EXHIBIT 1
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ALLMERICA FINANCIAL CORPORATION
SUMMARY OF PURCHASE RIGHTS
On December 16, 1997, the Board of Directors (the "Board") of Allmerica
Financial Corporation (the "Company") declared a dividend of one purchase right
(a "Right") for every outstanding share of the Company's common stock, $.01 par
value (the "Common Stock"). The Rights will be distributed on December 29, 1997
to stockholders of record as of the close of business on December 29, 1997 (the
"Dividend Record Date"). The terms of the Rights are set forth in a Rights
Agreement dated as of December 16, 1997 (the "Rights Agreement") between the
Company and First Chicago Trust Company of New York (the "Rights Agent"). The
Rights Agreement provides for the issuance of one Right for every share of
Common Stock issued and outstanding on the Dividend Record Date and for each
share of Common Stock which is issued or sold after that date and prior to the
"Distribution Date" (as defined below).
Each Right entitles the holder to purchase from the Company one share of
Common Stock at a price of $200 per share, subject to adjustment. The Rights
will expire on December 15, 2007 (the "Expiration Date"), or the earlier
redemption of the Rights, and are not exercisable until the Distribution Date.
No separate Rights certificates will be issued at the present time. Until
the Distribution Date (or earlier redemption or expiration of the Rights), (i)
the Rights will be evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates, (ii) new Common
Stock certificates issued after the Dividend Record Date upon transfer or new
issuance of the Company's Common Stock will contain a notation incorporating the
Rights Agreement by reference and (iii) the surrender for transfer of any of the
Company's Common Stock certificates will also constitute the transfer of the
Rights associated with the Common Stock represented by such certificate.
The Rights will separate from the Common Stock and Rights certificates will
be issued on the Distribution Date. Unless otherwise determined by a majority
of the Board then in office, the Distribution Date will occur on the earlier of
(i) the fifteenth business day following the later of the date of a public
announcement that a person, including affiliates or associates of such person
(an "Acquiring Person"), except as described below, has acquired or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding shares
of Common Stock or the date on which an executive officer of the Company has
actual knowledge that an Acquiring Person became such (the "Stock Acquisition
Date") or (ii) the fifteenth business day following commencement of a tender
offer or exchange offer that would result in any person or
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its affiliates and associates owning 15% or more of the Company's outstanding
Common Stock. In any event, the Board of Directors may delay the distribution of
the certificates. After the Distribution Date, separate certificates evidencing
the Rights ("Rights Certificates") will be mailed to holders of record of the
Company's Common Stock as of the close of business on the Distribution Date and
such separate Rights Certificates alone will evidence the Rights.
If, at any time after the Declaration Date, any person or group of
affiliated or associated persons (other than the Company and its affiliates)
shall become an Acquiring Person, each holder of a Right will have the right to
receive shares of the Company's Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a market value of two
times the exercise price of the Right. If the exercise price is $200, the
holder of each Right would be entitled to receive $400 in market value of the
Company's Common Stock for $200. Also, in the event that the Company were
acquired in a merger or other business combination, or more than 25% of its
assets or earning power were sold, each holder of a Right would have the right
to exercise such Right and thereby receive common stock of the acquiring company
with a market value of two times the exercise price of the Right. For example,
if the exercise price is $200, the holder of each Right would be entitled to
receive $400 in market value of the acquiring company's common shares (e.g., two
shares if the per share market value is $200, for $200). Following the
occurrence of any of the events described in this paragraph, any Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person shall immediately become null and
void.
The Board may, at its option, at any time after any Person becomes an
Acquiring Person, exchange all or part of the then outstanding and exercisable
Rights 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 of declaration of the
Rights (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). The Board, however, may not effect an exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary or any entity holding Common
Stock for or pursuant to the terms of any such plan), together with all
Affiliates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Stock then outstanding. Immediately upon the action of the Board
ordering the exchange of any Rights and without any further action and without
any notice, the right to exercise such Rights will terminate and the only right
thereafter of a holder of such Rights will be to receive that number of shares
of Common Stock equal to the number of such Rights held by the holder multiplied
by the Exchange Ratio.
The exercise price of the Rights, and the number of shares of Common 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 Common
Stock, (ii) upon the grant to holders of the Common Stock
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of certain rights or warrants to subscribe for shares of the Common Stock or
convertible securities at less than the current market price of the Common Stock
or (iii) upon the distribution to holders of the Common Stock of evidences of
indebtedness or assets (excluding cash dividends paid out of the earnings or
retained earnings of the Company and certain other distributions) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the exercise price of the Rights
will be required until cumulative adjustments equal at least 1% in such price.
At any time prior to the Expiration Date, the Company, by a majority vote
of the Board, may redeem the Rights at a redemption price of $.01 per Right (the
"Redemption Price"), as described in the Rights Agreement. Immediately upon the
action of the Board electing to redeem the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Neither the distribution of the Rights nor the subsequent separation of the
Rights on the Distribution Date will be a taxable event for the Company or its
stockholders. Holders of Rights may, depending upon the circumstances,
recognize taxable income upon the occurrence of a Common Stock Event. In
addition, holders of Rights may have taxable income as a result of (i) an
exchange by the Company of shares of Common Stock for Rights as described above
or (ii) certain anti-dilution adjustments made to the terms of the Rights after
the Distribution Date. A redemption of the Rights would be a taxable event to
holders.
The Rights Agreement may be amended by the Board at any time prior to the
Distribution Date without the approval of the holders of the Rights. From and
after the Distribution Date, the Rights Agreement may be amended by the Board
without the approval of the holders of the Rights in order to cure any
ambiguity, to correct any defective or inconsistent provisions, to change any
time period for redemption or any other time period under the Rights Agreement
or to make any other changes that do not adversely affect the interests of the
holders of the Rights (other than any Acquiring Person or its affiliates,
associates or transferees).
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A copy of the Rights Agreement will be filed with the Securities and
Exchange Commission as an Exhibit to the Company's Form 8-A. A copy of the
Rights Agreement is available free of charge from the Rights Agent, at the
following address:
First Chicago Trust Company of New York
525 Washington Blvd., Suite 4660, Jersey City, NJ 07810
Attention: Tenders & Exchanges Administration
(Allmerica Financial Corporation Rights Agreement)
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
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