AMERICAN MEDICAL SECURITY GROUP, INC.
AND
FIRSTAR BANK, N.A.
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF AUGUST 9, 2001
TABLE OF CONTENTS
Section 1. CERTAIN DEFINITIONS 1
Section 2. APPOINTMENT OF RIGHTS AGENT 5
Section 3. ISSUANCE OF RIGHTS CERTIFICATES. 5
Section 4. FORM OF RIGHTS CERTIFICATES 7
Section 5. COUNTERSIGNATURE AND REGISTRATION 7
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
CERTIFICATES 7
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS 8
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES 10
Section 9. AVAILABILITY OF PREFERRED SHARES 11
Section 10. PREFERRED SHARES RECORD DATE 12
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS 12
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES 20
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER 20
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES 22
Section 15. RIGHTS OF ACTION 24
Section 16 AGREEMENT OF RIGHT HOLDERS 24
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER 25
Section 18. CONCERNING THE RIGHTS AGENT 25
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT 25
Section 20. DUTIES OF RIGHTS AGENT 26
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Section 21. CHANGE OF RIGHTS AGENT 27
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES 28
Section 23. REDEMPTION 28
Section 24. EXCHANGE 29
Section 25. NOTICE OF CERTAIN EVENTS 30
Section 26. NOTICES 31
Section 27. SUPPLEMENTS AND AMENDMENTS 32
Section 28. SUCCESSORS 32
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. 32
Section 30. BENEFITS OF THIS AGREEMENT 32
Section 31. SEVERABILITY. 33
Section 32. GOVERNING LAW 33
Section 33. COUNTERPARTS 33
Section 34. DESCRIPTIVE HEADINGS 33
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RIGHTS AGREEMENT
Agreement, dated as of August 9, 2001, between American Medical Security
Group, Inc., a Wisconsin corporation (the "Company"), and Firstar Bank, N.A.
(the "Rights Agent").
On August 9, 2001 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend of one preferred
share purchase right (a "Right") for each Common Share (as hereinafter defined)
of the Company outstanding on August 20, 2001 (the "Record Date"), each Right
representing the right to purchase one ten-thousandth of a Preferred Share (as
hereinafter defined), 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 Common Share that shall become outstanding between the Record
Date and the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall become the Beneficial Owner
(as such term is hereinafter defined) of 12% or more of the Common Shares of the
Company then outstanding after the date hereof. Notwithstanding the foregoing,
the term "Acquiring Person" shall not include (i) the Company; (ii) any
Subsidiary (as such term is hereinafter defined) of the Company; (iii) any
employee benefit plan or employee stock ownership plan of the Company or any
Subsidiary of the Company; (iv) any entity holding Common Shares for or pursuant
to the terms of any such plan; (v) Blue Cross & Blue Shield United of Wisconsin
("BCBS") and its Affiliates and Associates, provided that from time to time
after the date hereof BCBS and its Affiliates and Associates do not increase the
aggregate number of Common Shares over which such Persons have beneficial
ownership as of any such time (other than Common Shares the beneficial ownership
of which was acquired through (A) any dividend or distribution of any Common
Shares or any Company securities convertible or exchangeable into Common Shares
or any stock split or (B) any grants of Common Shares or any Company securities
exercisable for Common Shares (or the exercise of any such securities for Common
Shares) under any benefit plan of the Company generally available for directors
of the Company), PROVIDED, HOWEVER, that nothing in this clause (v) shall
prohibit BCBS and its Affiliates and Associates from collectively beneficially
owning less than 12% of the Common Shares of the Company then outstanding; or
(vi) any Person who or which together with all Affiliates and Associates of such
Person shall become an "Acquiring Person" as the result of an acquisition of
Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportional number of shares beneficially owned by
such
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Person together with all Affiliates and Associates of such Person to 12% or more
of the Common Shares of the Company then outstanding, PROVIDED, HOWEVER, that if
a Person shall become the Beneficial Owner of 12% or more of the Common Shares
of the Company then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company, then such Person shall be deemed to
be an "Acquiring Person." Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") as in effect on
the date of this Agreement, but shall not include the Company, any Subsidiary of
or other Person controlled by the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any Person appointed as trustee
by the Company or such Subsidiary pursuant to the terms of any such plan in the
Person's capacity as trustee.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (A) the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
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 Person shall not be deemed the Beneficial Owner
of, or to beneficially own, (i) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange, (ii) securities issuable upon exercise of Rights at
any time prior to the occurrence of a Triggering Event, or (iii) 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
Person's Affiliates or Associates prior to the Distribution Date (as
hereinafter defined) 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
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Rights; or (B) the right (whether sole or shared) to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
PROVIDED, HOWEVER, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own", any security under this clause (B) as a
result of an agreement, arrangement or understanding to vote such security
if such agreement, arrangement or understanding: (1) arises solely from a
revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act and (2) is not reportable by such Person on Schedule 13D under
the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (c)) or
disposing of any securities of the Company; PROVIDED, HOWEVER, that nothing
in this paragraph (c) shall cause a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition, and then only
if such securities continue to be owned by such Person at such expiration
of forty days and PROVIDED FURTHER, HOWEVER, that any shareholder of the
Company, with Affiliate(s), Associate(s) or other Person(s) who may be
deemed representatives of it serving as director(s) of the Company, shall
not be deemed to beneficially own securities held by other Persons as a
result of (i) Persons affiliated or otherwise associated with such
shareholder serving as directors or taking any action in connection
therewith, (ii) discussing the status of its shares with the Company or
other shareholders of the Company similarly situated or (iii) voting or
acting in a manner similar to other shareholders similarly situated, absent
a specific finding by the Board of Directors of an express agreement among
such shareholders to act in concert with one another as shareholders so as
to cause, in the good faith judgment of the Board of Directors, each such
shareholder to be the Beneficial Owner of the shares held by the other
shareholder(s).
