Exhibit 4.1
================================================================================
SYLVAN LEARNING SYSTEMS, INC.
and
STATE STREET BANK & TRUST COMPANY
Rights Agent
---------------
Rights Agreement
---------------
Dated as of October 7, 1996
================================================================================
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions .............................................. 1
Section 2. Appointment of Rights Agent ...................................... 6
Section 3. Issue of Right Certificates ...................................... 6
Section 4. Form of Right Certificates ....................................... 8
Section 5. Countersignature and Registration ................................ 9
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates ...............................................10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights;
Nullification of Rights ..........................................11
Section 8. Cancellation and Destruction of Right Certificates ...............14
Section 9. Reservation and Availability of Preferred Shares .................15
Section 10. Preferred Shares Record Date .....................................16
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights ...........................................................17
Section 12. Certificate of Adjusted Purchase Price or Number of Shares .......30
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power ............................................................31
Section 14. Fractional Rights and Fractional Shares ..........................33
Section 15. Rights of Action .................................................35
Section 16. Agreement of Right Holders .......................................36
Section 17. Right Certificate Holder Not Deemed a Stockholder ................36
Section 18. Concerning the Rights Agent ......................................37
Section 19. Merger or Consolidation or Change of Name of Rights Agent ........37
Section 20. Duties of Rights Agent ...........................................38
Section 21. Change of Rights Agent ...........................................41
Section 22. Issuance of New Right Certificates ...............................42
Section 23. Redemption .......................................................43
Section 24. Notice of Certain Events .........................................44
Section 25. Notices ..........................................................45
Section 26. Supplements and Amendments .......................................46
Section 27. Exchange .........................................................48
Section 28. Determinations and Actions by the Board of Directors, Etc ........50
Section 29. Successors .......................................................50
Section 30. Benefits of this Agreement .......................................51
Section 31. Severability .....................................................51
Section 32. Governing Law ....................................................51
Section 33. Counterparts .....................................................52
Section 34. Descriptive Headings .............................................52
-ii-
RIGHTS AGREEMENT
----------------
Agreement, dated as of October 7, 1996, to be immediately effective as of
the Effective Date (as hereinafter defined), between SYLVAN LEARNING SYSTEMS,
INC., a Maryland corporation (the "Company"), and STATE STREET BANK & TRUST
COMPANY (the "Rights Agent").
The Board of Directors of the Company has 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 the Effective Date
immediately after the 3-for-2 stock split authorized by the Board of Directors
on September 27, 1996 is effected, each Right representing the right to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $.01 per share, of the Company having the rights and preferences set
forth in the Articles Supplementary filed with the State Department of
Assessments and Taxation of the State of Maryland on October 7, 1996, upon the
terms and subject to the conditions herein set forth, and has further authorized
the issuance of one Right with respect to each Common Share that shall become
outstanding between the Effective Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such terms are
defined in Sections 3 and 7 hereof).
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 be the Beneficial Owner (as such term is hereinafter
defined) of 15% or more of the Common Shares then outstanding, but shall not
include (i)(A) the Company; (B) any wholly owned Subsidiary of the Company;
(C) any employee benefit plan of the Company or of any Subsidiary or (D) an
entity holding Common Shares for or pursuant to the terms of any such plan or
(ii) any such Person who has become such a Beneficial Owner solely because
(A) of a reduction in the aggregate number of Common Shares outstanding or
(B) it acquired such Beneficial Ownership in the good faith belief that such
acquisition would not (x) cause such Beneficial Ownership to exceed 15% of the
Common Shares then outstanding and such Person relied in good faith in computing
the percentage of its Beneficial Ownership on publicly filed reports or
documents of the Company which are inaccurate or out-of-date or (y) otherwise
cause a Distribution Date or the adjustment provided for in Section 11(a)(ii) to
occur. Notwithstanding clause (ii) of the prior sentence, if any Person that is
not an Acquiring Person due to such clause (ii) does not reduce its percentage
of Beneficial Ownership of Common Shares to less than 15% by the Close of
business on the fifth Business Day after notice from the Company (the date of
notice being the first day) that such Person's Beneficial Ownership of Common
Shares so exceeds 15%, such Person shall, at the end of such five Business Day
period, become an Acquiring Person (and such clause (ii) shall no longer apply
to such Person). For purposes of this definition, the determination whether any
Person acted in "good faith" shall be conclusively determined by the Board of
Directors of the Company.
