Exhibit 4.1





Exhibit 4.1




EXECUTION VERSION




CAPITAL SENIOR LIVING CORPORATION




AND




MELLON INVESTOR SERVICES LLC, as Rights Agent




RIGHTS AGREEMENT




dated as of

February 25, 2010



 


 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	Section 1.
	 	Certain Definitions	 	 	1	 
	 
	 	 	 	 	 	 
	Section 2.
	 	Appointment of Rights Agent	 	 	10	 
	 
	 	 	 	 	 	 
	Section 3.
	 	Issue of Right Certificates	 	 	10	 
	 
	 	 	 	 	 	 
	Section 4.
	 	Form of Right Certificates	 	 	13	 
	 
	 	 	 	 	 	 
	Section 5.
	 	Countersignature and Registration	 	 	13	 
	 
	 	 	 	 	 	 
	Section 6.
	 	Transfer, Split Up, Combination and Exchange of Right Certificates;	 	 	13	 
	 
	 	Mutilated, Destroyed, Lost or Stolen Right Certificates	 	 	 	 
	 
	 	 	 	 	 	 
	Section 7.
	 	Exercise of Rights:  Purchase Price; Final Expiration Date of Rights	 	 	14	 
	 
	 	 	 	 	 	 
	Section 8.
	 	Cancellation and Destruction of Right Certificates	 	 	16	 
	 
	 	 	 	 	 	 
	Section 9.
	 	Reservation and Availability of Shares of Preferred Stock	 	 	16	 
	 
	 	 	 	 	 	 
	Section 10.
	 	Preferred Stock Record Date	 	 	17	 
	 
	 	 	 	 	 	 
	Section 11.
	 	Adjustment of Purchase Price, Number of Shares or Number of Rights	 	 	18	 
	 
	 	 	 	 	 	 
	Section 12.
	 	Certificate of Adjusted Purchase Price or Number of Shares	 	 	25	 
	 
	 	 	 	 	 	 
	Section 13.
	 	Consolidation, Merger or Sale or Transfer of Assets or Earning Power	 	 	25	 
	 
	 	 	 	 	 	 
	Section 14.
	 	Fractional Rights and Fractional Shares	 	 	29	 
	 
	 	 	 	 	 	 
	Section 15.
	 	Rights of Action	 	 	30	 
	 
	 	 	 	 	 	 
	Section 16.
	 	Agreement of Right Holders	 	 	31	 
	 
	 	 	 	 	 	 
	Section 17.
	 	Right Certificate Holder Not Deemed a Stockholder	 	 	31	 
	 
	 	 	 	 	 	 
	Section 18.
	 	Concerning the Rights Agent	 	 	31	 
	 
	 	 	 	 	 	 
	Section 19.
	 	Merger or Consolidation or Change of Name of Rights Agent	 	 	32	 
	 
	 	 	 	 	 	 
	Section 20.
	 	Duties of Rights Agent	 	 	33	 
	 
	 	 	 	 	 	 
	Section 21.
	 	Change of Rights Agent	 	 	35	 
	 
	 	 	 	 	 	 
	Section 22.
	 	Issuance of New Right Certificates	 	 	36	 
	 
	 	 	 	 	 	 
	Section 23.
	 	Redemption	 	 	37	 
	 
	 	 	 	 	 	 
	Section 24.
	 	Exchange	 	 	39	 
	 
	 	 	 	 	 	 
	Section 25.
	 	Notice of Certain Events	 	 	40	 
	 
	 	 	 	 	 	 
	Section 26.
	 	Notices	 	 	40	 
	 
	 	 	 	 	 	 
	Section 27.
	 	Supplements and Amendments	 	 	41	 
	 
	 	 	 	 	 	 
	Section 28.
	 	Successors	 	 	42	 
	 
	 	 	 	 	 	 
	Section 29.
	 	Benefits of this Agreement	 	 	42	 
	 
	 	 	 	 	 	 
	Section 30.
	 	Determinations and Actions by the Board of Directors of the Company	 	 	42	 
	 
	 	 	 	 	 	 
	Section 31.
	 	Severability	 	 	42	 
	 
	 	 	 	 	 	 
	Section 32.
	 	Governing Law	 	 	43	 






 


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TABLE OF CONTENTS




	 	 	 	 	 	 	 
	Section 33.

	 	Descriptive Headings; References; Calculation of Time Periods
	 	 	43	 
	 
	 	 	 	 	 	 
	Section 34.

	 	Counterparts
	 	 	43	 
	 
	 	 	 	 	 	 
	Exhibit A
	 	 	 	 	 	 
	Certificate of Designations for Series A
Junior Participating Preferred Stock
	 	 	 	 
	 
	 	 	 	 	 	 
	Exhibit B
	 	 	 	 	 	 
	Form of Right Certificate
	 	 	 	 
	Form of Assignment
	 	 	 	 
	Form of Election to Purchase
	 	 	 	 
	 
	 	 	 	 	 	 
	Exhibit C
	 	 	 	 	 	 
	Summary of Rights to Purchase Preferred Stock
	 	 	 	 







 


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RIGHTS AGREEMENT




This Rights Agreement, dated as of February 25, 2010 (this “Agreement”), is between
Capital Senior Living Corporation, a Delaware corporation (the “Company”), and Mellon
Investor Services LLC (operating with the service name BNY Mellon Shareowner Services), a New
Jersey limited liability company (the “Rights Agent”).



WITNESSETH:




WHEREAS, on February 24, 2010, the Board of Directors of the Company (the “Board”) has
authorized and declared a dividend distribution of one preferred share purchase right (a
“Right”) for each outstanding share of Common Stock (as herein defined) outstanding as of
the close of business (as herein defined) on March 8, 2010 (the “Record Date”) and has
authorized the issuance of one Right (subject to adjustment as provided herein) with respect to
each share of Common Stock issued or delivered by the Company between the Record Date and the
earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms
are herein defined) and under certain other circumstances, each Right representing the right to
purchase one one-thousandth (1/1,000) of one share of Series A Junior Participating Preferred
Stock, par value $0.01 per share, of the Company having the rights and preferences set forth in the
form of Certificate of Designations attached hereto as Exhibit A upon the terms and subject
to the conditions hereinafter set forth.



NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth,
the parties hereby agree as follows:



Section 1. Certain Definitions. For purposes of this Agreement, the following terms
have the meanings indicated:



(a) “Acquiring Person” shall mean any Person (other than the Company or any Related
Person) who or that together with all Affiliates and Associates of such Person, shall be or become
the Beneficial Owner of 20% or more of the shares of Common Stock then outstanding.
Notwithstanding the foregoing, no Person shall become an “Acquiring Person” solely as the result of
an acquisition of Common Stock by the Company or any Related Person that, by reducing the number of
shares outstanding, increases the proportionate number of shares Beneficially Owned by a Person,
together with all Affiliates and Associates of such Person, to 20% or more of the shares of Common
Stock then outstanding; provided, however, that if such Person, together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 20% or more of the shares
of Common Stock then outstanding by reason of share acquisitions by the Company and its Related
Persons and shall, after such share acquisitions by the Company and its Related Persons, become the
Beneficial Owner of any additional share or shares of Common Stock (other than by reason of a stock
dividend or distribution of shares by the Company made on a pro rata basis to all holders of Common
Stock or the issuance of shares by the Company pursuant to a stock split or subdivision of the
outstanding Common Stock), then such Person shall be deemed to be an “Acquiring Person,” except as
otherwise provided in the immediately following paragraph, unless upon consummation of the
acquisition of such additional share or shares of Common Stock, such Person, together with all
Affiliates and



 


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Associates of such Person, does not beneficially own 20% or more of the shares of Common Stock
then outstanding.



Notwithstanding the foregoing, if (i) (A) the Board determines in good faith that a Person who
otherwise would be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this
Section 1(a), became the Beneficial Owner of 20% or more of shares of Common Stock then
outstanding inadvertently (including, without limitation, because (1) such Person was unaware that
it, together with all Affiliates and Associates of such Person, had become the Beneficial Owner of
20% or more of the shares of Common Stock then outstanding or (2) such Person was aware of the
extent of its (and its Affiliates’ and Associates’) Beneficial Ownership of Common Stock but had no
actual knowledge of the consequences of such Beneficial Ownership under this Agreement) and without
any intention of changing or influencing control of the Company, (B) such Person (and/or its
Affiliates and Associates) promptly divests a sufficient number of shares of Common Stock so that
such Person, together with all Affiliates and Associates of such Person, would no longer satisfy
the conditions for being an “Acquiring Person” pursuant to the foregoing provisions of this
Section 1(a), and (C) such determination by the Board is made and such divestment by such
Person (and/or its Affiliates and Associates) is completed prior to the time when the first Right
is distributed by the Rights Agent pursuant to Section 3(a), then such Person shall not be deemed
to be an “Acquiring Person” or to have become an “Acquiring Person,” for all purposes of this
Agreement (such that, for the avoidance of doubt, under such circumstances no Distribution Date
shall occur, or be deemed to have occurred, as a result thereof and no adjustment pursuant to
Section 11(a)(ii) or Section 13 shall be made in respect thereof);
provided, however, that if such Person, after such determination and divestment,
together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 20% or
more of the shares of Common Stock then outstanding by reason of becoming the Beneficial Owner of
any additional shares of Common Stock, then such Person shall be deemed to be an “Acquiring Person”
(unless a subsequent determination and divestment is made pursuant to this clause (i)); or (ii) as
of the date of the first public announcement of the adoption of this Agreement, any Person,
together with all Affiliates and
Associates of such Person, is the Beneficial Owner of 20% or more
of the shares of Common Stock then outstanding, such Person (and any Affiliate or Associate of such
Person) shall not be deemed to be or become an Acquiring Person unless and until such Person shall,
after the first public announcement of the adoption of this Agreement, become the Beneficial Owner
of one or more additional shares of Common Stock (other than by reason of a stock dividend or
distribution of shares by the Company made on a pro rata basis to all holders of Common Stock or
the issuance of shares by the Company pursuant to a stock split or subdivision of the outstanding
Common Stock) unless, upon becoming the Beneficial Owner of such additional shares of Common Stock,
such Person, together with all Affiliates and
Associates of such Person, is not then the Beneficial
Owner of 20% or more of the shares of Common Stock then outstanding.



(b) “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement.



(c) “Agreement” shall have the meaning set forth in the preamble hereto.


 


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(d) “Associate” when used to indicate a relationship with any Person, shall mean each,
any and all of the following:



(i) any firm, corporation, limited liability company, partnership, joint venture, bank, trust
or other entity of which such Person is an officer, member, or partner;



(ii) any firm, corporation, limited liability company, partnership, joint venture, bank, trust
or other entity of which such Person is, directly or indirectly, the Beneficial Owner of 10% or
more of any class of equity securities; provided, however, that any such firm,
corporation, limited liability company, partnership, joint venture, bank, trust or other entity
shall not be an “Associate” of a Person if, and only for so long as, such Person (A) satisfies the
criteria set forth in both Rule 13d-1(b)(1)(i) and Rule 13d-1(b)(1)(ii) of the General Rules and
Regulations under the Exchange Act, (B) has reported Beneficial Ownership of the equity securities
of such firm, corporation, limited liability company, partnership, joint venture, bank, trust or
other entity on Schedule 13G under the Exchange Act and is not required to report its ownership of
such equity securities on Schedule 13D under the Exchange Act, (C) is the Beneficial Owner of less
than 20% of the shares of Common Stock then outstanding (including any such shares that are
beneficially owned by such Person’s Affiliates and Associates after giving effect to this proviso)
and (D) has not reported and is not required to report its ownership of Common Stock on Schedule
13D under the Exchange Act;



(iii) any trust or other estate in which such Person has a substantial beneficial interest or
as to which such Person serves as trustee or in a similar fiduciary capacity; or



(iv) any relative or spouse of such Person, or any relative of such spouse, who has the same
home as such Person.



(e) A Person shall be deemed the “Beneficial Owner” of and shall be deemed to
“beneficially own” and to have “Beneficial Ownership” of any securities:



(i) that such Person, or any of such Person’s Affiliates or Associates, beneficially owns,
directly or indirectly, within the meaning of Rule 13d-3 of the General Rules and Regulations under
the Exchange Act as in effect on the date of this Agreement;



(ii) that such Person, or any of such Person’s Affiliates or Associates, directly or
indirectly, has (A) the right to acquire (whether such right is exercisable immediately or only
after the passage of time or the satisfaction of other conditions) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities), written or
otherwise, or upon the exercise of conversion rights, exchange rights, warrants, options or other
rights (in each case, other than upon the exercise or exchange of the Rights); provided,
however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially
own,” (1) securities tendered pursuant to a tender or exchange offer made by such Person or any of
such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or
exchange or (2) securities that such Person has a right to acquire on the exercise of Rights at any
time prior to the time that such Person becomes an Acquiring Person; or (B) the right to vote
pursuant to any agreement, arrangement or understanding, written or otherwise; provided,



 


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however, that a Person shall not be deemed the “Beneficial Owner” of, or to
“beneficially own,” any security under this clause (B) if the 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 then
reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or



(iii) that are beneficially owned, directly or indirectly, by any other Person (or any of such
other Person’s Affiliates or Associates) with which such Person (or any of such Person’s Affiliates
or Associates), has (A) any agreement, arrangement or understanding, written or otherwise, for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the
proviso to Section 1(e)(ii)(B)) or disposing of any securities of the Company) or (B) any
agreement, arrangement or understanding (whether or not in writing) to cooperate in obtaining,
changing or influencing the control of the Company;


provided, however, that (1) nothing in this Section 1(e) shall cause a
Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of, or to
“beneficially own,” any securities acquired through such Person’s participation in good faith in a
firm commitment underwriting until (x) the expiration of 40 calendar days after but not including
the date of such acquisition, and then only if such securities continue to be owned by such Person
at the expiration of such 40 calendar day period or (y) such later date as the Board may determine
in any specific case; (2) no Person who is an officer, director or employee of the Company or a
Related Person shall be deemed, solely by reason of such Person’s status or authority as such, to
be the “Beneficial Owner” of, or to “beneficially own,” any securities (including, without
limitation, in a fiduciary capacity) beneficially owned by the Company, any Related Person or any
other officer, director or employee of the Company or any Related Person; and (3) a Person shall
not be deemed the “Beneficial Owner” of, or to “beneficially own,” any securities held by such
Person in trust accounts, managed accounts and the like, or otherwise held in a fiduciary capacity,
that are beneficially owned by third Persons who are not Affiliates or Associates of such Person.




Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the
phrase “then outstanding,” when used with reference to a Person’s Beneficial Ownership of
securities of the Company, shall mean the number of such securities then issued and outstanding
together with the number of such securities not then actually issued and outstanding that such
Person would be deemed to beneficially own hereunder.



(f) “Business Day” shall mean any day other than a Saturday, Sunday or a day on which
banking institutions in the States of Texas, Delaware, New Jersey or New York (or such other state
in which the Rights Agent maintains its principal place of business) are authorized or obligated by
law or executive order to close.



(g) “close of business” on any given date shall mean 5:00 p.m., Dallas, Texas time, on
such date; provided, however, that if such date is not a Business Day it shall mean
5:00 p.m., Dallas, Texas time, on the next succeeding Business Day.


