Exhibit 1
Community Banks, Inc.
and
Community Banks
as Rights Agent
___________________________
Rights Agreement
Dated as of February 28, 2002
TABLE OF CONTENTS
Section Page Numbers
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1. Certain Definitions.......................................... 1
2. Appointment of Rights Agent.................................. 6
3. Issuance of Rights Certificates.............................. 6
4. Form of Rights Certificates.................................. 8
5. Countersignature and Registration............................ 8
6. Transfer, Split-up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen
Certificates................................................. 9
7. Exercise of Rights, Purchase Price and Expiration Date of
Rights....................................................... 10
8. Cancellation and Destruction of Rights Certificates.......... 12
9. Reservation, Registration and Listing........................ 12
10. Effective Date of Rights Exercise............................ 14
11. Adjustment of Purchase Price, Number of Shares or Number of
Rights....................................................... 14
12. Certificate of Adjusted Purchase Price or Number of Shares... 24
13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power................................................ 24
14. Fractional Rights and Fractional Shares...................... 27
15. Rights of Action............................................. 28
16. Agreement of Right Holders................................... 28
17. Rights Certificate Holder Not Deemed a Stockholder........... 29
18. Concerning the Rights Agent.................................. 29
19. Merger or Consolidation or Change of Name of Rights Agent.... 30
20. Duties of Rights Agent....................................... 30
21. Change of Rights Agent....................................... 32
22. Issuance of New Rights Certificates.......................... 33
23. Redemption and Termination................................... 33
24. Notice of Certain Events..................................... 35
25. Notices...................................................... 36
26. Supplements and Amendments................................... 37
27. Successors................................................... 38
28. Determinations and Actions by the Board of Directors, etc.... 38
29. Benefits of this Agreement................................... 38
30. Severability................................................. 39
31. Governing Law................................................ 39
32. Counterparts................................................. 39
33. Descriptive Headings......................................... 39
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RIGHTS AGREEMENT
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RIGHTS AGREEMENT, dated as of February 28, 2002, (the "Agreement")
between COMMUNITY BANKS, INC., a corporation organized and existing under the
laws of the Commonwealth of Pennsylvania (the "Company") and COMMUNITY BANKS, a
bank and trust company organized under the laws of the Commonwealth of
Pennsylvania (the "Rights Agent").
WITNESSETH:
WHEREAS, on February 12, 2002, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right for each share of
Common Stock of the Company outstanding at the close of business on February 28,
2002, each Right representing the right to purchase one share of Common Stock,
upon the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each share of
Common Stock that shall become outstanding between the Record Date and the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date (all capitalized terms have the meanings hereinafter set forth).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and intending to be legally bound hereby, the
parties agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
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the following terms have the meanings indicated:
(a) "Acquiring Person" means any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
ten (10%) percent or more of the shares of Common Stock then outstanding, but
shall not include the Company, any Subsidiary (as hereinafter defined) of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any Person or entity holding shares of Common Stock for or pursuant
to the terms of any such plan. Notwithstanding the foregoing, no person shall
become an "Acquiring Person" as the result of an acquisition of shares of Common
Stock by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such person
to ten (10%) percent or more of the shares of Common Stock of the Company then
outstanding; provided, however, that if a person becomes the Beneficial Owner of
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ten (10%) percent or more of the shares of Common Stock of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company,
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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".
(b) "Adjustment Shares" means that number of shares of Common Stock
which each holder of a Right is entitled to receive upon exercise of a Right, as
adjusted from time to time in the manner set forth in Section 11.
(c) "Affiliate"and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, as in effect on the date of
this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) 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) (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or upon
the exercise of conversion rights, exchange rights, rights (other than
these Rights), warrants or options, or otherwise; provided, however, that a
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Person shall not be deemed the Beneficial Owner of, or to beneficially own,
(A) securities tendered pursuant to a tender or exchange offer made by or
on behalf of such Person or any of such Persons Affiliates or Associates
until such tendered securities are accepted for purchase or exchange; or
(B) securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities issuable upon exercise
of Rights from and after the occurrence of a Triggering Event which Rights
were acquired by such Person or any of such Persons 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;
(iii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a
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Person shall not be deemed the Beneficial Owner of, or to "beneficially
own," any security under this subparagraph (iii) as a result of an
agreement, arrangement or understanding to vote such security (1) which
arises solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations of the Exchange Act
and (2) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iv) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Persons Affiliates or
Associates has any agreement, arrangement or understanding (whether or not
in writing) (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering of
securities) for the purpose of acquiring, holding, voting (except to the
extent contemplated by the proviso to subparagraph (iii) of this paragraph)
of disposing of any securities of the Company.
(e) "Board" means the Board of Directors of the Company.
(f) "Business Day" means any day other than a Saturday, a Sunday,
or a day on which banking institutions in the Commonwealth of Pennsylvania are
authorized or obligated by law or executive order to close.
(g) "Close of Business" on any given date means 5:00 P.M.
Millersburg, Pennsylvania time, on such date; provided, however, that if such
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date is not a Business Day it shall mean 5:00 P.M., Millersburg, Pennsylvania
time, on the next succeeding Business Day.
(h) "Common Stock", when used with reference to the Company means
the shares of common stock, $5.00 par value per share of the Company. "Common
Stock" when used with reference to any Person other than the Company shall mean
the capital stock (or equity interest) with the greatest voting power of such
other Person or, the equity securities or other equity interest having power to
control or direct the management of such Person.
(i) "Common Stock Equivalents" means securities of the Company,
which either (i) have the same rights, privileges and preferences as Common
Stock or (ii) securities which the Board of Directors of the Company have deemed
to have the same per share value as Shares of Common Stock.
(j) "Company" means Community Banks, Inc.
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(k) "Continuing Director" means (i) any member of the Board of
Directors of the Company, while such Person is a member of the Board, who is not
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, or
otherwise affiliated with an Acquiring Person or of any such Affiliate or
Associate, and was a member of the Board prior to the date of this Agreement, or
(ii) any Person who subsequently becomes a member of the Board, while such
Person is a member of the Board, who is not an Acquiring Person, or an Affiliate
or Associate of an Acquiring Person, or a representative of an Acquiring Person
or of any such Affiliate or Associate or otherwise affiliated with an Acquiring
Person or of any such Affiliate or Associate, if such Person's nomination for
election or election to the Board is recommended or approved by a majority of
other members of the Board who are also Continuing Directors.
