RIGHTS AGENT RIGHTS AGREEMENT

 

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                                                                       Exhibit 4

 

                                                                  EXECUTION COPY

 

                          CODORUS VALLEY BANCORP, INC.

 

                                        AND

 

                             WELLS FARGO BANK, N.A.

 

                                  RIGHTS AGENT

 

                                RIGHTS AGREEMENT

                          DATED AS OF NOVEMBER 4, 2005

 

 

                                         6                                       1

 

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                                TABLE OF CONTENTS

 

<TABLE>

<CAPTION>

SECTION                                                                             PAGE

-------                                                                              ----

<S>                                                                                 <C>

  1.      Certain Definitions ...................................................      1

  2.      Appointment of Rights Agent ...........................................      4

  3.      Issuance of Rights Certificates .......................................      4

  4.      Form of Rights Certificates ...........................................      5

  5.      Countersignature and Registration .....................................      6

  6.      Transfer, Split Up, Combination an Exchange of Rights Certificate;

         Mutilated, Destroyed, Lost or Stolen Rights Certificates ..............      7

  7.      Exercise of Rights; Purchase Price; Expiration Date of Rights .........      8

  8.      Cancellation and Destruction of Rights Certificates ...................     10

  9.      Reservation and Availability of Capital Stock .........................     10

  10.     Common Stock Record Date ..............................................     11

  11.     Adjustment of Purchase Price, Number and Kind of Shares or Number

         of Rights .............................................................     12

  12.     Certificate of Adjusted Purchase Price or Number of Shares ............     19

  13.     Consolidation, Merger or Sale or Transfer of Assets or Earning Power ..     19

  14.     Fractional Rights and Fractional Shares ...............................     21

  15.     Rights of Action ......................................................     21

  16.     Agreement of Rights Holder ............................................     22

  17.     Rights Certificate Holder Not Deemed a Stockholder ....................     22

  18.     Concerning the Rights Agent ...........................................     23

  19.     Merger or Consolidation or Change of Name of Rights Agent .............     23

  20.     Duties of Rights Agent ................................................     24

</TABLE>

 

 

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<TABLE>

<S>                                                                                 <C>

  21.     Change of Rights Agent ................................................     26

  22.     Issuance of New Rights Certificates ...................................     26

  23.     Redemption and Termination ............................................     27

  24.     Notice of Certain Events ..............................................     28

  25.     Notices ...............................................................     28

  26.     Supplements and Amendments ............................................     29

  27.     Successors ............................................................     30

  28.     Determinations and Actions by the Board of Directors, etc. ............     30

  29.     Benefits of this Agreement ............................................     30

  30.     Severability ..........................................................     30

  31.     Governing Law .........................................................     30

  32.     Counterparts ..........................................................     31

  33.     Descriptive Headings ..................................................     31

</TABLE>

 

 

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                                RIGHTS AGREEMENT

 

          THIS RIGHTS AGREEMENT (the "Agreement") is dated as of November 4,

2005, and is between Codorus Valley Bancorp, Inc., a Pennsylvania corporation

(the "Company"), and Wells Fargo Bank, N.A. (the "Rights Agent").

 

                                   BACKGROUND:

 

          On November 4, 2005 (the "Rights Dividend Declaration Date"), the

Board of Directors of the Company authorized and declared a dividend

distribution of one Right for each share of common stock, par value $2.50 per

share, of the Company (the "Common Stock") outstanding at the close of business

on November 7, 2005 (the "Record Date"), and authorized the issuance of one

Right for each share of Common Stock of the Company outstanding on the Record

Date, each Right initially representing the right to purchase one share of

Common Stock of the Company, upon the terms and subject to the conditions

hereafter set forth (the "Rights").

 

          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 who or which, together

with all Affiliates and Associates of such Person, shall be the Beneficial Owner

of 20% or more of the shares of Common Stock then outstanding, but shall not

include the Company, any Subsidiary of the Company, any employee benefit plan of

the Company or of any Subsidiary of the Company, or any person or entity

organized, appointed or established by the Company for or pursuant to the terms

of any such plan.

 

          (b) "Adjustment Shares" shall have the meaning set forth in Section

11(a)(ii).

 

          (c) "Affiliate" and "Associate" shall have the respective meanings

ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under

the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in

effect on the date of this Agreement.

 

          (d) A Person shall be deemed the "Beneficial Owner" of, and shall be

deemed to "beneficially own," any securities:

 

               (i) which such Person or any of such Person's Affiliates or

Associates, directly or indirectly, has the right to acquire (whether such right

is exercisable immediately or only after the passage of time) pursuant to any

agreement, arrangement or understanding (whether or not in writing) or upon the

exercise of conversion rights, exchange rights, rights, warrants or options, or

otherwise; provided, however, that a Person shall not be deemed the "Beneficial

Owner" of, or to "beneficially own," (A) securities tendered pursuant to a

tender or exchange offer made by such Person or any of such Person's Affiliates

or Associates until such tendered securities are accepted

 

 

                                        9                                        1

 

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for purchase or exchange, or (B) securities issuable upon exercise of Rights at

any time prior to the occurrence of a Triggering Event;

 

