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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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Date of Report (Date of earliest
event reported): June 26, 1996
AVECOR CARDIOVASCULAR INC.
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(Exact name of registrant as specified in its charter)
Minnesota 0-21330 41-1695729
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
13010 County Road 6, Plymouth, Minnesota 55441
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 612/559-9504
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ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
On June 26, 1996, the Board of Directors of AVECOR Cardiovascular Inc.
(the "Company") declared a dividend distribution of one preferred stock
purchase right (a "Right") for each outstanding share of the Company's Common
Stock, par value $.01 per share (the "Common Shares"), payable to
shareholders of record at the close of business on August 2, 1996 (the
"Record Date"). Each Right entitles the registered holder to purchase from
the Company at any time following the Distribution Date (as defined below)
one one-thousandth of a share (a "Preferred Share Fraction") of the Company's
Series A Junior Preferred Stock, par value $.01 per share (the "Preferred
Shares"), or a combination of securities and assets of equivalent value, at a
purchase price of $80.00 per Preferred Share Fraction (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth
in a Rights Agreement (the "Rights Agreement") dated as of June 26, 1996,
between the Company and Norwest Bank Minnesota, N.A., as Rights Agent.
Initially, the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificates, and no separate Rights Certificates will be distributed.
The Rights will separate from the Common Shares and will be distributed to
the holders thereof on the "Distribution Date," which shall be the first to
occur of the following: (i) the close of business on the tenth business day
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding
Common Shares, other than as a result of a Permitted Offer, as defined (the
"Stock Acquisition Date"); (ii) the close of business on the tenth business
day (or such later date as the Board of Directors, acting by a majority of
the Continuing Directors, may determine) following the commencement of a
tender offer or exchange offer (other than a Permitted Offer, as defined)
that would result in a person or group beneficially owning 15% or more of the
outstanding Common Shares; or (iii) the close of business on the tenth
business day after a determination by at least a majority of the Continuing
Directors that a Person is an Adverse Person, and that such Person, alone or
together with its affiliates and associates, has become the beneficial owner
of a substantial amount of Common Shares (which amount shall in no event be
less than 10% of the Common Shares then outstanding) and (a) such beneficial
ownership by such Person is intended to cause the Company to repurchase the
Common Shares beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of transactions
intended to provide such Person with short-term financial gain under
circumstances where at least a majority of the Continuing Directors
determines that the best long-term interests of the Company and its
shareholders would not be served by taking such action or entering into such
transaction or series of transactions at that time or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with customers or
impairment of the Company's ability to maintain its competitive position).
A "Permitted Offer" means a tender or exchange offer which is for all
outstanding Common Shares at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by at least a
majority of the members of the Board who are Continuing Directors, who are
not officers of the Company and who are not Acquiring Persons or Affiliates,
Associates, nominees or representatives of an Acquiring Person, to be
adequate and otherwise in the best interests of the Company and its
shareholders (other than the Person or any Affiliate or Associate thereof on
whose behalf the offer is being made).
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A "Continuing Director" is (i) any person who is a member of the Board
of Directors prior to June 26, 1996, while such person is a member of the
Board of Directors, who is not an Acquiring Person or an Adverse Person, or
an affiliate or associate of either of the foregoing, or a representative or
designee of an Acquiring Person or an Adverse Person or any such affiliate or
associate, or (ii) any person who subsequently becomes a member of the Board
of Directors who is not an Acquiring Person or an Adverse Person, or an
affiliate or associate of either of the foregoing, or a representative or
designee of an Acquiring Person, an Adverse Person or any such affiliate or
associate, and whose nomination or election to the Board of Directors is
recommended or approved by a majority of the Continuing Directors.
Until the Distribution Date, (i) the Rights will be evidenced by Common
Share certificates and will be transferred with and only with such Common
Share certificates, (ii) new Common Share certificates issued after August 2,
1996 will contain a notation incorporating the Rights Agreement by reference
and (iii) the surrender for transfer of any certificate for Common Shares
outstanding will also constitute the transfer of the Rights associated with
the Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on June 25, 2006, unless earlier redeemed or
exchanged by the Company as described below (the earliest of all such dates,
the "Expiration Date").
As soon as practical after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Shares as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. All Common Shares issued prior
to the earlier of the Distribution Date and the Expiration Date will be
issued with Rights. Common Shares issued after the Distribution Date upon
the exercise of employee stock options, issuances under other employee stock
benefit plans or the conversion of convertible securities issued prior to the
Distribution Date will be issued with Rights.
In the event (i) that a person or group, with certain exceptions,
becomes the beneficial owner of more than 15% of the then outstanding Common
Shares, other than as a result of a Permitted Offer or (ii) at least a
majority of the Continuing Directors determines that a person is an Adverse
Person, then each holder of a Right will thereafter have the right to
receive, upon exercise, that number of Preferred Share Fractions (or in
certain circumstances, that number of Common Shares, cash, property or other
securities of the Company) having a market value equal to two times the
Exercise Price of the Right. The Rights, however, are not exercisable
following the occurrence of either of the events set forth above until such
time as the Rights are no longer redeemable by the Company as set forth
below. Notwithstanding any of the foregoing, following the occurrence of
either of the events set forth above, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person or Adverse Person (or certain related persons and
transferees) will be null and void. The events set forth in this paragraph
are referred to as "Section 11(a)(ii) Events."
In the event that, at any time following the Stock Acquisition Date,
other than pursuant to a Permitted Offer, (i) the Company is acquired in a
merger or other business combination transaction in which the Company is not
the surviving corporation or the Common Shares are changed or exchanged or
(ii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive that
number of shares of common stock of the
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acquiring company which equals the exercise price of the Right divided by
one-half of the current market price of such common stock at the date of the
occurrence of the event. The events set forth in this paragraph are referred
to as "Section 13 Events," and the Section 11(a)(ii) Events and the Section
13 Events are collectively referred to as the "Triggering Events."
At any time after the occurrence of a Section 11(a)(ii) Event, at the
election of a majority of the Continuing Directors, the Company may exchange
the Rights (other than Rights which have become void), in whole or in part,
at an exchange ratio of one Preferred Share Fraction per Right (subject to
adjustment).
The Purchase Price payable and the number of Preferred Share Fractions
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, split, combination, consolidation or reclassification of, the
Preferred Shares, (ii) if all holders of any security of the Company are
granted rights, options or warrants to subscribe for or purchase Preferred
Shares or convertible securities at less than the current market price of the
Preferred Shares, or (iii) upon the distribution to holders of Preferred
Shares of evidences of indebtedness or assets (excluding quarterly cash
dividends ) or of subscription rights or warrants (other than those referred
to above).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. The Company will not be required to issue fractional Preferred Shares
other than fractions which are integral multiples of Preferred Share
Fractions (or, in the event of an appropriate election, Common Shares) and,
in lieu of such fractional Preferred Shares (or Common Shares, as the case
may be), an adjustment in cash will be made based on the market price of the
Preferred Shares on the last trading date prior to the date of exercise.
