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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A
For Registration of Certain Classes of Securities
Pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
PHAMIS, INC.
(Exact name of registrant as specified in its charter)
Washington 0-25078 91-1141795
(State of other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
1001 Fourth Avenue Plaza, Suite 1500, Seattle, Washington 98154-1144
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Share Purchase Rights
Item 1. Description of Registrant's Securities to be Registered.
On July 24, 1996, the Board of Directors of PHAMIS, Inc. (the "Company")
declared a dividend distribution of one Right for each outstanding share of the
common stock, par value $0.0025 per share, of the Company (the "Common Stock"),
to shareholders of record at the close of business on July 31, 1996. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock, par value $0.0025
per share (the "Preferred Stock"), at a purchase price of $105 per one one-
thousandth of a share of Preferred Stock, subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and First Interstate Bank of Washington,
N.A., as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) the expiration of the
Company's redemption rights following a public announcement that a person or
group of affiliated or associated persons, with certain exceptions (an
"Acquiring Person"), has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), or (ii) 10 business days (or such later date as the
Continuing Directors (as defined in the Rights Agreement) shall determine)
following the commencement of a tender offer or exchange offer that would result
in a person or group beneficially owning 15% or more of such outstanding shares
of Common Stock.
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Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after July 31, 1996,
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. Pursuant to the Rights Agreement,
the Company reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.
The Rights are not exercisable until the Distribution Date (unless sooner
redeemed or exchanged) and will expire at the close of business on July 31, 2006
(the "Final Expiration Date"), unless earlier redeemed or exchanged by the
Company.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that, any Acquiring Person becomes the beneficial owner of 15%
or more of Common Stock (other than pursuant to an offer for all outstanding
shares of Common Stock which the Continuing Directors (as defined in the Rights
Agreement) determine to be fair to and otherwise in the best interests of the
Company and its shareholders) each holder of a Right will thereafter have the
right to receive, upon exercise, Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a value equal to two
times the exercise price of the Right. Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void.
For example, at an exercise price of $105 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $210 worth
of Common Stock (or other consideration, as noted above) for $105. Assuming
that the Common Stock had a per share value of $21 at such time, the holder of
each valid Right would be entitled to purchase ten shares of Common Stock for
$105.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or the Common Stock is
changed or exchanged (other than in a merger which follows and is on the same
terms as an offer described in the second preceding paragraph), or (ii) 50% or
more of the Company's assets, earning power or cash flow is sold or transferred,
each holder of a Right (except Rights which previously have been voided as set
forth above) shall thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two times the exercise
price of the Right. The events set forth in this paragraph and in the second
preceding paragraph are referred to as the "Triggering Events."
The Purchase Price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
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At any time until the close of business on the tenth business day following
the Stock Acquisition Date, the Company may redeem the Rights in whole, but not
in part, at a price of $0.01 per Right. After the redemption period has
expired, the Company's right of redemption may be reinstated if an Acquiring
Person reduces his beneficial ownership less than 15% of the outstanding shares
of Common Stock in a transaction or series of transactions not involving the
Company. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $0.01 redemption price.
After there is an Acquiring Person the Board of Directors may elect to
exchange each Right (other than Rights that have become null and void as
described above) for one share of Common Stock (or other equivalent securities)
per Right pursuant to the terms of the Rights Agreement.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen any
time period under the Rights Agreement; provided, however, that no amendment to
adjust the time period governing redemption shall be made at such time as the
Rights are not redeemable.
The Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment equal to the greater of $1 per share and
1,000 times the dividend declared per share of Common Stock. In the event of
liquidation, the holders of the Preferred Stock will be entitled to a
liquidation payment equal to $10 per share in preference to the Common Stock.
Each share of Preferred Stock will have 1,000 votes per share, voting together
with the Common Stock. In the event of any merger, consolidation or other
transaction in which Common Stock is exchanged, Preferred Stock will be entitled
to receive 1,000 times the amount received per share of Common Stock. These
rights are protected by customary antidilution provisions.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group other than an exempt person that
attempts to acquire the Company on terms not approved by the Board, except
pursuant to an offer conditioned on a substantial number of Rights being
acquired. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors prior to the time a person or
group other than an exempt person has acquired beneficial ownership of 15% or
more of the Common Stock, because until such time the Rights may generally be
redeemed by the Company at $0.01 per Right.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
The Rights Agreement between Phamis, Inc. and First Interstate Bank of
Washington, N.A. as Rights Agent, which includes as Exhibit B the form of Rights
Certificate, is attached hereto as Exhibit 2 and is incorporated herein by
reference. The foregoing description of the Rights does not purport to be
complete and is qualified in its entirety by reference to such exhibit.
Item 2. Exhibits
1. Form of Rights Certificate, incorporated by reference to Exhibit B to
Exhibit 2 filed herewith.
2. Rights Agreement dated as of July 29, 1996 between Phamis, Inc. and
First Interstate Bank of Washington, N.A. as Rights Agent.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized.
PHAMIS, INC.
Date: August 1, 1996 By: /s/ Gregg W. Blodgett
------------------------------------
Gregg W. Blodgett
Vice President of Administration and
Finance, Treasurer and Controller
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EXHIBIT INDEX
to
FORM 8-A
1. Form of Rights Certificate, incorporated by reference to Exhibit B to
Exhibit 2 filed herewith.
2. Rights Agreement dated as of July 29, 1996 between Phamis, Inc. and
First Interstate Bank of Washington, N.A. as Rights Agent.
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EXHIBIT 2
PHAMIS, INC.
and
First Interstate Bank of Washington, N.A.
Rights Agent
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Rights Agreement
Dated as of July 29, 1996
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TABLE OF CONTENTS
<TABLE>
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Page
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Recitals........................................................................................... 1
Section 1. Certain Definitions................................................................... 1
Section 2. Appointment of Rights Agent........................................................... 7
Section 3. Issue of Rights Certificates.......................................................... 8
Section 4. Form of Rights Certificates........................................................... 9
Section 5. Countersignature and Registration..................................................... 10
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificats; Mutilated,
Destroyed, Lost or Stolen Rights Certificates......................................... 11
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights......................... 12
Section 8. Cancellation and Destruction of Rights Certificates................................... 14
Section 9. Reservation and Availability of Capital Stock......................................... 14
Section 10. Preferred Stock Record Date........................................................... 16
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights........... 17
Section 12. Certificate of Adjusted Purchase Price or Number of Shares............................ 27
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.................. 28
Section 14. Fractional Rights and Fractional Shares............................................... 31
Section 15. Rights of Action...................................................................... 33
Section 16. Agreement of Rights Holders........................................................... 33
Section 17. Rights Certificate Holder Not Deemed a Shareholder.................................... 34
Section 18. Concerning the Rights Agent........................................................... 34
Section 19. Merger or Consolidation or Change of Name of Rights Agent............................. 35
Section 20. Duties of Rights Agent................................................................ 36
Section 21. Change of Rights Agent................................................................ 38
Section 22. Issuance of New Rights Certificates................................................... 39
Section 23. Redemption and Termination............................................................ 39
</TABLE>
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Section 24. Notice of Certain Events...................................... 41
Section 25. Notices....................................................... 42
Section 26. Supplements and Amendments.................................... 43
Section 27. Successors.................................................... 43
Section 28. Determinations and Actions by the Board of Directors.......... 43
Section 29. Benefits of this Agreement.................................... 44
Section 30. Severability.................................................. 44
Section 31. Governing Law................................................. 45
Section 32. Counterparts.................................................. 45
Section 33. Descriptive Headings.......................................... 45
Exhibit A Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
</TABLE>
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RIGHTS AGREEMENT
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RIGHTS AGREEMENT, dated as of July 29, 1996 (the "Agreement"), between
PHAMIS, Inc., a Washington corporation (the "Company"), and First Interstate
Bank of Washington, N.A., a Washington banking corporation (the "Rights Agent").