 


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(h) “Common Stock” shall mean the common stock, par value $0.01 per share (or as such
par value may be changed from time to time), of the Company.



(i) “Common Stock Equivalents” shall have the meaning set forth in Section
11(a)(iii).



(j) “Company” shall have the meaning set forth in the preamble hereto.



(k) “current market price per share” shall have the meaning set forth in Section
11(d).



(l) “Current Value” shall have the meaning set forth in Section 11(a)(iii).



(m) “Definitive Acquisition Agreement” shall mean any agreement entered into by the
Company that is conditioned on the approval by the holders of not less than a majority of the
outstanding shares of Common Shock at a meeting of stockholders with respect to (i) a merger,
consolidation, recapitalization, reorganization, share exchange, business combination or similar
transaction involving the Company or (ii) the acquisition in any manner, directly or indirectly, of
more than 50% of the consolidated total assets (including, without limitation, equity securities of
its subsidiaries) of the Company.



(n) “Distribution Date” shall have the meaning set forth in Section 3(a).



(o) “equivalent preferred stock” shall have the meaning set forth in Section
11(b).



(p) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.



(q) “Exchange Ratio” shall have the meaning set forth in Section 24(a).



(r) “Final Expiration Date” shall mean the close of business on the earlier of (i)
March 8, 2013 and (ii) March 8, 2011 if and only if Stockholder Approval has not been obtained on
or prior to such date.



(s) “Independent Directors” shall mean members of the Board who are not officers,
employees or Affiliates of the Company (or designees of such Affiliates).



(t) “invalidation time” shall have the meaning set forth in Section 11(a)(ii).



(u) “Outside Meeting Date” shall have the meaning set forth in Section 23(b).



(v) “Person” shall mean any individual, firm, corporation, limited liability company,
partnership (general or limited), or other entity, and shall include any successor (by merger or
otherwise) of such entity.



(w) “Preferred Stock” shall mean the Series A Junior Participating Preferred Stock,
par value $0.01 per share, of the Company having the rights and preferences set forth in the form
of Certificate of Designations of Series A Junior Participating Preferred Stock issued pursuant to
the Company’s Amended and Restated Certificate of Incorporation, as amended, and, to the extent
that there are not a sufficient number of shares of Series A Junior Participating Preferred



 


5









 






Stock of the Company authorized to permit the full exercise of the Rights, any other series of
preferred stock of the Company designated for such purpose containing terms substantially similar
to the terms of the Series A Junior Participating Preferred Stock of the Company.



(x) “Principal Party” shall have the meaning set forth in Section 13(b).



(y) “Purchase Price” shall have the meaning set forth in Section 4.



(z) “Qualified Offer” shall mean an offer determined by a majority of the Independent
Directors to have each of the following characteristics:



(i) a fully financed, all-cash tender offer, or an exchange offer offering shares of common
stock of the offeror (or any subsidiary or Affiliate of the offeror), or a combination thereof, in
each such case for all of the outstanding shares of Common Stock at the same per-share
consideration;



(ii) an offer that has commenced within the meaning of Rule 14d-2(a) under the Exchange Act;



(iii) an offer whose per-share offer price exceeds the greatest of (A) the highest reported
market price per share of the Common Stock during the 24 months immediately preceding the
commencement of the offer (within the meaning of Rule 14d-2(a) under the Exchange Act), (B) the
highest price per share of the Common Stock paid by the Person making the offer (or any of such
Person’s Affiliates) during the 24 months immediately preceding the commencement of the offer
(within the meaning of Rule 14d-2(a) under the Exchange Act) or prior to the expiration of the
offer, (C) an amount that is 25% higher than the 12-month moving average per share price of the
Common Stock (determined as of the Trading Day immediately preceding the date of commencement of
the offer (within the meaning of Rule 14d-2(a) under the Exchange Act)), (D) an amount that is 25%
higher than the closing price (as “closing price” is determined pursuant to Section
11(d)(i)) per share of the Common Stock on the Trading Day immediately preceding the
commencement of the offer (within the meaning of Rule 14d-2(a) under the Exchange Act) and (E) if,
at the time that the offer is commenced (within the meaning of Rule 14d-2(a) under the Exchange
Act), any other offer that is a Qualified Offer has been commenced and remains open, the price per
share of the Common Stock offered in such earlier Qualified Offer; provided, however, that, to the
extent that an offer that includes common stock of the offeror or any subsidiary or Affiliate of
the offeror, such per-share offer price of the offer will be determined by valuing such common
stock of the offeror (or any subsidiary or Affiliate of thereof, as applicable) at the lowest
reported market price for such common stock of the offeror (or any subsidiary or Affiliate of
thereof, as applicable) during the five Trading Days immediately preceding and the five Trading
Days immediately following the commencement of the offer (within the meaning of Rule 14d-2(a) under
the Exchange Act);



(iv) an offer that, within 20 Business Days after but not including the commencement date of
the offer (or within ten Business Days after any increase in the offer consideration), does not
result in a nationally recognized investment banking firm retained by the Board rendering an
opinion to the Board that the consideration being offered to the stockholders of the Company is
either unfair or inadequate;


 


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(v) if the offer includes shares of common stock of the offeror or any subsidiary or Affiliate
of the offeror, an offer pursuant to which (A) the offeror shall permit representatives of the
Company (including a nationally recognized investment banking firm retained by the Board, legal
counsel and an accounting firm designated by the Company) to have access to such offeror’s books,
records, management, accountants, financial advisors, counsel and other appropriate outside
advisors for the purposes of permitting such representatives to conduct a due diligence review of
the offeror in order to permit the Board to evaluate the offer and make an informed decision and,
if requested by the Board, to permit such investment banking firm (relying as appropriate on the
advice of such legal counsel) to be able to render an opinion to the Board with respect to whether
the consideration being offered to the stockholders of the Company is fair from a financial point
of view to such stockholders and (B) within ten Business Days after such representatives of the
Company (including a nationally-recognized investment banking firm retained by the Board and legal
counsel and an accounting firm designated by the Company) shall have notified the Company and the
offeror that it had completed such due diligence review to its satisfaction (or, following
completion of such due diligence review, within ten Business Days after any increase in the
consideration being offered), such investment banking firm does not render an opinion to the Board
that the consideration being offered to the stockholders of the Company is either unfair or
inadequate and such investment banking firm does not, after the expiration of such ten Business Day
period, render an opinion to the Board that the consideration being offered to the stockholders of
the Company has become either unfair or inadequate based on a subsequent disclosure or discovery of
a development or developments that have had or are reasonably likely to have a material adverse
effect on the value of the common stock of the offeror;



(vi) an offer that is subject to only the minimum tender condition described below in
Section 1(z)(ix) and other customary terms and conditions, which conditions shall not
include any financing, funding or similar conditions or any requirements with respect to the
offeror or its agents being permitted any due diligence with respect to the books, records,
management, accountants or other outside advisors of the Company;



(vii) an offer pursuant to which the Company has received an irrevocable, legally binding
written commitment of the offeror that the offer will remain open for at least 120 days and, if a
Special Meeting is duly requested in accordance with Section 23(b), for at least ten Business Days
after but not including the date of the Special Meeting or, if no Special Meeting is held within 90
days following receipt of the Special Meeting Notice in accordance with Section 23(b), for at least
ten Business Days following such 90-day period;



(viii) an offer pursuant to which the Company has received an irrevocable, legally binding
written commitment of the offeror that, in addition to the minimum time periods specified above in
Section 1(z)(vii), the offer, if it is otherwise to expire prior thereto, will be extended
for at least 20 Business Days after any increase in the consideration being offered or after any
bona fide alternative offer is commenced within the meaning of Rule 14d-2(a) under the Exchange
Act; provided, however, that such offer need not remain open, as a result of Section
1(z)(vii) and this Section 1(z)(viii), beyond (A) the time that any other offer
satisfying the criteria for a Qualified Offer is then required to be kept open under such
Section 1(z)(vii) and this Section 1(z)(viii) or (B) the expiration date, as such
date may be extended by public announcement (with prompt written notice to the Rights Agent) in
compliance with Rule 14e—1



 


7









 






under the Exchange Act, of any other tender offer for the Common Stock with respect to which
the Board has agreed to redeem the Rights immediately prior to acceptance for payment of Common
Stock thereunder (unless such other offer is terminated prior to its expiration without any Common
Stock having been purchased thereunder) or (C) one Business Day after the stockholder vote with
respect to approval of any Definitive Acquisition Agreement has been officially determined and
certified by the inspectors of elections;



(ix) an offer that is conditioned on a minimum of at least two-thirds of the outstanding
shares of the Common Stock not held by the Person making such offer (and such Person’s Affiliates
and Associates) being tendered and not withdrawn as of the offer’s expiration date, which condition
shall not be waivable;



(x) an offer pursuant to which the Company has received an irrevocable, legally binding
written commitment of the offeror to consummate, as promptly as practicable upon successful
completion of the offer, a second step transaction whereby all shares of the Common Stock not
tendered into the offer will be acquired at the same consideration per share actually paid pursuant
to the offer, subject to stockholders’ statutory appraisal rights, if any;



(xi) an offer pursuant to which the Company and its stockholders have received an irrevocable,
legally binding written commitment of the offeror that no amendments will be made to the offer to
reduce the consideration being offered or to otherwise change the terms of the offer in a way that
is adverse to a tendering stockholder;



(xii) an offer (other than an offer consisting solely of cash consideration) pursuant to which
the Company has received the written representation and certification of the offeror and the
written representations and certifications of the offeror’s Chief Executive Officer and Chief
Financial Officer, acting in such capacities, that (A) all facts about the offeror that would be
material to making an investor’s decision to accept the offer have been fully and accurately
disclosed as of the date of the commencement of the offer within the meaning of Rule 14d-2(a) under
the Exchange Act, (B) all such new facts will be fully and accurately disclosed on a prompt basis
during the entire period during which the offer remains open, and (C) all required Exchange Act
reports will be filed by the offeror in a timely manner during such period; and



(xiii) if the offer includes consideration consisting of shares of common stock of the offeror
or any subsidiary or Affiliate of the offeror, (A) the stock portion of the consideration offered
must consist solely of common stock of a Person that is a publicly owned or publicly traded United
States corporation, (B) such common stock must be freely tradable and listed or admitted to trading
on either the New York Stock Exchange or NASDAQ National Market System, (C) no stockholder approval
of the issuer of such common stock is required to issue such common stock, or, if such approval is
required, such approval has already been obtained, (D) no Person (including such Person’s
Affiliates and Associates) beneficially owns 20% or more of the voting stock of the issuer or such
common stock at the time of commencement of the offer or at any time during the term of the offer,
(E) no other class of voting stock or other voting securities of the issuer of such common stock is
outstanding and (F) the issuer of such common stock meets the registrant eligibility requirements
for use of Form S-3 for registering securities under the Securities Act, including the filing of
all required Exchange Act reports in a timely manner during the twelve calendar months prior to the
date of commencement of such offer.


 


8









 





For the purposes of Section 1(z)(i), “fully financed” shall mean that the offeror has
sufficient funds for the offer and related expenses which shall be evidenced by (1) firm,
unqualified, legally binding written commitments from responsible financial institutions having the
necessary financial capacity, accepted by the offeror, to provide funds for such offer subject only
to customary terms and conditions (for the avoidance of doubt it being understood that a provision
relating to the sharing with a financing source of any break-up or termination fee shall be
considered customary), (2) cash or cash equivalents then available to the offeror, set apart and
maintained solely for the purpose of funding the offer with an irrevocable, legally binding written
commitment being provided by the offeror to the Board to maintain such availability until the offer
is consummated or withdrawn or (3) a combination of the foregoing; which evidence has been provided
to the Company prior to, or upon, commencement of the offer. If an offer becomes a Qualified Offer
in accordance with this Section 1(y), but subsequently ceases to be a Qualified Offer as a
result of the failure at a later date of such offer to continue to satisfy any of the requirements
of this Section 1(z), such offer shall cease to be a Qualified Offer and the provisions of
Section 23(b) shall no longer be applicable to such offer, provided that the actual
redemption of the Rights pursuant to Section 23(b) shall not have already occurred.



(aa) “Record Date” shall have the meaning set forth in the recitals hereof.



(bb) “Redemption Date” shall have the meaning set forth in Section 7(a).



(cc) “Redemption Price” shall have the meaning set forth in Section 23(a).



(dd) “Redemption Resolution” shall have the meaning set forth in Section 23(b).



(ee) “Related Person” shall mean (i) any subsidiary of the Company or (ii) any
employee benefit plan of the Company or of any subsidiary of the Company, or (iii) any entity
organized, appointed or established pursuant to the terms of any such plan.



(ff) “Right” shall have the meaning set forth in the recitals hereof.



(gg) “Right Certificates” shall mean certificates evidencing the Rights in
substantially the form attached hereto as Exhibit B.



(hh) “Rights Agent” shall have the meaning set forth in the preamble hereto.



(ii) “Section 11(a)(ii) Trigger Date” shall have the meaning set forth in Section
11(a)(iii).



(jj) “Securities Act” shall mean the Securities Act of 1933, as amended.



(kk) “Security” shall have the meaning set forth in Section 11(d)(i).



(ll) “Senior Voting Stock” shall have the meaning set forth in Section 13(b).



(mm) “Share Acquisition Date” shall mean the first date of public announcement (by
press release, filing made with the Securities and Exchange Commission or otherwise, which for
purposes of this definition shall include, without limitation, a report filed pursuant to Section



 


9









 






13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become an “Acquiring Person” for purposes of this Agreement.



(nn) “Special Meeting” shall have the meaning set forth in Section 23(b).



(oo) “Special Meeting Notice” shall have the meaning set forth in Section 23(b).



(pp) “Special Meeting Period” shall have the meaning set forth in Section 23(b).



(qq) “Spread” shall have the meaning set forth in Section 11(a)(iii).



(rr) “Stockholder Approval” shall mean the approval of this Agreement by the
affirmative vote of a majority of all the votes cast at a meeting of stockholders of the Company,
duly held in accordance with the Company’s Amended and Restated Certificate of Incorporation and
Amended and Restated By-laws (as each may be amended from time to time) and applicable law, at
which a quorum is present.



(ss) “subsidiary” of a Person shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power sufficient to elect a majority
of the board of directors or other persons performing similar functions are beneficially owned,
directly or indirectly, by such Person or any other subsidiary of such Person.



(tt) “Substitution Period” shall have the meaning set forth in Section 11(a)(iii).



(uu) “Summary of Rights” shall have the meaning set forth in Section 3(b).



(vv) “Trading Day” shall have the meaning set forth in Section 11(d).



Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent
to act as agent for the Company in accordance with the express terms and conditions hereof (and no
implied terms or conditions), 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, upon
ten calendar days’ prior written notice to the Rights Agent. The Rights Agent shall have no duty
to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights
Agents.



Section 3. Issue of Right Certificates.



