<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES PURSUANT TO
SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
INNOVASIVE DEVICES, INC.
------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3132641
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(State of incorporation or organization) (IRS Employer
Identification No.)
734 Forest Street, Marlboro, MA 01752-3032
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(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
NONE Not applicable
If this form relates to the registration of a class of securities pursuant
to Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), check the following box. [ ]
If this form relates to the registration of a class of securities pursuant
to Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), check the following box. [X]
Securities Act registration statement file number to which this form
relates: _______ (if applicable)
Securities to be registered pursuant to Section 12(g) of the Act:
JUNIOR PREFERRED STOCK PURCHASE RIGHTS
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(Title of class)
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Item 1. Description of Registrant's Securities to be Registered
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As of January 14, 1999, the Board of Directors (the "Board") of Innovasive
Devices, Inc. (the "Company") declared a dividend of one purchase right
("Right") for every outstanding share of the Company's common stock, $.0001 par
value (the "Common Stock"). The Rights will be distributed to holders of record
of the Common Stock as of the close of business on January 15, 1999 (the
"Dividend Record Date"). The terms of the Rights are set forth in a Rights
Agreement dated as of January 14, 1999 (the "Rights Agreement") between the
Company and BankBoston, N.A. (the "Rights Agent"). The Rights Agreement
provides for the issuance of one Right for every share of Common Stock issued
and outstanding on the Dividend Record Date and for each share of Common Stock
which is issued or sold after that date and prior to the Distribution Date (as
defined below).
Each Right entitles the holder to purchase from the Company one one-
thousandth of a share of Series A Junior Preferred Stock, $.01 par value, of the
Company (the "Junior Preferred Stock"), at a price of $28 per one one-
thousandth of a share, subject to adjustments in certain events. The Rights
will expire on January 14, 2009 (the "Expiration Date"), or upon the earlier
redemption of the Rights, and are not exercisable until the Distribution Date.
No separate Rights certificates will be issued at the present time. Until
the Distribution Date (or earlier redemption or expiration of the Rights), (i)
the Rights will be evidenced by the outstanding Common Stock certificates and
will be transferred with and only with the Common Stock certificates, (ii) new
Common Stock certificates issued after the Dividend Record Date upon transfer or
new issuance of the Common Stock will contain a notation incorporating the
Rights Agreement by reference and (iii) the surrender for transfer of any Common
Stock certificate will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate.
The Rights will separate from the Common Stock on the Distribution Date.
Unless otherwise determined by action of a majority of the members of the Board
of Directors then in office, the Distribution Date (the "Distribution Date")
will occur on the earlier of (i) the tenth business day following the date of a
public announcement that a person, together with its affiliates and associates,
except as described below, has acquired or obtained the rights to acquire
beneficial ownership of 15% or more of the outstanding shares of Common Stock
(collectively, an "Acquiring Person") (such date is referred to herein as the
"Shares Acquisition Date") or (ii) the tenth business day following commencement
of a tender offer or exchange offer that would result in any person, together
with its affiliates and associates, owning 15% or more of the outstanding Common
Stock.
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After the Distribution Date, separate certificates evidencing the Rights
("Rights Certificates") will be mailed to holders of record of the Common Stock
as of the close of business on the Distribution Date and thereafter such
separate Rights Certificates alone will evidence the Rights. The Board, by
action of a majority of the members of the Board of Directors then in office,
may delay the distribution of the Rights Certificates.
If, at any time after January 14, 1999, any person or group of affiliated
or associated persons (other than the Company and its affiliates) shall become
an Acquiring Person, each holder of a Right will have the right to receive
shares of Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a market value of two times the exercise price
of the Right. Following the occurrence of any such event, any Rights that are,
or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person shall immediately become null and
void. Also, if the Company were acquired in a merger or other business
combination, or if more than 50% of its assets or earning power were sold, each
holder of a Right would have the right to exercise such Right and thereby
receive common stock of the acquiring company with a market value of two times
the exercise price of the Right.