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities issued and outstanding together with the number
of such securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.
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(d) "Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in Wisconsin are authorized or obligated by
law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., Milwaukee
time, on such date; PROVIDED, however, that if such date is not a Business Day
it shall mean 5:00 P.M., Milwaukee time, on the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company shall mean the
shares of Common Stock, no par value per share, of the Company. "Common Shares"
when used with reference to any Person other than the Company shall mean the
capital stock (or equity interest) with the greatest aggregate voting power
having power to control and direct the management of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(h) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(i) "Person" shall mean any individual, firm, corporation or other entity.
(j) "Preferred Shares" shall mean shares of Series B Junior Cumulative
Preferred Stock, no par value per share, of the Company having the rights,
preferences and limitations set forth in the Form of Articles of Amendment
attached to this Agreement as Exhibit A.
(k) "Redemption Date" shall have the meaning set forth in Section 7 hereof.
(l) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.
(m) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(n) "Section 13 Event" shall mean any event described in clauses (x), (y)
or (z) of Section 13(a) hereof.
(o) "Shares Acquisition Date" shall mean the first date of public
announcement (which shall include, without limitation, a report filed pursuant
to the Exchange Act) by the Company or an Acquiring Person of facts that show
that an Acquiring Person has become such.
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(p) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person, or which is
otherwise controlled by such Person.
(q) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable. In the event the Company appoints one or more Co-Rights Agents, the
respective duties of the Rights Agent and Co-Rights Agents shall be as the
Company determines.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES
(a) Until the earlier of (i) the close of business on the tenth Business
Day after the Shares Acquisition Date or (ii) the close of business on the tenth
Business Day (or such later date as may be determined by action of the Board of
Directors) after the date that a tender or exchange offer by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan or
employee stock ownership plan of the Company or of any Subsidiary of the Company
or any entity holding Common Shares for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 12% or more of the Common
Shares then outstanding, (the earlier of the dates specified in foregoing
clauses (i) and (ii) being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates in each case shall also be deemed to be Rights
Certificates) and not by separate Rights Certificates, and (y) the right to
receive Rights Certificates will be transferable only in connection with the
transfer of the underlying Common Shares. 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 send) by first-class, insured, postage-prepaid mail, to each record holder
of Common Shares as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more
certificates, in substantially the form of Exhibit B hereto (each, a "Rights
Certificate"), evidencing one Right for each Common Share so held (subject to
adjustment as provided herein). In the event that an adjustment in the number of
Rights per Common Share has been made pursuant to Section 11(i) hereof, at the
time of distribution of the Rights Certificates, the Company shall not be
required to issue Rights Certificates evidencing fractional Rights, but may, in
lieu thereof, make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole
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numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights. As of and after the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates.
(b) The Company will make available, as promptly as possible following the
Record Date, a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights") to any
holder of Rights who may so request from time to time prior to the Final
Expiration Date (as such term is defined in Section 7(a)). With respect to
certificates for Common Shares outstanding as of the Record Date or issued
subsequent to the Record Date, unless and until a Distribution Date occurs, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof. Until the Distribution Date (or the earlier of the Redemption
Date or the Final Expiration Date), the surrender for transfer of any
certificate for Common Shares in respect of which Rights have been issued shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (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 American
Medical Security Group, Inc. and Firstar Bank, N.A., dated as of
August 9, 2001 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of American Medical Security Group, 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. American Medical Security
Group, 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 is, was or becomes an Acquiring Person (as defined in the
Rights Agreement), whether currently held by or on behalf of such
Person or by any subsequent holder, become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but
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prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.
Section 4. FORM OF RIGHTS CERTIFICATES. The Rights Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any applicable rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
adjustment as provided herein, the Rights Certificates shall entitle the holders
thereof to purchase such number of one ten-thousandths of a Preferred Share as
shall be set forth therein at the price per one ten-thousandths of a Preferred
Share set forth therein (the "Purchase Price"), but the number of such one
ten-thousandths of a Preferred Share and the Purchase Price shall be subject to
adjustment as provided herein.
Section 5. COUNTERSIGNATURE AND REGISTRATION. The Rights Certificates shall
be executed on behalf of the Company by its President, any of its Vice
Presidents or its Treasurer, either manually or by facsimile signature and shall
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned, manually or by facsimile, by the Rights Agent and shall not be
valid for any purpose unless countersigned. In case any officer of the Company
who shall have signed any of the Rights Certificates shall cease to be such
officer of the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the individual who signed such 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 individual 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 Agreement any such individual 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, Certificate numbers
and the date of each of the Rights Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES. Subject
to the provisions of 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 (other than Rights Certificates representing
Rights
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that have become void pursuant to Section 11(a)(ii) hereof or that have been
exchanged pursuant to Section 24 hereof) 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 one ten-thousandths of a
Preferred Share (or, following a Triggering Event, Common Shares, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Rights Certificates surrendered then entitled such holder (or former holder
in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or 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 countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates. The Rights Agent may in its sole
discretion require the Company or the Person entitled to such Rights Certificate
to provide evidence that such payment has been made prior to countersigning and
delivering any Rights Certificate pursuant to this section.
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 countersignature and
delivery to the registered holder in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein), 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 Purchase Price for each
one ten-thousandths of a Preferred Share as to which the Rights are exercised,
at or prior to the earliest of (i) the Close of Business on August 20, 2011 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof.
