiring payment of the
Exercise Price, shares of Common Stock (to the extent available) and then,
if necessary, cash, which shares and/or cash shall have an aggregate value
equal to the Spread. To the extent that the Company determines that some
action need be taken pursuant to the first sentence of this Section
11(a)(iii), the Company shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all outstanding Rights. For purposes
of this Section 11(a)(iii), the value of the Common Stock shall be the
current market price (as determined pursuant to Section 11(d) hereof) per
share of Common Stock on the Section 11(a)(ii) Trigger Date and the value
of any "common stock equivalent" shall be deemed to have the same value as
the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as shares of Preferred Stock ("equivalent preferred
stock")) or securities convertible into Preferred Stock or equivalent preferred
stock at a price per share of Preferred Stock or per share of equivalent
preferred stock (or having a conversion price per share, if a security
convertible into Preferred Stock or equivalent preferred stock) less than the
current market price (as determined pursuant to Section 11(d) hereof) per share
of Preferred Stock on such record date, then the Exercise Price to be in effect
after such record date shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the sum of the number of shares of Preferred Stock outstanding on
such record date plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date plus the number of
additional shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights. Shares of Preferred Stock owned by or held for the account of the
Company or any Subsidiary shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights or warrants are not so
issued, the Exercise Price shall be adjusted to be the Exercise Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of shares of Preferred Stock (including any such distribution made in
connection with a share exchange or
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merger in which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other than a dividend
payable in shares of Preferred Stock but including any dividend payable in stock
other than Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), then the Exercise Price to be in effect
after such record date shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the then current market price (as determined pursuant to Section
11(d) hereof) per share of Preferred Stock on such record date less the fair
market value (as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent and the holders of the Rights) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Stock and the
denominator of which shall be such current market price (as determined pursuant
to Section 11(d) hereof) per share of Preferred Stock. Such adjustments shall be
made successively whenever such a record date is fixed, and in the event that
such distribution is not so made, the Exercise Price shall be adjusted to be the
Exercise Price which would have been in effect if such record date had not been
fixed.
(d) (i) For the purpose of any computation hereunder, the "current market
price" per share of Common Stock (or, after the occurrence of a Triggering
Event, any other securities) on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock or other securities for
the thirty (30) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that if, prior to the
expiration of such requisite thirty Trading Day period, the issuer announces
either (A) a dividend or distribution on such Common Stock (or other securities)
payable in such Common Stock (or other securities) or securities convertible
into such Common Stock (or other securities), other than the Rights, or (B) any
subdivision, combination or reclassification of such Common Stock (or other
securities), then, following the ex-dividend date for such dividend or the
record date for such subdivision, as the case may be, the "current market price"
shall be properly adjusted to take into account such event. The closing price
for each day shall be, if the shares of Common Stock (or other securities) are
listed and admitted to trading on a national securities exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which such
shares are listed or admitted to trading or, if such shares of Common Stock (or
other securities) are not listed or admitted to trading on any national
securities exchange, the last quoted sales price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported on The Nasdaq Stock Market's National Market (the "Nasdaq National
Market") or such other system then in use, or, if on any such date such shares
are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
shares of Common Stock (or other securities) selected by the Board. If on any
such date no market maker is making a market in such shares, the fair value of
such shares on such date as determined in good faith by the Board, shall be
used. The
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term "Trading Day" shall mean a Business Day or, if such shares are listed or
admitted to trading on any national securities exchange, a day on which the
principal national securities exchange on which such shares are listed or
admitted to trading is open for the transaction of business.
(ii) For the purpose of any computation of the current market price per
share of Preferred Stock, if the shares of Preferred Stock are not publicly held
or not so listed or traded, "current market price" per share of the Preferred
Stock shall be conclusively determined to be the current market price per share
of the Common Stock as determined pursuant to Section 11(d)(i) (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multiplied by one hundred. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or traded,
the "current market price" per share of Preferred Stock shall mean the fair
value per share as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Exercise Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one ten-thousandth of a share of Common
Stock (or other securities) or one hundred-thousandth of a share of Preferred
Stock. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which mandates such adjustment or (ii)
the Expiration Date.
(f) If, as a result of an adjustment made pursuant to Sections 11(a)(ii) or
13(a) hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock other than Preferred Stock, thereafter
the number of such other shares so receivable upon exercise of any Right and the
Exercise Price thereof shall be subject to adjustment from time to time in the
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k), and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Stock shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of whole or fractional
shares of Preferred Stock (or other securities or amount of cash or combination
thereof) that may be acquired from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
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(h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Exercise Price as a result of
the calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of one
one-hundredths of a share of Preferred Stock or other securities (calculated to
the nearest one-millionth of a share) obtained by
(i) multiplying (x) the number of one one-hundredths of a share of
Preferred Stock or other securities covered by a Right immediately prior to
this adjustment by (y) the Exercise Price in effect immediately prior to
such adjustment of the Exercise Price; and
(ii) dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment of the Exercise Price.