               (ii) which such Person or any of such Person's Affiliates or

Associates, directly or indirectly, has the right to vote or direct the voting

of or to dispose of or direct the disposition of or "beneficial ownership" of

(as determined pursuant to Rule 13d-3 of the General Rules and Regulations under

the Exchange Act), including pursuant to any agreement, arrangement or

understanding, whether or not in writing; provided, however, that a Person shall

not be deemed the "Beneficial Owner" of, or to "beneficially own," any security

under this subparagraph (ii) as a result of an agreement, arrangement or

understanding to vote such security if such agreement, arrangement or

understanding: (A) arises solely from a revocable proxy given in response to a

public proxy or consent solicitation made pursuant to, and in accordance with,

the applicable provisions of the General Rules and Regulations under the

Exchange Act, and (B) is not also then reportable by such Person on Schedule 13D

under the Exchange Act (or on any comparable or successor report);

 

               (iii) which are beneficially owned, directly or indirectly, by

any other Person (or any Affiliate or Associate thereof) with which such Person

(or any of such Person's Affiliates or Associates) has any agreement,

arrangement or understanding (whether or not in writing), for the purpose of

acquiring, holding, voting (except pursuant to a revocable proxy as described in

the proviso to subparagraph (ii) of this paragraph (d)) or disposing of any

voting securities of the Company.

 

          (e) "Business Day" shall mean any day other than a Saturday, Sunday or

a day on which banking institutions in the Commonwealth of Pennsylvania are

authorized or obligated by law or executive order to close.

 

          (f) "Close of Business" on any given date shall mean 5:00 P.M.,

Harrisburg, Pennsylvania time, on such date; provided, however, that if such

date is not a Business Day it shall mean 5:00 P.M., Harrisburg, Pennsylvania

time, on the next succeeding Business Day.

 

          (g) "Common Stock" shall mean the common stock, par value $2.50 per

share, of the Company, except that "Common Stock" when used with reference to

any Person other than the Company shall mean the capital stock of such Person

with the greatest voting power or the equity securities or other equity interest

having power to control or direct the management of such Person.

 

          (h) "Common stock equivalent" shall have the meaning set forth in

Section 11(a)(iii).

 

          (i) "Continuing Director" shall mean (i) any member of the Board of

Directors of the Company, while such Person is a member of the Board, who is not

an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a

representative of an Acquiring Person or of any Affiliate or Associate of an

Acquiring Person, and was a member of the Board prior to the date of this

Agreement, or (ii) any Person who subsequently becomes a member of the Board,

while such person is a member of the Board, who is not an Acquiring Person, or

an Affiliate or Associate of an Acquiring Person, or a representative of an

Acquiring Person or of any Affiliate

 

 

                                       10                                       2

 

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or Associate of an Acquiring Person, if such Person's nomination for election or

election to the Board is recommended or approved by a majority of the Continuing

Directors.

 

          (j) "Current market price" shall have the meaning set forth in Section

11(d).

 

          (k) "Current Value" shall have the meaning set forth in Section

11(a)(iii).

 

          (l) "Distribution Date" shall mean the earlier of (i) the close of

business on the tenth Business Day after the Stock Acquisition Date, or (ii) the

close of business on the tenth Business Day after the date that a tender or

exchange offer by any Person (other than the Company, any Subsidiary of the

Company, any employee benefit plan of the Company or of any Subsidiary of the

Company, or any Person or entity organized, appointed or established by the

Company for or pursuant to the terms of any such plan) is first published or

sent or given within the meaning of Rule 14e-2(a) of the General Rules and

Regulations under the Exchange Act if, upon consummation thereof, such Person

would be the Beneficial Owner of 20% or more of the shares of Common Stock then

outstanding.

 

          (m) "Equivalent common stock" shall have the meaning set forth in

Section 11(b).

 

          (n) "Expiration Date" and "Final Expiration Date" shall have the

meanings set forth in Section 7(a).

 

          (o) "Person" shall mean any individual, firm, corporation, partnership

or other entity.

 

          (p) "Principal Party" shall have the meaning set forth in Section

13(b).

 

          (q) "Purchase Price" shall have the meaning set forth in Section 4, as

the same may be adjusted from time to time pursuant to the provisions of this

Agreement.

 

          (r) "Record Date" shall have the meaning set forth in the "BACKGROUND"

clause of this Agreement.

 

          (s) "Redemption Price" shall have the meaning set forth in Section 23.

 

          (t) "Rights Dividend Declaration Date" shall have the meaning set

forth in the "BACKGROUND" clause of this Agreement.

 

          (u) "Section 11(a)(ii) Event" shall mean any event described in

Section 11(a)(ii) (A), (B) or (C) hereof.

 

          (v) "Section 13 Event" shall mean any event described in clauses (w),

(x), (y) or (z) of Section 13(a) hereof.

 

          (w) "Spread" shall have the meaning set forth in Section 11(a)(iii).

 

 

                                       11                                       3

 

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          (x) "Stock Acquisition Date" shall mean the first date of public

announcement (which, for purposes of this definition, shall include, without

limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by

the Company or an Acquiring Person that a Person has become an Acquiring Person.

 

          (y) "Subsidiary" shall mean, with reference to any Person, any

corporation or other entity of which an amount of voting securities sufficient

to elect a majority of the directors or Persons having similar authority of such

corporation or other entity is beneficially owned, directly or indirectly, by

such Person, or otherwise controlled by such Person.

 

          (z) "Substitution Period" shall have the meaning set forth in Section

11(a)(iii).

 

           (aa) "Trading Day" shall have the meaning set forth in Section 11(d).

 

          (bb) "Triggering Event" shall mean any Section 11(a)(ii) Event or any

Section 13 Event.

 

     Section 2. Appointment of Rights Agent. The Company hereby appoints the

Rights Agent to act as agent for the Company and the holders of the Rights (who,

in accordance with Section 3 hereof, shall prior to the Distribution Date also

be holders of Common Stock) in accordance with the terms and conditions hereof,

and the Rights Agent hereby accepts such appointment. The Company may from time

to time appoint such Co-Rights Agents as it may deem necessary or appropriate.