(l) "Distribution Date" means the earlier of (i) the tenth
business day after the Shares Acquisition Date (or, if the tenth business day
after the Shares Acquisition Date occurs before the Record Date, the close of
business on the Record Date) or (ii) the tenth business day after the date of a
tender or exchange offer by any Person is first published or sent or given
within the meaning of Rule 14d-2(a) of the Exchange Act, the consummation of
which would result in any Person becoming the beneficial Owner of Common Stock
aggregating ten (10%) percent or more of the then outstanding shares of Common
Stock. If any such tender or exchange offer is cancelled, terminated or
otherwise withdrawn prior to the Distribution Date, the Board may, in its sole
discretion deem such offer never to have been made.
(m) "Final Expiration Date" means February 28, 2012.
(n) "Pennsylvania Business Corporation Law" means the Act of
December 21, 1988, P.L. 1444, No. 177, as amended from time to time.
(o) "Person" means any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity,
excluding the Company or any Related Party.
(p) "Principal Party" means (i) in the case of any transaction
described in clause (i) or (ii) of the first sentence of Section 13(a), the
Person that is the issuer of any securities into which shares of Common Stock of
the Company are converted 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 (iii)
of the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions; provided, however, that in any such case, (A) if
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the Common Stock or other securities of such Person is not at such time and has
not been continuously over the preceding twelve (12) month period
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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 (B) in
case such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(q) "Purchase Price" means the price to be paid for one share of
Common Stock upon exercise of a Right, subject to adjustment as provided in this
Agreement.
(r) "Record Date" means February 28, 2002.
(s) "Related Party" means any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company, any
investment plan sponsored or operated by the Company or a Subsidiary of the
Company (but not the participants in such plan), or any entity or person
organized, appointed or established by the Company or any Subsidiary of the
Company for or pursuant to the terms of any such plan.
(t) "Rights Dividend Declaration Date" means the date the Board
authorized and declared a dividend distribution of one Right for each share of
Common Stock outstanding at the close of business on the Record Date.
(u) "Redemption Date" means the time at which the Rights are
redeemed as provided in Section 23.
(v) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A), (B) or (C) hereof.
(w) "Section 11(a)(ii) Trigger Date" means the later of (i ) the
first occurrence of a Section 11(a)(ii) Event and (ii) the date on which the
Company's right of redemption pursuant to Section 23(a) expires.
(x) "Section 13 Event" means any event described in clauses (i),
(ii) or (iii) of Section 13(a) hereof.
(y) "Share" means a share of the Common Stock, par value $5.00 per
share, of the Company and also means, if the context requires, a share of any
other class of the capital stock of the Company which may be authorized and
outstanding.
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(z) "Shares Acquisition Date" shall mean the first date of public
announcement (which for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that a Person has become an Acquiring Person.
(aa) "Subsidiary" of any Person means any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(bb) "Trading Day" means a day on which the principal national
securities exchange on which a security is listed or admitted to trading is open
for the transaction of business, or if the security is not listed or admitted to
trading on any national securities exchange, a Business Day.
(cc) "Transferee" means a Person to whom an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, transferred Rights, if such
transfer occurred (i) after the transferor of the Rights became an Acquiring
Person (or an Associate or Affiliate of the Acquiring Person), or (ii) prior to
or concurrently with the transferor of the Rights becoming an Acquiring Person
(or an Associate or Affiliate of the Acquiring Person) if the transferee
received the Rights (A) pursuant to a transfer from the Acquiring Person to
holders of equity interests in such Acquiring Person, (B) pursuant to a
continuing agreement, arrangement or understanding regarding the transferred
Rights, or (C) pursuant to a transfer which the Board of Directors of the
Company has determined is part of a plan, arrangement or understanding which has
a primary purpose or effect to avoid the purposes or effect of this Agreement,
including but not limited to Section 7(e).
(dd) "Triggering Event" means any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby
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appoints the Rights Agent to act as agent for the Company and the holders of the
Rights in accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates.
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(a) Until the Distribution Date:
(i) The Rights will be evidenced (subject to the provisions of
Section 3(b) hereof) by the certificates evidencing the Common Stock registered
in the names of the holders thereof (which certificates for Common Stock shall
also be deemed to be Rights Certificates) and not by separate Rights
Certificates, and
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(ii) The right to receive Rights Certificates will be transferable
only in connection with the transfer of the underlying shares of Common Stock.
As soon as practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign, and the Company will send or cause
to be sent (and the Rights Agent will, if requested, send) by first-class,
postage-prepaid mail, to each record holder of the Common Stock as of the close
of business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Rights Certificate, in substantially the form of
Exhibit A hereto (a "Rights Certificate"), evidencing one Right for each share
of Common Stock so held, subject to adjustments as provided herein. On and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) As soon as possible after the Record Date the Company will send
a copy of a Summary of Rights, in substantially the form of Exhibit B hereto
(the "Summary of Rights"), by first-class, postage-prepaid mail, to each record
holder of the Common Stock as of the close of business on the Record Date, at
the address of such holder shown on the records of the Company. Common Stock
certificates outstanding as of the Record Date (and until the Distribution Date)
will, together with the Summary of Rights, also evidence the Rights. Until the
Distribution Date (or the earlier of the Redemption Date or Final Expiration
Date), the surrender for transfer of any certificate for shares of Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Stock represented thereby.
(c) Certificates of Common Stock which are issued (including,
without limitation, reacquired Common Stock referred to in the last sentence of
this subparagraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or 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 Community Banks, Inc. and
Community Banks dated as of February 28, 2002 (the "Rights Agreement"), the
terms of which are incorporated herein by reference and a copy of which is
on file at the principal executive offices of Community Banks, Inc. 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. Community Banks, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of
a written request therefor. As described in the Rights Agreement, Rights
issued to any Person who becomes an Acquiring Person (as defined in the
Rights Agreement) shall become null and void.
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Certificates containing the foregoing legend, until the earlier of the
Distribution Date or the Final Expiration Date, shall represent both shares of
Common Stock and the Rights associated therewith and the surrender for transfer
of any such certificate shall constitute the transfer of the Rights associated
with such Common Stock. In the event that the Company purchases or acquires any
shares of Common Stock after the Record Date but prior to the Distribution Date,
any Rights associated with Common Stock shall be deemed cancelled and retired.
The Company shall not be entitled to exercise any Rights associated with Common
Stock which is no longer outstanding.
Section 4. Form of Rights Certificates.