The Board may, at its option, at any time after any person becomes an
Acquiring Person, exchange all or part of the then outstanding and exercisable
Rights for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after January 14, 1999 (as the same
may be adjusted, the "Exchange Ratio"). The Board however, may not effect an
exchange at any time after any person (other than (i) the Company, (ii) any
subsidiary of the Company, (ii) any employee benefit plan of the Company or of
any subsidiary of the Company or (iv) any entity holding Common Stock for or
pursuant to the terms of any such plan), together with all affiliates of such
person, becomes the beneficial owner of 50% or more of the Common Stock then
outstanding. Immediately upon the action of the Board ordering the exchange of
any Rights and without any further action and without any notice, the right to
exercise such Rights will terminate and the only right thereafter of a holder of
such Rights will be to receive that number of shares of Common Stock equal to
the number of such Rights held by the holder multiplied by the Exchange Ratio.
The exercise price of the Rights, and the number of one one-thousandths of
a share of Junior Preferred Stock or other securities or property issuable upon
exercise of the Rights, are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Junior Preferred Stock,
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(ii) upon the grant to holders of the Junior Preferred Stock of certain rights
or warrants to subscribe for shares of the Junior Preferred Stock or certain
convertible securities at less than the current market price of the Junior
Preferred Stock, or (iii) upon the distribution to holders of the Junior
Preferred Stock of evidences of indebtedness or assets (excluding cash dividends
paid out of the earnings or retained earnings of the Company and certain other
distributions) or of subscription rights, or warrants (other than those referred
to above).
At any time prior to the tenth day (or such later date as may be determined
by action of a majority of the members of the Board of Directors then in office)
after the Shares Acquisition Date, the Company, by action of a majority of the
members of the Board of Directors then in office, may redeem the Rights at a
redemption price of $.01 per Right, subject to adjustment in certain events (as
the same may be adjusted, the "Redemption Price"). Immediately upon such
action, the right to exercise the Rights will terminate, and the only right of
the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights Agreement may be amended by the Board at any time prior to the
Distribution Date without the approval of the holders of the Rights. From and
after the Distribution Date, the Rights Agreement may be amended by the Board
without the approval of the holders of the Rights in order to cure any
ambiguity, to correct any defective or inconsistent provisions, to change any
time period for redemption or any other time period under the Rights Agreement
or to make any other changes that do not adversely affect the interests of the
holders of the Rights (other than any Acquiring Person or its affiliates and
associates or their transferees).
A copy of the Rights Agreement dated as of January 14, 1999 between the
Company and BankBoston, N.A., as Rights Agent, specifying the terms of the
Rights (including as exhibits the form of Rights Certificate and the Summary of
Rights) is attached hereto as an exhibit. The foregoing description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is incorporated herein by reference.
Item 2. Exhibits
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1. Rights Agreement, dated as of January 14, 1999 (the "Rights Agreement")
between Innovasive Devices, Inc. and BankBoston, N.A., as Rights Agent.
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2. Form of Certificate of Vote of Directors Establishing a Series of a Class
of Stock of the Company, with respect to the Series A Junior Preferred
Stock, par value $.01 per share (attached as Exhibit A to the Rights
Agreement).
3. Form of Rights Certificate (attached as Exhibit B to the Rights Agreement).
Pursuant to the Rights Agreement, printed Rights Certificates will not be
mailed until the Distribution Date (as defined in the Rights Agreement).
4. Summary of Rights (attached as Exhibit C to the Rights Agreement).
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
INNOVASIVE DEVICES, INC.
Dated: January 14, 1999 By: /s/ Richard D. Randall
---------------------------------
Name: Richard D. Randall
Title: President and Chief
Executive Officer
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EXHIBIT INDEX
The following designated exhibits are filed herewith:
1. Rights Agreement, dated as of January 14, 1999 (the "Rights Agreement")
between Innovasive Devices, Inc. and BankBoston, N.A., as Rights Agent.
2. Form of Certificate of Vote of Directors Establishing a Series of a Class
of Stock of the Company, with respect to the Series A Junior Preferred
Stock, par value $.01 per share (attached as Exhibit A to the Rights
Agreement).
3. Form of Rights Certificate (attached as Exhibit B to the Rights Agreement).
Pursuant to the Rights Agreement, printed Rights Certificates will not be
mailed until the Distribution Date (as defined in the Rights Agreement).