 

     Section 3. Issuance of Rights Certificates.

 

          (a) Until the Distribution Date, (i) the Rights will be evidenced

(subject to the provisions of paragraph (b), (c) and (d) of this Section 3) by

the certificates for the Common Stock registered in the names of the holders of

the Common Stock (which certificates for Common Stock shall be deemed also to be

certificates for Rights) and not by separate certificates, and (ii) the Rights

will be transferable only in connection with the transfer of the underlying

shares of Common Stock (including a transfer to the Company). As soon as

practicable after the Distribution Date, the Rights Agent will send by

first-class, postage prepaid mail, to each such record holder of the Common

Stock as of the close of business on the Distribution Date, at the address of

such holder shown on the records of the Company, one or more right certificates,

in substantially the form of Exhibit A hereto (the "Rights Certificates"),

evidencing one Right for each share of Common Stock so held, subject to

adjustment as provided herein. In the event that an adjustment in the number of

Rights per share of Common Stock has been made pursuant to Section 11(i) hereof,

at the time of distribution of the Rights Certificates the Company shall make

the necessary and appropriate rounding adjustments (in accordance with Section

14(a) hereof) so that Rights Certificates representing only whole numbers of

Rights are distributed and cash is paid in lieu of any fractional Rights. As of

and after the Distribution Date, the Rights will be evidenced solely by such

Rights Certificates.

 

          (b) As promptly as practicable following the Rights Dividend

Declaration Date, the Company will send a copy of a Summary of Rights, in

substantially the form attached hereto as Exhibit B (the "Summary of Rights"),

by first-class, postage prepaid mail, to each record holder

 

 

                                        12                                       4

 

<PAGE>

 

of Common Stock as of the close of business on that day, at the address of such

holder shown on the records of the Company. With respect to certificates for the

Common Stock outstanding as of the Record Date, until the Distribution Date, the

Rights will be evidenced by such certificates for the Common Stock and the

registered holders of such Common Stock shall also be the registered holders of

the associated Rights. Until the earlier of the Distribution Date or the

Expiration Date (as such term is defined in Section 7 hereof), the transfer of

any certificates representing shares of Common Stock in respect of which Rights

have been issued shall also constitute the transfer of the Rights associated

with such shares of Common Stock.

 

          (c) Rights shall be issued in respect of all shares of Common Stock

which are issued after the Record Date but prior to the earlier of the

Distribution Date or the Expiration Date (including the issuance of Common Stock

pursuant to the exercise of rights under the Company's benefit plans), unless

the Board of Directors provides to the contrary by resolution adopted at or

before the time of the issuance. Certificates representing such shares of

subsequently issued Common Stock shall also be deemed to be certificates for

Rights.

 

          (d) Any certificates issued by the Company after the Record Date that

represent shares of Common Stock in respect of which rights have been issued

shall bear the following legend:

 

          This certificate also evidences and entitles the holder hereof to

certain Rights as set forth in the Rights Agreement between Codorus Valley

Bancorp, Inc. (the "Company") and Wells Fargo Bank, N.A. (the "Rights Agent")

dated as of November 4, 2005 (the "Rights Agreement"), the terms of which are

hereby incorporated herein by reference and a copy of which is on file at the

principal offices of the Company. Under certain circumstances, as set forth in

the Rights Agreement, such Rights will be evidenced by separate certificates and

will no longer be evidenced by this certificate. The Company will mail to the

holder of this certificate a copy of the Rights Agreement, as in effect on the

date of mailing, without charge promptly after receipt of a written request

therefor. Under certain circumstances set forth in the Rights Agreement, Rights

issued to, or held by, any Person who is, was or becomes an Acquiring Person or

any Affiliate or Associate thereof (as such terms are defined in the Rights

Agreement), whether currently held by or on behalf of such Person or by any

subsequent holder, may become null and void, and the transfer of such Rights may

be deemed to be restricted.

 

          With respect to such certificates containing the foregoing legend,

until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the

Rights associated with the Common Stock represented by such certificates shall

be evidenced by such certificates alone and registered holders of Common Stock

shall also be the registered holders of the associated Rights, and the transfer

of any of such certificates shall also constitute the transfer of the Rights

associated with the Common Stock represented by such certificates.

 

     Section 4. Form of Rights Certificates.

 

          (a) The Rights Certificates (and the forms of election to purchase and

of assignment to be printed on the reverse thereof) shall each be substantially

in the form set forth in Exhibit A hereto and may have such marks of

identification or designation and such legends, summaries or endorsements

printed thereon as the Company may deem appropriate and as are not inconsistent

 

 

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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 the National Association of Securities Dealers, Inc. or

any stock exchange on which the Rights may from time to time be listed, or to

conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,

the Rights Certificates, whenever distributed, shall be dated as of the Record

Date (or in the case of Rights issued in respect of Common Stock issued by the

Company after the Record Date, as of the date of issuance of such Common Stock),

shall note the date of issuance, and on their face shall entitle the holders

thereof to purchase such number of shares of Common Stock as shall be set forth

therein at the price set forth therein (such exercise price per share being

referred to herein as the "Purchase Price"), but the amount and type of

securities purchasable upon the exercise of each Right and the Purchase Price

thereof shall be subject to adjustment as provided herein.