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(a) The Rights Certificates (and the forms of election to purchase
Common Stock and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit "A" hereto. Such certificates 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
conform to usage, to comply with any applicable law, rule or regulation, or with
any rule or regulation of any stock exchange on which the Rights may from time
to time be listed. Subject to the provisions of Section 11 and Section 22
hereof, the Rights Certificates shall entitle the holders thereof to purchase
such number of shares of Common Stock as are set forth therein at the Purchase
Price inscribed thereon, but the Purchase Price and amount and type of
securities purchased upon exercise of Rights is subject to modification as
provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, or by a Transferee,
and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof
upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent feasible)
the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified in
Section 7(e) of such Agreement.
Section 5. Countersignature and Registration. The Rights
---------------------------------
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, President, or any Vice President, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile thereof,
and shall be attested
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by the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. If
any officer of the Company who signed any of the Rights Certificates ceases to
be such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed the Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates and the date of
each of the Rights Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of Rights
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Certificates; Mutilated, Destroyed, Lost or Stolen Certificates.
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(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the earlier of the Redemption
Date or the Final Expiration Date, any Rights Certificate or Rights Certificates
may be transferred, split up, combined or exchanged for another Rights
Certificate or Rights Certificates, entitling the registered holder to purchase
a like number of shares of Common Stock as the Rights Certificate or Rights
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Rights Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, split up, combined or exchanged at the principal
office of the Rights Agent. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and
Section 14 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any
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tax or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of a Rights Certificate.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the lost, stolen, destroyed or mutilated Rights
Certificate.
Section 7. Exercise of Rights, Purchase Price and Expiration Date
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of Rights.
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(a) Subject to Sections 7(e), 9(d), 11(a)(ii) and 23(a), the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Rights Agent at the principal
office of the Rights Agent, together with payment of the aggregate Purchase
Price with respect to the total number of shares of Common Stock (or other
securities, cash or other assets, as the case may be) as to which the Rights are
exercised, at or prior to the earliest of (i) the close of business on the Final
Expiration Date and (ii) the Redemption Date.
(b) The Purchase Price for each share of Common Stock pursuant to
the exercise of a Right shall initially be Twenty-Five Dollars ($25.00) and
shall be subject to adjustment from time to time as provided in Sections 11 and
13(a). The Purchase Price shall be payable in lawful money of the United States
of America, or if permitted by the Board, shares of Common Stock of the Company,
in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares of Common 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
such Rights Certificate, the Rights Agent shall promptly:
(i) Requisition from any transfer agent of the Common Stock
(including itself) certificates for the number of shares of Common Stock to
be purchased (the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests); and
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(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; and
(iii) After receipt of such certificates, cause the same to be
delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder; and
(iv) When appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Rights Certificate.
All payments made by holders of Rights Certificates shall be made by
certified check, cashiers check, bank draft or money order payable to the order
of the Company, unless the Board, in its sole discretion, permits payment of the
Purchase Price by delivery of certificate(s) (with appropriate stock power
executed in blank attached thereto) for whole numbers of shares of Common Stock
of the Company which shall be credited at the current market value thereof
(determined pursuant to Section 11(d) hereof).
In the event that the Company is obligated to issue other securities
(including Common Stock) of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that 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 Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Rights 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 Triggering Event, any Rights
beneficially owned by an Acquiring Person, an Associate or Affiliate of an
Acquiring Person, or a Transferee, shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to any Acquiring
Person or its Affiliates, Associates or Transferees.
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(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall
have:
(i) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise; and
(ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
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All Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement; and the Rights
Agent shall so cancel and retire, any other Rights Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation, Registration and Listing.
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(a) Except as provided in Section 11(a)(iii) hereof, and without
consideration of the adjustments provided by Section 11(a)(ii), the Company
covenants and agrees that, prior to the latter of the Distribution Date and the
occurrence of a Triggering Event, it will cause to be reserved and kept
available out of its authorized and unissued shares of Common Stock or out of
its authorized and issued shares held in its treasury, the number of shares of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) The Company shall use its best efforts promptly to cause, from
and after such time as the Rights become exercisable, all shares of Common Stock
and other securities reserved for issuance upon exercise of Rights to be listed
with any system or on any securities exchange on which the Company's Common
Stock then trades.
12
(c) The Company shall use its best efforts:
(i) To file, as soon as practical after the first occurrence
of a Section 11(a)(ii) Event (and the determination of the securities or
property to be delivered upon exercise of the Rights), or as soon as is
required by law following the Distribution Date, an appropriate
registration statement under the Securities Act of 1933, as amended (the
"Act"), with respect to the securities purchasable upon exercise of the
Rights;
(ii) Cause such registration statement to become effective as
soon as practical after the 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 Final Expiration Date.
The Company will also take all action necessary to ensure compliance
with the securities laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statements and to permit them to
become effective. Upon any suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in that jurisdiction shall have been obtained.
