SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
Dividend of Right to Purchase Preferred Stock
As of December 30,1997, the Board of Directors of PSC Inc. (the "Company")
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock, par value $.01 per share (the "Common
Shares"), of the Company to shareholders of record at the close of business on
December 30, 1997 (the "Record Date") and for each Common Share issued
(including shares distributed from Treasury by the Company thereafter and prior
to the Distribution Date (as defined below)). Each Right entitles the registered
holder, subject to the terms of the Rights Agreement (as defined below), to
purchase from the Company one one-thousandth of a share (a "Unit") of Series B
Preferred Stock, par value $.01 per share (the "Preferred Stock") at a purchase
price of $45.00 per Unit (the "Purchase Price"), subject to adjustment. The
Purchase Price is payable in cash or by certified or bank check payable to the
order of the Company or by wire transfer to the account of the Company (provided
a notice of such wire transfer is given by the holder of the related Right to
the Rights Agent). The description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") between the Company and Chase Mellon
Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent").
Distribution of the Rights; Right Certificates
Until the Distribution Date (or earlier redemption or expiration of the Rights),
which is defined below, the Rights will be evidenced with respect to any of the
Common Share certificates outstanding prior to the Distribution Date by such
Common Share certificates and no separate Right Certificates will be
distributed. The Rights Agreement provides that until the Distribution Date (or
earlier redemption or expiration of the Rights), (i) the Rights will be
transferred with and only with the Common Shares, (ii) new Common Share
certificates issued after the Record Date, upon transfer, replacement or new
issuance of Common Shares will be deemed to be issued with Rights and will
contain a notation incorporating the Rights Agreement by reference, and (iii)
the surrender for transfer of any certificates for Common Shares, outstanding as
of the Record Date, even without such notation or a copy of this Summary of
Rights being attached thereto, will also constitute the transfer of the Rights
associated with the Common Shares 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 Shares as of the close of business on the Distribution Date. From
and after the Distribution Date, such separate Right Certificates alone will
evidence the Rights.
Definition of Distribution Date
"Distribution Date" means the earlier to occur of (i) 10 business days following
the date of a public announcement (the date of such announcement being the
"Shares Acquisition Date") that a person, together with persons affiliated or
associated with it (other than the Company, any subsidiary of the Company, any
employee benefit plan of the Company or such subsidiary) (an "Acquiring
Person"), has acquired beneficial ownership of 20% or more of the then
outstanding Common Shares of the Company or (ii) 10 business days (or such later
date as may be determined by action of the Board of Directors prior to such time
as any person or group of affiliated persons becomes an Acquiring Person)
following the earlier of the commencement of, or the first public announcement
of the intent to commence, a tender offer or exchange offer by a person other
than the Company if, upon consummation of the offer, such person, together with
persons affiliated or associated with it, would be the beneficial owner of 20%
or more of the outstanding Common Shares.
Exercise and Expiration of the Rights
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on December 30, 2007 (the "Final Expiration
Date"), unless earlier redeemed or exchanged by the Company as described below.
Adjustment of the Purchase Price
The Purchase Price payable, and the number of Units of Preferred Stock 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 or
purchase Preferred Stock at a price, or securities convertible into Preferred
Stock with a conversion price, less than the then current market price of the
Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock
of evidences of indebtedness, cash or assets (excluding regular quarterly cash
dividends or dividends payable in Preferred Stock) or of subscription rights or
warrants (other than those referred to above). With certain exceptions, no
adjustment in the Purchase Price will be required until cumulative adjustments
require an adjustment of at least 1% in the Purchase Price. The Company is not
required to issue fractional Units. In lieu thereof an adjustment in cash may be
made based on the market value of a Unit of Preferred Stock on the last trading
day prior to the date of exercise.
The number of outstanding Rights are also subject to adjustment in the event of
a stock split of the Common Shares or a stock dividend on the Common Shares,
payable in Common Shares or subdivisions, consolidations or combinations of the
Common Shares occurring, in any such case, prior to the Distribution Date.