 

          (b) Any Rights Certificate issued pursuant to Section 3(a) or Section

22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person

or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an

Acquiring Person (or of any such Associate or Affiliate ) who becomes a

transferee after the Acquiring Person becomes such, or (iii) a transferee of an

Acquiring Person (or of any such Associate of Affiliate) who becomes a

transferee prior to or concurrently with the Acquiring Person becoming such and

receives such Rights pursuant to either (A) a transfer (whether or not for

consideration) from the Acquiring Person to holders of equity interests in such

Acquiring Person or to any Person with whom such Acquiring Person has any

continuing agreement, arrangement or understanding regarding the transferred

Rights or (B) a transfer which the Board of Directors of the Company has

determined is part of a plan, arrangement or understanding which has as a

primary purpose or effect avoidance of Section 7(e) hereof, and any Rights

Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,

exchange, replacement or adjustment of any other Rights Certificate referred to

in this sentence, shall bear (to the extent feasible) the following legend:

 

               The Rights represented by this Rights Certificate are or were

          beneficially owned by a Person who was or became an Acquiring Person

          or an Affiliate or Associate of an Acquiring Person (as such terms are

          defined in the Rights Agreement). Accordingly, this Rights Certificate

          and the Rights represented hereby may become null and void in the

          circumstances specified in Section 7(e) of such Agreement, and the

          transfer of such Rights may be deemed to be restricted.

 

     Section 5. Countersignature and Registration.

 

          (a) The Rights Certificates shall be executed on behalf of the Company

by its Chairman of the Board, its President or any Executive Vice President or

Vice President, either manually or by facsimile signature, and shall have

affixed thereto the Company's seal or a facsimile thereof which shall be

attested by the Secretary or an Assistant Secretary of the Company, either

manually or by a facsimile signature. The Rights Certificates shall be

countersigned by an authorized signatory of the Rights Agent but it shall not be

necessary for the same signatory to countersign all of the Rights Certificates

issued hereunder. The Rights Certificates shall be either manually or by

facsimile signature countersigned by the Rights Agent and shall not be valid for

 

 

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any purpose unless so countersigned. In case any officer of the Company who

shall have signed any of the Rights Certificates shall cease to be such officer

of the Company before countersignature by the Rights Agent and issuance and

delivery by the Company, such Rights Certificates, nevertheless, may be

countersigned by the Rights Agent and issued and delivered by the Company with

the same force and effect as though the person who signed such Rights

Certificates had not ceased to be such officer of the Company; and any Rights

Certificates may be signed on behalf of the Company by any person who, at the

actual date of the execution of such Rights Certificate, shall be a proper

officer of the Company to sign such Rights Certificate, although at the date of

the execution of this Rights Agreement any such person was not such an officer.

 

          (b) Following the Distribution Date, the Rights Agent will keep or

cause to be kept, at its principal office or offices designated as the

appropriate place for surrender of Rights Certificates upon exercise or

transfer, books for registration and transfer of the Rights Certificates issued

hereunder. Such books shall show the names and addresses of the respective

holders of the Rights Certificates and the date of each of the Rights

Certificates.

 

     Section 6. Transfer, Split Up, Combination and Exchange of Rights

Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

 

          (a) Subject to the provisions of Section 4(b), Section 7(e) and

Section 14 hereof, at any time after the close of business on the Distribution

Date, and at or prior to the close of business on the Expiration Date, any

Rights Certificate or Certificates may be transferred, split up, combined or

exchanged for another Rights Certificate or Certificates, entitling the

registered holder to purchase a like number of shares of Common Stock (or,

following a Triggering Event, other securities, cash or other assets, as the

case may be) as the Rights Certificate or Certificates surrendered then entitled

such holder (or former holder in the case of transfer) to purchase. Any

registered holder desiring to transfer, split up, combine or exchange any Rights

Certificate or Certificates shall make such request in writing delivered to the

Rights Agent, and shall surrender the Rights Certificate or Certificates to be

transferred, split up, combined or exchanged at the principal office or offices

of the Rights Agent designated for such purpose. Neither the Rights Agent nor

the Company shall be obligated to take any action whatsoever with respect to the

transfer of any such surrendered Rights Certificate until the registered holder

shall have completed and signed the certificate contained in the form of

assignment on the reverse side of such Rights Certificate and shall have

provided such additional evidence of the identity of the Beneficial Owner (or

former Beneficial Owner) or Affiliates or Associates thereof as the Company

shall reasonably request. Thereupon the Rights Agent shall, subject to Section

4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person

entitled thereto a Rights Certificate or Rights Certificates, as the case may

be, as so requested. The Company may require payment from the holder of the

Rights of a sum sufficient to cover any tax or governmental charge that may be

imposed in connection with any transfer, split up, combination or exchange of

Rights Certificates.

 

          (b) Upon receipt by the Company and the Rights Agent of evidence

reasonably satisfactory to them of the loss, theft, destruction or mutilation of

a Rights Certificate, and, in case of loss, theft or destruction, of indemnity

or security reasonably satisfactory to them, and

 

 

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<PAGE>

 

reimbursement to the Company and the Rights Agent of all reasonable expenses

incidental thereto, and upon surrender to the Rights Agent and cancellation of

the Rights Certificate if mutilated, the Company will execute and deliver a new

Rights Certificate of like tenor to the Rights Agent for countersignature and

delivery to the registered owner in lieu of the Rights Certificate so lost,

stolen, destroyed or mutilated.