4. Summary of Rights (attached as Exhibit C to the Rights Agreement).
<PAGE>
EXHIBIT 1
INNOVASIVE DEVICES, INC.
and
BANKBOSTON, N.A.
Rights Agent
RIGHTS AGREEMENT
Dated as of January 14, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Certain Definitions.................................. 1
Section 2. Appointment of Rights Agent.......................... 5
Section 3. Issuance of Rights Certificates...................... 6
Section 4. Form of Rights Certificates.......................... 8
Section 5. Countersignature and Registration.................... 9
Section 6. Transfer, Split Up, Combination and Exchange
of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates................... 9
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights............................ 10
Section 8. Cancellation and Destruction of Rights
Certificates......................................... 12
Section 9. Reservation and Availability of Preferred
Shares............................................... 13
Section 10. Preferred Shares Record Date......................... 14
Section 11. Adjustment of Purchase Price; Number of
Shares or Number of Rights........................... 15
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares..................................... 24
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.............................. 24
Section 14. Fractional Rights and Fractional Shares.............. 28
Section 15. Rights of Action..................................... 28
Section 16. Agreement of Rights Holders.......................... 29
Section 17. Rights Certificate Holder Not Deemed a
Stockholder.......................................... 29
Section 18. Concerning the Rights Agent.......................... 30
Section 19. Merger or Consolidation or Change of Name of
Rights Agent......................................... 30
</TABLE>
i
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<TABLE>
<S> <C>
Section 20. Duties of Rights Agent............................... 31
Section 21. Change of Rights Agent............................... 34
Section 22. Issuance of New Rights Certificate................... 35
Section 23. Redemption........................................... 35
Section 24. Exchange............................................. 36
Section 25. Notice of Certain Events............................. 38
Section 26. Notices.............................................. 38
Section 27. Supplements and Amendments........................... 39
Section 28. Successors........................................... 40
Section 29. Determinations and Actions by the Board of
Directors, etc....................................... 40
Section 30. Benefits of this Agreement........................... 40
Section 31. Severability......................................... 40
Section 32. Governing Law........................................ 41
Section 33. Counterparts......................................... 41
Section 34. Descriptive Headings................................. 41
</TABLE>
EXHIBITS
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Exhibit A Form of Certificate of Designations
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
ii
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RIGHTS AGREEMENT
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This Rights Agreement, dated as of January 14, 1999 (this "Agreement"), is
between INNOVASIVE DEVICES, INC., a Massachusetts corporation (the "Company"),
and BANKBOSTON, N.A., a national banking association (the "Rights Agent").
As of January 14, 1999 (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 January 15, 1999 (the "Record Date"), each right representing the right to
purchase one one-thousandth of a share of Series A Junior 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 Vote of Directors Establishing a Series of a Class of Stock, with
respect to the Series A Junior Preferred Stock of the Company, 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 (i)
-
the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan
-- ---
of the Company or of any Subsidiary of the Company or (iv) 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
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Beneficial Owner of 15% of 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
<PAGE>
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
--
within eight Business Days after such Person would otherwise become an Acquiring
Person (but for the operation of this clause (ii)), such Person notifies the
--
Board of Directors that such Person did so inadvertently and within two Business
Days after such notification, such Person is the Beneficial Owner of less than
15% of the outstanding Common Shares.
(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
- -------- -------
1(c)(ii)(A) 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 1(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
-
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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 1(c)(ii)(B)) or
disposing of any securities of the Company; provided, however, that in no case
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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 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 Massachusetts 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.,
-----------------
Massachusetts time, on such date; provided, however, that if such date is not a
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Business Day it shall mean 5:00 P.M., Massachusetts 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, $0.0001 par value. "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) "Distribution Date" shall mean the earlier of (i) the Close of
----------------- -
Business on the tenth Business Day (or such later date as may be determined by
action of a majority of the members of the Board of Directors then in office)
after the Shares Acquisition Date (or, if the tenth Business 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 Business Day (or
--
such later date as may be determined by action of a majority of the members of
the Board of Directors then in office)
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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.
(h) "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.
(i) "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.