(a) Until the earlier of (i) the close of business on the tenth calendar day after the Share
Acquisition Date (or, if the tenth calendar day after the Share Acquisition Date occurs before the
Record Date, the close of business on the Record Date) or (ii) the close of business on the tenth
Business Day (or such later date as may be determined by action of the Board prior to such time as
any Person becomes an Acquiring Person) after the date of the commencement of, or first public
announcement of the intent to commence, by any Person (other than the Company or a Related Person),
a tender or exchange offer the consummation of which would result in any Person (other than a
Related Person) becoming an Acquiring Person (including any such date that is after the date of
this Agreement and prior to the issuance of the Rights; the earlier of the dates in subsections (i)
and (ii) hereof being herein referred to as the “Distribution Date”), (x) the



 


10









 






Rights will be evidenced by the certificates for the Common Stock registered in the names of
the holders thereof (or, if the shares of Common Stock are uncertificated, by the registration of
the associated shares of Common Stock on the stock transfer books of the Company) together with a
copy of the Summary of Rights (as defined below) and not by separate Right Certificates, and the
records holder of Common Stock represented by such certificates (or such registrations on the stock
transfer books of the Company) shall be the record holders of the Rights represented thereby, (y)
the Rights will be transferable only in connection with the transfer of the Common Stock and (z)
the transfer of any shares of Common Stock in respect of which Rights have been issued will also
constitute the transfer of the Rights associated with such shares of Common Stock. As soon as
practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent
will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if so
requested by written notice and provided with a stockholder list and all other relevant information
that the Rights Agent may reasonably request, send), by first class, postage-prepaid mail, to each
record holder of Common Stock as of the close of business on the Distribution Date (other than an
Acquiring Person or any Affiliate or Associate of an Acquiring Person), at the address of such
holder shown on the records of the Company, a Right Certificate, evidencing one Right (subject to
adjustment as provided herein) for each share of Common Stock so held. If an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section 11(i) or
Section 11(n) hereof, at the time of the distribution of the Right Certificates, the
Company may make necessary and appropriate rounding adjustments (in accordance with Section
14(a) hereof) so that Right Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Right Certificates and the Rights will be transferable
only separately from the transfer of shares of Common Stock. The Company shall promptly notify the
Rights Agent in writing upon the occurrence of the Distribution Date and, if such notification is
given orally, the Company shall confirm same in writing on or prior to the Business Day next
following. Until such notice is received by the Rights Agent, the Rights Agent may presume
conclusively for all purposes that the Distribution Date has not occurred.



(b) On the Record Date or as soon as practicable thereafter, the Company will send a copy of a
Summary of Rights to Purchase Preferred Stock, in substantially the form attached hereto as
Exhibit C (the “Summary of Rights”), by first class, postage-prepaid mail or other
means used by the Company to deliver proxy statements to its stockholders, to each record holder of
Common Stock as of the close of business on the Record Date at the address of such holder shown on
the records of the Company.



(c) Rights shall be issued in respect of all shares of Common Stock issued or delivered by the
Company (including, without limitation, upon disposition of Common Stock out of treasury stock or
issuance or reissuance of Common Stock out of authorized but unissued shares) after the Record Date
but prior to the earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date, or in certain circumstances provided in Section 22, after the Distribution Date.
Confirmation and account statements sent to holders of Common Stock that is uncertificated and
registered in book-entry form or, in the case of certificated shares, certificates issued for
Common Stock (including, without limitation, in each case, upon transfer of outstanding Common
Stock, disposition of Common Stock out of treasury stock or issuance or reissuance of Common Stock
out of authorized but unissued shares) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date



 


11









 






shall have impressed on, printed on, written on or otherwise affixed to them a legend in
substantially the following form:




This Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Capital
Senior Living Corporation and Mellon Investor Services LLC, as
Rights Agent, dated as of February 25, 2010, as the same may be
supplemented or 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 Capital Senior Living Corporation. The Rights
are not exercisable prior to the occurrence of certain events
specified in the Rights Agreement. Under certain circumstances, as
set forth in the Rights Agreement, such Rights may be redeemed, may
be exchanged, may expire, may be amended, or may be evidenced by
separate certificates and no longer be evidenced by this
Certificate. Capital Senior Living Corporation will mail to the
holder of this Certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, Rights acquired
or beneficially owned by any Person who becomes an Acquiring Person
or any Affiliate or Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement) and their transferees will
become null and void and will no longer be transferable.



With respect to Common Stock that is uncertificated and registered in book-entry form and for
which there has been sent a confirmation or account statement containing the foregoing (or a
substantially similar) legend, until the earlier of the Distribution Date, the Redemption Date and
the Final Expiration Date, the Rights associated with the Common Stock represented by such
book-entry registrations shall be represented by such Common Stock alone, and transfer of any such
Common Stock shall also constitute the transfer of Rights associated with such shares of Common
Stock. With respect to such certificates containing the foregoing legend, until the earliest of
the Distribution Date, the Redemption Date and the Final Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any of such certificates, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.



In the event that the Company purchases or acquires any shares of Common Stock after the
Record Date but prior to the Distribution Date, any Rights associated with such shares of Common
Stock shall be deemed cancelled and retired so that the Company shall not be entitled to exercise
any Rights associated with the shares of Common Stock so purchased or acquired.



Notwithstanding this Section 3, the omission of a legend shall not affect the
enforceability of any part of this Agreement or the rights of any holder of the Rights.


 


12









 





Section 4. Form of Right Certificates. The Right Certificates (and the forms of
election to purchase shares and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the Company may deem
appropriate (but that do not affect the rights, duties or obligations of the Rights Agent as set
forth in this Agreement) 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 or automated quotation system on which
the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of
Section 22, the Right Certificates, whenever issued, on their face shall entitle the
holders thereof to purchase such number of shares of Preferred Stock as shall be set forth therein
at the price per share set forth therein (the “Purchase Price”), but the number of such
shares (and the type of securities or other property issuance upon exercise of the Rights ) and the
Purchase Price shall be subject to adjustment as provided herein. Notwithstanding any other
provision of this Agreement to the contrary, the Company and the Rights Agent may amend this
Agreement to provide for uncertificated Rights in addition to or in place of Rights evidenced by
Right Certificates.



Section 5. Countersignature and Registration.



(a) The Right Certificates shall be executed on behalf of the Company in the manner provided
in the by-laws of the Company for Common Stock certificates. The Right Certificates shall be
countersigned by the Rights Agent, either manually or by facsimile signature, 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 with
the same force and effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of the execution of
this Agreement any such person was not such an officer.



(b) Following the Distribution Date, and receipt by the Rights Agent of (i) written notice of
the Distribution Date pursuant to Section 3(a), and (ii) a stockholder list and all
relevant information reasonably requested by the Rights Agent pursuant to Section 3(a), the
Rights Agent will keep or cause to be kept, at its office designated for such purposes and at such
other offices 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 or any quotation system
on which the Rights may from time to time be listed or quoted, 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 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,
at any time after the close of business on the Distribution Date, and prior to the close of
business



 


13









 






on the earlier of the Redemption Date and the Final Expiration Date, any Right Certificate or
Right Certificates (other than Rights Certificates representing Rights that have become null and
void pursuant to Section 11(a)(ii) or that have been exchanged pursuant to Section
24) 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 one-thousandths of a
share of Preferred Stock (or number of shares of Common Stock or other securities, or amount of
cash or other property, as the case may be) as the Right Certificate or Right Certificates
surrendered then entitled such holder to purchase. The Rights Certificates shall be transferable
only on the registry books of the Rights Agent. As a condition to any transfer, split up,
combination or exchange of any Right Certificate pursuant to this Section 6, the registered
holder of such Right Certificate must (i) deliver to the Rights Agent a written request therefor
setting forth the requested action in reasonable detail, (ii) in the case of a transfer, properly
complete and duly execute the form of assignment set forth on the reverse side of such Right
Certificate, (iii) provided such additional evidence of the identity of the Beneficial Owner (or
any former or proposed Beneficial Owner) thereof and the Affiliates and Associates of such
Beneficial Owner (or any former or proposed Beneficial Owner) as the Company or the Rights Agent
shall reasonably request, (iv) have paid any tax or charge that may be imposed in connection with
such transfer, split up, combination or exchange as required by Section 9 and (v) surrender
such Right Certificate to the Rights Agent at the office of the Rights Agent designated for such
purpose. Upon the satisfaction of the foregoing conditions, the Company shall execute and deliver
to the Rights Agent, and the Rights Agent shall, manually or by facsimile, countersign and deliver
to the Person entitled thereto, a Right Certificate or Right Certificates, as the case may be, as
so requested. The Rights Agent shall have no duty or obligation under any Section of this
Agreement requiring the payment of taxes and charges, unless and until it is satisfied that all
such taxes and/or charges have been paid.



Upon receipt by the Company and the Rights Agent of (i) evidence satisfactory to them of the
loss, theft, destruction or mutilation of a Right Certificate, (ii) in the case of loss, theft or
destruction, indemnity or security satisfactory to them, (iii) in the case of mutilation, the
original Right Certificate and (iv) at the Company’s request, reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, the Company shall execute and deliver
to the Rights Agent, and the Rights Agent shall countersign and deliver to the Person entitled
thereto, a Right Certificate of like tenor in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.



Section 7. Exercise of Rights; Purchase Price; Final Expiration Date 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 properly completed and duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purposes together with payment of the Purchase Price for each one
one-thousandth of one share of the Preferred Stock (or Common Stock, other securities, cash or
assets, as the case may be) as to which the Rights are exercised, at or prior to the earliest of
(i) the Final Expiration Date, (ii) the time at which the Rights are redeemed as provided in
Section 23 (the “Redemption Date”) or (iii) the time at which such Rights are
exchanged as provided for in Section 24.


 


14









 





(b) The Purchase Price for each one one-thousandth of one share of the Preferred Stock
pursuant to the exercise of a Right shall initially be $22.00, shall be subject to adjustment from
time to time as provided in Section 11 and Section 13, and shall be payable in
lawful money of the United States of America in accordance with Section 7(c).



(c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of
election to purchase properly completed and duly executed, accompanied by payment of the aggregate
Purchase Price for shares to be purchased and an amount equal to any applicable tax or charge
required to be paid by the holder of such Right Certificate in accordance with Section 6 in
cash, or by certified check or cashier’s check payable to the order of the Company, the Rights
Agent shall thereupon (i) (A) promptly requisition from any transfer agent of the Preferred Stock
(or make available if the Rights Agent is the transfer agent of the Preferred Stock), certificates
for the number of one one-thousandths of a share of the Preferred Stock to be purchased or, in the
case of uncertificated shares or other securities, requisition from any transfer agent therefore a
notice setting forth such number of shares or other securities to be purchased for which
registration will be made on the stock transfer books of the Company (and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests) or (B) if the Company
elects to deposit Preferred Shares issuable upon exercise of the Rights hereunder with a depository
agent, promptly requisition from the depositary agent depositary receipts representing such number
of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company hereby directs the depositary agent
to comply with such request, (ii) after receipt of such certificates (or notices or depositary
receipts, as the case may be) cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, (iii) when necessary to comply with this Agreement, requisition
from the Company or any transfer agent thereof (or make available, if the Rights Agent is the
transfer agent) certificates representing the number of shares of equivalent preferred stock (or,
in the case of uncertificated shares, a notice of the number of shares of equivalent preferred
stock for which registration will be made on the stock transfer books of the Company) to be issued
in lieu of the issuance of shares of Preferred Stock in accordance with the provisions of
Section 11 when appropriate, after receipt of such certificates or notices, cause the same
to be delivered to or upon the order of the registered holder of such Right Certificate, (v) when
necessary to comply with this Agreement, promptly requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section 14 or in
lieu of the issuance of shares of Preferred Stock in accordance with the provisions of Section
11(a)(iii), (vi) after receipt of such certificates or depositary receipts, promptly 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, (vii) when necessary to
comply with this Agreement, after receipt, promptly deliver such cash to or upon the order of the
registered holder of such Right Certificate and (viii) when necessary to comply with this
Agreement, deliver any due bill or other instrument provided to the Rights Agent by the Company for
delivery to the registered holder of such Right Certificate as provided by Section 11(l).



(d) In case the registered holder of any Right Certificate shall exercise less than all the
Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to such holder’s duly authorized assigns, subject to the provisions of Section
14.


 


15









 





(e) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the purported exercise
of a Right Certificate pursuant to this Section 7 unless and until the registered holder
thereof shall have (i) properly completed and duly signed the election to purchase on the reverse
side of the Right Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or any former Beneficial Owner) thereof and the
Affiliates and Associates of such Beneficial Owner (or former Beneficial Owner) as the Company or
the Rights Agent may reasonably request.



Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates
surrendered for the purpose of exercise, transfer, split up, combination, redemption or exchange
shall, if surrendered to the Company or to any of its stock transfer agents, be delivered to the
Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall
be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other
Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.



Section 9. Reservation and Availability of Shares of Preferred Stock. The Company
covenants and agrees that it will cause to be reserved and kept available out of its authorized and
unissued Preferred Stock, or its authorized and issued Preferred Stock held in its treasury, the
number of shares of the Preferred Stock that will be sufficient to permit the exercise in full of
all outstanding Rights in accordance with this Agreement.



So long as the Preferred Stock (and, following the time that a Person becomes an Acquiring
Person, shares of Common Stock or other securities or other property) issuable upon the exercise of
the Rights may be listed on a national securities exchange or quoted on a quotation system, the
Company shall use its reasonable best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for issuance upon the exercise of Rights to be listed or
admitted on such exchange or quoted on such system upon official notice of issuance upon such
exercise.



The Company covenants and agrees that it will take all such action as may be necessary to
ensure that all shares of the Preferred Stock (and, following the time that a Person becomes an
Acquiring Person, shares of Common Stock or other securities or other property) delivered (or
evidenced by registration on the stock transfer books of the Company) upon exercise of Rights
shall, at the time of delivery of the certificates for (or registration of) such securities, be
(subject to payment of the Purchase Price and compliance with all other provisions of this
Agreement), duly and validly authorized and issued and fully paid and nonassessable shares.



The Company covenants and agrees that it will pay when due and payable any and all transfer
taxes and charges that may be payable in respect of the issuance or delivery of the Right
Certificate and of any certificates representing securities issued upon the exercise of Rights (or,
if such securities are uncertificated, the registration of such securities on the stock transfer
books



 


16









 






of the Company). Notwithstanding the foregoing, neither the Company nor the Rights Agent
shall have any duty or obligation to (a) pay any tax or charge that may be payable in respect of
(i) any transfer, split up, combination or exchange of Right Certificates or pursuant to
Section 6 or (ii) the issuance or delivery of certificates for (or the registration of) the
Preferred Stock (or other securities) in a name other than that of the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or (b) take any of the foregoing
actions or any other action under this Agreement that requires the payment by a Rights holder of
applicable taxes and/or charges unless and until any such tax or charge shall have been paid (any
such tax or charge being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company’s or the Rights Agent’s satisfaction that no such
tax or charge is due.