 

     Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

 

          (a) Subject to Section 7(e) and the last sentence of Section 23(a)

hereof, the registered holder of any Rights Certificate may exercise the Rights

evidenced thereby (except as otherwise provided herein including, without

limitation, the restrictions on exercisability set forth in Section 9(c),

Section 11(a)(iii) and Section 12(a) hereof) in whole or in part at any time

after the Distribution Date upon surrender of the Rights Certificate, with the

form of election to purchase and the certificate on the reverse side thereof

duly executed, to the Rights Agent at the principal office or offices of the

Rights Agent designated for such purpose, together with payment of the aggregate

Purchase Price with respect to the total number of shares of Common Stock (or

other securities or property, as the case may be) as to which such surrendered

Rights are then exercisable, at or prior to the earlier of (i) the close of

business on November 4, 2015 (the "Final Expiration Date"), or (ii) the time at

which the Rights are redeemed as provided in Section 23 hereof (the earlier of

(i) and (ii) being herein referred to as the "Expiration Date").

 

          (b) The Purchase Price for each share of Common Stock pursuant to the

exercise of a Right shall initially be $150.00, and shall be subject to

adjustment from time to time as provided in Section 11 hereof and shall be

payable in accordance with paragraph (c) below.

 

          (c) Upon receipt of a Rights Certificate representing exercisable

Rights, with the form of election to purchase and the certificate duly executed,

accompanied by payment, with respect to each Right so exercised, of the Purchase

Price per share of Common Stock (or other shares, securities or property, as the

case may be) to be purchased as set forth below and an amount equal to any

applicable transfer tax, the Rights Agent shall, subject to Section 20(k)

hereof, thereupon promptly, (i) (A) requisition from any transfer agent of the

shares of Common Stock (or make available, if the Rights Agent is the transfer

agent for such shares) certificates for the total number of shares of Common

Stock to be purchased and the Company hereby irrevocably authorizes its transfer

agent to comply with all such requests, or (B), if the Company shall have

elected to deposit the total number of shares of Common Stock issuable upon

exercise of the Rights hereunder with a depositary agent, requisition from the

depositary agent depositary receipts representing such number of shares of

Common Stock as are to be purchased (in which case certificates for the shares

of Common Stock represented by such receipts shall be deposited by the transfer

agent with the depositary agent) and the Company will direct the depositary

agent to comply with such request, (ii) requisition from the Company the amount

of cash, if any, to be paid in lieu of fractional shares in accordance with

Section 14 hereof, (iii) after receipt of such certificates or depositary

receipts, cause the same to be delivered to or upon the order of the registered

holder of such Rights Certificate, registered in such name or names as may be

designated by such holder, and (iv) after receipt thereof, deliver such cash, if

any, to or upon the order of the registered holder of such Rights Certificate.

The payment of the Purchase Price (as such amount may be reduced (including to

zero) pursuant to Section 11(a)(iii) hereof) may be

 

 

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made in any combination of (x) cash or certified bank check or bank draft

payable to the order of the Company, or (y) delivery of a certificate or

certificates (with appropriate stock power executed in blank attached thereto)

for whole numbers of shares of Common Stock, which shall be credited at their

current market price (as determined pursuant to Section 11(d) hereof). If the

Company receives payment from any holder of Rights in a number of whole shares

of Common Stock with a current market price (as determined pursuant to Section

11(d) hereof) that exceeds the Purchase Price due from such holder, the Company

may, at its election, (i) accept only such whole number of shares with a current

market price (as determined pursuant to Section 11(d) hereof) that is less than

the Purchase Price and require that the balance of the Purchase Price be paid

under clause (x), above, or (ii) make a cash refund of the difference between

the current market price (as determined pursuant to Section 11(d) hereof) of the

whole number of shares received and the Purchase Price due from such holder. In

the event that the Company is obligated to issue other securities of the

Company, pay cash and/or distribute other property pursuant to Section 11(a)

hereof, the Company will make all arrangements necessary so that such other

securities, cash and/or other property are available for distribution by the

Rights Agent, if and when appropriate.

 

          (d) In case the registered holder of any Rights Certificate shall

exercise less than all the Rights evidenced thereby, a new Rights Certificate

evidencing Rights equivalent to the Rights remaining unexercised shall be issued

by the Rights Agent and delivered to, or upon the order of, the registered

holder of such Rights Certificate, registered in such name or names as may be

designated by such holder, subject to the provisions of Section 14 hereof.

 

          (e) Notwithstanding anything in this Agreement to the contrary, from

and after the first occurrence of a Section 11(a)(ii) Event, (i) any Rights

beneficially owned by an Acquiring Person or an Associate or Affiliate of an

Acquiring Person, (ii) any Rights transferred by an Acquiring Person (or any

such Associate or Affiliate) after the Acquiring Person becomes such, or (iii)

any Rights transferred by an Acquiring Person (or any such Associate or

Affiliate) prior to or concurrently with the Acquiring Person becoming such and

if the transferee receives such Rights pursuant to either (A) a transfer

(whether or not for consideration) from the Acquiring Person to holders of

equity interests in such Acquiring Person or to any Person with whom the

Acquiring Person has any continuing agreement, arrangement or understanding

regarding the transferred Rights or (B) a transfer which the Board of Directors

of the Company has determined is part of a plan, arrangement or understanding

which has a primary purpose or effect the avoidance of this Section 7(e), shall

become null and void without any further action and no holder of such Rights

shall have any rights whatsoever with respect to such Rights, whether under any

provision of this Agreement or otherwise. The Company shall use all reasonable

efforts to ensure that the provisions of this Section 7(e) and Section 4(b)

hereof are complied with, but shall have no liability to any holder of Rights

Certificates or other Person as a result of its failure to make any

determinations with respect to an Acquiring Person or its Affiliates, Associates

or transferees hereunder.

