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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
The Guarantee Life Companies Inc.
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(Exact name of registrant as specified in its charter)
Delaware 47-0785066
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(State of incorporation or organization) (IRS Employer
Identification No.)
8801 Indian Hills Drive
Omaha, Nebraska 68114
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(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class to Name of each exchange on which each class
be so registered is to be registered
None
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If this Form relates to the registration of a class of debt securities and is
effective upon filing pursuant to General Instruction A.(c)(1), please check the
following box. [ ]
If this Form relates to the registration of a class of debt securities and is
to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A.(c)(2), please check the following box. [ ]
Securities to be registered pursuant to Section 12(g) of the Act:
Rights to Purchase Series A Junior Participating Cumulative Preferred Stock,
$1.00 par value per share, of the Registrant
---------------
(Title of Class)
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ITEM 1. Description of Registrant's Securities to be Registered
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On November 14, 1996, the Board of Directors of The Guarantee Life Companies
Inc. (the "Registrant") declared a dividend of one Right for each outstanding
share of Common Stock, $.01 par value per share (the "Common Stock"), of the
Registrant. The Rights will be issued on November 29, 1996 to the stockholders
of record on November 29, 1996 and will expire in ten years, subject to earlier
redemption. Under certain circumstances, each Right entitles the registered
holder to purchase from the Registrant one one-thousandth of a share of Series A
Junior Participating Cumulative Preferred Stock (the "Preferred Stock") of the
Registrant or, in certain circumstances, shares of Common Stock of the
Registrant or common stock of an acquiring company at one-half the market price
of such Common Stock or common stock, as the case may be. The Rights are
designed to make it more likely that all the Registrant's stockholders receive
fair and equal treatment in the event of any proposed takeover of the Registrant
and to guard against the use of partial tender offers or other coercive tactics
to gain control of the Registrant. The description and terms of the Rights are
set forth in a Rights Agreement (the "Rights Agreement") between the Registrant
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights
Agent").
Exercise Price
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When exercisable, except as set forth below, each Right entitles the
registered holder to purchase from the Registrant one one-thousandth of a share
of Preferred Stock, at a price of $80.00 per share (the "Purchase Price"),
subject to adjustment in certain circumstances.
Transfer and Detachment
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Until the earlier of the Expiration Date (as defined in the Rights Agreement)
or the "Distribution Date," which is the earlier to occur of (i) close of
business on the tenth business day following the time (the "Stock Acquisition
Time") of a public announcement or notice to the Registrant that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership (as defined in the
Rights Agreement) of 15% or more of the outstanding shares of Common Stock of
the Registrant, and (ii) the close of business on the tenth business day, or
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such later date as may be determined by the Board of Directors of the
Registrant, after the date of the commencement or announcement by a person of an
intention to make a tender offer or exchange offer for an amount of Common Stock
which, together with the shares of such stock already owned by such person,
constitutes 15% or more of the outstanding shares of such Common Stock, the
Rights will be evidenced, with respect to any of the Registrant's Common Stock
certificates outstanding as of November 29, 1996, by such Common Stock
certificate with a copy of a Summary of Rights attached thereto. The Rights
Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with the Registrant's Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after November 29, 1996, upon the transfer or
issuance of new shares of Common Stock, will contain a notation incorporating
the Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any of
the Registrant's Common Stock certificates outstanding as of November 29, 1996,
even without a copy of the Summary of Rights attached thereto, will also
constitute the transfer of the Rights associated with the shares of Common Stock
represented by such certificate.
As soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the Common Stock as of the close of business on the Distribution Date, and
such separate Right Certificates alone will evidence the Rights.
Exercisability
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The Rights are not exercisable until the Distribution Date. The Rights will
expire on November 18, 2006 unless earlier redeemed by the Registrant.
Right to Acquire Stock at Half Price
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In the event that after the Stock Acquisition Time, the Registrant is acquired
in a merger or other business combination transaction or 50% or more of the
Registrant's assets, cash flow or earning power are sold or otherwise
transferred, the Rights Agreement provides that proper provision shall be made
so that each holder of a Right, upon the exercise thereof at the then current
exercise price of the Right, shall thereafter be entitled to re-
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ceive that number of shares of common stock of the acquiring company which at
the time of such transaction would have a market value (as defined in the Rights
Agreement) of two times the exercise price of the Right. In the event that the
Registrant is the surviving corporation of a merger and its Common Stock is
changed or exchanged, proper provision shall be made so that each holder of a
Right will thereafter have the right to receive upon exercise that number of
shares of common stock of the other party to the transaction having a market
value of two times the exercise price of the Right.
In the event that a person or group becomes an Acquiring Person (otherwise
than pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock at a price and on terms which are determined to be fair and in the
best interests of the Registrant and its stockholders by a majority of the
members of the Board of Directors of the Registrant who are not Acquiring
Persons or representatives or nominees of or affiliated or associated with an
Acquiring Person), proper provision shall be made so that each holder of a
Right, other than Rights that were beneficially owned by the Acquiring Person,
which will thereafter be void, will thereafter have the right to receive upon
exercise that number of shares of Common Stock having a market value (as defined
in the Rights Agreement) of two times the exercise price of the Right. A person
or group will not be deemed to be an Acquiring Person if the Board of Directors
of the Registrant determines that such person or group became an Acquiring
Person inadvertently and such person or group promptly divests itself of a
sufficient number of shares of Common Stock so that such person or group is no
longer an Acquiring Person.
Adjustments
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The Purchase Price payable and the number of shares of Preferred Stock or
other securities or property issuable upon the 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, consolidation or
reclassification of the shares of Preferred Stock, (ii) upon the fixing of a
record date for the issuance to holders of Preferred Stock of certain rights,
options or warrants to subscribe for shares of Preferred Stock or "Equivalent
Preference Stock" (as defined in the Rights Agreement) at less than the current
market price of shares of Preferred Stock or Equivalent Preference Stock or
(iii) upon the fixing of a record date for the making of a
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distribution to holders of shares of Preferred Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends not exceeding
125% of the last regular periodic cash dividend or dividends payable in shares
of Preferred Stock) or of subscription rights or warrants (other than those
referred to above). The number of Rights and the number of shares of Preferred
Stock issuable upon exercise of each Right are also subject to adjustment in
the case of a stock split, combination or stock dividend on the shares of Common
Stock prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in the
Purchase Price. No fractional shares of Common Stock will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market value of shares
of Common Stock on the last trading date prior to the date of exercise.
Redemption or Exchange
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At any time prior to the earlier of (i) the Stock Acquisition Time and (ii)
November 18, 2006, the Registrant, by resolution of its Board of Directors, may
redeem the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"). Immediately upon the action of the Board of Directors of
the Registrant electing to redeem the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person of 50% or more of the outstanding Common Stock of the
Registrant, the Board of Directors of the Registrant may exchange the Rights
(other than Rights beneficially owned by such person which have become void), in
whole or in part, for Common Stock of the Registrant at an exchange ratio of one
share of Common Stock per Right (subject to adjustment). The Registrant may at
its option substitute shares of Preferred Stock of the Registrant for some or
all of the shares of Common Stock exchangeable for Rights, at an exchange ratio
of one one-thousandth of a share of Preferred Stock for each share of Common
Stock to be exchanged.
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Preferred Stock
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The shares of Preferred Stock purchasable upon exercise of the Rights will be
nonredeemable and junior to any other series of preferred stock the Registrant
may issue (unless otherwise provided in the terms of such preferred stock or in
the Registrant's Certificate of Incorporation). Each share of Preferred Stock
will be entitled to receive, in the aggregate, a dividend in an amount equal to
1000 times the dividend per share of Common Stock, or, if greater, $10.00 per
year. In the event of liquidation, the holders of shares of Preferred Stock
will be entitled to receive a minimum liquidation payment equal to the greater
of $10.00 per share or an amount equal to 1000 times the amount to be paid in
liquidation per share of Common Stock. Each share of Preferred Stock will have
1000 votes, voting together with the shares of Common Stock. In addition, if
dividends on the Preferred Stock are in arrears for four consecutive quarterly
payment periods, the holders of the shares of Preferred Stock will have the
right, voting as a class, to elect two members to the Board of Directors of the
Registrant. In the event of any merger, consolidation or other transaction in
which shares of Common Stock are exchanged, each share of Preferred Stock will
be entitled to receive 1000 times the amount and type of consideration received
per share of Common Stock. The rights of the shares of Preferred Stock as to
dividends and liquidation, and in the event of mergers and consolidations, are
protected by antidilution provisions.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Registrant, including, without limitation, the right to
vote or to receive dividends.
Amendment
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The Rights and the Rights Agreement can be amended by the Board of Directors
of the Registrant in any respect (including, without limitation, any extension
of the period in which the Right Certificates may be redeemed) at any time prior
to the Stock Acquisition Time. From and after such time, without the approval
of the stockholders of the Registrant or the holders of the Rights, the Board
of Directors may only supplement or amend the Rights Agreement in order (i) to
cure any ambiguity, (ii) to correct or supplement any provision contained in the
Rights Agreement which may be de fective or inconsistent with any other
provision in the Rights Agreement, (iii) to shorten or lengthen any time pe-
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riod under the Rights Agreement or (iv) to make any changes or supplements which
the Registrant may deem necessary or desirable which shall not adversely affect
the interests of the holders of Right Certificates (other than an Acquiring
Person or an affiliate or associate of any such person), provided that any such
action by the Board of Directors must have the concurrence of a majority of the
Continuing Directors (as defined in the Rights Agreement) and provided that the
Continuing Directors constitute a majority of directors then in office, and
provided that the Rights Agreement may not be supplemented or amended to
lengthen (A) a time period relating to when the Rights may be redeemed or to
modify the ability (or inability) of the Registrant's board of directors to
redeem the Rights, in either case at such time as the Rights are not then
redeemable or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the Rights of or the benefits to
the holders of Rights (other than an Acquiring Person or an affiliate or
associate of any such person).
Issuance of Rights
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Each outstanding share of Common Stock on November 29, 1996 will receive one
Right. As long as the Rights are attached to the shares of Common Stock, the
Registrant will issue one Right with each share of Common Stock it issues, so
that all such shares have attached Rights. Thirty thousand (30,000) shares of
Preferred Stock have been reserved for issuance upon exercise of the Rights.
