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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 16, 1999
Inamed Corporation
(Exact Name of Registrant as Specified in Charter)
Delaware 001-09741 59-0920629
(State or Other Juris- (Commission File (IRS Employer
diction of Incorporation) Number) Identification No.)
5540 Ekwill Street - Suite D, Santa Barbara, California 93111-2919
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number: (805) 692-5400
N/A
(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On November 16, 1999, Inamed Corporation (the "Company") and U.S. Stock
Transfer Corporation, as Rights Agent (the "Rights Agent") enter into an Amended
and Restated Rights Agreement (the "Amended and Restated Rights Agreement")
between the Company and the Rights Agent. The Amended and Restated Rights
Agreement provides for the substitution of one one-thousandth of a share of
Series A Junior Participating Preferred Stock (the "Preferred Stock") for each
share of common stock issuable upon the exercise of rights. Each one
one-thousandth of a share of the Preferred Stock is designed to have a value
approximately equal to, and rights similar to, one share of common stock.
This summary description of the Amended and Restated Rights Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Amended and Restated Rights Agreement which is attached hereto as Exhibit
4.1 and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
Exhibit Description
4.1 Amended and Restated Rights Agreement, dated as of November
16, 1999, between Inamed Corporation and U.S. Stock Transfer
Corporation, as Rights Agent.
10.1 Employment Agreement, dated January 23, 1998, by and between
Richard G. Babbitt and Inamed Corporation and other related
agreements.
10.2 Employment Agreement, dated January 22, 1998, by and between
Ilan K. Reich and Inamed Corporation and other related
agreements.
10.3 Form of Warrant for Senior Executive Officers.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
INAMED CORPORATION
Date: November 19, 1999 By: /s/ Ilan K. Reich
--------------------------------
Name: Ilan K. Reich
Title: President
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EXHIBIT INDEX
The following exhibits are filed herewith.
Exhibit Description
4.1 Amended and Restated Rights Agreement, dated as of November
16, 1999, between Inamed Corporation and U.S. Stock Transfer
Corporation, as Rights Agent.
10.1 Employment Agreement, dated January 23, 1998, by and between
Richard G. Babbitt and Inamed Corporation and other related
agreements.
10.2 Employment Agreement, dated January 22, 1998, by and between
Ilan K. Reich and Inamed Corporation and other related
agreements.
10.3 Form of Warrant for Senior Executive Officers.
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Exhibit 4.1
INAMED CORPORATION
and
U.S. STOCK TRANSFER CORPORATION, as
Rights Agent
Amended and Restated Rights Agreement
Dated as of November 16, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 1. CERTAIN DEFINITIONS ............................................................... 2
Section 2. APPOINTMENT OF RIGHTS AGENT ....................................................... 7
Section 3. ISSUE OF RIGHT CERTIFICATES ....................................................... 8
Section 4. FORM OF RIGHT CERTIFICATES ........................................................ 11
Section 5. COUNTERSIGNATURE AND REGISTRATION ................................................. 11
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES ........................... 12
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS ..................... 13
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES ................................ 16
Section 9. AVAILABILITY OF PREFERRED SHARES .................................................. 16
Section 10. PREFERRED SHARES RECORD DATE ...................................................... 18
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS ................ 19
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES ........................ 31
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER .............. 31
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES ........................................... 33
Section 15. RIGHTS OF ACTION .................................................................. 35
Section 16. AGREEMENT OF RIGHT HOLDERS ........................................................ 36
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER ................................. 36
Section 18. CONCERNING THE RIGHTS AGENT ....................................................... 37
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT ........................ 38
Section 20. DUTIES OF RIGHTS AGENT ............................................................ 39
Section 21. CHANGE OF RIGHTS AGENT ............................................................ 41
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES ................................................ 43
Section 23. REDEMPTION ........................................................................ 43
Section 24. EXCHANGE .......................................................................... 45
Section 25. NOTICE OF CERTAIN EVENTS .......................................................... 47
Section 26. NOTICES ........................................................................... 48
Section 27. SUPPLEMENTS AND AMENDMENTS ........................................................ 49
Section 28. SUCCESSORS ........................................................................ 50
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC ........................ 50
Section 30. BENEFITS OF THIS AGREEMENT ........................................................ 51
Section 31. SEVERABILITY ...................................................................... 51
Section 32. GOVERNING LAW ..................................................................... 51
Section 33. COUNTERPARTS ...................................................................... 52
Section 34. DESCRIPTIVE HEADINGS .............................................................. 52
</TABLE>
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EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Certificate of Designations of Series A Junior
Participating Preferred Stock
Exhibit B Form of Right Certificate
Exhibit C Summary of Rights to Purchase Preferred Shares
</TABLE>
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AMENDED AND RESTATED RIGHTS AGREEMENT
Amended and Restated Rights Agreement, dated as of November 16, 1999,
between Inamed Corporation, a Delaware corporation (the "Company") with its
executive offices in Santa Barbara, California, and U.S. Stock Transfer
Corporation (the "Rights Agent").
On June 2, 1997, the Board of Directors of the Company authorized and
declared a dividend of one Company Common Share (as hereinafter defined)
purchase right (an "Original Right") for each Common Share of the Company
outstanding on June 13, 1997 (the "Record Date"), each Original Right
representing the right to purchase one Common Share of the Company, upon the
terms and subject to the conditions herein set forth, and further authorized and
directed the issuance of one Original Right with respect to each Common Share of
the Company issued after the Record Date; provided, however, that no additional
Original Rights were to be issued after the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined). To that end, the Company entered into the Rights Agreement dated as of
June 2, 1997 with the Rights Agent (the "Original Rights Agreement").
On November 16, 1999, the Board of Directors of the Company authorized
an amendment to the Original Agreement and the Original Rights to, among other
things, substitute for each Common Share of the Company issuable upon exercise
of each Original Right one one-thousandth of a Preferred Share (as hereinafter
defined) of the Company and, in furtherance thereof, the Company and the Rights
Agent are entering into this Amended and Restated Rights Agreement (the Original
Rights Agreement, as so amended and restated and as it may hereafter be amended
in accordance with its terms, being herein referred to as "this Agreement"; and
the
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Original Rights, as amended in accordance with the terms hereof, being
referred to herein as the "Rights"), pursuant to which the Original Rights, as
amended in accordance with the terms of this Agreement, shall remain issued and
outstanding.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, after June 2, 1997,
shall become the Beneficial Owner (as such term is hereinafter defined) of 15%
or more of the Common Shares of the Company then outstanding, but shall not
include the Company, any Subsidiary (as such term is hereinafter defined) of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any entity holding Common Shares of the Company for or pursuant to
the terms of any such plan. Notwithstanding anything in this Agreement that
might otherwise be deemed to the contrary; (i) no Person shall become an
"Acquiring Person" as the result of an acquisition of Common Shares of the
Company by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 15% or more of the Common Shares of the Company then outstanding, provided,
however, that if a Person shall become the Beneficial Owner of 15% or more of
the Common Shares of the Company then outstanding by reason of share purchases
by the Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an "Acquiring Person"; (ii) if the Board of
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Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person" has become such inadvertently, and such
Person divests as promptly as practicable a sufficient number of Common Shares
so that such Person would no longer be an "Acquiring Person", then such Person
shall not be deemed to be an "Acquiring Person" for any purposes of this
Agreement; (iii) no officer or director of the Company who or which, together
with all Affiliates of such Person, is the Beneficial Owner of 15% or more of
the outstanding Common Shares of the Company as of the Record Date shall be
deemed an "Acquiring Person" for any purpose of this Agreement, provided, that
such officer or director together with his Affiliates does not become the
Beneficial Owner of 20% or more of the outstanding Common Shares of the Company,
and provided further that such officer or director need not continue in such
capacity after the Record Date; and (iv) Appaloosa Management L.P., together
with its Affiliates and Associates (collectively, "Appaloosa"), shall not be
deemed an "Acquiring Person" for any purpose of this Agreement with respect to
beneficial ownership of 15% or more of the outstanding Company Common Shares so
long as Appaloosa does not become the Beneficial Owner of Common Shares in an
amount in excess of the "Appaloosa Threshold" (as defined below). For purposes
of this Agreement, the "Appaloosa Threshold" as at any date shall mean an amount
equal to the sum of (A) all Common Shares of the Company beneficially owned by
Appaloosa as of March 1, 1999 (the "Grandfather Date"), including any Common
Shares of the Company which may be deemed to be beneficially owned by Appaloosa
through Warrants or other similar rights held by Appaloosa as of the Grandfather
Date, plus (B) an additional 875,000 Common Shares of the Company (adjusted for
stock splits, stock dividends and other similar transactions) of which Appaloosa
may acquire beneficial ownership after the Grandfather Date, plus (C) all Common
Shares of the Company in which Appaloosa may acquire beneficial
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ownership after the Grandfather Date through the exercise of any preemptive or
similar rights held by Appaloosa. The provisions of clause (iv) above shall not
apply to (x) any third party transferees not Affiliated with Appaloosa, or (y)
any Common Shares of the Company in which Appaloosa may acquire Beneficial
Ownership after the Grandfather Date other than as described under (B) or (C) of
clause (iv).
(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;
(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
these Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, 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 (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a
Person shall not be
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deemed the Beneficial Owner of, or to beneficially own, any security
pursuant to this clause (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 promulgated under the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has 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) 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.
Additionally, notwithstanding anything in this definition of Beneficial
Owner to the contrary, the phrase "then outstanding," when used with reference
to a Person's beneficial ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
Notwithstanding the foregoing, none of the Company's directors or
officers shall be deemed to be the Beneficial Owner of, or to beneficially own,
any Common Shares of the Company owned by any other director or officer of the
Company solely by virtue of such persons acting in their capacities as such,
including, without limitation, in connection with any
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formulation and publication of the Board of Directors' recommendation of a
position, and any actions taken in furtherance thereof, with respect to any
acquisition proposal relating to the Company, a tender or exchange offer for any
Common Shares of the Company or any solicitation of proxies with respect to any
Common Shares of the Company.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday,
or a day on which banking institutions in the State of New York 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., New
York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company shall mean
the shares of common stock, par value $.01 per share, of the Company. "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 have the meaning set forth in Section 3
hereof.
(h) "Final Expiration Date" shall have the meaning set forth in Section
7 hereof.
(i) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(j) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the Company having
the rights and preferences set
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forth in the Form of Certificate of Designations, Preferences and Rights of
Series A Junior Participating Preferred Stock, a copy of which is attached to
this Agreement as Exhibit A.
(k) "Purchase Price" shall have the meaning set forth in Section 7
hereof, as the same may be adjusted from time to time in accordance with the
terms of this Agreement.
(l) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(m) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(n) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(o) "Trading Day" shall have the meaning set forth in Section 11
hereof.
Certain additional terms used wholly within a subsequent Section of
this Agreement shall have the meaning given to them in the relevant Section of
this Agreement for purposes of such Section.
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 of the Company) in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. ISSUE OF RIGHT CERTIFICATES. (a) Until the earlier of (i)
the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day
(or such later date as
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may be determined by action of the Board of Directors prior to such time as any
Person becomes an Acquiring Person) after the date of the commencement 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 entity
holding Common Shares for or pursuant to the terms of any such plan) of, or of
the first public announcement of the intention of 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 entity holding Common Shares for or
pursuant to the terms of any such plan) to commence, a tender or exchange offer
the consummation of which would result in any Person becoming the Beneficial
Owner of Common Shares aggregating 15% or more of the then outstanding Common
Shares (including any such date which is after the date of this Agreement and
prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares of the Company registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the right to receive Right Certificates
will be transferable only in connection with the transfer of Common Shares of
the Company. 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, insured, postage-prepaid mail, to each record holder of Common
Shares of the Company as of the close of business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of EXHIBIT B hereto (a "Right
Certificate"), evidencing one Right for each Common Share of the
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Company so held. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) As soon as practicable after the date of this Agreement, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, 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 November 16, 1999, at the address of such holder shown
on the records of the Company. With respect to certificates for Common Shares of
the Company outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof. Until the earliest of the Distribution Date, the Redemption
Date or the Final Expiration Date, the surrender for transfer of any certificate
for Common Shares of the Company outstanding on the Record Date, with or without
a copy of the Summary of Rights attached thereto, shall also constitute the
transfer of the Rights associated with the Common Shares of the Company
represented thereby.
(c) Certificates for Common Shares of the Company which become
outstanding (including, without limitation, reacquired Common Shares referred to
in the last sentence of this paragraph (c)) after the date hereof but prior to
the earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in an Amended and Restated Rights Agreement
between Inamed Corporation and U.S. Stock Transfer Corporation, dated
as of November 16, 1999 (the "Rights Agreement"), the terms of which
are hereby incorporated herein by
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reference and a copy of which is on file at the principal executive
offices of Inamed Corporation. 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. Inamed Corporation 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, as set
forth in the Rights Agreement, Rights issued to any Person who becomes
an Acquiring Person (as defined in the Rights Agreement) may become
null and void. The Rights shall not be exercisable by a holder in any
jurisdiction where the requisite qualification to the issuance to such
holder of the Rights in such jurisdiction, shall not have been obtained
or obtainable.
With respect to certificates for Common Shares of the Company
outstanding on the date of this Agreement containing the legend provided for in
the Original Agreement as well as certificates for Common Shares of the Company
containing the foregoing legend, until the Distribution Date, the Rights
associated with the Common Shares of the Company 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 of the Company represented thereby. Any
Common Shares of the Company purchased or acquired by the Company 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 of the
Company which are no longer outstanding.
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Section 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as 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 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-thousandths of a Preferred
Share as shall be set forth therein at the Purchase Price, but the number of
such one one-thousandths of a Preferred Share and the Purchase Price shall be
subject to adjustment as provided herein.
Section 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents, or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who
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signed such Right Certificates had not ceased to be such officer of the Company;
and any Right Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Right Certificate, shall be a
proper officer of the Company to sign such Right Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.
Subject to the provisions of Section 14 hereof, at any time after the
close of business on the Distribution Date, and at or prior to the close of
business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11(a)(ii) hereof
or that have been exchanged pursuant to Section 24 hereof) may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of one
one-thousandths of a Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Right Certificate
or Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall
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endorse and surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right 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 Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS. (a) The registered holder of any Right 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 Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-thousandth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the close of business on June 2, 2007 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as
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provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-thousandth of a Preferred Share
purchasable pursuant to the exercise of a Right shall initially be $80.00, and
shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below (the "Purchase Price").
(c) Subject to the Company's rights under Section 11(a)(iii) hereof,
upon receipt of a Right Certificate representing exercisable Rights, with the
form of election to purchase duly executed, accompanied by payment of the
Purchase Price for the shares to be purchased (plus an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof) by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) requisition from the depositary agent depositary receipts
representing such number of one 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 or the amount of cash, property or other securities to be paid or
issued in lieu of the issuance of Common Shares in accordance with Section
11(a)(iii) hereof, (iii) after
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receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt, deliver such cash, property or
other securities to or upon the order of the registered holder of such Right
Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Subject to the Company's rights under Section 11(a)(iii) hereof to
otherwise fulfill its obligations, the Company covenants and agrees that it will
cause to be kept available out of its authorized and unissued Preferred Shares,
the number of Preferred Shares that will be sufficient to permit the exercise in
full of all outstanding Rights in accordance with this Section 7.