The Company shall, if legally required, (i) prepare and file, as soon as reasonably
practicable following the Distribution Date, a registration statement under the Securities Act with
respect to the securities purchasable upon exercise of or exchangeable for the Rights on an
appropriate form, and (ii) use its reasonable best efforts to (A) cause such registration statement
to become effective as soon as reasonably practicable after such filing, and (B) cause such
registration statement to remain effective (with a prospectus at all times meeting the requirements
of the Securities Act) until the earlier of (x) the date as of which the Rights are no longer
exercisable for such securities and (y) the Final Expiration Date. The Company also shall take all
such action as may be required or as is appropriate under, or to ensure compliance with, the
securities or “blue” sky laws of such jurisdictions as may be necessary with respect to the
securities purchasable upon the exercise of or exchangeable for the Rights. The Company may
temporarily suspend, for a period not to exceed 120 calendar days following the Distribution Date,
the exercisability of the Rights in order to prepare and file such registration statement and
permit it to become effective. Upon any such suspension of exercisability of Rights referred to in
this paragraph, 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. The Company shall notify the Rights Agent whenever it makes a
public announcement pursuant to this Section 9 and give the Rights Agent a copy of any such
announcement.



Section 10. Preferred Stock Record Date. Each Person in whose name any certificate
representing shares of the Preferred Stock (or other securities, as the case may be) is issued (or
in which such securities are registered upon the stock transfer books of the Company) upon the
exercise of Rights shall for all purposes be deemed to have become the holder of record of the
Preferred Stock (or other securities, as the case may be) represented thereby on, and such
certificate (or registration) shall be dated, the date upon which the Right Certificate evidencing
such Rights, together with the form of election to purchase properly completed and duly executed,
was duly surrendered and payment of the Purchase Price (and any applicable taxes or charges) was
made; provided, however, that if the date of such surrender and payment is a date
upon which the Preferred Stock (and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder of such securities
on, and such certificate (or registration) shall be dated, the next succeeding Business Day on
which the Preferred Stock (and/or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right
Certificate shall not be entitled to any rights of a stockholder of the Company with respect



 


17









 






to shares for which the Rights shall be exercisable, including, without limitation, the right
to vote, to receive dividends or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the Company, except as provided
herein.



Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The
Purchase Price, the number and kind or class of securities of the Company purchasable upon exercise
of 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 Record Date (A) declare a
dividend on the Preferred Stock payable in Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares of Preferred
Stock or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise provided in this
Section 11(a), 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 upon exercise of a Right, 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 that, if such Right
had been exercised immediately prior to such date and at a time when the Preferred Stock transfer
books of the Company were open, 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 Preferred Stock issuable upon exercise of one
Right. If an event occurs that would require an adjustment under both this 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) Subject to Section 24, in the event any Person becomes an Acquiring Person, each
holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal
to the Purchase Price in effect immediately prior to such Person becoming an Acquiring Person
multiplied by the number of one one-thousandths of a share of Preferred Stock for which a Right is
then exercisable, in accordance with the terms of this Agreement, in lieu of the number of one
one-thousandths of a share of Preferred Stock for which a Right otherwise was exercisable
immediately prior to the occurrence of such event, such number of shares of Common Stock as shall
equal the result obtained by (A) multiplying such Purchase Price by the number of one
one-thousandths of a share of Preferred Stock for which a Right is then exercisable and dividing
that product by (B) 50% of the current market price per share of the Common Stock (determined
pursuant to Section 11(d)) on the date of the occurrence of such event; provided,
however, that if the transaction that would otherwise give rise to the adjustment is also
subject to the provisions of Section 13, then only the provisions of Section 13
shall apply and no adjustment shall be made pursuant to this sentence of Section 11(a)(ii).
In the event that any Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action that would eliminate or diminish the benefits
intended to be afforded by the Rights. Notwithstanding anything in this Agreement to the contrary,
however,




 


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from and after the time (the “invalidation time”) when any Person first becomes an
Acquiring Person, any Rights that are or were acquired or beneficially owned by any Acquiring
Person (or any Affiliate or Associate of any Acquiring Person), including, without limitation, any
such Rights when held by (1) a transferee of any Acquiring Person (or any such Affiliate or
Associate) who becomes a transferee after the invalidation time, (2) a transferee of any Acquiring
Person (or any such Affiliate or Associate) who became a transferee prior to or concurrently with
the invalidation time pursuant to either (x) a transfer from the Acquiring Person to holders of its
equity securities or to any Person with whom it has any continuing agreement, arrangement or
understanding, written or otherwise, regarding the transferred Rights or (y) a transfer that the
Board determines is part of a plan, arrangement or understanding, written or otherwise, that has
the purpose or effect of avoiding the provisions of this Section 11(a)(ii), or (3) a
subsequent transferee of any Person described in the foregoing clauses (1) or (2), shall be null
and void without any further action and any holder of such Rights shall thereafter have no right to
exercise such Rights under any provision of this Agreement. The Company shall give the Rights
Agent written notice of the identity of any such Acquiring Person, Associate or Affiliate, or the
nominee of any of the foregoing, and the Rights Agent may rely on such notice in carrying out its
duties under this Agreement and shall be deemed not to have any knowledge of the identity of any
such Acquiring Person, Associate, or Affiliate, or the nominee of any of the foregoing unless and
until it shall have received such notice. The Company shall use all reasonable efforts to ensure
that the provisions of this Section 11(a)(ii) are complied with, but shall have no
liability to any holder of Rights 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, Section 6
or Section 7(d) that represents Rights beneficially owned by an Acquiring Person whose
Rights would be null and 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 null and 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 or Affiliate whose Rights would be null and void pursuant to the provisions of this
paragraph shall be cancelled.




(iii) The Company may, at its sole option and election, substitute for a share of Common Stock
issuable upon the exercise of Rights in accordance with Section 11(a)(ii) a number of
shares of Preferred Stock or fraction thereof such that the current market price per share of one
share of Preferred Stock multiplied by such number or fraction is equal, as nearly as practicable,
to the current market price per share of one share of Common Stock. In the event that there shall
not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to
permit the exercise in full of the Rights in accordance with Section 11(a)(ii), the Board
shall, with respect to such deficiency, to the extent permitted by applicable law and any material
agreements then in effect to which the Company is a party, (A) determine the excess (such excess,
the “Spread”) of (1) the value of the shares of Common Stock issuable upon the exercise of
a Right in accordance with Section 11(a)(ii) (the “Current Value”) over (2) the
Purchase Price in effect immediately prior to such Person becoming an Acquiring Person and (B) with
respect to each Right (other than Rights that have become null and void pursuant to Section
11(a)(ii)), make adequate provision to substitute for the shares of Common Stock issuable in
accordance with Section 11(a)(ii) upon exercise of the Right and payment of the applicable
Purchase Price, (1) cash, (2) a reduction in such Purchase Price, (3) shares or



 


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fractional shares of Preferred Stock or other equity securities of the Company (including,
without limitation, shares or fractions of shares of preferred stock that, by virtue of having
dividend, voting and liquidation rights substantially comparable to those of the shares of Common
Stock, are deemed in good faith by the Board to have substantially the same value as the shares of
Common Stock (such shares of Preferred Stock and shares or fractions of shares of preferred stock
are hereinafter referred to as “Common Stock Equivalents”)), (4) debt securities of the
Company, (5) other assets or (6) any combination of the foregoing, having a value that, when added
to the value of the shares of Common Stock issued upon exercise of such Right, shall have an
aggregate value equal to the Current Value (less the amount of any reduction in such Purchase
Price), where such aggregate value has been determined by the Board upon the advice of a nationally
recognized investment banking firm selected in good faith by the Board; provided,
however, that if the Company shall not make adequate provision to deliver value pursuant to
clause (B) above within 30 calendar days following the date on which any Person becomes an
Acquiring Person (the date on which any Person becomes an Acquiring Person being the “Section
11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, to the extent
permitted by applicable law and any material agreements then in effect to which the Company is a
party, upon the surrender for exercise of a Right and without requiring payment of such Purchase
Price, shares of Common Stock (to the extent available), and then, if necessary, such number or
fractions of shares of Preferred Stock (to the extent available) and then, if necessary, cash,
which shares and/or cash have an aggregate value equal to the Spread. If, upon any Person becoming
an Acquiring Person, the Board shall determine in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon exercise in full of the
Rights, then, if the Board so elects, the 30 calendar day period set forth above may be extended to
the extent necessary, but not more than 90 calendar days after but not including the Section
11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares (such 30 calendar day period, as it may be extended, is
herein called the “Substitution Period”). To the extent that the Company determines that
some action need be taken pursuant to the second and/or third sentence of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) and the last
sentence of this Section 11(a)(iii), that such action shall apply uniformly to all
outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such second sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of the shares of Common Stock shall be the current market
price per share (as determined pursuant to Section 11(d)) on the Section 11(a)(ii)
Trigger Date and the per share or fractional value of any Common Stock Equivalent shall be deemed
to equal the current market price per share of the Common Stock. The Board may, but shall not be
required to, establish procedures to allocate the right to receive shares of Common Stock upon the
exercise of the Rights among holders of Rights pursuant to this Section 11(a)(iii).



(b) In case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them (for a period expiring within 45 calendar
days after but not including such record date) to subscribe for or purchase Preferred Stock (or
shares having economically equivalent rights, privileges and preferences as the Preferred Stock


 


20









 




(“equivalent preferred stock”)) or securities convertible into Preferred Stock or
equivalent preferred stock at a price per share of Preferred Stock or equivalent preferred stock
(or having a conversion price per share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the current market price per share of the Preferred Stock (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 shares of
Preferred Stock and equivalent preferred stock outstanding on such record date plus the number of
shares of Preferred Stock that the aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred stock to be so offered (and/or the aggregate initial
conversion price of the convertible securities to be so offered) would purchase at such current
market price and the denominator of which shall be the number of shares of Preferred Stock and
equivalent preferred stock outstanding on such record date plus the number of additional shares of
Preferred Stock and/or equivalent preferred stock to be offered for subscription or purchase (or
into which the convertible securities to be so offered are initially convertible);
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of capital stock issuable
upon exercise of one Right. In case such subscription price may be paid in consideration part or
all of which shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board, whose determination shall be described in a written
statement filed with the Rights Agent. Shares of Preferred Stock owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed and in the event that
such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price that would then be in effect if such record date had not been fixed.




(c) In case the Company shall fix a record date for the making of a distribution to all
holders of Preferred Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation) of evidences of
indebtedness, cash, assets or stock (other than (i) a regular periodic cash dividend, the record
date for which occurs at a time when there is no Acquiring Person, or (ii) a regular periodic cash
dividend, the record date for which occurs at a time when there is an Acquiring Person, at a rate
not in excess of 125% of the rate of the last cash dividend theretofore paid or (iii) a dividend
payable in Preferred Stock) or subscription rights or warrants (excluding those referred to in
Section 11(b)), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current market price per share of the Preferred Stock
(as defined in Section 11(d)) on such record date, less the fair market value (as
determined in good faith by the Board, whose determination shall be described in a written
statement filed with the Rights Agent) of the portion of the evidences of indebtedness, cash,
assets or stock to be so distributed or of such subscription rights or warrants applicable to one
share of Preferred Stock and the denominator of which shall be such current market price per share
of the Preferred Stock; 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 issuable 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



 


21









 






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 market price per
share” of any security (a “Security”) 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 herein
defined) immediately prior to but not including such date; provided, however, that
in the event that the current market price per share of the Security is determined during the
period following the announcement by the issuer of such Security of (A) a dividend or distribution
on such Security payable in shares of such Security or securities convertible into shares of such
Security (other than the Rights), or (B) any subdivision, combination or reclassification of such
Security, and prior to the expiration of 30 Trading Days after (but not including) 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 per share shall be
appropriately adjusted to take into account ex-dividend trading. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and ask prices, regular way, in either case (1) as reported by the
principal consolidated transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, (2) 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, (3) 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 ask prices in the over-the-counter market, as reported
by the NASDAQ National Market System or such other system then in use, or, (4) if on any such date
the Security is not quoted by any such organization, the average of the closing bid and ask prices
as furnished by a professional market maker making a market in the Security selected by the Board
or (5) if on any such date, no such market maker is making a market for such Security, the fair
market value of the Security on such date as determined in good faith by the Board. The term
“Trading Day” and derivations thereof shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading on any national
securities exchange, a Business Day.



          (ii) For the purpose of any computation hereunder, if the Preferred Stock is publicly traded,
the “current market price per share” of Preferred Stock shall be determined in the same
manner as set forth above for Common Stock in Section 11(d)(i). If the Preferred Stock is
not publicly traded or if the current market price per share of Preferred Stock cannot be
determined in the manner provided above but the Common Stock is publicly traded, the “current
market price per share” of Preferred Stock shall be conclusively deemed to be the current market
price per share of Common Stock (appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the Record Date), multiplied by one thousand. If neither
the Common Stock nor the Preferred Stock is publicly held or so listed or traded, the “current
market price per share” of Preferred Stock shall mean the fair value per share as determined in
good faith by the Board, whose determination shall be described in a written statement filed with
the Rights Agent.





 


22











 




(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 that by reason of this Section 11(e) are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a
share of Common Stock or other share (other than Preferred Stock) or ten-millionth of a share of
Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than the
earlier of (A) three years from the date of the transaction that mandates such adjustment or (B)
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 or of any Principal Party other than shares of the Preferred Stock, thereafter the number
and/or kind of such other securities so receivable upon exercise of any Right (and/or the Purchase
Price in respect thereof) shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the shares of Preferred Stock
(and the Purchase Price in respect thereof) contained in Section 11(a), Section
11(b), Section 11(c), Section 11(e), Section 11(h), Section
11(i) and Section 11(m), and the provisions of Section 7, Section 9,
Section 10, Section 13 and Section 14 with respect to the shares of the
Preferred Stock shall apply on like terms to any such other securities (and the Purchase Price in
respect thereof).



(g) All Rights originally issued by the Company subsequent to any adjustment made to the
Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the
number of one one-thousandths of a share of the Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.



(h) Unless the Company shall have exercised its election as provided in Section 11(i),
upon each adjustment of the Purchase Price as a result of the calculations made in Section
11(b) and Section 11(c), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price per one
one-thousandth of a share of Preferred Stock, that number of one one-thousandths of a share of
Preferred Stock (calculated to the nearest ten-millionth) obtained by (i) multiplying (x) the
number of one one-thousandths of a share of Preferred Stock covered by a Right immediately prior to
this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.



(i) The Company may elect, on or after the date of any adjustment of the Purchase Price, to
adjust the number of Rights in substitution for any adjustment in the number of one one-thousandths
of a share of the Preferred Stock purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable for the number of
one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest ten-millionth)



 


23









 






obtained by dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after the adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust the number of Rights
(with prompt written notice thereof to the Rights Agent), indicating the record date for the
adjustment to be made 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 ten calendar 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, 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 to be so distributed shall be issued,
executed and delivered by the Company, and countersigned and delivered by the Rights Agent, 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.



(j) Irrespective of any adjustment or change in the Purchase Price and/or the number of one
one-thousandths of a share of the Preferred Stock and/or the kinds of other securities issuable
upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price per one one-thousandth of a share of Preferred Stock and the
number and kind of securities that 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-thousandth of the then par value, if any, of the shares of the Preferred Stock or below the
then par value, if any, of any other securities of the Company, issuable upon exercise of the
Rights, the Company shall take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and nonassessable
shares of such Preferred Stock, or other securities as the case may be, 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
(with prompt written notice of such election to the Rights Agent) to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such record date the shares of
Preferred Stock or other securities of the Company, if any, issuable upon such exercise over and
above the shares of the Preferred Stock and other securities of the Company, if any, issuable upon
such exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder’s right to receive such additional shares upon
the occurrence of the event requiring such adjustment.


