GENERAL SURGICAL INNOVATIONS, INC.
and
THE US STOCK TRANSFER CORPORATION
Rights Agent
PREFERRED SHARES RIGHTS AGREEMENT
Dated as of May 9, 1997
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . .1
Section 2. Appointment of Rights Agent. . . . . . . . . . . . . . . . . .5
Section 3. Issuance of Rights Certificates. . . . . . . . . . . . . . . .5
Section 4. Form of Rights Certificates. . . . . . . . . . . . . . . . . .7
Section 5. Countersignature and Registration. . . . . . . . . . . . . . .8
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or
Stolen Rights Certificates . . . . . . . . . . . . . . . . . .8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.9
Section 8. Cancellation and Destruction of Rights Certificates. . . . . 11
Section 9. Reservation and Availability of Preferred Shares . . . . . . 11
Section 10. Preferred Shares Record Date . . . . . . . . . . . . . . . . 12
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights . . . . . . . . . . . . . . . . . . . . . . 13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares . 20
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power. . . . . . . . . . . . . . . . . . . 21
Section 14. Fractional Rights and Fractional Shares. . . . . . . . . . . 24
Section 15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . 24
Section 16. Agreement of Rights Holders. . . . . . . . . . . . . . . . . 25
Section 17. Rights Certificate Holder Not Deemed a Shareholder . . . . . 25
Section 18. Concerning the Rights Agent. . . . . . . . . . . . . . . . . 25
Section 19. Merger or Consolidation or Change of Name of Rights Agent. . 26
Section 20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . 26
Section 21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . 28
Section 22. Issuance of New Rights Certificates. . . . . . . . . . . . . 29
Section 23. Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 25. Notice of Certain Events . . . . . . . . . . . . . . . . . . 32
Section 26. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 27. Supplements and Amendments . . . . . . . . . . . . . . . . . 33
Section 28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 29. Determinations and Actions by the Board of Directors, etc. . 34
Section 30. Benefits of this Agreement . . . . . . . . . . . . . . . . . 34
Section 31. Severability . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 32. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 35
Section 33. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 34. Descriptive Headings . . . . . . . . . . . . . . . . . . . . 35
EXHIBITS
Exhibit A Form of Certificate of Determination
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
RIGHTS AGREEMENT
Agreement, dated as of May 9, 1997 between General Surgical Innovations,
Inc., a California corporation (the "Company"), and The U.S. Stock Transfer
Corporation (the "Rights Agent").
On May 9, 1997 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend of one Preferred
Share purchase right (a "Right") for each Common Share (as hereinafter
defined) of the Company outstanding as of the Close of Business (as
hereinafter defined) on May 30, 1997 (the "Record Date"), each Right
representing the right to purchase one one-thousandth of a share of Series A
Participating Preferred Stock (as such number may be adjusted pursuant to the
provisions of this Agreement), having the rights, preferences and privileges
set forth in the form of Certificate of Determination of Rights, Preferences
and Privileges of Series A Participating Preferred Stock attached hereto as
Exhibit A, upon the terms and subject to the conditions herein set forth, and
further authorized and directed the issuance of one Right (as such number may
be adjusted pursuant to the provisions of this Agreement) with respect to
each Common Share that shall become outstanding between the Record Date and
the earlier of the Distribution Date and the Expiration Date (as such terms
are hereinafter defined), and in certain circumstances after the Distribution
Date.
NOW, THEREFORE, in consideration of the promises 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 15% or more of the Common Shares then outstanding, but
shall not include the Company, any Subsidiary of the Company or any employee
benefit plan of the Company or of any Subsidiary of the Company, or any
entity holding Common Shares for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no Person shall be deemed to be an Acquiring
Person either (i) as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or
more of the Common Shares of the Company then outstanding; PROVIDED, HOWEVER,
that if a Person shall become the Beneficial Owner of 15% or more of the
Common Shares of the Company then outstanding by reason of share purchases by
the Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an Acquiring Person; or (ii) if the Board of
Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person" as defined pursuant to the foregoing
provisions of this paragraph (a) has become such inadvertently, and such
Person divests as promptly as practicable
-1-
of a sufficient number of Common Shares so that such Person would no longer be
an "Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a). Notwithstanding the foregoing, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (a founder of
the Company) shall not be considered an "Acquiring Person" as a result of
being, at any date, the Beneficial Owner of up to an aggregate of 20% of the
total outstanding Common Stock of the Company, plus that number of shares
that he is permitted to purchase in accordance with the provisions of any
plan, arrangement, agreement or transaction approved by the Board of
Directors of the Company or any committee of the Board of Directors.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of
Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable
or successor law or regulation);
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
PROVIDED, HOWEVER, that a Person shall not be deemed pursuant to this Section
l(c)(ii)(A) to be the Beneficial Owner of, or to beneficially own,
(1) securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange or (2) securities
which a Person or any of such Person's Affiliates or Associates may be deemed to
have the right to acquire pursuant to any merger or other acquisition agreement
between the Company and such Person (or one or more of its Affiliates or
Associates) if such agreement has been approved by the Board of Directors of the
Company prior to there being an Acquiring Person; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; PROVIDED, HOWEVER, that
a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
any security under this Section l(c)(ii)(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 also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person (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) (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to Section
l(c)(ii)(B)) or disposing of any securities of the Company; PROVIDED, HOWEVER,
that in no case shall an officer or director of the Company be deemed (x) the
Beneficial Owner of any securities beneficially owned by another officer or
director of the Company solely by reason of actions undertaken by
-2-
such persons in their capacity as officers or directors of the Company or
(y) the Beneficial Owner of securities held of record by the trustee of any
employee benefit plan of the Company or any Subsidiary of the Company for the
benefit of any employee of the Company or any Subsidiary of the Company, other
than the officer or director, by reason of any influence that such officer or
director may have over the voting of the securities held in the plan.
(d) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in San Francisco, California are
authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., San
Francisco, California time, on such date; PROVIDED, HOWEVER, that if such date
is not a Business Day it shall mean 5:00 P.M., San Francisco, California time,
on the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company shall
mean the shares of Common Stock of the Company, $0.001 par value per share.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting power
of such other Person or, if such other Person is a Subsidiary of another Person,
the Person or Persons which ultimately control such first-mentioned Person.
(g) "Continuing Director" shall mean (i) any member of the Board of
Directors of the Company, while 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 such Affiliate or Associate, and who 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 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 such Affiliate or Associate,
if such Person's nomination for election or election to the Board is recommended
or approved by a majority of the Continuing Directors.