(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 of Rights upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed a certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliated of Associates
thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered for the purpose of exercise, transfer, split
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<PAGE> 19
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
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. AVAILABILITY OF PREFERRED SHARES. 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.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right 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 Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for Preferred Shares
in a name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for transfer, delivery or 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
16
<PAGE> 20
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
To the extent necessary or appropriate, the Company shall (i) prepare
and file, as soon as possible following the Distribution Date, a registration
statement under the Securities Act of 1933 (the "Act") with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as possible after
such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act) until no
longer required to do so under the Act with respect to securities purchasable
upon exercise of the Rights. The Company will also take all such action as may
be required as is appropriate under the securities or blue sky laws of such
jurisdictions as may be necessary or appropriate with respect to the securities
purchasable upon the exercise of the Rights. The Company may temporarily suspend
for a period not to exceed 90 days following the Distribution Date, the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension of
exercisability of Rights referred to in this paragraph, 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.
Notwithstanding any provision in this Agreement to the contrary, the
Rights shall not be exercisable by a holder in any jurisdiction where the
requisite qualification to the issuance to such holder, or the exercise by such
holder of the Rights in such jurisdiction, shall not have been obtained or be
obtainable, or the exercise thereof shall not be permitted under applicable law
or a registration statement shall not have been declared effective.
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Section 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (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 Common
Shares transfer books of the Company are open.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number of Preferred Shares or other securities
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 outstanding Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares 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), except as otherwise provided in this Section 11(a), 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, and the
number and kind of shares of capital stock issuable on such date, shall be
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<PAGE> 22
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification. 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 Sections 23 and 24 of this Agreement, in the event any
Person becomes an Acquiring Person, each holder of a Right shall thereafter have
a right to receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-thousandths of a Preferred
Share for which a Right is then exercisable, in accordance with the terms of
this Agreement and in lieu of Preferred Shares, such number of Common Shares of
the Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of a one one-thousandths of a Preferred
Share for which a Right is then exercisable and dividing that product by (y) 50%
of the then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date such Person became an
Acquiring Person (such resulting number of shares, the "Adjustment Shares"). In
the event that any Person shall become an Acquiring Person and the Rights shall
then be outstanding, the Company shall not take any action which would eliminate
or diminish the benefits intended to be afforded by the Rights.
Notwithstanding the foregoing or anything in this Agreement to the
contrary, from and after the time any Person becomes an Acquiring Person, any
Rights that are to be or were
19
<PAGE> 23
acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be null and void and any holder of
such Rights shall thereafter have no right whatsoever with respect to such
Rights under any provision of this Agreement or otherwise. No Right Certificate
shall be issued pursuant to Section 3 that represents Rights beneficially owned
by an Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof; no Right Certificate shall be
issued at any time upon the transfer of any Rights to an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate; and any Right Certificate delivered to the Rights Agent for transfer
to an Acquiring Person whose Rights would be void pursuant to the preceding
sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common Shares of
the Company issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Board of Directors shall, to the extent permitted by applicable law
and any material agreements then in effect to which the Company is a party, (A)
determine the excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right in accordance with the foregoing subparagraph (ii) (the
"Current Value") over (2) the then current Purchase Price multiplied by the
number of one one-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to the time that the Acquiring Person became such
(such excess is hereinafter referred to as the "Spread"), and (B) with respect
to each Right (other than Rights which have been void pursuant to Section
11(a)(ii)), make adequate provision to substitute for the Adjustment Shares
issuable in accordance with subparagraph (ii) upon exercise of the Right and
payment of the applicable
20
<PAGE> 24
Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) other
equity securities of the Company (including, without limitation, shares or
fractions of shares of preferred stock which, by virtue of having dividend,
voting and liquidation rights substantially comparable to those of the Common
Shares of the Company, are deemed in good faith by the Board of Directors to
have substantially the same value as the Common Shares of the Company (including
Preferred Shares), (4) debt securities of the Company, (5) other assets, or (6)
any combination of the foregoing, having a value which, when added to the value
of the Common Shares of the Company actually issued upon exercise of such Right,
shall have an aggregate value equal to the Current Value, where such aggregate
value has been determined by the Board of Directors upon the advice of an
investment banking firm selected by the Board of Directors; provided however, if
the Company shall not make adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the date that any Person
shall have become an Acquiring Person, then the Company shall be obliged to
deliver, to the extent permitted by applicable law and any material agreements
then in effect to which the Company is a party, upon the surrender for excise of
a Right and without requiring payment of the Purchase Price, Common Shares of
the Company (to the extent available), and then, if necessary, cash which shares
and/or cash have an aggregate value equal to the Spread. If, upon the date any
Person becomes an Acquiring Person, the Board of Directors shall determine in
good faith that it is likely that sufficient additional Common Shares of the
Company could be authorized for issuance upon exercise in full of the Rights,
then, if the Board of Directors so elects, the thirty (30) day period set forth
above may be extended to the extent necessary, but not more than ninety (90)
days after any Person becomes an Acquiring Person, in order that the Company may
seek stockholder approval for the authorization of such additional shares (such
thirty (30) day period, as it may be extended,
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<PAGE> 25
is hereinafter referred to as the "Substitution Period"). To the extent that the
Company determines that some action is required pursuant to the first and/or
second sentence of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 11(a)(ii) hereof and the last sentence of this Section
11(a)(iii) hereof, that such action shall apply uniformly to all outstanding
Rights and (y) may suspend the exercisability of the Rights until the expiration
of the Substitution Period in order to seek any authorization of additional
shares and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes
of this Section 11(a)(iii), the value of the Common Shares of the Company shall
be the current per share market price (as determined pursuant to Section 11(d)
hereof) on the date the Company's right of redemption pursuant to Section 23(a)
hereof expires and the per share or fractional value of any other equity
security of the Company with substantially the same value as the Common Shares
of the Company shall be deemed to equal the current per share market price of
the Common Shares of the Company. The Board of Directors of the Company may, but
shall not be required to, establish procedures to allocate the right to receive
Common Shares of the Company upon the exercise of the Rights among holders of
Rights pursuant to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Common Shares or securities convertible into Preferred
Shares or securities convertible into Preferred Shares at a
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<PAGE> 26
price per Preferred Share (or having a conversion price per share, if a security
convertible into Preferred Shares) less than the then current per share market
price of the Preferred Shares (as defined in Section 11(d)) on such record date,
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 Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares 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 Preferred Shares outstanding on such
record date plus the number of additional Preferred Shares 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. Preferred 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 fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend
23
<PAGE> 27
or a dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), 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 then current per share market price of the
Preferred Shares 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 assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one Preferred Share and the
denominator of which shall be such current per share market price of the
Preferred Shares. 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 again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
(as such term is hereinafter defined) 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 (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to the
expiration of 30 Trading Days 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
24
<PAGE> 28
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 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 quoted price or, if not so
quoted, 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. 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.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in accordance
with the method set forth in Section 11(d)(i). If the Preferred Shares are not
publicly traded, the "current per share market price" of the Preferred Shares
shall be conclusively deemed to be the current per share market price of the
Common Shares of the Company as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring
25
<PAGE> 29
after the date hereof), multiplied by one thousand (1,000). If neither the
Common Shares of the Company nor the Preferred Shares are 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.
(e) 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 one ten-millionth of a
Preferred Share or one ten-thousandth of any other share or security, 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 years from the date of the transaction which requires such
adjustment or (ii) the date of the expiration of the right to exercise any
Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13 hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right 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 Preferred Shares contained in Sections 12, 13 and 14 and the
provisions of Sections 7, 9, 10 and 13 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
26
<PAGE> 30
Purchase Price, the number of one 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 Sections 11(b) and (c), 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 one one-thousandths of
a Preferred Share (calculated to the nearest one ten-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-thousandths of a
Preferred Share 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 to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a Preferred Share 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
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 one 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
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<PAGE> 31
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 Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right 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 Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right 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 one one-thousandths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of Common Shares which
were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the Preferred Shares
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel,
28
<PAGE> 32
be necessary in order that the Company may validly and legally issue fully paid
and nonassessable Preferred Shares 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 Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares 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 upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, 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 consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the Company
to holders of its Preferred Shares shall not be taxable to such stockholders.
(n) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares of the Company payable in Common Shares of the
Company or (ii) effect a subdivision,
29
<PAGE> 33
combination or consolidation of the Common Shares of the Company (by
reclassification or otherwise than by payment of dividends in Common Shares of
the Company) into a greater or lesser number of Common Shares of the Company,
then in any such case (A) the number of one one-thousandths of a Preferred Share
purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-thousandths of a Preferred Share
so purchasable immediately prior to such event by a fraction, the numerator of
which is the number of Common Shares of the Company outstanding immediately
before such event and the denominator of which is the number of Common Shares of
the Company outstanding immediately after such event, and (B) each Common Share
of the Company outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share of the Company
outstanding immediately prior to such event had issued with respect to it. The
adjustments provided for in this Section 11(n) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or 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 Common Shares of the
Company or the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section
25 hereof.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. In the event, directly or indirectly, at any time after a Person
30
<PAGE> 34
has become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares of the Company shall be changed into or
exchanged for stock or other securities of any other Person (or the Company) or
cash or any other property, or (c) 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 other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (other than Rights which have become void
pursuant to Section 11(a)(ii) hereof) shall thereafter have the right to
receive, upon the exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-thousandths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of such
other Person (including the Company as successor thereto or as the surviving
corporation) as shall equal the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-thousandths of a Preferred Share
for which a Right is then exercisable and dividing that product by (B) 50% of
the then current per share market price of the Common Shares of such other
Person (determined pursuant to Section 11(d) hereof) on the date of consummation
of such consolidation, merger, sale or transfer; (ii) the issuer of such Common
Shares shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term "Company" as
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used in this Agreement, shall thereafter be deemed to refer to such issuer; and
(iv) such issuer shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares to permit the exercise
in full of all outstanding Rights in accordance with this Agreement) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights. The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and such issuer shall have
executed and delivered to the Rights Agent a supplemental agreement so
providing. The Company shall not enter into any transaction of the kind referred
to in this Section 13 if at the time of such transaction there are any 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. 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 Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right 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. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the
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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 Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are 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 Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which 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 which are
integral multiples of one one-thousandth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-thousandth of a Preferred
Share may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral
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multiples of one one-thousandth of a Preferred Share, the Company shall pay to
the registered holders of Right 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 one Preferred Share. For the purposes of this Section
14(b), the current market value of a Preferred Share shall be the closing price
of a Preferred Share (as determined pursuant to the second sentence of Section
11(d)(i) 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 right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
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 Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares of the Company); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares of the
Company), without the consent of the Rights Agent or of the holder of any other
Right Certificate (or, prior to the Distribution Date, of the Common Shares of
the Company), may, in his own behalf and for his 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 right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
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
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the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. AGREEMENT OF RIGHT 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 of the Company;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person in
whose name the Right 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 Right 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. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Right 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 Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the
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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 receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT. 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
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.
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 Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where
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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.
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 stock transfer or
corporate trust powers 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, 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 Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
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 Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been
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countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right 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 Right 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 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.
(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 be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
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(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 Right
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 Right 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 Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 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 Right Certificates after actual
notice that such change or adjustment is required); 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 Right 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.
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(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 Secretary or the Treasurer 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.
(h) The Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(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.
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 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares of the Company or Preferred Shares by registered or
certified mail, and to the holders of the Right
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Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon 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 Common Shares of the Company or Preferred Shares by registered or
certified mail, and to the holders of the Right 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 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 Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the registered holder of
any Right 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 legal business entity organized
and doing business under the laws of the United States or of the State of New
York (or of any other state of the United States so long as such entity is
authorized to do business in the State of New York, in good standing, having an
office in the State of New York, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to time of its
appointment as Rights Agent a combined capital and surplus of at least $25
million. 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
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with the predecessor Rights Agent and each transfer agent of the Common Shares
of the Company or Preferred Shares, and mail a notice thereof in writing to the
registered holders of the Right 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 RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right 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 Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares of the Company following the
Distribution Date and prior to the earlier of the Redemption Date and Final
Expiration Date, subject to the other terms of this Agreement, the Company may
with respect to Common Shares of the Company issued or sold pursuant to (i) the
exercise of stock options, (ii) under any employee plan or arrangement, (iii)
upon the exercise, conversion or exchange of securities, notes or debentures
issued by the Company or (iv) a contractual obligation of the Company, in each
case existing prior to the Distribution Date, issue Right Certificates
representing the appropriate number of Rights in connection with such issuance
or sale.
Section 23. REDEMPTION. (a) The Board of Directors of the Company may,
at its option, at any time prior to the close of business on the tenth Business
Day after the Shares Acquisition Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar
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transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The redemption of the Rights
by the Board of Directors may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors ordering
the redemption of the Rights, the Company shall mail a notice of redemption to
all the holders of the then outstanding Rights 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 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
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 of the Company prior
to the Distribution Date.
Section 24. EXCHANGE. (a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the
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then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 11(a)(ii) hereof) for
Common Shares of the Company at an exchange ratio of one Common Share of the
Company 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 "Exchange Ratio"). 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 of the Company 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 of the Company
then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (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 of the Company
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly 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 promptly
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 of the Company for
Rights will be
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effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares of
the Company issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Shares of the Company for issuance upon exchange of the Rights. In the
event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional Common Shares of the
Company, the Company shall substitute, for each Common Share of the Company that
would otherwise be issuable upon exchange of a Right, a number of Preferred
Shares or fraction thereof such that the current per share market price of one
Preferred Share multiplied by such number or fraction is equal to the current
per share market price of one Common Share of the Company as of the date of
issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of Common
Shares of the Company or to distribute certificates which evidence fractional
Common Shares of the Company. In lieu of such fractional Common Shares of the
Company, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Common Shares of the Company
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share of the Company. For the purposes of
this paragraph (d), the current market value of a whole Common Share of the
Company shall be the closing price of a Common Share of the Company (as
determined pursuant to the second
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sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares of the Company payable in Common Shares of the
Company or to effect a subdivision, combination or consolidation of the Common
Shares of the Company (by reclassification or otherwise than by payment of
dividends in Common Shares of the Company), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common Shares of the Company
and/or Preferred Shares, if any such date is to be fixed, and such notice shall
be so given in the case of any action
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covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes of such action, and
in the case of any such other action, at least 10 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares of the Company and/or Preferred Shares, whichever
shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) 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 Right 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:
Inamed Corporation
11 Penn Plaza
Suite 946
New York, New York 10001
Attention: General Counsel
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 Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
U.S. Stock Transfer Corporation
1745 Gardena Avenue
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<PAGE> 51
Glendale, California 91204
Attention: Richard Brown
Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right 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. The Company may (and the Rights
Agent shall at the direction of the Company) from time to time supplement or
amend this Agreement without the approval of any holders of Right Certificates
in order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
or to make any other provisions with respect to the Rights which the Company may
deem necessary or desirable, any such supplement or amendment to be evidenced by
a writing signed by the Company and the Rights Agent; provided, however, that
from and after such time as any Person becomes an Acquiring Person, this
Agreement shall not be amended or supplemented in any manner which would
adversely affect the interests of the holders of Rights (other than an Acquiring
Person or Affiliate or Associate of an Acquiring Person). Upon delivery of a
certificate from an appropriate officer of the Company which 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. Notwithstanding
the foregoing, the Company shall not amend, modify, supplement or replace
provision (iv) of Section 1(a) or otherwise amend, modify or supplement any
other provision of this Agreement which adversely affects the rights and
benefits of Appaloosa under such provision, in any such case without the prior
written consent of Appaloosa. It is understood and agreed that Appaloosa
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<PAGE> 52
is a third party beneficiary to this Rights Agreement and may enforce the
provisions of this Section as if it were a party to the Rights Agreement.
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 or any other class of capital stock 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-3d(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 to 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 purpose of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board to
any liability to the holders of the Rights.
49
<PAGE> 53
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 Right Certificates (and, prior to the Distribution
Date, the Common Shares of the Company) 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 Right Certificates (and, prior to the Distribution Date, the Common Shares
of the Company). Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interest of the holders of the
Company's 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.