(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 Rights Certificates
or of any shares of Common Stock upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Rights Certificates to a Person other
than, or the issuance or delivery of certificates for the Common Stock in a name
other than that of, the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or to issue or to deliver any certificates for
Common 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 Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
13
Section 10. Effective Date of Rights Exercise. Each person in whose
---------------------------------
name any certificate for securities issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of such securities,
and such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made. Provided, however, that if the
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date of such surrender and payment is a date upon which the transfer books of
the Company are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Common Stock transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights are exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or
-------------------------------------------------
Number of Rights. The Purchase Price, the number of shares of Common Stock
----------------
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) If the Company, after the date of this Agreement (A) declares
a dividend on the Common Stock payable in shares of Common Stock, (B)
subdivides the outstanding Common Stock, (C) combines the outstanding
Common Stock into a smaller number of shares of Common Stock, or (D) issues
any shares of its capital stock in a reclassification of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation),
then except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, the Purchase Price in effect at the time of the Record Date for
such dividend or of the effective date of such subdivision, combination or
reclassification, and/or the number and kind of shares of Common 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 the aggregate number and kind of
Shares which, if such Right had been exercised immediately prior to such
date and at a time when the transfer books of the Company were open, the
holder of the Right would have owned upon such exercise and been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition to,
and shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
14
(ii) In the event:
(A) any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, at any time after the date of this Agreement,
directly or indirectly,
(1) shall merge into the Company or otherwise combine
with the Company or a Subsidiary and the Company or the Subsidiary
shall be the continuing of surviving corporation of such merger or
combination and the Common Stock of the Company shall remain
outstanding and unchanged, or
(2) shall effect a statutory share exchange with the
Company, after which the Company is not a Subsidiary of any Acquiring
Person or any Associate or Affiliate of any Acquiring Person, or
(3) shall, in one or more transactions, other than in
connection with the exercise or conversion of securities exercisable
or convertible into capital stock of the Company or any of its
Subsidiaries, transfer any assets to the Company or to any of its
Subsidiaries in exchange (in whole or in part) for shares of any
equity security of the Company or for securities exercisable for or
convertible into shares of any equity security of the Company or
otherwise obtain from the Company, with or without consideration, any
additional shares of any equity security of the Company or securities
exercisable for or convertible into shares of any equity security of
the Company (other than as part of a pro rata distribution to all
holders of Common Stock), or
(4) shall receive any compensation from the Company
or any of the Company's Subsidiaries other than compensation for full-
time employment as a regular employee at rates in accordance with the
Company's (or its Subsidiaries') past practices, or
(5) shall receive the benefit, directly or indirectly
(except proportionately as a stockholder and except if resulting from
a requirement of law or governmental regulation), of any loans,
advances, guarantees, pledges or other financial assistance or any tax
15
credits or other tax advantage provided by the Company or any of its
Subsidiaries, or
(6) shall sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise dispose, in one or more transactions,
to, from or with, as the case may be, the Company or any of its
Subsidiaries, assets on terms and conditions less favorable to the
Company than the Company would be able to obtain in arm's length
negotiation with an unaffiliated third party,
(B) any Person, alone or together with its Affiliates and
Associates, shall, at any time after the Rights Dividend Declaration Date,
become the Beneficial Owner of ten (10%) percent or more of the shares of
Common Stock then outstanding, unless the event causing the ten (10%)
percent threshold to be crossed is a transaction set forth in Section 13(a)
hereof, or is an acquisition of shares of Common Stock pursuant to a tender
offer or exchange offer for all outstanding shares of Common Stock at a
price and on terms determined by at least a majority of the Continuing
Directors, after receiving advice from one or more investment banking
firms, to be (a) at a price which is fair to stockholders (taking into
account all factors which such members of the Board deem relevant) and (b)
otherwise in the best interests of the Company and its stockholders, taking
into consideration all relevant factors including but not limited to those
set forth in the Pennsylvania Business Corporation Law,
(C) at any time after a Shares Acquisition Date and during such
time as there is an Acquiring Person, there shall be any reclassification
of securities (including any reverse stock split), or recapitalization of
the Company (whether or not such reclassification or recapitalization
occurs in a merger in which the Company survives), or any repurchase by the
Company or any of its Subsidiaries of shares of Common Stock, or any other
class or series of securities issued by the Company or any merger or
consolidation of the Company with any of its Subsidiaries or other
transaction or series of transactions involving the Company (whether or not
with or into or otherwise involving an Acquiring Person or any Affiliate or
Associate thereof but excluding a tender offer or exchange offer of the
nature described in clause (A) above) which has the effect, directly or
indirectly, of increasing by more than one (1%) percent the proportionate
share of the outstanding shares of any class of equity securities of the
Company or any of its Subsidiaries which is directly or indirectly
beneficially owned by an Acquiring Person or any Associate or Affiliate of
any Acquiring Person,
16
then, promptly following the occurrence of a Section
11(a)(ii) Event, proper provision shall be made so that each holder of a
Right (except as provided below) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, 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 shares of
Common Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by fifty (50%) percent of the current market price
(determined pursuant to Section 11(d)(i) hereof) per share of Common Stock
on the date of such first occurrence (such number of shares, the
"Adjustment Shares").
(iii) If the number of shares of Common Stock which are
authorized by the Company's articles of incorporation but not outstanding
or reserved for issuance for purposes other than upon exercise of the
Rights are insufficient to permit the exercise in full of the Rights in
accordance with this Agreement, the Company shall:
(A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current
Value") over (2) the Purchase Price (such excess, the "Spread"), and
(B) with respect to each Right, 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 Common Stock Equivalents, (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has been
determined by the Board of Directors of the Company based upon the advice
of an investment banking firm selected by the Board of Directors of the
Company; Provided, however, if the Company shall not have made adequate
-------
provision to deliver value pursuant to this clause (B) within thirty (30)
days following the Section 11(a)(ii) Trigger Date, then the Company shall
be obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock (to
the extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Board of Directors
of the Company shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could
17
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 need
be taken pursuant to the first and/or second sentences of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof,
that such action shall apply uniformly to all outstanding Rights, and (y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer
in effect. For purposes of this Section 11(a)(iii), the value of the Common
Stock shall be the current market price (as determined pursuant to Section
11(d) hereof per share of the Common Stock on the Section 11(a)(ii) Trigger
Date) and the value of any Common Stock Equivalent shall be deemed to have
the same value as the Common Stock on such date.
(b) If the Company fixes a record date for the issuance of rights,
options or warrants to all holders of Common Stock entitling them (for a period
expiring within forty (45) calendar days after such record date) to subscribe
for or purchase shares of Common Stock (or Common Stock Equivalents) or
securities convertible into Common Stock or Common Stock Equivalents at a price
per share of Common Stock or Common Stock Equivalents (or having a conversion
price per share, if a security convertible into Common Stock or Common Stock
Equivalents) less than the then current per share market price of the Common
Stock (calculated in the manner set forth 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 Common Stock outstanding on such record date plus the number of shares of
Common Stock which the aggregate offering price of the total number of Common
Stock and/or Common Stock Equivalents to be offered (and/or the aggregate
initial conversion price of the convertible securities to be offered) would
purchase at such current market price and the denominator of which shall be the
number of shares of Common Stock outstanding on such record date plus the number
of additional shares of Common Stock and/or Common Stock Equivalents to be
offered for subscription or purchase (or into which the convertible
18
securities so to be offered are initially convertible). If the subscription
price may be paid in a consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board, whose determination shall be described in a statement filed
with the Rights Agent. Common Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any computation. Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) or evidences of indebtedness or assets
(other than a regular quarterly cash dividend or a dividend payable in Common
Stock) or subscription rights or warrants (excluding those referred to in
Section 11 (b)), 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 then current
per share market price of the Common 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, 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 Common Stock and the denominator of which shall be such current per share
market price of the Common 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) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "current market
price" of any security, (a "Security" for the purpose of this Section 11(d)(i)),
on any date shall be deemed to be the average of the daily closing prices per
share of such Security for the thirty (30) consecutive Trading Days immediately
prior to such date. For purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the ten (10) consecutive Trading Days immediately
following such date, provided, however, if the current market price per share of
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the Security is determined during a period following the announcement by the
issuer of such Security of (A) a dividend or distribution on such Security
payable in shares of such Security of securities convertible into such shares
(other than the Rights), or (B) any subdivision, combination or reclassification
of such Security and prior to the expiration of the requisite thirty (30)
Trading Days or ten (10) Trading Days, as set forth above, or
19
after the ex-dividend date for such dividend or distribution, or the Record Date
for such subdivision, combination or reclassification, then, and in each such
case, the "current market price" shall be appropriately adjusted to reflect the
ex-dividend trading. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, 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
Security is not listed or admitted to trading on the New York Stock Exchange, as
reported on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security if not listed or admitted to
trading on any national securities exchange, the last closing price or, if no
such sale takes place on such day, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Company. If on such date no market maker is making a
market in the Security, the fair value of each share of such Security on such
date shall be determined in good faith by the Board.