(i) The Company may elect on or after the date of any adjustment of the
Exercise Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-hundredths of a share of Preferred Stock (or other securities)
that may be acquired upon the exercise of a Right. Each of the Rights
outstanding after the adjustment in the number of Rights shall be exercisable
for the number of one one-hundredth of a share of Preferred Stock (or other
securities) for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
ten-thousandth) obtained by dividing the Exercise Price in effect immediately
prior to adjustment of the Exercise Price by the Exercise Price in effect
immediately after adjustment of the Exercise Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Exercise
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) days later than the date of such public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates to be so distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Exercise Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
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(j) Irrespective of any adjustment or change in the Exercise Price or the
number of one one-hundredth of a share of Preferred Stock (or other securities)
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Exercise Price per one
hundredth of a share and the number of one one-hundredths of a share of
Preferred Stock (or other securities) which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Exercise Price below the then par value, if any, of the number of one
one-hundredth of a share of Preferred Stock (or other securities) 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 such fully paid and nonassessable number of one
one-hundredth of a share of Preferred Stock (or other securities) at such
adjusted Exercise Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Exercise Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date of that
number of one one-hundredths of a share of Preferred Stock and shares of other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-hundredth of a share of Preferred Stock and
shares of other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Exercise Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise) or securities upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board shall determine to be
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less
than the current market price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance
of rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Preferred Stock, shall not be taxable to such
holders or shall reduce the taxes payable by such holders.
(n) The Company shall not, at any time after the Exercisability Date:
(i) consolidate with any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof);
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(ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof); or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer),
in one transaction, or a series of related transactions, assets, cash flow
or earning power aggregating more than 50% of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof);
if
(x) at the time of or immediately after such consolidation, merger or
sale, there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights; or
(y) prior to, simultaneously with, or immediately after such share
exchange, merger or sale, the Person which constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) hereof
shall have distributed or otherwise transferred to its shareholders (or
other persons holding an equity interest in such Person) Rights previously
owned by such Person or any of its Affiliates and Associates;
provided, however, that this Section 11(n) shall not affect the ability of any
Subsidiary of the Company to effect a share exchange with, merge with or into,
or sell or transfer assets or earning power to, the Company or any other
Subsidiary of the Company.
(o) After the Exercisability Date, the Company shall not, except as
permitted by Section 23 or Section 27 hereof, take (or permit any Subsidiary to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will materially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Common Stock, a copy of such certificate, and (c) mail a brief summary thereof
to each holder of a Rights Certificate (or, if prior to the Exercisability Date,
to each holder of a certificate representing shares of Common Stock) in
accordance with Section 26 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein
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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.
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly:
(x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the
continuing or surviving corporation of such share exchange or merger,
(y) any Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof) shall effect a
consolidation with, or merge with or into, the Company, and the Company
shall be the continuing or surviving corporation of such share exchange or
merger and, in connection with such share exchange or merger, all or part
of the outstanding shares of Common Stock shall be converted into or
exchanged for stock or other securities of any other Person or cash or any
other property, or
(z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer) to any Person or Persons
(other than the Company or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), in one or
more transactions, assets, cash flow or earning power aggregating more than
50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole),
(any such event described in clause (x), (y) or (z) above being a "Section 13
Event"); then, and in each such case, proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at
the then current Exercise Price (disregarding any adjustment of the
Exercise Price pursuant to Section 11(a)(ii) hereof), such number of
validly authorized and issued, fully paid, nonassessable and freely
tradeable shares of common stock of the Principal Party (as such term is
hereinafter defined), which shares shall not be subject to any liens,
encumbrances, rights of first refusal, transfer restrictions or other
adverse claims, as shall be equal to the result obtained by:
(A) multiplying the then current Exercise Price by the number of
one one-hundredths of a share of Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has
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occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of one one-hundredth of a share of Preferred
Stock for which a Right was exercisable immediately prior to the first
occurrence of such Section 11(a)(ii) Event by the Exercise Price in
effect immediately prior to such first occurrence), and
(B) dividing that product (which, following the first occurrence
of a Section 13 Event, shall be the "Exercise Price" for all purposes
of this Agreement) by 50% of the current market price (determined
pursuant to Section 11(d) hereof) per share of the common stock of
such Principal Party on the date of consummation of such Section 13
Event;
(ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the
first occurrence of a Section 13 Event;
(iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its common
stock) in connection with the consummation of any such transaction as may
be necessary to ensure that the provisions of this Agreement shall
thereafter be applicable to its shares of common stock thereafter
deliverable upon the exercise of the Rights; and
(v) the provisions of Section 11(a)(ii) hereof shall be of no further
effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a) hereof, (A) the Person that is the
issuer of any securities into which shares of Common Stock are converted in
such merger or consolidation, or, if there is more than one such issuer,
the issuer of common stock that has the highest aggregate current market
price (determined pursuant to Section 11(d) hereof) and (B) if no
securities are so issued, the Person that is the other party to such merger
or consolidation, or, if there is more than one such Person, the Person the