In general, at any time prior to the first to occur of (i) ten days
following the Stock Acquisition Date, (ii) ten days after a person is
determined to be an Adverse Person, or (iii) the Final Expiration Date, the
Company, acting by a majority of the Continuing Directors, may redeem the
Rights in whole, but not in part, at a price of $.001 per Right (payable in
cash, stock or other consideration deemed appropriate by the Board of
Directors). Immediately upon redemption of the Rights, the Rights will
terminate and the only right of the holders of the Rights will be to receive
the $.001 redemption price.
The Preferred Shares purchasable upon exercise of the Rights will be
nonredeemable and junior to any other series of preferred stock the Company
may issue (unless otherwise provided in the terms of such other stock). Each
Preferred Share will have a preferential quarterly dividend in an amount
equal to 1,000 times the dividend declared on each Common Share [but in no
event less than $100]. In the event of liquidation, the holders of Preferred
Shares will receive a preferred liquidation payment equal to the greater of
$1,000 per share, plus accrued dividends, or 1,000 times the payment made
with respect to each Common Share. Each Preferred Share will have 1,000
votes, voting together with the Common Shares. 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 and type
of consideration received per Common Share. The rights of the Preferred
Shares as to dividends, liquidation and voting, and in the event of mergers
and consolidations, are protected by customary antidilution provisions.
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Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or receive dividends. The creation of the Rights should not be
taxable to shareholders. Shareholders may, however, depending upon the
circumstances, recognize taxable income in the event that the rights become
exercisable for Preferred Shares (or other consideration) of the Company or
for common stock of an acquiring company as set forth above.
Any of the provisions of the Rights Agreement, including the definition
of Acquiring Person or the Purchase Price, may be amended by at least a
majority of the Continuing Directors prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended
by at least a majority of the Continuing Directors in order to cure any
ambiguity, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person or Adverse
Person), or to shorten or lengthen certain time periods under the Rights
Agreement. However, no amendment to adjust the time period governing
redemption can be made at such time as the Rights are not redeemable.
As of June 30, 1996, there were 7,782,918 Common Shares outstanding and
967,520 Common Shares reserved for issuance under outstanding warrants and
various stock-based compensation plans of the Company. Each outstanding
Common Share on August 2, 1996 will receive one Right. So long as the Rights
Agreement remains in effect and the Rights continue to remain attached to and
trade with the Common Shares, the Company will issue one Right for each
Common Share issued between the Record Date and any Distribution Date, so
that all outstanding shares will have attached Rights. Assuming 7,800,000
shares of Common Stock are outstanding on the Record Date, the Company will
have initially reserved for issuance upon exercise of the Rights 105,000
Preferred Shares.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Company's Board of Directors. The Rights
should not interfere with any merger or other business combination approved
by at least a majority of the Continuing Directors of the Company because the
Continuing Directors may, at their option, either (i) declare the transaction
to be a "permitted offer," or (b) at any time before the close of business on
the 10th business day following the Stock Acquisition Date or the date on
which a person is determined to be an Adverse Person, redeem the then
outstanding Rights at the redemption price.
ITEM 7. EXHIBITS.
4.1 Form of Rights Agreement, dated as of June 26, 1996, between AVECOR
Cardiovascular Inc. and Norwest Bank Minnesota, N.A., which
includes as Exhibit B the form of Rights Certificate (filed
herewith electronically). Pursuant to the Rights Agreement,
printed Rights Certificates will not be mailed until as soon as
practicable after the Distribution Date (as defined therein).
99.1 Press Release dated July 2, 1996 (filed herewith electronically).
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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.
Dated: July 17, 1996 AVECOR CARDIOVASCULAR INC.
By: /s/ ANTHONY BADOLATO
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Anthony Badolato
Chief Executive Officer
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INDEX TO EXHIBITS
NO. DESCRIPTION METHOD OF FILING
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4.1 Form of Rights Agreement, dated as
of June 26, 1996, between AVECOR
Cardiovascular Inc. and Norwest Bank
Minnesota, N.A., which includes as
Exhibit B the form of Rights
Certificate. Pursuant to the Rights
Agreement, printed Rights Certificates
will not be mailed until as soon as
practicable after the Distribution
Date (as defined therein). . . . . . . . Filed herewith electronically.
99.1 Press Release dated July 2, 1996 . . . . Filed herewith electronically.
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RIGHTS AGREEMENT
between
AVECOR CARDIOVASCULAR INC.
and
NORWEST BANK MINNESOTA, N.A.
dated as of June 26, 1996
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TABLE OF CONTENTS
Section Page
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1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Appointment of Rights Agent. . . . . . . . . . . . . . . . . . . . . . . 6
3. Issue of Rights Certificates . . . . . . . . . . . . . . . . . . . . . . 6
4. Form of Rights Certificates. . . . . . . . . . . . . . . . . . . . . . . 8
5. Countersignature and Registration. . . . . . . . . . . . . . . . . . . . 9
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates . . . . . . . . 10
7. Exercise of Rights; Purchase Price; Expiration Date. . . . . . . . . . . 11
8. Cancellation and Destruction of Rights Certificates. . . . . . . . . . . 12
9. Reservation and Availability of Capital Stock; Registration . . . . . . 13
10. Capital Stock Record Date. . . . . . . . . . . . . . . . . . . . . . . . 14
11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12. Certificate of Adjusted Purchase Price or Number of Shares . . . . . . . 22
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power . . 22
14. Fractional Rights and Fractional Shares. . . . . . . . . . . . . . . . . 24
15. Rights of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16. Agreement of Rights Holders. . . . . . . . . . . . . . . . . . . . . . . 26
17. Rights Certificate Holder Not Deemed a Shareholder . . . . . . . . . . . 26
18. Concerning the Rights Agent. . . . . . . . . . . . . . . . . . . . . . . 27
19. Merger or Consolidation or Change of Name of Rights Agent. . . . . . . . 27
20. Duties of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . 28
21. Change of Rights Agent . . . . . . . . . . . . . . . . . . . . . . . . . 30
22. Issuance of New Rights Certificates. . . . . . . . . . . . . . . . . . . 30
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23. Redemption and Termination . . . . . . . . . . . . . . . . . . . . . . . 31
24. Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
25. Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . 33
26. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
27. Supplements and Amendment. . . . . . . . . . . . . . . . . . . . . . . . 34
28. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
29. Determinations and Actions by the Board. . . . . . . . . . . . . . . . . 35
30. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . 35
31. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
32. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
33. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
34. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Exhibits
A - Form of Certificate of Designation, Preferences and Rights of Series A
Junior Preferred Stock
B - Form of Rights Certificate
C - Summary of Rights Agreement
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RIGHTS AGREEMENT
This RIGHTS AGREEMENT, dated as of June 26, 1996 (this "Agreement"), is
between AVECOR CARDIOVASCULAR INC., a Minnesota corporation (the "Company"),
and Norwest Bank Minnesota, N.A., a national banking association, as Rights
Agent (the "Rights Agent").