A copy of the Rights Agreement, which includes as Exhibit B the form of Right
Certificate, is attached hereto as Exhibit 1 and is incorporated herein by
reference. The foregoing description of the Rights is qualified in its
entirety by reference to such Exhibit.
ITEM 2. Exhibits
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1. Rights Agreement between the Registrant and ChaseMellon
Shareholder Services, L.L.C., Rights Agent, dated as of November
18, 1996, which includes as Exhibit B the form of Right
Certificate.
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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.
THE GUARANTEE LIFE COMPANIES INC.
(Registrant)
By /s/ Richard A. Spellman
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Name: Richard A. Spellman
Title: General Counsel and Secretary
DATE: November 25, 1996
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EXHIBIT INDEX
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Exhibit No. Description
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1. Rights Agreement between the Registrant
and ChaseMellon Shareholder Services,
L.L.C., Rights Agent, dated as of
November 18, 1996, which includes as
Exhibit B the form of Right Certificate.
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EXHIBIT 1
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================================================================================
THE GUARANTEE LIFE COMPANIES INC.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
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RIGHTS AGREEMENT
Dated as of November 18, 1996
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TABLE OF CONTENTS
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Section Page
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1. Certain Definitions....................................2
2. Appointment of Rights Agent...........................13
3. Issue of Right Certificates...........................13
4. Form of Right Certificates............................17
5. Countersignature and Registration.....................19
6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates...................................20
7. Exercise of Rights; Purchase Price; Expiration Date of
Rights...............................................22
8. Cancellation and Destruction of Right Certificates....27
9. Reservation and Availability of Capital Stock.........28
10. Preferred Stock Record Date...........................31
11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights..................................32
12. Certificate of Adjusted Purchase Price or Number of
Shares...............................................55
13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power........................................55
14. Fractional Rights and Fractional Shares...............62
15. Rights of Action......................................65
16. Agreement of Right Holders............................66
17. Right Certificate Holder Not Deemed a Shareholder.....68
18. Concerning the Rights Agent...........................69
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19. Merger or Consolidation or Change of Name of Rights
Agent................................................70
20. Duties of Rights Agent................................72
21. Change of Rights Agent................................77
22. Issuance of New Right Certificates....................79
23. Redemption............................................80
23A.Exchange..............................................82
24. Notice of Certain Events..............................85
25. Notices...............................................87
26. Supplements and Amendments............................88
27. Successors............................................91
28. Determinations and Actions by the Board of Directors,
etc..................................................91
29. Benefits of this Agreement............................92
30. Severability..........................................93
31. Governing Law.........................................94
32. Counterparts..........................................94
33. Descriptive Headings..................................94
Exhibit A - Certificate of Designation
Exhibit B - Form of Right Certificate
Exhibit C - Form of Summary of Rights
ii
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RIGHTS AGREEMENT
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THIS RIGHTS AGREEMENT, dated as of November 18, 1996 (the "Agreement"),
between The Guarantee Life Companies Inc., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services, L.L.C. (the "Rights Agent"),
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has authorized and declared
a dividend of one Right (as hereinafter defined) for each share of Common
Stock, par value $0.01 per share, of the Company outstanding at the Close of
Business (as hereinafter defined) on November 29, 1996 (the "Record Date"), each
Right representing the right to purchase one one-thousandth (1/1,000th) of a
share of Series A Junior Participating Cumulative Preferred Stock, par value
$1.00 per share, of the Company having the rights and preferences set forth in
the form of Certificate of Designation attached hereto as Exhibit A, and has
further authorized the issuance of one Right with respect to each share of
Common Stock of the Company that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Expiration Date and the
Final Expiration Date (as such terms are hereinafter defined);
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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
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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, shall be the Beneficial Owner of
15% or more of the shares of Common Stock of the Company then outstanding, but
shall not include any employee benefit plan of the Company or any Subsidiary of
the Company or any Person organized, appointed or established by the Company or
such Subsidiary for or pursuant to the terms of any such employee benefit plan.
Notwithstanding the foregoing:
(i) no Person shall become an "Acquiring Person" as the result of an
acquisition of shares of Common Stock by the Company which, by reducing the
number of shares of Common Stock outstanding, increases the proportionate number
of shares Beneficially Owned by such Person to 15% or more of the shares of
Common Stock of the Company then outstanding, provided, however, that if a
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Person shall become the Beneficial Owner of 15% or more
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of the shares of Common Stock of the Company by reason of share purchases by the
Company and shall, after such share purchases by the Company, at a time when
such Person Beneficially Owns 15% or more of the Common Stock, become the
Beneficial Owner of any additional shares of Common Stock of the Company, then
such Person shall be deemed to be an "Acquiring Person";
(ii) if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person" has become such
inadvertently (including, without limitation, because (A) such Person was
-
unaware that he or it Beneficially Owned a percentage of Common Stock that would
otherwise cause such Person to be an "Acquiring Person" or (B) such Person was
-
aware of the extent of his or its Beneficial Ownership but had no actual
knowledge of the consequences of such Beneficial Ownership under this Agreement)
and without any intention of changing or influencing control of the Company,
and if such Person as promptly as practicable divested or divests himself or
itself of Beneficial Ownership of a sufficient number of shares of Common Stock
so that such Person would no longer be an "Acquiring
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Person", then such Person shall not be deemed to be or to have become an
"Acquiring Person" for any purposes of this Agreement; and
(iii) no Person shall become an "Acquiring Person" by virtue of ownership
of Common Stock of the Company by any Affiliate and/or Associate of such Person,
which Affiliate and/or Associate is deemed to be an Affiliate and/or Associate
of such Person solely by reason of such Affiliate and/or Associate being a
director or officer of the Company.
(b) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
(c) "Affiliate" and "Associate", when used with reference to any Person,
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as in effect on the Record Date.
(d) 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 vote or dispose of,
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including pursuant to any agreement, arrangement or understanding (whether or
not in writing); provided, however, that a Person shall not be deemed the
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Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
-
revocable proxy given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then reportable on Schedule
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13D under the Exchange Act (or any comparable or successor report);
(ii) which such Person or any of such Person's Affiliates or Associates
has the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing), or upon the exercise of conversion
rights, exchange rights, rights (other than these Rights), warrants or options,
or otherwise, provided, however, that a Person shall not be deemed the
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Beneficial Owner of, or to beneficially own, (A) securities tendered pursuant
-
to a tender or exchange offer made by or on behalf of
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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 either a Section
11(a)(ii) Event or a Section 13 Event, or (C) securities issuable upon exercise
-
of Rights from and after the occurrence of either a Section 11(a)(ii) Event or a
Section 13 Event, which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to
Section 11(i) hereof in connection with an adjustment made with respect to any
Original Rights; or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person or
any of such Person's Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in subparagraph (i) of
this paragraph (d)) or disposing of any securi-
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ties of the Company in a manner that relates or is reasonably likely potentially
to relate to influencing the control or management of the Company; provided,
--------
however, that nothing in this paragraph (d) shall cause a person engaged in
- -------
business as an underwriter of securities to be the Beneficial Owner of, or to
beneficially own, any securities acquired through such person's participation in
good faith in a firm commitment underwriting until the expiration of forty days
after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of Nebraska are authorized or
obligated by law or executive order to close.
(f) "Certificate of Designation" shall mean the Certificate of Designation
of Series A Junior Participating Cumulative Preferred Stock setting forth the
powers, preferences, rights, qualifications, limitations and restrictions of
such series of preferred stock of the Company, a form of which is attached
hereto as Exhibit A.
(g) "Close of Business" on any given date shall mean 5:00 P.M., New York
City time, on such date; provided, however, that if such date is not a Business
-------- -------
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Day, it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(h) "Common Stock" when used with reference to the Company shall mean the
Common Stock, par value $0.01 per share, of the Company. "Common Stock" when
used with reference to any Person other than the Company which is organized in
corporate form shall mean the capital stock with the greatest voting power, or
the equity securities or other equity interest having power to control or direct
the management, of such Person, or, if such Person is a Subsidiary of another
Person, the capital stock with the greatest voting power of the Person which
ultimately controls such first-mentioned Person. "Common Stock" when used with
reference to any Person which is not organized in corporate form shall mean
units of beneficial interest which (i) shall represent the right to participate
-
generally in the profits and losses of such Person (including, without
limitation, any flow-through tax benefits resulting from an ownership interest
in such Person) and which (ii) shall be entitled to exercise the greatest voting
--
power of such Person or, in the case of a limited partnership, shall have the
power to remove the general partner or partners.
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(i) "Common Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
(j) "Company" shall have the meaning set forth in the first paragraph of
this Agreement.
(k) "Continuing Director" shall mean any member of the Board of Directors
of the Company (while such person is a member of such Board of Directors) who
either (i) was a member of such Board of Directors prior to the Stock
-
Acquisition Time or (ii) is not an Acquiring Person, an Affiliate or Associate
--
of an Acquiring Person, or a representative or nominee of an Acquiring Person or
of any such Affiliate or Associate, and subsequently became a member of such
Board of Directors, and whose nomination for election or election thereto was
recommended or approved by a majority of the Continuing Directors then on such
Board of Directors.
(l) "Current Market Price" shall have the meaning set forth in Section
11(d) hereof.
(m) "Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(n) "Distribution Date" shall have the meaning specified in Section 3(a)
hereof.
(o) "Equivalent Preference Stock" shall have the meaning set forth in
Section 11(b) hereof.
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(p) "Expiration Date" shall have the meaning specified in Section 7(a)
hereof.
(q) "Final Expiration Date" shall have the meaning specified in Section
7(a) hereof.
(r) "NASDAQ" shall have the meaning set forth in Section 11(d) hereof.
(s) "Outside Directors" shall have the meaning set forth in Section
11(a)(ii) hereof.
(t) "Person" shall mean any individual, firm, corporation, partnership,
trust or other entity, and shall include any successor (by merger or otherwise)
of such entity.
(u) "Preferred Stock" shall mean shares of Series A Junior Participating
Cumulative Preferred Stock, par value $1.00 per share, of the Company, having
the rights, preferences and limitations set forth in the form of Certificate of
Designation attached to this Agreement as Exhibit A, and, to the extent there
are not a sufficient number of shares of Series A Junior Participating
Cumulative Preferred Stock authorized to permit the full exercise of the then
outstanding Rights, any other series of preferred stock of the Company
designated for such purpose by the Board of Directors of the Company containing
terms substantially
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similar to the terms of the Series A Junior Participating Cumulative Preferred
Stock.