Recitals
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WHEREAS, on July 24, 1996, the Board of Directors of the Company authorized
and declared a dividend distribution of one Right for each share of common
stock, par value $0.0025 per share, of the Company (the "Common Stock")
outstanding at the close of business on July 31, 1996 (the "Record Date"), and
has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions hereof) for each share of Common Stock of
the Company issued between the Record Date (whether originally issued or
delivered from the Company's treasury) and the Distribution Date (as hereinafter
defined), each Right initially representing the right to purchase one one-
thousandth share of Series A Junior Participating Preferred Stock of the Company
having the rights, powers and preferences set forth in the form of Certificate
of Designation, Preferences and Rights attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person' shall mean any Person who or which, together
with all Affiliates and Associates of such Person, is (or has previously been,
at any time after the date of this Agreement, whether or not such Person(s)
continues to be) the Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding (determined without taking into account any securities
exercisable or exchangeable for, or convertible into, Common Stock, other than
any such securities beneficially owned by the Acquiring Person and Affiliates
and Associates of such Person). In any case, an Exempt Person, so long as such
Person remains an Exempt Person, is not an Acquiring Person.
A Person does not become an "Acquiring Person" solely as the result of 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 to 15% or more of the Common Stock then outstanding as
determined above.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adjusted Current Value" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(d) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
(e) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act as in effect on the date of this Agreement.
(f) "Agreement" shall mean this Rights Agreement as originally
executed or as it may from time to time be supplemented or amended pursuant to
the applicable provisions hereof.
(g) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the
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exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own" (A) securities tendered
pursuant to a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable upon exercise
of Rights at any time prior to the occurrence of a Triggering Event;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has 'beneficial ownership' of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided however, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report);
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this Section 1(g) or
disposing of any voting securities of the Company; or
(iv) which such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of Rule 13d-3
of the General Rules and Regulations under the Exchange Act, as in effect
on the date of this Agreement.
Nothing in this Section 1(g) causes a person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such person's participation in good faith
in a firm commitment underwriting until the expiration of forty days after the
date of such acquisition.
(h) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of New York or Washington are
authorized or obligated by law or executive order to close.
(i) "Close of Business" on any given date shall mean 5:00 P.M.,
Seattle, Washington time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., Seattle, Washington time, on the
next succeeding Business Day.
(j) "Common Stock," when used with reference to the Company prior to a
Section 13 Event, shall mean the shares of Common Stock, par value $0.0025 per
share, of the Company or any other shares of capital stock of the Company into
which the Common Stock shall be reclassified or changed. "Common Stock," when
used with reference to any Person (other than the Company prior to a Section 13
Event), shall mean shares of capital stock of such Person (if such Person is a
corporation) of any class or series, or units of equity interests in such Person
(if such Person is not a corporation) of any class or series, the terms of which
do not limit (as a maximum amount and not merely in proportional terms) the
amount of dividends or income payable or distributable on such class or series
or the amount of assets distributable on such class or series upon any voluntary
or involuntary liquidation, dissolution or winding up of such Person and do not
provide that such class or series is subject to redemption at the option of such
Person, or any shares of capital stock or units of equity interests into which
the foregoing shall be reclassified or changed; provided, however, that, if at
any time there shall be more than one such class or series of capital stock or
equity interests of such Person, "Common Stock" of such Person shall include all
such classes and series substantially in the proportion of the total number of
shares or other units of each such class or series outstanding at such time.
(k) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
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(l) "Company" shall mean the Person named as the "Company" in the
first paragraph of this Agreement until a successor corporation shall have
become such or until a Principal Party shall assume, and thereafter be liable
for, all obligations and duties of the Company hereunder, pursuant to the
applicable provisions hereunder, and thereafter "Company" shall mean such
successor corporation or Principal Party.
(m) "Control" with respect to any Person shall mean the power to
direct the management and policies of such Person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
(n) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such Person is a member of the Board of
Directors of the Company, who is not an Acquiring Person (as defined herein), or
an Affiliate or Associate of an Acquiring Person or a representative, designee
or nominee of an Acquiring Person or of any such Affiliate or Associate, and who
was a member of the Board of Directors of the Company on the date of this
Agreement, and (ii) any Person who becomes a member of the Board of Directors of
the Company after the date of this Agreement, while such Person is a member of
the Board of Directors of the Company, who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or a representative, designee or
nominee of an Acquiring Person or of any such Affiliate or Associate, if such
Person's nomination for election, or election, to the Board of Directors of the
Company is recommended or approved by a majority of the Continuing Directors.
(o) "Current Market Price" shall have the meaning set forth in Section
11(d) hereof.
(p) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(q) "Distribution Date" means the earlier of (i) the day after the
Company's right to redeem the Rights pursuant to Section 23 expires and (ii) the
tenth Business Day after commencement or public disclosure of an intention to
commence (including, without limitation, any such commencement or public
disclosure which occurs on or after the date of this Agreement and prior to the
issuance of the Rights) a tender offer or exchange offer by a Person if, after
acquiring the maximum number of securities sought pursuant to such offer, such
Person, or any Affiliate or Associate of such Person, would be an Acquiring
Person. If there is at least one Continuing Director then in office, the Board
of Directors of the Company, with the concurrence of a majority of the
Continuing Directors then in office, may defer the date set forth in clause (ii)
of the preceding sentence to a specified later date or to an unspecified later
date to be determined by a subsequent action or event.
(r) "equivalent preferred stock" shall have the meaning set forth in
Section 11(b) hereof.
(s) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(t) "Exchange Ratio" shall have the meaning set forth in Section
11(a)(iv) hereof.
(u) "Exempt Person" shall mean (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan of the Company or of any Subsidiary
of the Company, (iv) any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan, (v) any party which
would be deemed an Acquiring Person on the date of this Agreement, so long as
and provided that after the Record Date such party does not acquire beneficial
ownership of additional shares of Common Stock constituting more than 1% of the
Common Stock then outstanding, or (vi) any such Person who has become such a
Beneficial Owner solely because (A) of a change in the aggregate number of
Common Stock outstanding since the last date on which such Person acquired
Beneficial Ownership of any Common Stock or (B) it acquired such Beneficial
Ownership in the good-faith belief that such acquisition would not (y) cause
such Beneficial Ownership to exceed 15% of the Common Stock then outstanding and
such Person relied in good faith in computing the percentage of its Beneficial
Ownership on publicly filed reports or documents of the Company that are
inaccurate or out of date or (z) otherwise cause a Distribution Date or the
adjustment provided for in Section 11(a) to occur. Notwithstanding clause (vi)
of the prior sentence, if any Person that is not an Acquiring Person due to such
clause (vi) does not
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reduce its percentage of Beneficial Ownership of Common Stock to below 15% by
the Close of Business on the fifth Business Day after notice from the Company
(the date of notice being the first day) that such Person's Beneficial Ownership
of Common Stock so exceeds 15%, such Person shall, at the end of such five
Business Day period, become an Acquiring Person (and such clause (vi) shall no
longer apply to such Person). For purposes of this definition, the
determination whether any Person acted in "good faith" shall be conclusively
determined by the Company's Board of Directors, acting by a vote of those
directors of the Company whose approval would be required to redeem the Rights
under Section 23. In connection with clause (v) above, any person's status as
an Exempt Person due to such clause shall not be transferable and any transferee
of such person shall not be an Exempt Person by virtue of such clause (v).