common stock of which has the highest aggregate current market price
(determined pursuant to Section 11(d) hereof); and
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(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a) hereof, the Person that is the party
receiving the largest portion of the assets or earning power transferred
pursuant to such transaction or transactions, or, if each Person that is a
party to such transaction or transactions receives the same portion of the
assets or earning power transferred pursuant to such transaction or
transactions or if the Person receiving the largest portion of the assets
or earning power cannot be determined, whichever Person the common stock of
which has the highest aggregate current market price (determined pursuant
to Section 11(d) hereof); provided, however, that in any such case:
(A) if the common stock of such Person is not at such time, and
has not been continuously over the preceding twelve-month period,
registered under Section 12 of the Exchange Act ("Registered Common
Stock"), or such Person is not a corporation, and such Person is a
direct or indirect Subsidiary of another Person that has Registered
Common Stock outstanding, "Principal Party" shall refer to such other
Person;
(B) if the common stock of such Person is not Registered Common
Stock or such Person is not a corporation, and such Person is a direct
or indirect Subsidiary of another Person but is not a direct or
indirect Subsidiary of another Person which has Registered Common
Stock outstanding, "Principal Party" shall refer to the ultimate
parent entity of such first-mentioned Person;
(C) if the common stock of such Person is not Registered Common
Stock or such Person is not a corporation, and such Person is directly
or indirectly controlled by more than one Person, and one or more of
such other Persons has Registered Common Stock outstanding, "Principal
Party" shall refer to whichever of such other Persons is the issuer of
the Registered Common Stock having the highest aggregate current
market price (determined pursuant to Section 11(d) hereof); and
(D) if the common stock of such Person is not Registered Common
Stock or such Person is not a corporation, and such Person is directly
or indirectly controlled by more than one Person, and none of such
other Persons have Registered Common Stock outstanding, "Principal
Party" shall refer to whichever ultimate parent entity is the
corporation having the greatest shareholders' equity or, if no such
ultimate parent entity is a corporation, shall refer to whichever
ultimate parent entity is the entity having the greatest net assets.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its common stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in
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accordance with this Section 13, and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that the Principal Party will:
(i) (A) file on an appropriate form, as soon as practicable following
the execution of such agreement, a registration statement under the
Securities Act with respect to the common stock that may be acquired upon
exercise of the Rights, (B) cause such registration statement to remain
effective (and to include a prospectus complying with the requirement of
the Securities Act) until the Expiration Date, and (C) as soon as
practicable following the execution of such agreement, take such action as
may be required to ensure that any acquisition of such common stock upon
the exercise of the Rights complies with any applicable state securities or
"blue sky" laws; and
(ii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
(d) In case the Principal Party which is to be a party to a transaction
referred to in this Section 13 has a provision in any of its authorized
securities or in its certificate of incorporation or Bylaws or other instrument
governing its corporate affairs, which provision would have the effect of
(i) causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in this
Section 13, shares of common stock of such Principal Party at less than the
then current market price per share (determined pursuant to Section 11(d)
hereof) or securities exercisable for, or convertible into, common stock of
such Principal Party at less than such then current market price (other
than to holders of Rights pursuant to this Section 13); or
(ii) providing for any special payment, tax or similar provisions in
connection with the issuance of the common stock of such Principal Party
pursuant to the provisions of Section 13;
then, in such event, the Company 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.
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(e) The provisions of this Section 13 shall similarly apply to successive
mergers or share exchanges or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a) hereof.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the Persons to which such fractional
Rights would otherwise be issuable an amount in cash equal to such fraction of
the market value of a whole Right. For purposes of this Section 14(a), the
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 of the Rights for any day shall
be:
(i) if the Rights are listed or admitted to trading on a national
securities 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
(ii) if the Rights are not listed or admitted to trading on any
national securities exchange, the last quoted sales price; or
(iii) if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported on the Nasdaq National
Market or such other system then in use; or
(iv) 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 a
majority of the Board of Directors; or
(v) 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 a majority of the Board of Directors, which determination shall be
described in a statement filed with the Rights Agent and the holders of the
Rights.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
hundredth of a share of Preferred Stock) (or other securities) upon exercise of
the Rights or to distribute certificates which evidence such fractional shares
of Preferred Stock (other than fractions which are integral multiples of one
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<PAGE> 32
hundredth of a share of Preferred Stock) (or other securities). In lieu of such
fractional shares of Preferred Stock that are not integral multiples of one
hundredth of a share of Preferred Stock (or other securities), the Company may
pay to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
then current market value of one hundredth of a share of Preferred Stock (or
other securities). For purposes of this Section 14(b), the current market value
of one hundredth of a share of Preferred Stock (or other securities) shall be
the closing price (as the term "closing price" is used in Section 11(d) hereof)
of one hundredth of a share of Preferred Stock (or other securities) for the
Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right, by the acceptance of the Right, expressly waives
his or her right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action.
All rights of action in respect of this Agreement, other than rights of
action vested in the Rights Agent pursuant to Section 18 hereof, are vested in
the respective registered holders of the Rights Certificates (and, prior to the
Exercisability Date, the registered holders of certificates representing shares
of Common Stock); and any registered holder of a Rights Certificate (or, prior
to the Exercisability Date, of a certificate representing shares of Common
Stock), without the consent of the Rights Agent or of the holder of any other
Rights Certificate (or, prior to the Exercisability Date, of a certificate
representing shares of Common Stock), may, in his own behalf and for his own
benefit, enforce (and may institute and maintain any suit, action or proceeding
against the Company or any other Person to enforce, or otherwise act in respect
of) his right to exercise the Rights evidenced by such Rights Certificate in the
manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders.