(h) "Distribution Date" shall mean the earlier of (i) the Close of
Business on the tenth day (or such later date as may be determined by action of
a majority of Continuing Directors then in office) after the Shares Acquisition
Date (or, if the tenth day after the Shares Acquisition Date occurs before the
Record Date, the Close of Business on the Record Date) or (ii) the Close of
Business on the tenth day (or such later date as may be determined by action of
a majority of Continuing Directors then in office) 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 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if, assuming the successful consummation
thereof, such Person would be the Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding.
-3-
(i) "Equivalent Shares" shall mean Preferred Shares and any other
class or series of capital stock of the Company which is entitled to participate
in dividends and other distributions, including distributions upon the
liquidation, dissolution or winding up of the Company, on a proportional basis
with the Common Shares. In calculating the number of any class or series of
Equivalent Shares for purposes of Section 11 of this Agreement, the number of
shares, or fractions of a share, of such class or series of capital stock that
is entitled to the same dividend or distribution as a whole Common Share shall
be deemed to be one share.
(j) "Expiration Date" shall mean the earliest of (i) the Close of
Business on the Final Expiration Date, (ii) the Redemption Date, (iii) the time
at which the Board of Directors orders the exchange of the Rights as provided in
Section 24 hereof or (iv) the consummation of a transaction contemplated by
Section 13(d) hereof.
(k) "Final Expiration Date" shall mean May 8, 2007.
(l) "Permitted Offer" shall mean a tender offer for all outstanding
Common Shares made in the manner prescribed by Section 14(d) of the Exchange Act
and the rules and regulations promulgated thereunder; PROVIDED, HOWEVER, that
such tender offer occurs at a time when Continuing Directors are in office and a
majority of the Continuing Directors then in office has determined that the
offer is both adequate and otherwise in the best interests of the Company and
its shareholders (taking into account all factors that such Continuing Directors
deem relevant, including without limitation prices that could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value).
(m) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(n) "Preferred Shares" shall mean shares of Series A Participating
Preferred Stock of the Company.
(o) "Purchase Price" shall have the meaning set forth in
Section 4(a) hereof.
(p) "Record Date" shall have the meaning set forth in the recitals
at the beginning of this Agreement.
(q) "Redemption Date" shall mean the time at which the Board of
Directors of the Company orders redemption of the Rights as provided in
Section 23 hereof.
(r) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(s) "Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals at the beginning of this Agreement.
(t) "Section 13 Event" shall mean any event described in
clause (i), (ii) or (iii) of Section 13(a) hereof.
-4-
(u) "Shares 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 an Acquiring Person has become such;
PROVIDED THAT, if such person is determined not to have become an Acquiring
Person pursuant to Section l(a)(ii) hereof, then no Shares Acquisition Date
shall be deemed to have occurred.
(v) "Subsidiary" of any Person shall mean 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 any
corporation or other entity otherwise controlled by such Person.
(w) "Total Exercise Price" shall have the meaning set forth in
Section 4(a) hereof.
(x) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
(y) A "Triggering Event" shall be deemed to have occurred upon any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becoming an Acquiring Person.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall, prior to the Distribution Date, also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable, upon ten (10) 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. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates
for Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by separate
Rights Certificates and (ii) the right to receive Rights Certificates will be
transferable only in connection with the transfer of Common Shares. Until the
earlier of the Distribution Date or the Expiration Date, the surrender for
transfer of such certificates for Common Shares shall also constitute the
surrender for transfer of the Rights associated with the Common Shares
represented thereby. 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 requested,
send) by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date, at
-5-
the address of such holder shown on the records of the Company, a Rights
Certificate in substantially the form of Exhibit B hereto (a "Rights
Certificate"), evidencing one Right for each Common Share so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per Common Share has been made pursuant to Section 11(a)(i),
Section 11(i) or Section 11(p) hereof, then 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 the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates and may be
transferred by the transfer of the Rights Certificates as permitted hereby,
separately and apart from any transfer of one or more Common Shares, and the
holders of such Rights Certificates as listed in the records of the Company or
any transfer agent or registrar for the Rights shall be the record holders
thereof.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send (or cause to be sent) a copy of a Summary of Rights in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by first-
class, postage-prepaid mail, to each record holder of Common Shares as of the
Close of Business on the Record Date, at the address of such holder shown on the
records of the Company.
(c) Unless the Board of Directors, by resolution adopted at or
before the time of the issuance (including pursuant to the exercise of rights
under the Company's benefit plans) of any Common Shares, specifies to the
contrary, Rights shall be issued in respect of all Common Shares that are issued
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date or, in certain circumstances provided in Section 22 hereof,
after the Distribution Date. Certificates representing such Common Shares shall
also be deemed to be certificates for Rights, and shall bear the following
legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between General
Surgical Innovations, Inc. and The US Stock Transfer Corporation as
the Rights Agent, dated as of May 9, 1997 (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 General
Surgical Innovations, Inc.. Under certain circumstances, as set forth
in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
General Surgical Innovations, Inc. 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
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.
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 Shares repre-
-6-
sented by such certificates shall be evidenced by such certificates alone, and
the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with the Common Shares which are
no longer outstanding.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
Common Shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form of 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 and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of 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 with respect to
Common Shares issued by the Company after the Record Date, as of the date of
issuance of such Common Shares) and on their face shall entitle the holders
thereof to purchase such number of one-thousandths of a Preferred Share as shall
be set forth therein at the price set forth therein (such exercise price per one
one-thousandth of a Preferred Share being hereinafter referred to as the
"Purchase Price" and the aggregate exercise price of all Preferred Shares
issuable upon exercise of one Right being hereinafter referred to as the "Total
Exercise Price"), but the number and type of securities purchasable upon the
exercise of each Right and the Purchase Price 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 or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring 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 contain (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
-7-
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 the Rights Agreement.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its President
or any Vice President, either manually or by facsimile signature, and by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature, and shall have affixed thereto the Company's seal (if any)
or a facsimile thereof. The Rights Certificates shall be manually countersigned
by the Rights Agent and shall not be valid for any purpose unless 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 Certificate 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 office designated for such purposes, 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, the number of Rights evidenced on its face by each 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 Sections 7(e), 14 and 24 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
Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of one-thousandths of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Rights Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Rights Certificates to be transferred, split
up, combined or exchanged at the office 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
-8-
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 Sections 7(e), 14 and 24 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 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, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder 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), 23(b) and 24(b) hereof, the registered
holder of any Rights 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 Rights Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the Purchase Price for each one-thousandth of a Preferred Share
as to which the Rights are exercised, at or prior to the Expiration Date.