(j) "Final Expiration Date" shall mean January 14, 2009.
---------------------
(k) "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 a
-------- -------
majority of the members of the Board of Directors then in office has determined
that the offer is both adequate and otherwise in the best interests of the
Company and its stockholders (taking into account all factors that the Board of
Directors deems 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).
(l) "Person" shall mean any individual, firm, corporation or other
------
entity, and shall include any successor (by merger or otherwise) of such entity.
(m) "Preferred Shares" shall mean shares of Series A Junior Preferred
----------------
Stock of the Company.
(n) "Purchase Price" shall have the meaning set forth in Section 4(a)
--------------
hereof.
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(o) "Record Date" shall have the meaning set forth in the recitals at
-----------
the beginning of this Agreement.
(p) "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.
(q) "Redemption Price" shall have the meaning set forth in Section
----------------
23(a) hereof.
(r) "Rights Dividend Declaration Date" shall have the meaning set
--------------------------------
forth in the recitals at the beginning of this Agreement.
(s) "Section 13 Event" shall mean any event described in clause (i),
----------------
(ii) or (iii) of Section 13(a) hereof.
(t) "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 1(a)(ii) hereof, then no Shares Acquisition Date
shall be deemed to have occurred.
(u) "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.
(v) "Total Exercise Price" shall have the meaning set forth in Section
--------------------
4(a) hereof.
(w) "Trading Day" shall have the meaning set forth in Section 11(d)
-----------
hereof.
(x) 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
5
<PAGE>
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 Agent.
Section 3. Issuance of Rights Certificates.
-------------------------------
(a) Until the Distribution Date, (i) the Rights will be evidenced
-
(subject to the provisions of Section 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 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, separated 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 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.
6
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(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
INNOVASIVE DEVICES, INC. and BANKBOSTON, N.A., as the Rights
Agent, dated as of January 14, 1999 (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
INNOVASIVE DEVICES, 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. INNOVASIVE DEVICES, 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 represented 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 cancelled
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
7
<PAGE>
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 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
8
<PAGE>
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 President or any Vice President, either manually or by facsimile
signature, and by the Treasurer or an Assistant Treasurer 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
through 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
9
<PAGE>
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 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 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) 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 $28, 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
10
<PAGE>
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 depositary agent, requisition from the depositary agent of
depositary 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 depositary agent) and the Company hereby directs the depositary 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
---
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder and (iv) 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
11
<PAGE>
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.
(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 cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall,
12
<PAGE>
at the written request of the Company, destroy such cancelled 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 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
13
<PAGE>
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 depositary
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 depositary 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 evidenced thereby, the
14
<PAGE>
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 time 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
15
<PAGE>
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.
(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 Organization 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
16
<PAGE>
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 stockholder or regulatory
approval for such issuance, (4) debt securities of the Company except to the
-
extent that the Company has not obtained any necessary stockholder 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 that the Company has not obtained any necessary
stockholder 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
stockholder 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
17
<PAGE>
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 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) or evidences of indebtedness
or assets (other than a regular quarterly cash
18
<PAGE>
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 (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 Days 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, 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
19
<PAGE>
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 Quotations 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),
20
<PAGE>
(j), (k), (l) 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 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
21
<PAGE>
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.
(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 bill 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
--
22
<PAGE>
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 stockholders.
(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 stockholders 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.
(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
23
<PAGE>
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
-
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.
- -------------
(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
24
<PAGE>
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
25
<PAGE>
Principal Party following the first occurrence of a Section 13 Event;
(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 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
26
<PAGE>
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
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)
27
<PAGE>
(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 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
28
<PAGE>
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 violators 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 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 Stockholder. 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 stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to
29
<PAGE>
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 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 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
counter-signature of the predecessor Rights Agent and deliver such Rights
Certificates so
30
<PAGE>
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 President, any Vice President, the Chief
Financial Officer, the Clerk or any Assistant Clerk 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.
31
<PAGE>
(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.
(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 Clerk or any Assistant
Clerk 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
32
<PAGE>
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 stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not 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.
(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 provisions 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
33
<PAGE>
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 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 stockholder 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
$50,000,000. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the 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 Certificate. 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
34
<PAGE>
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 of 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 the members of the Board of 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.