Every holder of a Right, by accepting the same, consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Exercisability Date, the Rights shall be transferable
only in connection with the transfer of Common Stock;
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(b) after the Exercisability Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates duly executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Exercisability Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificate or the associated Common Stock
Certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent,
subject to the last sentence of Section 7(e) hereof, shall be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or any other Person as a result of its inability to
perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation;
provided, however, that the Company must use its best efforts to have any
such order, decree or ruling lifted or otherwise overturned as promptly as
practicable.
Section 17. Rights Certificate Holder Not Deemed a Shareholder.
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the shares of
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby; nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or, except as provided in Section 25 hereof, to
receive notice of meetings or other actions affecting shareholders, or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
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Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses, including reasonable fees and
disbursements of its counsel, incurred in connection with the execution and
administration of this Agreement and the exercise and performance of its duties
hereunder. The Company shall indemnify the Rights Agent, its officers,
employees, agents and directors for, and hold each of them harmless against, any
losses, expenses, claims, damages or liabilities incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent or such other indemnified party in
connection with the acceptance or administration of this Agreement and
performance hereunder, including without limitation, the costs and expenses of
defending against any claim of liability therefrom, directly or indirectly, and
will promptly reimburse the Rights Agent for legal and other expenses reasonably
incurred in defending any such loss, expense, claim, damage or liability. The
indemnity provided herein shall survive the expiration of the Rights and the
termination of this Agreement. The costs and expenses reasonably and actually
incurred by the Rights Agent in successfully enforcing a claim for
indemnification shall be paid by the Company.
(b) The Rights Agent shall be protected by the indemnity provided by this
Section and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with its administration of this
Agreement or the performance of its duties hereunder in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it to be genuine and to have been signed, executed
and, where necessary, verified or acknowledged by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or shareholder services businesses of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any document or any further act on
the part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case, at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned;
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and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
The Rights Agent undertakes the duties and obligations expressly imposed by
this Agreement (and no implied duties or obligations shall be read into this
Agreement against the Rights Agent) upon the following terms and conditions, by
all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or 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 advice
or opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person, Affiliate
or Associate and the determination of "current market price") be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be specified
herein) may be deemed to be conclusively proved and established by a certificate
signed by any person reasonably believed by the Rights Agent to be the Chairman
of the Board, the Chief Executive Officer, the President, any Vice President,
the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary
of the Company and delivered to the Rights Agent; provided, however, that such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same
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(except as to its countersignature on such Rights Certificates), but all such
statements and recitals are and shall be deemed to have been made by the Company
only.
(d) The Rights Agent is serving as an administrative agent and,
accordingly, shall not have any responsibility for the validity or legality of
any provision of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or for the validity, legality or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or failure
by the Company to satisfy conditions contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 7(e) hereof) without having received written notice of such change, nor
shall it be responsible for any adjustment required under the provisions of this
Agreement or for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after receipt by the Rights Agent of the certificate describing any such
adjustment contemplated by Section 12 hereof); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or any other securities to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock or any other securities will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(e) The Company shall perform, execute, acknowledge and deliver or cause to
be performed, executed, acknowledged and delivered all such further acts,
instruments and assurances as may reasonably be required by the Rights Agent for
the performance by the Rights Agent of its duties under this Agreement.
(f) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person reasonably believed by the Rights Agent to be the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer or any Assistant Treasurer of the
Company, and to apply to such officers for advice or instructions in connection
with its duties; and it shall not be liable to the Company, the holder of any
Rights Certificate or any shareholder of the Company 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 awaiting instructions. Any
application by the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent, set forth in writing any action proposed to
be taken or omitted by the Rights Agent 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 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 in such application (which date shall
not be less than five Business Days after the date any such officer of the
Company actually
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<PAGE> 37
receives such application, unless any such officer shall have consented in
writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be
taken or omitted.
(g) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or offer securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(h) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct if reasonable care was exercised in the selection and
continued employment thereof.
(i) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties or in the exercise of its rights hereunder if
the Rights Agent in its sole judgment shall have reasonable grounds for
believing that repayment of such funds or adequate indemnification against such
risk or liability is not reasonably assured to it.
(j) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, either has not
been completed, has not been signed, or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first consulting
with the Company. If such certificate has been completed and signed, the Rights
Agent may assume without further inquiry that the Rights Certificate is not
owned by a person described in Section 4(b) or Section 7(e) hereof and shall not
be charged with any knowledge to the contrary.
(k) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own gross negligence, bad faith or willful misconduct.
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<PAGE> 38
Section 21. Change of Rights Agent.
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon thirty (30) days' notice in writing
mailed to the Company and to each transfer agent of the Common Stock and the
Preferred Stock by registered or certified mail, and at the expense of the
Company to the holders of Rights Certificates by first-class mail. The Company
may remove the Rights Agent or any successor Rights Agent upon thirty (30) days'
notice in writing mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock and the Preferred
Stock by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and doing business
under the laws of the United States or any state of the United States, in good
standing, and may be the Company or a Subsidiary of the Company. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or the Rights to
the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change made in accordance with the provisions of this Agreement in
the Exercise Price or the number or kind or class of shares or other securities
or property that may be acquired under the Rights Certificates. In addition, in
connection with the issuance or sale of shares of Common Stock following the
Exercisability Date and prior to the Expiration Date, the Company:
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<PAGE> 39
(i) shall, with respect to shares of Common Stock so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and
(ii) may, in any other case, if deemed necessary or appropriate by the
Board, issue Rights Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that no
such Rights Certificate shall be issued if, and to the extent that (x) the
Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
person to whom such Rights Certificate would be issued, or (y) appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption.