(b) The Purchase Price for each one-thousandth of a Preferred Share
issuable pursuant to the exercise of a Right shall initially be $35.00, shall
be subject to adjustment from time to time as provided in Sections 11 and 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the number of one-thousandths of a Preferred
Share (or other securities or property, as the case may be) to be purchased and
an amount equal to any applicable transfer tax required to be paid by the holder
of such Rights Certificate in accordance with Section 9 hereof in cash, or by
certified check or cashier's check payable to the order of the Company, the
Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly
(i) (A) requisition from any transfer agent of the Preferred Shares (or make
available, if the Rights Agent is the transfer agent for the Preferred Shares) a
certificate or certificates for the number of one-thousandths of a Preferred
Share 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 one-thousandths of a Preferred Share issuable
upon exercise of the Rights hereunder with a depository
-9-
agent, requisition from the depository agent of depository receipts representing
such number of one-thousandths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depository agent) and the
Company hereby directs the depository agent to comply with such request,
(ii) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depository 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) when appropriate, after receipt thereof, deliver such cash
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)(iv) hereof) may be made in cash or by certified bank
check or bank draft payable to the order of the Company. 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 to the registered holder of such Rights Certificate or to
his or her duly authorized assigns, 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 Triggering Event or a Section 13 Event,
any Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such (a "Post Transferee"), (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e) (a "Prior Transferee") or (iv) any subsequent
transferee receiving transferred Rights from a Post Transferee or a Prior
Transferee, either directly or through one or more intermediate transferees,
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 to any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or any of such Acquiring
Person's Affiliates, Associates or transferees hereunder.
-10-
(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
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 to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no 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 Rights Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. The Rights Agent shall deliver all canceled
Rights Certificates to the Company, or shall, at the written request of the
Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES.
(a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of and to the extent of
its authorized and unissued shares of preferred stock not reserved for another
purpose (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Shares and/or other securities), the
number of Preferred Shares (and, following the occurrence of the Triggering
Event, Common Shares and/or other securities) that will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) If the Company shall hereafter list any of its Preferred Shares
on a national securities exchange, then so long as the Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on a national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable (but only to
the extent that it is reasonably likely that the Rights will be exercised), all
shares reserved for such issuance to be listed on such exchange 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
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iv)
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, as
amended (the "Securities Act"), with respect to the securities purchasable upon
exercise of the
-11-
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 Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities and
(B) the date of expiration of the Rights. The Company may temporarily suspend,
for a period 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 and file such registration statement and permit it to
become effective. Upon any such suspension, the Company shall issue a public
announcement stating, and notify the Rights Agent, that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement and
notification to the Rights Agent at such time as the suspension is no longer in
effect. 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. 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, or an exemption therefrom shall be available, and
until a registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
Preferred Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(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 original issuance or delivery of the Rights
Certificates or of any Preferred Shares upon the exercise of Rights. The Company
shall not, however, be required 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 certificates or depository receipts for the
Preferred Shares in a name other than that of, the registered holder of the
Rights Certificate evidencing Rights surrendered for exercise or to issue or to
deliver any certificates or depository receipts for Preferred Shares upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such 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. PREFERRED SHARES RECORD DATE. Each person in whose name any
certificate for a number of one-thousandths of a Preferred Share is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of Preferred 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
multiplied by the number of one-thousandths of a Preferred Share with respect to
which the Rights have been exercised (and any applicable transfer taxes) was
made; PROVIDED, HOWEVER, that if the date of such surrender and payment is a
date upon which the Preferred Shares transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the Preferred Shares transfer books of the Company are open. Prior to the
exercise of the Rights
-12-
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a holder of Preferred Shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number and kind of shares or other property
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 Shares payable in
Common Shares, (B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares (by reverse stock split or otherwise) into a smaller
number of Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11(a) and Section 7(e) hereof: (1) each of the Rights
outstanding at the time of the record date for such dividend or the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to the nearest one
ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
Ratio"), the numerator of which shall be the total number of Common Shares or
shares of capital stock issued in such reclassification of the Common Shares
outstanding immediately following such dividend, subdivision, combination or
reclassification and the denominator of which shall be the total number of
Common Shares outstanding immediately prior to such time, and the number of
Rights that shall thereafter be issued with respect to each Common Share or
share of such other capital stock that shall become outstanding thereafter prior
to the Distribution Date shall be equal to the total number of outstanding
Rights immediately after such event (as adjusted pursuant to this clause (1))
divided by the total number of outstanding Common Shares or shares of such other
capital stock immediately after such event (subject to further adjustment
pursuant to the provisions of this Agreement); (2) 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 shall be adjusted so that the
Purchase Price thereafter shall equal the result obtained by dividing the
Purchase Price in effect immediately prior to such time by the Exchange Ratio;
PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of such Right; and (3) the
number of Common Shares or shares of such other capital stock issuable upon the
exercise of each Right shall remain unchanged immediately after such event, but,
in the event of a reclassification, the kind of shares issuable upon the
exercise of each Right immediately after such reclassification shall be adjusted
to be the kind of shares of such other capital stock issued in such
reclassification, rather than Common Shares. 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.
-13-
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event, proper provision shall be made so that each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the right to receive for
each Right, upon exercise thereof in accordance with the terms of this Agreement
and payment of the then-current Total Exercise Price, in lieu of a number of
one-thousandths of a Preferred Share, such number of Common Shares of the
Company as shall equal the result obtained by multiplying the then-current
Purchase Price by the then number of one-thousandths of a Preferred Share for
which a Right was exercisable (or would have been exercisable if the
Distribution Date had occurred) immediately prior to the first occurrence of a
Triggering Event, and dividing that product by 50% of the current per share
market price (determined pursuant to Section 11(d) hereof) for Common Shares on
the date of occurrence of the Triggering Event (such number of shares being
hereinafter referred to as the "Adjustment Shares").
(iii) The right to buy Common Shares of the Company pursuant
to Section 11(a)(ii) hereof shall not arise as a result of any Person becoming
an Acquiring Person through an acquisition of Common Shares pursuant to a
Permitted Offer.