(v) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(w) "Final Expiration Date" shall mean July 31, 2006.
(x) "Initial Exercise Price" shall be $105.
(y) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotation System.
(z) "Person" shall mean any individual, firm corporation, partnership
or other entity.
(aa) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.0025 per share, of the Company, and,
to the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of preferred stock, par value $0.0025 per share, of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series A Junior Participating Preferred Stock.
(ab) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(ac) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
(ad) "Record Date" shall have the meaning set forth in the WHEREAS
clause at the beginning of this Agreement.
(ae) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(af) "Reduction Amount" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ag) "Rights" shall have the meaning set forth in the WHEREAS clause
at the beginning of this Agreement.
(ah) "Rights Agent" shall mean the Person named as the "Rights Agent"
in the first Paragraph of this Agreement until a successor Rights Agent shall
have become such pursuant to the applicable provisions hereof, and thereafter
Rights Agent shall mean such successor Rights Agent. If at any time there is
more than one Person appointed by the Company as Rights Agent pursuant to the
provisions of this Agreement, "Rights Agent" shall mean and include each such
Person.
(ai) "Rights Certificates" shall have the meaning set forth in Section
3(a) hereof.
(aj) "Section 11(a)(ii) Event" shall have the meaning specified in
Section 11(a)(ii) hereof.
(ak) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
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(al) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such;
provided that, if such person is determined not to have become an Acquiring
Person pursuant to Sections 1(a), 1(g) and 1(u), then no Share Acquisition Date
shall be deemed to have occurred.
(am) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(an) "Substitute Consideration" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(ao) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ap) "Summary of Rights" shall have the meaning set forth in Section
3(b) hereof.
(aq) "Total Consideration" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ar) "Trading Day" shall mean a day on which the principal national
securities exchange (or principal recognized foreign stock exchange, as the case
may be) on which any securities or Rights, as the case may be, are listed or
admitted to trading is open for the transaction of business or, if the
securities or Rights in question are not listed or admitted to trading on any
national securities exchange (or recognized foreign stock exchange, as the case
may be), a Business Day.
(as) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Rights Certificates.
----------------------------
(a) Until the Distribution Date, (x) the Rights will be evidenced
(subject to the provisions of Paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by first-
class, insured postage prepaid mail, to each record holder of the Common Stock
as of the close of business on the Distribution Date, at the address of such
holder shown on the records of the Company, one or more right certificates, in
substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. At the request of the Rights Agent, the Company
shall provide the Rights Agent with a list of holders of record of the Common
Stock as of the close of business on the Distribution Date. In the event that
an adjustment in the number of Rights per share of Common Stock has been made
pursuant to Section 11(p) hereof, at the time of distribution of the Right
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 Distribution
Date, the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights, in substantially the form attached
hereto as Exhibit C (the "Summary of Rights"), by first-class, postage prepaid
mail, to each record holder of the 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 the Common Stock outstanding as of
the Record Date, until the Distribution Date, the Rights will be evidenced by
such
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<PAGE>
certificates for the Common Stock and the registered holders of the Common Stock
shall also be the registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date (as such term is defined
in Section 7 hereof), the transfer of any certificates representing shares of
Common Stock in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date. Certificates representing such shares of Common Stock shall
also be deemed to be certificates for Rights, and shall bear the following
legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between PHAMIS, Inc. (the
"Company") and First Interstate Bank of Washington, N.A. (the "Rights
Agent"), dated as of July 29, 1996 (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which is on
file at the principal offices of the 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 Associates 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 such certificates containing the foregoing legend, until
the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall each be substantially
in the form set forth in Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the Provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Distribution Date and on their face shall entitle the holders
thereof to purchase such number of one one-thousandth of a share of Preferred
Stock as shall be set forth therein at the price set forth therein (such
exercise price per one one-thousandth of a share, the "Purchase Price"), but the
amount and type of securities purchasable upon the exercise of each Right and
the Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section
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<PAGE>
11 hereof upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent feasible)
the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified
in Section 7(e) of such Agreement,
In the case of a determination made pursuant to clause (iii)(B) of this
Section 4(b) the Company shall notify the Rights Agent of such determination.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President or any Vice President, either
manually or by facsimile signature. The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
of the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- ----------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-thousandth of a share of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the Principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial owner (or former Beneficial owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
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.
-7-
<PAGE>
(b) Upon receipt by the Rights Agent of evidence reasonably
satisfactory to it of the loss, theft destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Rights Certificate if mutilated, the
Company will execute and deliver a new Rights Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as herein
including, without limitation, the restrictions on exercisability set forth in
Section 9(c), Section 11(a)(iii), Section 11(a)(iv) and Section 23(a) hereof) in
whole or in part at any time after the Distribution Date upon surrender of the
Rights Certificate, with the form of election to purchase and the certificate on
the reverse side thereof duly executed, to the Rights Agent at the principal
office or offices of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-thousandth of a share (or other securities, cash or other assets, as the
case may be) as to which such surrendered Rights are then exercisable, at or
prior to the earlier of (i) the Final Expiration Date, (ii) the time at which
the Rights are redeemed as provided in Section 23 hereof, (iii) the time at
which the Rights expire pursuant to Section 11(a)(iv) or Section 13(d) hereof
(the earlier of (i), (ii) and (iii) being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be the
Initial Exercise Price, and shall be subject to adjustment from time to time as
provided in Sections 11 and 13(a) hereof and shall be payable in accordance with
paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable transfer tax, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition
from any transfer agent of the shares of Preferred Stock (or make available, if
the Rights Agent is the transfer agent for such shares) certificates for the
total number of one one-thousandth of a share of Preferred Stock to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandth of a share of
Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified
bank check or bank draft payable to the order of the Company. In the event that
the Company is obligated to issue other securities (including Common Stock) of
the Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. 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 case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights
-8-
<PAGE>
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Rights Agent or the Company, as the case may be, shall reasonably
request.
Section 8. Cancellation and Destruction of Rights Certificates. All
---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, 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.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a
-9-
<PAGE>
registration statement under the Act, with respect to the securities purchasable
upon exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and
(B) the date of the expiration of the Rights. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the securities
or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in clause (i) of the first
sentence of this Section 9(c), the exercisability of the Rights in order to
prepare and file such registration statement and permit it to become effective.