(v) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(w) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
(x) "Record Date" shall have the meaning set forth in the WHEREAS clause at
the beginning of this Agreement.
(y) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
(z) "Right" shall have the meaning set forth in the WHEREAS clause at the
beginning of this Agreement.
(aa) "Right Certificate" shall have the meaning set forth in Section 3(a)
hereof.
(bb) "Rights Agent" shall have the meaning set forth in the first
paragraph of this Agreement.
(cc) "Section 11(a)(ii) Event" shall have the meaning set forth in Section
11(a)(ii) hereof.
(dd) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(ee) "Section 13 Event" shall have the meaning set forth in Section 13(a)
hereof.
(ff) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
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(gg) "Stock Acquisition Time" shall mean the time of occurrence of
whichever of the following first occurs: (i) the first public announcement by
-
the Company or an Acquiring Person that the Acquiring Person has become such, or
(ii) the communication to the Company (including, without limitation, to the
--
directors of the Company) of any notice (including, without limitation, any
written consent or notice related thereto) from an Acquiring Person indicating
or reflecting that the Acquiring Person has become such.
(hh) "Subsidiary" shall mean, with respect to any Person, any corporation
or other entity of which securities or other ownership interests having
ordinary voting power sufficient, in the absence of contingencies, to elect a
majority of the board of directors or other persons performing similar functions
are at the time beneficially owned, directly or indirectly, by such Person or
otherwise controlled by such Person.
(ii) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(jj) "Summary of Rights" shall have the meaning set forth in Section 3(b)
hereof.
(kk) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
12
<PAGE>
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. Any actions which may be taken by the Rights Agent
pursuant to the terms of this Agreement may be taken by any such Co-Rights
Agent.
Section 3. Issue of Right Certificates. (a) Until the earlier of the
---------------------------
Close of Business on (i) the tenth Business Day after the Stock Acquisition
-
Time, or (ii) the tenth Business Day, or such specified or unspecified later
--
date as may be determined by action of the Board of Directors of the Company,
after the date of the commencement of (as determined by reference to Rule 14d-
2(a), as in effect under the Exchange Act on the Record Date), or first public
announcement of the intent of any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person organized, appointed or established by the Company or
such Subsidiary as a fiduciary pursuant to the terms of any such employee
benefit plan) to commence (which intention to commence remains in effect for
five Business Days after such announcement), a tender or exchange
13
<PAGE>
offer for an amount of Common Stock of the Company which, together with the
shares of such stock already owned by such Person, constitutes 15% or more of
the outstanding Common Stock of the Company (including any such date which is
after the date of this Agreement and prior to the issuance of the Rights) (the
earlier of such dates described in clauses (i) and (ii) above being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
-
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for shares of Common Stock registered in the names of the holders
of Common Stock (which certificates for Com mon Stock shall be deemed also to be
certificates for Rights) and not by separate Right Certificates, and (y) the
-
right to receive Right Certificates will be transferable only in connection with
the transfer of the underlying Com mon Stock. 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 Common Stock as of the Close of Business
on the Distribution Date, at the address of such holder shown on the records of
the Company, a Right Certificate, in substantially the form of Exhibit B hereto
(a "Right Certificate"), evidencing one Right for each share of Common Stock so
held, subject to adjustment as provided herein and to the provisions of Section
14(a) here-
14
<PAGE>
of. As of the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
(b) On the Record Date or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as Exhibit C (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common Stock as
of the Close of Business on the Record Date, at the address of such holder shown
on the records of the Company. With respect to certificates for Common Stock
outstanding as of the Record Date, until the earlier of the Distribution Date or
the Expiration Date, the Rights will be evidenced by such certificates for
Common Stock registered in the names of the holders of Common Stock with a copy
of the Summary of Rights attached thereto. Until the earliest of the
Distribution Date, the Expiration Date and the Final Expiration Date, the
surrender for transfer of any of the certificates for Common Stock outstanding
on the Record Date, with or without a copy of the Summary of Rights attached
thereto, shall also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.
(c) Certificates for Common Stock issued (or delivered from the Company's
treasury) after the Record Date but prior to the earliest of the Distribution
Date, the
15
<PAGE>
Expiration Date and the Final Expiration Date shall have impressed on, printed
on, written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement between The Guarantee Life
Companies Inc. (the "Corporation") and ChaseMellon Shareholder Services,
L.L.C., dated as of November 18, 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 executive offices of the Corporation. Under
certain circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be evidenced
by this certificate. The Corporation will mail to the holder of this
certificate a copy of the Rights Agreement without charge promptly after
receipt of a written request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to an Acquiring Person or any
Associate or Affiliate thereof (as such terms are defined in the Rights
Agreement) may be null and void. The Rights shall not be exercisable, and
shall be void so long as held, by a holder in any jurisdiction where the
requisite qualification for the issuance to such holder, or the exercise by
such holder of the Rights in such jurisdiction, shall not have been
obtained or be obtainable.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificates.
16
<PAGE>
Section 4. Form of Right Certificates. (a) The Right Certificates
--------------------------
(and the forms of election to purchase shares, certification and assignment to
be printed on the reverse thereof) shall 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 Sections 11 and 22 hereof, the
Right Certificates, whenever distributed, which are distributed in respect of
shares of Common Stock which were issued and outstanding as of the Record Date,
shall be dated as of the Record Date, and all Right Certificates which are
distributed in respect of other shares of Common Stock shall be dated as of the
respective dates of issuance of such Common Stock, and in each such case on
their face shall entitle the holders thereof to purchase such number of one one-
thousandths of a share of Preferred Stock as shall be set forth therein at the
price per one one-thousandth of a share of Preferred Stock set forth therein
(the "Purchase Price"), but the number and type of
17
<PAGE>
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided in this Agreement.
(b) Any Right 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 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 (whether or not in
writing) which has as a primary purpose or effect the avoidance of the
provisions of Section 7(e), Section 11(a)(ii) or of Section 13 hereof with
respect to the limitation of the Rights beneficially owned by an Acquiring
Person (or any Associate or Affiliate thereof), and any
18
<PAGE>
Right Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Right Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend modified as necessary to apply to such Person:
The Rights represented by this Certificate are or were beneficially owned
by a Person who was or became an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement).
Accordingly, this Certificate and the Rights represented hereby may become
null and void in the circumstances specified in Section 7(e) of the Rights
Agreement.
Section 5. Countersignature and Registration. (a) The Right
---------------------------------
Certificates shall be executed on behalf of the Company manually or by facsimile
signature by the Chairman of the Board, the President or any Vice President and
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or any Assistant Secretary, either manually or by
facsimile signature. The Right Certificates shall be countersigned by the
Rights Agent manually 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 Right Certificates shall cease to be such officer of the Company before
counter-signature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered
19
<PAGE>
by the Company with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such officer of the Company; and
any Right Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office in New York, New York, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date and certificate number of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a)
- ---------------------------------------------------------------------
Subject to the provisions of Sections 4(b) and 14 hereof, at any time after the
Close of Business on the Distribution Date, and at or prior to the Close of
Business on the earlier of the Expiration Date and the Final Expiration Date,
any Right Certificate or Right Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certifi-
20
<PAGE>
cates, entitling the registered holder to purchase a like number of shares of
Preferred Stock (or other securities, cash, and/or assets, as the case may be)
as the Right Certificate or Right Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Right Certificate shall make such request in writing
delivered to the Rights Agent, and shall surrender the Right Certificate or
Right Certificates to be transferred, split up, combined or exchanged, with the
form of assignment and certificate appropriately executed, at the principal
office of the Rights Agent in New York, New York. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Right Certificate or Right Certificates until
the registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Right Certificate or Right
Certificates and shall have provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request. Thereupon the Rights Agent
shall countersign and deliver to the Person entitled thereto a Right Certificate
or Right Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any
21
<PAGE>
tax or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of any Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, if requested by the Company,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will execute and deliver a new
Right Certificate of like tenor to the Rights Agent for counter-signature and
delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Right
- ------
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office of the Rights Agent in New York, New
22
<PAGE>
York, together with payment of the Purchase Price for each one one-thousandth of
a share of Preferred Stock as to which the Rights are exercised, at or prior to
the earliest of (i) the Close of Business on November 18, 2006 (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 are exchanged as provided
---
in Section 23A hereof, or (iv) the time at which the Rights expire pursuant to
--
Section 13(d) hereof (the earliest of such times being herein referred to as the
"Expiration Date").
(b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock issued pursuant to the exercise of a Right shall initially be
$80.00, shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and certificate duly executed,
accompanied by payment (by certified check or bank draft payable to the order
of the Company) of the Purchase Price for the Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased and an
amount equal to any applicable transfer tax required to be paid by the holder of
23
<PAGE>
the Rights pursuant hereto in cash, or by certified check or bank draft payable
to the order of the Company, the Rights Agent shall, subject to Section 20(k)
hereof, (i)(A) promptly requisition from any transfer agent of the Preferred
- -
Stock (or make available, if the Rights Agent is the transfer agent)
certificates for the number of shares 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-thousandths 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 hereby directs the
depositary agent to comply with such request, (ii) when appropriate, requisition
--
from the Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) promptly after receipt of
---
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder, and
24
<PAGE>
(iv) when appropriate, after receipt, promptly deliver such cash to or upon the
--
order of the registered holder of such Right Certificate. In the event that the
Company is obligated to issue other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(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.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14 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 any such Acquiring Person (or of any
--
such Associate or Affiliate) who becomes a transferee after such Acquiring
Person becomes such, or (iii) a transferee of any such Acquiring Person (or of
---
any such Associate or Affiliate) who becomes a transferee prior
25
<PAGE>
to or concurrently with such Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
-
such 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 the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Right Certificates or any other Person
as a result of its failure to make any determination with respect to an
Acquiring Person or any of its respective 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 of any Right Certificate upon the
occurrence of any purported transfer or exercise as set forth in this
26
<PAGE>
Section 7 unless such registered holder shall have (i) completed and signed the
-
certificate following the form of assignment or election to purchase set forth
on the reverse side of the Right Certificate surrendered for such assignment or
exercise, and (ii) provided such additional evidence of the identity of the
--
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
--------------------------------------------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Right Certificates, and
in
27
<PAGE>
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 or any
authorized and issued shares of Preferred Stock held in its treasury (and will
use its best efforts, following the occurrence of a Section 11(a)(ii) Event, to
cause to be reserved and kept available out of its authorized and unissued
shares of Common Stock and/or other securities or out of its authorized and
issued shares of Common Stock and/or other securities held in its treasury), the
number of shares of Preferred Stock (and, following the occurrence of a Section
11(a)(ii) Event, Common Stock and/or other securities) that will be sufficient
to permit the exercise in full of all outstanding Rights.