Notwithstanding the foregoing, R. Xxxxxxx Xxxxxxx, whether acting
individually or as a trustee, personal representative, attorney-in-fact, or
other representative or agent, as well as any trustee, personal representative,
attorney-in-fact, or other representative or agent acting for R. Xxxxxxx Xxxxxxx
or his estate (collectively "Xxxxxxx"), shall be entitled, for purposes of
determining whether Xxxxxxx is an Acquiring Person, to disregard the Drake
Shares (as hereinafter defined) so long as any other Common Shares (the "Other
Shares") collectively owned by Xxxxxxx do not exceed 1% or more of the Common
Shares then outstanding; provided,
-2-
however, that the foregoing exception no longer shall apply from and after the
date on which the Drake Shares (plus any Other Shares) represent less than 15%
of the Common Shares then outstanding. For purposes of the foregoing, the Drake
Shares shall mean any shares issued as a direct result of the acquisition of
Drake Prometric, L.P. by the Company (including any shares in respect thereof
issued as a result of stock dividends, stock splits or similar transactions
initiated by the Company) to Xxxxxxx or any trustee, personal representative,
attorney-in-fact, or other representative or agent acting for Xxxxxxx or his
estate.
(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 Effective Date.
(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 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, 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, 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 (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a
-------- -------
Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the
-3-
agreement, arrangement or understanding to vote such security
(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 rules and
regulations of the Exchange Act and (2) is not also then reportable
on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting (except
to the extent permitted by subparagraph (ii)(B) of this paragraph
(c)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, (A) 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 then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder and (B) a Person engaged in
business as an underwriter of securities shall not be considered 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 (40) days after the date of such acquisition.
(d) "Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of Maryland are authorized
or obligated by law or executive order to close.
-4-
(e) "Close of business" on any given date shall mean 5:00 P.M.,
Baltimore time, on such date; provided, however, that if such date is not a
-------- -------
Business Day it shall mean 5:00 P.M., Baltimore time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company shall mean
shares of Common Stock, par value $.01 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 voting power of such
Person or, if such Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(g) "Disinterested Director" shall mean any member of the Board of
Directors of the Company, while such Person is a member of the Board, who is not
(i) an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or
a representative of an Acquiring Person or of any such Affiliate or Associate,
or (ii) a Person, an Affiliate, Associate, or representative of a Person, any of
whom has stated an intent to take, or to consider taking, any action which would
result in such Person becoming an Acquiring Person, or which would cause a
Triggering Event.
(h) "Distribution Date" shall have the meaning set forth in Section
3 hereof.
(i) "Effective Date" shall mean November 7, 1996 immediately after the
3-for-2 stock split authorized by the Board of Directors of the Company on
September 27, 1996 is effected.
(j) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(k) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(l) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company.
-5-
(m) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(n) "Share Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(o) "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 interests is owned, directly or indirectly, by such Person.
(p) "Triggering Event" shall mean any action which would cause the
occurrence of any event described in Section 11(a)(ii) or Section 13 hereof.
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.
Section 3. Issue of Right Certificates.
---------------------------
(a) Until the earlier of (i) the twentieth business day after the
Share Acquisition Date and (ii) the twentieth business day (or such later date
as may be determined by action of the Board of Directors prior to such time as
any Person becomes an Acquiring Person) after the date of the commencement of,
or first public announcement of the intention of any Person to commence, a
tender or exchange offer the consummation of which would result in beneficial
ownership by a Person (other than the Company, any wholly owned Subsidiary of
the Company or any employee benefit 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) of 15% or more of the
-6-
Outstanding Common Shares (including any such date that is after the date of
this Agreement and prior to the issuance of the Rights; the earlier of such
dates being herein referred to as the "Distribution Date"), (x) the Rights will
be evidenced (subject to the provisions of paragraph (b) of this Section 3) by
the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates, and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date, the Rights Agent
will send, by first-class, insured, postage-prepaid mail, to each record holder
of Common Shares as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Right Certificate,
in substantially the form of Exhibit A hereto, evidencing one Right for each
Common Share so held. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) On the Effective Date or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common Shares as
of the close of business on the Effective Date, at the address of such holder
shown on the records of the Company. With respect to certificates for Common
Shares outstanding as of the Effective Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof (together with a copy of the Summary of Rights). Until the
Distribution Date (or the earlier Redemption Date or Final Expiration Date), the
surrender for transfer of any certificate for Common Shares outstanding on the
Effective Date, with or without a copy of the Summary of Rights attached
thereto, shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby.
-7-
(c) Certificates for Common Shares issued after the Effective Date but
prior to the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between SYLVAN
LEARNING SYSTEMS, INC. and STATE STREET BANK & TRUST COMPANY, dated
as of October 7, 1996, as amended from time to time (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 SYLVAN LEARNING SYSTEMS, 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. SYLVAN LEARNING SYSTEMS, INC. will mail to the holder of
this certificate a copy of the Rights Agreement without charge
promptly following receipt of a written request therefor. Under
certain circumstances, Rights beneficially owned by Acquiring Persons
(as defined in the Rights Agreement) and any subsequent holder of
such Rights may 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 otherwise acquires any Common Shares
after the Record Date but prior to the Distribution Date, any Rights associated
with such Common Shares shall be deemed cancelled 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 Right Certificates.