 


24









 





(m) Notwithstanding anything in this Section 11 to the contrary, 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 (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any shares of the Preferred Stock at less than the current
market price, (iii) issuance wholly for cash of any shares of the Preferred Stock or securities
that by their terms are convertible into or exchangeable for Preferred Stock, (iv) stock dividends
on the Preferred Stock payable in Preferred Stock or (v) issuance of rights, options or warrants
referred to hereinabove in this Section 11, hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such stockholders.



(n) Notwithstanding anything in this Agreement to the contrary, in the event that at any time
after the Record Date and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the outstanding Common Stock payable in Common Stock or (ii) effect a subdivision,
combination or consolidation of the Common Stock (by reclassification or otherwise than by payment
of dividends in Common Stock) into a greater or lesser number of shares of Common Stock, then in
any such case (A) the number of one one-thousandths of a share of Preferred Stock purchasable after
such event upon proper exercise of each Right shall be determined by multiplying the number of one
one-thousandths of a share of Preferred Stock so purchasable immediately prior to such event by a
fraction, the numerator of which is the number of shares of Common Stock outstanding immediately
before such event and the denominator of which is the number of shares of Common Stock outstanding
immediately after such event, and (B) each share of Common Stock outstanding immediately after such
event shall have issued with respect to it that number of Rights that each share of Common Stock
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. If an event
occurs that would require an adjustment under Section 11(a)(ii) and this Section
11(n), the adjustments provided for in this Section 11(n) shall be in addition and
prior to any adjustment required pursuant to Section 11(a)(ii).



(o) The Company agrees that, after the Share Acquisition Date, it will not, except as
permitted by Section 23, Section 24 or Section 27, take (or permit any
subsidiary to take) any action if, at the time such action is taken, it is reasonably foreseeable
that such action will diminish substantially or eliminate the benefits intended to be afforded by
the Rights.



Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an
adjustment is made as provided in Section 11 and Section 13, the Company shall (a)
promptly prepare a certificate setting forth such adjustment and a brief written statement of the
facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each
transfer agent for the Common Stock and the Preferred Stock a copy of such certificate and (c) mail
a brief summary thereof to each holder of a Right Certificate in accordance with Section 25
and Section 26. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment or statement contained therein and shall have no duty or
liability with respect to and shall not be deemed to have knowledge of such adjustment or event
unless and until it shall have received such certificate.


 


25









 






Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.



(a) In the event that, following the time at which any Person becomes an Acquiring Person, (i)
the Company shall consolidate with, or merge with and into, any other Person (other than one or
more direct or indirect wholly owned subsidiaries of the Company in a transaction that complies
with Section 11(o) hereof), (ii) any Person (other than one or more direct or indirect
wholly owned subsidiaries of the Company in a transaction that complies with Section 11(o)
hereof) shall consolidate with 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 Stock shall be changed into or exchanged for stock or other securities of any other
Person (or the Company) or cash or any other property, or (iii) 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 (including without limitation securities creating any
obligation on the part of the Company and/or its subsidiaries) aggregating more than 50% of the
assets or earning power of the Company and its subsidiaries (taken as a whole) to any other Person
or Persons (other than the Company or one or more of its direct or indirect wholly owned
subsidiaries in a transaction that complies with Section 11(o) hereof), then, and in each
such case, proper provision shall be made so that (A) each holder of a Right (other than Rights
that have been null and void pursuant to Section 11(a)(ii)) shall thereafter have the right
to receive, upon the exercise thereof at the Purchase Price in effect immediately prior to such
Person becoming an Acquiring Person multiplied by the number of one one-thousandths of a share of
Preferred Stock for which a Right would then be exercisable (whether or not such Right was then
exercisable), in accordance with the terms of this Agreement and in lieu of shares of Preferred
Stock, such number of shares of validly issued, fully paid, non-assessable and freely tradable
Senior Voting Stock (as hereinafter defined) of the Principal Party (as hereinafter defined)
(including the Company as successor thereto or as the surviving corporation), unencumbered and not
subject to any liens, encumbrances, rights of call or first refusal or other adverse claims, as
shall be equal to the result obtained by (1) multiplying such Purchase Price by the then number of
one one-thousandths of share of Preferred Stock for which a Right would then be exercisable
(whether or not such Right was then exercisable) and dividing that product by (2) 50% of the
current market price per share of the Senior Voting Stock of such Principal Party (determined in
the manner described in Section 11(d)) on the date of consummation of such consolidation,
merger, sale or transfer; provided that the Purchase Price and the number of shares of Senior
Voting Stock of such Principal Party issuable upon exercise of each Right shall be further adjusted
as provided in Section 11(f) to reflect any events occurring in respect of such Principal
Party after the date of such consolidation, merger, sale or transfer; (B) the Principal Party 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; (C) the term
“Company” shall thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 shall apply to such Principal Party following
the occurrence of such consolidation, merger, sale or transfer and (D) such Principal Party shall
take such steps (including, but not limited to, the reservation of a sufficient number of shares of
its Senior Voting Stock in accordance with Section 9, with each reference to Preferred
Stock in Section 9 being deemed to be a reference to the shares of its Senior Voting Stock)
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 the shares of its Senior
Voting Stock thereafter deliverable upon the exercise of the Rights; provided that, upon the
subsequent



 


26









 






occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a Right (other than Rights that have
been null and void pursuant to Section 11(a)(ii)) shall thereupon be entitled to receive,
upon exercise of a Right and payment of the Purchase Price as provided in this Section
13(a), such cash, shares, rights, warrants and other property that such holder would have been
entitled to receive had such holder, at the time of such transaction, owned the Senior Voting Stock
of the Principal Party receivable upon the exercise of a Right pursuant to this Section
13(a), and such Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights
in accordance with the terms hereof for such cash, shares, rights, warrants and other property.



(b) “Principal Party” shall mean (i) in the case of any transaction described in
Section 13(a)(i) or Section 13(a)(ii), (A) the Person (including the Company as the
continuing or surviving corporation of a transaction described in Section 13(a)(ii)) that
is the issuer of any securities into which shares of Common Stock are converted in such merger or
consolidation, (or, if there is more than one such issuer, the issuer of such securities that has
the greatest aggregate market value of securities outstanding), or (B) if no securities are so
issued, (1) the Person that is the other party to the merger if such Person survives said merger
(or, if there is more than one such Person, such Person who has the greatest aggregate market value
of securities outstanding) or (2) if the Person that is the other party to the merger does not
survive the merger, the Person that does survive the merger (including the Company if it survives)
or (3) the Person resulting from the consolidation; and (ii) in the case of any transaction
described in Section 13(a)(iii), the Person that is the other party to such transaction or,
if more than one, the Person that is the party receiving the greatest portion of the assets or
earning power (including without limitation securities creating any obligation on the part of the
Company and/or its subsidiaries) transferred pursuant to such transaction or transactions;
provided, however, that in any such case, if the Senior Voting Stock of such Person
is not at such time and has not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, then (A) if such Person is a direct or indirect subsidiary of
another Person the Senior Voting Stock of which is and has been so registered, the term “Principal
Party” shall refer to such other Person; or (B) if such Person is a subsidiary, directly or
indirectly, of more than one Person and the Senior Voting Stock of any two or more of such Persons
is and has been so registered, the term “Principal Party” shall refer to whichever of such Persons
is the issuer of the Senior Voting Stock having the greatest aggregate market value of shares
outstanding; or (C) if such Person is owned, directly or indirectly, by a joint venture formed by
two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set
forth in clauses (A) and (B) above shall apply to each of the owners having an interest in such
joint venture as if such joint venture were a subsidiary of both or all of such joint venturers and
the Principal Party in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such joint venture bear to the
total of such interests. “Senior Voting Stock” shall mean the capital stock (or equity interest)
of the Principal Party with the greatest voting power.



(c) The Company shall not consummate any such consolidation, merger, sale or transfer
referenced in clauses (i), (ii) and (iii) of Section 13(a) unless prior thereto the Company
and such Principal Party or Parties shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in Section 13(a) and Section
13(b) and further providing that, as soon as practicable after the date of any such
consolidation, merger or



 


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sale or transfer of assets, the Principal Party or Parties (i) will prepare and file a
registration statement under the Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and use its best efforts (A) to
cause such registration statement to become effective as soon as practicable after such filing, (B)
to cause such registration statement to remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the date of expiration of the Rights, and (C) to
similarly comply with applicable state securities laws, and list (or continue the listing of) the
Rights and the securities purchasable upon exercise of the Rights on a national securities
exchange; (ii) will deliver to holders of the Rights historical financial statements for the
Principal Party or Parties and each of its Affiliates that comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the Exchange Act; and (iii)
obtain waivers of any rights of first refusal or preemptive rights in respect of the Common Stock
of the Principal Party subject to purchase upon exercise of outstanding Rights.



(d) If the Principal Party has a provision in any of its authorized securities or in its
certificate of incorporation or by-laws or other instrument governing its affairs, which provision
would have the effect of (i) causing such Principal Party to issue (other than to holders of Rights
pursuant to this Section 13), in connection with, or as a consequence of, the consummation
of a transaction referred in clauses (i), (ii) and (iii) of Section 13(a), shares of Senior
Voting Stock or Senior Voting Stock equivalents of such Principal Party at less than the
then-current market price per share thereof (determined pursuant to Section 11(d)) or
securities exercisable for, or convertible into, Senior Voting Stock or Senior Voting Stock
equivalents of such Principal Party at less than such then-current market price or (ii) providing
for any special payment, tax or similar provision in connection with the issuance of the Senior
Voting Stock of such Principal Party pursuant to the provisions of this Section 13, then,
in such event, the Company hereby covenants and agrees with each holder of Rights that it shall not
consummate any such transaction unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement providing that the
provision in question of such Principal Party shall have been canceled, waived or amended, or that
the authorized securities shall be redeemed, so that the applicable provision will have no effect
in connection with, or as a consequence of, the consummation of the proposed transaction.



(e) The Company covenants and agrees that it shall not, at any time after a Person first
becomes an Acquiring Person, enter into any transaction referred in clauses (i), (ii) and (iii) of
Section 13(a) if (i) at the time of or immediately after such transaction there are any
rights, warrants, instruments or securities outstanding or any agreements or arrangements that, as
a result of the consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights, (ii) prior to, simultaneously with or immediately
after such transaction, the stockholders of the Person who constitutes, or would constitute, the
Principal Party for purposes of Section 13(b) shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates or Associates or (iii) the form or nature
of organization of the Principal Party would preclude or limit the exercisability of the Rights.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a consolidation, merger, sale or
transfer referenced in clauses (i), (ii) or (iii) of Section 13(a) occurs at any time after
the occurrence of a Person becoming an Acquiring Person, except for Rights that have become null
and void pursuant to Section 11(a)(ii), Rights that shall not have been previously
exercised will cease to be



 


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exercisable in the manner provided in Section 11(a)(ii) and will thereafter be
exercisable in the manner provided in Section 13(a).




Section 14. Fractional Rights and Fractional Shares.



(a) The Company shall not be required to issue fractions of Rights or to distribute Right
Certificates that 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 ask prices, regular way, in either case (i) as
reported by the principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange, or (ii) if the Rights are not listed
or admitted to trading on the New York Stock Exchange, as reported by 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 (iii) 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 ask prices in the over-the-counter market, as
reported by the NASDAQ National Market System or such other system then in use, or (iv) if on any
such date the Rights are not quoted by any such organization, the average of the closing bid and
ask prices as furnished by a professional market maker making a market in the Rights, selected by
the Board or (v) if on any such date, no such market maker is making a market in the Rights, the
fair market value of the Rights on such date as determined in good faith by the Board.



(b) The Company shall not be required to issue fractions of shares of Preferred Stock (other
than fractions that are integral multiples of one one-thousandth of a share of Preferred Stock)
upon exercise or exchange of the Rights or to distribute certificates that evidence fractional
shares of Preferred Stock (other than fractions that are integral multiples of one one-thousandth
of a share of Preferred Stock). Fractions of shares of Preferred Stock in integral multiples of
one one-thousandth of a share of Preferred Stock may, at the election of the Company, be evidenced
by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are entitled as
beneficial owners of shares of Preferred Stock. In lieu of fractional shares that are not integral
multiples of one one-thousandth of a share of Preferred Stock, the Company shall pay to the
registered holders of Right Certificates with regard to which such fractional shares would
otherwise be issuable an amount in cash equal to the same fraction of the current market value of a
whole share of Preferred Stock. For purposes of this Section 14(b), the current market
value of a whole share of Preferred Stock shall be the closing price of a share of Preferred Stock
(as determined pursuant to the second sentence of Section 11(d)(i)) for the Trading Day
immediately prior to the date of such exercise or exchange).



(c) The Company shall not be required to issue fractions of shares of Common Stock upon
exercise or exchange of the Rights or to distribute certificates that evidence fractional



 


29









 






shares of Common Stock. In lieu of such fractional shares, the Company shall pay to the
registered holders of Right Certificates with regard to which such fractional shares would
otherwise be issuable an amount in cash equal to the same fraction of the current market value of a
whole share of Common Stock. For purposes of this Section 14(c), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d)(i)) for the Trading Day
immediately prior to the date of such exercise or exchange).



(d) The holder of a Right by the acceptance of the Right expressly waives such holder’s right
to receive any fractional Rights or any fractional shares upon exercise of a Right (except as
provided in this Section 14).



(e) Whenever a payment for fractional Rights or fractional shares is to be made by the Rights
Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting
forth in reasonable detail the facts related to such payments and the prices and/or formulas
utilized in calculating such payments, and (ii) provide sufficient monies to the Rights Agent in
the form of fully collected funds to make such payments. The Rights Agent shall be fully protected
in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed
to have knowledge of any payment for fractional Rights or fractional shares under any section of
this Agreement relating to the payment of fractional Rights or fractional shares unless and until
the Rights Agent shall have received such a certificate and sufficient monies.



Section 15. Rights of Action. All rights of action in respect of this Agreement,
excepting the rights of action given to the Rights Agent herein, are vested in the respective
registered holders of the Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Right Certificate (or, prior to the
Distribution Date, any registered holder of Common Stock), without the consent of the Rights Agent
or of the registered holder of any other Right Certificate (or, prior to the Distribution Date, any
other registered holder of the Common Stock), may, in such holder’s own behalf and for such
holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce this Agreement, or otherwise act in respect of such holder’s right
to exercise the Rights evidenced by such Right Certificate (or, prior to the Distribution Date, by
such certificate or book entry evidencing the Common Stock) in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the
registered holders of Rights, it is specifically acknowledged that the registered 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.



Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights
Agent shall have any liability to any holder of a Right or other Person as a result of the
Company’s or the Rights Agent’s inability to perform any of their respective obligations under this
Agreement by reason of any preliminary or permanent injunction or other order, judgment, decree or
ruling (whether interlocutory or final) issued by a court or by a governmental, regulatory,
self-regulatory or administrative agency or commission, or any statute, rule,



 


30









 






regulation or executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation.