(b) 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, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act of 1933, as
28
<PAGE>
amended (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
-
Expiration Date. 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, acting by resolution of its Board of Directors, 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(b), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. Notwithstanding any provision
of this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction
29
<PAGE>
unless the requisite qualification in such jurisdiction shall have been
obtained.
(c) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all one one-thousandths of a share of
Preferred Stock (and, following the occurrence of a Section 11(a)(ii) 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 shares.
(d) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any shares of Preferred Stock (or shares of 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 Right Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts for a
number of one one-thousandths of a share of Preferred Stock (or shares of Common
Stock and/or other securities, as the case may be), in a name other than that
of, the registered holder of the
30
<PAGE>
Right Certificate evidencing Rights surrendered for exercise or to issue or
deliver any certificates for shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) or depositary receipts for Preferred Stock
upon the exercise of any Rights until any such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name
---------------------------
any certificate for a number of one one-thousandths of a share of Preferred
Stock (or shares of 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 shares of Preferred Stock (or shares of 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 Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that if the
-------- -------
date of such surrender and payment is a date upon which the Preferred Stock (or
shares of 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
31
<PAGE>
the record holder of such shares (fractional and otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or shares of 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 Right Certificate, as such, 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
meetings or other proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of shares, or
- -------------------
fractions thereof, 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 into a greater
-
number of shares, (C) combine or consolidate the outstanding
-
32
<PAGE>
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 Section 7(e) hereof and this Section 11(a), the Purchase Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be, which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Stock transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification.
If an event occurs which would require an adjustment under both
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in
this Section 11(a)(i)
33
<PAGE>
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 (a "Section 11(a)(ii) Event") that any 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 is a
Section 13 Event or is an acquisition of Common Stock of the Company pursuant to
a tender or exchange offer for all outstanding Common Stock of the Company at a
price and on terms determined by at least a majority of the members of the Board
of Directors of the Company who are not Acquiring Persons or representatives,
nominees, Affiliates or Associates of an Acquiring Person (the "Outside
Directors"), after receiving advice from one or more investment banking firms,
to be (A) at a price which is fair to stockholders (taking into account all
-
factors which such Outside Directors deem relevant, including, without
limitation, prices which could reasonably be achieved if the Company or its
assets were to be sold on an orderly basis designed to realize maximum value)
and (B) otherwise in the best interests of the Company and its stockholders,
-
then proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof), shall thereafter have the right to
receive, upon exercise thereof following the Distribution Date at the then
current Purchase Price in accor-
34
<PAGE>
dance with the terms of this Agreement, in lieu of a number of one-thousandths
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-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to the first
occurrence of such Section 11(a)(ii) Event, whether or not such Right was then
exercisable, and (y) dividing that product (which, following such first
-
occurrence, shall thereafter be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by 50% of the Current Market Price
per share of the Common Stock of the Company (determined pursuant to Section
11(d) hereof) on the date of the occurrence of such Section 11(a)(ii) Event
(such number of shares being hereinafter referred to as the "Adjustment
Shares"). The Company shall notify the Rights Agent as to any Persons who are
deemed by the Company to be Acquiring Persons or Associates, Affiliates or
transferees (as described in subparagraphs (ii) and (iii) of Section 7(e)
hereof) of such Persons and shall identify any Rights pertaining thereto.
(iii) In lieu of issuing shares of Common Stock of the Company in
accordance with Section 11(a)(ii) hereof, the Company, acting by resolution of
its Board of Directors (which resolution shall be effective only with the
35
<PAGE>
concurrence of a majority of the Continuing Directors), may (and, in the event
that the number of shares of Common Stock which are authorized by the Company's
Certificate of Incorporation but 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) hereof, the
Company, acting by resolution of its Board of Directors (which resolution shall
be effective only with the concurrence of a majority of the Continuing
Directors), shall): (A) determine the excess of (1) the value of the Adjustment
- -
Shares issuable upon the exercise of a Right (the "Current Value"), over (2) the
-
Purchase Price attributable to each Right (such excess, the "Spread") and (B)
-
with respect to each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
- - -
Common Stock or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock which the Board of
Directors of the Company (with the concurrence of a majority of the Continuing
Directors) has deemed to have the same value as shares of Common Stock of the
Company (such shares or units of preferred stock hereinafter called "Common
Stock Equivalents")), (4) debt securities of the
-
36
<PAGE>
Company, (5) other assets, or (6) any combination of the foregoing having an
- -
aggregate value equal to the Current Value, where such aggregate value has been
determined by action of the Board of Directors of the Company (with the
concurrence of a majority of the Continuing Directors) based upon the advice of
a nationally recognized investment banking firm selected by the Board of
Directors of the Company which has theretofore performed no services for the
Company or any Subsidiary of the Company in the past five years; provided,
--------
however, if the Company shall not have made adequate provision to deliver value
- -------
pursuant to clause (B) above within thirty (30) days following the later of (x)
-
the first occurrence of a Section 11(a)(ii) Event and (y) the first date that
-
the right to redeem the Rights pursuant to Section 23 hereof, as such date may
be amended pursuant to Section 26 hereof, shall expire (the later of (x) and (y)
being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares of Common
Stock of the Company (to the extent available) and then, if necessary, cash,
securities and/or assets, that in the aggregate have a value equal to the
Spread. If, after the occurrence of a Section 11(a)(ii) Event, the number of
shares of Common Stock that are authorized by the Company's Certificate of
37
<PAGE>
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit exercise in full
of the Rights in accordance with Section 11(a)(ii) hereof and the Company,
acting by resolution of its Board of Directors (which resolution shall be
effective only with the concurrence of a majority of the Continuing Directors),
shall determine in good faith that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares (such period as it may be extended, the
"Substitution Period"). To the extent that the Company determines that some
action is to be taken pursuant to the terms of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 7(e) hereof, that such action
-
shall apply uniformly to all outstanding Rights, and (y) may suspend the
-
exercisability of the Rights until the expiration of the Substitution Period in
order to seek such stockholder approval for the authorization of additional
shares and/or to decide the appropriate form of distribution to be made pursuant
to the first sentence of this Section 11(a)(iii)
38
<PAGE>
and to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii), the value of the
Common Stock shall be the Current Market Price per share of Common Stock (as
determined pursuant to Section 11(d) hereof) on the date of the first occurrence
of the Section 11(a)(ii) Event, and the per share or per unit value of any
Common Stock Equivalents shall be deemed to equal the Current Market Price per
share of the Common Stock of the Company on such date.
(b) In the event that the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of shares of Preferred
Stock entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Preferred Stock (or shares having the
same rights, privileges and prefer ences as the shares of Preferred Stock
("Equivalent Preference Stock")) or securities convertible into shares of
Preferred Stock or Equivalent Preference Stock at a price per share of Preferred
Stock or Equivalent Preference Stock (or having a conversion price per share, if
a security convertible into shares of Preferred Stock or Equivalent Preference
39
<PAGE>
Stock) less than the Current Market Price per share of the Preferred Stock (as
defined in Section 11(d) hereof) 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 additional shares of Preferred Stock
and/or Equivalent Preference Stock which the aggregate offering price of the
total number of such shares 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 Preference Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price
may be paid in a consideration part or all of which shall be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company (with the concurrence of a majority of
the Continuing Directors), whose determination shall be described in a
statement filed with the Rights Agent. Pre-
40
<PAGE>
ferred 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, options 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 the making of 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 or surviving corporation) of evidences of indebtedness or assets
(other than a regular periodic cash dividend at a rate not in excess of 125% of
the rate of the last regular periodic cash dividend theretofore paid or a
dividend payable in 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 per share of Preferred
Stock (as defined in Section 11(d) hereof) on such record date, less the fair
market value (as determined in good faith by the Board of Directors
41
<PAGE>
of the Company, with the concurrence of a majority of the Continuing Directors,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one share
of Preferred Stock, and the denominator of which shall be such Current Market
Price 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 again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, the "Current
Market Price" 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 30
consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that in the event that the Current Market
-------- -------
Price per share of Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (a) a dividend or
-
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into such Common Stock or (b) any subdivision,
-
combination or
42
<PAGE>
reclassification of such Common Stock, and prior to the expiration of 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, as the case may be,
then, and in each such case, the "Current Market Price" shall be appropriately
adjusted to take into account the ex-dividend trading. The closing price for
each 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 the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization, the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the shares
of Common Stock are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or, if the
shares of Common
43
<PAGE>
Stock are not listed or admitted to trading on any national securities exchange,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in shares of Common Stock selected by the Company,
acting by resolution of the Board of Directors of the Company (which resolution
shall be effective only with the concurrence of a majority of the Continuing
Directors). If on any such date no market maker is making a market in shares of
Common Stock, the fair value of such shares on such date as determined in good
faith by the Company, acting by resolution of the Board of Directors of the
Company (which resolution shall be effective only with the concurrence of a
majority of the Continuing Directors), shall be used. The term "Trading Day"
shall mean a day on which NASDAQ is in operation or, if the shares of Common
Stock are not quoted on NASDAQ but are listed or admitted to trading on any
national securities exchange, a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange nor quoted
on NASDAQ, a Business Day. If the current per share market price of the Common
Stock cannot be determined in the manner provided above, or if the Common Stock
is not publicly held or not so
44
<PAGE>
listed or traded, "Current Market Price" per share of Common Stock shall mean
the fair value per share as determined in good faith by the Company, acting by
resolution of the Board of Directors of the Company (which resolution shall be
effective only with the concurrence of a majority of the Continuing Directors),
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "Current Market
Price" per share of Preferred Stock shall be determined in the same manner as
set forth for the Common Stock in Section 11(d)(i) hereof (other than the last
sentence thereof). 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 Section 11(d)(i)
hereof, 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 listed or traded, the "Current Market Price" per share of Preferred
45
<PAGE>
Stock shall mean the fair value per share as determined in good faith by the
Company, acting by resolution of its Board of Directors (which resolution shall
be effective only with the concurrence of a majority of the Continuing
Directors), whose determination shall be described in a statement filed with
Rights Agent and shall be conclusive for all purposes. For all purposes of this
Agreement, the "Current Market Price" of one one-thousandth of a share of
Preferred Stock shall be equal to the "Current Market Price" of one share of
Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in such price; provided, however, that any
-------- -------
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest ten-thousandth of a share of Common Stock or other share or the
nearest one-ten-millionth 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
-
years from the date of the transaction which requires such adjustment or (ii)
--
the Expiration Date.