(a) The Rights may be redeemed by action of the Board pursuant to paragraph
(b) of this Section 23 and shall not be redeemed in any other manner.
Notwithstanding anything contained or implied in this Agreement to the contrary,
the Rights shall not be exercisable after the occurrence of a Section 11(a)(ii)
Event until such time as the Company's right of redemption hereunder have
expired.
(b) The Board may, at its option, at any time prior to the earlier of (i)
the Close of Business on the tenth Business Day after the Stock Acquisition
Date, or (ii) the Final Expiration Date, redeem all, but not less than all, of
the then outstanding Rights at a redemption price of $.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"); provided, however, that with
respect to any redemption of Rights under either of the circumstances set forth
in clauses (i) and (ii) below, the Rights may be redeemed only if there are
Continuing Directors then in office and the Board of Directors of the Company,
with the concurrence of a majority of the Continuing Directors then in office,
approves such redemption: (i) such approval occurs at any time after any Person
becomes an Acquiring Person, or (ii) such approval occurs at any time after a
change (resulting from a proxy solicitation or from a vote of shareholders or in
any other manner) in a majority of the directors in office at the commencement
of such solicitation, or prior to such vote if any Person who is a participant
in such solicitation or vote has stated (or, if the majority of the directors in
office at the commencement of such solicitation or prior to such vote has
determined in good faith) that such Person (or any of its Affiliates or
Associates) intends to take or may consider taking, any action that would result
in such Person becoming an Acquiring Person or that would result in the
occurrence of a Section 11(a)(ii) Event. The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the current per share
market price of shares of Common Stock at the time of redemption determined
pursuant to Section 11(d) hereof) or any other form of consideration deemed
appropriate by the Board; provided that if the
36
<PAGE> 40
Company elects to pay the Redemption Price in shares of Common Stock, the
Company shall not be required to issue fractional shares of Common Stock. In
lieu of such fractional shares of Common Stock, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount of cash
equal to the same fraction of the current per share market price of a whole
share of Common Stock.
(c) Immediately upon the action of the Board ordering the redemption of the
Rights pursuant to paragraph (b) of this Section 23, and without any further
action and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board of Directors ordering the
redemption of the Rights pursuant to paragraph (b), the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Exercisability Date, on the registry books of the transfer agent for the
Common Stock of the Company. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof and other than in connection with the purchase of shares of
Common Stock prior to the Exercisability Date.
Section 24. Exchange.
(a) The Board may, at its option, at any time after any Person becomes an
Acquiring Person, exchange all or any part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"); provided, however, that with respect to any such
action by the Board as to such an exchange, the Rights may be so exchanged only
if (i) there are Continuing Directors then in office and (ii) the Board approves
such exchange with the concurrence of a majority of the Continuing Directors
then in office. Notwithstanding the foregoing, the Board shall not be empowered
to effect such exchange at any time after any Adverse Person becomes the
Beneficial Owner of 50% or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board ordering the exchange of any
Rights pursuant to paragraph (a) of this Section 24, and without any further
action and without any notice,
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<PAGE> 41
the right to exercise such Rights shall terminate and the only right thereafter
of a holder of such Rights shall be to receive that number of shares of Common
Stock equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company shall
promptly mail a notice of any such exchange to all of the holders of such Rights
at their addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the shares of Common Stock for Rights
will be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, the Company
shall pay to the registered holders of the Right Certificates with regard to
which such fractional shares of Common Stock would otherwise be issuable an
amount in cash equal to the same fraction of the current per share market price
of a whole share of Common Stock. For the purposes of this paragraph (d), the
current market price of a whole share of Common Stock shall be the closing price
of a share of Common Stock (as determined pursuant to the second and third
sentences of Section 11(d) hereof) for the Trading Day immediately prior to the
date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the Exercisability
Date,
(i) to pay any dividend payable in stock of any class to the holders
of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the company);
(ii) to offer to the holders of Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities, rights or options;
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<PAGE> 42
(iii) to effect any reclassification of its Preferred Stock (other
than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock);
(iv) to effect any consolidation or merger into or with any other
Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one or more transactions, of more than 50% of the
assets, cash flow or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company
and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof); or
(v) to effect the liquidation, dissolution or winding up of the
Company;
then, in each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26 hereof, a
notice of such proposed action (which shall specify the record date for the
purposes of such stock dividend or distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed), and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier; provided, however, that no such notice shall be
required pursuant to this Section 25 if any Subsidiary of the Company effects a
consolidation or merger with or into, or effects a sale or other transfer of
assets or earning power to, any other Subsidiary of the Company.
(b) In case any of the events set forth in Section 11(a)(ii) hereof shall
occur, then, in any such case, (i) the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate, to the extent feasible
and in accordance with Section 26 hereof, a notice of the occurrence of such
event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the
preceding paragraph to Preferred Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.