(iv) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if the Board of Directors determines
that such action is necessary or appropriate and not contrary to the interest of
holders of Rights (and, in the event that the number of Common Shares 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, or if any necessary
regulatory approval for such issuance has not been obtained by the Company, the
Company shall): (A) determine the excess of (1) the value of the Common 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 such Common Shares, upon exercise of
the Rights, (1) cash, (2) a reduction in the Purchase Price, (3) other equity
securities of the Company (including, without limitation, shares or units of
shares of any series of preferred stock which the Board of Directors of the
Company has deemed to have the same value as Common Shares (such shares or units
of shares of preferred stock are herein called "common stock equivalents")),
except to the extent that the Company has not obtained any necessary shareholder
or regulatory approval for such issuance, (4) debt securities of the Company,
except to the extent that the Company has not obtained any necessary shareholder
or regulatory approval for such issuance, (5) other assets or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Board of Directors
of the Company based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors of the Company; 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 later of
(x) the first occurrence of a Triggering Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires (the later of
(x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"),
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, Common Shares
(to the extent available), except to the extent
-14-
that the Company has not obtained any necessary shareholder or regulatory
approval for such issuance, and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Board of Directors of
the Company shall determine in good faith that it is likely that sufficient
additional Common Shares could be authorized for issuance upon exercise in full
of the Rights or that any necessary regulatory approval for such issuance will
be obtained, the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek shareholder approval for the
authorization of such additional shares or take action to obtain such regulatory
approval (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)(iv), 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, to take any action to obtain any required
regulatory approval 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)(iv), the value of the Common Shares
shall be the current per share market price (as determined pursuant to Section
11(d) hereof) of the Common Shares on the Section 11(a)(ii) Trigger Date and the
value of any "common stock equivalent" shall be deemed to have the same value as
the Common Shares on such date.
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Common Shares or of any class or series of Equivalent Shares
entitling such holders (for a period expiring within forty-five (45) calendar
days after such record date) to subscribe for or purchase Common Shares or
Equivalent Shares or securities convertible into Common Shares or Equivalent
Shares at a price per share (or having a conversion price per share, if a
security convertible into Common Shares or Equivalent Shares) less than the then
current per share market price of the Common Shares or Equivalent Shares (as
defined in Section 11(d)) on such record date, then, in each such case, 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 Common Shares and
Equivalent Shares (if any) outstanding on such record date, plus the number of
Common Shares or Equivalent Shares, as the case may be, which the aggregate
offering price of the total number of Common Shares or Equivalent Shares, as the
case may be, so to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such current
market price, and the denominator of which shall be the number of Common Shares
and Equivalent Shares (if any) outstanding on such record date, plus the number
of additional Common Shares or Equivalent Shares, as the case may be, to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent and shall
-15-
be binding on the Rights Agent and the holders of the Rights. Common Shares and
Equivalent Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Common Shares or of any class or series of Equivalent Shares (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend, if any, or a dividend
payable in Common Shares) or subscription rights, options or warrants
(excluding those referred to in Section 11(b)), then, in each such case, 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 (as
determined pursuant to Section 11(d) hereof) of a Common Share or an Equivalent
Share on such record date, less the fair market value per Common Share or
Equivalent Share (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to a
Common Share or Equivalent Share, as the case may be, and the denominator of
which shall be such current market price (as determined pursuant to Section
11(d) hereof) of a Common Share or Equivalent Share on such record date. 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 be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iv) hereof, the "current per share
market price" of any security (a "Security" for the purpose of this Section
11(d)) on any date shall be deemed to be the average of the daily closing prices
per share of such Security for the thirty (30) consecutive Trading Days (as such
term is hereinafter defined) immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iv) hereof, the "current per share
market price" of any Security on any date shall be deemed to be the average of
the daily closing prices per share of such Security for the ten (10) consecutive
Trading Days immediately prior to such date; PROVIDED, HOWEVER, that in the
event that the current per share market price of the Security is determined
during a period following the announcement by the issuer of such Security of
(i) a dividend or distribution on such Security payable in shares of such
Security or securities convertible into such shares or (ii) any subdivision,
combination or reclassification of such Security, and prior to the expiration of
the requisite thirty (30) Trading Day or ten (10) Trading Day period, after the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing price
for each day shall be the last sale price, regular way, or,
-16-
in case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last sale price or, if such
last sale price is not reported, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in the Common Shares, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company shall be used.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day. If the
Common Shares are not publicly held or so listed or traded, "current per share
market price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; PROVIDED, HOWEVER,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a Common Share or other share or one
hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years from the date of
the transaction which requires such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)
or 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and if required, the Purchase Price 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 Common Shares contained in
Sections 11(a), (b), (c), (e), (h), (i), (j), (k), (1) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted
-17-
Purchase Price, the number of one-thousandths of a Preferred Share 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), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of Preferred
Shares (calculated to the nearest one hundred-thousandth of a share) obtained by
(i) multiplying (x) the number of Preferred Shares 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 as a result of the calculations made in Section 11(b) to
adjust the number of Rights, in substitution for any adjustment in the number of
Preferred Shares purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable
for the number of one-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights 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 Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of Preferred Shares issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Purchase Price per one one-thousandth of a Preferred Share and the number of
one-thousandths of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.