Effects of Certain Events
In the event that a person, together with persons affiliated or associated with
it, becomes an Acquiring Person, each holder of a Right, except as provided
below, will thereafter have the right to receive, upon exercise thereof, Units
of Preferred Stock having a value equal to two times the exercise price of the
Right. The exercise price is the Purchase Price multiplied by the number of
Units of Preferred Stock issuable upon exercise of a Right prior to the event
set forth in the preceding sentence. Notwithstanding the foregoing, following
the occurrence of the event set forth in the first sentence in this paragraph,
all Rights that are, or (under certain circumstances set forth in the Rights
Agreement) were, beneficially owned by any Acquiring Person (or by certain
related parties and transferees) will be null and void.
For example, at an exercise price of $45 per Right, each Right not owned by an
Acquiring Person (or by certain related parties and transferees) following the
event set forth in the preceding paragraph would entitle its holder to purchase
$90 worth of Units of Preferred Stock for $45. Assuming that the Units of
Preferred Stock had a per Unit value of $10 at such time, the holder of each
valid Right would be entitled to purchase 9 Units of Preferred Stock for $45.
In the event that (i) the Company is acquired in a merger or other business
combination transaction in which the Company is not the surviving corporation,
or (ii) fifty percent (50%) or more of the Company's assets or earning power is
sold or transferred, each holder of a Right (other than Rights that theretofore
become null and void as described in the second preceding paragraph) shall
thereafter have the right to receive, upon exercise thereof, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right.
Redemption of the Rights
At any time until the close of business on the tenth business day following the
Shares Acquisition Date, the Board of Directors of the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"), payable at the election of the Board of Directors, in cash or Company
Common Shares. The redemption of the Rights may be made effective at such time
on such basis, with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon the action of the Board of Directors
of the Company ordering redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Exchange of the Rights
At any time after a person or group of affiliated or associated persons becomes
an Acquiring Person, the Board of Directors of the Company, at its option, may
exchange each Right (other than Rights owned by such person or group which have
become void), in whole or in part, for Common Shares or Units of Preferred Stock
at an exchange ratio of on Common Share or one Unit of Preferred Stock per Right
(subject to adjustment).
Amendment of the Rights Agreement
Any of the provisions of the Rights Agreement may be amended without the
approval of the holders of Company Common Shares at any time prior to the
Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
Exercise of the Right Entitles the Rightholder to the Rights of a Shareholder;
Tax Consequences
Until a Right is exercised, the holder thereof, as such, will have no rights as
a shareholder of the Company, including, without limitation, the right to vote
or to receive dividends. While the distribution of the Rights will not be
taxable to shareholders or to the Company, shareholders may, depending on the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Units of Preferred Stock.
Description of Preferred Stock
The Units of Preferred Stock that may be acquired upon exercise of the Rights
will be nonredeemable and will be subordinate to any other shares of preferred
stock that have been or may be issued by the Company.
Each Unit of Preferred Stock will receive ratably any dividend declared on the
Company Common Shares.
In the event of liquidation, the holder of each Unit of Preferred Stock will
receive a preferred liquidation payment equal to the greater of $1.00 per Unit
or the per share amount paid in respect of a share of the Company Common Shares.
Each Unit of Preferred Stock will have one vote, voting together with the
Company Common Shares.
In the event of any merger, consolidation or other transaction in which Company
Common Shares are exchanged, each Unit of Preferred Stock will be entitled to
receive the per share amount paid in respect of each share of Company Common
Shares.
The rights of holders of the Preferred Stock to dividends, liquidation and
voting, and in the event of mergers and consolidations, are protected by
customary antidilution provisions.
Because of the nature of the Preferred Stock dividend, liquidation and voting
rights, the economic value of one Unit of Preferred Stock that may be acquired
upon the exercise of each Right is expected to approximate the economic value of
one share of Company Common Shares.
Copy of the Rights Agreement and Certificate of Amendment Available
A copy of the Rights Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to a Current Report on Form 8-K. Copies of the Rights
Agreement and the Certificate of Amendment are available free of charge from the
Company. This summary description of the Rights and the Preferred Stock does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement and the Certificate of Amendment, including the definitions
therein of certain terms, which Rights Agreement and Certificate of Amendment
are incorporated herein by reference.