Section 26. Notices.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including by telex, telegram or cable)
and be mailed or sent or delivered, if to the Company, at the following address
(until another address is filed in writing by the Company):
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<PAGE> 43
Physician Reliance Network, Inc.
Two Lincoln Centre, Suite 900
5420 LBJ Freeway
Dallas, Texas 75240
Attention: Chief Executive Officer
and, if to the Rights Agent, at the following address (until another address is
filed in writing by the Rights Agent):
Harris Trust and Savings Bank
311 West Monroe Street, 14th Floor
Chicago, Illinois 60606
Attention: Julie Power
All said notices shall be deemed given upon receipt. Notices or demands
authorized by this Agreement to be given or made by the Company or the Rights
Agent to the holder of any Rights Certificate (or, if prior to the
Exercisability Date, to the holder of certificates representing shares of
Preferred Stock) shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed to such holder at the address of such holder as
shown on the registry books of the Company.
Section 27. Supplements and Amendments.
Prior to the Exercisability Date and subject to the penultimate sentence of
this Section 27, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Exercisability Date and subject to the penultimate sentence
of this Section 27, the Company and the Rights Agent shall, if the Company by
action of a majority of the Continuing Directors so directs, supplement or amend
this Agreement without the approval of any holders of Rights Certificates in
order:
(i) to cure any ambiguity;
(ii) to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provisions herein;
(iii) to shorten or lengthen any time period hereunder; or
(iv) to change or supplement the provisions hereunder in any manner
which the Company may deem necessary or desirable and which shall be
consistent with, and for the
40
<PAGE> 44
purpose of fulfilling, the objectives of the Board in adopting this
Agreement, including any change in the number or class of shares of capital
stock of the Company for which the Rights are potentially exercisable prior
to a Triggering Event;
provided, however, that from and after such time as any Person becomes an
Acquiring Person, this Agreement shall not be amended in any manner which would
adversely affect the interests of the holders of Rights; and provided, further,
that this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence (A) subject to Section 31 hereof, a time period
relating to when the Rights may be redeemed at such time as the Rights are not
then redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Without limiting the foregoing, the Company
may at any time prior to such time as any Person becomes an Acquiring Person
amend this Agreement to change the Exercise Price hereunder. Upon the delivery
of a certificate from an appropriate officer of the Company or, so long as any
Person is an Acquiring Person hereunder, from the majority of the Board of
Directors, which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment which changes the rights
and duties of the Rights Agent under this Agreement shall be effective without
the consent of the Rights Agent, and no supplement or amendment shall be made
which changes the Redemption Price, the Exercise Price, the Expiration Date or
the number of shares of Common Stock (or other securities) for which a Right is
exercisable without the approval of a majority of the Board of Directors. Prior
to the Exercisability Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock.
Section 28. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares
of Common Stock or other securities outstanding at any particular time,
including for purposes of determining the particular percentage of outstanding
shares of Common Stock of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange
Act Regulations as in effect on the date hereof. Except as otherwise
specifically provided herein, the Board shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power (i) to interpret the provisions of this
Agreement, and (ii) to make all determinations deemed necessary or advisable for
the administration of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
or by a majority of the Board in good faith (x) shall be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
41
<PAGE> 45
other parties, and (y) shall not subject the Board or any member thereof to any
liability to the holders of the Rights.
Section 29. Successors.
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 30. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Exercisability Date, registered holders of
shares of Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Exercisability Date, registered holders of shares of Common
Stock).
Section 31. Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if (i) any such
term, provision, covenant or restriction is held by such court or authority to
be invalid, void or unenforceable, and a majority of the Board determines in its
good faith judgment that severing the invalid language from this Agreement would
adversely affect the purpose or effect of this Agreement; and (ii) at the time
of such holding by such court or authority, the Rights are not redeemable, then
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the Close of Business on the tenth day following the date
of such determination by a majority of the Board as described above.
Section 32. Governing Law.
This Agreement, each Right and each Rights Certificate issued hereunder
shall be governed by, and construed in accordance with, the laws of the State of
Texas.
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<PAGE> 46
Section 33. Counterparts.
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original, but all of which taken together shall
constitute one and the same instrument.
Section 34. Descriptive Headings.
The headings contained in this Agreement are for descriptive purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
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<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the date first above written.
PHYSICIAN RELIANCE NETWORK, INC.
By: /s/ George P. McGinn, Jr.
-------------------------------------------------
George P. McGinn, Jr.
Executive Vice President, General Cousel, and
Secretary
HARRIS TRUST AND SAVINGS BANK
By: /s/ Julie Power
-------------------------------------------------
Julie Power
Trust Officer
44
<PAGE> 48
EXHIBIT A
[FORM OF RIGHTS CERTIFICATE]
Certificate No. ___________ Rights
NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS
AGREEMENT). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
ON THE TERMS SET FORTH IN THE AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED
IN THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS
DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.] *
Rights Certificate
PHYSICIAN RELIANCE NETWORK, INC.