The Company will notify the Rights Agent of any such suspension. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In
addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all one one-thousandth of a share of
Preferred Stock (and, following the occurrence of a Triggering Event Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates and
of any certificates for a number of one one-thousandth of a share of share of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandth of a share of share of Preferred Stock (or Common
Stock and/or other securities, as the case may be) in respect of a name other
than that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandth of a share of share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name any
---------------------------
certificate for a number of one one-thousandth of a share of share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of
a Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
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<PAGE>
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
----------------------------------------------------------
Number of Rights. The Purchase Price, the number and kind of shares covered by
- ----------------
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, then in each such event the Purchase Price and the
Redemption Price set forth in Section 23, as each is in effect at the time
of the record date for such dividend or distribution, or of the effective
date of such subdivision, combination or reclassification, shall be
proportionately adjusted by multiplying the Purchase Price and such
Redemption Price by a fraction the numerator of which shall be the total
number of shares of Preferred Stock outstanding immediately prior to the
occurrence of such event and the denominator of which shall be the total
number of shares of Preferred Stock outstanding immediately following the
occurrence of such event. 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) In the event any Person (other than an Exempt Person), alone or
together with its Affiliates and Associates, shall become an Acquiring
Person, unless the event causing such Person to become an Acquiring Person
(A) is a Section 13 Event or (B) is an acquisition of shares of Common
Stock pursuant to a tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined by at least a
majority of the Continuing Directors, after receiving advice from one or
more investment banking firms, to be (1) at a price which is fair to
shareholders (taking into account all factors which such Continuing
Directors deem relevant including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on an orderly
basis designed to realize maximum value) and (2) otherwise in the best
interests of the Company and its shareholders, then, promptly following the
occurrence of such an 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 the right to receive, and the
Company shall issue, upon exercise thereof at the then current Purchase
Price in accordance with the terms of this Agreement, in lieu of a number
of one one-thousandth of a share of Preferred Stock, such number of shares
of Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one one-
thousandth of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event, and
(y) dividing that product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each Right and for
all purposes of this Agreement) by 50% of the current market price
(determined pursuant to Section 11(d) hereof) per share of Common Stock on
the date of such first occurrence (such number of shares, the "Adjustment
Shares"). If the transaction or event that would otherwise give rise to
the foregoing adjustment is also subject to the provisions of Section 13 of
this Agreement, then only the provisions of Section 13 of this Agreement
shall apply and no adjustment shall be made pursuant to this Section
11(a)(ii).
(iii) In lieu of issuing shares of Common Stock in accordance with
Section 11(a)(ii), the Company may, if a majority of the Continuing
Directors (or if no Continuing Directors are then in office, the Board of
Directors of the Company) determine that such action is necessary or
appropriate and not contrary to the interests of holders of Rights (and, in
the event that the number of shares of Common Stock which are authorized by
the Company's certificate of incorporation, but which are not outstanding
or reserved for issuance for purposes other than upon exercise of the
Rights, are not sufficient to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii), the Company shall) take one or more of
the following actions: (A) reduce the Purchase Price required to be paid
in order to exercise a Right by any amount (the "Reduction Amount"), in
which event the number of Adjustment Shares and/or the amount of any
Substitute Consideration (as hereinafter defined) issuable in respect of
each Right (the Adjustment Shares, if any, and the Substitute
Consideration, if any, issuable in respect of a Right are
-11-
<PAGE>
herein collectively referred to as the "Total Consideration") shall be
reduced so that the aggregate value of the Total Consideration issuable in
respect of each Right is equal to the Current Value (as hereinafter
defined) less the Reduction Amount (herein the "Adjusted Current Value"),
and/or (B) make adequate provision with respect to each Right to substitute
for all or part of the Adjustment Shares otherwise obtainable upon exercise
of a Right: (1) cash, (2) other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred
stock which a majority of the Continuing Directors (or if no Continuing
Directors are then in office, the Board of Directors of the Company) have
determined to have the same value as shares of Common Stock (such shares or
units of preferred stock being referred to as "Common Stock Equivalents")),
(3) debt securities of the Company, (4) other assets, or (5) any
combination of the foregoing (collectively, "Substitute Consideration"),
having an aggregate value which, when added to the value of the Adjustment
Shares (if any) in respect of which no substitution is being made, is equal
to the Adjusted Current Value. If a majority of the Continuing Directors
(or if no Continuing Directors are then in office, the Board of Directors)
determine to issue or deliver any equity securities (other than Common
Stock or Common Stock Equivalents), debt securities and/or other assets
pursuant to this Section 11(a)(iii), the value of such securities and/or
assets shall be determined by a majority of the Continuing Directors (or if
no Continuing Directors are then in office, the Board of Directors of the
Company) based upon the advice of an investment banking firm selected by a
majority of the Continuing Directors (or if no Continuing Directors are
then in office, the Board of Directors of the Company). If the Company is
required to make adequate provision to deliver value pursuant to the first
sentence of this Section 11(a)(iii) and the Company shall not have made
such adequate provision to deliver value within ninety (90) days following
the first occurrence of a Section 11(a)(ii) Event (the "Substitution
Period"), then notwithstanding any provision of Section 11(a)(ii) or this
Section 11(a)(iii) to the contrary, the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the excess of the Current Value over the Purchase
Price. If both Common Stock and cash are to be delivered pursuant to the
preceding sentence, amounts of both Common Stock and cash shall be
delivered upon surrender of each Right in a ratio of Common Stock to cash
that bears the same ratio as the total value of all Common Stock to be
delivered (as determined pursuant to this Section 11(a)(iii)) bears to the
total value of all cash to be delivered; provided, however, that the
Company may adjust such ratio to avoid issuing any fractional shares of
Common Stock so long as the method of adjustment is applied consistently to
each holder of Rights entitled to receive value thereon pursuant to this
Section 11(a)(iii). To the extent that the Company determines that some
action is to be taken pursuant to the first and/or third sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights,
and (y) may suspend the exercisability of the Rights but in no event to a
time later than the expiration of the Substitution Period. In the event of
any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer
in effect. Upon any change in the Adjustment Shares obtainable upon
exercise of a Right pursuant to this Section 11(a)(iii), the Purchase Price
shall thereafter mean the amount, if any, required to be paid upon exercise
of a Right for the Adjustment Shares, if any, and the Substitute
Consideration, if any, then issuable or deliverable upon exercise of a
Right, and a majority of the Continuing Directors (or if no Continuing
Directors are then in office, the Board of Directors of the Company) shall
make any necessary provisions to ensure that the provisions of Section
11(e) shall thereafter apply as appropriate to the Total Consideration. For
purposes of this Section 11(a)(iii), (A) "Current Value" shall be the
product derived by multiplying (x) the number of Adjustment Shares issuable
in respect of each Right determined under Section 11(a)(ii), by (y) the
Current Market Price per share of Common Stock on the date of the
Triggering Event, and (B) the value of each share of Common Stock and each
share or unit of any "Common Stock Equivalent" shall be deemed conclusively
to be equal to the Current Market Price per share of the Common Stock on
the date of the Triggering Event.
(iv) A majority of the Continuing Directors (or if no Continuing
Directors are then in office, the Board of Directors of the Company) may,
at their option, at any time and from time to time after the first
occurrence of a Section 11(a)(ii) Event, cause the Company to exchange, for
all or part of the then-outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant
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to the provisions of Section 7(e) hereof), shares of Common Stock or Common
Stock Equivalents 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 of this Agreement (such
exchange ratio being hereinafter referred to as the "Exchange Ratio"). Any
partial exchange shall be effected on a pro rata basis based on the number
of Rights (other than Rights which have become void pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.