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 evidenced by the certificates of Common
Stock registered in the names of the holders thereof (or if the shares of Common Stock are
uncertificated, by the registration of the associated shares of Common Stock on the stock transfer
books of the Company), and the Rights will be transferable only in connection with the transfer of
the Common Stock;



(b) after the Distribution Date, the Right Certificates are transferable only on the registry
books of the Rights Agent if surrendered at the office or offices of the Rights Agent designated
for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates properly completed and duly executed;



(c) the Company and the Rights Agent may deem and treat the Person in whose name the Right
Certificate is registered (or, prior to the Distribution Date, each registered holder of Common
Stock) as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates or the associated Common Stock
certificates 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;



(d) this Agreement may be supplemented or amended from time to time in accordance with its
terms; and



(e) the power and authority delegated to the Board pursuant to this Agreement shall be
exclusive and shall be as set forth in Section 30.



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 Stock or any other securities of the Company that 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 23, Section 24 or Section
25), or to receive dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with the provisions
hereof.



Section 18. Concerning the Rights Agent. 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 other disbursements (including but not
limited to counsel fees and disbursements) incurred in the administration and execution of



 


31









 






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,
damage, judgment, fine, penalty, claim, demand, settlement, cost or expense (including, without
limitation, the reasonable fees and expenses of legal counsel), incurred without gross negligence,
bad faith or willful misconduct on the part of the Rights Agent (which gross negligence, bad faith
or willful misconduct must be determined by a final, non-appealable order, judgment, decree or
ruling of a court of competent jurisdiction), for any action taken, suffered or omitted to be done
by the Rights Agent in connection with the acceptance, administration and performance of its duties
under this Agreement, including the costs and expenses of defending against any claim of liability
in the premises and the enforcement of this indemnification. The provisions of this Section
18 and of Section 20 shall survive the termination of this Agreement, the exercise of
or expiration of the Rights and the resignation, replacement or removal of the Rights Agent.



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 Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement or other paper or document believed by
it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the
proper person or persons or otherwise upon the advice of counsel as set forth in Section
20. The Rights Agent shall not be deemed to have knowledge of any event of which it was
supposed to receive notice hereunder, and the Rights Agent shall be fully protected and shall incur
no liability for failing to take action in connection therewith, unless and until it has received
such notice in writing.



Notwithstanding anything to the contrary contained herein, the Rights Agent shall not be
liable for any delays or failures in performance resulting from acts beyond its reasonable control
including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or
malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power
failures or mechanical difficulties with information storage or retrieval systems, labor
difficulties, war, or civil unrest.



Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any Person
into which the Rights Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or
any successor Rights Agent shall be a party, or any Person succeeding to the appropriate 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 Person would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21. 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



 


32









 






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 countersigned, 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 expressly imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Right Certificates, by their acceptance thereof, shall be
bound:



(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company
or an employee of the Rights Agent), and the advice or opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent and the Rights Agent shall incur no
liability for or in respect of any action taken, suffered or omitted by it in accordance with such
advice or opinion.



(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem
it necessary or desirable that any fact or matter (including, without limitation, the identity of
any Acquiring Person and the determination of “current market price per share”) be proved or
established by the Company prior to taking, suffering or omitting to take 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 and complete
authorization and protection to the Rights Agent for any action taken, suffered or omitted 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 gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or
willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling
of a court of competent jurisdiction). Anything to the contrary notwithstanding, in no event shall
the Rights Agent be liable for special, punitive, indirect, consequential or incidental loss or
damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage. Any liability of the Rights Agent under
this Agreement will be limited to the aggregate amount of fees paid by the Company to the Rights
Agent.



(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.


 


33









 





(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 and delivery 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
responsible for any change in the exercisability of Rights (including any Rights becoming null and
void pursuant to Section 11(a)(ii)) or any adjustment in the terms of the Rights (including
the manner, method or amount thereof) provided for in Section 3, Section 11,
Section 13, Section 23 or Section 24, or the ascertaining of the existence
of facts that would require any such change or adjustment (except with respect to the exercise of
Rights evidenced by 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 shares of the Preferred Stock to be issued pursuant to this
Agreement or any Right Certificate or as to whether any shares of the Preferred Stock 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 Chief
Executive Officer, 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 such instructions shall be full authorization and protection to the Rights Agent and the Rights
Agent shall not be liable for or in respect of any action taken, suffered or omitted by it in
accordance with instructions of any such officer or for any delay in acting while waiting for those
instructions. The Rights Agent shall be fully authorized and protected in relying upon the most
recent instructions received by any such officer. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken, suffered or omitted by the Rights Agent under this Agreement and the
date on and/or after which such action shall be taken or suffered or such omission shall be
effective. The Rights Agent shall not be liable for any action taken or suffered by, or omission
of, the Rights Agent in accordance with a proposal included in any such application on or after the
date specified in such application (which date shall not be less than five Business Days after but
not including the date any such officer of the Company actually receives such application, unless
any such officer shall have consented in writing to an earlier date) unless, prior to taking any
such action (or the effective date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application specifying the action to be taken,
suffered or omitted.



(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent
may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not



 


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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 Person.



(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 (through its directors, officers and employees) 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, absent gross negligence, bad
faith or willful misconduct in the selection and continued employment thereof (which gross
negligence, bad faith or willful misconduct must be determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction).



(j) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise,
transfer, split up, combination or exchange either (i) the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not been properly
completed or indicates that the Rights are beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof or (ii) any other actual or suspected irregularity exists, the
Rights Agent shall not take any further action with respect to such requested exercise or transfer
without first consulting with the Company, and will thereafter take further action with respect
thereto only in accordance with the Company’s written instructions.



(k) The Rights Agent shall have no responsibility to the Company, any holders of Rights or any
holders of shares of Preferred Stock or other securities for interest or earnings on any monies
held by the Rights Agent pursuant to this Agreement, except as otherwise may specifically be agreed
to in a separate writing by the Company and the Rights Agent.



(l) The Rights Agent shall not be required to take notice or be deemed to have notice of any
event or condition hereunder, including, but not limited to, a Distribution Date, a Redemption
Date, any adjustment of the Purchase Price, the existence of an Acquiring Person or any other event
or condition that may require action by the Rights Agent, unless the Rights Agent shall be
specifically notified in writing of such event or condition by the Company, and all notices or
other instruments required by this Agreement to be delivered to the Rights Agent must, in order to
be effective, be received by the Rights Agent as specified in Section 26, and in the
absence of such notice so delivered, the Rights Agent may conclusively assume no such event or
condition exists.



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 calendar days’ notice in
writing mailed to the Company and to each transfer agent of the Common Stock and the Preferred
Stock, by registered or certified mail. In the event the transfer agency relationship in effect
between and be discharged from its duties under this Agreement as of the effective date of such
termination. the Company and the Rights Agent terminates, the Rights Agent will be deemed to have
resigned automatically The Company may remove the Rights Agent or any successor Rights Agent upon
30 calendar days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock and the Preferred Stock, by registered
or certified mail. The Company will provide notice of any resignation (including any automatic
resignation) or removal of any Rights Agent to the holders



 


35









 






of the Right Certificates by first class mail as soon as practicable after such event. 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 calendar 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 such holder’s
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
Person (or an Affiliate of such a Person) organized and doing business under the laws of the United
States or of any state of the United States, in good standing, that is authorized under such laws
to exercise corporate trust powers 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. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock, and mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may be.



Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions
of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or sale by the Company
of Common Stock following the Distribution Date and prior to the Final Expiration Date, the Company
may, with respect to shares of Common Stock so issued or sold pursuant to (a) the exercise of stock
options, (b) under any employee plan or arrangement, (c) the exercise, conversion or exchange of
securities (other than Rights), notes or debentures issued by the Company or (d) a contractual
obligation of the Company, in each case existing prior to the Distribution Date, issue Right
Certificates representing the appropriate number of Rights in connection with such issuance or
sale; provided, however, that (i) no such Right Certificate will be issued if, and
to the extent that, in its good faith judgment the Board determines that the issuance of such Right
Certificate could have a material adverse tax consequence to the Company or to the Person to whom
or which such Right Certificate otherwise would be issued and (ii) no such Right Certificate will
be issued if, and to the extent that, appropriate adjustment otherwise has been made in lieu of the
issuance thereof.


 


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Section 23. Redemption.



(a) The Board may, at its option, at any time prior to the close of business, on the earlier
of (i) the Share Acquisition Date or (ii) the Final Expiration Date, redeem all but not less than
all of the then-outstanding Rights at a redemption price of $0.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction occurring after the
Record Date (such redemption price being hereinafter referred to as the “Redemption
Price”). The redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board in its sole discretion may establish. The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock (based on the current market price
of the Common Stock at the time of redemption as determined pursuant to Section 11(d)(i))
or any other form of consideration deemed appropriate by the Board, or any combination thereof.
The Company may, at its option, combine the payment of the Redemption Price with any other payment
being made concurrently to holders of Common Stock and, to the extent that any such other payment
is discretionary, may reduce the amount thereof on account of the concurrent payment of the
Redemption Price. If legal or contractual restrictions prevent the Company from paying the
Redemption Price (in the form of consideration deemed appropriate by the Board) at the time of
redemption, the Company will pay the Redemption Price, without interest, promptly after such time
as the Company ceases to be so prevented from paying the Redemption Price.



(b) If the Company receives a Qualified Offer and the Board has not redeemed the outstanding
Rights or exempted such Qualified Offer from the terms of this Agreement or called a special
meeting of stockholders for the purpose of voting on whether or not to exempt such Qualified Offer
from the terms of this Agreement, in each case by the end of 90 days following the commencement of
such Qualified Offer, and if the Company receives, not earlier than 90 days nor later than 120 days
following the commencement of such Qualified Offer, a written notice complying with the terms of
this Section 23(b) (the “Special Meeting Notice”), properly executed by the holders
of record (or their duly authorized proxy) of 10% or more of the shares of Common Stock then
outstanding (excluding shares of Common Stock beneficially owned by the Person making the Qualified
Offer and such Person’s Affiliates and Associates), directing the Board to submit to a vote of
stockholders at a special meeting of the stockholders of the Company (a “Special Meeting”)
a resolution authorizing the redemption of all, but not less than all, of the then-outstanding
Rights at the Redemption Price (the “Redemption Resolution”), then the Board shall take
such actions as are necessary or desirable to cause the Redemption Resolution to be submitted to a
vote of stockholders within 90 Business Days following receipt by the Company of the Special
Meeting Notice (the “Special Meeting Period”), including by including a proposal relating
to adoption of the Redemption Resolution in the proxy materials of the Company for the Special
Meeting; provided, however, that if the Company, at any time during the Special Meeting Period and
prior to a vote on the Redemption Resolution, enters into a Definitive Acquisition Agreement, the
Special Meeting Period may be extended (and any Special Meeting called in connection therewith may
be cancelled) if the Redemption Resolution will be separately submitted to a vote at the same
meeting as the Definitive Acquisition Agreement or if the Board has irrevocably determined to
redeem the Rights or terminate this Agreement in connection with the closing of the transaction
contemplated by the Definitive Acquisition Agreement. For purposes of a Special Meeting Notice,
the record date for determining eligible holders of record of the Common Stock shall be the 90th
day following the commencement of a Qualified Offer. Any Special Meeting Notice must be delivered
to the



 


37









 






Secretary of the Company at the principal executive offices of the Company and must set forth,
as to the stockholders of record executing such Special Meeting Notice, (i) the name and address of
such stockholders, as they appear on the Company’s books and records, (ii) the number of shares of
Common Stock that are owned of record by each of such stockholders and (iii) in the case of Common
Stock that is beneficially owned by another Person, an executed certification by the holder of
record that such holder has executed such Special Meeting Notice only after obtaining instructions
to do so from such beneficial owner. Subject to the requirements of applicable law, the Board may
take a position in favor of or opposed to the adoption of the Redemption Resolution, or no position
with respect to the Redemption Resolution, as it determines to be appropriate in the exercise of
its fiduciary duties. In the event that (A) no Person has become an Acquiring Person prior to the
effective date of redemption referred to below in this sentence, (B) the Qualified Offer continues
to be a Qualified Offer prior to the last day of the Special Meeting Period (the “Outside
Meeting Date”) and (C) either (1) the Special Meeting is not held on or prior to the Outside
Meeting Date or (2) at the Special Meeting at which a quorum is present, the holders of a majority
of the shares of Common Stock outstanding as of the record date for the Special Meeting selected by
the Board (excluding shares of Common Stock beneficially owned by the Person making the Qualified
Offer and such Person’s Affiliates and Associates) vote in favor of the Redemption Resolution, then
all of the Rights shall automatically be redeemed at the Redemption Price (unless the Board shall
have first taken such other irrevocable action as may be necessary to prevent the existence of the
Rights from interfering with the consummation of the Qualified Offer), such redemption to be
effective, as the case may be, (x) as of the close of business on the Outside Meeting Date if a
Special Meeting is not held on or prior to such date or (y) if a Special Meeting is held on or
prior to the Outside Meeting Date, as of the date on which the results of the vote adopting the
Redemption Resolution at the Special Meeting are certified as official by the appointed inspectors
of election for the Special Meeting.



(c) Immediately upon the effectiveness of the action of the Board ordering the redemption of
the Rights pursuant to Section 23(a) or the effectiveness of a redemption of the Rights
pursuant to Section 23(b), in either case, and without any further action and without any
notice, the right to exercise the Rights will terminate and each Right will thereafter represent
only the right to receive the Redemption Price, without interest thereon. The Company shall
promptly give public notice of any such redemption and, within ten calendar days after such action
causing a redemption of the Rights pursuant to Section 23(a) or Section 23(b), the
Company shall mail a notice of redemption to all the holders of the then-outstanding Rights at
their last addresses as they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice
that 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. Notwithstanding the foregoing, the failure to give, or any
defect in, any notice required to be made or given pursuant to this Section 23(c) shall not
affect the validity of the redemption of the Rights.



(d) Neither the Company nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other than that specifically set forth in
this Section 23 or in Section 24, and other than in connection with the repurchase
of Common Stock prior to the Distribution Date.


 


38









 






Section 24. Exchange.



(a) The Board may, at its sole option and election, 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 null and void pursuant to the provisions of Section
11(a)(ii)) for shares of Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred to as the
“Exchange Ratio”). Notwithstanding the foregoing, the Board shall not be empowered to
effect such exchange at any time after any Acquiring Person, together with all Affiliates and
Associates of such Acquiring Person, becomes the Beneficial Owner of 50% or more of the voting
power of the shares of Common Stock then outstanding. From and after the occurrence of an event
specified in Section 13(a), any Rights that theretofore have not been exchanged pursuant to
this Section 24(a) shall thereafter be only exercisable in accordance with Section
13 and may not be exchanged pursuant to this Section 24(a). The exchange of the Rights
by the Board may be made effective at such time, on such basis and with such conditions as the
Board may establish at its sole option and election.