-18-
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the par or stated value, if any, of the number
of one-thousandths of a Preferred Share issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue as
fully paid and nonassessable shares such number of one-thousandths of a
Preferred Share at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; PROVIDED, HOWEVER, that
the Company shall deliver to such holder a due ▇▇▇▇ or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
prior to the Distribution Date, 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 or Common Shares, (ii) issuance wholly for cash of
any Preferred or Common Shares at less than the current market price,
(iii) issuance wholly for cash of Preferred or Common Shares or securities which
by their terms are convertible into or exchangeable for Preferred or Common
Shares, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred or Common Shares shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, effect or permit to occur any Triggering Event or
Section 13 Event, if (i) at the time or immediately after such Triggering Event
or Section 13 Event there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (ii) prior to, simultaneously with or immediately after such
Section 13 Event, the shareholders of the Person who constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(b) hereof shall
have received a distribution of Rights previously owned by such Person or any of
its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or
permit to be taken) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
-19-
(p) Anything in this Agreement to the contrary notwithstanding, in
the event the Company shall at any time after the date of this Agreement
(A) declare a dividend on the Preferred Shares payable in Preferred Shares,
(B) subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares (by reverse stock split or otherwise) into a smaller number of
Preferred Shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11 and Section 7(e) hereof: (1) each of the Rights
outstanding at the time of the record date for such dividend or the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to the nearest one
ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
Fraction"), the numerator of which shall be the total number of Preferred Shares
or shares of capital stock issued in such reclassification of the Preferred
Shares outstanding immediately following such time and the denominator of which
shall be the total number of Preferred Shares outstanding immediately prior to
such time, and the number of Rights that shall thereafter be issued with respect
to each Common Share or share of other capital stock that shall be issued in a
reclassification of the Common Shares prior to the Distribution Date shall be
equal to the total number of outstanding Rights immediately after such event (as
adjusted pursuant to this clause (1)) divided by the total number of outstanding
Common Shares or shares of such other capital stock immediately after such event
(subject to further adjustment pursuant to the provisions of this Agreement);
(2) 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 shall be adjusted so that the Purchase Price thereafter shall
equal the result obtained by dividing the Purchase Price in effect immediately
prior to such time by the Exchange Fraction; PROVIDED, HOWEVER, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of one-thousandths of a
Preferred Share or share of such other capital stock issuable upon the exercise
of each Right shall remain unchanged immediately after such event, but, in the
event of a reclassification, the kind of shares issuable upon the exercise of
each Right immediately after such reclassification shall be adjusted to be the
kind of shares of such other capital stock issued in such reclassification,
rather than Preferred Shares.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 26 hereof. Notwithstanding the foregoing
sentence, the failure of the Company to make such certification or give such
notice shall not affect the validity of such adjustment or the force or effect
of the requirement for such adjustment. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment contained
therein and shall not be deemed to have knowledge of such adjustment unless and
until it shall have received such certificate.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
-20-
(a) In the event that, following the Shares Acquisition Date,
directly or indirectly:
(i) the Company shall consolidate with, or merge with and
into, any other Person (other than a Subsidiary of the Company in a transaction
the principal purpose of which is to change the state of incorporation of the
Company or which complies with Section 11(o) hereof);
(ii) any Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(o) hereof) shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such consolidation or merger; 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 aggregating 50% or more 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 wholly
owned Subsidiaries in one or more transactions, each of which 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 (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable Common Shares of the Principal Party
(as hereinafter defined), free of any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by
(1) multiplying the then current Purchase Price by the number of one-thousandths
of a Preferred Share for which a Right was exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Triggering Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Triggering Event by the Purchase
Price in effect immediately prior to such first occurrence) and (2) dividing
that product (which, following the first occurrence of a Section 13 Event, shall
be referred to as the "Total Exercise Price" for each Right and for all purposes
of this Agreement) by 50% of the current per share market price (determined
pursuant to Section 11(d) hereof) of the Common Shares of such Principal Party
on the date of consummation of such Section 13 Event;
(B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, 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 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event;
-21-
(D) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of its Common Shares)
in connection with the consummation of any such transaction as may be necessary
to assure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to its Common Shares thereafter deliverable
upon the exercise of the Rights.
(b) "Principal Party" shall mean, in the case of any transaction
described in clause (i), (ii) or (iii) of Section 13(a), the Person or Acquiring
Person referred to therein (or such Person's or Acquiring Person's successor,
including, if applicable, the Company, if it is the surviving corporation),
PROVIDED, HOWEVER, that in any such case, (i) if such Person is a direct or
indirect Subsidiary of another Person, "Principal Party" shall refer to such
other Person and (ii) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, "Principal Party" shall refer to whichever
of such Persons is the issuer of the Common Shares having the greatest aggregate
value, and PROVIDED, FURTHER, that for purposes of transactions described in
clause (iii) hereof, "Principal Party" shall refer to that Person receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions.
(c) If, for any reason, the Rights cannot be exercised for Common
Shares of such Principal Party as provided in Section 13(a), then each holder of
Rights shall have the right to exchange its Rights for cash from such Principal
Party in an amount equal to the number of Common Shares that it would otherwise
be entitled to purchase times 50% of the current per share market price, as
determined pursuant to Section 11(d) hereof, of such Common Shares of such
Principal Party. If, for any reason, the foregoing formulation cannot be applied
to determine the cash amount into which the Rights are exchangeable, then the
Board of Directors, based upon the advice of one or more nationally recognized
investment banking firms, and based upon the total value of the Company, shall
determine such amount reasonably and with good faith to the holders of Rights.
Any such determination shall be final and binding on the Rights Agent.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in clauses (i) and
(ii) of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired Common Shares pursuant to a Permitted Offer (or a wholly-
owned Subsidiary of any such Person or Persons); (ii) the price per share of
Common Shares offered in such transaction is not less than the price per share
of Common Shares paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same form as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
(e) The Company shall not consummate any Section 13 Event unless
the Principal Party shall have a sufficient number of authorized Common Shares
that have not been issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and unless prior thereto
the Company and such issuer shall have executed and delivered to the Rights
Agent a supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
-22-
Sections 13(a) and (b) hereof, that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal Party upon
exercise of outstanding Rights have been waived, that there are no rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement, and further providing that, as soon as practicable
after the date of such Section 13 Event, such Principal Party will:
(i) 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, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date, and similarly comply with applicable
state securities laws;
(ii) use its best efforts to list (or continue the listing
of) the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on NASDAQ; and
(iii) deliver to holders of the Rights historical financial
statements for such Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
In the event that at any time after the occurrence of a
Triggering Event some or all of the Rights shall not have been exercised at the
time of a transaction described in this Section 13, the Rights which have not
theretofore been exercised shall thereafter be exercisable in the manner
described in Section 13(a) (without taking into account any prior adjustment
required by Section 11(a)(ii)).
(f) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Rights Certificates which evidence fractional Rights. In lieu
of such fractional Rights, there shall be paid to the registered holders of the
Rights 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, as determined pursuant to the second sentence of
Section 11(d) hereof.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one one-
thousandth of a Preferred Share) upon
-23-
exercise of the Rights or to distribute certificates which evidence fractional
Preferred Shares (other than fractions that are integral multiples of one one-
thousandth of a Preferred Share). In lieu of fractional Preferred Shares that
are not integral multiples of one one-thousandth of a Preferred Share, the
Company shall pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of a Common Share. For purposes of this
Section 14(b), the current market value of a Common Share shall be the closing
price of a Common Share (as determined pursuant to the second sentence of
Section 11(d) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his or her right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal 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 fully executed; and
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Shares certificate made by anyone
-24-
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) 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
Rights Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust 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, HOWEVER, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent
-25-
shall succeed to the agency created by this Agreement, any of the Rights
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 Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights 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), and the opinion or advice of such counsel shall
be full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion
or advice.