Section 32. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
50
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
INAMED CORPORATION
By: /s/ David Bamberger
_______________________________________
Name: David Bamberger
Title: Senior Vice President, Secretary
and General Counsel
U.S. STOCK TRANSFER CORPORATION
By: /s/ Richard Brown
_______________________________________
Name: Richard Brown
Title: Vice President
<PAGE> 55
Exhibit A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
of
INAMED CORPORATION
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Inamed Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware at a meeting
duly called and held on November 16, 1999:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation of the Corporation, the Board of Directors hereby creates a
series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of
the Corporation and hereby states the designation and number of shares, and
fixes the relative rights, preferences, and limitations thereof as follows:
"Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of this series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Junior Preferred Stock") and the number of shares constituting the Series A
Junior Preferred Stock shall be twenty-five thousand (25,000). Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Series A Junior
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon
A-1
<PAGE> 56
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Junior Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any other stock) ranking prior and superior to the Series A
Junior Preferred Stock with respect to dividends, the holders of shares of
Series A Junior Preferred Stock, in preference to the holders of Common Stock,
par value $.01 per share (the "Common Stock"), of the Corporation, and of any
other junior 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 first day of March, June, September and
December in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A Junior
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $1 or (b) 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 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 declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, 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 (b) 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 outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the
Series A Junior Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(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, unless the date of issue
of such shares is prior to the record date for
A-2
<PAGE> 57
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, which record date shall
be not more than 60 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 declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, 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, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, in the
Certificate of Incorporation of the Corporation or by law, the holders of shares
of Series A Junior Preferred Stock and the holders of shares of Common Stock and
any other capital stock of the Corporation having general voting rights shall
vote together as one class on all matters submitted to a vote of stockholders of
the Corporation.
(C) Except as set forth herein, or as otherwise provided 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) 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
A-3
<PAGE> 58
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:
(i) declare or pay dividends, or make any other distributions,
on 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, 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 the 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 junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Series A Junior Preferred Stock; or
(iv) redeem or 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.
(B) 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 subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Designations creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (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
A-4
<PAGE> 59
Stock shall have received $1,000 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, provided that the holders of shares of Series A Junior
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity (upon
liquidation, dissolution or winding up) with the Series A Junior Preferred
Stock, except distributions made ratably on the Series A Junior Preferred Stock
and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Junior Preferred Stock were entitled immediately prior to such event under the
proviso in clause (1) 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 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 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 each share of
Series A Junior Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, 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. Rank. The Series A Junior Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of Preferred Stock.
A-5
<PAGE> 60
Section 10. Amendment. The Certificate of Incorporation of the
Corporation, as amended, shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Series A Junior Preferred Stock, voting together as a single class."
A-6
<PAGE> 61
IN WITNESS WHEREOF, Inamed Corporation has caused this Certificate of
Designations of Series A Junior Participating Preferred Stock to be duly
executed by its Senior Vice President, Secretary and General Counsel this 16th
day of November, 1999.
INAMED CORPORATION
_____________________________
Senior Vice President,
Secretary and General Counsel
A-7
<PAGE> 62
Exhibit B
Form of Right Certificate
Certificate No. R- __________ Rights
RIGHTS NOT EXERCISABLE AFTER JUNE 2, 2007 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS
SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY ANY PERSON WHO IS OR BECOMES
AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) SHALL BECOME NULL AND
VOID.
Right Certificate
INAMED CORPORATION
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
Amended and Restated Rights Agreement, dated as of November 16, 1999 (the
"Rights Agreement"), between Inamed Corporation, a Delaware corporation (the
"Company"), and U.S. Stock Transfer Corporation (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time,
on June 2, 2007 at the principal office of the Rights Agent, or at the office of
its successor as Rights Agent, one one-thousandth of a fully paid and
non-assessable share of Series A Junior Participating Preferred Stock, par value
$.01 per share (the "Preferred Shares"), of the Company, at a purchase price of
$80.00 per one one-thousandth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-thousandths of a Preferred Share which
may be purchased upon exercise hereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of __________, ______
based on the Preferred Shares as constituted at such date. As provided in the
Rights Agreement, the Purchase Price and the number of one one-thousandths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right 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 Right Certificates. Copies of
the Rights
B-1
<PAGE> 63
Agreement are on file at the principal executive offices of the Company and the
above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for shares of the
Company's Common Stock, par value $.01 per share.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate 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 for the
election of directors or upon any matter submitted to stockholders at a 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 Right Certificate shall
have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
B-2
<PAGE> 64
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ____________, ______.
ATTEST: INAMED CORPORATION
By_________________________
Countersigned:
U.S. STOCK TRANSFER CORPORATION
By___________________
Authorized Signature
B-3
<PAGE> 65
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED hereby
-------------------------------------------
sells, assigns and transfers unto
----------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint Attorney, to transfer the within
Right Certificate on the books of the within-named Company, with full power of
substitution.
Dated:
--------------
---------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor
institution (a bank, stockbroker, savings and loan association or credit union
with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934.
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
---------------------------------
Signature
B-4
<PAGE> 66
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: INAMED CORPORATION
The undersigned hereby irrevocably elects to exercise Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certificates for such
Preferred Shares be 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 Right
Certificate, a new Right 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
B-5
<PAGE> 67
Form of Reverse Side of Right Certificate -- continued
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
- -------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
Signature
- -------------------------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-6
<PAGE> 68
Exhibit C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN
THE RIGHTS AGREEMENT, RIGHTS OWNED BY ANY PERSON
WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN
THE RIGHTS AGREEMENT) SHALL BECOME NULL AND VOID
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On May 23, 1997, the Board of Directors of Inamed Corporation
(the "Company") declared a dividend distribution of one common share purchase
right (an "Original Right") for each outstanding share of common stock, par
value $.01 per share (the "Common Shares"), of the Company. The dividend
distribution was payable on June 13, 1997 (the "Record Date") to the
stockholders of record on that date. On November 16, 1999, the Board of
Directors of the Company amended the terms of each Original Right to substitute
for each Common Share issuable upon exercise thereof one one-thousandth of a
share of Series A Junior Participating Preferred Stock, par value $.01 per
share, of the Company (the "Preferred Shares"; and each Original Right as so
amended, the "Rights"). Each Right entitles the registered holder to purchase
from the Company one one-thousandth of a Preferred Share at a price of $80.00
per one one-thousandth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in an Amended
and Restated Rights Agreement (the "Rights Agreement") between the Company and
U.S. Stock Transfer Corporation, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of 15% or more of the
outstanding Common Shares of the Company or (ii) 10 business days (or such later
date as may be determined by action of the Board of Directors prior to such time
as any person or group of affiliated persons becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Shares
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate with a copy
of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution
Date (or earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the Common Shares. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Shares
outstanding as of the Record Date, even without such
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<PAGE> 69
notation or a copy of this Summary of Rights being attached thereto, will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date.
The Rights will expire on June 2, 2007 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares
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
Preferred Shares, (ii) upon the grant to holders of the Preferred Shares of
certain rights or warrants to subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred Shares with a conversion price,
less than the then-current market price of the Preferred Shares or (iii) upon
the distribution to holders of the Preferred Shares of evidences of indebtedness
or assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one
one-thousandths of a Preferred Share issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the Common Shares or
a stock dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will
not be redeemable. Each Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $1 per share but will be entitled to
an aggregate dividend of 1,000 times the dividend declared per Common Share. In
the event of liquidation, the holders of the Preferred Shares will be entitled
to a minimum preferential liquidation payment of $1,000 per share but will be
entitled to an aggregate payment of 1,000 times the payment made per Common
Share. Each Preferred Share will have 1,000 votes, voting together with the
Common Shares as a single class. Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 1,000 times the amount received per
Common Share. These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend,
liquidation and voting rights, the value of the one one-thousandth interest in a
Preferred Share purchasable upon exercise of each Right should approximate the
value of one Common Share.
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In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, the Rights Agreement provides
that proper provision shall be made so that each holder of a Right, other than
Rights beneficially owned by the Acquiring Person (which will thereafter be
void), will thereafter have the right to receive (subject to adjustment) upon
exercise that number of Common Shares having a market value of two times the
exercise price of the Right. At any time after any person or group becomes an
Acquiring Person and prior to the acquisition by such person or group of 50% or
more of the outstanding Common Shares, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group, which will
have become void), in whole or in part, at an exchange ratio of one Common
Share, or one one-thousandth of a Preferred Share (or of a share of a class or
series of the Company's preferred stock having equivalent rights, preferences
and privileges), per Right (subject to adjustment).
The Rights Agreement provides that none of the Company's
directors or officers shall be deemed to beneficially own any Common Shares
owned by any other director or officer by virtue of such persons acting in their
capacities as such, including in connection with the formulation and publication
of the Board of Directors' recommendation of its position, and actions taken in
furtherance thereof, with respect to an acquisition proposal relating to the
Company or a tender or exchange offer for the Common Shares.
In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold after a person or group has become an Acquiring Person,
proper provision will be made so that each holder of a Right will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market value
of two times the exercise price of the Right.
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional Preferred Shares will be issued (other
than fractions which are integral multiples of one one-thousandth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to the close of business on the tenth
Business Day after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
Common Shares, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time on such basis
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
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The terms of the Rights may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights,
except that from and after such time as any person or group of affiliated or
associated persons becomes an Acquiring Person no such amendment may adversely
affect the interests of the holders of the Rights (other than the Acquiring
Person and its affiliates and associates, in whose hands Rights are void).
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.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration Statement on
Form 8-A/A dated November 19, 1999. A copy of the Rights Agreement is available
free of charge from the Company. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by reference.
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<PAGE> 72
Form of Letter to Shareholders
[INAMED CORPORATION LETTERHEAD]
November 16, 1999
To Our Shareholders:
In 1997, the Board of Directors of the Company (the "Board")
declared a dividend distribution of one Common Share purchase right (the
"Rights") to the holders of the Company's common stock, $.01 par value per share
(the "Common Shares"), thereby creating a Shareholder Rights Plan (the "Plan").
Recently, the Company amended the Plan to substitute for each Common Share
purchasable upon exercise of each Right one one-thousandth of a share of Series
A Junior Participating Preferred Stock, par value $.01 per share, of the Company
(the "Preferred Share"). The Preferred Shares have been designed so that each
one one-thousandth of a Preferred Share has a value approximately the same as
each Common Share. This letter reviews the terms of the Plan as so amended.
The Rights contain provisions to protect shareholders in the
event of an unsolicited attempt to acquire the Company, including a gradual
accumulation of shares in the open market, a partial or two-tier tender offer
that does not treat all shareholders equally, a squeeze-out merger and other
abusive takeover tactics which the Board believes are not in the best interests
of shareholders. These tactics unfairly pressure shareholders, squeeze them out
of their investment without giving them any real choice and deprive them of the
full value of their shares.
Over 2,000 companies, including a large portion of the
Business Week 1000 companies and Fortune 500 companies, have issued similar
rights to protect their shareholders against these tactics. We consider the Plan
to be the best available means of protecting both your right to retain your
equity investment in INAMED Corporation and the full value of that investment,
while not foreclosing a fair acquisition bid for the Company.
The Rights are not intended to prevent a takeover of the
Company and will not do so. However, they should deter any attempt to acquire
the Company in a manner or on terms not approved by the Board. The Rights are
designed to deal with the very serious problem of another person or company
using abusive tactics to deprive the Board and the Company's shareholders of any
real opportunity to determine the destiny of the Company.
The Rights may be redeemed by the Board for one cent per Right
at any time prior to the tenth business day following the accumulation, through
open-market purchases, a tender offer or otherwise, of 15% or more of the
Company's shares by a single acquiror or group.
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Because of the redemption feature, the Rights should not interfere with any
merger or business combination approved by the Board prior to that time.
The Board believes that the issuance of the Rights have not in
any way weakened the financial strength of the Company or interfered with its
business plans. The issuance of the Rights have had no dilutive effect, have not
affected reported earnings per share, are not taxable to the Company or to you,
and have not changed the way in which the Company's shares are traded. As
explained in detail below, the Rights will only be exercisable if and when the
problem arises which they were created to deal with. They will then operate to
protect you against being deprived of your right to share in the full measure of
your Company's long-term potential.
The Rights were issued on June 13, 1997 to shareholders of
record on that date and will expire approximately ten years from that date. The
Rights automatically trade with the Common Shares. However, ten days after a
person or group acquires 15% or more of the Company's Common Shares, or ten
business days (or such later date as may be determined by the Board prior to a
person or group acquiring 15% or more of the Company's Common Shares) after a
person or group announces an offer the consummation of which would result in
such person or group owning 15% or more of the shares (even if no purchases
actually occur), the Rights will become exercisable and separate certificates
representing the Rights will be distributed. The Company's largest shareholder,
Appaloosa Management, is permitted by the Plan to increase its current share
ownership by 875,000 shares (plus shares which may be acquired upon the exercise
of currently outstanding warrants and other rights owned by Appaloosa
Management).
When the Rights first become exercisable, unless a holder is a
person or group who has acquired 15% or more of the Company's shares, that
holder will be entitled to buy from the Company one Common Share for $80.00. If
any person or group acquires 15% or more of the Company's outstanding Common
Shares, the "flip-in" provision of the Rights will be triggered and the Rights
will entitle a holder (other than such person or any member of such group) to
buy a number of additional Common Shares having a market value of twice the
exercise price of each Right. Thus, if at the time of the 15% acquisition the
Company's Common Shares were to have a market value per share equal to $20, the
holder of each Right (other than such person or any member of such group) would
be entitled to receive 8 shares of the Company's Common Shares for $80. If the
Company is involved in a merger or other business combination with a person or
group or affiliate at any time after that person or group has acquired 15% or
more of the Company's shares, the Rights will entitle a holder to buy a number
of shares of common stock of the acquiring company having a market value of
twice the exercise price of each Right. For example, if at the time of the
business combination the acquiring company's stock has a per share value of $40,
the holder of each Right would be entitled to receive 4 shares of the acquiring
company's common stock for $80, i.e., at a 50% discount.
Following the acquisition by any person or group of 15% or
more of the Company's Common Shares, but only prior to the acquisition by a
person or group of a 50% stake, the Board will also have the ability to exchange
the Rights (other than Rights held by such person or group), in whole or in
part, for one Common Share per Right. This provision will have
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an economically dilutive effect on the acquiror, and provide a corresponding
benefit to the remaining holders of the Rights, that is comparable to the
flip-in without requiring holders of the Rights to go through the process and
expense of exercising their Rights.
While, as noted above, the distribution of the Rights was not
taxable to you or the Company, shareholders may recognize taxable income upon
the occurrence of certain subsequent events.
In declaring the Rights dividend, we expressed our confidence
in the future of the Company and our determination that you, our shareholders,
be given every opportunity to participate fully in that future. The significant
progress that the Company has made since that time has justified our confidence
and strengthened our resolve to protect the Company from abusive takeover
tactics.
On behalf of the Board of Directors,
By_________________________________
David E. Banberger
Senior Vice President,
Secretary and General Counsel
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<PAGE> 1
EMPLOYMENT AGREEMENT
Exhibit 10.1
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into at Las Vegas, Nevada, on the date hereinafter set forth, by and between
RICHARD G. BABBITT (hereinafter referred to as the "Employee"), and INAMED
CORPORATION, a Florida corporation (hereinafter referred to as the
"Corporation").