--------------------------
The Right 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 A hereto and may have such marks of
identification or designation and such legends, summaries or
-8-
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Sections 11 and 22 hereof, the Right Certificates, whenever
issued, which are issued in respect of Common Shares which were issued and
outstanding as of the Effective Date, shall be dated as of the Effective Date,
and all Right Certificates which are issued in respect of other Common Shares
shall be dated as of the respective dates of issuance of such Common Shares, and
in either case on their face shall entitle the holders thereof to purchase such
number of Preferred Shares as shall be set forth therein at the price per one
one-hundredth of a Preferred Share set forth therein (the "Purchase Price"), but
the number of such Preferred Shares and the Purchase Price shall be subject to
adjustment as provided herein.
Section 5. Countersignature and Registration.
---------------------------------
The Right Certificates shall be executed on behalf of the Company by its
Chairman of the Board, its President or any Vice President, either manually or
by facsimile signature, and have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary, or an Assistant
Secretary, of the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be countersigned by the Rights Agent, and issued and delivered by the Company
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate,
-9-
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal offices, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date and
certificate number of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
------------------------------------------------------------------
Mutilated, Destroyed, Lost or Stolen Right Certificates.
-------------------------------------------------------
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 and the Final Expiration Date,
any Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 7(g) or Section
11(a)(ii) hereof or that have been exchanged pursuant to Section 27 hereof) may
be transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
Preferred Shares as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Right Certificates to be transferred, split up, combined or exchanged at the
principal office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split-up, combination or exchange of
Right Certificates.
-10-
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, 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 Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Notwithstanding any other provision hereof, the Company and the Rights
Agent may amend this Rights Agreement to provide for uncertificated Rights in
addition to or in place of Rights evidenced by Right Certificates.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights;
--------------------------------------------------------------
Nullification of Rights.
-----------------------
(a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent
in Canton, Massachusetts, together with payment of the Purchase Price for each
one one-hundredth of a Preferred Share as to which the Rights are exercised, at
or prior to the earlier of (i) the close of business on the tenth (10th)
anniversary of the Effective Date (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.
(b) The Purchase Price for each one one-hundredth of a Preferred Share
pursuant to the exercise of a Right shall initially be $157.00, which initial
Purchase Price (i) was determined
-11-
after taking into consideration the 3-for-2 stock split authorized by the Board
of Directors of the Company on September 27, 1996 which is to be effected as a
stock dividend immediately prior to the Effective Date; (ii) shall be subject to
adjustment from time to time as provided in Sections 11 and 13 hereof; and
(iii) shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the shares to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof in cash, or by certified check
or bank draft 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 its transfer agent to comply with all such
requests, or (B) requisition from any depositary agent for the Preferred Shares
depositary receipts representing such number of one one-hundredths 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
interests in shares in accordance with Section 14 hereof, (iii) promptly after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, promptly deliver such cash to
or upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights
-12-
remaining unexercised shall be issued by the Rights Agent and delivered to the
registered holder of such Right Certificate or to his duly authorized assigns,
subject to the provisions of Section 14 hereof.
(e) In the event that the Company is obligated to issue other securities
(including Common Stock) of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
(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 or the transfer of any surrendered Rights
Certificates under Section 6, unless and until such registered holder shall have
(i) completed and signed (A) in the case of a Section 7 exercise, a form of
election or (B) in the case of a Section 6 transfer, a form of assignment, as
set forth on the reverse side of the Rights Certificate, 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.
(g) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of an event described in Section 11(a)(ii), any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring
-13-
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(g), shall become null and void without
any further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(g) are complied with, but shall have no liability
to any holder of Rights Certificates or other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder. No Right Certificate shall be
issued pursuant to Section 3 that represents Rights beneficially owned by an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof; no Right Certificate shall be issued at
any time upon the transfer of any Rights to an Acquiring Person whose rights
would be void pursuant to the preceding sentence or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and
any Right Certificate delivered to the Rights Agent for transfer to an Acquiring
Person (or any Associate, Affiliate or nominee thereof) whose Rights would be
void pursuant to the preceding sentence shall be canceled.
Section 8. Cancellation and Destruction of Right Certificates.
--------------------------------------------------
All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or to any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled by it,
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise
-14-
than upon the exercise thereof. The Rights Agent shall deliver all canceled
Right Certificates to the Company, or shall, at the written request of the
Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares.