(b) Immediately upon the effectiveness of the action of the Board ordering the exchange of any
Rights pursuant to Section 24(a), and without any further action and without any notice,
the right to exercise such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange and within ten calendar days of such action pursuant to Section
24(a), the Company shall mail a notice of any such exchange by first class mail 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 that 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 Common Stock for Rights will be effected and, in the event of any partial exchange,
the number of Rights that will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights that have become null and void pursuant to the
provisions of Section 11(a)(ii)) held by each holder of Rights. Notwithstanding the
foregoing, the failure to give, or any defect in, any notice required to be made or given pursuant
to this Section 24(b) shall not affect the validity of the exchange of Rights.



(c) The Company may, at its option, substitute for a share of Common Stock issuable upon the
exchange of Rights in accordance with Section 24(a), (i) a number of shares of Preferred
Stock (or equivalent preferred stock) or fraction thereof such that the current market price per
share of one share of Preferred Stock (or equivalent preferred stock) multiplied by such number or
fraction is equal to the current market price per share of one share of Common Stock, (ii) cash,
(iii) debt securities of the Company, (iv) other assets or (v) any combination of the foregoing, in
any event having an aggregate value, as determined in good faith by the Board, equal to the current
market value of one share of Common Stock on the Trading Day immediately preceding the date of the
effectiveness of the exchange pursuant to this Section 24.


 


39









 





Section 25. Notice of Certain Events. In case the Company shall propose at any time
following the Distribution Date (a) to pay any dividend payable in stock of any class to the
holders of its Preferred Stock or to make any other distribution to the holders of its Preferred
Stock (other than a regular periodic cash dividend at a rate not in excess of 125% of the rate of
the last cash dividend theretofore paid), (b) to offer to the holders of its Preferred Stock
rights, options or warrants to subscribe for or to purchase any additional shares of the Preferred
Stock or shares of stock of any class or any other securities, rights or options, (c) to effect any
reclassification of its Preferred Stock (other than a reclassification involving only the
subdivision or combination of outstanding Preferred Stock), (d) to effect any consolidation or
merger into or with, or to effect any sale or other transfer (or to permit one or more of its
subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50%
of the assets or earning power (including without limitation securities creating any obligation on
the part of the Company and/or any of its subsidiaries) of the Company and its subsidiaries (taken
as a whole) to any other Person or Persons (other than the Company or one or more of its wholly
owned subsidiaries), (e) to effect the liquidation, dissolution or winding up of the Company or (f)
to declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock or
to effect a subdivision, combination or consolidation of the shares of Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common Stock), then, in
each such case, the Company shall give to the Rights Agent and each holder of a Right Certificate,
in accordance with Section 26, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution or offering of rights, options or
warrants, or the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of participation therein by
the holders of the Common Stock and/or the Preferred Stock, if any such date is to be fixed, and
such notice shall be so given in the case of any action covered by clause (a) or (b) above at least
ten calendar days prior to the record date for determining holders of the Preferred Stock for
purposes of such action, and in the case of any such other action, at least ten calendar days prior
to the date of the taking of such proposed action or the date of participation therein by the
holders of the Common Stock and/or the Preferred Stock, whichever shall be the earlier. In case
the event set forth in Section 11(a)(ii) or Section 13 shall occur, then the
Company shall as soon as practicable thereafter give to the Rights Agent and each holder of a
Right, in accordance with Section 26, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under Section
11(a)(ii) or Section 13, as applicable.



Section 26. Notices. Notices or demands authorized by this Agreement to be given or
made by the Rights Agent or by the holder of any 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 by the Company with the Rights Agent) as follows:


Capital Senior Living Corporation

14160 Dallas Parkway, Suite 300

Dallas, Texas 75254

Attention: Corporate Secretary




Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right Certificate to or



 


40









 






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:


Mellon Investor Services LLC

600 N. Pearl Street, Suite 1010

Dallas, Texas 75201



With a copy to:



Mellon Investor Services LLC

Newport Office Center VII

480 Washington Blvd

Jersey City, NJ 07310

Attention: Legal Department 




Notices or demands authorized by this Agreement to be given or made by the Company or the
Rights Agent to the holder of any Right Certificate (or, if prior to the Distribution Date, to the
holder of Common Stock) shall be sufficiently given or made if sent by first class mail, postage
prepaid, addressed to such holder at the address of such holder as shown on the registry books of
the Company.



Section 27. Supplements and Amendments. Prior to the time at which the Rights cease
to be redeemable pursuant to Section 23, and subject to this Section 27, the
Company may in its sole and absolute discretion, and the Rights Agent will if the Company so
directs, supplement or amend any provision of this Agreement in any respect without the approval of
any holders of Rights or Common Stock. From and after the time at which the Rights cease to be
redeemable pursuant to Section 23, and subject to this Section 27, the Company, by
action of the Board, may from time to time and in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend this Agreement in any respect without
the approval of any holders of Rights, including, without limitation, in order to (a) cure any
ambiguity, (b) correct or supplement any provision contained herein that may be defective or
inconsistent with any other provisions herein, (c) shorten or lengthen any time period hereunder,
or (d) otherwise change, amend, or supplement any provisions hereunder in any manner that the
Company may deem necessary or desirable; provided, however, that no such supplement
or amendment shall (i) adversely affect the interests of the holders of Rights as such (other than
Rights that have become null and void pursuant to Section 11(a)(ii) hereof) (ii) cause this
Agreement to become amendable other than in accordance with this Section 27 or (iii) cause
the Rights to again become redeemable. Without limiting the foregoing, the Company, by action of
the Board, may at any time when the Rights are redeemable, amend this Agreement to make the
provisions of this Agreement inapplicable to a particular transaction by which a Person might
otherwise become an Acquiring Person or to otherwise alter the terms and conditions of this
Agreement as they may apply with respect to any such transaction. Upon the delivery of a
certificate from an officer of the Company which states that the proposed supplement or amendment
is in compliance with the terms of this Section 27, the Rights Agent will execute such
supplement or amendment. Notwithstanding anything contained in this Agreement to the contrary, the
Rights Agent may, but shall not be obligated to, enter into any supplement or amendment that
affects the Rights Agent’s own rights, duties, obligations, or immunities under



 


41









 






this Agreement. Notwithstanding anything in this Agreement to the contrary, the limitations
on the ability of the Board to amend this Agreement set forth in this Section 27 shall not
affect the power or ability of the Board to take any other action that is consistent with its
fiduciary duties under Delaware law, including, without limitation, accelerating or extending the
Final Expiration Date or making any other amendment to this Agreement that is permitted by this
Section 27 or adopting a new stockholder rights plan with such terms as the Board
determines in its sole discretion to be appropriate.



Prior to the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.



Notwithstanding anything in this Agreement to the contrary, the Rights Agent may, but shall
not be obligated to, enter into any supplement or amendment that affects the Rights Agent’s own
rights, duties, obligations or immunities under this Agreement.



Section 28. Successors. All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.



Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed
to give to any Person other than the Company, the Rights Agent and the registered holders of the
Right Certificates (and, prior to the Distribution Date, the registered holders of the Common
Stock) any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be
for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common
Stock).



Section 30. Determinations and Actions by the Board of Directors of the Company. The
Board shall have the exclusive power and authority to administer this Agreement and to exercise the
rights and powers specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without limitation, the right and
power to (a) interpret the provisions of this Agreement (including, without limitation, Section
27, this Section 30 and other provisions hereof relating to its powers or authority
hereunder) and (b) make all determinations and calculations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a determination contemplated by
Section 1(a) or a determination to redeem or not redeem the Rights, to exchange or not
exchange the Rights, or to amend this Agreement). All such actions, calculations, interpretations
and determinations (including, for purposes of clause (y) below, all omissions with respect to the
foregoing) that are done or made by the Board in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights, as such, and all other Persons
and (y) not subject any director of the Company to any liability to the Rights Agent, the holders
of the Rights or any other Person. The Rights Agent is entitled always to assume that the Board
acted in good faith and shall be fully protected and incur no liability in reliance thereon.



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



 


42









 






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, if such excluded provision shall affect the
rights, immunities, duties or obligations of the Rights Agent hereunder, the Rights Agent shall be
entitled to resign immediately; and provided further, that nothing contained in
this Section 31 will affect the ability of the Company under the provisions of Section
27 to supplement or amend this Agreement to replace such invalid, null and void or
unenforceable term, provision, covenant or restriction with a legal, valid and enforceable term,
provision, covenant or restriction. Without limiting the foregoing, if any provision requiring a
specific group of directors of the Company to act is held by any court of competent jurisdiction or
other authority to be invalid, void or unenforceable, such determination shall then be made by the
full Board in accordance with applicable law and the Company’s Amended and Restated Certificate of
Incorporation and Amended and Restated By-laws (as each may be amended from time to time).



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 Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state; provided, however,
that with respect solely to matters regarding the rights, duties, obligations and immunities of the
Rights Agent hereunder, the laws of the State of New York shall govern without regard to its
conflict of laws principles.



Section 33. Descriptive Headings; References; Calculation of Time Periods.
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.
Except as otherwise specifically provided, any reference to any section or exhibit will be deemed
to refer to such section of or exhibit to this Agreement. Each reference in this Agreement to a
period of time following or after a specified date or event shall be calculated without including
such specified date or the day on which such specified event occurs.



Section 34. 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.



{Remainder of Page Left Intentionally Blank}




 


43









 







IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed
and their respective seals to be hereunto affixed and attested, all as of the day and year first
above written.





	 	 	 	 	 	 	 	 	 	 	 
	Attest:	 	 	 	CAPITAL SENIOR LIVING CORPORATION  
	 
	 	 	 	 	 	 	 	 	 	 
	By:  
	 	/s/ David R. Brickman	 	 	 	By:  	 	/s/ Lawrence A. Cohen	 	 
	 

	 
	 	 	 	 	 	 	 
	 

	Name:  	 David R. Brickman
	 	 	 	 	Name:  	 Lawrence A. Cohen	 	 
	 

	Title: 	 Vice President,Secretary and
General Counsel
	 	 	 	 	Title: 	 Chief Executive Officer	 	 
	 
		 	 	 	 	 	MELLON INVESTOR SERVICES LLC  
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	By:	 	/s/ Ann Peters	 	 
	 

	 	 
	 	 	 	 	 	 	 
	 

	 	
	 	 	 	 	Name: 	 Ann Peters	 	 
	 

	 	
 
	 	 	 	 	Title: 	 Vice President and Relationship Manager	 








 


44









 




Exhibit A




FORM OF

CERTIFICATE OF DESIGNATION




of




SERIES A JUNIOR PARTICIPATING PREFERRED STOCK




of




CAPITAL SENIOR LIVING CORPORATION




Pursuant to Section 151 of the

Delaware General Corporation Law




CAPITAL SENIOR LIVING CORPORATION, a corporation organized and existing under the laws of the
State of Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:



That pursuant to the authority vested in the Board of Directors in accordance with the
provisions of the Certificate of Incorporation of the said Corporation, as amended, the said
Board of Directors as of March 8, 2000, adopted the following resolution creating a series of
shares of Preferred Stock designated as “Series A Junior Participating Preferred Stock”:




RESOLVED, that pursuant to the authority vested in the Board of Directors of this
Corporation in accordance with the provisions of the Certificate of Incorporation, a
series of Preferred Stock, par value $.01 per share, of the Corporation be and hereby is
created, and that the designation and number of shares thereof and the voting and other
powers, preferences and relative, participating, optional or other rights of the
 shares of such series and the qualifications, limitations and restrictions thereof are
as follows:




Series A Junior Participating Preferred Stock



1. Designation and Amount. There shall be a series of Preferred Stock that shall be
designated as “Series A Junior Participating Preferred Stock,” and the number of shares
constituting such series shall be 65,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, however, that no decrease shall reduce the
number of shares of Series A Junior Participating Preferred Stock to less than the number of
shares then issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding securities issued
by the Corporation.



2. Dividends and Distributions.


 


Exhibit A
— Page 1










 




(A) Subject to the prior and superior right of the holders of any shares of any class or
series of stock of the Corporation ranking prior and superior to the shares of Series A Junior
Participating Preferred Stock with respect to dividends, the holders of shares of Series A
Junior Participating Preferred Stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose, dividends payable in
cash in an amount per share (rounded to the nearest cent) equal to the Adjustment Number (as
defined below) times the aggregate per share amount of all cash dividends, and the Adjustment
Number times the aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a subdivision of
the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common
Stock, par value $.01 per share, of the Corporation (the “Common Stock”) since the earlier of (i)
the date of the immediately preceding dividend payment or (ii) the date of the first issuance of
any share or fraction of a share of Series A Junior Participating Preferred Stock. The
“Adjustment Number” shall initially be 1,000. If the Corporation shall at any time after March
9, 2000 (the “Rights Declaration Date”), (i) declare and pay any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.



(B) The Corporation shall declare a dividend or distribution on the Series A Junior
Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in shares of Common
Stock).



(C) The Board of Directors may fix a record date for the determination of holders of
shares of Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more than 60 days prior
to the date fixed for the payment thereof.



3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall
have the following voting rights:



(A) Each share of Series A Junior Participating Preferred Stock shall entitle the
holder thereof to a number of votes equal to the Adjustment Number on all matters submitted to
a vote of the stockholders of the Corporation.



(B) Except as required by law and by Section 10 hereof, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.



4. Certain Restrictions.


 


Exhibit A
— Page 2









 




(A) Whenever quarterly dividends or other dividends or distributions payable on the
Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been
paid in full, the Corporation shall not:



(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock;



(ii) declare or pay dividends on or make any other distributions on any shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the
Series A Junior Participating Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the holders of all such
shares are then entitled; or



(iii) purchase or otherwise acquire for consideration any shares of Series A Junior
Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A
Junior Participating Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all holders of Series A
Junior Participating Preferred Stock, or to such holders and holders of any such shares ranking on
a parity therewith, upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and equitable treatment
among the respective series or classes.



(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation unless the
Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.



5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired promptly after the
acquisition thereof. All such shares shall upon their retirement become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to any
conditions and restrictions on issuance set forth herein.




6. Liquidation, Dissolution or Winding Up.



(A) Upon any liquidation, dissolution or winding up of the Corporation, voluntary or
otherwise, no distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received an amount per share (the “Series A



 


Exhibit A
— Page 3









 





Liquidation Preference”) equal to the greater of (i) $1.00 plus an amount equal to accrued
and unpaid dividends and distributions thereon whether or not declared, to the date of such
payment, or (ii) the Adjustment Number times the per share amount of all cash and other
property to be distributed in respect of the Common Stock upon such liquidation, dissolution or
winding up of the Corporation.



(B) If, however, there are not sufficient assets available to permit payment in full of
the Series A Liquidation Preference and the liquidation preferences of all other classes
and series of stock of the Corporation, if any, that rank on a parity with the
Series A Junior Participating Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of the Series A Junior
Participating Preferred Stock and the holders of such parity shares in proportion to their
respective liquidation preferences.



(C) Neither the merger or consolidation of the Corporation into or with another
corporation nor the merger or consolidation of any other corporation into or with the
Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this Section 6.



7. Consolidation, Merger, Etc. In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the outstanding shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other property, then in
any such case each share of Series A Junior Participating Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share equal to the Adjustment Number
times the aggregate amount of stock, securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each share of Common Stock is changed or
exchanged.