The parties hereto, intending to be legally bound, do hereby agree as follow:
1. EMPLOYMENT
1.1 POSITIONS AND DUTIES
The Corporation does hereby employ the Employee and the Employee
hereby accepts such employment as President, Chief Executive Officer and
Chairman upon the terms and provisions set forth in this Agreement. The Employee
shall be the Chairman of the Executive Committee responsible for the management
of the Corporation and all of its worldwide operating subsidiaries. The Employee
shall report to the Board of Directors. The Employee shall be elected as a
member of the Board of Directors and shall be nominated to serve as a director
at each successive annual meeting during the term of this Agreement. The
Employee shall perform all the duties assigned to him by the Corporation,
commensurate with the position as President, Chief Executive Officer, and
Chairman and shall observe and comply with the Corporation's rules and
regulations regarding the performance of his duties, and shall carry out and
perform all orders, directions, and policies stated to him by the Corporation
periodically, either orally or in writing. The Employee shall at all times carry
out the duties assigned to him in a loyal, trustworthy and businesslike manner.
The Employee agrees that this Agreement may be terminated as provided in
Paragraph 7 hereof.
1.2 PLACE OF EMPLOYMENT
Unless the parties agree otherwise in writing, during the term of
this Agreement, the Employee shall perform the services required by this
Agreement at the Corporation's headquarters in Las Vegas, Nevada; it being
understood that the Employee may retain an office in his home in Palm Springs,
California and travel from time to time to the Corporation's offices until such
time he establishes a home in Las Vegas.
2. TERM
This Agreement shall commence as of January 23, 1998 and shall
continue for a period of three (3) years from the date of this Agreement; and at
the end of every month of this Agreement, the term of Employee's employment
shall automatically be extended by one month, unless either party gives 60 days'
prior written notice of its intention to discontinue this automatic extension.
<PAGE> 2
3. COMPENSATION
3.1 AMOUNT OF COMPENSATION
The Employee's compensation is set forth in Exhibit A hereto. The
Corporation and the Employee may, from time to time, modify the employment
conditions and compensation by mutual agreement. These changes will be recorded
in subsequent amendments.
3.2 REIMBURSEMENTS
The Employee shall be reimbursed by the Corporation only for
amounts actually expended by the Employee in the course of performing duties for
the Corporation where:
3.2.1 AUTHORIZATION
The Employee has been authorized by the Corporation to incur such
expenses that are reasonably consistent with practices or policies of the
Corporation.
3.2.2 DOCUMENTATION
The Employee tenders receipts or other documentation
substantiating the amounts as required by the Corporation.
3.3 FRINGE BENEFITS
The Employee shall be entitled to receive, on the same basis as
the Corporation's other executive employees, all other benefits maintained by
the Corporation for its executive employees generally, including but not limited
to a cellular phone, leased automobile, county club fees, paid leave, medical,
dental, life and disability insurance and any other health and welfare benefit
plans and perquisites, as in effect from time to time. The Employee will be
granted paid leave consistent with the Corporation's paid leave policy in effect
from time to time.
3.4 WARRANTS AND STOCK OPTIONS
(a) WARRANTS. The Employee will, concurrently with the signing of
this Agreement, receive an Executive Officer Warrant ("Warrant") as specified in
Exhibit D hereto. This employment warrant is not a part of the Corporation's
Stock Compensation Plan, and is not transferable and may be exercised only by
the Employee, or by the Employee's estate or personal representative within
three (3) months of the Employee's death. In the event of the termination of
this Agreement pursuant to Paragraph 7.1.2, the Warrants that at the time of
termination have vested may be exercised by the Employee or his estate or
personal representative within twelve (12) months of such termination. Subject
to the foregoing, employment with the Corporation is a condition of exercise of
the Warrant.
(b) LOCK-UP AGREEMENTS. The Employee will execute any other
documents reasonably required by the Corporation in connection with said
Warrants, and hereby
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<PAGE> 3
agrees to execute any lock-up or similar agreements required by the
Corporation's underwriters in connection with an offering or offerings of the
Corporation's securities. Such agreement shall exceed six (6) months in
duration.
4. NON-COMPETITION
The Employee agrees that during the term of this Agreement, he
shall diligently devote his time and efforts to the duties and responsibilities
assigned to him by the Corporation. In connection therewith:
4.1 Non-Competition
The Employee agrees that during the term of this Agreement,
without the prior express written authorization of the Corporation's Board of
Directors, he shall not compete with the Corporation in any manner whatsoever.
Without limiting the generality of the foregoing, the Employee shall not, during
the term of this Agreement, directly or indirectly (whether for compensation or
otherwise), alone or as an agent, principal, partner, officer, employee,
trustee, director, shareholder or in any other capacity, own, manage, operate,
join, control or participate in the ownership, management, operation or control
of or furnish any capital to or be connected in any manner with or provide any
services as a consultant for any business which competes directly or indirectly
with the business of the Corporation as it may be conducted from time to time;
provided, however, that nothing contained in this Agreement shall be deemed to
preclude the Employee from owning not more than one percent of the capital stock
of a publicly-traded entity which is in competition with such business. In
addition, it is understood and agreed that the Employee may continue to be
active with Rego One, DNA Technologies, Inc. and MRI SAVESIGHT to the degree
necessary to wind down his previous responsibilities; provided, however, that
those activities shall not impair the Employee's agreement to devote his
full-time attention to the Corporation.
4.2 Civil and Charitable Activities
The Employee may engage in civic, educational and charitable
activities. The Employee shall be entitled, with the approval of the
Corporation's Board, to serve as a director of any corporation other than a
corporation which, in the good faith opinion of the Corporation's Board, is in
competition with the Corporation. The Employee shall be entitled to receive
compensation from any corporation with respect to which he serves as a director
in accordance with this Section 4.2. Notwithstanding anything to the contrary
set forth herein, the Employee shall not be entitled to engage in any of the
activities set forth in this Section 4.2 if such activities, in the good faith
opinion of the Corporation's Board, interfere or could reasonably be expected to
interfere with the Employee's performance of his duties and activities under
this Agreement.
4.3 Non-Solicitation of Employees
After the termination of the Employee's employment hereunder, the
Employee shall not, either alone or jointly, with or on behalf of others, either
directly or indirectly, whether as principal, partner, agent, shareholder,
director, officer, employee,
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<PAGE> 4
consultant, or otherwise, at any time during a period of one (1) year following
such termination, offer employment to, or solicit the employment or engagement
of, or otherwise entice away from the employment of the Corporation or any
affiliated entity, either for the Employee's own account or for any other
person, firm, or company, any person who is employed by the Corporation or any
such affiliated entity, whether or not such person would commit any breach of
his or her contract of employment by reason of leaving the service of the
Corporation or any affiliated entity.
4.4 Non-Solicitation of Customers
After the termination of the Employee's employment hereunder, the
Employee shall not, either alone or jointly, with or on behalf of others, either
directly or indirectly whether as principal, partner, agent, shareholder,
director, officer, employee, consultant, or otherwise, at any time during a
period of one (1) year following such termination, engage in any activity for
the purpose of influencing or attempting to influence any of the Corporation's
customers, to conduct business with any business enterprise in competition with
the Corporation.
4.5 Separate Covenants
Each of the covenants of this paragraph 4 shall be construed as a
separate covenant covering its subject matter in each of the separate counties
in the States of California, Nevada and Florida (collectively, the "Governmental
Subdivisions"); to the extent that any covenant shall be judicially
unenforceable in any one or more of said Governmental Subdivisions, said
covenant shall not be affected with respect to each other Governmental
subdivision, each covenant with respect to each Governmental Subdivision being
construed as severable and independent.
5. PROHIBITION AGAINST COMPETITION
5.1 Agreement Not To Compete
As a result of the Employee's employment, the Employee will have
access to trade secrets and confidential information about the Corporation, its
products, its services, its customers and its methods of doing business. In
consideration for access to this information and the sale of the Corporation's
stock by the Employee to the Corporation, pursuant to the Repurchase Option, the
Employee agrees that for a period of one (1) year after termination of
employment, the Employee will not, directly or indirectly, compete with the
Corporation without the Corporation's prior express written approval.
5.2 Competition Defined
"Competition" shall mean any participation in, assistance of,
employment by, ownership of any interest in, acceptance of business from or
assistance, promotion or organization of any person partnership, corporation,
firm, association or other business organization, entity or enterprise which,
directly or indirectly, is engaged in, or hereinafter engages in, research on,
or development, production, marketing, leasing or selling of, any
4
<PAGE> 5
product, process or service which is the same as, similar to, or in competition
with, any line of business or research in which the Corporation, its parent,
subsidiary or affiliated company, is now engaged or hereinafter engages, whether
as an agent, consultant, employee, officer, director, investor, partner,
shareholder, proprietor or in any other individual or representative capacity,
but excluding the holding for investment of less that 5% of the outstanding
securities of any corporation which are regularly traded on a recognized stock
exchange.
5.3 Further Employee Agreements
For a period of one (1) year after the termination of the
Employee's employment, the Employee will not undertake any employment or
activity competitive with the Corporation wherein the loyal and complete
fulfillment of the duties of the competitive employment or activity would call
upon the Employee to make judgements on or otherwise to use any confidential
business information concerning the Corporation. The Employee will not, directly
or indirectly, either for himself or for any other person, firm or corporation,
divert or take away (or attempt to divert or take away), any of the
Corporation's present, former or prospective customers, including, but not
limited to, those upon whom he called, met with or became acquainted with while
engaged as an employee of the Corporation. The Employee will not interfere with
the contractual or business relationships of the Corporation, will not solicit
or attempt to solicit any employees or clients of the Corporation, nor slander
or disparage the Corporation, or undertake any activity which adversely impacts
the goodwill of the Corporation and its business opportunities.
5.4 Separate Covenants
Each of the convenants of Paragraph 5 shall be construed as
separate convenants covering their subject matter in each of the separate
counties, countries and states in the United States and governmental
subdivisions outside of the United States (collectively, the "Governmental
Subdivisions"); to the extent that any covenant shall be judicially
unenforceable in any one or more of said counties, states or countries, said
covenant shall not be affected with respect to each other Governmental
Subdivision, each covenant with respect to each Governmental Subdivision being
construed as severable and independent.
6. INTELLECTUAL PROPERTY AND CONFIDENTIALITY AGREEMENT
The Employee has executed or will concurrently execute the
Corporation's Intellectual Property and Confidentiality Agreement, the terms of
which are incorporated herein by reference. The terms of this Employment
Agreement shall prevail in the case of any discrepancy between the Corporation's
Intellectual Property and Confidentiality Agreement and this Agreement. The
Corporation's Intellectual Property and Confidentiality Agreement is attached
hereto as Exhibit C.
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<PAGE> 6
7. TERMINATION OF AGREEMENT
7.1 Grounds
This Agreement shall terminate upon the occurrence of any of the
following events:
7.1.1 Expiration of Term
At any time upon expiration of the terms specified in Paragraph 2
hereof.
7.1.2 Thirty (30) Day Termination by Employee
By the Employee, upon thirty (30) days' prior written notice to
the Corporation.
7.1.3 Termination by Employer (For Cause)
This Agreement may be immediately terminated by the Corporation
for the following causes: The Employee's personal dishonesty, lack of
trustworthiness, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than minor misdemeanors such as
minor traffic violation) or a material breach of any provision of this
Agreement, or any other agreement between the Employee and the Corporation.
7.2 Disability
7.2.1 Termination
In the event that the Employee is unable to perform his assigned
duties and responsibilities due to illness, physical or mental disability or any
other reason, and such disability continues for a period of six (6) consecutive
months after all available sick leave has been utilized, the Corporation may
terminate this Agreement upon ten (10) days' written notice.
7.2.2 Death
Upon the death of the Employee.
8. SEVERANCE COMPENSATION
If the Corporation should terminate the Employee's employment
hereunder during the Term (as defined in Section 2) for reasons other than cause
(as defined in Section 7.1.3) or Employee's death or disability (as defined in
Section 7.2), or if Employee should resign his employment for Good Reason, as
defined below, the Employee shall be entitled to the following Severance
compensation:
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<PAGE> 7
(a) Payment of his base salary in effect at the time of
termination from the date of termination until the expiration date of this
Agreement under Paragraph 2.
(b) Continuation of all benefits, including without limitation
medical, dental and life insurance, during the Post-Termination Period or until
the date on which the Employee first becomes eligible for insurance coverage of
a similar nature provided by a firm that employs him following termination of
employment by the Corporation, whichever occurs first.
Notwithstanding the foregoing, nothing in this Employment Agreement shall
require the Corporation to make any payment or to provide any benefit to the
Employee that the Corporation is otherwise required to provide under any other
contract, agreement or arrangement, including, without limitation, the Employee
Severance Agreement between the Corporation and the Employee, attached hereto as
Exhibit F, and the Employee Retention Agreement between the Corporation and the
Employee, attached hereto as Exhibit G, both incorporated by reference herein.
8.1 Termination by Employee for Good Reason
The Employee shall have Good Reason for terminating his
employment with the Corporation under this Employment Agreement if one or more
of the following occurs:
(a) an involuntary change in the Employee's status or position
with the Corporation which constitutes a demotion from the Employee's then
current status or position;
(b) layoff or involuntary termination of the Employee's
employment, except in connection with the termination of the Employee's
employment for Cause or as a result of the non-renewal of this Agreement or of
the Employee's disability, death or retirement;
(c) a reduction by the Corporation in the Employee's base salary,
excluding bonuses, other than in the case of reductions in salary with respect
to the Corporation's other executive officers generally;
(d) any action or inaction by the Corporation that would
adversely affect the Employee's continued participation in any Benefit Plan on
at least as favorable basis as was the case at the time of such action or
inaction, or that would materially reduce the Employee's benefits in the future
under the Benefit Plan or deprive him of any material benefits that he then
enjoyed, except to the extent that such action or inaction by the Corporation
(i) is also taken or not taken, as the case may be, in respect of all employees
generally; (ii) is required by the terms of any Benefit Plan as in effect
immediately before such action or inaction; or (iii) is necessary to comply with
applicable law or to preserve the qualification of any Benefit Plan under
section 401(a) of the Internal Revenue Code;
(e) the Corporation's failure to obtain express assumption of
this Employment Agreement by any successor to the Corporation; and
(f) any material violation by the Corporation of any agreement,
including this Employment Agreement, between the Corporation and the Employee.
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<PAGE> 8
Notwithstanding the foregoing, no action by the Corporation shall give rise to a
Good Reason if it results from the Employee's termination for Cause, death or
retirement, and no action by the Corporation specified in paragraphs (a) through
(c) of this section shall give rise to a Good Reason if it results from the
Employee's disability.
For purposes of this Section 8, "Benefit Plan" shall mean any compensation plan,
such as an incentive or stock option plan, or any employee benefit plan, such as
a thrill, pension, profit-sharing, stock bonus, long-term performance award,
medical disability, accident or life insurance plan, or any other plan, program
or policy of the Corporation that is intended to benefit employees.
9. MISCELLANEOUS
9.1 Notices
Any notice required to be given pursuant to this Agreement shall
be effective only if in writing and delivered personally or by mail. If given by
mail, such notice must be sent by registered or certified mail, postage prepaid,
mailed to the parties at the addresses set forth on the signature page hereof,
or at such other addresses as the parties may designate, from time to time, by
written notice. Mailed notices shall be deemed received two (2) business days
after the date of deposit in the mail.
9.2 Equitable Remedies
The Employee acknowledges and agrees that in the event of any
breach, violation or evasion of the terms, conditions and provisions of Sections
4, 5, 7, and 8 above, or this Section 9, such breach, violation or evasion shall
result in immediate and irreparable injury and harm to the Corporation and shall
entitle the Corporation to injunctive relief, as well as to all other legal or
equitable remedies to which the Corporation may be entitled.
9.3 Partial Invalidity
If any term or provision of this Agreement or the application
thereof to any person or circumstance shall be held to be invalid or
unenforceable to any extent, the remainder of this Agreement or application of
such term or provision to persons or circumstances other than those to which it
is held invalid or unenforceable shall not be affected thereby, and each term
and provision of the Agreement shall be valid and be enforced to the fullest
extent permitted by law.