On June 26, 1996 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company (as the composition of Board of Directors may change
from time to time, the "Board") authorized and declared a dividend
distribution of one Right for each Common Share (as hereinafter defined) of
the Company outstanding at the close of business (as hereinafter defined) on
August 2, 1996 (the "Record Date"), each Right (individually a "Right" and
collectively the "Rights") initially representing the right to purchase one
one-thousandth of a Preferred Share (as hereinafter defined) of the Company
having the rights, powers and preferences set forth in the form of the
Certificate of Designation, Preferences and Rights attached hereto as Exhibit
A, upon the terms and subject to the conditions hereinafter set forth, and
has further authorized and directed the issuance of one Right for each Common
Share issued between the Record Date and the earlier of the Distribution Date
or the Expiration Date (both as hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
alone or together with all Affiliates and Associates of such Person,
shall be the Beneficial Owner of 15% or more of the Common Shares then
outstanding (other than as a result of a Permitted Offer (as
hereinafter defined)), but shall not include the Company, any
Subsidiary of the Company, or any employee benefit plan of the Company
or of any Subsidiary of the Company or any Person organized, appointed
or established by the Company for or pursuant to the terms of any such
plan. Notwithstanding the foregoing, no Person shall become an
"Acquiring Person": (i) as the result of an acquisition of Common
Shares by the Company which, by reducing the number of Common Shares
outstanding, increases the proportionate number of Common Shares
beneficially owned by such Person to 15% or more of the Common Shares
then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 15% or more of the Common Shares then outstanding
by reason of Common Share purchases by the Company and shall thereafter
become the Beneficial Owner of any additional Common Shares, other than
pursuant to the receipt of stock dividends or stock splits on a pro
rata basis on Common Shares already beneficially owned by such Person,
then such Person shall be deemed to be an "Acquiring Person"; or (ii)
who beneficially owns 15% or more of the outstanding Common Shares but
who acquired Beneficial Ownership of Common Shares without any plan or
intention to seek or affect control of the Company, if such Person
promptly enters into an irrevocable commitment promptly to divest, and
thereafter promptly divests (without exercising or retaining any power,
including voting, with respect to such shares), sufficient shares of
Common Shares (or securities convertible into, exchangeable into or
exercisable for Common Shares) so that such Person ceases to be the
Beneficial Owner of 15% or more
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of the outstanding shares of Common Shares; or (iii) who beneficially
owns Common Shares consisting solely of one or more (A) Common Shares
beneficially owned pursuant to the grant for exercise of an option
granted to such Person by the Company in connection with an agreement
to merge with, or acquire, the Company entered into prior to a Section
11(a)(ii) Trigger Date, (B) Common Shares (or securities convertible
into, exchangeable into or exercisable for Common Shares), beneficially
owned by such Person or its Affiliates or Associates at the time of
grant of such option or (C) Common Shares (or securities convertible
into, exchangeable into or exercisable for Common Shares) acquired by
Affiliates or Associates of such Person after the time of such grant
which, in the aggregate, amount to less than 1% of the outstanding
Common Shares.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii).
(d) "Adverse Person" shall mean any Person determined to be an Adverse
Person pursuant to the criteria set forth in Section 11(a)(ii)(B).
(e) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act as in effect on the date hereof.
(f) "Agreement" shall have the meaning set forth in the preamble
clause at the beginning hereof.
(g) (i) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(A) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, beneficially owns;
(B) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, whether or not in
writing (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights,
other rights, warrants or options or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own,"(1) securities tendered pursuant to a tender or exchange offer made by
or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, (2) securities issuable upon exercise of Rights at any time prior
to the occurrence of a Triggering Event, or (3) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 (the "Original Rights") or pursuant to
Section 11(i) in connection with an adjustment made with respect to any
Original Rights;
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(C) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right (sole
or shared) to vote or dispose of or has "beneficial ownership" of (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act, or any comparable or successor rule, whether or
not the Company is subject to the Exchange Act), including, without
limitation, pursuant to any agreement, arrangement or understanding,
whether or not in writing; provided, however, that a Person shall not
be deemed the "Beneficial Owner" of, or to "beneficially own," any
security under this Section 1(g)(i)(C) as a result of an oral or
written agreement, arrangement or understanding to vote such security
if such agreement, arrangement or understanding (1) arises solely from
a revocable proxy given in response to a proxy or consent solicitation
made pursuant to and in accordance with, the applicable provisions of
the General Rules and Regulations under the Exchange Act (and if such
provisions are not applicable by law such proxy or solicitation is made
in substantially the same manner as if such provisions were
applicable), and (2)is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report) (and if the Company is not subject to the Exchange Act, would
not be then reportable if the Company was subject to the Exchange Act);
or
(D) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding, whether or
not in writing, for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in Section 1(g)(i)(C)(1)) or
disposing of such securities.
(ii) Notwithstanding anything in this definition to the
contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities, 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 is deemed to own beneficially hereunder.
(h) "Board" shall have the meaning set forth in the recital
clause at the beginning of this Agreement.
(i) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of Minnesota
are authorized or obligated by law or executive order to close.
(j) "Close of business" on any given date shall mean 5:00 p.m.
Minneapolis, Minnesota time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 p.m. Minneapolis,
Minnesota time on the next succeeding Business Day.
(k) "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: (i) in the case of Persons organized in
corporate form, the shares of capital stock or units of equity security
with the greatest voting power of such Person or, if such Person is a
Subsidiary of another Person, of the Person or Persons which ultimately
control or direct the management of such first-mentioned Person, and
(ii) in the case of Persons not organized in corporate form, the units
of beneficial interest which (A) represent the right to participate
generally in the
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profits and losses of such Person (including without limitation any
flow-through tax benefits resulting from an ownership interest in such
Person) and (B) are entitled to exercise the greatest voting power of
such Person or, in the case of a limited partnership, shall have the
power to remove the general partner or partners.
(l) "Common stock equivalents" shall have the meaning set
forth in Section 11(a)(iii).
(m) "Company" shall have the meaning set forth in the
preamble clause at the beginning of this Agreement.
(n) "Continuing Director" shall mean (i) any Person who
is a member of the Board, while such Person is a member of the Board,
who is not an Acquiring Person or an Adverse Person, or an Affiliate or
Associate of any such Person, or a representative or designee of an
Acquiring Person or an Adverse Person or of any such Affiliate or
Associate, and was a member of the Board prior to the date of this
Agreement, or (ii) any Person who subsequently becomes a member of the
Board, while such Person is a member of the Board, who is not an
Acquiring Person or an Adverse Person, or an Affiliate or Associate of
any such Person, or a representative or designee of an Acquiring Person
or an Adverse Person or of any such Affiliate or Associate, if such
Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing Directors.
(o) "Current Market Price" shall have the meaning set forth
in Section 11(d).
(p) "Current Value" shall have the meaning set forth in
Section 11(a)(iii).
(q) "Distribution Date" shall have the meaning set forth in Section
3(a).
(r) "Equivalent preferred shares" shall have the meaning set forth
in Section 11(b).
(s) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(t) "Exchange Ratio" shall have the meaning set forth in Section
24(a).
(u) "Expiration Date" shall have the meaning set forth in Section
7(a).
(v) "Final Expiration Date" shall mean the close of business on
June 25, 2006.
(w) "Original Rights" shall have the meaning set forth in Section
1(g)(i)(B)(3).