This certifies that [ ], or registered assigns, is the registered
holder of the number of Rights set forth above, each of which entitles the
registered holder thereof, subject to the terms and conditions of the Rights
Agreement dated June 2, 1997 (the "Rights Agreement") between Physician Reliance
Network, Inc., a Texas corporation (the "Company"), and Harris Trust and
- --------
* The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
<PAGE> 49
Savings Bank, as Rights Agent (the "Rights Agent," which term shall include any
successor Rights Agent under the Rights Agreement), to purchase from the Company
at any time after the Exercisability Date (as such term is defined in the Rights
Agreement) and prior to the Expiration Date (as such term is defined in the
Rights Agreement) at the office of the Rights Agent or its successor designated
for such purpose, one-hundredth of one fully paid nonassessable share of Series
One Junior Preferred Stock, no par value, of the Company (the "Preferred Stock")
at the Exercise Price initially of $60 per one hundredth of one share of
Preferred Stock, upon presentation and surrender of this Rights Certificate with
the Election to Purchase and related certificate duly executed. The number of
Rights evidenced by this Rights Certificate (and the number of shares of
Preferred Stock which may be purchased upon exercise thereof) set forth above,
and the Exercise Price per share set forth above shall be subject to adjustment
in certain events as provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement) or, under certain circumstances described in the Rights Agreement, a
transferee of any such Acquiring Person, Associate or Affiliate, such Rights
shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
<PAGE> 50
In certain circumstances described in the Rights Agreement, the Rights
evidenced hereby may entitle the registered holder thereof to purchase shares of
capital stock of an entity other than the Company or receive cash or other
assets, all as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms and conditions
of the Rights Agreement, which terms and conditions are hereby incorporated
herein by reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Rights Certificates. Copies of the Rights
Agreement are on file at the principal office of the Rights Agent and are
available from the Company upon written request.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing an aggregate number of Rights equal to the aggregate
number of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the
registered holder shall be entitled to receive, upon surrender hereof, another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company under certain circumstances
at its option at a redemption price of $.001 per Right, payable at the Company's
option in cash or in Common Stock, subject to adjustment in certain events as
provided in the Rights Agreement.
<PAGE> 51
No fractional shares of Preferred Stock (other than fractions which are
integral multiples of one hundredth of a share of Preferred Stock) will be
issued upon the exercise of any Right or Rights evidenced hereby, but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Preferred
Stock or of any other securities which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the signature of the proper officers of the Company. Dated as
of ________________, _____.
ATTEST: PHYSICIAN RELIANCE NETWORK, INC.
_______________________________ By:_____________________________
Title:_________________________ Title:__________________________
<PAGE> 52
Countersigned:
Harris Trust and Savings Bank
By ________________________________
Authorized Signature
<PAGE> 53
[FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE]
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the
Rights Certificate)
FOR VALUE RECEIVED ____________________ hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
_____________________________________________________________ this Rights
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint _______________ Attorney, to transfer
the within Rights Certificate on the books of the within-named Company, with
full power of substitution.
Dated:__________, _____.
_______________________________________
Signature
Signature Guaranteed:
<PAGE> 54
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated:__________, _____. _________________________________
Signature
Signature Guaranteed:
________________________________________________________________________________
NOTICE
This signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Signature must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
<PAGE> 55
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder
desires to exercise Rights represented
by the Rights Certificate)
To: PHYSICIAN RELIANCE NETWORK, INC.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the number of hundredths of a
share of Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Please insert social security or other identifying number:______________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Please insert social security or other identifying number:______________________
Dated:__________, _____
___________________________________________
Signature
Signature Guaranteed:
________________________________________________________________________________
<PAGE> 56
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof (as defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate thereof.
Dated:__________, _____ _________________________________
Signature
Signature Guaranteed:
________________________________________________________________________________
NOTICE
This signature to the foregoing Election to Purchase and Certificate
must conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Signature must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
<PAGE> 57
EXHIBIT B
SUMMARY OF RIGHTS AGREEMENT
Each holder of shares of Common Stock of PHYSICIAN RELIANCE NETWORK,
INC. (the "Company") as of the Record Date will receive a distribution of one
Stock Purchase Right (a "Right") per share of the Common Stock in accordance
with and pursuant to the Rights Agreement. A Right will also accompany each
share of the Common Stock issued following the Record Date. Each Right, when it
first becomes exercisable, entitles the holder to purchase from the Company one
hundredth of one share of Series One Junior Preferred Stock at an initial
exercise price of $60 per one-hundredth of one share (the "Exercise Price"),
subject to adjustment.
Exercisability of Rights. Initially, the Rights will not be exercisable
or transferable apart from the shares of the Common Stock with respect to which
they are distributed, and will be evidenced only by the certificates
representing shares of Common Stock. The Rights will become exercisable and
transferable apart from the Common Stock on a date (the "Exercisability Date")
that is the earlier of (a) the close of business on the tenth business day after
a Stock Acquisition Date, defined as the first date of a public announcement
that a person or group of affiliated or associated persons has become an
Acquiring Person (as defined below); or (b) the close of business on such date
as a majority of the Company's Board of Directors shall determine, which date
may occur only following the commencement of a tender or exchange offer that, if
consummated, would result in a person or group becoming an Acquiring Person. The
Rights will be exercisable from the Exercisability Date until the Expiration
Date (which is the earlier of (x) the close of business on June 2, 2007 (the
"Final Expiration Date") or (y) the date the Rights are redeemed by the Company
(the "Redemption Date")), at which time they will expire.