9.4 Waiver
No waiver of any right hereunder shall be effective for any
purpose unless in writing, signed by the party hereto possessing said right, nor
shall any waiver be construed to be a waiver of any subsequent right, term or
provision of this Agreement.
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9.5 Assignment; Effect on Agreement
It is hereby acknowledged and agreed that the Employee's rights
and obligations under this Agreement are personal in nature and shall not be
assigned or delegated. This agreement shall be binding on and inure to the
benefit of the heirs, personal representatives, successors and assigns of the
parties, subject, however, to the restrictions on assignment and delegation
contained herein.
9.6 Disputes and Arbitration
Any dispute arising in connection with the interpretation or
enforcement of the provisions of this Agreement, or its application or validity,
will be submitted to arbitration. Such arbitration proceedings will be held in
Las Vegas, Nevada, in accordance with the rules then existing of the American
Arbitration Association. This agreement to arbitrate is specifically
enforceable.
Any award rendered in any such arbitration proceeding will be
final and binding on each of the parties, and judgment may be entered thereon in
any court of competent jurisdiction. The costs and fees of any such arbitration
proceeding (including the legal fees incurred by the Employee) will be borne by
the Corporation. The arbitrators may in their discretion award costs and
reasonable attorneys' fees to the prevailing party.
9.7 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of the State of Nevada.
9.8 Entire Agreement
This Agreement (and the Exhibits attached hereto which are part
of this Agreement) contains the entire agreement and understanding between the
parties and supersedes all prior agreements and understandings, oral or written.
No modification, termination or attempted waiver shall be valid, unless in
writing and signed by both parties.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 23rd day of January, 1998.
"CORPORATION"
INAMED CORPORATION
By:/s/ Donald K. McGhan
Donald K. McGhan
Title: Chairman of the Board
ADDRESS:
3800 Howard Hughes Parkway
Las Vegas, Nevada 89109
"EMPLOYEE"
/s/ Richard G. Babbitt
Richard G. Babbitt
ADDRESS:
50 Lost River Drive
Palm Desert, California 92211
SOCIAL SECURITY NUMBER: ###-##-####
10
<PAGE> 11
EXHIBIT A TO EMPLOYMENT AGREEMENT
EMPLOYEE COMPENSATION
1. SALARY
The Employee's Annual Salary shall be FOUR HUNDRED THOUSAND
DOLLARS ($400,000), payable in accordance with the Corporation's pay policy,
with applicable federal, state and local taxes withheld. The Salary shall be
reviewed periodically (but not less than annually) by the Compensation Committee
and approved by the Board of Directors.
2. BONUS
The Employee will be entitled to a bonus based on a yet to be
determined program that will be developed by Management, presented to the
Compensation Committee and approved by the Board of Directors. Employee
understands that the bonus program may not apply to the initial year of
employment or may only apply to a portion of the initial year of employment.
This Exhibit A may only be amended by an Amendment to the
Employment Agreement in the form attached hereto as Exhibit B.
IN WITNESS WHEREOF, the undersigned has executed this Exhibit A
to Employment Agreement this 23d day of January, 1998:
SIGNED BY: ACCEPTED BY:
EMPLOYEE INAMED CORPORATION
/s/ Richard G. Babbitt /s/ Donald K. McGhan
Richard G. Babbitt Donald K. McGhan
Its: Chairman of the Board
<PAGE> 12
Exhibit F To Employment Agreement
EMPLOYEE SEVERANCE AGREEMENT
January 30, 1998
Richard G. Babbitt
50 Lost River Drive
Palm Desert, California 92211
Dear Richard:
INAMED Corporation and its subsidiaries (the "Corporation") considers it
essential to the best interests of the Corporation and its stockholders to
foster the continuous employment of key management personnel. In this
connection, the Board of Directors of the Corporation (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
change in control of the Corporation may exist, and that such possibility and
the uncertainty and questions which it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Corporation and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your employment with the
Corporation is terminated under the circumstances described below subsequent to
a "change in control of the Corporation" (as defined in Section 2).
1. TERM OF AGREEMENT. This agreement shall commence on January
23, 1998, and shall continue in effect through January 22, 2001. Commencing on
January 23, 2001 and each year thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not later than ninety
(90) days the preceding year, the Corporation shall have given written notice
that it does not wish to extend this Agreement. If a change in control of the
Corporation, as defined in Section 2, shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect for a
period of not less than twenty-four (24) months beyond the month in which such
change in control occurred.
2. CHANGE IN CONTROL. No benefit shall be payable hereunder
unless there shall have been a change in control of the Corporation, as set
forth below. For purposes of this Agreement, a "change in control of the
Corporation" shall be deemed to have occurred if:
(i) Any "person", as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Corporation, any
trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of
the Corporation), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation
<PAGE> 13
representing 20% or more of the combined voting power of the
Corporation's then outstanding securities (except that Appaloosa
Management Company and its affiliates shall not be deemed to be
included within this subsection at such time as its beneficial
ownership is exempted from the Corporation's Shareholder Rights
Plan, as may be amended from time to time);
(ii) During any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the
Corporation to effect a transaction described in clause (i),
(iii) or (iv) of this Section) whose election by the Board or
nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning
of the period or whose election or nomination for election was
previously so approved cease for any reason to constitute at
least a majority thereof;
(iii) The stockholders of the Corporation approve
a merger or consolidation of the Corporation with any other
corporation, other than (a) a merger or consolidation which would
result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger or
consolidation or (b) a merger or consolidation effected to
implement a recapitalization of the Corporation (or similar
transaction) in which no "person" (as hereinabove defined)
acquires more than 20% of the combined voting power of the
Corporation's then outstanding securities; or
(iv) The stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an agreement
for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL.
(i) General. If any of the events described in
Section 2 constituting a change in control of the Corporation
occurs, you shall be entitled to the benefits provided in Section
4(iii) upon the subsequent termination of your employment during
the term of this Agreement unless such termination is (a) because
of your death or disability, (b) by the Corporation for cause, or
(c) by you other than for good reason. In the event your
employment with the Corporation is terminated for any reason and
subsequently a change in control of the Corporation should occur,
you shall not be entitled to any benefits hereunder.
(ii) Disability. If, as a result of your
incapacity due to physical or mental illness, you are absent from
the full-time performance of your duties with the Corporation for
six (6) consecutive months, and within thirty (30) days after
written notice of
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<PAGE> 14
termination is given you shall not have returned to the full-time
performance of your duties, your employment may be terminated for
"Disability".
(iii) Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination (a) upon the
willful and continued failure by you to substantially perform
your duties with the Corporation (other than any such failure
resulting from your incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance of a
Notice of Termination (as defined in Subsection 3(v)) by you for
Good Reason (as defined in Subsection 3(iv)) after written demand
for substantial performance is delivered to you by the Board,
which specifically identifies the manner in which the Board
believes that you have not substantially performed your duties
(for purposes of this Subsection, no act, or failure to act, on
your part shall be deemed "willful" unless done, or omitted to be
done, by you without good faith and without reasonable belief
that your action was in the best interest of the Corporation) or
(b) notwithstanding the foregoing, you shall not be terminated
for Cause unless and until a copy of a resolution duly adopted by
the unanimous affirmative vote of the entire membership of the
Board of Directors (other than yourself) at a meeting of the
Board (after reasonable notice to you and an opportunity for you,
together with counsel, to be heard before the Board), finding
that in the good faith opinion of the Board you were guilty of
conduct set forth above in this Subsection and specifying the
particulars thereof in written detail which has been delivered to
you.
(iv) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean, without your express written
consent, the occurrence after a change in control of the
Corporation of any of the following circumstances unless, in the
case of paragraph (a), (e), (f), or (h), such circumstances are
fully corrected prior to the Date of Termination (as defined in
Section 3(vi)) specified in the Notice of Termination (as defined
in Section 3(v)) given in respect thereof:
(a) The assignment to you of any
duties inconsistent with the position in the
Corporation that you held immediately prior to the
change in control of the Corporation, or a
significant adverse alteration in the nature or
status of your responsibilities or the conditions
of your employment from those in effect
immediately prior to such change in control;
(b) A reduction by the Corporation
in your annual base salary as in effect on the
date hereof;
(c) The relocation of the
Corporation's offices at which you are principally
employed immediately prior to the date of the
change in control of the Corporation to a location
more than 50 miles from the principal location of
your employment, or the Corporation requiring you
to be based anywhere other than the Corporation's
offices except for required travel on the
Corporation's business to an extent substantially
consistent with your present business travel
obligations;
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<PAGE> 15
(d) The failure by the Corporation
to pay to you any portion of your current
compensation or to pay to you any portion of an
installment of deferred compensation under any
deferred compensation program of the Corporation
within seven (7) days of the date such
compensation is due;
(e) The failure by the Corporation
to continue in effect any material compensation or
benefit plan in which you participate immediately
prior to the change in control of the Corporation,
unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by
the Corporation to continue your participation
therein (or in such substitute or alternative
plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided,
and other compensation agreements as existed at
the time of the change in control of the
Corporation;
(f) The failure by the Corporation
to continue to provide you with benefits
substantially similar to those enjoyed by you
under any of the Corporation's life insurance,
medical, health and accident, or disability plans
in which you were participating at the time of the
change in control of the Corporation, the failure
by the Corporation to provide you with the number
of paid vacation days to which you are entitled on
the basis of years of service with the Corporation
in accordance with the Corporation's normal
vacation policy, or as stated within your
Employment Agreement, Compensation Agreement or
like same agreements, regardless of the type or
form of said Agreements, in effect at the time of
the change in control of the Corporation;
(g) The failure of the Corporation
to obtain a satisfactory agreement from any
successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(h) Any purported termination of
your employment that is not effected pursuant to a
Notice of Termination satisfying the requirements
of Subsection (v) hereof (and, if applicable, the
requirements of Subsection (iii) hereof), which
purported termination shall not be effective for
purposes of this Agreement.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of, rights with respect
to any circumstances constituting Good Reason hereunder.
(v) Notice of Termination. Any purported
termination of your employment by the Corporation or by you shall
be communicated by written Notice of Termination to the other
party hereto in accordance with Section 6. "Notice of
Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
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<PAGE> 16
(vi) Date of Termination, Etc. "Date of
Termination" shall mean (a) if your employment is terminated for
Disability, thirty (30) days after Notice of Termination is given
(provided that you have not returned to the full-time performance
of your duties during such thirty-day (30) period), and (b) if
your employment is terminated pursuant to Subsection (iii) or
(iv) hereof or for any other reason (other than Disability), the
date specified in the Notice of Termination (which, in the case
of a termination for Cause shall not be less than sixty (60) days
from the date such Notice of Termination is given, and in the
case of a termination for Good Reason, not less than thirty (30)
nor more than ninety (90) days from the date such Notice of
Termination is given); provided, however, that if within thirty
(30) days after any Notice of Termination is given, or if later,
prior to the Date of Termination (as determined without regard to
this provision), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, then the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which
the time for appeal therefrom has expired and no appeal has been
perfected); provided, further, that the Date of Termination shall
be extended by a notice of dispute only if such notice is given
in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
Notwithstanding the fact that any such dispute is pending, the
Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue you as
a participant in all compensation, benefit and insurance plans in
which you were participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this
Agreement, and shall not be offset against or reduce any other
amounts due under this Agreement and shall not be reduced by any
compensation earned by you as the result of employment by another
employer.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Following
a change in control of the Corporation, you shall be entitled to the following
benefits during a period of disability, or upon termination of your employment,
as the case may be, provided that such period or termination occurs during the
term of this Agreement:
(i) During any period that you fail to perform
your full-time duties with the Corporation as a result of
incapacity due to physical or mental illness, you shall continue
to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation
payable to you under the Corporation's disability plan or program
or other similar plan during such period, until this Agreement is
terminated pursuant to Section 3(ii) hereof. Thereafter, or in
the event your employment shall be terminated by reason of your
death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in
effect in accordance with the terms of such programs.
(ii) If your employment shall be terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full base salary
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<PAGE> 17
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which
you are entitled under any compensation plan of the Corporation
at the time such payments are due, and the Corporation shall have
no further obligations to you under this Agreement.
(iii) If your employment by the Corporation shall
be terminated by you for Good Reason or by the Corporation other
than for Cause or Disability, then you shall be entitled to the
benefits provided below:
(a) The Corporation shall pay to
you your full base salary through the Date of
Termination at the rate in effect at the time
Notice of Termination is given, no later than the
fifth day following the Date of Termination, plus
all other amounts to which you are entitled under
any compensation plan of the Corporation, at the
time such payments are due;
(b) In lieu of any further salary
payment to you for periods subsequent to the Date
of Termination, the Corporation shall pay as
severance pay to you, at the time specified in
Subsection (v), a lump sum severance payment
(together with the payments provided in paragraphs
(c) and (e) below, the "Severance Payments") equal
to 300% of your annual base salary in effect as of
the Date of Termination or immediately prior to
the change in control of the Corporation,
whichever is greater, and 300% of the highest
annual bonus awarded to you pursuant to the
Corporation's Incentive Profit Share Plan or any
successor plan thereto, with respect to three (3)
fiscal years preceding the change in control of
the Corporation;
(c) In lieu of shares of common
stock of the Corporation ("Common Shares")
issuable upon exercise of outstanding options
(other than options qualifying as incentive stock
options ("ISOs") under Section 422A of the
Internal Revenue Code of 1986 (the "Code") which
ISOs were granted on or before the date hereof)
("Options"), and stock appreciation rights
("SARs"), if any, and limited stock appreciation
rights ("LSARs"), if any, granted to you under the
Corporation's 1984 Stock Option Plan, 1986 Stock
Option Plan, or any successor plans (which Options
shall be canceled upon the making of the payment
referred to below), the Corporation shall pay to
you, at the time specified in Subsection (v), an
amount in cash equal to the product of (1) the
excess of, in the case of an ISO granted after the
date hereof, the closing price of the Common Stock
as reported on the NASDAQ on or nearest the Date
of Termination (or on a nationally recognized
exchange or quotation system on which trading
volume in the Common Shares is highest) and, in
the case of all other Options, the higher of such
closing price or the highest per share price for
Common Shares actually paid in connection with any
change in control of the Corporation, over the per
share option price of each Option held by you
(whether or not fully exercisable), and (2) the
number of Common Shares covered by each such
Option;
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<PAGE> 18
(d) The Corporation shall pay to
you all legal fees and expenses incurred by you as
a result of such termination (including all such
fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to
obtain or enforce any right or benefit provided by
this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the
application of Section 4999 of the Code, to any
payment or benefit provided hereunder); and
(e) For a twenty-four (24) month
period after such termination, the Corporation
shall arrange to provide you with life,
disability, dental, accident and group health
insurance benefits substantially similar to those
which you were receiving immediately prior to the
Notice of Termination. Notwithstanding the
foregoing, the Corporation shall not provide any
benefit otherwise receivable by you pursuant to
this paragraph (e) if an equivalent benefit is
actually received by you during the twenty-four
(24) month period following your termination, and
any such benefit actually received by you shall be
reported to the Corporation.