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(b) The Purchase Price for each one ten-thousandth of a Preferred Share
purchasable pursuant to the exercise of a Right shall initially be $30.00, and
shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof and shall be payable in lawful money of the United States of America
in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the shares to be purchased and an amount equal to any
applicable tax or governmental charge required to be paid by the holder of such
Rights Certificate in accordance with Section 9 hereof by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes any such transfer agent
to comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the Preferred Shares issuable upon exercise of the
Rights hereunder into a depositary, requisition from the depositary agent
depositary receipts representing such number of one ten-thousandths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such certificates
or depositary receipts, cause the same to be delivered to or upon the order of
the registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, and (iv) when appropriate, after
receipt, deliver such cash to or upon the order of the registered holder of such
Rights Certificate. The payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by
certified bank check or bank draft payable to the order of the Company. In the
event that the Company is obligated to issue other securities (including Common
Shares) of the Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent 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 Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such
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Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. No Rights Certificate shall
be issued pursuant to Section 3 that represents Rights beneficially owned by any
Person whose Rights would be void pursuant to the preceding sentence; no Rights
Certificate shall be issued at any time upon the transfer of any Rights to any
Person whose Rights would be void pursuant to the preceding sentence or to any
nominee of such Person; and any Rights Certificate delivered to the Rights Agent
for transfer to any Person whose Rights would be void pursuant to the preceding
sentence shall be canceled. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(e) are complied with, but shall
have no liability to any holder of Rights Certificates or any other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or any of its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
10
Section 9. AVAILABILITY OF PREFERRED SHARES.
(a) The Company covenants and agrees that it will take all such action as
may be necessary to insure that all Preferred Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares, except as
provided in Section 180.0622(2)(b) of the Wisconsin Business Corporation Law as
judicially interpreted.
(b) 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 Preferred Shares (or Common Shares and/or other securities, as the case may
be) upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer or delivery
of Rights Certificates to a Person other than, or the issuance or delivery of
certificates or depositary receipts for the Preferred Shares (or Common Shares
and/or other securities, as the case may be) in a name other than that of, the
registered holder of the Rights Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any certificates or depositary receipts for
Preferred Shares (or Common Shares and/or other securities, as the case may be)
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 reasonable
satisfaction that no such tax is due.
(c) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Preferred Shares or any
Preferred Shares held in its treasury (and, following the occurrence of a
Triggering Event, out of its authorized and unissued Common Shares and/or other
securities or out of its authorized securities and shares held in its treasury),
the number of Preferred Shares (and, following the occurrence of a Triggering
Event, Common Shares and/or other securities) that, as provided in this
Agreement including Section 11(a)(iii) hereof, will be sufficient to permit the
exercise in full of all outstanding Rights.
(d) So long as the Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(e) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a registration statement under the Securities Act of 1933 (the "Act"),
with respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable
11
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the date of the expiration of the
Rights. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company may
temporarily suspend for a period of time not to exceed ninety days after the
date set forth in clause (i) of the first sentence of this Section 9(e), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension has been rescinded. In addition, if the Company shall
determine that a registration statement is required following the Distribution
Date, the Company may temporarily suspend the exercisability of the Rights until
such time as a registration statement has been declared effective.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained, the exercise thereof shall not
be permitted under applicable law, or a registration statement shall not have
been declared effective.
Section 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; PROVIDED, HOWEVER,
that, if the date of such surrender and payment is a date upon which the
Preferred Shares (or Common Shares and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the Preferred Shares (or Common Shares
and/or other securities, as the case may be) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a holder of securities
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number and kind of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Shares payable in Preferred
Shares, (B) sub-divide or split the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification or
12
recapitalization of the Preferred Shares (including any such reclassification or
recapitalization in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, split, combination, reclassification, or recapitalization,
and the number and kind of shares of capital stock issuable on such date, shall
be proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive (subject to payment of the Purchase Price) the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Shares transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, split, combination, reclassification or recapitalization. If an
event occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person shall, at any time after the Rights
Dividend Declaration Date, become an Acquiring Person, unless the event
causing such Person to become an Acquiring Person is a transaction set
forth in Section 13(a) hereof, then promptly following the occurrence of
such event, proper provision shall be made so that each holder of a Right
(except as provided below and in Section 7(e) hereof) shall thereafter have
a right to receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one ten-thousandths of a
Preferred Share for which a Right is then exercisable, in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of
Common Shares of the Company (the "Adjustment Shares") as shall equal the
result obtained by (x) multiplying the then current Purchase Price by the
then number of one ten-thousandths of a Preferred Share for which a Right
was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event (whether or not such Right was then issued or exercisable),
and (y) dividing that product (which, following such first occurrence,
shall thereafter be referred to as the "Purchase Price" for each Right and
for all purposes of this Agreement) by 50% of the then Current Per Share
Market Price of the Company's Common Shares (determined pursuant to Section
11(d) hereof) on the date of such first occurrence.
(iii) In the event that the number of Common Shares which is
authorized by the Company's articles of incorporation, but not outstanding
or reserved for issuance for purposes other than upon exercise of the
Rights, is not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii), the Company shall (A)
determine the value of the Adjustment Shares issuable upon the exercise of
a Right (the "Current Value"), and (B) with respect to each Right (subject
to Section 7(e) hereof), make adequate provision to substitute for the
Adjustment Shares, upon the exercise of a Right and payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price,
(3) Common Shares or other equity securities of the Company (including,
without limitation, shares, or units of shares, of preferred stock, such as
the Preferred Shares, which the Board of Directors of the Company has
deemed to have essentially the same value or economic rights as shares of
Common Shares (such
13
shares of preferred stock being referred to as "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 (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board of Directors of
the Company based upon the advice of a nationally recognized investment
banking firm selected by the Board; PROVIDED, HOWEVER, that if the Company
shall not have made adequate provision to deliver value pursuant to clause
(B) above within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires (the later
of (x) or (y) being referred to herein as the "Section 11(a)(ii) Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender
for exercise of a Right and without requiring payment of the Purchase
Price, Common Shares (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread.