(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 per share market price") be proved or established by
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
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.
-26-
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights 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 Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Sections 3, 11, 13, 23 or 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 Rights
Certificates after receipt by the Rights Agent of a certificate furnished
pursuant to Section 12 describing such change or adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions. 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 or omitted by the Rights Agent under this Rights
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken 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 (5) Business Days after the
date any 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 or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
-27-
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
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 thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Preferred Shares and the Common Shares by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his or
her Rights Certificate for inspection by the Company), then the registered
holder of any Rights 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 either (a)
a corporation organized and doing business under the laws of the United States
or of any state of the United States, in good standing, which is authorized
under such laws to exercise corporate trust or shareholder services powers and
is subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million or (b) an affiliate of such a corporation.
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
-28-
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
Preferred Shares and the Common Shares, and mail a notice thereof in writing to
the registered holders of the Rights 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 RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company and
(b) may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; PROVIDED, HOWEVER,
that (i) no such Rights Certificate shall be issued and this sentence shall be
null and void AB INITIO if, and to the extent that, such issuance or this
sentence would create a significant risk of or result in material adverse tax
consequences to the Company or the Person to whom such Rights Certificate would
be issued or would create a significant risk of or result in such options' or
employee plans' or arrangements' failing to qualify for otherwise available
special tax treatment and (ii) no such Rights Certificate shall be issued if,
and to the extent that, appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.
Section 23. REDEMPTION.
(a) The Company may, at its option and with the approval of the
Board of Directors, at any time prior to the Close of Business on the earlier of
(i) the tenth day following the Shares Acquisition Date or such later date as
may be determined by action of a majority of Continuing Directors then in office
and publicly announced by the Company or (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a redemption price of
$0.01 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being herein referred to as the "Redemption Price") and the Company may,
at its option, pay the Redemption Price either in Common Shares (based on the
current per share market price thereof (as determined pursuant to Section 11(d)
hereof) at the time of redemption) or cash. Such redemption of the Rights by
the Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish;
PROVIDED, HOWEVER, if the Board of Directors of the Company authorizes
redemption of the Rights on or after the time a Person becomes an Acquiring
Person, then there must be Continuing Directors then in office and such
authorization shall require the concurrence of a majority of such Continuing
Directors.
-29-
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within ten (10) days after the action
of the Board of Directors ordering the redemption of the Rights, the Company
shall give notice of such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. 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 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.
Section 24. EXCHANGE.
(a) Subject to applicable laws, rules and regulations, and subject
to subsection (c) below, the Company may, at its option, by majority vote of the
Board of Directors and a majority vote of the Continuing Directors, at any time
after the occurrence of a Triggering Event, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e) hereof) for Common Shares
at an exchange ratio of one Common Share per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter referred to as the "Ratio
of Exchange"). Notwithstanding the foregoing, the Board of Directors shall not
be empowered to effect such exchange at any time after any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any such Subsidiary, or any entity holding Common Shares for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection (a) of this Section 24 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 Common Shares equal to the number of such
Rights held by such holder multiplied by the Ratio of Exchange. The Company
shall give public notice of any such exchange; PROVIDED, HOWEVER, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company shall mail a notice of any such exchange to all of
the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common
-30-
Shares for Rights will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) hereof) held by each
holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.
For purposes of this Section 24(c) only, the Current Value shall mean the
product of the current per share market price of Common Shares (determined
pursuant to Section 11(d) on the date of the occurrence of the event described
above in subparagraph (a)) multiplied by the number of Common Shares for which
the Right otherwise would be exchangeable if there were sufficient shares
available. To the extent that the Company determines that some action need be
taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c), the Board
of Directors may temporarily suspend the exercisability of the Rights for a
period of up to sixty (60) days following the date on which the event described
in Section 24(a) shall have occurred, in order to seek any authorization of
additional Common Shares and/or to decide the appropriate form of distribution
to be made pursuant to the above provision 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.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional Common Shares, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable, an amount in cash equal to the same fraction
of the current per share market value of a whole Common Share (as determined
pursuant to the second sentence of Section 11(d) hereof).
(e) The Company may, at its option, by majority vote of the Board
of Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.
(f) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection (e) of this Section 24 and
without any further
-31-
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 rights in exchange therefor as has been determined by the Board
of Directors in accordance with subsection (e) above. The Company shall give
public notice of any such exchange; PROVIDED, HOWEVER, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company shall mail a notice of any such exchange to all of the holders of
such Rights at their last addresses as they appear upon the registry books of
the transfer agent for the Common Shares of the Company. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the method
by which the exchange of the Rights will be effected.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose to effect or permit to occur
any Triggering Event having the effects described in Section 11(a)(ii) hereof or
a Section 13 Event, the Company shall give notice thereof to each holder of
Rights in accordance with Section 26 hereof at least twenty (20) days prior to
occurrence of such Triggering Event or Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Sections 11(a)(ii) and 13
hereof.
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 Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
General Surgical Innovations, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
U.S Stock Transfer Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
-32-
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date,
the Company may supplement or amend this Agreement in any respect without the
approval of any holders of Rights and the Rights Agent shall, if the Company so
directs, execute such supplement or amendment. From and after the Distribution
Date, the Company and the Rights Agent may from time to time supplement or amend
this Agreement without the approval of any holders of Rights in order to
(i) cure any ambiguity, (ii) correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) shorten or lengthen any time period hereunder (which lengthening or
shortening, following the first occurrence of an event set forth in the proviso
to Section 23(a) hereof, shall be effective only if there are Continuing
Directors and shall require the concurrence of a majority of such Continuing
Directors) or (iv) to change or supplement the provisions hereunder in any
manner that the Company may deem necessary or desirable and that shall not
adversely affect the interests of the holders of Rights (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person); PROVIDED, this
Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence, (A) a time period relating to when the Rights may
be redeemed at such time as the Rights are not then redeemable or (B) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company that
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Shares.