------------------------------------------------
(a) 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, the number of Preferred Shares that will
be sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the Preferred Shares issuable upon the exercise of Rights
may be listed on any national securities exchange or automated quotation system,
the Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
(c) From and after such time as the Rights become exercisable, the
Company shall use its best efforts to, if then necessary to permit the issuance
of Preferred Shares (and following the time that a Person first becomes an
Acquiring Person, Common Shares and other securities) upon the exercise of
Rights, register and qualify such Preferred Shares (and following the time that
a Person first becomes an Acquiring Person, Common Shares and other securities)
under the Securities Act and any applicable state securities or "Blue Sky" laws
(to the extent exemptions therefrom are not available), cause such registration
statement and qualifications to become effective as soon as possible after such
filing and keep such registration and qualifications effective until the earlier
of the date as of which the Rights are no longer exercisable for such securities
and the Final Expiration Date. The Company may temporarily suspend, for a period
of time not to exceed 90 days, the exercisability of the Rights in order to
prepare and file a registration statement under the Securities Act and permit it
to become effective. Upon any such
-15-
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act (if required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all 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.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax that may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax is
due.
Section 10. Preferred Shares Record Date.
----------------------------
Each person in whose name any certificate for Preferred Shares 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
-16-
the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares 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 transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights.
------------------------------------------------------------------
The Purchase Price, the number of Preferred 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) subdivide 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 of the Preferred
Shares (including any such reclassification in connection with a consolidation,
merger or statutory share exchange in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a), the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of 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 the aggregate number and kind of shares of
capital stock which,
-17-
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, the holder
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of one Right. If an event occurs which would
require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), 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).
(ii) In the event:
(A) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, (1) shall merge into the Company or
otherwise combine with the Company and the Company shall be the
continuing or surviving corporation of such merger or combination
and the Common Shares of the Company shall remain outstanding and
not changed into or exchanged for stock or other securities of any
other Person or the Company or cash or any other property, (2)
shall, in one or more transactions, other than in connection with
the exercise of Rights or the exercise or conversion of securities
exercisable or convertible into capital stock of the Company or any
of its Subsidiaries, transfer any assets to the Company or any of
its Subsidiaries in exchange (in whole or in part) for shares of any
class of capital stock of the Company or any of its Subsidiaries or
for securities exercisable for or convertible into shares of any
class of capital stock of the Company or any of its Subsidiaries or
otherwise obtain from the Company or any of its Subsidiaries, with
or without consideration, any additional shares of any class of
capital stock of the Company or any of its Subsidiaries or
securities
-18-
exercisable for or convertible into shares of any class
of capital stock of the Company or any of its Subsidiaries (other
than as part of a pro rata distribution to all holders of Common
Shares), (3) shall sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise dispose (in one or more transactions),
to, from, with or of, as the case may be, the Company or any of its
Subsidiaries, assets, including securities, on terms and conditions
less favorable to the Company than the Company would be able to
obtain in arm's-length negotiation with an unaffiliated third party,
(4) shall receive any compensation from the Company or any of the
Company's Subsidiaries other than compensation for full-time
employment as a regular employee at rates in accordance with the
Company's (or its Subsidiaries') past practices, or (5) shall
receive the benefit, directly or indirectly (except proportionately
as a stockholder), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax advantage
provided by the Company or any of its Subsidiaries,
(B) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger,
statutory share exchange or consolidation of the Company with any of
its Subsidiaries or any other transaction or series of transactions
involving the Company or any Subsidiary of the Company (whether or
not with or into or otherwise involving an Acquiring Person) which
has the effect, directly or indirectly, of increasing by more than
1% the proportionate share of the outstanding shares of any class of
equity securities or of securities exercisable for or convertible
into securities of the Company or any of its Subsidiaries that is
directly or indirectly owned by any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, or
-19-
(C) any Person (other than the Company, any wholly-owned
Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary, or any entity holding Common Shares for or
pursuant to the terms of any such plan), alone or together with its
Affiliates and Associates, shall, at any time, become the
Beneficial Owner of 15% or more of the Common Shares then
outstanding, unless the event causing the 15% threshold to be
crossed is a transaction set forth in Section 13 hereof, or is an
acquisition of Common Shares pursuant to a tender offer or an
exchange offer for all outstanding Common Shares at a price and on
terms determined by at least a majority of the members of the Board
of Directors who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of an Acquiring
Person, after receiving advice from one or more investment banking
firms, to be (a) at a price which is fair to stockholders (taking
into account all factors which such members of the Board deem
relevant including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise
in the best interests of the Company and its stockholders,
then, and in each such case, proper provision shall be made so
that each holder of a Right, except as provided below, shall thereafter have a
right to receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of Preferred Shares, such
number of Common Shares as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable and dividing that product
by (y) 50% of the current per share market price of the Common Shares
(determined pursuant to Section 11(d)) on the fifth day after the date of the
occurrence of any one of the events listed above in this subparagraph (ii);
provided, however, that if the transaction that would otherwise give rise to
-------- -------
-20-
the foregoing adjustment is also subject to the provisions of Section 13 hereof,
then only the provisions of Section 13 hereof shall apply and no adjustment
shall be made pursuant to this Section 11(a)(ii). At its discretion, the Board
of Directors of the Company may, by resolution duly adopted, provide that
holders of Rights, upon exercise thereof, shall receive, in lieu of Common
Shares, such number of one-hundredths of a share of Preferred Shares as shall
equal the result obtained by (X) multiplying the then current Purchase Price by
the number of one one-hundredths of a share of Preferred Shares for which a
Right is then exercisable and dividing the product by (Y) 50% of the then
current per share market price of the Company's Common Shares (determined
pursuant to Section 11(d) hereof) on the fifth day after the date of the
occurrence of any of the events listed above in this subparagraph (ii).