For purposes of the preceding sentence, the term "Spread" shall mean the
excess of (i) the Current Value over (ii) the Purchase Price. If the Board
of Directors of the Company determines in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may
seek shareholder approval for the authorization of such additional shares
(such thirty (30) day period, as it may be extended, is herein called the
"Substitution Period"). To the extent that the Company determines that
action should be taken pursuant to the first and/or third sentences of this
Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights,
and (2) may suspend the exercisability of the Rights until the expiration
of the Substitution Period in order to seek such shareholder approval for
such 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 each Adjustment Share
shall be the Current Per Share Market Price of such Adjustment Share on the
Section 11(a)(ii) Trigger Date and the per share or per unit value of any
Common Stock Equivalent shall be deemed to equal the Current Per Share
Market Price of the Common Shares on such date.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Shares entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Preferred Shares (or shares having the same rights, privileges and
preferences as the Preferred Shares ("Equivalent Preferred Shares")) or
securities convertible into Preferred Shares or Equivalent Preferred Shares at a
price per Preferred Share or Equivalent Preferred Share (or having a conversion
price per share, if a security convertible into Preferred Shares or Equivalent
Preferred Shares) less than the then Current Per Share Market Price (as defined
in Section 11(d)) of the Preferred Shares on such record date, the Purchase
Price to be in effect after such record date shall be determined by
14
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate subscription or offering price of the total number of Preferred Shares
and/or Equivalent Preferred Shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Per Share Market Price and the denominator of which
shall be the number of Preferred Shares outstanding on such record date plus the
number of additional Preferred Shares and/or Equivalent Preferred Shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible); PROVIDED, HOWEVER, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the consideration to be paid for one ten-thousandths Preferred Share as is
determined from time to time by the Board of Directors of the Company. In case
such subscription or offering price may be paid in a consideration part or all
of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and holders of the Rights.
Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed and, in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend out of the earnings or
retained earnings of the Company or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the then Current Per
Share Market Price of the Preferred Shares on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and holders of the Rights)
of the portion of the assets or evidences of indebtedness so to be distributed
or of such subscription rights or warrants applicable to one Preferred Share,
and the denominator of which shall be such Current Per Share Market Price of the
Preferred Shares; PROVIDED, HOWEVER, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the consideration to be paid
for one ten-thousandths Preferred Share as is determined from time to time by
the Board of Directors of the Company. 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 have been in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current Per Share
Market Price" of
15
any security, including Common Shares (each, 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 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date, and
for purposes of computations made pursuant to Section 11(a)(iii) hereof, the
Current Per Share Market Price of Common Shares on any date shall be deemed to
be the average of the daily closing prices per share of such Common Shares for
the ten (10) consecutive Trading Days immediately following such date; PROVIDED,
HOWEVER, that, in the event that the Current Per Share Market Price of 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 or securities convertible into such shares (other than
the Rights), or (B) any subdivision, combination, consolidation, reverse stock
split or reclassification of such Security and the ex-dividend date for such
subdivision, combination, consolidation, reverse stock split or reclassification
shall not have occurred prior to the commencement of a 30 Trading Day or 10
Trading Day period, as set forth above, then, and in each such case, the Current
Per Share Market Price shall be appropriately adjusted to take into account
ex-dividend trading or such subdivision, combination, consolidation, reverse
stock split or reclassification. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is 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 Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the 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 any such date no market maker is making
a market in the Security, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company shall be used.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day. If the
Security is not publicly held or not so listed or traded, the Current Per Share
Market Price shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed by the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "Current Per
Share Market Price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i) (other than the
last sentence thereof). If the Preferred Shares are not publicly traded,
the "Current Per Share Market Price" of the Preferred Shares shall be
conclusively deemed to be an amount equal to 10,000 (as such number
16
may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares occurring
after the date of this Agreement) multiplied by the Current Per Share
Market Price of the Common Shares as determined pursuant to Section
11(d)(i) hereof (appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof). If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, then the "Current Per Share Market Price" of the
Preferred Shares shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be
binding upon the Rights Agent and the holders of the Rights.