 

          (f) Notwithstanding anything in this Agreement to the contrary,

neither the Rights Agent nor the Company shall be obligated to undertake any

action with respect to a registered holder upon the occurrence of any purported

exercise as set forth in this Section 7 unless such registered holder shall have

(i) completed and signed the certificate contained in the form of election to

 

 

                                       17                                       9

 

<PAGE>

 

purchase set forth on the reverse side of the Rights Certificate surrendered for

such exercise and (ii) provided such additional evidence of the identity of the

Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates

thereof as the Company shall reasonably request.

 

     Section 8. Cancellation and Destruction of Rights Certificates. All Rights

Certificates surrendered for the purpose of exercise, transfer, split up,

combination or exchange shall, if surrendered to the Company or any of its

agents, be delivered to the Rights Agent for cancellation or in cancelled form,

or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights

Certificates shall be issued in lieu thereof except as expressly permitted by

any of the provisions of this Agreement. The Company shall deliver to the Rights

Agent for cancellation and retirement, and the Rights Agent shall so cancel and

retire, any other Rights Certificate purchased or acquired by the Company

otherwise than upon the exercise thereof. Subject to applicable law and

regulation, the Rights Agent shall maintain in a retrievable database electronic

records of all cancelled or destroyed stock certificates which have been

cancelled or destroyed by the Rights Agent. The Rights Agent shall maintain such

electronic records or physical records for the time period required by

applicable law and regulation. Upon written request of the Corporation (and at

the expense of the Corporation), the Rights Agent shall provide to the

Corporation or its designee copies of such electronic records or physical

records relating to stock certificates cancelled or destroyed by the Rights

Agent.

 

     Section 9. Reservation and Availability of Capital Stock.

 

          (a) The Company covenants and agrees that prior to the occurrence of a

Triggering Event it will cause to be reserved and kept available out of its

authorized and unissued shares of Common Stock, the number of shares of Common

Stock that, except as provided in Section 11 (a)(iii) hereof and without

consideration of the adjustments under Section 11(a)(ii), will be sufficient to

permit the exercise in full of all outstanding Rights. The Company covenants and

agrees that following the occurrence of a Triggering Event it will cause to be

reserved and kept available out of its authorized and unissued shares of Common

Stock and/or other securities, the number of shares of Common Stock and/or other

securities that, except as provided in Section 11(a)(iii) hereof, will be

sufficient to permit the exercise in full of all outstanding Rights.

 

          (b) The Company shall use its best efforts to cause, from and after

such time as the Rights become exercisable, all shares reserved for such

issuance to be listed with the National Association of Securities Dealers, Inc.

or on any national securities exchange on which the Company's Common Stock then

trades upon official notice of issuance upon such exercise.

 

          (c) The Company shall use its best efforts to (i) file, as soon as

practicable following the earliest date after the first occurrence of a Section

11(a)(ii) Event on which the consideration to be delivered by the Company upon

exercise of the Rights has been determined in accordance with Section 11(a)(iii)

hereof, or as soon as is required by law following the Distribution Date, as the

case may be, a registration statement under the Securities Act of 1933 (the

"Act"), with respect to the securities purchasable upon exercise of the Rights

on an appropriate form, (ii) cause such registration statement to become

effective as soon as practicable after such filing, and (iii) cause such

registration statement to remain effective (with a prospectus at all times

meeting the requirements of the Act) until the earlier of (A) the date as of

which the Rights are no longer

 

 

                                       18                                      10

 

<PAGE>

 

exercisable for such securities, and (A) the date of the expiration of the

Rights. The Company will also take such action as may be appropriate under, or

to ensure compliance with, the securities or "blue sky" laws of the various

states in connection with the exercisability of the Rights. The Company may

temporarily suspend, for a period of time not to exceed ninety (90) days after

the date set forth in clause (i) of the first sentence of this Section 9(c), the

exercisability of the Rights in order to prepare, file and achieve effectiveness

of such registration statements. Upon any such suspension, the Company shall

notify the Rights Agent and issue a public announcement stating that the

exercisability of the Rights has been temporarily suspended, as well as a public

announcement at such time as the suspension is no longer in effect.

Notwithstanding any provision of this Agreement to the contrary, the Rights

shall not be exercisable in any jurisdiction unless the requisite qualification

in such jurisdiction shall have been obtained.

 

          (d) The Company covenants and agrees that it will take all such action

as may be necessary to ensure that all Common Stock and/or other securities

delivered upon exercise of Rights shall, at the time of delivery of the

certificates for such shares (subject to payment of the Purchase Price), be duly

and validly authorized and issued and fully paid and nonassessable.

 

          (e) The Company further covenants and agrees that it will pay when due

and payable any and all federal and state transfer taxes and charges which may

be payable in respect of the issuance or delivery of the Rights Certificates and

of any certificates for shares of Common Stock and/or other securities, as the

case may be, upon the exercise of Rights. The Company shall not, however, be

required (i) to pay any transfer tax which may be payable in respect of any

transfer or delivery of Rights Certificates to a Person other than, or the

issuance or delivery of Common Stock and/or other securities, as the case may

be, in respect of a name other than that of, the registered holder of the Rights

Certificates evidencing Rights surrendered for exercise or, (ii) to issue or

deliver any certificates for Common Stock and/or other securities, as the case

may be, in a name other than that of the registered holder upon the exercise of

any Rights until such tax shall have been paid (any such tax being payable by

the holder of such Rights Certificate at the time of surrender) or until it has

been established to the Company's satisfaction that no such tax is due.