46
<PAGE>
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Preferred Stock, thereafter the Purchase Price and the number of such other
shares so receivable upon exercise of any Right and the number of Rights
outstanding 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 Sections 11(a), (b), (c), (e), (g), (h), (i), (j),
(k) and (m) and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Stock shall apply on like terms to any such other shares,
provided, however, that the Company shall not be liable for its inability or
- -------- -------
failure to reserve and keep available for issuance upon exercise of the Rights
pursuant to Section 11(a)(ii) a number of shares of Common Stock greater than
the number then authorized by the Certificate of Incorporation of the Company
but not outstanding or reserved for any other purpose.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of
a share of Preferred Stock purchasable from time to time
47
<PAGE>
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) hereof, upon each adjustment of the Purchase Price as a result
of the calculations made in Section 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one one-
thousandths of a share of Preferred Stock (calculated to the nearest one-
millionth of a share of Preferred Stock) obtained by (i) multiplying (A) the
- -
number of one one-thousandths of a share covered by a Right immediately prior to
such adjust ment of the Purchase Price by (B) the Purchase Price in effect
-
immediately prior to such adjustment of the Purchase Price and (ii) dividing the
--
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one
48
<PAGE>
one-thousandths 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 ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 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 Right Certificates held
49
<PAGE>
by such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Right Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of shares of Preferred Stock, or fraction thereof, issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share and the number of shares which were expressed in the initial Right
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the one one-thousandths
of a share of Preferred Stock issuable upon exercise of the Rights, the Com
pany shall take any corporate action which may, in the opinion of counsel, be
necessary in order that the Company may
50
<PAGE>
validly and legally issue fully paid and nonassessable shares 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 issuing to the holder of any Right exercised after such record date
the Preferred Stock, or a fraction thereof, and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the 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 (frac tional 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, acting by resolution of its Board of Directors (which resolution shall
be effective only with the concurrence of a majority of the Continuing
Directors), shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in
51
<PAGE>
its sole discretion shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Stock, any issuance wholly for
cash of any Preferred Stock at less than the current market price, any issuance
wholly for cash of Preferred Stock or securities which by their terms are
convertible into or exchangeable for Preferred Stock, any stock dividends or any
issuance of rights, options or warrants referred to herein above in this Section
11, hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
-
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
--
the Company in a transaction that complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
---
transaction or in a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
-
52
<PAGE>
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 that would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
-
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 26 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 eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event the Company shall at any time after the date of this Agreement and prior
to the Distribution Date (i) declare or pay any dividend on the Common Stock of
-
the Company payable in such Common Stock or (ii) subdivide the outstanding
--
Common Stock of the Company into a greater number of shares (by reclassification
or
53
<PAGE>
otherwise than by payment of dividends in such Common Stock) or (iii) combine or
---
consolidate the outstanding Common Stock of the Company into a smaller number of
shares, then in any such case, (x) the number of one one-thousandths of a share
-
of Preferred Stock purchasable after such event upon proper exercise of each
Right shall be determined by multiplying the number of one one-thousandths of a
share of Preferred Stock so purchasable immediately prior to such event by a
fraction, the numerator of which is the number of shares of Common Stock of the
Company outstanding immediately before such event and the denominator of which
is the number of shares of such Common Stock outstanding immediately after such
event and (y) action shall be taken such that each share of Common Stock of the
-
Company outstanding immediately after such event shall have issued with respect
to it that number of Rights which each share of such Common Stock outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(p) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected. If an event occurs which would require an adjustment under Section
11(a)(ii) hereof and this Section 11(p), the adjustments provided for in this
Section 11(p) shall be in addition and prior to any adjustment required
pursuant to Section 11(a)(ii) hereof.
54
<PAGE>
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 and 13
- ------
hereof, the Company shall (a) promptly prepare a certificate setting forth such
-
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
- --
Common Stock and Preferred Stock a copy of such certificate and (c) mail a brief
-
summary thereof to each holder of a Right Certificate (or if prior to the
Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 25 of this Agreement. Notwithstanding
the foregoing sentence, the failure of the Company to make such certificates or
give such notice shall not affect the validity or the force or effect of the
requirement for such adjustment. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained. Any
adjustment to be made pursuant to Sections 11 and 13 hereof 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 (a "Section 13 Event") that, following the
- -------------
Stock Acquisition Time, directly or indirectly, (x) the Company shall
-
consolidate with, or merge with and into, any other Person (other
55
<PAGE>
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) and the Company shall not be the surviving or continuing
corporation of such merger, consolidation or combination, (y) any Person (other
-
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with the Company, or merge with and into the
Company, and the Company shall be the surviving or continuing corporation of
such merger or consolidation and, in connection therewith, all or part of the
Common Stock shall be changed into or exchanged for stock or other securities of
the Company or of any 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 or more transactions, assets, cash flow or
earning power aggregating more than 50% of the assets, cash flow or earning
power of the Company and its Subsidiaries (taken as a whole and calculated on
the basis of the Company's most recent regularly prepared financial statement)
to any other Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies with Section 11(o)
hereof), then, and in each such case (except as provided in Section 13(d)
hereof), proper provision shall be made so that (i) each holder of a Right
-
(except as otherwise provided in Section 7(e) hereof) shall
56
<PAGE>
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
tradable shares of Common Stock of the Principal Party (as hereinafter defined),
not subject to any liens, encumbrances, rights of call, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by (A)
-
multiplying the then current Purchase Price by the number of one one-thousandths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of one one-thousandths of a share of Preferred Stock for
which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and 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 (B) 50% of the
-
Current Market Price per share of Common Stock of such Principal Party
(determined pursuant to Section 11(d) hereof) on the date of consummation of
such merger, consolidation, sale or transfer; (ii) such Principal
--
57
<PAGE>
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 accordance with Section 9 hereof) in connection
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be possible, in
relation to its 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. The Company shall not
consummate any such merger, consolidation, sale or transfer unless prior thereto
the Company and such issuer shall have executed and delivered to the Rights
Agent a supplemental agreement containing the provisions required by this
Section 13.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of the
first sentence of Sec-
58
<PAGE>
tion 13(a) hereof, the Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the first
sentence of Section 13(a) hereof, the Person that is the party receiving the
greatest portion of the assets, cash flow 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 any time and has not been continuously over the preceding twelve month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Stock of which is and
has been so registered, "Principal Party" shall refer to such other Person; and
(2) in case such Person is a Subsidiary, directly or indirectly, of more than
-
one Person, the Common Stock 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.
59
<PAGE>
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of shares of authorized 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 issuer shall have executed and delivered to the
Rights Agent a supplemental agreement containing the provisions set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any such Section 13 Event, the Principal Party
will:
(i) prepare and file a registration statement under the Act with respect to
the Rights and the securities purchasable upon exercise of the Rights on an
appropriate form and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing and
-
(B) remain effective (with a prospectus at all times meeting the requirements of
- --
the Act) until the Expiration Date; and
(ii) deliver to holders of the Rights historical financial statements for
the Principal Party and each of its Affiliates which comply in all respects with
the requirements for registration on Form 10 under the Exchange Act.
60
<PAGE>
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a) hereof.
(d) Notwithstanding anything in this Agreement to the contrary, this
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) hereof if (i) such transaction is consummated with
- -- - -
a Person or Persons who acquired Common Stock of the Company pursuant to a
tender offer or exchange offer for all outstanding Common Stock of the Company
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 of the Company offered in such transaction is not less than the
price per share of Common Stock of the Company paid to all holders of Common
Stock of the Company 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 Common Stock of the Company 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
61
<PAGE>
such transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
(e) The Company covenants and agrees that it will not, after the Stock
Acquisition Time, engage in any Section 13 Event if at the time of or after such
event there are any charter or by-law provisions or any rights, warrants or
other instruments outstanding or any other action taken which would diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
Section 14. Fractional Rights and Fractional Shares. (a) The
---------------------------------------
Company shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractions of Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(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
62
<PAGE>
other system then in use or, if on any such date the Rights are not quoted by
any such organization, the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
(selected by the Company, acting by resolution of its Board of Directors, which
resolution shall be effective only with the concurrence of a majority of the
Continuing Directors). If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Company, acting by resolution of its Board of Directors (which
resolution shall be effective only with the concurrence of a majority of the
Continuing Directors), shall be used.
63
<PAGE>
(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-
thousandths of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares (other than fractions
which are integral multiples of one one-thousandths of a share of Preferred
Stock). Fractions of Preferred Stock in integral multiples of one one-
thousandths of a share 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 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 which are not
integral multiples of one one-thousandths of a share of Preferred Stock, the
Company may pay to the registered holders of Right Certificates at the time such
Right Certificates are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one share of Preferred Stock.