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. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For
all purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company (and, where specifically provided for herein,
the Continuing Directors) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board, or the Company (or, where specifically provided for
herein, the Continuing Directors), or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions,
-33-
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board (or, where specifically provided for herein, by the Continuing
Directors) in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights Certificates and all other
parties and (y) not subject the Board or the Continuing Directors to any
liability to the holders of the Rights.
Section 30. 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 Rights Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Board of Directors.
Section 32. GOVERNING LAW. This Agreement and each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of California 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.
Section 33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
-34-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
GENERAL SURGICAL INNOVATIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Title: Vice President, Finance
and Chief Financial Officer
-----------------------------
THE U.S. STOCK TRANSFER CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Title: Vice President
---------------------------
-35-
EXHIBIT A
CERTIFICATE OF DETERMINATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF
GENERAL SURGICAL INNOVATIONS, INC.
The undersigned, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and Tae ▇▇▇ ▇▇▇▇, do hereby certify:
1. That they are the duly elected President and Secretary, respectively,
of General Surgical Innovations, Inc., a California corporation (the
"Corporation").
2. That pursuant to the authority conferred upon the Board of Directors
by the Articles of Incorporation of the said Corporation, the said Board of
Directors on May 9, 1997 adopted the following resolutions creating a series
of shares of Preferred Stock designated as Series A Participating Preferred
Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by the Articles of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock,
$0.001 par value, of the Corporation, to be designated "Series A
Participating Preferred Stock," initially consisting of 50,000 shares and to
the extent that the designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of the
Series A Participating Preferred Stock are not stated and expressed in the
Articles of Incorporation, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions thereof, as follows (all
terms used herein which are defined in the Articles of Incorporation shall be
deemed to have the meanings provided therein):
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Participating Preferred Stock," par value $0.001 per
share, and the number of shares constituting such series shall be 50,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to dividends, the holders
of shares of Series A 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, quarterly dividends payable in cash on the last day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to, subject to the provision for adjustment hereinafter set forth,
1,000 times the aggregate per share amount of all cash dividends, and 1,000
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 of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Participating Preferred
Stock. In the event the Corporation shall at any time after May 30, 1997
(the "Rights Declaration Date") (i) declare 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 amount to which holders of shares of Series A
Participating Preferred Stock were entitled immediately prior to such event
under the preceding sentence shall be adjusted by multiplying such amount 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 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) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of
Series A Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Participating Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Participating Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Participating Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date fixed
for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Participating
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Participating Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the shareholders of
the Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare 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 number of votes per share to which holders of shares of
Series A Participating Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such 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) Except as otherwise provided herein or by law, the holders of
shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of shareholders of the corporation.
(C) Except as required by law, holders of Series A 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.
Section 4. CERTAIN RESTRICTIONS.
(A) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 2 hereof.
(B) Whenever quarterly dividends or other dividends or
distributions payable on the Series A 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
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 Participating Preferred Stock;
(ii) declare or pay dividends on, 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 Series A Participating
Preferred Stock, except dividends paid ratably on the Series A 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;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, PROVIDED THAT the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series A Participating Preferred Stock, or any shares of stock ranking
on a parity with the Series A 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 such shares 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.
(C) 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.
Section 5. REACQUIRED SHARES. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation 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 the conditions and restrictions on issuance set forth
herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, 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 Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Participating Preferred Stock
shall have received an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
plus an amount equal to the greater of (1) $1,000 per share, PROVIDED THAT in
the event the Corporation does not have sufficient assets, after payment of its
liabilities and distribution to holders of Preferred Stock ranking prior to the
Series A Participating Preferred Stock, available to permit payment in full of
the $1,000 per share amount, the amount required to be paid under this
Section 6(A)(1) shall, subject to Section 6(B) hereof, equal the value of the
amount of available assets divided by the number of outstanding shares of
Series A Participating Preferred Stock or (2) subject to the provisions for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount to
be distributed to the holders of Common Stock (the greater of (1) or (2), the
"Series A Liquidation Preference"). In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare 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 amount to which holders
of shares of Series A Participating Preferred Stock were entitled immediately
prior to such event under clause (2) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock that were 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) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the 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 the shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1,000 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. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare 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 amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Participating Preferred Stock shall be adjusted by
multiplying such amount 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.
Section 8. NO REDEMPTION. The shares of Series A Participating Preferred
Stock shall not be redeemable.
Section 9. RANKING. The Series A Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. AMENDMENT. The Articles of Incorporation of the Corporation
shall not be further amended in any manner which would materially alter or
change the powers, preference or special rights of the Series A Participating
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series A
Participating Preferred Stock, voting separately as a class.
Section 11. FRACTIONAL SHARES. Series A Participating Preferred Stock may
be issued in fractions of a share which shall entitle the holder, in proportion
to such holder's fractional shares,
to exercise voting rights, receive dividends, participate in distributions and
to have the benefit of all other rights of holders of Series A Participating
Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this Corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Determination
of Rights, Preferences and Privileges in accordance with the foregoing
resolution and the provisions of California law and to take such actions as they
may deem necessary or appropriate to carry out the intent of the foregoing
resolution."
3. That the authorized number of shares of Preferred Stock of the
Corporation is 5,000,000, and that no such Preferred Stock has been issued.
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Determination are true and correct of our own
knowledge.
Executed at _____________, California on __________, 199__.
------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
------------------------------
Tae ▇▇▇ ▇▇▇▇, Secretary
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. ____ _____ Rights
NOT EXERCISABLE AFTER _________, 2007 OR EARLIER IF TERMINATED BY THE COMPANY OR
IF THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS
ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [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
RIGHTS AGREEMENT.(1)]
RIGHTS CERTIFICATE
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 May 9, 1997 (the "Rights Agreement"),
between General Surgical Innovations, Inc., a California Corporation (the
"Company"), and The US Stock Transfer Corporation (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 5:00 P.M., San
Francisco, California time, on May 8, 2007 at the office of the Rights Agent
designated for such purpose, or at the office of its successor as Rights
Agent, one one-thousandth of a fully paid non-assessable share of Series A
Participating Preferred Stock, par value $0.001 per share, (the "Preferred
Shares"), of the Company, at a purchase price of $35.00 per one-thousandth of
a Preferred Share (the "Purchase Price"), upon presentation and surrender of
this Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of one-thousandths of a Preferred Share which may
be purchased upon exercise hereof) and the Purchase Price set forth above are
the number and Purchase Price as of May 30, 1997, based on the Preferred
Shares as constituted at such date. As provided in the Rights
--------------------
1 The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
Agreement, the Purchase Price and the number and kind of Preferred Shares or
other securities which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events.