(e) Anything to the contrary notwithstanding, no adjustment in the Purchase
Price shall be required unless such adjustment would require an increase or
decrease of at least 1% in the Purchase Price; PROVIDED, HOWEVER, that any
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest one one-hundredth millionth of a Preferred Share or one
one-millionth of 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 years from the
date of the transaction which requires such adjustment or (ii) the Final
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of any Person other than
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m) hereof, and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one ten-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one ten-thousandths of
a Preferred Share (calculated to the nearest one one-hundredth millionth of a
Preferred Share) obtained by (i) multiplying (x) the number of one
ten-thousandths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product
17
so obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one ten-thousandths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
ten-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one one-millionth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least 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) and
subject to Section 7(e) hereof, the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one ten-thousandths of a Preferred Share 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 one ten-thousandths of
a Preferred Share which were expressed in the initial Rights Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one
ten-thousandths of a Preferred Share issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable one ten-thousandths of a Preferred Share at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may
18
elect to defer until the occurrence of such event the issuance to the holder of
any Right exercised after such record date of the number of one ten-thousandths
of a Preferred Share and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the number of one
ten-thousandths of a Preferred Share and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company
shall deliver to such holder a due xxxx or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional or
otherwise) or securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board of Directors of the Company
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Shares, (ii) issuance wholly for cash of any
Preferred Shares at less than the current market price, (iii) issuance wholly
for cash of Preferred Shares or securities which by their terms are convertible
into or exchangeable for Preferred Shares, (iv) stock dividends or (v) issuance
of rights, options or warrants referred to in Section 11(b), hereafter made by
the Company to holders of its Preferred Shares shall not be taxable to such
Shareholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger, sale or transfer there
are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger, sale, or
transfer 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 Distribution Date, it
will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
19
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that at any time after the date of this Agreement and prior to the
Distribution Date, the Company shall (i) declare or pay any dividend on the
Common Shares payable in Common Shares or (ii) effect a subdivision, combination
or consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then in any such case (i) the number of one ten-thousandths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one ten-thousandths of a
Preferred Share so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (ii) each Common Share outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for in this Section 11(p)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 or 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 Shares or the
Preferred Shares a copy of such certificate and (c) if such adjustment occurs at
any time after the Distribution Date, mail a brief summary thereof to each
holder of a Rights Certificate in accordance with Section 25 hereof. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment contained therein.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
(a) In the event that, following the Shares Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation, (y) any Person (other than a Subsidiary of the Company
in a transaction that complies with Section 11(o) hereof) shall consolidate with
the Company, or merge with or into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any other Person (or the
Company) or cash or any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more related transactions, assets, cash flow or earning
power aggregating 50% or more of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person other than
the Company or one or more of its Subsidiaries in one or more transactions each
of which complies with Section 11(o) hereof, then, and in each such case (except
as may be contemplated by Section 13(d) hereof), proper provision shall be made
so that: (i) each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof at a price
20
equal to the then current Purchase Price in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of validly authorized and
issued, fully paid, nonassessable and freely tradeable Common Shares of the
Principal Party (as such term is hereinafter defined) not subject to any liens
(except under law), encumbrances, rights of first refusal or other adverse
claims as shall equal the result obtained by (A) multiplying the then current
Purchase Price by the number of one ten-thousandths of a Preferred Share for
which a Right is then exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of such one
ten-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event by the
Purchase Price in effect immediately prior to such first occurrence of a Section
11(a)(ii) Event), and (B) dividing that product (which product, following the
first occurrence of a Section 13 Event, shall, for all purposes of this
Agreement, mean and be referred to as the "Purchase Price" for each Right) by
50% of the then Current Per Share Market Price (determined pursuant to Section
11(d)(i) hereof) of the Common Shares of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a Section
13 Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares 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 Common Shares thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Company are converted, changed
or exchanged in such merger or consolidation, or, if no securities are so
issued, the Person that is the other party to such merger or consolidation,
or, if the other party to the merger does not survive the merger, the
Person that does survive the merger (including the Company, if it
survives); and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets, cash flow or earning power transferred
pursuant to such transaction or transactions;
PROVIDED, HOWEVER, that in any such case, (1) if the common stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the common stock of which is
and has been so registered, "Principal Party" shall refer to
21
such other Person; and (2) if the common stock of such Person is not and has not
been so registered and such Person is a Subsidiary, directly or indirectly, of
more than one Person, the common stock of two or more of which are and have been
so registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the common stock having the greatest aggregate market value.
(c) The Company shall not consummate any such Section 13 Event unless the
Principal Party shall have a sufficient number of authorized shares of its
common stock which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement confirming that the
requirements of Section 13(a) and Section 13(b) hereof shall promptly be
performed in accordance with their terms, and further providing that, as soon as
practicable after the date of any such Section 13 Event, the Principal Party
will:
(i) prepare and file a registration statement under the Securities
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
(ii) take all such other action as may be necessary to enable the
Principal Party to issue the securities purchasable upon exercise of the
Rights, including but not limited to the registration or qualification of
such securities under all requisite securities laws of jurisdictions of the
various states and the listing of such securities on such exchanges and
trading markets as may be necessary or appropriate; and
(iii) 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 (or any
successor form) 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).
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. The Company shall not
be required to issue fractions of Rights or to distribute Rights Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the 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 Day immediately prior to the
date on which such fractional
22
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 Preferred
Shares (other than fractions which are integral multiples of one ten-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one ten-thousandth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one ten-thousandths of a Preferred
Share may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one ten-thousandth of a Preferred Share, 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 Preferred Share. For the purposes of
this Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall not
be required to issue fractions of Common Shares upon exercise of the Rights or
to distribute certificates which evidence fractional Common Shares. In lieu of
fractional Common Shares, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one (1)
Common Share. For purposes of this Section 14(c), the current market value of
one Common Share shall be the closing price per Common Share (as determined
pursuant to Section 11(d)(i) hereof) on the Trading Day immediately prior to the
date of such exercise.
(d) 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 (except as provided above).
23
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 Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), 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 the Common Shares;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer;
(c) subject to the terms of this Agreement, 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 Shares certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Shares certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligation; PROVIDED, HOWEVER, that the Company must use its reasonable efforts
to have any such order, decree or ruling lifted or otherwise overturned as soon
as possible.