Notwithstanding the foregoing, upon the occurrence of any of the events listed
above in this subparagraph (ii), any Rights that are or were beneficially owned
on or after the earlier of the Distribution Date or the Shares Acquisition Date
by an Acquiring Person (or any Associate or Affiliate of such Acquiring Person)
shall become void in accordance with the provisions of Section 7(g) of this
Agreement and any holder of such Rights shall thereafter have no right to
exercise such Rights under any provision of this Agreement.
(iii) The Company covenants and agrees not to enter into any
transaction of the kind listed in this subparagraph (ii) if at the time of such
transaction (x) there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights, or (y) it has
insufficient authorized and unissued shares of Common Stock to provide for the
adjustment required by subparagraph (ii).
(iv) Any Right Certificate issued pursuant to Section 3 hereof
that represents Rights beneficially owned by an Acquiring Person or any
Associate or Affiliate thereof and any Right Certificate issued at any time upon
the transfer of any Rights to an Acquiring Person or
-21-
any Associate or Affiliate thereof or to any nominee of such Acquiring Person,
Associate or Affiliate, and any Right Certificate issued pursuant to Section 6
hereof or this Section 11 upon transfer, exchange, replacement or adjustment of
any other Right Certificate referred to in this sentence, shall contain the
following legend
The Rights represented by this Right Certificate were issued to a
Person who was an Acquiring Person or an Affiliate or an Associate
of an Acquiring Person. This Right Certificate and the Rights
represented hereby may become void in the circumstances specified in
Section 11(a)(ii) of the Rights Agreement.
(v) In the event that despite the covenant in subparagraph
(iii) an event specified in subparagraph (ii) occurs and there shall not be
sufficient treasury shares or authorized but unissued Common Shares to permit
the exercise in full of the Rights in accordance with subparagraph (ii), the
Company covenants to us its best efforts to carry out all such action as may be
necessary to authorize additional Common Shares for issuance upon exercise of
the Rights, and, if such action is not completed within forty-five (45) days
from the date the adjustment was required, the Company shall: (A) determine the
excess of (1) the value of the Common Shares (the "Exercise Shares") issuable
upon the exercise of a Right (the "Current Value") over (2) the then current
Purchase Price (such excess, the "Spread"), and (B) with respect to each Right,
make adequate provision to substitute for the Exercise Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price,
(3) Common Stock or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock which the Board of
Directors of the Company has deemed to have the same value as shares of Common
Stock (such shares of preferred stock, "common stock equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the Company
based upon the advice of a nationally recognized investment banking firm
selected by the Board of Directors of the Company;
-22-
provided, however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within ninety (90) days following the
first occurrence of a Section 11(a)(ii) event, then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, securities and/or assets which in the
aggregate are equal to the Spread. To the extent that the Company determines
that some action need be taken pursuant to this subparagraph (v), the Company
(x) shall provide, subject to the last sentence of subparagraph (ii) hereof,
that such action shall apply uniformly to all outstanding Rights, and (y) may
suspend the exercisability of the Rights for such time as may be reasonably
necessary in order to seek any authorization of additional shares and/or to
decide the appropriate form of distribution to be made pursuant hereto and to
determine the value thereof.
(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 current per share
market price of the Preferred Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of Preferred
Shares which the aggregate 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 market price and the denominator of which shall be the
number of Preferred Shares outstanding on such record date
-23-
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). In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. 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 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 or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b)), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
current per share market price of the Preferred Shares (as defined in Section
11(d)) 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) 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 aggregate par value of the shares of
capital stock of the Company to be
-24-
issued upon exercise of one Right. 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
that would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security for the purposes 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; 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 (1) a dividend or distribution on such Security payable in
such Common Shares or securities convertible into such Common Shares, or (2) any
subdivision, combination or reclassification of such Security, and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current market price shall be
appropriately adjusted. 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 Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the Security is not quoted by any
such
-25-
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 such Security, the closing price of such Security shall be deemed to
be the fair value of such Security as determined in good faith by the Board of
Directors of the Company. 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
Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in
the State of New York are not authorized or obligated by law or executive order
to close.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in the same
manner as set forth above for Common Shares in clause (i) of this Section 11(d).