 

      Section 10. Common Stock Record Date. Each person in whose name any

certificate for shares of Common Stock and/or other securities, as the case may

be, is issued upon the exercise of Rights shall for all purposes be deemed to

have become the holder of record of such shares represented thereby on, and such

certificate shall be dated, the date upon which the Rights Certificate

evidencing such Rights was duly surrendered and payment of the Purchase Price

(and all applicable transfer taxes) was made; provided, however, that if the

date of such surrender and payment is a date upon which the applicable stock

transfer books of the Company are closed, such Person shall be deemed to have

become the record holder of such shares (fractional or otherwise) on, and such

certificate shall be dated, the next succeeding Business Day on which the

applicable stock transfer books of the Company are open. Prior to the exercise

of the Rights evidenced thereby, the holder of a Rights Certificate shall not be

entitled to any rights of a stockholder of the Company with respect to shares

for which the Rights shall be exercisable, including, without limitation, the

right to vote, to receive dividends or other distributions or to

 

 

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<PAGE>

 

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 and Kind of Shares and

Number of Rights. The Purchase Price, the number and kind of shares covered by

each Right and the number of Rights outstanding are subject to adjustment from

time to time as provided in this Section 11.

 

          (a) (i) In the event the Company shall at any time after the date of

this Agreement (A) declare a dividend on the Common Stock payable in shares of

Common Stock, (B) subdivide or split the outstanding Common Stock, (C) combine

the outstanding Common Stock into a smaller number of shares, or (D) issue any

shares of its capital stock in a reclassification of the Common 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) and Section 7(e) hereof, the Purchase Price in

effect at the time of the record date for such dividend or at the time of the

effective date of such subdivision, combination or reclassification, and/or the

number and kind of shares of Common Stock or capital stock, as the case may be,

issuable on such date, shall be proportionately adjusted so that the holder of

any Right exercised after such time shall be entitled to receive, upon payment

of the Purchase Price then in effect, the aggregate number and kind of shares of

Common Stock or capital stock, as the case may be, which, if such Right had been

exercised immediately prior to such date and at a time when the Common Stock

transfer books of the Company were open, he would have owned upon such exercise

and been entitled to receive by virtue of such dividend, subdivision,

combination or reclassification; provided, however, that in the case of a

dividend on the Common Stock payable in shares of Common Stock as referenced in

clause (A) of this Section 11(a)(i), where the record date of such dividend is

prior to the Distribution Date and where each share of Common Stock issued

pursuant to such dividend is issued Rights under Section 3(c) hereof, then in

such case the Purchase Price shall be reduced (and no other adjustment shall be

made pursuant to this Section 11(a)(i)) on the record date of such dividend to a

number which is equal to the result obtained by multiplying the Purchase Price

then in effect by a fraction, the numerator of which is the number of Rights

outstanding prior to such dividend and the denominator of which is the number of

Rights outstanding immediately following such dividend. If an event occurs which

would require an adjustment under both this Section 11(a)(i) and Section

11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be

in addition to, and shall be made prior to, any adjustment required pursuant to

Section 11(a)(ii) hereof.

 

               (ii) In the event:

 

                    (A) any Acquiring Person or any Associate or Affiliate of

any Acquiring Person, at any time after the date of this Agreement, directly or

indirectly, (1) shall merge into the Company or otherwise combine with the

Company and the Company shall be the continuing or surviving corporation of such

merger or combination and the Common Stock of the Company shall remain

outstanding and unchanged, (2) shall effect a statutory share exchange with the

Company, after which the Company is not a Subsidiary of any Acquiring Person or

any Associate or Affiliate of any Acquiring Person, (3) shall, in one or more

transactions, other than in connection with the exercise of Rights or the

exercise or conversion of securities exercisable

 

 

                                       20                                       12

 

<PAGE>

 

or convertible into capital stock of the Company or any of its Subsidiaries,

transfer any assets to the Company or any of its Subsidiaries in exchange (in

whole or in part) for shares of any class of capital stock of the Company or any

of its Subsidiaries or for securities exercisable for or convertible into shares

of any class of capital stock of the Company or any of its Subsidiaries or

otherwise obtain from the Company or any of its Subsidiaries, with or without

consideration, any additional shares of any class of capital stock of the

Company or any of its Subsidiaries or securities exercisable for or convertible

into shares of any class of capital stock of the Company or any of its

Subsidiaries (other than as part of a pro rata distribution to all holders of

Common Shares), (4) shall sell, purchase, lease, exchange, mortgage, pledge,

transfer or otherwise dispose (in one or more transactions), to, from, with or

of, as the case may be, the Company or any of its Subsidiaries, assets,

including securities, on terms and conditions less favorable to the Company than

the Company would be able to obtain in arm's-length negotiation with an

affiliated third party, (5) shall receive any compensation from the Company or

any of the Company's Subsidiaries other than compensation for services as a

director or for full-time employment as a regular employee, in either case at

rates in accordance with the Company's (or its Subsidiaries') past practices, or

(6) shall receive the benefit, directly or indirectly (except proportionately as

a shareholder), of any loans, advances, guarantees, pledges, or other financial

assistance or any tax credits or other tax advantage provided by the Company or

any of its Subsidiaries, or

 

                     (B) any Person (other than the Company, any Subsidiary of

the Company, any employee benefit plan of the Company or of any Subsidiary of

the Company, or any Person or entity organized, appointed or established by the

Company for or pursuant to the terms of any such plan), alone or together with

its Affiliates and Associates, shall, at any time after the Rights Dividend

Declaration Date, become the Beneficial Owner of 20% or more of the shares of

Common Stock then outstanding, other than pursuant to any transaction set forth

in Section 13(a) hereof,

 