With certain exceptions described in the Rights Agreement, a person or
group becomes an Acquiring Person when such person or group acquires or obtains
the rights to acquire beneficial ownership of 18% or more of the then
outstanding shares of the Common Stock, or 10% or more of such shares if the
Company's Board of Directors, after reasonable inquiry and investigation,
declares the acquiring person an Adverse Person under guidelines set forth in
the Rights Agreement. The Board of Directors may declare any person to be an
Adverse Person after it determines that (i) such person, alone or together with
its affiliates and associates, has become the beneficial owner of 10% or more of
the Company's Common Stock and (ii) after reasonable inquiry and investigation,
such Person's ownership in the Company is reasonably likely (x) to cause the
Company to take action that would provide such person with short-term gain to
the detriment of the long-term interests of the Company and its shareholders, or
(y) to have a material adverse impact on the business or prospects of the
Company.
<PAGE> 58
Transferability of Rights. Prior to the Exercisability Date, the Rights
will not be transferable apart from the shares of the Common Stock to which they
are attached. Thus, the surrender or transfer of any Common Stock certificate
prior to that date will also constitute the transfer of the Rights associated
with the shares represented by such certificate. As soon as practicable after
the Exercisability Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to each record holder of shares of the Common
Stock as of the close of business on the Exercisability Date and, in certain
circumstances, holders of certain shares issued after the Exercisability Date.
Flip-In Rights. Upon the occurrence of an Exercisability Date (a
"Flip-In Event"), each holder of a Right will thereafter have the right (the
"Flip-In Right") to receive, upon exercise, the number of shares of the Common
Stock (or, in certain circumstances, at the discretion of the Company's Board of
Directors, cash, property, other securities of the Company or other
consideration) having a market value immediately prior to the Flip-In Event
equal to two times the then current Exercise Price of the Right; provided,
however, that any Right that is (or, in certain circumstances specified in the
Rights Agreement, was) beneficially owned by an Acquiring Person (or any of its
affiliates or associates) will become null and void upon the occurrence of the
Flip-In Event. Cash will be paid in lieu of issuing fractional shares of Common
Stock pursuant to an exercise of the Rights.
Flip-Over Rights. If, at any time following a Stock Acquisition Date,
either (i) the Company is acquired in a merger or other business combination
transaction, or (ii) the Company sells or otherwise transfers more than 50% of
its aggregate assets, cash flow, or earning power, each holder of a Right
(except Rights previously voided as described above) will thereafter have the
right (the "Flip-Over Right") to receive, upon exercise, shares of common stock
of the Acquiring Person having a value equal to two times the then current
Exercise Price of the Right. The Flip-Over Right shall be exercisable apart
from, and regardless of the exercise or surrender of, the Flip-In Right.
Redemption of the Rights. At any time prior to the earlier of (i) the
close of business on the tenth business day following the Stock Acquisition
Date, or (b) the close of business on the Final Expiration Date, and in certain
other circumstances, the Company's Board of Directors may redeem the Rights, in
whole but not in part, at a Redemption Price of $.001 per Right.
Exchange of the Rights. At any time after any person becomes an
Acquiring Person, the Board of Directors may exchange the Rights (other than
Rights owned by such Acquiring Person which have become void), in whole or in
part, at an exchange ratio of one share of Common Stock per right.
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after such Acquiring Person becomes the
beneficial owner of 50% or more of the shares of Common Stock then outstanding.
Amendment of the Rights Agreement. At any time prior to the
Exercisability Date, the Board of Directors may amend any provision of the
Rights Agreement in any manner. Thereafter, the Board
<PAGE> 59
may amend the Rights Agreement in certain respects, including generally (a) to
shorten or lengthen any time period under the Rights Agreement or (b) in any
manner that the Company's Board of Directors deems necessary or desirable, so
long as such amendment is consistent with and for the purpose of fulfilling the
objectives of the Board in originally adopting the Rights Plan. Certain
amendments (including changes to the Redemption Price, Exercise Price,
Expiration Date, or number of shares for which a Right is exercisable), whether
prior to the Exercisability Date or thereafter, are permitted only upon approval
by a majority of the Board of Directors.
Series One Junior Preferred Stock. Each one hundredth of a share of
Series One Junior Preferred Stock, if issued, will have one vote per hundredth
of a share and will vote on all matters submitted to a vote of the Company's
shareholders, except as otherwise required by law. Subject to prior dividend
rights and sinking fund or redemption or purchase rights which may be applicable
to any other series of Preferred Stock, the holders of the Series One Junior
Preferred Stock will be entitled to share ratably in such dividends, if any, as
may be declared from time to time by the Company's Board of Directors in its
discretion out of funds legally available therefor with respect to the Series
One Junior Preferred Stock and on a one hundred-to-one basis with respect to the
Common Stock. The holders of each one-hundredth of a share of Series One Junior
Preferred stock are entitled to share in any assets remaining after satisfaction
of all prior claims upon liquidation of the Company, including prior claims of
any other series of Preferred Stock, ratably with the holders of each share of
the Company's Common Stock. Holders of the Series One Junior Preferred Stock
will have no preemptive or other subscription rights, and the Series One Junior
Preferred Stock is not subject to call.