(iv) In the event that you become entitled to the
Severance Payments, if any of the Severance Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of
the Code (or any similar tax that may hereafter be imposed), the
Corporation shall pay to you at the time specified in Subsection
(v) below, an additional amount (the "Gross-Up Payment") such
that the net amount retained by you, after deduction of any
Excise Tax on the Severance Payments and any federal, state and
local income tax and Excise Tax upon the payment provided for by
this Subsection, shall be equal to the Severance Payments. For
purposes of determining whether any of the Severance Payments
will be subject to the Excise Tax and the amount of such Excise
Tax, (a) any other payments or benefits received or to be
received by you in connection with a change in control of the
Corporation or your termination of employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or
agreement with the Corporation, any person whose actions result
in a change in control of the Corporation or any person
affiliated with the Corporation or such person) shall be treated
as "parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the
Corporation's independent auditors and acceptable to you such
other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the base amount within the
meaning, of Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax, (b) the amount of the Severance
Payments which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (1) the total amount of the
Severance Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause
(a), above), and (c) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Corporation's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, you
shall be deemed
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<PAGE> 19
to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes
at the highest marginal rate of taxation in the state and
locality of your residence on the Date of Termination, net of the
maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that
the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of termination of
your employment, you shall repay to the Corporation at the time
that the amount of the reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to
such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local
income tax imposed on the Gross-Up Payment being repaid by you if
such repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction) plus interest
on the amount of such repayment at the rate provided in Section
1274(b)(2)(b). In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of the
termination of your employment (including by reason of any
payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Corporation shall make an
additional Gross-Up Payment in respect of such excess (plus any
interest payable with respect to such excess) at the time that
the amount of such excess is finally determined.
(v) The payments provided for in Subsections
4(iii)(b) and (c) and Subsection 4(iv) above shall be made not
later than the fifth day following the Date of Termination;
provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Corporation shall
pay to you on such day an estimate, as determined in good faith
by the Corporation, of the minimum amount of such payments and
shall pay the remainder of such payments (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In
the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess
shall constitute a loan by the Corporation to you, payable on the
fifth day after demand by the Corporation (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code).
(vi) In the event of Termination of Employment or
Change of Control, the Corporation shall without contest forgive
any and all Officer and/or Director advancement, loans or draws,
direct or indirect, current, past or future due and payable,
under any and all types of agreement regardless of said amounts,
terms, etc. This shall occur no later than the day following the
Termination Date or Change of Control effective date.
(vii) Except as provided in Subsection (iii)(e)
hereof, you shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any
compensation earned by you as a result of employment by another
employer, by retirement benefits, by offset against any amount
claimed to be owed by you to the Corporation, or otherwise.
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<PAGE> 20
5. SUCCESSORS; BINDING AGREEMENT.
(i) The Corporation will require any successor
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or
assets of the Corporation to expressly assume and agree to
perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall
entitle you to compensation from the Corporation in the same
amount and on the same terms to which you would be entitled
hereunder if you terminate your employment for Good Reason
following a change in control of the Corporation, except that for
purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Corporation" shall mean
the Corporation as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by you and your personal or legal heirs,
distributees, devisees and legatees. If you should die while any
amount would still be payable to you hereunder had you continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to
your devisee, legatee or other designee or, if there is no such
designee, to your estate.
6. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States postage
prepaid, addressed to the respective addresses set forth on the first page of
this Agreement, provided that all notices to the Corporation shall be directed
to the attention of the Board with a copy to the Secretary of the Corporation,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be, at your
discretion, governed by the laws of the State of Florida, State of Nevada, or
the State of California without regard to its conflicts of law principles. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding
9
<PAGE> 21
required under federal, state or local law. The obligations of the Corporation
under Section 4 shall survive the expiration of the term of this Agreement.
8. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument
10. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement, shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in the State of Nevada, in the
State of California or in the State of Florida, to be at your option, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
Jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes the provisions of the General Policy as well as all prior
agreements, provisos, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and canceled.
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If this letter sets forth our Agreement on the subject matter hereof, kindly
sign and return to the Corporation the enclosed copy of this letter, which will
then constitute our Agreement on this subject.
Sincerely,
INAMED CORPORATION AND SUBSIDIARIES
By:/s/ Donald K. McGhan
Donald K. McGhan
Title: Chairman of the Board
Agreed to this 30th day of January, 1998
/s/ Richard G. Babbitt
Richard G. Babbitt, Employee
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<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into at
Las Vegas, Nevada, on the date hereinafter set forth, by and between ILAN K.
REICH (hereinafter referred to as the "Employee"), and INAMED CORPORATION, a
Florida corporation (hereinafter referred to as the "Corporation").
The parties hereto, intending to be legally bound, do hereby agree as
follow:
1. EMPLOYMENT
1.1 POSITIONS AND DUTIES
The Corporation does hereby employ the Employee and the Employee
hereby accepts such employment as EXECUTIVE VICE PRESIDENT upon the terms and
provisions set forth in this Agreement. The Employee shall be one of three
members of the Executive Committee responsible for the management of the
Corporation and all of its worldwide operating subsidiaries. The Employee shall
report to the Chief Executive Officer. The Employee shall have overall senior
executive responsibility for the Corporation's legal and regulatory affairs,
financing activities and the profit and cash flow improvement program, as well
as such other tasks and duties as may be assigned to him from time to time by
the Chief Executive Officer. The Employee shall be elected as a member of the
Board of Directors and shall be nominated to serve as a director at each
successive annual meeting during the term of this Agreement. The Employee shall
perform all the duties assigned to him by the Corporation, shall observe and
comply with the Corporation's rules and regulations regarding the performance of
his duties, and shall carry out and perform all orders, directions, and policies
stated to him by the Corporation periodically, either orally or in writing. The
Employee shall at all times carry out the duties assigned to him in a loyal,
trustworthy and businesslike manner. The Employee agrees that this Agreement may
be terminated as provided in Paragraph 7 hereof.
1.2 PLACE OF EMPLOYMENT
Unless the parties agree otherwise in writing, during the term of
this Agreement, the Employee shall perform the services required by this
Agreement at either Las Vegas, Nevada, or Santa Barbara, California (as the
Corporation and Employee may mutually agree is appropriate); it being understood
that the Employee shall not be required to relocate from the New York City area,
and may retain an office in New York City and travel from time to time to the
Corporation's offices.
2. TERM
This Agreement shall commence as of January 23, 1998 and shall
continue for a period of three (3) years from the date of this Agreement; and at
the end of every month of this Agreement, the term of Employee's employment
shall automatically be extended by one month, unless either party gives 60 days'
prior written notice of its intention to discontinue this automatic extension.
<PAGE> 2
3. COMPENSATION
3.1 AMOUNT OF COMPENSATION
The Employee's compensation is set forth in Exhibit A hereto. The
Corporation may, from time to time, increase, but not reduce, Employee's
compensation. These changes will be recorded in subsequent amendments.
3.2 REIMBURSEMENTS
The Employee shall be reimbursed by the Corporation only for
amounts actually expended by the Employee in the course of performing duties for
the Corporation where:
3.2.1 AUTHORIZATION
The Employee has been authorized by the Corporation to incur such
expenses that are reasonably consistent with practices or policies of the
Corporation. The Corporation agrees to reimburse Employee for the reasonable
expenses of maintaining an office in New York City.
3.2.2 DOCUMENTATION
The Employee tenders receipts or other documentation
substantiating the amounts as required by the Corporation.
3.3 FRINGE BENEFITS
The Employee shall be entitled to receive, on the same basis as
the Corporation's other executive employees, all other benefits maintained by
the Corporation for its executive employees generally, including but not limited
to a cellular phone, leased automobile, county club fees, paid leave, medical,
dental, life and disability insurance and any other health and welfare benefit
plans and perquisites, as in effect from time to time. The Employee will be
granted paid leave consistent with the Corporation's paid leave policy in effect
from time to time.
3.4 WARRANTS AND STOCK OPTIONS
(a) WARRANTS. The Employee will, concurrently with the signing of
this Agreement, receive an Executive Officer Warrant ("Warrant") as specified in
Exhibit D hereto. This employment warrant is not a part of the Corporation's
Stock Compensation Plan, and is not transferable and may be exercised only by
the Employee, or by the Employee's estate or personal representative within
three (3) months of the Employee's death. In the event of the termination of
this Agreement pursuant to Paragraph 7.1.2, the Warrants that at the time of
termination have vested may be exercised by the Employee or his estate or
personal representative within twelve (12) months of such termination. Subject
to the foregoing, employment with the Corporation is a condition of exercise of
the Warrant.
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(b) LOCK-UP AGREEMENTS. The Employee will execute any other
documents reasonably required by the Corporation in connection with said
Warrants, and hereby agrees to execute any lock-up or similar agreements
required by the Corporation's underwriters in connection with an offering or
offerings of the Corporation's securities.
4. COMPETITION
The Employee agrees that during the term of this Agreement he
shall diligently devote his time and efforts to the duties and responsibilities
assigned to him by the Corporation, and without prior express written
authorization of the Corporation's Board of Directors, the Employee shall not,
directly or indirectly, either alone or in concert with others, during the term
of this Agreement:
4.1 OTHER SERVICES
Perform or render any services of a business, professional or
commercial nature, relating to service or products competitive with the
Corporation, to or for the benefit of any other person or firm, whether for
compensation or otherwise, except for personal investments, and for other
activities approved by the Corporation. It is understood and agreed that the
Employee may continue to practice law, on an "of counsel" basis; provided,
however, that those activities shall not impair the Employee's agreement to
devote at least 75% of his time to the Corporation.
4.2 COMPETITION
Engage in any activity directly or indirectly in competition with
or adverse to the Corporation;
4.3 SOLICITATION
Engage in any activity for purposes of influence or attempting to
influence the Corporation's customers, either directly or indirectly, to conduct
business with any business enterprise in competition with the Corporation;
4.4 COMPETING ENTERPRISE
Undertake or participate in any planning for or organization of
any business activity that is or will be in competition with the Corporation in
any field(s) or area(s) in which the Employee has worked or with which the
Employee has come into contact, or of which the Employee has gained knowledge
during the term of his employment under this Agreement; or
4.5 OTHER ACTIVITIES
Engage in any other business activity that would materially
interfere with the performance of any of the Employee's obligations and duties
under this Agreement.
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<PAGE> 4
5. PROHIBITION AGAINST COMPETITION
5.1 AGREEMENT NOT TO COMPETE
As a result of the Employee's employment, the Employee will have
access to trade secrets and confidential information about the Corporation, its
products, its services, its customers and its methods of doing business. In
consideration for access to this information and the sale of the Corporation's
stock by the Employee to the Corporation, pursuant to the Repurchase Option, the
Employee agrees that for a period of one (1) year after termination of
employment, the Employee will not, directly or indirectly, compete with the
Corporation without the Corporation's prior express written approval.
5.2 COMPETITION DEFINED
"Competition" shall mean any participation in, assistance of,
employment by, ownership of any interest in, acceptance of business from or
assistance, promotion or organization of any person partnership, corporation,
firm, association or other business organization, entity or enterprise which,
directly or indirectly, is engaged in, or hereinafter engages in, research on,
or development, production, marketing, leasing or selling of, any product,
process or service which is the same as, similar to, or in competition with, any
line of business or research in which the Corporation, its parent, subsidiary or
affiliated company, is now engaged or hereinafter engages, whether as an agent,
consultant, employee, officer, director, investor, partner, shareholder,
proprietor or in any other individual or representative capacity, but excluding
the holding for investment of less that 5% of the outstanding securities of any
corporation which are regularly traded on a recognized stock exchange.
5.3 FURTHER EMPLOYEE AGREEMENTS
For a period of one (1) year after the termination of the
Employee's employment, the Employee will not undertake any employment or
activity competitive with the Corporation wherein the loyal and complete
fulfillment of the duties of the competitive employment or activity would call
upon the Employee to make judgements on or otherwise to use any confidential
business information concerning the Corporation. The Employee will not, directly
or indirectly, either for himself or for any other person, firm or corporation,
divert or take away (or attempt to divert or take away), any of the
Corporation's present, former or prospective customers, including, but not
limited to, those upon whom he called, met with or became acquainted with while
engaged as an employee of the Corporation. The Employee will not interfere with
the contractual or business relationships of the Corporation, will not solicit
or attempt to solicit any employees or clients of the Corporation, nor slander
or disparage the Corporation, or undertake any activity which adversely impacts
the goodwill of the Corporation and its business opportunities.
5.4 SEPARATE COVENANTS
Each of the covenants of Paragraph 5 shall be construed as
separate covenants covering their subject matter in each of the separate
counties, countries and states in the United States and governmental
subdivisions outside of the United States (collectively, the "Governmental
Subdivisions"); to the extent that any covenant shall be judicially
unenforceable in any one or
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<PAGE> 5
more of said counties, states or countries, said covenant shall not be affected
with respect to each other Governmental Subdivision, each covenant with respect
to each Governmental Subdivision being construed as severable and independent.
6. INTELLECTUAL PROPERTY AND CONFIDENTIALITY AGREEMENT
The Employee has executed or will concurrently execute the
Corporation's Intellectual Property and Confidentiality Agreement, the terms of
which are incorporated herein by reference. The terms of this Employment
Agreement shall prevail in the case of any discrepancy between the Corporation's
Intellectual Property and Confidentiality Agreement and this Agreement. The
Corporation's Intellectual Property and Confidentiality Agreement is attached
hereto as Exhibit C.
7. TERMINATION OF AGREEMENT
7.1 GROUNDS
This Agreement shall terminate upon the occurrence of any of
the following events:
7.1.1 EXPIRATION OF TERM
At any time upon expiration of the term specified in Paragraph 2
hereof;
7.1.2 THIRTY (30) DAY TERMINATION BY EMPLOYEE
By the Employee, upon thirty (30) days' prior written notice to
the Corporation.
7.1.3 TERMINATION BY EMPLOYER (FOR CAUSE)
This Agreement may be immediately terminated by the Corporation
for the following causes: The Employee's personal dishonesty, lack of
trustworthiness, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than minor misdemeanors such as
minor traffic violation) or a material breach of any provision of this
Agreement, or any other agreement between the Employee and the Corporation.
7.2 DISABILITY
7.2.1 TERMINATION
In the event that the Employee is unable to perform his assigned
duties and responsibilities due to illness, physical or mental disability or any
other reason, and such disability continues for a period of six (6) consecutive
months after all available sick leave has been utilized, the Corporation may
terminate this Agreement upon ten (10) days' written notice.
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<PAGE> 6
7.2.2 DEATH
Upon the death of the Employee.
8. SEVERANCE COMPENSATION
If the Corporation should terminate the Employee's employment
hereunder during the Term (as defined in Section 2) for reasons other than cause
(as defined in Section 7.1.3) or Employee's death or disability (as defined in
Section 7.2), or if Employee should resign his employment for Good Reason, as
defined below, the Employee shall be entitled to the following Severance
compensation:
(a) Payment of his base salary in effect at the time of
termination from the date of termination until the expiration date of this
Agreement under Paragraph 2.
(b) Continuation of all benefits, including, without
limitation, medical, dental and life insurance, during the Post-Termination
Period or until the date on which the Employee first becomes eligible for
insurance coverage of a similar nature provided by a firm that employs him
following termination of employment by the Corporation, whichever occurs first.
Notwithstanding the foregoing, nothing in this Employment Agreement shall
require the Corporation to make any payment or to provide any benefit to the
Employee that the Corporation is otherwise required to provide under any other
contract, agreement or arrangement, including, without limitation, the Employee
Severance Agreement between the Corporation and the Employee, attached hereto as
Exhibit F, and the Employee Retention Agreement between the Corporation and the
Employee, attached hereto as Exhibit G, both incorporated by reference herein.