Immediately upon the action of a majority of the Continuing Directors
(or if no Continuing Directors are then in office, the Board of Directors
of the Company) ordering the exchange of any Rights pursuant to this
Section 11(a)(iv) and without any further action and without any notice,
the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of
shares of Common Stock and/or Common Stock Equivalents 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 and in
addition, the Company shall promptly mail a notice of any such exchange to
all of the holders of such Rights in accordance with Section 25 of this
Agreement, provided, however, that the failure to give, any delay in giving
or any defect in, such notice shall not affect the validity of such
exchange. Each such notice of exchange shall state the method by which the
exchange of the Common Stock or Common Stock Equivalents for Rights will be
effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. In the event that the number of shares of Common
Stock which is authorized but not outstanding or reserved for issuance for
a purpose other than exercise of the Rights is not sufficient to permit any
exchange of Rights as contemplated in accordance with this Section
11(a)(iv), the Board of Directors of the Company shall take all such action
within its power as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights. The Company shall
not be required to issue fractions of shares of Common Stock or Common
Stock Equivalents or to distribute certificates which evidence fractional
shares of Common Stock or Common Stock Equivalents. In lieu of such
fractional shares of Common Stock or Common Stock Equivalents, the Company
shall pay to the registered holders of the Rights Certificates with regard
to which such fractional shares of Common Stock or Common Stock Equivalents
would otherwise be issuable an amount in cash equal to the product derived
by multiplying (x) the subject fraction, by (y) the last sale price of the
Company's Common Stock on the fifth Trading Day following the public
announcement of the exchange by the Company, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices on such
day, in either case on a when issued basis (taking into account the
exchange), as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the NYSE
(or, if the Company's Common Stock is not so listed or traded, then as
determined in the manner provided under the definition of "Current Market
Price," adjusted to take into account the exchange). For the purposes of
this Section 11(a)(iv) the value of any Common Stock Equivalent on any date
shall be the same as the value of the Common Stock, as determined pursuant
to the previous sentence, on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock") or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share; if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the current market price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price
may be paid by delivery of consideration part or all of
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which may be in a form other than cash, the value of such consideration shall be
as determined in good faith by a majority of the Continuing Directors of the
Company (or if no Continuing Directors are then in office, by the Board of
Directors), whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed,
and in the event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by a majority of the Continuing
Directors or if no Continuing Directors are then in office, by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such current market price (as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the period that is
the shorter of (a) 30 consecutive Trading Days immediately prior to the date in
question and (b) the number of consecutive Trading Days beginning on the Trading
Day immediately after the date of the first public announcement of the event
requiring a determination of the Current Market Price and ending on the Trading
Day immediately prior to the record date of such event; and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the then (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per Share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights) or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account exdividend trading. The closing price for each
Trading Day price shall be the closing price quoted on the composite tape for
securities listed on the New York Stock Exchange, or, if such securities are not
quoted on such composite tape or if such securities are not listed on such
exchange, on the principal United States securities exchange registered under
the Exchange Act (or any recognized foreign stock exchange) on which such
securities are listed, if such securities are not listed on any such exchange,
the closing price or average of the closing bid and asked quotations with
respect to a share of such securities on the National Association of Securities
Dealers, Inc. Automated Quotations System or such other system then in use or,
if such quotations are available, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in such
securities selected by a majority of the Continuing Directors. If on any such
Trading Day no market maker is making a market in such securities, the closing
price of such securities on such Trading Day shall be deemed to be the fair
value of such securities as determined in good faith by a majority of the
Continuing Directors (whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent, the
holders of Rights and all other Persons).
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(ii) For the purpose of any computation hereunder, the Current Market
Price per share of Preferred Stock shall be determined in the same manner as set
forth above for the Common Stock in clause (i) of this Section 11(d) (other than
the last sentence there). If the Current Market Price per share of Preferred
Stock cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described in clause
(i) of this Section 11(d), the Current Market Price per share of Preferred Stock
shall be conclusively deemed to be an amount equal to 1,000 (as such number may
be appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date of
this Agreement) multiplied by the Current Market Price per share of the Common
Stock. If neither the Common Stock nor the Preferred Stock is publicly held or
so quoted, Current Market Price per share of the 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 Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or one one-thousandth of a share of Preferred Stock, as the case
may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in this Section 11 and
the provisions of Sections 7, 9, 10, 12, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandth of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandth of a
share of Preferred Stock (calculated to the nearest one one-thousandth obtained
by (i) multiplying (x) the number of one one-thousandth of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect, on or after the date of any adjustment of
the Purchase Price or any adjustment to the number of shares of Preferred Stock
for which a Right may be exercised, to adjust the number of Rights, in lieu of
any adjustment in the number of one one-thousandth of a share of Preferred Stock
purchasable 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-thousandth of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one one-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the
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public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-thousandth of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share and the number of one one-thousandth of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
one-thousandth of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-thousandth of a share
of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-thousandth of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-thousandth of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person, (ii) merge
with or into any other Person, or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50% of the assets,
earning power or cash flow of the Company and its Subsidiaries (taken at a
whole) to any other Person or Persons, 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, (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates, or (z) the form or nature
of organization of the Principal Party would preclude or limit the
exercisability of the Rights.
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(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 11(a)(iv), 23, 26 or 30
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Record Date and prior to the
Distribution Date (i) declare a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares
of Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction the numerator which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or if prior to the
Distribution Date, to each holder of a certificate representing shares of Common
Stock) in accordance with Section 25 hereof. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained. Notwithstanding the foregoing, the failure of the Company to give
such notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment. Any adjustment to be made pursuant to Sections
11 and 13 of this Agreement shall be effective as of the date of the event
giving rise to such adjustment.