(x) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(y) "Permitted Offer" shall mean a tender or exchange offer which
is for all outstanding Common Shares at a price and on terms determined,
prior to the purchase of shares under such tender or exchange offer, by
at least a majority of the members of the Board who are Continuing
Directors, who are not officers of the Company and who are not Acquiring
Persons or Affiliates, Associates, nominees or representatives of an
Acquiring
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Person, to be adequate (taking into account all factors that such
directors deem relevant including, without limitation, prices that could
reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and otherwise in the
best interests of the Company and its shareholders (other than the
Person or any Affiliate or Associate thereof on whose behalf the offer
is being made), taking into account all factors that such directors may
deem relevant.
(z) "Preferred Share" shall mean a share of Series A Junior Preferred
Stock, par value $.01 per share, of the Company and, to the extent that
there are not a sufficient number of shares of Series A Junior Preferred
Stock authorized to permit the full exercise of the Rights, shares of
any other series of Preferred Stock of the Company designated for such
purpose containing terms substantially similar to the terms of the
Series A Junior Preferred Stock.
(aa) "Preferred Share Fraction" shall mean one one-thousandth of a
Preferred Share.
(bb) "Principal Party" shall have the meaning set forth in Section
13(b).
(cc) "Purchase Price" shall have the meaning set forth in Section
4(a), and shall initially be as set forth in Section 7(b).
(dd) "Record Date" shall have the meaning set forth in the recital
clause at the beginning of this Agreement.
(ee) "Redemption Price" shall have the meaning set forth in Section
23(a).
(ff) "Rights" shall have the meaning set forth in the recital clause
at the beginning of this Agreement.
(gg) "Rights Agent" shall have the meaning set forth in the preamble
clause at the beginning of this Agreement until a successor Rights Agent
shall have become such pursuant to the applicable provisions of this
Agreement, and thereafter "Rights Agent" shall mean such successor
Rights Agent. If at any time there is more than one Person appointed by
the Company as Rights Agent pursuant to the provisions of this
Agreement, "Rights Agent" shall mean and include each such Person.
(hh) "Rights Certificates" shall have the meaning set forth in Section
3(a).
(ii) "Rights Dividend Declaration Date" shall have the meaning set
forth in the recital clause at the beginning of this Agreement.
(jj) "Section 11(a)(ii) Election" shall mean the election described
in Sections 11(a)(ii)(x) and (y).
(kk) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A) or (B).
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(ll) "Section 11(a)(ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii).
(mm) "Section 13 Event" shall mean any event described in clauses
(i), (ii) or (iii) of Section 13(a).
(nn) "Section 24(a) Election" shall have the meaning set forth in
Section 24(a).
(oo) "Spread" shall have the meaning set forth in Section 11(a)(iii).
(pp) "Stock Acquisition Date" shall mean the date of first public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.
(qq) "Subsidiary" shall mean, with reference to any Person, any other
Person of which at least a majority of the voting power of the voting
equity securities or equity interests is beneficially owned, directly or
indirectly, or otherwise controlled by such first-mentioned Person.
(rr) "Substitute Consideration" shall have the meaning set forth in
Section 11(a)(iii).
(ss) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii).
(tt) "Trading Day" shall have the meaning set forth in Section
11(d)(i).
(uu) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
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 Common Shares) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such additional
Rights Agents as it may deem necessary or desirable.
Section 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the first to occur of:
(i) the close of business on the tenth Business Day after the
Stock Acquisition Date (or, if the tenth Business Day after the Stock
Acquisition Date occurs before the Record Date, the close of business on
the Record Date),
(ii) the close of business on the tenth Business Day (or such
later date as may be determined by the Board, acting by a majority of
the Continuing Directors, prior to such time as any Person has become an
Acquiring Person) after the date that a tender or exchange offer (other
than a Permitted Offer) by any Person (other than the Company,
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any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of
any such plan) is first published or sent or given within the meaning of
Rule 14d-2(a) of the General Rules and Regulations under the Exchange
Act (or any comparable or successor rule), if upon consummation thereof,
such Person would be the Beneficial Owner of 15% or more of the Common
Shares then outstanding, or
(iii) the close of business on the tenth Business Day after
a determination, pursuant to Section 11(a)(ii)(B), that a Person is an
Adverse Person,
(the first to occur of (i), (ii), and (iii) being herein referred to as
the "Distribution Date"),(A) the Rights will be evidenced (subject to
the provisions of Section 3(b)) by the certificates for the Common
Shares registered in the names of the holders thereof (which
certificates for Common Shares shall be deemed also to be certificates
for Rights) and not by separate certificates and (B) the Rights will be
transferable only in connection with the transfer of the underlying
Common Shares (including a transfer to the Company). As soon as
practicable after the Company has notified the Rights Agent of the
occurrence of the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of
Common Shares as of the close of business on the Distribution Date, at
the address of such holder shown on the records of the Company, one or
more Rights certificates, in substantially the form of Exhibit B hereto
(the "Rights Certificates"), evidencing one Right for each Common Share
so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per Common Share has been made
pursuant to Section 11(p), at the time of distribution of the Right
Certificates, the Company shall make and notify the Rights Agent of the
necessary and appropriate rounding adjustments (in accordance with
Section 14(a)) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights
will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights Agreement, in substantially the
form attached hereto as Exhibit C, by first-class, postage prepaid mail,
to each record holder of Common Shares as of the close of business on
the Record Date at the address of such holder shown on the records of
the Company. With respect to certificates for the Common Shares
outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates for the Common Shares and
the registered holders of the Common Shares shall also be the registered
holders of the associated Rights. Until the earlier of the Distribution
Date or the Expiration Date, the transfer of any certificates
representing Common Shares in respect of which Rights have been issued
shall also constitute the transfer of the Rights associated with such
Common Shares. Certificates issued after the Record Date upon the
transfer of Common Shares outstanding on the Record Date shall bear the
legend set forth in Section 3(c).
(c) Rights shall be issued in respect of all Common Shares which are
issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Rights shall also be issued
to the extent provided in Section 22 in respect of all Common Shares
which are issued after the Distribution Date and prior to the Expiration
Date.
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Certificates representing Common Shares (including, without limitation,
certificates issued upon transfer or exchange of Common Shares) issued
after the Record Date but prior to the earlier of the Distribution Date
or the Expiration Date shall also be deemed to be certificates for the
associated Rights, and shall bear the following legend:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights
Agreement between AVECOR Cardiovascular Inc. (the
"Company") and Norwest Bank Minnesota, N.A. (the "Rights
Agent") dated as of June 26, 1996 (the "Rights
Agreement"), and as the same may be amended from time to
time, the terms of which (including restrictions on the
transfer of such Rights) are hereby incorporated herein
by reference and a copy of which is on file at the
principal executive offices of the Company. 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. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect
on the date of mailing, without charge after receipt of a
written request therefor from such holder. Under certain
circumstances, as set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person, an Adverse Person or any
Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement), and any subsequent holder of
such Rights, whether currently held by or on behalf of
such Person or by any subsequent holder, may become null
and void."