If the Security is not publicly held or so listed or traded, "current
market price" per share shall mean the fair value per share as determined in
good faith by the Board, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(e) No adjustment in the Purchase Price shall be required unless it
would require an increase or decrease of at least one (1%) percent in the
Purchase Price; provided, however, that any adjustments which by reason of this
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Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one ten-thousandth of a
share of Common Stock or any other share or security as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which requires such adjustment or
(ii) the date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a), the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k)
and (m), and the provisions
20
of Sections 7, 9, 10, 13, and 14 with respect to the shares of Common Stock
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of shares of Common Stock
(calculated to the nearest one ten-thousandth) obtained by
(i) Multiplying (x) the number of shares covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price; and
(ii) Dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Common 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 shares of Common Stock for
which a Right was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest one 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 date
thereafter, but, if the Rights Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company and the Rights Agent shall, as
promptly as practical, distribute to holders of record of Rights Certificates on
such record date Rights Certificates evidencing, subject to Section 14 hereof,
the additional Rights to which such holders shall be entitled as a result of
such adjustment, or at the option of the Company, shall distribute to such
holders of
21
record in substitution and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Company, new Rights Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Such Rights Certificates shall
be issued, executed and countersigned in the manner provided for herein and
shall be registered in the names of the holders of record of Rights Certificates
on the Record Date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of shares of Common Stock issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of shares of Common Stock which were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and non-assessable shares of
Common Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 requires an adjustment in
the Purchase Price to be effective as of a record date for a specified event,
the Company may defer until the occurrence of such event the issuance of Common
Stock and other capital stock or securities of the Company, if any, issuable
upon the exercise of a Right over and above the shares of Common Stock and other
capital stock or securities of the Company, if any, which were 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
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due xxxx or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion determines advisable in order to avoid
the occurrence of a taxable event to its shareholders upon the consolidation or
subdivision of the Common Stock, issuance of any Common Stock for cash at less
than the current market price, issuance of Common Stock or securities for cash
which by their terms are convertible into or exchangeable for Common Stock,
issuance of stock dividends or issuance of rights, options or warrants referred
to in this Section 11.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date,
22
(i) consolidate with;
(ii) merge with or into; or
(iii) sell or transfer to, in one or more transactions,
assets or earning power aggregating more than fifty (50%) percent of
the assets or earning power of the Company and its Subsidiaries taken
as a whole,
any other Person if (x) at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments outstanding
or agreements in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or (y) the
shareholders of the Person who constitutes, or would constitute the "Principal
Party" for purposes of Section 13(a) hereof shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates and
Associates.
(o) The Company covenants and agrees that, after the Shares
Acquisition Date, it will not, except as permitted by Section 23 or Section 26
hereof, take any action the purpose or effect of which is to substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights, unless such action is approved by a majority of the Continuing
Directors.
(p) Anything in this Agreement to the contrary notwithstanding,
in the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date:
(i) declare a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock;
(ii) subdivide the outstanding shares of Common Stock; or
(iii) combine the outstanding shares of Common Stock into
a smaller number of shares,
the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of
23
shares of Common Stock outstanding immediately following the occurrence of such
event.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof,
------
the Company shall promptly,
(a) Prepare a certificate setting forth such adjustment, and a
brief statement of the facts accounting for such adjustment;
(b) File with the Rights Agent and with each transfer agent for the
Common Stock a copy of each certificate; and
(c) Mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
-------------
(a) In the event that, following a Shares Acquisition Date,
directly or indirectly,
(i) the Company shall consolidate with, or merge with and into, any
other Person, and the Company shall not be the continuing or surviving
corporation;
(ii) any Person shall consolidate with, or merge with or into, the
Company, and the Company shall be the continuing or surviving corporation
and, in connection with such consolidation or merger, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other
property; or
(iii) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating more
than fifty (50%) percent of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any Person or Persons, then, and in
each such case (except as contemplated by Section 13(c) hereof), proper
provision shall be made so that:
(A) Each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price in accordance with the terms
24
of this Agreement, such number of validly authorized and issued, fully
paid, non-assessable and freely tradeable shares of Common Stock of the
Principal Party, not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained
by (1) multiplying the then current Purchase Price by the number of shares
of Common Stock for which a Right is exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such shares of Common 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 (2) fifty
(50%) percent of the current market price (determined pursuant to Section
11(d) hereof) per share of the Common Stock or other securities of such
Principal Party on the date of consummation of such Section 13 Event;
(B) Such Principal Party shall thereafter be liable for, and
shall automatically assume by virtue of such Section 13 Event, all the
obligations and duties of the Company pursuant to this Agreement;
(C) 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;
(D) Such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction
as may be necessary to assure that the provisions hereof shall thereafter
be applicable, as nearly as reasonably may be, in relation to its shares of
Common Stock or other securities thereafter deliverable upon the exercise
of the Rights; and
(E) The provisions of Section 11(a)(ii) hereof shall be of no
effect following the first occurrence of any Section 13 Event.
(b) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraph (a) of this Section 13 and
further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party 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 Final Expiration Date; and
25
(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.
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).
(c) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(i) and (ii) of Section 13(a) if
(i) such transaction is consummated with a Person or Persons
who acquired shares of Common Stock pursuant to a tender offer or exchange
offer for all outstanding shares of Common Stock which complies with the
provisions of Section 11(a)(ii)(B) hereof (or a wholly owned subsidiary of
any such Person or Persons),
(ii) The price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant
to such tender offer or exchange offer, and
(iii) The form of consideration being offered to the remaining
holders of shares of Common Stock pursuant to such transaction is the same
as the form of consideration paid pursuant to such tender offer or exchange
offer. Upon consummation of any such
26
transaction contemplated by the Section 13(c), all Rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of 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 Date immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the 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 last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock, and in lieu thereof, the Company
shall pay to the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one share of Common Stock. For purposes
of this Section 14(b), the current market value of one share of Common Stock
shall be the closing price of one share of Common Stock (as determined pursuant
to Section 11(d) hereof) for the Trading Day immediately prior to the date of
such exercise.