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(n) and Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(n) and Section 11(o) hereof) shall consolidate with,
merge with or into, or effect a share exchange with the Company, and the Company
shall be the continuing or surviving corporation of such consolidation or merger
and, in connection with such consolidation or merger, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other Person or cash or any other property, or (z)
the Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series of related
transactions, assets, earning power or cash flow aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies with Section 11(n)
and Section 11(o) hereof), then, and in each such case (except as may be
contemplated by Section 13(d) hereof), proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, nonassessable and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-thousandth
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-thousandth of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by
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(2) 50% of the current market price (determined pursuant to Section 11(d)(i)
hereof) per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a Section
13 Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the first occurrence
of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y)
of the first sentence of Section 13(a), the Person that is the issuer of
any securities into which shares of Common Stock of the Company are
converted or for which they are exchanged in such merger, consolidation or
exchange offer, and if no securities are so issued, the Person that is the
other party to such merger, consolidation or exchange offer; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary or Affiliate of another Person the Common Stock
of which is and has been so registered, "Principal Party" shall refer to such
other Person; and (2) in case such Person is a Subsidiary, directly or
indirectly, or Affiliate of more than one Person, the Common Stocks of two or
more of which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Stock having the greatest
aggregate market value; and (3) if the Common Stock of none of such other
Persons has been so registered, "Principal Party" refers to whichever of such
other Persons (other than an individual) is the Person which has the equity
securities with the greatest aggregate market value. In case such Person is
owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules set
forth above apply to each of the chains of ownership having an interest in such
joint venture as if such Person were a Subsidiary of both or all of such joint
venturers and the Principal Parties in each such chain shall bear the
obligations set forth in Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized shares of its
Common Stock which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and, at the request of
the Company, the Principal Party shall have furnished to the Rights Agent an
opinion of independent counsel stating that such supplemental agreement is a
legal, valid and binding agreement of the Principal Party enforceable against
the Principal Party in accordance with its terms and a certificate of a
nationally recognized firm of independent accountants setting forth the number
of shares of Common Stock of such issuer which may be purchased upon the
exercise of each Right after the consummation of such Section 13 Event. In
addition, as soon as practicable after the date of any consolidation, merger or
sale of assets mentioned in paragraph (a) of this Section 13, the Principal
Party, at its own expense, will:
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as
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<PAGE>
practicable after such filing and (B) remain effective (with a prospectus
at all times meeting the requirements of the Act) until the Expiration
Date;
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act;
(iii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the state
securities or "blue sky" laws of such jurisdictions as may be necessary or
appropriate;
(iv) use its best efforts to list the Rights and the securities
purchasable upon exercise of the Rights on a United States national
securities exchange and/or NASDAQ National Market System; and
(v) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Stock of the Principal Party subject to
purchase upon exercise of outstanding Rights.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a tender offer
or exchange offer for all outstanding shares of Common Stock which complies with
the provisions of Section 11(a)(ii) hereof (or a wholly owned subsidiary of any
such Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
(e) Without limiting the generality of this Section 13, in the event
the nature of the organization of any Principal Party shall preclude or limit
the acquisition of Common Stock of such Principal Party upon exercise of the
Rights as required by Section 13(a) as a result of a Section 13 Event, it shall
be a condition to such transaction that such Principal Party shall take such
steps (including, but not limited to, a reorganization) as may be necessary to
ensure that the benefits intended to be derived under this Section 13 upon the
exercise of the Rights are assured to the holders thereof.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by a majority
of the Continuing Directors, or if no Continuing Directors are
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<PAGE>
then in office, by the Board of Directors of the Company. 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 Continuing
Directors (or if no Continuing Directors are then in office, by the Board of
Directors of the Company) whose determination shall be described in a statement
filed with the Rights Agent and shall be binding and conclusive for all
purposes.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). Fractions of shares of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock. In lieu of fractional
shares of Preferred Stock that are not integral multiples of one one-thousandth
of a share of Preferred Stock, the Company may at its option (i) issue scrip or
warrants in registered form (either represented by a certificate or
uncertificated) or in bearer form (represented by a certificate) which shall
entitle the holder to receive a full one one-thousandth of a share of Preferred
Stock upon the surrender of such scrip or warrants aggregating a full one one-
thousandth of a share of Preferred Stock, or (ii) pay to the registered holders
of Rights Certificates at the time such Rights Certificates are exercised as
provided in this Agreement an amount in cash equal to the same fraction of the
current market value of a share of Preferred Stock. For purposes of this
Section 14(b), the current market value of one one-thousandth of a share of
Preferred Stock shall be one one-thousandth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price of one share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and 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 Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
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<PAGE>
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
--------------------------------------------------
holder, as such of any Rights Certificate shall be entitled to vote, receive
dividends or distributions or be deemed for any purpose the holder of the number
of one one-thousandth of a share of Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 24 hereof), or to receive dividends or subscription rights,
or to institute, as a holder of Preferred Stock or other securities issuable on
exercise of the Rights represented by any Rights Certificate, any derivative
action on behalf of the Company, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for 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 be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
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<PAGE>
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the 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 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 herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by any
person the Rights Agent reasonably believes to be the Chairman of the Board, the
President, any Vice President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct, or breach of this Agreement
resulting from such conduct, by it or its attorneys or agents.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence
-22-
<PAGE>
of facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or Preferred Stock to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person the Rights Agent reasonably believes to be the Chairman of the Board, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer or
omitted to be taken by it while awaiting advice or instructions from any such
officer. Any application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Agreement and the
date on or after which 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 ten Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be
taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to Purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 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.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under thirty (30)
days' notice in writing mailed to the Company, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail. The Company
may remove the Rights Agent or any successor Rights Agent upon thirty (30) days'
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock and Preferred Stock,
by registered or certified mail, and to the holders of the Rights Certificates
by first-class mail.
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<PAGE>
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.
Notwithstanding any other provision of this Agreement, in no event shall the
resignation or removal of a Rights Agent be effective until a successor Rights
Agent shall have been appointed and have accepted such appointment. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the incumbent Rights
Agent or any registered holder of any Rights Certificate may apply to any court
of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the State of New York or Washington (or of any other state of the
United States so long as such corporation is authorized to do business as a
banking institution in the State of New York or Washington), in good standing,
which is authorized under such laws to exercise corporate trust powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000. 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, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
-----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by a majority of the Continuing Directors (or if no
Continuing Directors are then in office, by the Board of Directors of the
Company) to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
under the Rights Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale of shares of
Common Stock following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued and this sentence shall be null and void ab initio if, and to
the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
--------------------------
(a) The Board of Directors of the Company may, at its option, at any
time prior to the close of business on the earlier of (i) the tenth Business Day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth
Business Day following the Record Date) or such later date as may be determined
by a majority of Continuing Directors then in office and publicly announced by
the Company and (ii) the Expiration Date, redeem all but not less than all the
then outstanding Rights at a redemption price of $0.01 per Right, as such amount
may be appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"); provided, however, that if,
following the occurrence of a Stock Acquisition Date and following the
expiration of the right-of-redemption hereunder but prior to any Triggering
Event, (i) a Person who is an Acquiring Person shall have transferred or
otherwise disposed of a number of shares
-24-
<PAGE>
of Common Stock in one transaction or series of transactions, not directly or
indirectly involving the Company or any of its Subsidiaries, which did not
result in the occurrence of a Triggering Event such that such Person is
thereafter a Beneficial Owner of less than 15% of the outstanding shares of
Common Stock, (ii) there are no other Persons, immediately following the
occurrence of the event described in clause (i), who are Acquiring Persons and
(iii) the Board shall so approve, then the right of redemption shall be
reinstated and thereafter be subject to the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder as extended (if
applicable) has expired. The Company may, at its option, pay the Redemption
Price in cash, shares of Common Stock (based on the Current Market Price, as
defined in Section 11(d)(i) hereof, of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the Board
of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption Of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held; provided, however, that such resolution of the Board of
Directors of the Company may be revoked, rescinded or otherwise modified at any
time prior to the time and date of effectiveness set forth in such resolution,
in which event the right to exercise will not terminate at the time and date
originally set for such termination by the Board of Directors of the Company.
As soon as practicable after the action of the Board of Directors of the Company
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and to the holders of the then-outstanding Rights
by mailing such notice to all such holders at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the issuance of
Rights Certificates, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner provided in this Agreement
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. In any case, failure to give such notice by
mail, or any defect in the notice, to any particular holder of Rights shall not
affect the sufficiency of the notice to other holders of Rights. In the case of
a redemption permitted under this Section 23, the Company may, at its option,
discharge all of its obligations with respect to the Rights by (i) issuing a
press release announcing the manner of redemption of the Rights and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at their
last addresses as they appear on the registry books of the Rights Agent or,
prior to the issuance of the Rights Certificates, on the registry books of the
transfer agent for the Common Stock, and upon such action, all outstanding
Rights Certificates shall be null and void without any further action by the
Company. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or Section 11(a)(iv), and
other than in connection with the purchase of shares of Common Stock prior to
the earlier of the Distribution Date and the Expiration Date.
Section 24. Notice of Certain Events.