Until the earlier of the Distribution Date or the Expiration Date, the
Rights associated with the Common Shares represented by certificates for
Common Shares shall be evidenced by such certificates alone and
registered holders of Common Shares shall also be the registered holders
of the associated Rights, and the transfer of any of such certificates
shall also constitute the transfer of the Rights associated with such
Common Shares, whether or not containing the foregoing legend. In the
event that the Company purchases or acquires and cancels any Common
Shares after the Record Date but prior to the earlier of the
Distribution Date or the Expiration 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 that are no longer outstanding.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to exercise,
certification and assignment to be printed on the reverse thereof) shall
each be substantially in the form set forth in 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, national market system or
over-the-counter market on which the Rights may from time to time be
listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22, the Rights Certificates, whenever distributed, shall
entitle the holders thereof to purchase such number of Preferred Share
Fractions as shall be set forth therein at the price per Preferred Share
Fraction set forth therein (the "Purchase Price"), but the amount and
type of securities purchasable upon
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<PAGE>
the exercise of each Right and the Purchase Price thereof shall be subject
to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 that represents Rights beneficially owned by a Person reasonably
believed by at least a majority of the Continuing Directors to be (i) an
Acquiring Person, an Adverse Person or any Associate or Affiliate of any
such Person,(ii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee
after the Acquiring Person or Adverse Person becomes such, or (iii)a
transferee of an Acquiring Person or an Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person or Adverse Person becoming such
and receives such Rights pursuant to either (A) a transfer (whether or
not for consideration) from the Acquiring Person or Adverse Person (or
from any such Associate or Affiliate) to holders of equity interests in
such Acquiring Person or Adverse Person (or any such Associate or
Affiliate) or to any Person with whom such Acquiring Person or Adverse
Person (or any such Associate or Affiliate) has any continuing oral or
written plan, agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which at least a majority of the
Continuing Directors has determined is part of an oral or written plan,
arrangement or understanding that has as a primary purpose or effect
avoidance of Section 7(e), and any Rights Certificate issued to any such
Person pursuant Section 6 or Section 11 upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in
this sentence, shall contain (to the extent feasible) the following
legend, modified as applicable to such Person:
"The Rights represented by this Rights Certificate are or
were beneficially owned by a person who was or became an
[Acquiring] [Adverse] Person or an Affiliate or Associate
of an [Acquiring] [Adverse] Person (as such terms are
defined in the Rights Agreement). Accordingly, this
Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in
Section 7(e) of such Agreement."
The provisions of Section 7(e) of this Agreement shall be operative whether
or not the foregoing legend is contained on any such Rights Certificate.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chief Executive Officer, its President and Chief Operating
Officer or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a
facsimile thereof, which shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights 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 Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the
Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the
Company; and any Rights Certificates
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<PAGE>
may be signed on behalf of the Company by any person who, at the actual
date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not
such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated by the Rights Agent as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates, the date of
each of the Rights Certificates and whether each such Rights Certificate
contains a legend as set forth in Section 4(b).
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e), Section
14 and Section 20(k), at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Certificates may be
transferred, split up, combined or exchanged for another Rights
Certificate or Certificates, entitling the registered holder to purchase
a like number of Preferred Share Fractions (or, following a Triggering
Event, Common Shares, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to
purchase. Any registered holder desiring to transfer, split up, combine
or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender
the Rights Certificate or Certificates to be transferred, split up,
combined or exchanged, with the form of assignment and certificate
appropriately executed, at the office of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificate until the registered holder
shall have duly completed and executed the certificate contained in the
form of assignment on the reverse side of such Rights Certificate and
shall have provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon
the Rights Agent shall, subject to Section 4(b), Section 7(e), Section
14 and Section 20(k), countersign and deliver to each Person entitled
thereto a Rights Certificate or Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover
any transfer tax or charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them,
and, at the Company's or the Rights Agent's request, reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of the
Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the
Rights Certificate so lost, stolen, destroyed or mutilated.
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Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE.
(a) Subject to Section 7(e), the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein, including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section
11(a)(iii) and Section 23(a)) in whole or in part, at any time after the
Distribution Date upon surrender of the Rights Certificate, with the
form of election to exercise and the certificate on the reverse side
thereof duly completed and executed, to the Rights Agent at the office
of the Rights Agent designated for such purpose, together with payment
of the aggregate Purchase Price for the total number of Preferred Share
Fractions (or Common Shares, other securities, cash or other assets, as
the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the first to occur of:(i) the Final
Expiration Date;(ii) the time at which such Rights expire as provided in
Section 13(d);(iii) the time at which such Rights are redeemed as
provided in Section 23; or (iv) the time at which such Rights are
exchanged as provided in Section 24 (the first to occur of (i), (ii),
(iii) and (iv) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each Preferred Share Fraction 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 and
Section 13(a) and shall be payable in accordance with Section 7(c).
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to exercise and certificate on the
reverse side thereof duly completed and executed, accompanied by payment
of the Purchase Price for the number of Preferred Share Fractions (or
Common Share, other securities, cash or other assets, as the case may
be) to be purchased and an amount equal to any applicable transfer tax
or charge, the Rights Agent shall, subject to Section 14(b) and Section
20(k), thereupon promptly (i) requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is the transfer
agent for such Preferred Shares) certificates for the total number of
Preferred Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests,(ii)
requisition from the Company the amount of cash, if any, to be paid in
lieu of fractional shares in accordance with Section 14,(iii) promptly
after receipt of such certificates, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder,
and (iv) promptly after receipt thereof, deliver such cash, if any, to
or upon the order of the registered holder of such Rights Certificate.
The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii)) may be made by cash, certified bank
check or money order payable to the order of the Company. If the
Company determines to issue other securities of the Company (including
without limitation, upon an appropriate Section 11(a)(ii) Election or
Section 24(a) Election, Common Shares), pay cash and/or distribute other
assets pursuant to Section 11(a), the Company will make all arrangements
necessary so that such other securities, cash and/or other assets are
available for distribution by the Rights Agent, if and when appropriate.
The Company reserves the right to require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a number of Rights
be exercised so that only whole Preferred Shares would be issued.
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(d) In case the registered holder of any Rights Certificate shall
exercise less than all Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or
upon the order of, the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder,
subject to the provisions of Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
that are or were beneficially owned by (i) an Acquiring Person, an
Adverse Person or any Associate or Affiliate of any such Person,(ii) a
transferee of an Acquiring Person or an Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring
Person or Adverse Person becomes such, or (iii) a transferee of an
Acquiring Person or an Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person or Adverse Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person (or from any
such Associate or Affiliate) to holders of equity interests in such
Acquiring Person or Adverse Person (or any such Associate or Affiliate)
or to any Person with whom the Acquiring Person or Adverse Person (or
any such Associate or Affiliate) has any continuing oral or written
plan, agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which at least a majority of the Continuing
Directors has determined is part of an oral or written plan, agreement,
arrangement or understanding that has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any
further action and any holder of such Rights shall have no rights
whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable
efforts to ensure that the provisions of this Section 7(e) and Section
4(b) are complied with, but shall have no liability to any holder of a
Rights Certificate or other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or Adverse Person
or any of their respective Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake
any action with respect to a registered holder upon the occurrence of
any purported transfer or exercise as set forth in this Section 7 unless
such registered holder shall have (i) duly completed and executed the
certificate following the form of assignment or election to exercise set
forth on the reverse side of the Rights Certificate surrendered for such
assignment or exercise, and (ii) provided such additional evidence of
the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and
no Rights Certificates shall be issued in lieu thereof except as expressly
permitted by this Agreement. The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written
request of the Company, destroy such
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cancelled Rights Certificates in accordance with the rules and regulations of
the Securities and Exchange Commission, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK; REGISTRATION.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available for issuance upon the exercise of outstanding Rights
as many of its authorized and unissued Preferred Shares (and, following
the occurrence of a Triggering Event, if applicable, out of its
authorized and unissued Common Shares and/or other securities or out of
its authorized and issued shares held in its treasury), which together
at all times after the Distribution Date as provided in this Agreement,
including Section 11(a)(iii), will be sufficient to permit the exercise
in full of all outstanding Rights.