27
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), may, in his own behalf and for his own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) Prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of shares of Common Stock, and the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of the Common Stock;
(b) After the Distribution Date, Rights 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;
(c) Subject to Section 7(e) hereof, the Company and the Rights Agent
may deem and treat the person in whose name the Rights Certificate (or, prior to
the Distribution Date, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Rights Certificate or the
associated Common Stock certificate made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary; and
28
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
-------- -------
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of a share of Common Stock or
any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action; or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
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 and its directors, officers,
employees, agents and attorneys (collectively, the "Indemnified Party") for, and
to hold it and them harmless against, any loss, liability, or expense, incurred
without negligence, bad faith or willful misconduct on the part of the
Indemnified Party, for anything done or omitted by the Indemnified Party in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of
29
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, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. 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 stock
transfer or corporate trust business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the 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.
30
(b) The Rights Agent shall not be deemed to have knowledge of any
fact or matter pertaining to the performance of its duties under this Agreement,
except such facts or matters as are evidenced by records which are required to
be created and maintained by it hereunder, until it shall have been advised
thereof in writing by the Company or by a holder of Rights. Whenever in the
performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact of matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board, 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 to the Company and any
other Person 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 Rights
Certificates (except 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 of
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 11 or Section 13 hereof or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after actual
notice that such change or adjustment is required); 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 to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock will, when issued, be validly authorized and issued, fully paid
and non-assessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
31
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, or any Vice President, 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 by
it in good faith in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided, reasonable care was exercised in the selection
--------
and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days, notice in writing mailed to the Company and to
each transfer agent of the Common Stock by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon thirty (30) days
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall, with such
notice, submit his Rights Certificate for inspection by the Company), then the
registered holder of any Rights Certificate may apply to any court of competent
32
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the Commonwealth of Pennsylvania (or of any other state in the United States
so long as such corporation is authorized to do business as a banking
institution in the Commonwealth of Pennsylvania), in good standing, having an
office in the Commonwealth of Pennsylvania, 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 has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least Ten Million ($10,000,000.00) Dollars. 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 mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Rights Certificates. Notwithstanding
-----------------------------------
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by the Board to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement.
Section 23. Redemption and Termination.
--------------------------
(a) The Board may, at its option, at any time prior to the earlier of
(i) The close of business on the tenth (10th) business day
following the Shares Acquisition Date (or, if the Shares Acquisition Date
shall have occurred prior to the Record Date, the close of business on the
tenth (10th) business day following the Record Date); or
(ii) The Final Expiration Date, redeem all but not less than all
the then outstanding Rights at a redemption price of $.001 per Right,
subject to appropriate adjustment to reflect any stock split, stock
33
dividend or similar transaction occurring after the date hereof (such
redemption price hereinafter referred to as the "Redemption Price").
Notwithstanding the foregoing, if:
(i) A Person becomes an Acquiring Person; or
(ii) A change resulting from a Solicitation (as hereinafter
defined) occurs in a majority of the directors in office at the
commencement of such Solicitation,
then redemption of the Rights may only be authorized by a majority of Continuing
Directors then in office.
Notwithstanding the foregoing, if, following the occurrence of a
Shares Acquisition Date and following the expiration of the right of redemption
hereunder, but prior to any Triggering Event:
(i) A Person who is an Acquiring Person shall have transferred or
otherwise disposed of a number of shares of Common Stock in one transaction
or series of transactions, not directly or indirectly involving the Company
or any of its Subsidiaries, such that such Person is thereafter a
Beneficial Owner of five (5%) percent or less of the outstanding shares of
Common Stock; and
(ii) There are no other Persons, immediately following the occurrence
of the event described in clause (i), who are Acquiring Persons,
then the right of redemption shall be reinstated and thereafter be subject to
the provisions of this Section 23.
Notwithstanding anything contained in this Agreement to the contrary,
the Rights shall not be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Company's right of redemption hereunder
has expired. As used in this Section 23, the term "Solicitation" means a proxy
or consent solicitation by a Person participating in such solicitation who has
stated (or, if upon the commencement of such solicitation, a majority of the
Board of Directors of the Company has determined in good faith) that such Person
(or any of its Affiliates or Associates) intends to take, or may consider
taking, any action which would result in such Person becoming an Acquiring
Person or which would cause the occurrence of a Triggering Event, but does not
include a solicitation by any Person (or one or more of its Affiliates or
Associates) concurrent with a cash tender offer pursuant to Schedule 14D-1 (or
any successor form) filed with the Securities and Exchange Commission for
34
all outstanding shares of Common Stock not beneficially owned by such Person (or
by its Affiliates or Associates).
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the Transfer Agent for the Common Stock. Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
Section 24. Notice of Certain Events.
------------------------
(a) In case the Company shall propose at any time after the
Distribution Date:
(i) To pay any dividend payable in stock of any class to the
holders of its Common Stock or to make any other distribution to the
holders of its Common Stock (other than a regular quarterly cash dividend);
(ii) To offer to all of the holders of its outstanding shares
of Common Stock rights or warrants to subscribe for or to purchase any
additional shares of Common Stock or shares of stock of any class or any
other securities, rights or options;
(iii) To effect any reclassification of its Common Stock (other
than a reclassification involving only the subdivision of outstanding
shares of Common Stock);
(iv) To effect any consolidation or merger into or with, or to
effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more
transactions, of fifty (50%) percent or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to, any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof);
35
(v) To effect the liquidation, dissolution or winding up of the
Company; or
(vi) To declare or pay any dividend on the Common Stock payable
in shares of Common Stock or to effect a subdivision, combination or
consolidation of the Common Stock (by reclassification or otherwise that by
payment of dividends in Common Stock),
then, in each such case, the Company shall give to each holder of a Rights
Certificate, 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, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Stock, if any such date is to be fixed, and
such notice shall be so given in the case of any action covered by clause (i) or
(ii) above at least twenty (20) days prior to the record date for determining
holders of the Common Stock for purposes of such action, and in the case of any
other such action, at least twenty (20) days prior to the date of the taking of
such proposed action or the date of participation therein by the holders of the
Common Stock, whichever shall be the earlier.