For purposes of this Section 14(b), the current market value of a share of
Preferred Stock shall be the closing price of a share of Preferred Stock (as
determined pursuant to the second sentence of
64
<PAGE>
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Section 11(a)(ii) Event or a
Section 13 Event, the Company shall not be required to issue fractions of shares
of its Common Stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares of its Common Stock. In lieu of fractional
shares of its Common Stock, the Company may pay to the registered holders of
Right Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
share of its Common Stock. For purposes of this Section 14(c), the current
market value of one share of Common Stock of the Company shall be the closing
price of one share of Common Stock of the Company (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of
----------------
this Agreement, except the rights of action vested in the Rights Agent pursuant
to Section 18 hereof, are vested in the respective registered holders of
65
<PAGE>
the Right Certificates (and, prior to the Distribution Date, the registered
holders of Common Stock); and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of Common Stock), without the consent of
the Rights Agent or of any holder of any other Right Certificate (or, prior to
the Distribution Date, of Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance
of the obligations hereunder, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by
--------------------------
accepting such Right consents and agrees with the Company and with every other
holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be evidenced by the
certificates for shares of
66
<PAGE>
Common Stock registered in the name of the holders of such shares (which
certificates for shares of Common Stock shall also constitute certificates for
Rights) and each Right will be transferable only in connection with the transfer
of Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer and with the appropriate forms and certificates duly completed and
fully executed;
(c) the Company and the Rights Agent may deem and treat the Person in whose
name the Right Certificate (or, prior to the Distribution Date, the associated
Common Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Right Certificates or the associated Common 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 shall be affected by any notice to
the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent
67
<PAGE>
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. Right Certificate Holder Not Deemed a Shareholder. No
-------------------------------------------------
holder, as such, of any Right or Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder 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 Right Certificate be construed to
confer upon the holder of any Right or Right Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or
68
<PAGE>
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 otherwise, until
the Right or Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company agrees to
---------------------------
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent 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. In no case will the
Rights Agent be liable for special, indirect, incidental or consequential loss
or damage of any kind whatsoever, even if
69
<PAGE>
the Rights Agent has been advised of the possibility of such loss or damage.
(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 Right Certificate
or certificate for Preferred Stock or 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.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. (a) Any corporation into which the Rights Agent or any successor Rights
- -----
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer 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
-------- -------
70
<PAGE>
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. The purchase of all or substantially all of the Rights
Agent's assets employed in the performance of transfer agent activities shall be
deemed a merger or consolidation for purposes of this Section 19. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent
71
<PAGE>
may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this 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 Right 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 opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(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 an Acquiring Person and the
determination of the Current Market Price per share of Preferred Stock and
Common Stock) 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 conclu-
72
<PAGE>
sively proved and established by a certificate signed by 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.
(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 Right
Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(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 Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any coven-
73
<PAGE>
ant or condition contained in this Agreement or in any Right Certificate; nor
shall it be responsible for any adjustment required under the provisions of
Sections 11 or 13 hereof or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that would require
any such adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice of any such adjustment), nor shall it be
responsible for any determination by the Board of Directors of the Company (with
the concurrence of a majority of the Continuing Directors) of the Current Market
Price of the Rights or Preferred Stock or Common Stock, 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 or
other securities to be issued pursuant to this Agreement or any Right
Certificate or as to whether any shares of Preferred Stock or Common Stock or
other securities will, when 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
74
<PAGE>
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 the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(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, except it may not
act for an Acquiring Person in an
75
<PAGE>
investment banking capacity, or otherwise assist an Acquiring Person in ways
hostile to the Company, without the consent of the Company.
(i) The Rights Agent may execute and exercise any of the rights and powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company or to holders of the Rights
resulting from any such act, omission, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment
76
<PAGE>
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 this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock and Preferred Stock by registered, certified
or express mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock and
Preferred Stock by registered, certified or express mail, and to the holders of
the Right Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated
77
<PAGE>
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Company), then the
registered holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of any state of the United States, in good standing, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject
to supervision or examination by federal or state authority and which, or which
together with its parent, has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and
78
<PAGE>
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, 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 Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by resolution of its Board of Directors (which
resolution shall, if adopted after the Stock Acquisition Time, be effective only
with the concurrence of a majority of the Continuing Directors), to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares of stock or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale 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, or upon the exercise, con-
79
<PAGE>
version or exchange of securities, notes or debentures 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 (with the concurrence of a majority of the
Continuing Directors), issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
-------- -------
that (i) no such Right Certificates shall be issued if, and to the extent that,
-
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Right Certificates would be issued, and (ii) no such Right
--
Certificates shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption. (a) The Company may, by resolution of its
----------
Board of Directors, at its option, at any time prior to the earlier of (x) the
-
Stock Acquisition Time or (y) the Close of Business on the Final Expiration
-
Date, redeem all but not less than all of the then outstanding Rights at a
redemption price of $0.01 per Right (payable in cash, shares of Common Stock
(based on the Current Market Price of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the Board
of Directors of the Company), appropriately adjusted to
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<PAGE>
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").
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights (or at such time subsequent to
such action as the Board of Directors may determine), 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. Within 10 days after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the holders of the then outstanding Rights by mailing such notice
to all such holders at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Neither the Company nor
any of its Affiliates or Associates may redeem, acquire or purchase any Rights
at any time in any manner other than that specifically set forth in this Section
23, and other
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<PAGE>
than in connection with the repurchase of Common Stock of the Company prior to
the Distribution Date.
Section 23A. Exchange. (a) The Board of Directors of the Company
--------
may, at its option, at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e)) for Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any Person (other than the Company, any wholly owned
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Stock as a fiduciary for or pursuant to
the terms of any such employee benefit plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 23A, evidence of
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which shall have been filed with the Rights Agent, and without any further
action and without any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of such Rights shall be to receive
that number of shares of Common Stock equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to give,
-------- -------
or any defect in, such notice shall not affect the validity of such exchange.
The Company shall promptly mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 7(e) hereof) held
by each holder of Rights.
(c) In any exchange pursuant to this Section 23A, the Company, at its
option, may substitute shares of Preferred Stock (or any other series of
preferred stock of the
83
<PAGE>
Company containing terms substantially similar to the terms of the Preferred
Stock) for some or all of the shares of Common Stock exchangeable for Rights, at
the initial rate of one one-thousandth of a share of Preferred Stock (or of such
other series of preferred stock of the Company) for each share of Common Stock,
as appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Stock pursuant to the terms thereof, so that the fraction of a share
of Preferred Stock (or of such other series of preferred stock of the Company)
delivered in lieu of each share of Common Stock shall have the same voting
rights as one share of Common Stock.
(d) In the event that there shall not be sufficient shares of Common
Stock or Preferred Stock (or any other series of preferred stock of the Company
containing terms substantially similar to the terms of the Preferred Stock)
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 23A, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock or Preferred Stock (or such other series of preferred stock of the
Company) for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common
Stock or to distribute certificates
84
<PAGE>
which evidence fractional Common Stock. In lieu of such fractional shares, the
Company shall pay to the registered holders of the Right Certificates with
regard to which such fractional shares would otherwise be issuable an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this paragraph (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 23A.
Section 24. Notice of Certain Events. (a) In case the Company
------------------------
shall propose (i) to pay any dividend payable in stock of any class to the
-
holders of its Preferred Stock or to make any other distribution to the holders
of its Preferred Stock (other than a regular quarterly dividend out of earnings
on retained earnings of the Company at a rate not in excess of 125% of the rate
of the last regular quarterly cash dividend theretofore paid), or (ii) to offer
--
to the holders of Preferred Stock options, rights or warrants to subscribe for
or to purchase any additional Preferred Stock or shares of stock of any class
or any other securities, rights or options, or (iii) to effect any
---
reclassification of the Preferred Stock (other than a reclassification
involving only the subdivision of outstanding
85
<PAGE>
shares of Preferred Stock), or (iv) to effect any merger, consolidation or other
--
combination into or with, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one or
more transactions, of more than 50% of the assets, cash flow or earning power of
the Company and its Subsidiaries (taken as a whole) to, any other Person, or
(v) to effect the liquidation, dissolution or winding up of the Company, then,
-
in each such case, the Company shall give to each holder of a Right, 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,
merger, consolidation, combination, sale, transfer, liquidation, dissolution or
winding up is to take place and the date of participation therein by the holders
of Common Stock and/or 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 days prior to the record date for determining
holders of Preferred Stock for purposes of such action, and in the case of any
such other action, at least twenty days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of Common
Stock and/or Preferred Stock, whichever shall be the
86
<PAGE>
earlier. The failure to give notice 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) or
Section 13(a) of this Agreement shall occur, then, in any such case, (i) the
-
Company shall as soon as practicable thereafter give to each holder of a Right
Certificate, to the extent feasible and in accordance with Section 25, 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) or
Section 13(a) hereof, and (ii) all references in Section 24(a) hereof to
--
Preferred Stock shall be deemed thereafter to refer also to Common Stock or
other securities issuable in respect of the Rights.
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 Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
87
<PAGE>
The Guarantee Life Companies Inc.
Guarantee Centre
8801 Indian Hills Drive
Omaha, Nebraska 68114-4066
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, New Jersey 07660
Attention: General Counsel - Legal Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or if prior
to the Distribution Date to each holder of a certificate representing shares of
Common Stock) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such Right holder (or if prior to the Distribution
Date to such holder of Common Stock) at the address of such holder as shown on
the registry books of the Company.
Section 26. Supplements and Amendments. Prior to the Stock
--------------------------
Acquisition Time and subject to the penultimate
88
<PAGE>
sentence of this Section 26, the Company may, by resolution of its Board of
Directors, and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement in any respect whatsoever (including,
without limitation, any extension of the period in which the Rights may be
redeemed) without the approval of any holders of certificates representing
shares of Common Stock of the Company. From and after the Stock Acquisition
Time and subject to the penultimate sentence of this Section 26, without the
approval of any holders of certificates representing shares of Common Stock of
the Company or of Right Certificates, the Company may, by resolution of its
Board of Directors (which resolution shall be effective only with the
concurrence of a majority of the Continuing Directors, and only if the
Continuing Directors constitute a majority of the number of directors then in
office), and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder or (iv) to change or supplement or make any other provisions in any
manner which the Company may deem necessary or desirable, which shall not
adversely affect the interests of, or diminish substantially or eliminate the
benefits
89
<PAGE>
intended to be afforded by the Rights to, the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of any such
Person); provided, however, that this Agreement may not be supplemented or
-------- -------
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed or to modify the ability (or
inability) of the Board of Directors of the Company to redeem the Rights, in
either case at such time as the Rights are not then redeemable or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of or the benefits to the holders of Rights (other than
an Acquiring Person or an Affiliate or Associate of any such Person). Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of one one-thousandths
of a share of Preferred Stock for which a Right is exercisable. Prior to the
Stock Acquisition Time, the interests of the holders of Rights shall be
90
<PAGE>
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,
--------------------------------- -------------------
etc. For all purposes of this Agreement, any calculation of the number of
- ---
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act. The Board of Directors of the Company
(with, where specifically provided for herein, the concurrence of the Continuing
Directors or the Outside Directors) shall have the exclusive power, authority
and discretion to administer this Agreement and to exercise all rights and
powers specifically granted to such Board of Directors (with, where specifically
provided for herein, the concurrence of the Continuing Directors or the Outside
Directors), or as may be necessary or advisable in the administration of this
Agreement, including, without limita-
91
<PAGE>
tion, 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, but not limited to, a determination
to redeem or not redeem the Rights, to amend the Agreement or to find or to
announce publicly that any Person has become an Acquiring Person). All such
actions, calculations, interpretations and determinations (including, for
purposes of clauses (i) and (iii) below, all omissions with respect to the
foregoing) which are done or made by the Board of Directors of the Company
(with, where specifically provided for herein, the concurrence of the Continuing
Directors or the Outside Directors), the Outside Directors or the Company (i)
-
shall be within the discretion of the Board of Directors or the Outside
Directors, (ii) shall be final, conclusive and binding on the Company, the
--
Rights Agent, the holders of the Right Certificates and all other parties, and
(iii) shall not subject the Board of Directors of the Company, the Continuing
---
Directors or the Outside Directors to any liability to the holders of the Rights
and Right Certificates.