(b) If the Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares or other securities, if applicable)
issuable and deliverable upon the exercise of the Rights are listed or
admitted for trading on any national securities exchange or included for
quotation on any national market system, the Company shall use its best
efforts to cause, from and after such time as the Rights become
exercisable, all shares and other securities reserved for such issuance
to be listed or admitted for trading on such national securities
exchange or included for quotation on any such national market system
upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as is
practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event as of which the consideration to be delivered by
the Company upon exercise of the Rights has been determined pursuant to
this Agreement, including in accordance with Section 11(a)(iii), or as
soon as is required by law following the Distribution Date, as the case
may be, a registration statement or statements under the Act, with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form or forms, (ii) cause such registration
statement or statements to become effective as soon as practicable after
such filing, and (iii) cause such registration statement or statements
to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which
the Rights are no longer exercisable for such securities or (B) the
Expiration Date. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue
sky" laws of the various states. The Company may temporarily suspend,
for a period of time not to exceed 90 days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such
registration statement or statements and permit it or them to become
effective. Upon any such suspension, the Company shall either advise in
writing all shareholders of record as of that date or issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as either advise in writing all
shareholders of record as of that date or issue a public announcement at
such time as the suspension is no longer in effect. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction unless the requisite qualifications in
such jurisdiction, if any, shall have been obtained, the exercise
thereof shall not be permitted under applicable law or a registration
statement (if required by law) shall not have been declared effective.
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(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (and, following
the occurrence of a Triggering Event, Common Shares or other securities,
if applicable) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly
authorized and issued and, with respect to Preferred Shares, Common
Shares or other shares of capital stock, fully paid and non-assessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges
that may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for Preferred Share Fractions (or
Common Shares or other securities, as the case may be) upon the exercise
of Rights. The Company shall not, however, be required (i) to pay any
transfer tax or charge that may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the issuance
or delivery of a number of Preferred Share Fractions (or Common Shares
or other securities, as the case may be) in respect of a name other than
that of the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or (ii) to issue or deliver any
certificates for a number of Preferred Share Fractions (or Common Shares
or other securities, as the case may be) in a name other than that of
the registered holder upon the exercise of any Rights until such tax or
charge shall have been paid (any such tax or charge being payable by the
holder of such Rights Certificate at the time of surrender) or until it
has been established to the Company's satisfaction that no such tax or
charge is due.
Section 10. CAPITAL STOCK RECORD DATE. Each Person in whose name any
certificate for a number of Preferred Share Fractions (or Common Shares or
other securities, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of such
Preferred Share Fractions (or Common Shares or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Purchase Price (and all applicable transfer taxes or
charges) was made; provided, however, that if the date of such surrender and
payment is a date upon which the applicable transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
shares (or other securities, as the case may be), fractional or otherwise,
on, and such certificate shall be dated, the next succeeding Business Day on
which the applicable transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate,
as such, shall not be entitled to any rights of a shareholder of the Company
with respect to shares (or other securities, as the case may be) for which
the Rights shall be exercisable, including, without limitation, the right to
vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of 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 or pay any dividend on any security of the
Company payable in
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Preferred Shares, (B) subdivide or split the outstanding Preferred
Shares, (C) combine or consolidate the outstanding Preferred Shares into
a smaller number of shares or effect a reverse stock split of the
outstanding 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) and Section 7(e), the Purchase
Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, split, combination,
consolidation or reclassification, and the number and kind of shares of
capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in effect,
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 Company's transfer books for the Preferred Shares (or other
capital stock, as the case may be) were open, he would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, split, combination, consolidation or reclassification. If
an event occurs that would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii), 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).
(ii) Subject to Section 24 of this Agreement, in the event:
(A) Any Person shall, at any time after the Rights Dividend
Declaration Date, become an Acquiring Person, unless the event causing
such Person to become an Acquiring Person is a transaction set forth in
Section 13(a), or
(B) the Board shall declare any Person to be an Adverse Person,
upon a determination by at least a majority of the Continuing Directors,
that such Person, alone or together with its Affiliates or Associates,
has, at any time after the Rights Dividend Declaration Date, become the
Beneficial Owner of a substantial amount of Common Shares (which amount
shall in no event be less than 10% of the Common Shares then
outstanding) and a determination by at least a majority of the
Continuing Directors, after reasonable inquiry and investigation,
including consultation with such Persons as such directors shall deem
appropriate, that (1) such Beneficial Ownership by such Person is
intended to cause the Company to repurchase the Common Shares
beneficially owned by such Person or to cause pressure on the Company to
take action or enter into a transaction or series of transactions
intended to provide such Person or its Affiliates or Associates with
short-term financial gain under circumstances where at least a majority
of the Continuing Directors determines that the best long-term interests
of the Company and its shareholders would not be served by taking such
action or entering into such transaction or series of transactions at
that time or (2) such Beneficial Ownership is causing or reasonably
likely to cause a material adverse impact (including, but not limited
to, impairment of relationships with customers or impairment of the
Company's ability to maintain its competitive position) on the business
or prospects of the Company,
then, promptly following the first occurrence of a Section 11(a)(ii)
Event, proper provision shall be made so that each holder of a Right
(except as provided below and in Section 7(e)) shall thereafter have the
right to receive, upon exercise thereof at the then current Purchase
Price in accordance with the terms of this Agreement, (x) such number of
Preferred Share
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<PAGE>
Fractions, or (y) at the election of at least a majority of the
Continuing Directors and in lieu of a number of Preferred Share
Fractions (a "Section 11(a)(ii) Election"), such number of Common
Shares, that equals the result obtained by (xx) multiplying the then
current Purchase Price by the then number of Preferred Share Fractions
for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (yy) dividing that product
(which, following such first occurrence, shall thereafter be referred to
as the "Purchase Price" for each Right for all purposes of this
Agreement) by one one-thousandth of 50% of the Current Market Price
(determined pursuant to Section 11(d)(ii) per Preferred Share (or 50% of
the current market price (determined pursuant to Section 11(d)(ii)) per
Common Share, as the case may be) on the date of such first occurrence
(such number of shares, the "Adjustment Shares").