(b) In case a Section 11(a)(ii) Event shall occur, then the Company
shall as soon as practicable thereafter give to each holder of a Rights
Certificate, in accordance with Section 25 hereof, a notice of the occurrence of
such event, which notice shall describe the event and the consequences of the
event to holders of Rights under Section 11(a)(ii) hereof.
Section 25. Notices. Notices or demand authorized by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Community Banks, Inc.
X.X. Xxx 000
000 Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
36
Community Banks
X.X. Xxx 000
000 Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: President
Notices or demand authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 26. Supplements and Amendments. 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 shares of Common Stock for which a Right is exercisable
without the approval of a majority of the Continuing Directors. Prior to the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date, the Company and the Rights Agent shall, if
the Company so directs, supplement or amend this Agreement without the approval
of any holders of Rights Certificates in order:
(i) To cure any ambiguity;
(ii) To correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein;
(iii) To shorten or lengthen any time period hereunder (which
lengthening or shortening, following the first occurrence of any event set
forth in clauses (i) and (ii) of the first proviso to Section 23(a) hereof,
shall be effective only if there are Continuing Directors and shall require
the concurrence of a majority of such Continuing Directors); or
(iv) To change or supplement the provisions hereunder in any
manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Rights Certificates;
provided, this Agreement may not be supplemented or amended to lengthen,
--------
pursuant to clause (iii) of this sentence,
(A) A time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable; or
37
(B) Any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights.
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.
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)
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board (with, where
specifically provided for herein, the concurrence of the Continuing Directors)
or to the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to:
(i) Interpret the provisions of this Agreement; and
(ii) Make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem
the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board (with, where specifically
provided for herein, the concurrence of the Continuing Directors) in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board (or
the Continuing Directors) to any liability to the holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy
38
or claim under this Agreement; but this Agreement shall be for the sole
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, registered holders
of the Common Stock).
Section 30. Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable present or future laws, but if any provision of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
illegal or unenforceable, in any respect under any such applicable law, such
invalidity, illegality or unenforceability will not affect the remaining
provisions of this Agreement, but this Agreement will be reformed, construed,
and enforced in such jurisdiction or by such authority as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Section 31. Governing Law. This Agreement and each Rights Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
Commonwealth of Pennsylvania 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the date and year first above written.
ATTEST: Community Banks, Inc.
By:__________________________ By: _____________________________________
Xxxxx X. Xxxxxxxxxxxx,
Chairman, President and CEO
ATTEST: Community Banks
By:__________________________ By: ______________________________________
Xxxxx X. Xxxxxxxxxxxx,
President and CEO
39
EXHIBIT A
FORM OF RIGHTS CERTIFICATE
Certificate No. R- Rights
NOT EXERCISABLE AFTER FEBRUARY 28, 2012 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Rights Certificate
Community Banks, 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 February 28,
2002, (the "Rights Agreement"), between Community Banks, Inc., a Pennsylvania
corporation (the "Company"), and Community Banks (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to, Millersburg, Pennsylvania
time, on February 28, 2012 at the principal office of the Rights Agent or at the
office of its successor as Rights Agent, one fully paid non-assessable share of
Common Stock ("Common Stock") of the Company, at a purchase price of $25.00 per
share of Common Stock (the "Purchase Price"), upon presentation and surrender of
this Rights Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Rights Certificate (and the number of shares
of Common Stock which may be purchased upon exercise hereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
February 28, 2002, based on the Common Stock as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number
of shares of Common Stock which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events.
40
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Right Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.
The Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office of the Rights Agent, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase like aggregate number of
shares of Common Stock as the Rights evidenced by the Rights Certificate or
Rights Certificates surrendered shall have entitled such holder to purchase. If
this Rights Certificate shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
No fractional shares of Common Stock will be issued upon the exercise
of any Right or Rights evidenced hereby, but in lieu thereof a cash payment may
be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Common
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
41
subscription rights, or otherwise, until the Right or Rights evidenced by this
Rights Certificate shall have been exercised as provided in the Rights
Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _______________________.
ATTEST: Community Banks, Inc.
________________________________ By:__________________________________________
Secretary President
Countersigned:
___________________________
By: ___________________________
42
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer Rights Certificate)
FOR VALUE RECEIVED ________________________________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated:____________________
_____________________________________________
Signature
Signature Guaranteed:
--------------------------------------------------------------------------------
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [_] is [_] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [_]
did [_] did not acquire the Right evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Associate or
Affiliate of an Acquiring Person.
Dated:_____________________________
______________________________________________
Signature
Signature Guaranteed:
43
NOTICE
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
44
Form of Reverse Side of Rights Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right represented
by the Rights Certificate)
To: Community Banks, Inc.
The undersigned hereby irrevocably elects to
exercise______________________ Rights represented by this Rights Certificate to
purchase the shares of Common Stock issuable upon the exercise of such Rights
and requests that certificates for such shares of Common Stock 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 evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
Dated:______________________
_________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
45
Form of Reverse Side of Rights Certificate -- continued
________________________________________________________________________________
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [_] is [_] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[_] did [_] did not acquire the Right evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Associate or Affiliate of an Acquiring Person.
Dated: ___________________
_____________________________
Signature
Signature Guaranteed:
________________________________________________________________________________
NOTICE
------
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.
46
EXHIBIT "B"
COMMUNITY BANKS, INC.
SUMMARY OF RIGHTS AGREEMENT
The following is a summary description of the Rights and the Rights
Agreement. This description does not purport to be complete, is intended to
provide a general description only, and is qualified in its entirety by the
Rights Agreement between Community Banks, Inc. and Community Banks, as Rights
Agent dated as of February 28, 2002. A copy of the Rights Agreement is available
free of charge from the Rights Agent.
On February 12, 2002, the Board of Directors of Community Banks, Inc. (the
"Company") declared a distribution of one Right (a "Right") for each outstanding
share of common stock, par value $5.00 per share, of the Company (the "Common
Stock") to shareholders of record at the close of business on February 28, 2002
(the "Record Date").
Purchase Price. Each Right initially entitles the registered holder to
--------------
purchase from the Company one (1) share of Common Stock at a purchase price of
$25.00 (the "Purchase Price"), subject to adjustment as provided in the Rights
Agreement. The Purchase Price is payable in cash, certified check, cashier's
check, bank draft or money order unless the Board of Directors in its sole
discretion, permits payment of the Purchase Price in whole shares of the
Company's Common Stock having an equivalent market value.