(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.
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
35
<PAGE>
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 action of a majority of
the members of the Board of Directors then in office, 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 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
36
<PAGE>
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 members of the Board of Directors then in office, 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 the Board of Directors
by action of a majority of the members of the Board of Directors then in office,
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 9(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 action of a majority of the
members of the Board of Directors then in office, at any time before any Person
has become an Acquiring Person,
37
<PAGE>
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 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
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 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:
Innovasive Devices, Inc.
734 Forest Street
Marlboro, Massachusetts 01752
Attention: President
38
<PAGE>
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:
BankBoston, N.A.
c/o EquiServe Limited Partnership
150 Royall Street
Canton, MA 02102
Attention: Client Administration
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 by action of a majority of the members of
the Board of Directors then in office) or (iv) 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.
39
<PAGE>
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 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 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, 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
of 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 of 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
40
<PAGE>
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 Commonwealth of Massachusetts and for all purposes shall be
governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts applicable to contracts to be made and performed entirely within
Massachusetts.
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.
[The remainder of this page is left blank intentionally.]
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Attest: INNOVASIVE DEVICES, INC.
By: /s/ Roslyn G. Daum By: /s/ Richard D. Randall
---------------------- --------------------------
Roslyn G. Daum Richard D. Randall
Clerk President
Attest: BANKBOSTON, N.A.
By: /s/ Geraldine Murray By: /s/ Katherine Anderson
---------------------- --------------------------
Name: Geraldine Murray Name: Katherine Anderson
Title: Account Manager Title: Director of Client Services
<PAGE>
EXHIBIT A
---------
The Commonwealth of Massachusetts
Office of the Massachusetts Secretary of State
One Ashburton Place, Boston, Mass. 02108
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OR A CLASS OF STOCK
General Laws, Chapter 156B, Section 26
---------
We, Richard D. Randall, President, and Roslyn G. Daum, Clerk of Innovasive
Devices, Inc., located at 734 Forest Street, Marlboro, Massachusetts 01752, do
hereby certify that at a meeting of the directors of the Corporation held on
January 12, 1999, the following vote establishing and designating a series of a
class of stock and determining the relative rights and preferences thereof was
duly adopted:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation (the "Board of Directors") by the
provisions of Article IV of the Amended and Restated Articles of Organization of
the Corporation (the "Articles of Organization"), there hereby is created, out
of the 1,000,000 shares of Preferred Stock of the Corporation, $0.01 par value,
authorized in Article III of the Articles of Organization (the "Preferred
Stock"), a series of the Preferred Stock designated as "Series A Junior
Preferred Stock" (the "Series A Junior Preferred Stock") consisting of 25,000
shares, which series shall have the following preferences, voting powers,
qualifications and special or relative rights and privileges:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Junior Preferred Stock", $0.01 par value, and the number
of shares constituting such series shall be 25,000.
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 Junior Preferred Stock with respect to dividends, the holders of
shares of Series A Junior 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
<PAGE>
Series A Junior 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 Junior Preferred Stock.
In the event the Corporation shall at any time after January 14, 1999 (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 Junior
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 ere outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior 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 Junior Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Series A Junior
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 Junior
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 Junior 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 Junior Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon,
2
<PAGE>
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 Junior
-------------
Preferred Stock shall have the following voting rights.
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Junior Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the stockholders 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 to a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Junior
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 Junior Preferred Stock and the holders of shares of Common
Stock shall vote together as one class on all matters submitted to a vote of
stockholders of the corporation.
(C) Except as required by law, holders of Series A Junior 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 Junior Preferred Stock unless concurrently therewith it shall
declare a dividend on the Series A Junior Preferred Stock as required by Section
2 hereof.
(B) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Junior Preferred
Stock outstanding shall have been paid in full, the Corporation shall not
3
<PAGE>
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with Series A Junior Preferred Stock,
except dividends paid ratably on the Series A Junior 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 Junior 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 Junior Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares
of Series A Junior Preferred Stock, or any shares of stock ranking on a parity
with the Series A Junior 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 Junior 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.