                    (C) during such time as there is an Acquiring Person, there

shall be any reclassification of securities (including any reverse stock split),

or recapitalization of the Company, or any merger or consolidation of the

Company with any of its Subsidiaries or any other transaction or series of

transactions involving the Company or any subsidiary of the Company (whether or

not with or into or otherwise involving an Acquiring Person) which has the

effect, directly or indirectly, of increasing by more than 1% the proportionate

share of the outstanding shares of any class of equity securities or of

securities exercisable for or convertible into securities of the Company or any

of its Subsidiaries that is directly or indirectly owned by any Acquiring Person

or any Associate or Affiliate of any Acquiring Person, then within five (5)

Business Days after the date of the occurrence of a Section 11(a)(ii)(B) Event

and promptly following the occurrence of any Section 11 (a)(ii)(A) or (C) Event,

proper provision shall he made by the Company so that each holder of a Right

(except as provided below and in Section 7(e) hereof) shall thereafter have the

right to receive, upon exercise thereof at the then current Purchase Price in

accordance with the terms of this Agreement, in lieu of the number of shares of

Common Stock for which the Rights were theretofore exercisable, such number of

shares of Common Stock of the Company as shall equal the result obtained by (x)

multiplying the then current Purchase Price by the then number of shares of

Common Stock for which a Right was exercisable immediately prior to the first

occurrence of Section 11 (a)(ii) Event and dividing that product (which,

following such first occurrence, shall thereafter be referred to as the

"Purchase

 

 

                                       21                                      13

 

<PAGE>

 

Price" for each Right and for all purposes of this Agreement) by (y) 50% of the

current market price (determined pursuant to Section 11(d) hereof) per share of

Common Stock on the date of such first occurrence (such number of shares, the

"Adjustment Shares").

 

               (iii) In the event that the number of shares of Common Stock

which are authorized by the Company's articles of incorporation but not

outstanding or reserved for issuance for purposes other than upon exercise of

the Rights are not sufficient to permit the exercise in full of the Rights in

accordance with the foregoing subparagraph (ii) of this Section 11(a), and

subject to such limitations as are necessary to prevent a default under any

agreement for money borrowed as presently constituted to which the Company is a

party and subject to any limitations contained in Section 1551 of the

Pennsylvania Business Corporation Law of 1988, as amended, or any similar

successor provision thereof, the Company shall: (A) determine the excess of (1)

the value of the Adjustment Shares issuable upon the exercise of a Right (the

"Current Value") over (2) the Purchase Price (such excess, the "Spread"), and

(B) with respect to each Right, make adequate provision to substitute for the

Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2)

a reduction in the Purchase Price, (3) Common Stock or other equity securities

of the Company (including, without limitation, shares, or units of shares, of

preferred stock which the Board of Directors of the Company has deemed to have

the same value as shares of Common Stock (such shares of preferred stock,

"common stock equivalents")), (4) debt securities of the Company, (5) other

assets, or (6) any combination of the foregoing, having an aggregate value equal

to the Current Value, where such aggregate value has been determined by the

Board of Directors of the Company based upon the advice of an investment banking

firm selected by the Board of Directors of the Company; provided, however if the

Company shall not have made adequate provision to deliver value pursuant to

clause (B) above within thirty (30) days following the first occurrence of a

Section 11(a)(ii) Event, then the Company shall be obligated to deliver, upon

the surrender for exercise of a Right and without requiring payment of the

Purchase Price, shares of Common Stock (to the extent available) and then, if

necessary, cash, which in the aggregate is equal in value to the Spread. If the

Board of Directors of the Company shall determine in good faith that it is

likely that sufficient additional shares of Common Stock could be authorized for

issuance upon exercise in full of the Rights, the thirty (30) day period set

forth above may be extended to the extent necessary, but not more than ninety

(90) days following the first occurrence of a Section 11(a)(ii) Event, in order

that the Company may seek shareholder approval for the authorization of such

additional shares (such period, as it may be extended, the "Substitution

Period"). To the extent that the Company determines that some action need be

taken pursuant to the first and/or second sentences of this Section 11(a)(iii),

the Company (x) shall provide, subject to Section 7(e) hereof, that such action

shall apply uniformly to all outstanding Rights, and (y) may suspend the

exercisability of the Rights until the expiration of the Substitution Period in

order to seek any authorization of additional shares and/or to decide the

appropriate form of distribution to be made pursuant to such first sentence and

to determine the value thereof. In the event of any such suspension, the Company

shall issue a public announcement stating that the exercisability of the Rights

has been temporarily suspended, as well as a public announcement at such time as

the suspension is no longer in effect. For purposes of this Section 11(a)(iii),

the value of the Common Stock shall be the current market price (as determined

pursuant to Section 11(d) hereof) per share of the Common Stock on the date of

the first occurrence of a Section 11(a)(ii) Event and the value of

 

 

                                       22                                       14

 

<PAGE>

 

any "common stock equivalent" shall be deemed to have the same value as the

Common Stock on such date.

 

          (b) In case the Company shall fix a record date for the issuance of

rights, options or warrants to all holders of Common Stock entitling them to

subscribe for or purchase (for a period expiring within forty-five (45) calendar

days after such record date) Common Stock (or shares having the same rights,

privileges and preferences as the shares of Common Stock ("equivalent common

stock")) or securities convertible into Common Stock or equivalent common stock

at a price per share of Common Stock or p