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 the Right Certificates (and, prior to the
Distri-
92
<PAGE>
bution 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 Right Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 30. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company (with the concurrence of a majority of the Continuing
Directors) 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 shall be
reinstated and shall not expire until the Close of Business on the tenth
Business Day following the date of such determination by the Board of Directors.
Without limiting
93
<PAGE>
the foregoing, if any provision of this Agreement requiring that a determination
be made by the Board of Directors with the concurrence of a majority of the
Continuing Directors or Outside Directors or by the Outside Directors is held by
a court of competent jurisdiction or other authority to be invalid, void, or
unenforceable, such determination shall then be made by the Board of Directors
in accordance with applicable law and the Company's certificate of incorporation
and by-laws.
Section 31. Governing Law. This Agreement and each Right
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 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.
94
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
THE GUARANTEE LIFE COMPANIES
INC.
By /s/ Richard A. Spellman
____________________________
Name: Richard A. Spellman
Title:General Counsel and Secretary
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By /s/ Gary D'alessandro
______________________________
Name: Gary D'alessandro
Title:Assistant Vice President
95
<PAGE>
Exhibit A
---------
CERTIFICATE OF DESIGNATION OF SERIES A JUNIOR
PARTICIPATING CUMULATIVE PREFERRED STOCK
Par Value $1.00 Per Share
of
THE GUARANTEE LIFE COMPANIES INC.
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
We, William C. Bauhard, Chief Financial Officer, and Richard A.
Spellman, Secretary, of The Guarantee Life Companies Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), in accordance with the provisions of Section 103
thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation (the "Certificate") of the Corporation, as
amended, the said Board of Directors on November 14, 1996 by the affirmative
vote of at least a majority of the members of the Board of Directors, adopted
the following resolution creating a series of thirty thousand (30,000) shares of
Preferred Stock, par value $1.00 per share:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate, a series of Preferred Stock of the Corporation be, and it hereby
is, created, and that the designation and amount thereof and the
<PAGE>
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 Cumulative Preferred Stock, par value $1.00 per share (the "Junior
Preferred Stock") and the number of shares constituting such series shall be
thirty thousand (30,000). Such number of shares may be increased or decreased
by resolution of the Board of Directors; provided, that no decrease shall
--------
reduce the number of shares of Junior Preferred Stock to a number less than the
number of shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the Corporation convertible into Junior Preferred Stock.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the rights of the holders of any shares of any series of
preferred stock (or any similar stock) ranking prior and superior to the Junior
Preferred Stock with respect to dividends, the holders of shares of Junior
Preferred Stock, in preference to the holders of Common Stock, and of any other
junior stock which may be outstanding, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of January, April,
July and October 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
Junior Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $2.50 per share ($10.00 per annum), 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
2
<PAGE>
(by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Junior Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Junior Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the Junior
Preferred Stock as provided in paragraph (A) of this Section 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 $2.50 per share ($10.00 per
annum) on the Junior 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 Junior Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Junior 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 or 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 Junior Preferred Stock entitled to receive
a quarterly
3
<PAGE>
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 accumulate
but shall not bear interest. Dividends paid on the shares of Junior 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
Junior Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights.
-------------
The holders of shares of Junior Preferred Stock shall have the
following voting rights.
(A) Subject to the provisions for adjustment as hereinafter set forth,
each share of Junior Preferred Stock shall entitle the holder thereof to 1,000
votes (and each one one-thousandth of a share of Junior Preferred Stock shall
entitle the holder thereof to one vote) on all matters submitted to a vote of
the stockholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by classification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the number of votes per share
to which holders of shares of Junior Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Certificate, in any other
certificate of designation creating a series of preferred stock or any similar
stock, or by law, the holders of shares of Junior
4
<PAGE>
Preferred Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of the Corporation.
(C) If at any time the Corporation shall not have declared and paid all
accrued and unpaid dividends on the Junior Preferred Stock as provided in
Section 2 hereof for four consecutive Quarterly Dividend Payment Dates, then, in
addition to any voting rights provided for in paragraphs (A) and (B), the
holders of the Junior Preferred Stock shall have the exclusive right, voting
separately as class, to elect two directors on the Board of Directors of the
Corporation (such directors, the "Preferred Directors"). The right of the
holders of the Junior Preferred Stock to elect the Preferred Directors shall
continue until all such accrued and unpaid dividends shall have been paid. At
such time, the terms of any of the Preferred Directors shall terminate. At any
time when the holders of the Junior Preferred Stock shall have thus become
entitled to elect Preferred Directors, a special meeting of shareholders shall
be called for the purpose of electing such Preferred Directors, to be held
within 30 days after the right of the holders of the Junior Preferred Stock to
elect such Preferred Directors shall arise, upon notice given in the manner
provided by law or the by-laws of the Corporation for giving notice of a special
meeting of shareholders (provided, however, that such a special meeting shall
not be called if the annual meeting of shareholders is to convene within said 30
days). At any such special meeting or at any annual meeting at which the holders
of the Junior Preferred Stock shall be entitled to elect Preferred Directors,
the holders of a majority of the then outstanding Junior Preferred Stock present
in person or by proxy shall be sufficient to constitute a quorum for the
election of such directors. The persons elected by the holders of the Junior
Preferred Stock at any meeting in accordance with the terms of the preceding
sentence shall become directors on the date of such election.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Junior Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends
5
<PAGE>
and distributions, whether or not declared, on shares of Junior Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends or, make any other distributions on any shares
or stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding-up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding-up) with the Junior Preferred Stock except dividends paid
ratably on the Junior 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 Junior 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 Junior Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Junior
Preferred Stock, or any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding-up) with the Junior
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 classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
6
<PAGE>
(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 Junior 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 preferred stock, without
designation as to series, 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, in the Certificate, in any other certificate of designation creating a
series of preferred stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding-Up.
--------------------------------------
Upon any voluntary or involuntary liquidation, dissolution or winding-
up of the Corporation, no distribution shall be made (A) to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding-up) to the Junior Preferred Stock unless prior thereto,
the holders of shares of Junior Preferred Stock shall have received the higher
of (i) $10.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
or (ii) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock; nor shall any distribution be
made (B) to the holders of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding-up) with the Junior Preferred Stock,
except distributions made ratably on the Junior Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding-up. In
the event the Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassi-
7
<PAGE>
fication or otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in each such
case the aggregate amount to which holders of shares of Junior Preferred Stock
are entitled immediately prior to such event under the provision in clause (A)
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.
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, or otherwise changed, then in any such case each share of Junior
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Junior Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. No Redemption.
-------------
The shares of Junior Preferred Stock shall not be redeemable.
Section 9. Rank.
----
8
<PAGE>
Unless otherwise provided in the Certificate or a certificate of
designation relating to a subsequent series of preferred stock of the
Corporation, the Junior 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 on liquidation, dissolution or winding-up, and senior to
the Common Stock of the Corporation.
Section 10. Amendment.
---------
The Certificate, as amended and restated, shall not be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Junior Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Junior Preferred Stock, voting together as a single series.
Section 11. Fractional Shares.
-----------------
Junior Preferred Stock may be issued in fractions of a share (in one
one-thousandths (1/1,000) of a share and integral multiples thereof) which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Junior Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its Chief Financial Officer and attested by its
Secretary this ____ day of November, 1996.
_______________________
William C. Bauhard
Chief Financial Officer
ATTEST:
______________________
Richard A. Spellman
Secretary
9
<PAGE>
Exhibit B
---------
[Form of Right Certificate]
Certificate No. R- ______ Rights
NOT EXERCISABLE AFTER NOVEMBER 18, 2006 OR EARLIER IF THE BOARD OF DIRECTORS
ORDERS THE REDEMPTION OR EXCHANGE OF THE RIGHTS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO LONG
AS HELD, BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION TO
THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN
SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED OR BE OBTAINABLE. [THE RIGHTS
REPRESENTED BY THIS 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
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]/1/
Rights Certificate
THE GUARANTEE LIFE COMPANIES 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 Novembet 18, 1996 (the "Rights Agreement"),
between The Guarantee Life Companies Inc., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services, L.L.C. (the "Rights Agent"),
to
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/1/. The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
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purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M. (New York City time)
on November 18, 2006, at the principal office of the Rights Agent, or its
successors as Rights Agent, one one-thousandth of a fully paid nonassessable
share of Series A Junior Participating Cumulative Preferred Stock, par value
$1.00 per share of the Company (the "Preferred Stock"), at a purchase price of
$80.00 per one one-thousandth of a share of Preferred Stock (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase and the Certificate contained therein duly executed.
The number of Rights evidenced by this Right Certificate (and the number of one-
thousandths of a share of Preferred Stock which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per one one-thousandth of a
share of Preferred Stock set forth above, are the number and Purchase Price as
of [Date], based on the shares of Preferred Stock as constituted at such date.
From and after the first occurrence of a Section 11(a)(ii) Event (as
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate
-
or Associate thereof (as such terms are defined in the Rights
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Agreement), (ii) a transferee of any such Acquiring Person (or of any Associate
--
or Affiliate thereof) who becomes a transferee after such Acquiring Person (or
any Associate or Affiliate thereof) becomes such or (iii) under certain
---
circumstances specified in the Rights Agreement, a transferee of such Acquiring
Person (or of any Associate or Affiliate thereof) who becomes a transferee prior
to or concurrently with such Acquiring Person becoming such, 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.