------------------------
(a) In case the Company shall propose at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(n) and Section 11(o) hereof), or to
effect any sale or other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets, earning power or cash flow 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(n) and Section 11(o)
hereof), or (v) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger,
-25-
<PAGE>
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. The failure to give notice as required by
this Section 24 or any defect therein shall not affect the legality or validity
of the action taken by the Company or the vote upon any such action.
(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 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 25. Notices. Notices or demands authorized by this Agreement to
-------
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
PHAMIS, Inc.
1001 Fourth Avenue Plaza, Suite 1500
Seattle, Washington 98154-1144
Attention: President
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
First Interstate Bank of Washington, N.A.
999 Third Avenue, 14th Floor
Seattle, Washington 98104
Attention: Stock Transfer
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 26. Supplements and Amendments. Prior to the Distribution Date
--------------------------
and subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of Rights. From and after
the Distribution Date and subject to the penultimate sentence of this Section
26, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of Rights
in order to (i) cure any ambiguity, (ii) correct or supplement any provision
contained herein that may be defective or inconsistent with any other provision
herein, (iii) shorten or lengthen any time period hereunder (which lengthening
or shortening shall be effective only if there are Continuing Directors and
shall require the concurrence of a majority of such Continuing Directors) or
(iv) change or supplement the provisions hereunder in any manner that the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person); provided, however, this
Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable, or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or
-26-
<PAGE>
clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company that
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Any supplement or amendment to this Agreement duly approved by the Company shall
become effective immediately upon execution by the Company, whether or not also
executed by the Rights Agent. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made that reduces
the Redemption Price, provides for an earlier Expiration Date, reduces the
Purchase Price or reduces the number of one-hundredths of a share of Preferred
Stock for which a Right is exercisable. Prior to the Distribution Date, the
interests of holders of Rights shall be deemed coincident with the interests of
the holders of Common Stock.
Section 27. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of Directors. For all
----------------------------------------------------
purposes of this Agreement, any calculation of the number of shares of Common
Stock at any particular time, including for purposes of determining the
particular percentage of such outstanding shares of Common Stock of which any
Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act (or any successor provision); provided, however, that any such
calculation made for purposes of determining the particular percentage of
outstanding shares of Common Stock of which any Person is the Beneficial Owner
shall also include any such other securities not then actually issued and
outstanding which such Person would be deemed to be the Beneficial Owner of, or
to "beneficially own," pursuant to Section 1(g) of this Agreement. The Board of
Directors of the Company (with, where specifically provided for herein, the
concurrence of the Continuing Directors) shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board (with where specifically provided for herein,
the concurrence of the Continuing Directors) or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
(with, where specifically provided for herein, the concurrence of the Continuing
Directors) in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board or the Continuing Directors to any liability to the
holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
--------------------------
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 30. Severability.
------------
(a) If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated: provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof, if expired, shall be
reinstated and shall not expire until the Close of Business on the tenth day
following the date of such determination by the Board of Directors. Without
limiting the foregoing, if any provision requiring that a determination be made
by less than the entire Board (or at a time or with the concurrence of a group
of directors consisting of less than the entire Board) is held by a court of
competent
-27-
<PAGE>
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall then be made by the Board in accordance with applicable law
and the Company's Articles of Incorporation and Bylaws.
(b) If legal counsel to the Company delivers to the Company a written
opinion to the effect that, as a result of changes in law, any term, provision,
covenant or restriction of this Agreement may be invalid, void, or
unenforceable, then, notwithstanding any other provision of this Agreement, the
Company and the Rights Agent may amend this Agreement to modify, revise or
delete such term, provision, covenant or restriction to the extent necessary to
comply with such law as so changed. In such event, if the Board of Directors of
the Company determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 hereof, if
expired, shall be reinstated and shall not expire until the Close of Business on
the tenth day following the date of such determination by the Board of
Directors.
Section 31. Governing Law. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Washington and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PHAMIS, INC.
By /s/ Frank T. Sample
--------------------
Name: Frank T. Sample
Title: President
FIRST INTERSTATE BANK
OF WASHINGTON, N.A.
By /s/ Pauline F. Skudler
-----------------------
Name: Pauline F. Skudler
Title: Assistant Vice President
-28-
<PAGE>
Exhibit A
---------
FORM OF
STATEMENT OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
PHAMIS, INC.
Pursuant to Section 23B.06.020
of the General Corporation Law
of the State of Washington
PHAMIS, INC., a corporation organized and existing under the General
Corporation Law of the State of Washington, in accordance with the provisions of
Section 23B.01.200 thereof, hereby states that pursuant to the authority
conferred upon the Board of Directors by the Restated Articles Certificate of
Incorporation of the said Corporation, the said Board of Directors on July 24,
1996, adopted the following resolution creating a series of 8,000 shares of
Preferred Stock designated as Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Restated Articles
of Incorporation, a series of Preferred Stock of the Corporation be and it
hereby is created, and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 8,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock or other class of capital stock of the
Corporation ranking prior and superior to the shares of Series A Junior
Participating Preferred Stock with respect to dividends, the holders of shares
of Series A Junior Participating Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or
(b) subject to the provision for adjustment hereinafter set forth, 1,000 times
the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $0.0025 per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. In the event the Corporation shall at any
time after July 31, 1996 (the "Rights Declaration Date"), (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
A-1
<PAGE>
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Junior Participating Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
(D) The holders of shares of Series A Junior Participating Preferred Stock
shall not be entitled to receive any dividends or other distributions except as
provided herein.
Section 3. Voting Rights. The holders of shares of Series A Junior
-------------
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Junior Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) If at the time of any annual meeting of shareholders for the election
of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Junior Participating
Preferred Stock are in default, the number of directors constituting the
Corporation's Board of Directors shall be increased by two. In addition to
voting together with the holders of Common Stock for the election of other
directors of the Corporation, the holders of record of the Series A Junior
Participating Preferred Stock, voting separately as a class to the exclusion of
the holders of Common Stock, shall be entitled at said meeting of shareholders
(and at each subsequent annual meeting of shareholders), unless all dividends in
arrears have been paid or declared and set apart for payment prior thereto, to
vote for the election of two directors of the Corporation, the holders of Series
A Junior Participating Preferred Stock being entitled to cast a number of votes
per share of Series A Junior Participating Preferred Stock as set forth in
Section 3(A). Until the default in payment of all dividends that permitted the
election of said directors shall cease to exist, any director who shall have
been so elected pursuant to the next preceding sentence may be removed at any
time, either with or without cause, only by
A-2
<PAGE>
the affirmative vote of the holders of shares of Series A Junior Participating
Preferred Stock at the time entitled to cast a majority of the votes entitled to
be cast for the election of any such director at a special meeting of such
holders called for that purpose, and any vacancy thereby created shall be filled
by the vote of such holders. If and when such default shall cease to exist, the
holders of Series A Junior Participating Preferred Stock shall be divested of
the foregoing special voting rights, subject to revesting in the event of each
and every subsequent like default in payment of dividends. Upon the termination
of the foregoing special voting rights, the terms of office of all persons who
may have been elected directors pursuant to said special voting rights shall
forthwith terminate, and the number directors constituting the Corporation's
Board of Directors shall be reduced by two. The voting rights granted by this
Section 3(C) shall be in addition to any other voting rights granted to the
holders of the Series A Junior Participating Preferred Stock in this Section 3.
(D) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series
A Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to
the Series A Junior Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Participating
-----------------
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of
A-3
<PAGE>
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
--------------------------------------
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $10 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph
C below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock sayable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event both this Section 7 and Section 2 appear to apply to a
transaction, this Section 7 will control. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Junior
Participating Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption; No Sinking Fund.