8. No Redemption. Shares of Series A Junior Participating Preferred Stock shall not be
subject to redemption by the Company.



9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all
other series of the Preferred Stock as to the payment of dividends, and as to the distribution
of assets upon liquidation, dissolution or winding up, unless the terms of any such series shall
provide otherwise, and shall rank senior to the Common Stock as to such matters.



10. Amendment. At any time that any shares of Series A Junior Participating Preferred
Stock are outstanding, the Certificate of Incorporation of the Corporation shall not be amended
in any manner that would materially alter or change the powers, preferences or special rights of
the Series A Junior Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of two-thirds of the outstanding shares of Series A
Junior Participating Preferred Stock, voting separately as a class.



11. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in
fractions of a share that shall entitle the holder, in proportion to such holder’s factional
shares, to exercise voting rights, receive dividends, participate in distributions and to have
the benefit of all other rights of holders of Series A Junior Participating Preferred Stock.


 


Exhibit A
— Page 4









 




IN WITNESS WHEREOF, the undersigned has executed this Certificate this                                          day of
March, 2000.



	 	 	 	 	 
	 	CAPITAL SENIOR LIVING CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 


Exhibit A
— Page 5











 




Exhibit B




Form of Right Certificate




			
	Certificate No. R-                    
	 	                     Rights







NOT EXERCISABLE AFTER THE FINAL EXPIRATION DATE (AS DEFINED IN THE
RIGHTS AGREEMENT) OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE
RIGHTS ARE SUBJECT, AT THE OPTION OF THE COMPANY, TO REDEMPTION AT
$0.001 PER RIGHT OR TO EXCHANGE, ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS AND
THEIR AFFILIATES AND ASSOCIATES (AS SUCH TERMS ARE DEFINED IN
SECTION 1 OF THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID.



Right Certificate




CAPITAL SENIOR LIVING CORPORATION




This certifies that
                    
                    , or registered assigns, is the registered owner of the
number of Rights set forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement dated as of February 25, 2010 (the “Rights
Agreement”) between CAPITAL SENIOR LIVING CORPORATION, a Delaware corporation (the
“Company”), and MELLON INVESTOR SERVICES LLP, a New Jersey limited liability company (the
“Rights Agent”), to purchase from the Company at any time after the Distribution Date (as
such term is defined in the Rights Agreement) and prior to the close of business (as such term is
defined in the Rights Agreement) on the Final Expiration Date (as defined in the Rights Agreement
at the office of the Rights Agent, or its successors as Rights Agent, designated for such purposes,
one one-thousandth of one fully paid and non-assessable share of the Series A Junior Participating
Preferred Stock (the “Preferred Stock”) of the Company, at a purchase price of $22.00 per
one one-thousandth of one share (the “Purchase Price”), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-thousandths of a share of Preferred
Stock that may be purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of                     , based on the shares of
the Preferred Stock of the Company as constituted at such date.


 


Exhibit B — Page 1









 





As provided in the Rights Agreement, the Purchase Price, the number and kind or class of
shares of stock of the Company that may be purchased upon the exercise of the Rights evidenced by
this Right Certificate are subject to modification and adjustment upon the happening of certain
events.



This Right Certificate is subject to all of the terms, provisions and conditions of the Rights
Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and
made a part hereof and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights
Agent, the Company and the holders of the Right Certificates. Copies of the Rights Agreement are
on file at the principal executive offices of the Company and the office of the Rights Agent.



This Right Certificate, with or without other Right Certificates, upon surrender at the office
of the Rights Agent designated for such purposes, may be exchanged for another Right Certificate or
Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of the Preferred Stock as the Rights evidenced by the Right Certificate
or Right Certificates surrendered shall have entitled such holder to purchase.



If this Right Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Right Certificate or Right Certificates for the number of whole
Rights not exercised.



Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate
may, but are not required to, be (i) redeemed by the Company at its option at a redemption price of
$0.001 per Right or (ii) exchanged by the Company in whole or in part for shares of Preferred Stock
or Common Stock, par value $0.01 per share, of the Company.



No fractional shares of the Preferred Stock or Common Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions that are integral multiples of one
one-thousandth of one share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment will be made as provided in
the Rights Agreement.



No holder of this Right Certificate shall be entitled to vote or receive dividends or be
deemed for any purpose the holder of the Preferred Stock or of any other securities of the Company
that may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided
in the Rights Agreement.



This Right Certificate shall not be valid or obligatory for any purpose until it shall have
been countersigned by the Rights Agent.


 


Exhibit B — Page 2









 






WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.



Dated as of                     , 2010.



	 	 	 	 	 	 	 
	Attest:

	 	CAPITAL SENIOR LIVING CORPORATION


	By:  	 	 	 	 	By:  	 
	 

	 	Name: 
	 	 	 	Name: 

	 

	 	Title: 
	 	 	 	Title: 







	 	 	 	 
	Countersigned:	MELLON INVESTOR SERVICES LLC, as Rights Agent

 
	 	By:  	 
	 	 	Name:  	 
	 	 	Title:  	 



 


Exhibit B — Page 3









 





[Form of Reverse Side of Right Certificate]




FORM OF ASSIGNMENT




(To be executed by the registered holder if such holder desires to transfer the Right Certificate)



     FOR VALUE RECEIVED                                                    hereby




sells, assigns and transfers unto






 




(Please print name and address of transferee)





this Right Certificate, together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint                     
                     Attorney, to transfer the within Right
Certificate on the books of the within-named Company, with full power of substitution.




Dated:                           , 20     



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 
	 	 	 
	 


(Signature
must conform in all respects to the name of holder as written upon
the face

of this Right Certificate, without alteration or enlargement or any change whatsoever.)





Signature Guaranteed:



Signatures must be guaranteed by an “eligible guarantor institution” as defined in Rule
17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended.



 




(to be completed if applicable)




The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement).



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 
	 	 	 



 


Exhibit B — Page 4









 






FORM OF ELECTION TO PURCHASE




(To be executed by the registered holder if such holder desires to exercise the Right Certificate)




TO: CAPITAL SENIOR LIVING CORPORATION





The undersigned hereby irrevocably elects to exercise
                    
                     Rights
represented by this Right Certificate to purchase the shares of the Preferred Stock issuable upon
the exercise of such Rights and requests that certificates for such shares be issued in the name
of:



[Please insert social security or other identifying number]






 




(Please print name and address)




If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new
Right Certificate for the balance remaining of such Rights shall be registered in the name of and
delivered to:



[Please insert social security or other identifying number]





 




(Please print name and address)





Dated:                           , 20     



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 
	 	 	 
	 


(Signature
must conform in all respects to the name of holder as written upon
the face

of this Right Certificate, without alteration or enlargement or any change whatsoever.)





Signature Guaranteed:



Signatures must be guaranteed by an “eligible guarantor institution” as defined in Rule
17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended.



 




(to be completed if applicable)




The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement).



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 
	 	 	 



 


Exhibit B — Page 5









 





	 	 	 	 	 



Exhibit C




CAPITAL SENIOR LIVING CORPORATION




SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK





On February 24, 2010, the Board of Directors of CAPITAL SENIOR LIVING CORPORATION (the
“Company”) declared a dividend distribution of one preferred stock purchase right (a
“Right”) for each outstanding share of common stock, par value $0.01 per share, of the
Company (the “Common Stock”). The distribution is payable on March 9, 2010 to the
stockholders of record on March 8, 2010 (the “Record Date”). Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of the Company’s
Series A Junior Participating Preferred Stock (the “Preferred Stock”) at a price of $22.00
per one one-thousandth of a share of Preferred Stock (the “Purchase Price”), subject to
adjustment. The description and terms of the Rights are set forth in a Rights Agreement dated
February 25, 2010 (the “Rights Agreement”), between the Company and Mellon Investor
Services LLC, as Rights Agent (the “Rights Agent”).



A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as
an Exhibit to a Registration Statement on Form 8-A dated February 26, 2010. Copies of the Rights
Agreement are available free of charge from the Rights Agent. The following summary description of
the Rights does not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by reference.



Until the close of business on the Distribution Date, the Rights will be evidenced, with
respect to any of the Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate (or in the case of uncertificated shares of Common Stock, by the registration of
such shares on the transfer books of the Company) with a copy of this Summary of Rights. The
“Distribution Date” will be the earlier to occur of:




	 	(i)	 	the tenth calendar day following a public announcement that a person or group
of affiliated or associated persons (an “Acquiring Person”) has acquired
beneficial ownership of 20% or more of the outstanding shares of the Common Stock (the
“Share Acquisition Date”); and







	 	(ii)	 	the tenth business day (or such later date as may be determined by action of
the Board of Directors of the Company prior to such time as any such person or group
becomes an Acquiring Person) after the date of the commencement of, or first public
announcement of the intent to commence, by any such person or group, a tender or
exchange offer the consummation of which would result in any such person or group
becoming an Acquiring Person.






The Rights Agreement provides that, until the Distribution Date (or earlier redemption or
expiration of the Rights), the Rights will be transferable only in connection with the transfer of
the Common Stock. Until the Distribution Date (or earlier redemption or expiration of the Rights),
new Common Stock certificates issued, or, in the case of newly issued uncertificated



 


Exhibit C — Page 1









 






shares of Common Stock, confirmations and account statements sent, after the Record Date, upon
transfer or new issuance of the Common Stock, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any of the Common Stock certificates outstanding as of the
Record Date, even without a copy of this Summary of Rights, will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing the Rights
(“Right Certificates”) will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate Right Certificates alone will evidence
the Rights.



The Rights are not exercisable until the Distribution Date. The Rights will expire on the
earlier of (i) March 8, 2013 and (ii) March 8, 2011, if and only if Stockholder Approval has not
been obtained on or prior to such date (as applicable, the “Final Expiration Date”) unless
the Final Expiration Date is extended or unless earlier redeemed or exchanged by the Company, in
each case as described below.



Each share of Preferred Stock purchasable upon exercise of the Rights will be entitled, when,
as and if declared, to a dividend payment per share equal to an aggregate dividend of 1,000 times
the dividend declared per share of Common Stock. In the event of liquidation, the holders of the
Preferred Stock will receive a preferential liquidation payment of $1.00 per share (plus any
accrued and unpaid dividends), but will be entitled to receive an aggregate liquidation payment
equal to 1,000 times the payment made on one share of Common Stock.



Each share of Preferred Stock will have 1,000 votes voting together with the Common Stock.
Finally, in the event of any merger, consolidation or other transaction in which shares of Common
Stock are exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the
amount received per one share of Common Stock. The Rights are protected by customary anti-dilution
provisions. Because of the nature of the Preferred Stock dividend, liquidation and voting rights,
the value of the one one-thousandth interest in a share of Preferred Stock purchasable upon
exercise of each Right should approximate the value of one share of Common Stock.



The Purchase Price payable, and the number of shares of the Preferred Stock or other
securities or property issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or
reclassification of the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for shares of the Preferred Stock or convertible securities
at less than the current market price of the Preferred Stock or (iii) upon the distribution to
holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular periodic
cash dividends out of earnings or retained earnings at a rate not in excess of 125% of the rate of
the last cash dividend theretofore paid or dividends payable in the Preferred Stock) or of
subscription rights or warrants (other than those referred to above).



The number of outstanding Rights and the number of one one-thousandths of a share of Preferred
Stock issuable upon exercise of each Right are also subject to adjustment in the event of a stock
split of the Common Stock or a stock dividend on the Common Stock payable in



 


Exhibit C — Page 2









 






shares of Common Stock or subdivisions, consolidations or combinations of the Common Stock
occurring, in any such case, prior to the Distribution Date.



In the event that the Company is acquired in a merger or other business combination
transaction or 50% or more of its assets or earning power are sold after a person or group has
become an Acquiring Person, proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the Purchase Price, that number
of shares of the senior voting stock of the acquiring company that at the time of such transaction
would have a market value of two times the Purchase Price. In the event that any person or group
of affiliated or associated persons becomes an Acquiring Person, proper provision will be made so
that each holder of a Right, other than Rights that were or are beneficially owned by the Acquiring
Person (which will thereafter be null and void), will thereafter have the right to receive upon
exercise that number of shares of the Common Stock having a market value of two times the Purchase
Price.



With certain exceptions, no adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares of
Preferred Stock or Common Stock will be issued (other than fractions that are integral multiples of
one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts) and, in lieu thereof, an adjustment in cash will be made based on
the market price of the Preferred Stock or Common Stock, as applicable, on the last trading date
prior to the date of exercise.



At any time after any person or group becomes an Acquiring Person and prior to the acquisition
by such person or group of 50% or more of the outstanding shares of Common Stock, the Board of
Directors of the Company may exchange the Rights (other than Rights owned by such person or group
that will have become null and void) in whole or in part, at an exchange ratio of one share of
Common Stock (or, if there is an insufficient number of issued but not outstanding or authorized
but unissued shares of Common Stock to permit such exchange, then one one-thousandth of a Preferred
Share) per Right (subject to adjustment).



At any time prior to 5:00 p.m. Dallas, Texas time on the earlier of (i) the Share Acquisition
Date and (ii) the Final Expiration Date, the Board of Directors of the Company may redeem the
Rights in whole, but not in part, at a price of $0.001 per Right (the “Redemption Price”).
In addition, if a Qualified Offer (as described below) is made, the record holders of 10% or more
of the outstanding shares of Common Stock may direct the Board of Directors of the Company to call
a special meeting of stockholders to consider a resolution authorizing a redemption of all Rights.
If the special meeting is not held within ninety (90) days of being called or if, at the special
meeting, the holders of a majority of the shares of Common Stock outstanding (other than shares
held by the offeror and its affiliated and associated persons) vote in favor of the redemption of
the Rights, then the Board of Directors of the Company will redeem the Rights or take such other
action as may be necessary to prevent the Rights from interfering with the consummation of the
Qualified Offer.



A Qualified Offer is an offer determined by a majority of the independent directors on the
Board of Directors of the Company to be a fully financed offer for all outstanding shares of Common
Stock at a per-share offer price that exceeds the greatest of certain price thresholds



 


Exhibit C — Page 3









 






specified in the Rights Agreement and that the Board of Directors of the Company, upon the
advice of a nationally recognized investment banking firm, does not deem to be either unfair or
inadequate. A Qualified Offer is conditioned upon a minimum of at least two-thirds of the
outstanding shares of Common Stock not held by the offeror (and its affiliated and associated
persons) being tendered and not withdrawn, with a commitment to acquire all shares of Common Stock
not tendered for the same consideration. If the Qualified Offer includes non-cash consideration,
such consideration must consist solely of freely tradeable common stock of a publicly traded
company, and the Board of Directors of the Company and its representatives must be given access to
conduct a due diligence review of the offeror to determine whether the consideration is fair and
adequate. A Qualified Offer must also remain open for at least one hundred twenty (120) days
following commencement.



Immediately upon the action of the Board of Directors of the Company to redeem or exchange the
Rights, the Company shall make announcement thereof, and upon such action, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to receive the
Redemption Price, or the shares of Common Stock or Preferred Stock exchangeable for the Rights, as
applicable.



Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder
of the Company, including, without limitation, liquidation rights, the right to vote or to receive
dividends.




 


Exhibit C — Page 4