(iii) In the event that the number of Preferred Shares (or
Common Shares, if applicable) that are authorized by the Company's
Articles of Incorporation but not outstanding or reserved for issuance
for purposes other than upon exercise of the Rights are not sufficient
to permit the exercise in full of all of the exercisable Rights in
accordance with Section 11(a)(ii), the Company shall: (A) determine the
excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value") over (2) the Purchase Price
(such excess, the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon payment
of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Preferred Shares, Common Shares and/or other equity
securities of the Company (including, without limitation, shares, or
units of shares, of preferred stock which based on, among other things,
the dividend and liquidation rights of such preferred shares, have
substantially the same economic value as Common Shares (such shares of
preferred stock, "common stock equivalents")), (4) debt securities of
the Company, (5) other assets, or (6) any combination of the foregoing
(whichever substituted, the "Substitute Consideration"), having an
aggregate value equal to the Current Value, where such aggregate value
has been determined by at least a majority of the Continuing Directors
based upon the advice of an investment banking firm selected by at least
a majority of the Continuing Directors; provided, however, if the
Company shall not have made adequate provision to deliver substitute
consideration pursuant to clause (B) above within 30 days following the
later of (x) the date of the occurrence of a Section 11(a)(ii) Event and
(y) the date on which the Company's right of redemption pursuant to
Section 23(a) expires (the later of (x) and (y) being referred to herein
as the "Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, Preferred Shares (or
Common Shares, as the case may be), to the extent available and then, if
necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If at least a majority of the Continuing Directors shall
determine in good faith that it is likely that sufficient additional
Preferred Shares (or Common Shares, as the case may be) could be
authorized for issuance upon exercise in full of the Rights, the 30-day
period set forth above may be extended to the extent necessary, but not
more than 90 days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek shareholder approval for the authorization of
such additional shares (such period, as it may be extended, the
"Substitution Period"). To the extent that some action need be taken
pursuant to the first and/or second sentences of this Section
11(a)(iii), the Company (xx) shall provide, subject to Section 7(e),
that such action shall apply uniformly to all outstanding Rights, and
(yy) 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
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<PAGE>
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 give notice to the Rights Agent and
either advise in writing all shareholders of record as of that date or
issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a notice to the Rights
Agent and either a written notice to all shareholders of record or a
public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), (xxx) the value of the
Preferred Shares shall be the Current Market Price (as determined
pursuant to Section 11(d)(ii)) per Preferred Share on the Section
11(a)(ii) Trigger Date, (yyy) the value of the Common Shares (if
applicable) shall be the Current Market Price (as determined pursuant to
Section 11(d)(i)) per Common Share on the Section 11(a)(ii) Trigger
Date, and (zzz) the value of any other "common stock equivalent" shall
be deemed to have the same value as a Common Share on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of any security of the
Company entitling them to subscribe for or purchase (for a period
expiring within 45 calendar days after such record date) Preferred
Shares (or shares having the same rights, privileges and preferences as
the Preferred Shares ("equivalent preferred shares")) or securities
convertible into Preferred Shares or equivalent preferred shares at a
price per Preferred Share or equivalent preferred share (or having a
conversion price per share, if a security convertible into Preferred
Shares or equivalent preferred shares) less than the Current Market
Price (as determined pursuant to Section 11(d)(ii)) per Preferred Share
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 and/or
equivalent 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 and/or equivalent
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 by delivery
of consideration part or all of which may in a form other than cash, the
value of such consideration shall be as determined in good faith by at
least a majority of the Continuing Directors, whose determination shall
be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent and the holders of the Rights. 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
adjustments 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 a distribution to
all holders of Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a
regular quarterly dividend out of the earnings or retained earnings of
the Company), assets (other than a regular quarterly dividend referred
to above or a dividend payable in Preferred Shares, but including any
dividend payable in stock other
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<PAGE>
than Preferred Shares) or subscription rights or warrants (excluding
those referred to in Section 11(b)), the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price (as determined
pursuant to Section 11(d)(ii) per Preferred Share on such record date,
less the fair market value (as determined in good faith by at least a
majority of the Continuing Directors, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of
the cash, assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to a Preferred Share and
the denominator of which shall be such Current Market Price (as
determined pursuant to Section 11(d)(ii)) per Preferred Share. Such
adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the
Purchase Price shall be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii), the "Current Market
Price" per Common Share on any date shall be deemed to be the average of
the daily closing prices per share of such Common Shares for the 30
consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date, and for purposes of computations made
pursuant to Section 11(a)(iii), the "Current Market Price" per share of
Common Shares on any date shall be deemed to be the average of the daily
closing prices per share of such Common Shares for the 10 consecutive
Trading Days immediately following such date; provided, however, that in
the event that the Current Market Price per share of the Common Shares
is determined during a period following the announcement by the issuer
of such Common Shares of (A) a dividend or distribution on such Common
Shares payable in such Common Shares or securities convertible into such
Common Shares (other than the Rights), or (B) any subdivision, split,
combination or reclassification of such Common Shares, and prior to the
expiration of the requisite 30 Trading Day or 10 Trading Day period, as
set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, split,
combination or reclassification, then, and in each such case, the
"Current Market Price" shall be properly adjusted to take into account
ex-dividend trading. The closing price for each Trading 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 on the
principal national securities exchange on which the Common Shares are
listed or admitted to trading or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, the last sale
price or, if not so reported, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the Nasdaq System
or such other system then in use, or, if on any such date the Common
Shares 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 Common Shares selected by the Continuing
Directors. If on any such date no market maker is making a market in
the Common Shares, the "Current Market Price" per share shall mean the
fair value per share as determined in good faith by at least a majority
of the Continuing Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Common Shares are listed or
admitted to trading is open for the transaction of business or, if the
Common
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<PAGE>
Shares are not listed or admitted to trading on any national securities
exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "Current
Market Price" per Preferred Share shall be determined in the same manner
as set forth above for the Common Shares in Section 11(d)(i) (other than
the last sentence thereof). If the Current Market Price per Preferred
Share cannot be determined in the manner provided above or if the
Preferred Shares are not publicly held or listed or traded in a manner
described in Section 11(d)(i), the "Current Market Price" per Preferred
Share shall be conclusively deemed to be an amount equal to one thousand
(1000) (as such number may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect to the
Common Shares occurring after the date of this Agreement) multiplied by
the Current Market Price per Common Share. If neither the Common Shares
nor the Preferred Shares are publicly held or so listed or traded,
"Current Market Price" per Preferred Share shall mean the fair value per
share as determined in good faith by at least a majority of the
Continuing Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the "Current Market
Price" of a Preferred Share Fraction shall be equal to the "Current
Market Price" of one Preferred Share divided by one thousand (1000).
(e) Anything herein to the contrary notwithstanding, except the last
sentence of this Section 11(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 ten-thousandths of a Common
Share or other share or one-millionth of a Preferred Share, as the case
may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment which would be required by this Section 11, but for the first
sentence of this Section 11(e), shall be made no later than the earlier
of (i) three years from the date of the transaction or event which
mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a), the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than
Preferred Shares, thereafter the number of such other shares so
receivable upon exercise of any Right and the Purchase Price thereof
shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect
to the Preferred Shares contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13
and 14 with respect to the Preferred Shares shall apply on like terms to
any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of Preferred
Share Fractions purchasable from time to time hereunder upon exercise of
the Rights, all subject to further adjustment as provided herein.