If the current per share market price of the Preferred Shares cannot be
determined in the manner provided above, the "current per share market price" of
the Preferred Shares shall be conclusively deemed to be the current per share
market price of the Common Shares (appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof),
multiplied by one hundred. If neither the Common Shares nor the Preferred Shares
are publicly held or so listed or traded, "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 with the Rights Agent.
(e) 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 ten-thousandth of a Common
Share
-26-
or other share or one-millionth of a Preferred Share 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 that requires such adjustment or (ii) the
date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a), the
holder of any Right thereafter exercised shall become entitled to receive any
shares of capital stock of the Company other than Preferred Shares, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares contained
in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10
and 13 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 Preferred Shares
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 Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
-27-
(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 Preferred Shares 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 one-hundredths 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 ten-thousandth)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
-28-
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of Preferred Shares issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-hundredth of a share and the number of shares which
were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares 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 Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of the
Preferred Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares 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 upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any of Preferred Shares at less than the current market
price, issuance wholly for cash of Preferred Shares or securities which by their
terms are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or
-29-
issuance of rights, options or warrants referred to hereinabove in subsection
(b) of this Section 11, hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such shareholders.
(n) 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-hundredths of a Preferred Share purchasable after such event upon
proper exercise of each Right shall be determined by multiplying the number of
one one-hundredths 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(n) 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 and 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Common Shares or the Preferred Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate in accordance with
Section 25 hereof.
-30-
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power.
-----
In the event, directly or indirectly at any time after any Person has
become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such 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 cash or any other property, (c)
the Company shall engage in any statutory share exchange whereby the Company's
Common Shares are converted into stock, securities, cash or any other property
of any other Person or (d) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets 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 wholly owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (other than Rights that have become void
pursuant to Section 11(a)(ii) hereof) shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, such number of Common Shares of
such other Person (including the Company as successor thereto or as the
surviving corporation) as shall be equal to the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable and dividing that
product by (y) 50% of the current per share market price of the Common Shares of
such other Person (determined pursuant to Section 11(d)) on the date of
consummation of such consolidation, merger, statutory share exchange, sale or
transfer; (ii) the issuer of such Common Shares shall thereafter be liable for,
and shall assume, by virtue of such consolidation, merger, sale or transfer, all
the obligations and duties of the Company pursuant to this Agreement; (iii) the
term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such
issuer shall take such steps (including, but not
-31-
limited to, the reservation of a sufficient number of its Common Shares in
accordance with Section 9 hereof) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights. The Company shall not consummate
any such consolidation, merger, statutory share exchange, sale or transfer
unless prior thereto the Company and such issuer shall have executed and
delivered to the Rights Agent a supplemental agreement so providing. The Company
covenants and agrees not to enter into any transaction of the kind listed in
this Section 13 if at the time of such transaction there are any rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights. The provisions of this Section 13 shall similarly apply
to successive mergers or consolidations or sales or other transfers.
If, for any reason, the Rights cannot be exercised for Common Shares of
the Company or such other Person, then a holder of Rights will have the right to
exchange his Rights, without payment of the applicable exercise price, for cash
from the Company or such other Person in an amount equal to the number of Common
Shares he would otherwise be entitled to purchase times 50% of the then current
market price, as determined pursuant to Section 11(d)(i) hereof, of such Common
Shares of the Company or such other Person. If, for any reason, including,
without limitation, if such other Person is an individual, private partnership
or private company, the foregoing cannot be applied to determine the cash amount
into which the Rights are exchangeable, then the Board of Directors of the
Company, based upon the advice from one or more investment banking firms, shall
determine such amount reasonably and with utmost good faith to the holders of
the Rights. Any such determination shall be binding and final.
Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparts (a), (b) and (c)
of this Section 13 if (i) such
-32-
transaction is consummated with a Person or Persons who acquired Common Shares
pursuant to a cash tender offer for all outstanding Common Shares which complies
with the provisions of Section 11(a)(ii)(C) hereof (or a wholly-owned subsidiary
of such Person or Persons), (ii) the price per Common Share offered in such
transaction is not less than the price per Common Share paid to all holders of
Common Shares whose shares were purchased pursuant to such cash tender offer and
(iii) the form of consideration being offered to the remaining holders of Common
Shares pursuant to such transaction is the same as the form of consideration
paid pursuant to such cash tender offer. Upon consummation of any such
transaction contemplated by this paragraph, all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such 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 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
-33-
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 that are integral multiples of one one-hundredth of
a Preferred Share) upon exercise of the Rights or to issue certificates which
evidence fractions of Preferred Shares (other than fractions that are integral
multiples of one one-hundredth of a Preferred Share). Fractions of Preferred
Shares in integral multiples of one one-hundredth 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 one-hundredth of a Preferred Share, the Company shall
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For purposes of this Section 14(b)
hereof, 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) 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
-34-
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
of one Common Share (as determined pursuant to Section 11(d) hereof) for the
Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares
(except as provided above) upon exercise of a Right.
Section 15. Rights of Action.
----------------
All rights of action in respect of this Agreement, excepting the rights
of action given to the Rights Agent under Section 18 hereof, are vested in the
respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Right 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 Right 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 Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of, the obligations of any Person subject to this Agreement.
-35-
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 Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common 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.
Section 17. Right Certificate Holder Not Deemed a Stockholder.
-------------------------------------------------
No holder, as such, of any Right 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 Right Certificate be construed to confer upon the holder of any
Right Certificate, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to
-36-
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
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 Right 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 its 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
-37-
corporation succeeding to the corporate trust or stock transfer business of the
Rights Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided 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 Right
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been counter- signed, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
----------------------
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Right Certificates, by their acceptance thereof, shall be
bound:
-38-
(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 Chairman of the Board, the
President, any Vice President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
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 Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be
-39-
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(g) or Section 11(a)(ii) hereof) or
any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Sections 3, 11, 13 or 23, 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 Right 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 Right 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
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer.
(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.
-40-
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
Section 21. Change of Rights Agent.
----------------------
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon 30 days' notice in writing
mailed to the Company and to each transfer agent of the Common Shares and
Preferred Shares by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Shares and Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be a (A) corporation organized and doing business under the
laws of the United States or of the States of Maryland or New York (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 States of Maryland or New York), in
good standing, that is authorized under such laws to
-41-
exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and that 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 and Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
----------------------------------
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by 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 Right
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common Shares following the
Distribution Date and prior to the earlier of the Redemption Date and the
Expiration Date, the Company may, with respect to Common Shares so issued or
sold pursuant to (i) the exercise of stock options, (ii) any employee plan or
arrangement, (iii) the exercise, conversion or exchange of notes, debentures or
other securities issued by the Company or (iv) any other contractual obligation
of the Company, in each case existing prior to the Distribution Date, issue
Right
-42-
Certificates representing the appropriate number of Rights in connection with
such issuance or sale.
Section 23. Redemption.
----------
(a) The Board of Directors of the Company may, at its option, by a vote
which includes the concurrence, by affirmative vote, of a majority of the
Disinterested Directors, at any time prior to the earlier of (i) the close of
business on the twentieth day following the Share Acquisition Date, (or, if the
Share Acquisition Date shall have occurred prior to the Effective Date, the
close of business on the twentieth day following the Effective Date), or (ii)
the Final Expiration Date, redeem all but not less than all the then outstanding
Rights at a redemption price of $.05 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"); provided, however, that if,
--------
following the occurrence of a Share Acquisition Date and following the
expiration of the right of redemption hereunder but prior to a Triggering Event,
(i) a Person who is an Acquiring Person shall have transferred or otherwise
disposed of a number of shares of Common Shares in one transaction or series of
transactions, not directly or indirectly involving the Company or any of its
Subsidiaries, which did not result in the occurrence of a Triggering Event such
that such Person is thereafter a Beneficial Owner of 10% or less of the
outstanding shares of Common Shares, and (ii) there are not other Persons,
immediately following the occurrence of the event described in clause (i), who
are Acquiring Persons, then the right of redemption shall be reinstated and
thereafter be subject to the provisions of this Section 23. Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable, and a Triggering Event shall not be deemed to have occurred, after
the first occurrence of an event described in Section 11(a)(ii) hereof until
such time as the Company's right of redemption hereunder has expired.
-43-
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, 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. Within 10 days after the
action of the Board of Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common 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. In any case, failure to give such notice by mail, or any defect in
the notice, to any particular holder of Rights shall not affect the sufficiency
of the notice to other holders of Rights. 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, and other than in connection with the purchase of Common Shares prior to the
Distribution Date.
Section 24. Notice of Certain Events.
------------------------
In case the Company shall propose (a) 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) or (b) to offer to the holders of its 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, or (c) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), or (d) to effect any consolidation, merger, or
-44-
statutory share exchange 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, or (e) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to each holder of a
Right Certificate, in accordance with Section 25 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, statutory share exchange, 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 (a) or (b) above at least 20 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 20 days prior
to the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, whichever
shall be the earlier.