8.1 TERMINATION BY EMPLOYEE FOR GOOD REASON
The Employee shall have Good Reason for terminating his
employment with the Corporation under this Employment Agreement if one or more
of the following occurs:
(a) an involuntary change in the Employee's status or position with the
Corporation which constitutes a demotion from the Employee's then current status
or position;
(b) layoff or involuntary termination of the Employee's employment,
except in connection with the termination of the Employee's employment for Cause
or as a result of the non-renewal of this Agreement or of the Employee's
disability, death or retirement;
(c) a reduction by the Corporation in the Employee's base salary,
excluding bonuses, other than in the case of reductions in salary with respect
to the Corporation's other executive officers generally;
(d) any action or inaction by the Corporation that would adversely
affect the Employee's continued participation in any Benefit Plan on at least as
favorable a basis as was the case at the time of such action or inaction, or
that would materially reduce the Employee's benefits in the future under the
Benefit Plan or deprive him of any material benefits that he then
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<PAGE> 7
enjoyed, except to the extent that such action or inaction by the Corporation
(i) is also taken or not taken, as the case may be, in respect of all employees
generally, (ii) is required by the terms of any Benefit Plan as in effect
immediately before such action or inaction; or (iii) is necessary to comply with
applicable law or to preserve the qualification of any Benefit Plan under
section 401 (a) of the Internal Revenue Code;
(e) the Corporation's failure to obtain express assumption of this
Employment Agreement by any successor to the Corporation; and
(f) any material violation by the Corporation of any agreement,
including this Employment Agreement, between the Corporation and the Employee.
Notwithstanding the foregoing, no action by the Corporation shall give rise to a
Good Reason if it results from the Employee's termination for Cause, death or
retirement, and no action by the Corporation specified in paragraphs (a) through
(c) of this section shall give rise to a Good Reason if it results from the
Employee's disability.
For purposes of this Section 8, "Benefit Plan" shall mean any
compensation plan, such as an incentive or stock option plan, or any employee
benefit plan, such as a thrift, pension, profit-sharing or, stock bonus,
long-term performance award, medical disability, accident or life insurance
plan, or any other plan, program or policy of the Corporation that is intended
to benefit employees.
9. MISCELLANEOUS
9.1 NOTICES
Any notice required to be given pursuant to this Agreement shall
be effective only if in writing and delivered personally or by mail. If given by
mail, such notice must be sent by registered or certified mail, postage prepaid,
mailed to the parties at the addresses set forth on the signature page hereof,
or at such other addresses as the parties may designate, from time to time, by
written notice. Mailed notices shall be deemed received two (2) business days
after the date of deposit in the mail.
9.2 REMEDIES
9.2.1 EQUITABLE REMEDIES
The Employee acknowledges and agrees that in the event of any
breach, violation or evasion of the terms, conditions and provisions of Sections
4, 5, 7, and 8 above, or this Section 9, such breach, violation or evasion shall
result in immediate and irreparable injury and harm to the Corporation and shall
entitle the Corporation to injunctive relief, as well as to all other legal or
equitable remedies to which the Corporation may be entitled.
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9.2.2 TERMINATION OF AGREEMENT
It is further agreed that in the event of such breach, the
Corporation may forthwith terminate this Agreement, notwithstanding anything
herein to the contrary.
9.3 PARTIAL INVALIDITY
If any term or provision of this Agreement or the application
thereof to any person or circumstance shall be held to be invalid or
unenforceable to any extent, the remainder of this Agreement or application of
such term or provision to persons or circumstances other than those to which it
is held invalid or unenforceable shall not be affected thereby, and each term
and provision of the Agreement shall be valid and be enforced to the fullest
extent permitted by law.
9.4 WAIVER
No waiver of any right hereunder shall be effective for any
purpose unless in writing, signed by the party hereto possessing said right, nor
shall any waiver be construed to be a waiver of any subsequent right, term or
provision of this Agreement.
9.5 ASSIGNMENT; EFFECT ON AGREEMENT
It is hereby acknowledged and agreed that the Employee's rights
and obligations under this Agreement are personal in nature and shall not be
assigned or delegated. This agreement shall be binding on and inure to the
benefit of the heirs, personal representatives, successors and assigns of the
parties, subject, however, to the restrictions on assignment and delectation
contained herein.
9.6 DISPUTES AND ARBITRATION
Any dispute arising in connection with the interpretation or
enforcement of the provisions of this Agreement, or its application or validity,
will be submitted to arbitration. Such arbitration proceedings will be held in
Las Vegas, Nevada, in accordance with the rules then existing of the American
Arbitration Association. This agreement to arbitrate is specifically
enforceable.
Any award rendered in any such arbitration proceeding will be
final and binding on each of the parties, and judgment may be entered thereon in
any court of competent jurisdiction. The costs and fees of any such arbitration
proceeding (including the legal fees incurred by the Employee) will be borne by
the Corporation. The arbitrators may in their discretion award costs and
reasonable attorneys' fees to the prevailing party.
9.7 GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws of the State of Nevada.
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9.8 ENTIRE AGREEMENT
This Agreement (and the Exhibits attached hereto which are part of
this Agreement) contains the entire agreement and understanding between the
parties and supersedes all prior agreements and understandings, oral or written.
No modification, termination or attempted waiver shall be valid, unless in
writing and signed by both parties.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 22nd day of January, 1998.
"CORPORATION"
INAMED CORPORATION
By:/s/ Donald K. McGhan
------------------------
Donald K. McGhan
Title: Chairman of the Board
ADDRESS:
3800 Howard Hughes Parkway
Las Vegas, Nevada 89109
"EMPLOYEE"
/s/ Ilan K. Reich
-----------------
Ilan K. Reich
ADDRESS:
162 West 94th Street
New York, New York 10025
SOCIAL SECURITY NUMBER: ###-##-####
<PAGE> 11
EXHIBIT A TO EMPLOYMENT AGREEMENT
EMPLOYEE COMPENSATION
1. SALARY
The Employee's Annual Salary shall be FOUR HUNDRED THOUSAND
DOLLARS ($400,000), payable in accordance with the Corporation's pay policy,
with applicable federal, state and local taxes withheld. The Salary shall be
reviewed periodically (but not less than annually) by the Compensation Committee
and approved by the Board of Directors.
2. BONUS
The Employee will be entitled to a bonus based on a yet to be
determined program that will be developed by Management, presented to the
Compensation Committee and approved by the Board of Directors. Employee
understands that the bonus program may not apply to the initial year of
employment or may only apply to a portion of the initial year of employment.
This Exhibit A may only be amended by an Amendment to the Employment
Agreement in the form attached hereto as Exhibit B.
IN WITNESS WHEREOF, the undersigned has executed this Exhibit A to
Employment Agreement this 22nd day of January, 1998:
SIGNED BY: ACCEPTED BY:
EMPLOYEE INAMED CORPORATION
/s/ Ilan K. Reich /s/Donald K. McGhan
- ------------------ -------------------
Ilan K. Reich Donald K. McGhan
Its: Chairman of the Board
<PAGE> 12
Exhibit F To Employment Agreement
INAMED "Innovation and Medicine" INAMED Corporation
3800 Howard Hughes Pkwy.
Suite 1800
Las Vegas, NV 89109
EMPLOYEE SEVERANCE AGREEMENT (702) 791-3388
FAX: (702) 791-1922
January 22, 1998
Ilan K. Reich
162 West 94th Street
New York, New York 10025
Dear Ilan:
INAMED Corporation and its subsidiaries (the "Corporation") considers it
essential to the best interests of the Corporation and its stockholders to
foster the continuous employment of key management personnel. In this
connection, the Board of Directors of the Corporation (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
change in control of the Corporation may exist, and that such possibility and
the uncertainty and questions which it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Corporation and its stockholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (this "Agreement") in the event your employment with the
Corporation is terminated under the circumstances described below subsequent to
a "change in control of the Corporation" (as defined in Section 2).
1. TERM OF AGREEMENT. This Agreement shall commence on January 23,
1998, and shall continue in effect throughout the term of the Employment
Agreement (as set forth in Paragraph 2 thereof) being entered today. If a change
in control of the Corporation, as defined in Section 2, shall have occurred
during the term of this Agreement, notwithstanding any provision to the contrary
in the Employment Agreement or any other agreement between you and the
Corporation, this Agreement shall continue in effect for a period of not less
than twenty-four (24) months beyond the month in which such change in control
occurred.
2. CHANGE IN CONTROL. No benefit shall be payable hereunder unless
there shall have been a change in control of the Corporation, as set forth
below. For purposes of this Agreement, a "change in control of the Corporation"
shall be deemed to have occurred if:
<PAGE> 13
(i) Any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Corporation, any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation,
or any corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their
ownership of stock of the Corporation), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20% or more
of the combined voting power of the Corporation's then outstanding
securities (except that Appaloosa Management Company and its affiliates
shall not be deemed to be included within this subsection at such time
as its beneficial ownership is exempted from the Corporation's
Shareholder Rights Plan, as may be amended from time to time);
(ii) During any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Corporation to effect a transaction
described in clause (i), (iii) or (iv) of this Section) whose election
by the Board or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved cease for any reason to constitute at least
a majority thereof;
(iii) The stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than
(a) a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50%
of the combined voting power of the voting securities of the
Corporation or such surviving entity outstanding immediately after such
merger or consolidation or (b) a merger or consolidation effected to
implement a recapitalization of the Corporation (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than 20% of the combined voting power, of the Corporation's then
outstanding securities; or
(iv) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL.
(i) General. If any of the events described in Section 2
constituting a change in control of the Corporation occurs, you shall
be entitled to the benefits provided in Section 4(iii) upon the
subsequent termination of your employment during the term of this
Agreement unless such termination is (a) because of your death or
disability, (b) by the Corporation for cause, or (c) by you other than
for good reason. In the event your employment with the Corporation is
terminated for any reason and subsequently a change in control of the
Corporation should occur, you shall not be entitled to any benefits
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hereunder.
(ii) Disability. If, as a result of your incapacity due to
physical or mental illness, you are absent from the full-time
performance of your duties with the Corporation for six (6) consecutive
months, and within thirty (30) days after written notice of termination
is given you shall not have returned to the full-time performance of
your duties, your employment may be terminated for "Disability".
(iii) Cause. Termination by the Corporation of your employment
for "Cause" shall mean termination (a) upon the willful and continued
failure by you to substantially perform your duties with the
Corporation in accordance with the terms of the Employment Agreement
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination (as defined in Subsection
3(v)) after written demand for substantial performance is delivered to
you by the Board, which specifically identifies the manner in which the
Board believes that you have not substantially performed your duties
(for purposes of this Subsection, no act, or failure to act, on your
part shall be deemed "willful" unless done, or omitted to be done, by
you without good faith and without reasonable belief that your action
was in the best interest of the Corporation) or (b) notwithstanding the
foregoing, you shall not be terminated for Cause unless and until a
copy of a resolution duly adopted by the unanimous affirmative vote of
the entire membership of the Board of Directors (other than yourself)
at a meeting of the Board (after reasonable notice to you and an
opportunity for you, together with counsel, to be heard before the
Board), finding that in the good-faith opinion of the Board you were
guilty of conduct set forth above in this Subsection and specifying the
particulars thereof in written detail which has been delivered to you.
(iv) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the
occurrence after a change in control of the Corporation of any of the
following circumstances unless, in the case of paragraphs (a), (e),
(f), (g) or (h), such circumstances are fully corrected prior to the
Date of Termination (as defined in Section 3(vi)) specified in the
Notice of Termination (as defined in Section 3(v)) given in respect
thereof:
(a) The assignment to you of any duties inconsistent
with the position in the Corporation that you held immediately
prior to the change in control of the Corporation, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those
in effect immediately prior to such change in control;
(b) A reduction by the Corporation in your annual
base salary as in effect on the date hereof;
(c) The relocation of your office in New York City,
or the relocation of the Corporation's principal offices
immediately prior to the date of the change in control of the
Corporation to a location more than 50 miles, or the Corporation
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requiring you to be based anywhere other than in accordance with
Section 1.2 of the Employment Agreement;
(d) The failure by the Corporation to pay to you any
portion of your current compensation or to pay to you any portion
of an installment of deferred compensation under any deferred
compensation program of the Corporation within seven (7) days of
the date such compensation is due;
(e) The failure by the Corporation to continue in
effect any material compensation or benefit plan in which you
participate immediately prior to the change in control of the
Corporation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect
to such plan, or the failure by the Corporation to continue your
participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the
amount of benefits provided, and other compensation agreements as
existed at the time of the change in control of the Corporation;
(f) The failure by the Corporation to continue to
provide you with benefits substantially similar to those enjoyed
by you under any of the Corporation's life insurance, medical,
health and accident, or disability plans in which you were
participating at the time of the change in control of the
Corporation, the failure by the Corporation to provide you with
the number of paid vacation days to which you are entitled on the
basis of years of service with the Corporation in accordance with
the Corporation's normal vacation policy, or as stated within your
Employment Agreement, Compensation Agreement or like same
agreements, regardless of the type or form of said Agreements, in
effect at the time of the change in control of the Corporation;
(g) The failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; or
(h) Any purported termination of your employment
that is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (v) hereof (and, if
applicable, the requirements of Subsection (iii) hereof), which
purported termination shall not be effective for purposes of this
Agreement.
Your right to terminate your employment pursuant to this Subsection shall not be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of, rights with respect
to any circumstances constituting Good Reason hereunder.
(v) Notice of Termination. Any purported termination of your
employment by the Corporation or by you shall be communicated by
written Notice of Termination to the other party hereto in accordance
with Section 6. "Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and
circumstances claimed to
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<PAGE> 16
provide a basis for termination of your employment under the
provision so indicated.
(vi) Date of Termination, etc. "Date of Termination" shall
mean (a) if your employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that you have not
returned to the full-time performance of your duties during such
thirty-day (30) period), and (b) if your employment is terminated
pursuant to Subsection (iii) or (iv) hereof or for any other reason
(other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination for Cause shall not be
less than sixty (60) days from the date such Notice of Termination is
given, and in the case of a termination for Good Reason, not less than
thirty (30) nor more than ninety (90) days from the date such Notice of
Termination is given); provided, however, that if within thirty (30)
days after any Notice of Termination is given, or if later, prior to
the Date of Termination (as determined without regard to this
provision), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, then the
Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no
appeal has been perfected); provided, further, that the Date of
Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues
the resolution of such dispute with reasonable diligence.
Notwithstanding the fact that any such dispute is pending, the
Corporation will continue to pay you your full compensation in effect
when the notice giving rise to the dispute was given (including, but
not limited to, base salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this
Subsection. Amounts paid under this Subsection are in addition to all
other amounts due under this Agreement, and shall not be offset against
or reduce any other amounts due under this Agreement and shall not be
reduced by any compensation earned by you as the result of employment
by another employer.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Following a
change in control of the Corporation, you shall be entitled to the following
benefits during a period of disability, or upon termination of your employment,
as the case may be, provided that such period or termination occurs during the
term of this Agreement:
(i) During any period that you fail to perform your full-time
duties with the Corporation as a result of incapacity due to physical
or mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period, together
with all compensation payable to you under the Corporation's disability
plan or program or other similar plan during such period, until this
Agreement is terminated pursuant to Section 3(ii) hereof. Thereafter,
or in the event your employment shall be terminated by reason of your
death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
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<PAGE> 17
(ii) If your employment shall be terminated by the Corporation
for Cause or by you other than for Good Reason, the Corporation shall
pay you your full base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given, plus all
other amounts to which you are entitled under any compensation plan of
the Corporation at the time such payments are due, and the Corporation
shall have no further obligations to you under this Agreement.