The Rights evidenced by this Right Certificate shall not be
exercisable, and shall be void so long as held, by a holder in any jurisdiction
where the requisite qualification to the issuance to such holder, or the
exercise by such holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.
As provided in the Rights Agreement, the Purchase Price and the number
of one one-thousandths of a share of Preferred Stock or the number and kind of
other securities which may be purchased upon the exercise of the Rights
evidenced by this Right Certificate are subject to modification and adjustment
upon the happening of certain events, including Section 11(a)(ii) Events and
Section 13 Events (as defined in the Rights Agreement).
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This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, as it may be amended from time to time,
which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Rights Agent, the Company
and the holders of the Right Certificates, which limitations of rights include
the temporary suspension of the exercisability of such Rights under the specific
circumstances set forth in the Rights Agreement. Copies of the Rights Agreement
are on file at the principal executive offices of the Company and the above-
mentioned office of the Rights Agent and are also available upon written request
to the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
one one-thousandths of a share of Preferred Stock as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive
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<PAGE>
upon surrender hereof another Right Certificate or Right Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Right Certificate may be redeemed by the Company at a
redemption price of $.01 per Right at any time prior to the earlier of (i) the
-
Stock Acquisition Time (as defined in the Rights Agreement) and (ii) the close
--
of business on the Expiration Date (as defined in the Rights Agreement).
Subject to the provisions of the Rights Agreement, the rights evidenced by this
Right Certificate may be exchanged in whole or part for shares of Common Stock
or fractional shares of Preferred Stock (or any other substantially similar
series of preferred stock of the Company).
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.
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 in any respect whatsoever up until the
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<PAGE>
Stock Acquisition Time and thereafter in certain respects which do not adversely
affect the interests of holders of Right Certificates (other than an Acquiring
Person or the Affiliates or Associates thereof).
No holder of this Right 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 Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
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<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of __________, ____.
ATTEST: THE GUARANTEE LIFE
COMPANIES INC.
_________________________ By_________________________
Secretary Title:
Countersigned:
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By_______________________
Authorized Signatory
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<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ____________________________ hereby sells, assigns
and transfers unto ________________
_______________________________________________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _____________________ Attorney,
to transfer the within Right Certificate on the books of the within named
Company, with full power of substitution.
Dated:_____________, ____
__________________________
Signature
Signatures Guaranteed:
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
___________________________
Signature
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<PAGE>
NOTICE
------
The signature to the foregoing Assignment must correspond to the name
as written upon the face of this Right Certificate in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To The Guarantee Life Companies Inc.:
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Right Cer tificate to purchase the shares of
Preferred Stock issuable upon the exercise of such Rights and requests that
certifi cates for such shares be issued in the name of:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
If such number of Rights shall not be all the Rights evi denced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Dated:__________________, ____
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[Form of Election to Purchase -- continued]
__________________________
Signature
(Signature must conform in all respects to name
of holder as specified on the face of this
Right Certificate.)
Signature Guaranteed:
________________________________________________________________________________
(To be completed if applicable)
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
__________________________
Signature
________________________________________________________________________________
NOTICE
------
In the event the certification set forth above in the Forms of
Assignment and Election is not completed, the Company will deem the beneficial
owner of the Rights evidenced by this Right Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
and, in the case of an Assignment, will affix a legend to that effect on any
Right Certificates issued in exchange for this Rights Certificate.
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<PAGE>
Exhibit C
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THE GUARANTEE LIFE COMPANIES INC.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On November 14, 1996, the Board of Directors of The Guarantee Life
Companies Inc. (the "Company") declared a dividend distribution of one Preferred
Share Purchase Right (a "Right") for each outstanding share of Common Stock, par
value $0.01 per share, of the Company (the "Common Stock"). The following is a
summary of the terms of the Rights.
Each Right entitles the registered holder to purchase from the Company
one one-thousandth of a share of Series A Junior Participating Cumulative
Preferred Stock, par value $1.00 per share, of the Company (the "Preferred
Stock") at a price of $80.00 per one one-thousandth of a share of Preferred
Stock, subject to adjustment (the "Purchase Price"). The description and terms
of the Rights are set forth in a Rights Agreement, dated as of November 18, 1996
(the "Rights Agreement"), between the Company and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent (the "Rights Agent").
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate certificates representing
the Rights ("Right Certificates") will be distributed. The Rights will separate
from the Common Stock and a "Distribution Date" will occur upon the earlier to
occur of (i) ten business days following the time (the "Stock Acquisition Time")
of a public announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding Common Stock of the
Company and (ii) ten business days (or, if determined by the Board of Directors,
a specified or unspecified later date) following the commencement or
announcement of an intention to make a tender offer or exchange offer which, if
successful, would cause the bidder to own 15% of more of the outstanding Common
Stock.
The Rights Agreement provides that, until the Distribution Date, (i) the
Rights will be transferred with and only with the Common Stock, (ii) new Common
Stock certificates issued after November 29, 1996, upon transfer or new
issuance of the Common Stock, will contain a notation incorporating the Rights
Agreement by reference and
<PAGE>
(iii) the surrender for transfer of any of the Common Stock certificates
outstanding will also constitute the transfer of the Rights associated with the
shares of Common Stock represented by such certificate. As soon as practicable
following the Distribution Date, separate Right Certificates will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights. Except as otherwise determined by the Board of Directors, only shares of
Common Stock issued prior to the Distribution Date will be issued with Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on November 18, 2006, unless earlier redeemed or exchanged by the
Company as described below.
In the event that, after the Stock Acquisition Time, the Company is
acquired in a merger or other business combination transaction (except certain
transactions with a person who became an Acquiring Person as a result of a
tender offer described in the next succeeding paragraph) or 50% or more of its
assets, cash flow or earning power is sold, proper provision shall be made so
that each holder of a Right shall thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction would have a market value (as defined in the Rights Agreement) of
two times the Purchase Price of the Right. In the event that, after the Stock
Acquisition Time, the Company were the surviving corporation of a merger and
its Common Stock were changed or exchanged, proper provision shall be made so
that each holder of a Right will thereafter have the right to receive upon
exercise that number of shares of common stock of the Company having a market
value of two times the exercise price of the Right.
In the event that a person or group becomes an Acquiring Person (except
pursuant to a tender offer for all outstanding Common Stock determined to be at
a fair price and otherwise in the best interests of the Company and its
stockholders by a majority of the Outside Directors), proper provision shall be
made so that each holder of a Right (other than the Acquiring Person) will
thereafter have the right to receive upon exercise that number of shares of
Common Stock (or, in certain circumstances, cash, a reduction in the Purchase
Price, Common Stock, other equity securities of the Company, debt securities of
the Company, other
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property or a combination thereof) having a market value (as defined in the
Rights Agreement) of two times the Purchase 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 (or
an affiliate, associate or transferee thereof) will be null and void. A person
will not be an Acquiring Person if the Board of Directors of the Company
determines that such person or group became an Acquiring Person inadvertently
and such person or group promptly divests itself of a sufficient number of
shares of Common Stock so that such person or group is no longer an Acquiring
Person.
The Purchase Price payable, and the number of shares of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of Preferred Stock of certain
rights or warrants to subscribe for Preferred Stock or convertible securities at
less than the current market price of Preferred Stock or (iii) upon the
distribution to holders of Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above). The number of Rights and number of shares of Preferred
Stock issuable upon the exercise of each Right are also subject to adjustment in
the event of a stock split, combination or stock dividend on the Common Stock.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock which may, upon the election of the Company, be
evidenced by depositary receipts) 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 prior to the earlier of the Stock Acquisition Time and the
Expiration Date (as defined in the Rights Agreement), the Board of Directors may
redeem the Rights in whole, but not in part, at a price of $.01 per
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<PAGE>
Right (the "Redemption Price"). Immediately upon the action of the Board of
Directors ordering redemption of the Rights (or at such time subsequent to such
action as the Board of Directors may determine), the Rights will terminate and
the only right of the holders of Rights will be to receive the $.01 Redemption
Price.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such Person of 50% or more of the outstanding shares of Common
Stock, the Board of Directors of the Company may exchange the Rights (other than
Rights beneficially owned by such Person which have become void), in whole or
part, at an exchange ratio of one share of Common Stock per Right (subject to
adjustment). The Company, at its option, may substitute one one-thousandth of a
share of Preferred Stock (or other series of substantially similar preferred
stock of the Company) for each share of Common Stock to be exchanged.
Each share of Preferred Stock purchasable upon exercise of the Rights
will have a minimum preferential dividend of $10 per year, but will be entitled
to receive, in the aggregate, a dividend of 1,000 times the dividend declared
on the shares of Common Stock. In the event of liquidation, the holders of the
shares of Preferred Stock will be entitled to receive a minimum liquidation
payment of $10 per share, but will be entitled to receive an aggregate
liquidation payment equal to 1,000 times the payment made per share of Common
Stock. Each share of Preferred Stock will have one thousand votes, voting
together with the shares of Common Stock. In the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Preferred Stock will be entitled to receive 1,000 times
the amount and type of consideration received per share of Common Stock. The
rights of the shares of Preferred Stock as to dividends and liquidation, and in
the event of mergers and consolidations, are protected by anti-dilution
provisions.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, other than rights resulting from such
holder's ownership of shares of Common Stock, 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 consid-
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eration) of the Company or for common stock of the acquiring company as set
forth above.
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 prior to the Stock Acquisition Time. After such time, the
provisions of the Rights Agreement may be amended by the Board of Directors
(only with the concurrence of a majority of the Continuing Directors) in order
to cure any ambiguity, to correct or supplement defective or inconsistent
provisions, to shorten or lengthen any time period under the Rights Agreement,
to make changes which do not adversely affect the interests of the 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 term "Continuing Director" means (i) any member of the Board of
-
Directors of the Company who was a member of the Board prior to the Stock
Acquisition Time, and (ii) any person who is subsequently elected to the Board,
--
if such person is recommended or approved by a majority of the Continuing
Directors then on the Board of Directors, and such person is not an Acquiring
Person or an affiliate, associate, representative or nominee of an Acquiring
Person.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Form 8-A dated [Date]. Copies of the
Rights Agreement are 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, as it may be amended from
time to time, which is hereby incorporated herein by reference.
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