Issuance of Separate Rights Certificates. Initially, the Rights will be
----------------------------------------
attached to all Common Stock certificates, and no separate Rights Certificates
will be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) ten (10) business days
following the date (the "Shares Acquisition Date") of a public announcement that
a person or group of affiliated or associated persons (an "Acquiring Person")
has acquired, or obtained the right to acquire, (10%) percent or more of such
outstanding shares of Common Stock, or (ii) ten (10) business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning ten (10%) percent or more of such outstanding
shares of Common Stock.
47
Until the Distribution Date: (i) The Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the Record Date
and prior to the Distribution Date will contain a notation incorporating the
Rights Agreement by reference, and (iii) the surrender for transfer of any
certificates for Common Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate. As
soon as practicable after the Distribution Date, Rights Certificates will be
mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights.
Exercise of Rights. The Rights are not exercisable until the Distribution
------------------
Date and will expire at the close of business on February 28, 2012, unless
earlier redeemed by the Company as described below.
Adjustments to Prevent Dilution. The Purchase Price and the number of
-------------------------------
shares of Common Stock or other securities or property issuable upon exercise of
the Rights, and, in certain circumstances, the number of Rights associated with
each share of Common Stock, 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 Common Stock, (ii) if holders of the
Common Stock are granted certain rights or warrants to subscribe for Common
Stock or convertible securities at less than the current market price of the
Common Stock, or (iii) upon the distribution to holders of the Common Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least one (1%) percent of the
Purchase Price.
The Company is not required to issue fractional shares and, in lieu
thereof, an adjustment in cash may be made based on the market price of the
Common Stock on the last trading date prior to the date of exercise.
48
Triggering Events
-----------------
Section 11(a)(ii) Event. If (i) the Company or any Acquiring Person
-----------------------
publicly announces that a person has become the beneficial owner of ten (10%)
percent or more of the then outstanding shares of Common Stock (except pursuant
to an offer for all outstanding shares of Common Stock which the Board of
Directors determines to be fair to and otherwise in the best interests of the
Company and its shareholders), (ii) at any time after a Shares Acquisition Date,
the Company is the surviving corporation in a merger, or the Company is the
acquiring corporation in a statutory share exchange with an Acquiring Person in
which the Common Stock of the Company is not changed or exchanged, (iii) at any
time after a Shares Acquisition Date, an Acquiring Person engages in any one of
a number of self-dealing transactions specified in the Rights Agreement, or (iv)
during a time that there is an Acquiring Person, one or more specified events
occur that result in such Acquiring Person's ownership interest in the Company
being increased by more than one (1%) percent, the Rights Agreement provides
that each holder of a Right will thereafter have the right to receive, upon
exercise, Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the exercise price
of the Right. Any of these events are referred to as a "Section 11(a)(ii)
Event."
Upon the occurrence of a Section 11(a)(ii) Event or a Section 13 Event
(described below), all Rights that are, or (under circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person or certain
related parties will be null and void.
Rights are not exercisable following the occurrence of a Section 11(a)(ii)
Event or a Section 13 Event until such time as the Rights are no longer
redeemable by the Company.
For example, at an exercise price of $25.00 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following a Section
11(a)(ii) Event would entitle its holder to purchase $50.00 worth of Common
Stock (or other consideration, as noted above) for $25.00. Assuming that the
Common Stock had a
49
per share value of $25.00 at such time, the holder of each valid Right would be
entitled to purchase two shares of Common Stock for $25.00.
The Board of Directors may, in its sole discretion, at any time after any
person becomes an Acquiring Person and the Rights become exercisable and prior
to the time that any person becomes the beneficial owner of fifty (50%) percent
or more of the Company's Common Stock, exchange all of the then outstanding and
exercisable Rights (except Rights which have been voided as set forth above) for
Common Stock at an exchange ratio of one share of Common Stock per Right,
subject to adjustment in accordance with the terms of the Rights Agreement.
Section 13 Event. If at any time on or after a Shares Acquisition Date, (i)
----------------
the Company is acquired in a merger or other business combination or share
exchange transaction (other than a merger which follows a Section 11(a)(ii)
Event), or (ii) fifty (50%) percent or more of the Company's assets or earning
power is sold or transferred, then each holder of a Right (except Rights which
have been voided as set forth above) shall thereafter have the right to receive,
upon exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the Right. A Section 11(a)(ii) Event and a Section
13 Event are sometimes referred to as "Triggering Events."
Redemption of Rights. In general, the Company may redeem the Rights in
--------------------
whole, but not in part, at a price of $.001 per Right, at any time until ten
(10) business days following a Shares Acquisition Date. After the redemption
period has expired, the Company's right of redemption may be reinstated if an
Acquiring Person reduces his beneficial ownership to less than five (5%) percent
of the outstanding shares of Common Stock in a transaction or series of
transactions not involving the Company. Generally, immediately upon the action
of the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$.001 per Right redemption price.
Under certain circumstances set forth in the Rights Agreement, the decision
to redeem and certain other decisions shall require the concurrence of a
majority of the Continuing Directors. The term "Continuing Directors" means any
member of the Board of Directors of the Company who was a member of the Board
prior to the date of the Rights Agreement, and any person who is subsequently
elected to the Board if
50
such person is recommended or approved by a majority of the Continuing
Directors, but shall not include an Acquiring Person or an affiliate, associate
or representative of any such person.
Rights of Holders of Rights Certificates. Until a Right is exercised, the
----------------------------------------
holder thereof, as such, will have no rights as a shareholder of the Company,
including, without limitation, the right to vote or to receive dividends. While
the distribution of the Rights will not be taxable to shareholders or to the
Company for federal income tax purposes, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Amendment of Rights Agreement. Any of the provisions of the Rights
-----------------------------
Agreement may be amended by the Board of Directors of the Company prior to the
Distribution Date. However, no supplement or amendment may be made, without the
approval of a majority of the Continuing Directors, that changes the Redemption
Price, the Final Expiration Date or the Purchase Price or that reduces the
number of shares of Common Stock for which a Right is exercisable. From and
after the Distribution Date, the provisions of the Rights Agreement may be
amended by the Board in order to cure any ambiguity, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interests
of any Acquiring Person or any affiliate or associate of such person), or to
shorten or lengthen any time period under the Rights Agreement. However, on or
after the Distribution Date, no amendment to lengthen the time periods governing
redemption may be made at such time as the Rights are not redeemable or to
lengthen any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or benefits to, the
holders of Rights.
Filing With Securities and Exchange Commission. A copy of the Rights
----------------------------------------------
Agreement has been filed with the Securities and Exchange Commission as an
Exhibit to a Registration Statement on Form 8-A dated February 27, 2002, and is
available free of charge from the Rights Agent.
51