24
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a Shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
Shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
Shareholders (except as provided in Section 25 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. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder,
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
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 the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, 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
25
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.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter 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 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 or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any
26
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 3, 11, 13, 23 or 24, 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 Preferred Shares to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as 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
determinations, interpretations and instructions with respect to the performance
of its duties hereunder from any one of the President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered 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 Shareholder, 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 that 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 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares 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 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered
27
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 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 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) a corporation organized and
doing business under the laws of the United States or of the State of Wisconsin
(or of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the State of Wisconsin),
in good standing, having an office in the State of Wisconsin, 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 $50 million or (b) an Affiliate of a corporation described
in clause (a) of this sentence. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares or Preferred Shares, 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 its Board of Directors 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.
(a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth 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
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 $0.001 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement
28
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. The Company may, at its option, pay the
Redemption Price in cash, Common Shares (based on the Current Per Share Market
Price, as defined in Section 11(d)(i) hereof, of the Common Shares at the time
of redemption) or any other form of consideration deemed appropriate by the
Board of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23, and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; PROVIDED, HOWEVER, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Promptly after such action of the Board of Directors ordering the redemption of
the Rights, the Company shall mail a notice of redemption to all the holders of
the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof, and other than in connection
with the purchase of Common Shares prior to the Distribution Date.
Section 24. EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common
Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Shares for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; PROVIDED, HOWEVER, that
29
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected, and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 11(a)(ii)
hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Shares (or Equivalent Preferred Shares, as such
term is defined in paragraph (b) of Section 11 hereof) for Common Shares
exchangeable for Rights, at the initial rate of one ten-thousandth of a
Preferred Share (or Equivalent Preferred Stock) for each Common Share, as
appropriately adjusted to reflect stock splits, stock dividends and other
similar transactions after the date hereof.
(d) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, the Company shall pay to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (e), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall, at any time after the Distribution Date,
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of the Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (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 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi)
30
to declare or pay any dividend on the Common Shares payable in Common Shares or
to effect a subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Rights
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes of such action,
and, in the case of any such other action, at least 10 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall occur,
then the Company shall as soon as practicable thereafter give to each holder of
a Rights Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
American Medical Security Group, Inc.
0000 XXX Xxxxxxxxx
X.X. Xxx 00000
Xxxxx Xxx XX 00000-0000
Attention: General Counsel
with a copy to:
Xxxxxxx & Xxxxx LLP
Xxx Xxxxx Xxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate 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.
31
Section 27. SUPPLEMENTS AND AMENDMENTS.
(a) Prior to the Distribution Date, 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 Common Shares. 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, 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 (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person).
Notwithstanding anything contained in this Agreement to the contrary, this
Agreement may not be amended (other than pursuant to clauses (i) or (ii) of the
preceding sentence) at a time when the Rights are not redeemable.
(b) 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 27, the Rights Agent shall execute such
supplement or amendment.
Section 28. 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 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For
all purposes of this Agreement, any calculation of the number of Common Shares
or any other class of capital stock outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding Common Shares of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General
Rules and Regulations under the Exchange Act. The Board of Directors of the
Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board 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
any of the directors on the Board to any liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the Common Shares) any
32
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 32. GOVERNING LAW. This Agreement and each Rights Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Wisconsin and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. DESCRIPTIVE 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.
33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
AMERICAN MEDICAL SECURITY GROUP, INC.
Attest:
By:/s/ Xxxxxx X. Xxxxxxx By:/s/ Xxxx X. Xxxxxxxxxx
Title: Assistant Secretary Title: Executive Vice President
FIRSTAR BANK, N.A.
Rights Agent
Attest:
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxxxxx X. Xxxx
Its: Vice President Its: Trust Officer
34
EXHIBIT A
FORM
of
ARTICLES OF AMENDMENT TO RESTATED ARTICLES OF INCORPORATION
WITH RESPECT TO DESIGNATION, PREFERENCES,
LIMITATIONS AND RELATIVE RIGHTS
of
SERIES B JUNIOR CUMULATIVE PREFERRED STOCK
of
AMERICAN MEDICAL SECURITY GROUP, INC.
---------------------
American Medical Security Group, Inc., a corporation organized and existing
under the Wisconsin Business Corporation Law (the "WBCL") (hereinafter called
the "Corporation"), hereby certifies that the following resolution was adopted
by the Board of Directors of the Corporation at a meeting duly called and held
on August 9, 2001 in accordance with Sections 180.0602 and 180.1002 of the WBCL:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Restated Articles of
Incorporation, the Board of Directors hereby creates a series of Preferred
Stock, no par value per share (the "Preferred Stock"), of the Corporation and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
"Series B Junior Cumulative Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series B Junior Cumulative Preferred Stock" (the "Series B
Preferred Stock") and the number of shares constituting the Series B Preferred
Stock shall be Ten Thousand (10,000).
Section 2. DIVIDENDS AND DISTRIBUTIONS.
A. Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the
Series B Preferred Stock
1
with respect to dividends, the holders of shares of Series B Preferred
Stock, in preference to the holders of Common Stock, no par value per share
(the "Common Stock"), of the Corporation, and of any other junior stock,
shall be entitled to receive, when and as declared by the Board of
Directors out of funds legally available for the purpose, cumulative
dividends payable in cash quarterly on the first days of January, April,
July and October in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series B Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1 or (b) subject to the
provision for adjustment hereinafter set forth, 10,000 times the aggregate
per share amount of all cash dividends, and 10,000 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of
a share of Series B Preferred Stock. In the event the Corporation shall at
any time after August 9, 2001 (the "Rights Declaration Date") declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of
a dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which holders
of shares of Series B Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
B. The Corporation shall declare a dividend or distribution on the
Series B Preferred Stock as provided in paragraph A of this Section
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on
the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1 per share on the Series B Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
C. Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series B Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which
2
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series B Preferred Stock in
an amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of Directors
may fix a record date for the determination of holders of shares of Series
B Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to
the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series B Preferred Stock
shall have the following voting rights:
A. Subject to the provision for adjustment hereinafter set forth, each
share of Series B Preferred Stock shall entitle the holder thereof to
10,000 votes on all matters submitted to a vote of the Shareholders of the
Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the number of votes per share to which holders of
shares of Series B Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
B. Except as otherwise provided herein, in any other amendment
creating a series of Preferred Stock or any similar stock, or by law or by
the resolution or resolutions providing for the issue of any series of
Preferred Stock, the holders of shares of Series B Preferred Stock and the
holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class
on all matters submitted to a vote of shareholders of the Corporation.