------------------------------
(A) The shares of Series A Junior Participating Preferred Stock shall not
be subject to redemption by the Corporation or at the option of any holder of
Series A Junior Participating Preferred Stock; provided, however,
A-4
<PAGE>
that the Corporation may purchase or otherwise acquire outstanding shares of
Series A Junior Participating Preferred Stock in the open market or by offer to
any holder or holders of shares of Series A Junior Participating Preferred
Stock.
(B) The shares of Series A Junior Participating Preferred Stock shall not
be subject to or entitled to the operation of a retirement or sinking fund.
Section 9. Ranking. The Series A Junior Participating Preferred Stock
-------
shall rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation of the
---------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating Preferred
-----------------
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, this statement has been signed by the President of
PHAMIS, Inc. on this 24th day of July, 1996.
PHAMIS, INC.
By: /s/ Frank T. Sample
---------------------------------
Name: Frank T. Sample
Title: President
A-5
<PAGE>
Exhibit B
---------
[Form of Rights Certificate]
Certificate No. R- Rights
-------
NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT). UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED
BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT)
AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE
RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING 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
PHAMIS, INC.
This certifies that _________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of July 29, ___, 1996 (the "Rights Agreement"),
between PHAMIS, Inc., a Washington corporation (the "Company"), and First
Interstate Bank of Washington, N.A., a Washington banking corporation (the
"Rights Agent"), to purchase from the Company at any time prior to the
Expiration Date (as such term is defined in the Rights Agreement) at the office
or offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-thousandth of a fully paid, non-assessable share of Series
A Junior Participating Preferred Stock (the "Preferred Stock") of the Company,
at a purchase price of $105 per one one-thousandth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate duly executed. The number
of Rights evidenced by this Rights Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
per share set forth above, are the number and Purchase Price as of July 31,
1996, based on the Preferred Stock as constituted at such date. The Company
reserves the right to require prior to the occurrence of a Triggering Event (as
such term is defined in the Rights Agreement) that a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities, which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
B-1
<PAGE>
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandth of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company or may be exchanged by the
Company for shares of the Company's Common Stock or other Company securities.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or, to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company.
Dated as of ________________, 19___.
ATTEST: PHAMIS, INC.
By
- --------------------------------------- ---------------------------
Secretary President
Countersigned:
FIRST INTERSTATE BANK
OF WASHINGTON, N.A.
By
------------------------------------
B-2
<PAGE>
[Form of Reverse Side of Rights Certificate)
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
-------------------------------------------------------------
hereby sells, assigns and transfers unto
---------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within named
Company, with full power of substitution.
Dated: , 19
----------------------- ---
------------------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: , 19
------------- --- --------------------------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
B-3
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires
to exercise Rights represented by
the Rights Certificate:)
To: PHAMIS, Inc.
The undersigned hereby irrevocably elects to exercise Rights represented
by this Rights Certificate to purchase the shares of Preferred Stock issuable
upon the exercise of the Rights (or such other securities of the Company or of
any other person which may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of and
delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
------------------------ --- -------------------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate are [ ] [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: , 19
------------------------ --- -------------------------------------
Signature
B-4
<PAGE>
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-5
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On July 24, 1996, the Board of Directors of PHAMIS, Inc. (the "Company")
declared a dividend distribution of one Right for each outstanding share of the
common stock, par value $0.0025 per share, of the Company (the "Common Stock"),
to shareholders of record at the close of business on July 31, 1996. Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock, par value $0.0025
per share (the "Preferred Stock"), at a purchase price of $105 per one one-
thousandth of a share of Preferred Stock, subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and First Interstate Bank of Washington,
N.A., as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) the expiration of the
Company's redemption rights following a public announcement that a person or
group of affiliated or associated persons, with certain exceptions (an
"Acquiring Person"), has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), or (ii) 10 business days (or such later date as the
Continuing Directors (as defined in the Rights Agreement) shall determine)
following the commencement of a tender offer or exchange offer that would result
in a person or group beneficially owning 15% or more of such outstanding shares
of Common Stock.
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after July 31, 1996,
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. Pursuant to the Rights Agreement,
the Company reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.
The Rights are not exercisable until the Distribution Date (unless sooner
redeemed or exchanged) and will expire at the close of business on July 31, 2006
(the "Final Expiration Date"), unless earlier redeemed or exchanged by the
Company.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that, any Acquiring Person becomes the beneficial owner of 15%
or more of Common Stock (other than pursuant to an offer for all outstanding
shares of Common Stock which the Continuing Directors (as defined in the Rights
Agreement) determine to be fair to and otherwise in the best interests of the
Company and its shareholders) each holder of a Right will thereafter have the
right to receive, upon exercise, Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a value equal to two
times the exercise price of the Right. Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void.
For example, at an exercise price of $80 per Right, each Right not owned by
an Acquiring Person (or by certain related parties) following an event set forth
in the preceding paragraph would entitle its holder to
C-1
<PAGE>
purchase $160 worth of Common Stock (or other consideration, as noted above) for
$80. Assuming that the Common Stock had a per share value of $20 at such time,
the holder of each valid Right would be entitled to purchase eight shares of
Common Stock for $80.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or the Common Stock is
changed or exchanged (other than in a merger which follows and is on the same
terms as an offer described in the second preceding paragraph), or (ii) 50% or
more of the Company's assets, earning power or cash flow is sold or transferred,
each holder of a Right (except Rights which previously have been voided as set
forth above) shall thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two times the exercise
price of the Right. The events set forth in this paragraph and in the second
preceding paragraph are referred to as the "Triggering Events."
The Purchase Price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
At any time until the close of business on the tenth business day following
the Stock Acquisition Date, the Company may redeem the Rights in whole, but not
in part, at a price of $0.01 per Right. After the redemption period has
expired, the Company's right of redemption may be reinstated if an Acquiring
Person reduces his beneficial ownership less than 15% of the outstanding shares
of Common Stock in a transaction or series of transactions not involving the
Company. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $0.01 redemption price.
After there is an Acquiring Person the Board of Directors may elect to
exchange each Right (other than Rights that have become null and void as
described above) for one share of Common Stock (or other equivalent securities)
per Right pursuant to the terms of the Rights Agreement.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen any
time period under the Rights Agreement; provided, however, that no amendment to
adjust the time period governing redemption shall be made at such time as the
Rights are not redeemable.
The Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment equal to the greater of $1 per share and
1,000 times the dividend declared per share of Common Stock. In the event of
liquidation, the holders of the Preferred Stock will be entitled to a
liquidation payment equal to $10 per share in preference to the Common Stock.
Each share of Preferred Stock will have 1,000 votes per share, voting together
with the Common Stock. In the event of any merger, consolidation or other
transaction in which Common Stock is exchanged, Preferred Stock will be entitled
to receive 1,000 times the amount received per share of Common Stock. These
rights are protected by customary antidilution provisions.
C-2
<PAGE>
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group other than an exempt person that
attempts to acquire the Company on terms not approved by the Board, except
pursuant to an offer conditioned on a substantial number of Rights being
acquired. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors prior to the time a person or
group other than an exempt person has acquired beneficial ownership of 15% or
more of the Common Stock, because until such time the Rights may generally be
redeemed by the Company at $0.01 per Right.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
C-3