In case any of the events set forth in Section 11(a)(ii) of this
Agreement shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to each holder of a Right Certificate, in accordance
with Section 25 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof.
Section 25. Notices.
-------
Notices or demands authorized by this Agreement to be given or made by
the Rights Agent or by the holder of any Right Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
-45-
SYLVAN LEARNING SYSTEMS, INC.
0000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
BOSTON EQUISERV
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 26. Supplements and Amendments.
--------------------------
Prior to the Distribution Date and subject to the penultimate sentence of
this Section 26, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock,
including, without limitation, any supplement or amendment deemed necessary or
appropriate by the Company in light of any judicial or other legal developments,
whether or not controlling precedent in respect of this Agreement. From and
after the Distribution Date and subject to the penultimate sentence of this
Section 26, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of Rights
Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) to shorten or lengthen any time period hereunder
(which lengthening or shortening, shall be effective only if there are
Disinterested Directors and shall
-46-
require the concurrence, by affirmative vote, of a majority of such
Disinterested Directors), or (iv) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights
Certificates (other than a Acquiring Person or an Affiliate or Associate of any
Acquiring Person); provided, however, this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Without limiting the foregoing, the Company
may at any time prior to such time as any Person becomes an Acquiring Person
amend this Agreement to lower the thresholds set forth in Section 1(a) and 3(a)
hereof from 15% to any percentage greater than the greater of (i) the largest
percentage of the outstanding Common Shares then known by the Company to be
beneficially owned by any Person (other than the Company, any wholly-owned
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), and (ii) 10%.
Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 26, the Rights Agent shall execute such
supplement or amendment and shall be fully protected by Section 18 in so doing.
Nothing herein shall require the Rights Agent to execute any supplement or
amendment which adversely affects the rights and protections afforded to the
Rights Agent under Sections 18, 19 and 20 hereof. Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall be
made which changes the Redemption Price, the Purchase Price or the number of one
one-hundredths of a share of Preferred Stock for which a Right is exercisable or
which changes the Final Expiration Date to a date earlier than November 7, 2006.
Prior to the Distribution Date, the interest of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock.
-47-
Section 27. Exchange.
--------
(a) Subject to any limitations of applicable law, the Board of Directors
of the Company may, at its option, at any time after any person becomes an
Acquiring Person, exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become void pursuant to the
provisions of Section 7(g) or 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 wholly-owned Subsidiary of the Company, any employee benefit plan
of the Company or of any 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 subsection (a) of this Section
27 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only rights 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
-------- -------
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
-48-
number of Rights which will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 7(g) or Section 11(a)(ii) hereof) held by
each holder of Rights.
(c) In any exchange pursuant to this Section 27, the Company, at its
option, may substitute Preferred Shares (or equivalent preferred shares, as such
term is defined in Section 11(b) hereof) for Common Shares exchangeable for
Rights, at the initial rate of one one-hundredth of a Preferred Share (or
equivalent preferred share) for each Common Share, as appropriately adjusted to
reflect adjustments in the voting rights of the Preferred Shares pursuant to the
terms thereof, so that the fraction of a Preferred Share delivered in lieu of
each Common Share shall have the same voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares or
Preferred Shares issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 27, the
Company shall take all such action as may be necessary to authorize additional
Common Shares or Preferred 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 holder
of the Right 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
subsection (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 after the public
announcement by the Company that an exchange is to be effected pursuant to this
Section 27.
-49-
Section 28. Determinations and Actions by the Board of Directors, Etc.
----------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of
shares of Common Shares outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
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 in effect on the date hereof. The Board
of Directors of the Company (with, where specifically provided for herein, the
concurrence of a majority of the Disinterested Directors) shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board (with, where specifically
provided for herein, the concurrence of a majority of the Disinterested
Directors) or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board (with, where
specifically provided for herein, the concurrence of a majority of the
Disinterested Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board or the Disinterested Directors to
any liability to the holders of the Rights.
Section 29. Successors.
----------
All the covenants and provisions of this Agreement by or for the benefit
of the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
-50-
Section 30. Benefits of this Agreement.
--------------------------
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Rights Agent and the registered holders
of the Right Certificates (and, prior to the Distribution Date, the Common
Shares) any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Right Certificates.
Section 31. Severability.
------------
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
--------
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the close of business on the twentieth day following the
date of such determination by the Board of Directors.
Section 32. Governing Law.
-------------
This Agreement and each Right Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Maryland 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.
-51-
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
ATTEST: SYLVAN LEARNING SYSTEMS, INC.
By: By:
----------------------------- ---------------------------------
Title:
ATTEST: STATE STREET BANK & TRUST COMPANY
By: By:
----------------------------- ---------------------------------
Title:
-52-