(iii) If your employment by the Corporation shall be
terminated by you for Good Reason or by the Corporation other than for
Cause or Disability, then you shall be entitled to the benefits
provided below:
(a) The Corporation shall pay to you your full base
salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given, no later than the
fifth day following the Date of Termination, plus all other
amounts to which you are entitled under any compensation plan
of the Corporation, at the time such payments are due;
(b) In lieu of any further salary payment to you for
periods subsequent to the Date of Termination, the Corporation
shall pay as severance pay to you, at the time specified in
Subsection (v), a lump sum severance payment (together with
the payments provided in paragraphs (c) and (e) below, the
"Severance Payments") equal to 300% of your annual base salary
in effect as of the Date of Termination or immediately prior
to the change in control of the Corporation, whichever is
greater, and 300% of the highest annual bonus awarded to you
pursuant to the Corporation's Incentive Profit Share Plan or
any successor plan thereto, with respect to three (3) fiscal
years preceding the change in control of the Corporation;
(c) In lieu of shares of common stock of the
Corporation ("Common Shares") issuable upon exercise of
outstanding warrants or options, the Corporation shall pay to
you, at the time specified in Subsection (v), an amount in
cash equal to the product of (1) the excess of the higher of
the closing price of the Common Stock as reported on Nasdaq on
or nearest the Date of Termination or the highest per share
price for Common Shares actually paid in connection with any
change in control of the Corporation, over the per share
option price of each Option held by you (whether or not fully
vested or exercisable), and (2) the number of Common Shares
covered by each such Option;
(d) The Corporation shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to
obtain or enforce any right or benefit provided by this
Agreement or in connection with any tax audit or proceeding to
the extent attributable to the application of Section 4999 of
the Code, to any payment or benefit provided hereunder); and
(e) For a twenty-four (24) month period after such
termination, the
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<PAGE> 18
Corporation shall arrange to provide you with life,
disability, dental, accident and group health insurance
benefits substantially similar to those which you were
receiving immediately prior to the Notice of Termination.
Notwithstanding the foregoing, the Corporation shall not
provide any benefit otherwise receivable by you pursuant to
this paragraph (e) if an equivalent benefit is actually
received by you during the twenty-four (24) month period
following your termination, and any such benefit actually
received by you shall be reported to the Corporation;
(iv) In the event that you become entitled to the Severance
Payments, if any of the Severance Payments will be subject to the tax
(the "Excise Tax") imposed by Section 4999 of the Code (or any similar
tax that may hereafter be imposed), the Corporation shall pay to you
at the time specified in Subsection (v) below, an additional amount
(the "Gross-Up Payment") such that the net amount retained by you,
after deduction of any Excise Tax on the Severance Payments and any
federal, state and local income tax and Excise Tax upon the payment
provided for by this Subsection, shall be equal to the Severance
Payments. For purposes of determining whether any of the Severance
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (a) any other payments or benefits received or to be
received by you in connection with a change in control of the
Corporation or your termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement
with the Corporation, any person whose actions result in a change in
control of the Corporation or any person affiliated with the
Corporation or such person) shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Corporation's independent auditors and
acceptable to you such other payments or benefits (in whole or in
part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of
the Code in excess of the base amount within the meaning of Section
280G(b)(3) of the Code, or are otherwise not subject to the Excise
Tax, (b) the amount of the Severance Payments which shall be treated
as subject to the Excise Tax shall be equal to the lesser of (1) the
total amount of the Severance Payments or (2) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) (after
applying clause (a), above), and (c) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Corporation's independent auditors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, you shall be deemed to
pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Corporation at
the time that the amount of the reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to
the Excise Tax and federal and state and
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<PAGE> 19
local income tax imposed on the Gross-Up Payment being repaid by you
if such repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction) plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(b). In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of the
termination of your employment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Corporation shall make an additional Gross-Up
Payment in respect of such excess (plus any interest payable with
respect to such excess) at the time that the amount of such excess is
finally determined.
(v) The payments provided for in Subsections 4(iii)(b) and (c)
and Subsection 4(iv) above shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such
day, the Corporation shall pay to you on such day an estimate, as
determined in good faith by the Corporation, of the minimum amount of
such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by the Corporation to you, payable on the fifth day after demand
by the Corporation (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(vi) In the event of Termination of Employment or Change of
Control, the Corporation shall without contest forgive any and all
Officer and/or Director advancement, loans or draws, direct or
indirect, current, past or future due and payable, under any and all
types of agreement regardless of said amounts, terms, etc. This shall
occur no later than the day following the Termination Date or Change of
Control effective date.
(vii) Except as provided in Subsection (iii)(e) hereof, you
shall not be required to mitigate the amount of any payment provided
for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section
4 be reduced by any compensation earned by you as a result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to the Corporation, or
otherwise.
5. SUCCESSORS; BINDING AGREEMENT.
(i) The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Corporation would be
required to perform it if no such succession had taken place. Failure
of the Corporation to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Corporation
in the same amount and on the same terms to which you would be
8
<PAGE> 20
entitled hereunder if you terminate your employment for Good Reason
following a change in control of the Corporation, except that for
purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
As used in this Agreement, "Corporation" shall mean the Corporation as
hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by you and your personal or legal heirs, distributees,
devisees and legatees. If you should die while any amount would still
be payable to you hereunder had you continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other
designee or, if there is no such designee, to your estate.
6. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States postage
prepaid, addressed to the respective addresses set forth on the first page of
this Agreement, provided that all notices to the Corporation shall be directed
to the attention of the Board with a copy to the Secretary of the Corporation,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be, at your
discretion, governed by the laws of the State of Florida, the State of Nevada,
or the State of California without regard to its conflicts of law principles.
All references to sections of the Exchange Act or the Code shall be deemed also
to refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Corporation under Section 4
shall survive the expiration of the term of this Agreement.
8. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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<PAGE> 21
10. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in the State of Nevada, in the
State of California, in the State of New York, or in the State of Florida, to be
at your option, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes the provisions of the General Policy as well as all prior agreements,
provisos, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto; and any prior agreement of the parties hereto in respect of
the subject matter contained herein is hereby terminated and canceled.
If this letter sets forth our Agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our Agreement on this subject.
Sincerely,
INAMED CORPORATION AND SUBSIDIARIES
By:/s/ Donald K. McGhan
--------------------
Donald K. McGhan
Title: Chairman of the Board
AGREED TO THIS 22ND DAY OF JANUARY, 1998
/s/ Ilan K. Reich
- -----------------
Ilan K. Reich, Employee
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<PAGE> 1
Exhibit 10.3
FORM OF WARRANT
WARRANT NO.
INAMED CORPORATION
EXECUTIVE OFFICER WARRANT
THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED AT ANY TIME WHATSOEVER, EXCEPT UPON DELIVERY TO THE COMPANY OF AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION
IS NOT REQUIRED FOR SUCH TRANSFER OR THAT ANY SUCH TRANSFER WILL NOT BE IN
VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
This Warrant ("this Warrant") is made and entered into at New York,
New York, on the date hereinafter set forth by and between INAMED CORPORATION,
a Delaware corporation (hereinafter called the "Company"), and
(hereinafter called the "Holder").
WHEREAS:
A. The Company wishes to grant the Holder the Warrant which gives the
Holder the right, but not the obligation, to purchase stock in the
Company as recognition of the Holder's valuable services as
of the Company, and the Holder will, in consideration of the receipt
of said Warrant, agree to the terms, conditions and provisions set
forth herein.
NOW, THEREFORE, in consideration of the premises, it is agreed as follows:
1. WARRANT. Subject to the conditions set forth herein, the
Company hereby grants to the Holder the right, privilege and option to purchase
( ) shares (the "Warrant Shares") of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), at a price per share (the
"Strike Price") of
Page 1 of 6
<PAGE> 2
Dollars ($_____) in the manner hereinafter provided, effective as of , (the
"Grant Date") to be vested as follows:
(a) Fifty percent (50%) on the first anniversary of the
commencement of the Term of Employment (as defined in the Employment
Agreement between the Company and the Holder); and
(b) Fifty percent (50%) on the second anniversary of the
commencement of the Term of Employment;
unless this Warrant has been terminated pursuant to Section 3 hereof and
provided, however, that this Warrant, unless it has expired or been earlier
terminated, shall vest as to all Warrant Shares (notwithstanding the price of
the Common Stock) upon a "change of control" of the Company. For purposes of
this Warrant, a "change of control" of the Company shall be deemed to have
occurred if, at any time following the date of this Warrant:
(i) Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than the Company,
any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation
owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their
ownership of stock of the Company)), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more (or, in the case of Appaloosa
Management, L.P. and its "affiliates" and "associates," as
such terms are defined in Rule 12b-2 under the Exchange Act,
36% or more) of the combined voting power of the Company's
then outstanding securities;
(ii) During any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board of Directors of the Company (the
"Board"), and any new director (other than a director
designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (i),
(iii) or (iv) of this Section) whose election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason
to constitute at least a majority thereof;
(iii) The stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than (a) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
Page 2 of 6
<PAGE> 3
(either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after
such merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove
defined) acquires more than 20% of the combined voting power
of the Company's then outstanding securities; or
(iv) The stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets.
In the event of any split, combination, reclassification, recapitalization,
merger, consolidation or any other extraordinary corporate transaction occurring
after the date of this Warrant which the Compensation Committee of the Board (or
any successor committee, the "Compensation Committee") determines will result in
a change in the Common Stock for which an adjustment pursuant to this paragraph
is appropriate in order to preserve the benefits to the Holder of this Warrant,
the Strike Price, the type of securities or other property subject to this
Warrant and/or the number of Warrant Shares (or other securities or property)
shall be adjusted in a manner which the Compensation Committee determines to be
appropriate under the circumstances. In making any determination pursuant to
this paragraph, the Compensation Committee shall be entitled to rely, and the
members of the Compensation Committee shall incur no liability and shall be
fully protected in respect of any action taken in reliance, on advice of
counsel.
2. METHOD OF EXERCISE. Warrant Shares purchased under this
Warrant shall, at the time of purchase, be paid for in full, either in cash
and/or in shares of Common Stock held by the Holder for at least six months and
having a fair market value (based on the average closing bid price of the Common
Stock for the five trading day period immediately prior to the date of exercise)
which, when added to the portion of the total Strike Price to be paid in cash,
equals the total Strike Price for the portion of this Warrant being exercised.
To the extent that the right to purchase Warrant Shares has accrued hereunder,
this Warrant may be exercised, from time to time, by written notice to the
Company stating the number of Warrant Shares with respect to which this Warrant
is being exercised and the time of delivery thereof, which shall be at least
fifteen (15) days after the giving of such notice, unless an earlier date shall
have been mutually agreed upon. If requested by the Company, the Holder shall
provide the Company with an opinion of counsel satisfactory to the Company that
the exercise of this Warrant and the issuance of the Warrant Shares do not
require registration under, and that any such exercise and issuance will not be
in violation of, the Securities Act of 1933, as amended (the "Act"), or
applicable state securities laws or any rule or regulations promulgated
thereunder.
Page 3 of 6
<PAGE> 4
At the time specified in such notice, the Company shall, without
transfer or issue tax to the Holder, deliver to him by certified mail, a
certificate or certificates for such Warrant Shares, against the payment by the
Holder of the Strike Price, in full, for the number of Warrant Shares to be
delivered, by certified or bank cashier's check, or the equivalent thereof
acceptable to the Company, or through the use of Common Stock in accordance with
the preceding paragraph; provided, however, that the time of such delivery may
be postponed by the Company for such period as may be required for it, with
reasonable diligence, to comply with any requirements of any state or federal
agency or any securities exchange. If the Holder fails to accept delivery of and
pay for all or any part of the number of Warrant Shares specified in the notice
given by the Holder, upon tender and delivery of said shares, the Holder's right
to exercise this Warrant with respect to such undelivered shares shall be
terminated.
3. TERMINATION OF WARRANT. Except as herein otherwise stated,
this Warrant, to the extent not theretofore exercised, shall expire at 5:00 p.m.
New York City time on , .
4. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder
hereby warrants and represents to the Company, as of the date hereof and as of
the date or dates on which any Warrant Shares are purchased hereunder, as
follows:
(a) Holder is an Accredited Investor as defined in
Regulation D promulgated by the Securities and Exchange Commission
under the Act.
(b) Holder is, by reason of Holder's business or
financial experience, capable of evaluating the merits and risks of
this investment and of protecting the Holder's own interests in
connection with this Warrant.
(c) In deciding whether to acquire the Warrant Shares,
the Holder has relied, and will rely, exclusively upon consultations
with his legal, financial and tax advisors with respect to the nature
of this Warrant.
(d) Holder understands that neither the Securities and
Exchange Commission, nor any other federal or state governmental agency
having jurisdiction over the sale and issuance of the Warrant Shares,
will make any finding or determination relating to the appropriateness
for investment of the Warrant Shares and that none of them has or will
recommend or endorse the Warrant Shares.
(e) The Warrant Shares will be purchased for Holder's own
account for investment and will not be purchased with a view to the
sale or distribution thereof, and the Holder has no intention of
distributing or reselling any portion of this Warrant or the Warrant
Shares which Holder is receiving or may purchase. Holder acknowledges
that this Warrant and the Warrant Shares have not been registered under
the Act, and must be held indefinitely unless subsequently registered
under the Act or an exemption for such registration is available. The
Holder also acknowledges that Holder is fully aware of the restrictions
on
Page 4 of 6
<PAGE> 5
disposing of the Warrant Shares resulting from the provisions of the
Act and the General Rules and Regulations of the Securities and
Exchange Commission thereunder. Holder further understands that the
Warrant Shares have not been, and will not be, qualified under
applicable state securities laws.
(f) Holder, if requested by the Company's underwriters
from time to time, will execute "lock-up" agreements as requested,
relating to this Warrant and the Warrant Shares.
(g) Holder recognizes that "stop transfer" instructions
will be issued against any stock certificates under this Warrant and
that a restrictive legend that addresses acquisition for investment,
subject to Rule 144 promulgated under the Act, will be placed on the
stock certificates issued for the securities.
5. RESTRICTIONS ON ISSUANCE OF SHARES. The Company shall not be
obligated to sell and issue any shares pursuant to this Warrant unless the
shares with respect to which this Warrant is exercised are, at the time,
effectively registered, or exempt from registration, under the Act. The Company
may require an opinion of counsel acceptable to the Company to the effect of any
exemption.
6. TRANSFERABILITY OF WARRANT; RIGHTS PRIOR TO EXERCISE. During
the Holder's lifetime, this Warrant hereunder shall be exercisable only by the
Holder, or any guardian or legal representative of the Holder in accordance with
the Employment Agreement between the Holder and the Company, except as otherwise
provided in this Warrant. This Warrant is freely transferable at the option of
the Holder to the Holder's spouse, lineal descendants (including those adopted)
or any lineal descendant of the Holder's siblings (collectively, the "Permitted
Transferees") or any trust created solely for the benefit of a Permitted
Transferee, provided that any Permitted Transferee must give the Company written
notice of such transfer within ten (10) days of the transfer and must agree in a
writing satisfactory to the Company to be bound by the terms of this Warrant.
Holder shall have no rights as a shareholder of shares subject
to this Warrant until payment of the Strike Price pursuant to Section 2 and the
delivery of such shares are herein provided.
7. REGISTRATION RIGHTS. The Holder shall have the same
registration rights under Form S-8 or otherwise as may be generally made
available from time to time to officers and employees of the Company.
8. SERVICE NOT AFFECTED. The granting of this Warrant or its
exercise shall not be construed as granting to the Holder any right with respect
to the continuance of the Term of Employment. Except as may otherwise be limited
by a written agreement between the Company and the Holder, the right of the
Company to terminate as defined in the Employment Agreement is specifically
reserved by the Company, as the Company or on behalf of the Company (whichever
the case may be), and acknowledged by the Holder.
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<PAGE> 6
9. BINDING EFFECT. This Warrant shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
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<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Amended and Restated
Warrant to be executed on this day of , .
"COMPANY" "HOLDER"
INAMED CORPORATION
By:______________________________ ______________________________
Signature
______________________________
Social Security Number
- --------------------------------------------------------------------------------
NUMBER OF WARRANTS: ( ) EXACTLY
- --------------------------------------------------------------------------------
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STRIKE PRICE: ($ ) PER SHARE
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