4
<PAGE>
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 Junior Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior 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
Junior 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 Junior 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 Junior 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 Junior 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 Junior 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
5
<PAGE>
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 Junior
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 Junior Preferred
-------------
Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior 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 Organization 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 Junior 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 Junior Preferred
Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior 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 Junior Preferred Stock.
6
<PAGE>
IN WITNESS WHEREOF AND UNDER THE PAINS AND PENALTIES OF PERJURY, we have
hereto signed our names this ___ day of January, 1999.
________________________________
Richard D. Randall, President
________________________________
Roslyn G. Daum, Clerk
7
<PAGE>
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
--------------------------
Certificate No. ___. ____ Rights
NOT EXERCISABLE AFTER JANUARY 14, 2009 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 January 14, 1999 (the "Rights
Agreement"), between INNOVASIVE DEVICES, INC., a Massachusetts corporation (the
"Company"), and BANKBOSTON, N.A. (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., Massachusetts time, on ___________ 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 Junior Preferred Stock, par value $0.01 per share, (the
"Preferred Shares"), of the Company, at a purchase price of $28 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) set
________________________
/1/ The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
<PAGE>
forth above are the number and Purchase Price as of January 14, 1999 based on
the Preferred Shares as constituted at such date. As provided in the Rights
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 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 holders 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 stockholder of the Company or any right to vote
2
<PAGE>
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this 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.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of ___________ ___, _____.
Attest: INNOVASIVE DEVICES, INC.
____________________________________ By:__________________________________
Clerk President
Countersigned:
BANKBOSTON, N.A.,
as Rights Agent
By:_________________________________
Authorized Signature
3
<PAGE>
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: ___________,_____ ___________________________________
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.
4
<PAGE>
Form of Reverse Side of Rights Certificate -- continued
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] 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: ______________ ,____ _________________________________
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.
5
<PAGE>
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: ______________ ,____ _________________________________
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.
6
<PAGE>
Form of Reverse Side of Rights Certificate -- continued
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: ________________, ____ ____________________________
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.
7
<PAGE>
Form of Reverse Side of Rights Certificate -- continued
NOTICE
------
The signature in the foregoing Forms of Assignment and Election and
Certificates 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.
8
<PAGE>
EXHIBIT C
---------
INNOVASIVE DEVICES, INC.
STOCKHOLDER RIGHTS PLAN
Summary of Rights
-----------------
Distribution and The Board of Directors has declared a dividend of one
Transfer of Right for each share of INNOVASIVE DEVICES, INC. Common
Rights; Rights Stock outstanding. Prior to the Distribution Date
Certificate: referred to below, the Rights will be evidenced by and
- ----------- trade with the certificates for the Common Stock. After
the Distribution Date, INNOVASIVE DEVICES, INC. (the
"Company") will mail Rights certificates to the
Company's stockholders and the Rights will become
transferable apart from the Common Stock.
Distribution Rights will separate from the Common Stock and become
Date: exercisable following the tenth business day (or such
- ---- later date as may be determined by the Board of
Directors)(the "Distribution Date") after a person or
group (a) acquires beneficial ownership of 15% or more
of the Company's Common Stock 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
Purchasable Upon the holder to purchase, for $28, a fraction of a share
Exercise of of the Company's Preferred Stock with economic terms
Rights: similar to that of one share of the Company's Common
- ------ Stock.
<PAGE>
Flip-In: If an acquiror (an "Acquiring Person") obtains 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")), 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 below),
- --------- (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 At any time after an event triggering the flip-in or
Provision: 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 the Company's option for
the Rights: $0.01 per Right at any time on or prior to the tenth
- ---------- day (or such later date as may be determined by the
Board of Directors) after public announcement that a
person has acquired beneficial ownership of 15% or more
of the Company's Common Stock (the "Shares Acquisition
Date").
<PAGE>
Expiration of The Rights expire on the earliest of (a) January 14,
the Rights: 2009, (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 The terms of the Rights and the Rights Agreement may be
Terms of Rights: amended in any 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
Provisions: anti-dilution provisions.
- ----------
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, stockholders may recognize
taxable income.
The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement, dated as of January 14, 1999, between the Company and the
Rights Agent.