This Rights 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 Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Rights Certificate (i) may be redeemed by the Company, at its option, at a
redemption price of $0.01 per Right or (ii) may be exchanged by the Company in
whole or in part for Common Shares, substantially equivalent rights or other
consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
amount of securities as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
No fractional portion of less than one one-thousandth of a Preferred Share
will be issued upon the exercise of any Right or Rights evidenced hereby but in
lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which 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 shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
-2-
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of _____________, 1997.
ATTEST: GENERAL SURGICAL INNOVATIONS, INC.
By:
------------------------------ ------------------------------
Secretary President and Chief Executive Officer
Countersigned:
------------------------------
as Rights Agent
By:
---------------------------
Authorized Signature
-3-
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED _______________________________________ hereby sells,
assigns and transfers unto ______________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: ____________, 19__
------------------------------
Signature
Signature Guaranteed:
The signature(s) should be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee medallion program) pursuant to
S.E.C. Rule 17Ad-15.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, or an
Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated:____________, 19__
------------------------------
Signature
Signature Guaranteed:
The signature(s) should be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee medallion program) pursuant to
S.E.C. Rule 17Ad-15.
Form of Reverse Side of Rights Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate)
To:____________________
The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise of such Rights and requests that certificates for such number of one-
thousandths of a Preferred Share 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 Rights
Certificate, a new Rights 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:____________, 19__
------------------------------
Signature
Signature Guaranteed:
The signature(s) should be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee medallion program) pursuant to
S.E.C. Rule 17Ad-15.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated:____________, 19__
------------------------------
Signature
Signature Guaranteed:
The signature(s) should be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee medallion program) pursuant to
S.E.C. Rule 17Ad-15.
Form of Reverse Side of Rights Certificate -- continued
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
EXHIBIT C
GENERAL SURGICAL INNOVATIONS, INC.
SHAREHOLDER RIGHTS PLAN
SUMMARY OF RIGHTS
DISTRIBUTION AND The Board of Directors has declared a dividend of one
TRANSFER OF RIGHTS; Right for each share of General Surgical Innovations
RIGHTS CERTIFICATE: Common Stock outstanding. Prior to the Distribution Date
referred to below, the Rights will be evidenced by and
trade with the certificates for the Common Stock. After
the Distribution Date, General Surgical Innovations, Inc.
(the "Company") will mail Rights certificates to the
Company's shareholders and the Rights will become
transferable apart from the Common Stock.
DISTRIBUTION DATE: Rights will separate from the Common Stock and become
exercisable following the tenth day (the "Distribution
Date") (or such later date as may be determined by a
majority of the Directors not affiliated with the
acquiring person or group (the "Continuing Directors"))
after a person or group (a) announces acquisition of
beneficial ownership of 15% or more of the Company's
Common Stock (the "Shares Acquisition Date") (or, in
the case of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a founder of the Company,
if he acquires shares of Common Stock that would
increase his beneficial holdings above 20%, unless
approved by the Company's Board of Directors or a
committee thereof) or (b) announces a tender or exchange
offer, the consummation of which would result in
ownership by a person or group of 15% or more of the
Company's Common Stock.
PREFERRED STOCK After the Distribution Date, each Right will entitle the
PURCHASABLE UPON holder to purchase, for $35.00, one one-thousandth of a
EXERCISE OF RIGHTS: share of the Company's Preferred Stock with economic
terms similar to that of one share of the Company's
Common Stock.
FLIP-IN: If an acquiror (an "Acquiring Person") obtains beneficial
ownership of 15% or more of the Company's Common Stock
(other than pursuant to a tender offer deemed fair by the
Board of Directors (a "Permitted Offer") (or, in
the case of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a founder of the Company,
if he acquires shares of Common Stock that would
increase his beneficial holdings above 20%, unless
approved by the Company's Board of Directors or a
committee thereof) THEN each Right (other than Rights
owned by an Acquiring Person or its affiliates) will
entitle the holder thereof to purchase, for the exercise
price, a number of shares of the Company's Common Stock
having a then current market value of twice the exercise
price.
FLIP-OVER: If, after the Shares Acquisition Date (defined above),
(a) the Company merges into another entity, (b) an
acquiring entity merges into the Company or (c) the
Company sells more than 50% of the Company's assets or
earning power, THEN each Right (other than Rights owned
by an Acquiring Person or its affiliates) will entitle
the holder thereof to purchase, for the exercise price, a
number of shares of Common Stock of the person engaging
in the transaction having a then current market value of
twice the exercise price (unless the transaction
satisfies certain conditions and is consummated with a
person who acquired shares pursuant to a Permitted Offer,
in which case the Rights will expire).
EXCHANGE PROVISION: At any time after an event triggering the flip-in or
flip-over rights and prior to the acquisition by the
Acquiring Person of 50% or more of the outstanding Common
Stock, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by the Acquiring
Person or its affiliates), in whole or in part, at an
exchange ratio of one Common Share per Right (subject to
adjustment).
REDEMPTION OF Rights will be redeemable at Company's option for $0.01
THE RIGHTS: per Right at any time on or prior to the tenth day (or
such later date as may be determined by a majority of the
Continuing Directors) after the Shares Acquisition Date.
EXPIRATION OF The Rights expire on the earliest of (a) May 8, 2007,
THE RIGHTS: (b) exchange or redemption of the Rights as described
above, or (c) consummation of a merger or consolidation
or sale of assets resulting in expiration of the Rights
as described above.
AMENDMENT OF TERMS The terms of the Rights Agreement may be amended in any
OF RIGHTS: respect without the consent of the Rights holders on or
prior to the Distribution Date; thereafter, the terms of
the Rights and the Rights Agreement may be amended
without the consent of the Rights holders in order to
cure any ambiguities or to make changes which do not
adversely affect the interests of Rights holders (other
than the Acquiring Person).
VOTING RIGHTS: Rights will not have any voting rights.
ANTI-DILUTION Rights will have the benefit of certain customary anti-
PROVISIONS: dilution provisions.
-2-
TAXES: The Rights distribution should not be taxable for federal
income tax purposes. However, following an event which
renders the Rights exercisable or upon redemption of the
Rights, shareholders may recognize taxable income.
The foregoing is a summary of certain principal terms of the Shareholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of May 9, 1997, between the Company and the
Rights Agent.
-3-