C. Except as set forth herein or as otherwise provided by law, the
holders of Series B Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. CERTAIN RESTRICTIONS.
A. Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on
3
shares of Series B Preferred Stock outstanding shall have been paid in
full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series B
Preferred Stock, except dividends paid ratably on the Series B
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Series B Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series B Preferred Stock, or any shares of stock ranking
on a parity with the Series B Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective Series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
B. The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph A of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. REACQUIRED SHARES. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Restated Articles of Incorporation, or in any other amendment creating a series
of Preferred Stock or any similar stock or as otherwise required by law.
4
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred Stock unless,
prior thereto, the holders of shares of Series B Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series B Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 10,000 times the aggregate amount to
be distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
except distributions made ratably on the Series B Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock then in each
such case the aggregate amount to which holders of shares of Series B Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 10,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
declare any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series B Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. REDEMPTION. The shares of Series B Preferred Stock shall not be
redeemable.
5
Section 9. RANK. The Series B Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all other
series of the Corporation's Preferred Stock, unless the terms of any such series
shall provide otherwise.
Section 10. AMENDMENT. At any time when any shares of Series B Preferred
Stock are outstanding, the Restated Articles of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series B Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series B Preferred Stock, voting
together as a single class.
Section 11. FRACTIONAL SHARES. Series B Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series B Preferred Stock."
None of the shares of the Series B Preferred Stock have been issued as of
the date hereof.
6
IN WITNESS WHEREOF, these Articles of Amendment are executed on behalf of
the Corporation by its Executive Vice President this _____ day of __________,
2001.
________________________________
Executive Vice President
7
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER AUGUST 20, 2011 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. [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.]1
Rights Certificate
AMERICAN MEDICAL SECURITY GROUP, 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 August 9, 2001 (the "Rights Agreement"), between American
Medical Security Group, Inc., a Wisconsin corporation (the "Company"), and
Firstar Bank, N.A. (the "Rights Agent"), to purchase from the Company at any
time prior to 5:00 P.M. (Milwaukee time) on August 20, 2011 (unless such date is
extended prior thereto by the Board of Directors) at the office or
__________________________
1 The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
1
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one ten-thousandth of a fully paid, nonassessable share of Series
B Junior Cumulative Preferred Stock, no par value per share (the "Preferred
Shares"), of the Company, at a purchase price of $30 per one ten-thousandth of a
share (the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number and Purchase
Price as of August 20, 2001, based on the Preferred Shares as constituted at
such date. The Company reserves the right to require prior to the occurrence of
a Triggering Event (as such term is defined in the Rights Agreement) that a
number of Rights be exercised so that only whole shares of Preferred Shares will
be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of Preferred Shares or other securities, which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one ten-thousandths of a share of Preferred
Shares 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
2
hereof another Rights Certificate or Rights Certificates for the number of whole
Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.001 per Right at any time prior to the earlier of the close of
business on (i) the tenth Business Day following the Shares Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. In addition, under certain circumstances following the
Shares Acquisition Date, the Rights may be exchanged, in whole or in part, for
shares of the Common Stock, or shares of preferred stock of the Company having
essentially the same value or economic rights as such shares. Immediately upon
the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.
The Company, in its sole discretion, may elect not to issue fractional
shares of Preferred Shares upon the exercise of any Right or Rights evidenced
hereby (other than fractions which are integral multiples of one ten-thousandth
of a Preferred Share, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof make a cash payment, as provided in
the Rights Agreement. The Company, at its election, may require that a number of
Rights be exercised so that only whole shares of Preferred Shares would be
issued.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of Preferred Shares or of any
other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give
consent to or withhold consent from any corporate action, or, to receive notice
of meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the 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.
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WITNESS the facsimile signature of the proper officers of the Company.
Dated as of _________ __,
ATTEST: AMERICAN MEDICAL SECURITY GROUP, INC.
___________________________________ By____________________________________
Secretary Title:
Countersigned:
FIRSTAR BANK, N.A.
By____________________________
Authorized Signature
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[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _______________________________
hereby Sells, assigns and transfers unto ______________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within named
Company, with full power of substitution.
Dated: __________________,_____
_______________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _______________, ____ ___________________________________
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.
The undersigned hereby certifies that the Rights evidenced by this Rights
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
Signature
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by
the Rights Certificate.)
To American Medical Security Group, Inc.:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the Preferred Shares issuable
upon the exercise of the Rights (or such other securities of the Company or of
any other person which may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of and
delivered to:
Please insert social security or other identifying number:______________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number:______________________
(Please print name and address)
Dated: _______________,_____
________________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: ______________,_____ ______________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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 Agreement) and such Assignment or
Election to Purchase will not be honored.
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On August 9, 2001, the Board of Directors of American Medical Security
Group, Inc. (the "Company") declared a dividend of one preferred share purchase
right (a "Right") for each outstanding share of common stock, no par value per
share (the "Common Shares"), of the Company. The dividend is payable on August
20, 2001, (the "Record Date") to the shareholders of record on that date. Each
Right entitles the registered holder to purchase from the Company a unit
consisting of one ten-thousandths of a share (a "Unit") of Series B Junior
Cumulative Preferred Stock, no par value per share (the "Preferred Shares"), of
the Company at a price of $30.00 per one ten-thousandths of a Preferred Share
(the "Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") dated as of
August 9, 2001, between the Company and Firstar Bank, N.A., as Rights Agent (the
"Rights Agent").
Initially, the Rights will be attached to all Common Share certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. Subject to certain exceptions specified in the Rights Agreement,
the Rights will separate from the Common Shares and a Distribution Date will
occur upon the earlier to occur of (i) the tenth business day following the date
(the "Shares Acquisition Date") of the first public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has become
the beneficial owner of 12% or more of the Common Shares then outstanding, other
than as a result of repurchases of stock by the Company or certain inadvertent
actions by certain shareholders or (ii) the tenth business day (or such later
date as may be determined by action of the Board of Directors) following the
commencement of a tender or exchange offer the consummation of which would
result in the beneficial ownership by a person or group of 12% or more of such
outstanding Common Shares. "Acquiring Person" does not include Blue Cross & Blue
Shield United of Wisconsin ("BCBS") and its Affiliates and Associates, provided,
at any time while BCBS and its Affiliates and Associates hold more than 12%,
such persons do not acquire beneficial ownership of any additional Common Shares
other than by dividend or grant by the Company.
The Rights Agreement provides that, until the Distribution Date, (i) Rights
will be evidenced by the Common Share certificates and will be transferred with
and only with such Common Share certificates, (ii) new Common Share certificates
issued after the Record Date, upon transfer or new issuance of Common Shares,
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Shares,
outstanding as of the Record Date, will also constitute the
1
transfer of the Rights associated with the Common Shares represented by such
certificate. Pursuant to the Rights Agreement, the Company reserves the right to
require prior to the occurrence of a Triggering Event (as defined below) that,
upon any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Shares will be issued.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and, thereafter, the separate Rights Certificates alone will
evidence the Rights. Except as otherwise determined by the Board of Directors,
only Common Shares issued prior to the Distribution Date will be issued with
Rights.
The Rights are not exercisable until the later of the Distribution Date and
the date upon which the Rights are no longer redeemable by the Company. The
Rights will expire on August 20, 2011 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed,
exchanged or terminated by the Company, in each case, as described below. At no
time will the Rights have any voting power. The Purchase Price payable, and the
number of Preferred Shares or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Preferred Shares, (ii) upon the grant to holders of
the Preferred Shares of certain rights or warrants to subscribe for or purchase
Preferred Shares at a price, or securities convertible into Preferred Shares
with a conversion price, less than the then current market price of the
Preferred Shares or (iii) upon the distribution to holders of the Preferred
Shares of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable in
Preferred Shares) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights and the number of one ten-thousandths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights are not
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 10,000 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share plus an amount equal to
accrued and unpaid dividends thereon but will be entitled to an aggregate
payment of 10,000 times the payment made per Common Share. Each Preferred Share
will have 10,000 votes, voting together with the Common Shares. Finally, in the
event of any merger,
2
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 10,000 times the amount received per
Common Share. These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one ten-thousandths interest in a Preferred
Share purchasable upon exercise of each Right held approximates the value of one
Common Share.
In the event that a person or a group has become an Acquiring Person, each
holder of a Right will thereafter have the right to receive, upon exercise,
Common Shares (or, in certain, circumstances, cash, property or other securities
of the Company) having a value equal to two times the exercise price of the
Right. Notwithstanding any of the foregoing, following the occurrence of the
event set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of the event set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
As an example, at an exercise price of $30 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $60 worth
of Common Shares (or other consideration, as noted above) for $30. Assuming that
the Common Shares had a per share value of $6 at such time, the holder of each
valid Right would be entitled to purchase 10 Common Shares for $30.
In the event that, at any time following the Shares Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction
(x) in which the Company is not the surviving entity or (y) in which the Company
is the surviving entity and the Common Shares are changed or exchanged, or (ii)
50% or more of the Company's assets, cash flow or earning power is sold or
transferred, each holder of a Right (except Rights which have previously been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the Right. The events set forth in this paragraph
and in the second preceding paragraph are referred to as the "Triggering
Events."
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person or group of 50% or more of the outstanding Common
Shares, the Board of Directors of the Company may exchange the Rights (other
than Rights owned by such person or group which have become void), in whole or
in part, at an exchange ratio of one Common Share or one ten-thousandth of a
Preferred Share (or of a share of a class or series of the Company's preferred
stock having equivalent rights, preferences and privileges), per Right (subject
to adjustment).
3
The Purchase Price payable, and the number of Units of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Shares or convertible securities at less
than the current market price of the Preferred Shares, or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
At any time until ten business days following the Shares Acquisition Date,
(subject to extension by the Board), the Board of Directors of the Company may
redeem the Rights in whole, but not in part, at a price of $0.001 per Right
(payable in cash, Common Shares or other consideration deemed appropriate by the
Board of Directors) (the "Redemption Price"). The redemption of the Rights may
be made effective at such time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish. Immediately upon the
action of the Board of Directors ordering the redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a 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, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Shares (or other consideration) of the Company or for
common stock of the acquiring company or in the event of the redemption of the
Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to correct any deficiency or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (other than an Acquiring Person or certain related parties),
or to shorten or lengthen any time period under the Rights Agreement. The
foregoing notwithstanding, no amendment (other than to cure an ambiguity or to
correct a deficiency) may be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
August 14, 2001. A copy of the Rights Agreement is available free of charge from
the Company. This
4
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