<PAGE>
(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 Preferred Share Fractions (calculated to the nearest one-millionth of a
Preferred Share) obtained by (i) multiplying (A) the number of Preferred
Share Fractions covered by a Right immediately prior to this adjustment, by
(B) 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, acting by the decision of at least a majority of the
Continuing Directors, may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of Preferred Share Fractions purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment
in the number of Rights shall be exercisable for the number of Preferred
Share Fractions 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 of a Preferred Share) 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 either advise in writing all
shareholders of record as of that date or make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates have been
issued, shall be at least 10 Business Days later than the date of written
advice to all shareholders of record or the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of rights
pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company,
new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Preferred Share Fractions issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Preferred Share Fraction and the
number of Preferred Share Fractions which were expressed in the initial
Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated or par value, if any, of the
number of Preferred Share
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<PAGE>
Fractions issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue
fully paid and non-assessable Preferred Share Fractions 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 issuance to the holder of any Right exercised after such
record date the Preferred Share Fractions and other capital stock or
securities of the Company, if any, issuable upon such exercise over and
above the number of Preferred Share Fractions 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 or securities (fractional or otherwise) 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 in their sole discretion a majority of the Continuing
Directors shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Shares, (ii) issuance wholly
for cash of any Preferred Shares at less than the Current Market Price, or
(iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
stock dividends or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any Person (other than a
Subsidiary of the Company in a transaction that complies with Section
11(o)), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o)), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in
one transaction, or a series of related transactions, assets or earning
power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or
more transactions each of which complies with Section 11(o)), if (A) at the
time of or immediately after such consolidation, merger, sale or transfer
there are any rights, warrants or other instruments or securities
outstanding or agreements in effect that would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights or
(B) prior to, simultaneously with or immediately after such consolidation,
merger, sale or transfer, the shareholders of the Person who constitutes,
or would constitute, the "Principal Party" for purposes of Section 13(a)
shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, Section 24 or Section
27, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to
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<PAGE>
be afforded by the Rights, unless such action is approved by a majority of
the Continuing Directors.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare or pay any
dividend on the outstanding Common Shares payable in Common Shares, (ii)
subdivide or split the outstanding Common Shares, or (iii) combine or
consolidate the outstanding Common Shares into a smaller number of Common
Shares or effect a reverse stock split of the outstanding Common Shares, or
(iv) issue any shares of its capital stock in a reclassification of the
Common Shares (including any such reclassification in connection with the
consolidation or merger in which the Company is the continuing or surviving
corporation), the number of Rights associated with each Common Share then
outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each Common Share following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each Common Share immediately prior to such event by a
fraction, the numerator of which shall be the number of Common Shares
outstanding immediately prior to the occurrence of such event and the
denominator of which shall be the total number of Common Shares outstanding
following the occurrence of such event.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 or Section 13, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent, and with each transfer agent for the Preferred
Shares and the Common Shares, a copy of such certificate, and (c) mail a brief
summary thereof to each holder of a Rights Certificate (or, if prior to the
Distribution Date, to each holder of a certificate representing Common Shares)
in accordance with Section 26. The Rights Agent shall be fully authorized to
rely and be protected in relying on any such certificate and on any adjustment
therein contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly,
(i) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o)), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger,
(ii) any Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(o)) shall consolidate with, or
merge with or into, the Company, and the Company shall be the continuing or
surviving corporation of such consolidation or merger and, in connection
with such consolidation or merger, all or part of the outstanding Common
Shares held by existing shareholders of the Company shall be changed into
or exchanged for stock or other securities of any Person or cash or any
other property, or
(iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one transaction
or a series of related transactions, assets, or earning power aggregating
more than 50% of the assets or earning
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<PAGE>
power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies with
Section 11(o)),
then, and in each such case, except as contemplated by Section 13(d),
proper provision shall be made so that: (A) each holder of a Right, except
as otherwise provided herein, shall thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, such number of validly authorized and
issued, fully paid, non-assessable and freely tradeable Common Shares of
the Principal Party, not subject to any liens, encumbrances, rights of
first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number
of Preferred Share Fractions for which a Right is exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section
11(a)(ii) Event has occurred prior to the first occurrence of a Section 13
Event, multiplying the number of such Preferred Share Fractions for which a
Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior
to such first occurrence), and dividing that product (which, following the
first occurrence of a Section 13 Event, shall be referred to as the
"Purchase Price" for each Right for all purposes of this Agreement) by (2)
50% of the Current Market Price (determined pursuant to Section 11(d)) per
Common Share of such Principal Party on the date of consummation of such
Section 13 Event; (B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement; (C) the term
"Company" shall thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11 shall apply
only to such Principal Party following the first occurrence of a Section 13
Event; (D) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common
Shares thereafter deliverable upon the exercise of the Rights; and (E) the
provisions of Section 11(a)(ii) shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean (i) in the case of any transaction
described in Section 13(a)(i) or (ii), the Person that is the issuer of any
securities into which Common Shares are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the
other party to such merger or consolidation, and (ii) in the case of any
transaction described in Section 13(a)(iii), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; provided, however, that in
any such case, (A) if the Common Shares of such Person are not at such time
and have not been continuously over the preceding 12 month period
registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Shares of which
are and have been so registered, "Principal Party" shall refer to such
other Person; and (B) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of two or more of
which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Shares having the
greatest aggregate market value.
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<PAGE>
(c) (i) The Company shall not consummate any such transaction
constituting a Section 13 Event unless the Principal Party shall have a
sufficient number of authorized Common Shares which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and
such Principal Party shall have executed and delivered to the Rights Agent
a supplemental agreement providing for the terms set forth in Section 13(a)
and (b) and further providing that, as soon as practicable after the date
of consummation of any transaction constituting a Section 13 Event, the
Principal Party will (A) prepare and file a registration statement under
the Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (1) become effective as
soon as practicable after such filing and (2) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date, and (B) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
that comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
(ii) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the
event that a Section 13 Event shall occur at any time after the occurrence
of a Section 11(a)(ii) Event, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in
Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in
subparagraphs (i) and (ii) of Section 13(a) if: (i) such transaction is
consummated with a Person or Persons who acquired Common Shares pursuant to
a Permitted Offer (or a wholly owned Subsidiary of any such Person or
Persons); (ii) the price per Common Share offered in such transaction is
not less than the price per Common Share paid to all holders of Common
Shares whose shares were purchased pursuant to such Permitted Offer, and
(iii) the form of consideration offered in such transaction is the same as
the form of consideration paid pursuant to such Permitted Offer. Upon
consummation of any such transaction contemplated by this Section 13(d),
all Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p), or to
distribute Rights Certificates that evidence fractional Rights. The
Company may, in lieu of such fractional Rights, pay to the registered
holders of the Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For 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 of the Rights for any 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 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 sale price or, if not
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<PAGE>
so reported, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the Nasdaq System 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 at least a majority of the Continuing Directors. 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 shall be as determined in good faith
by at least a majority of the Continuing Directors, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(b) The Company shall not be required to issue fractions of Preferred
Shares upon exercise of the Rights or to distribute certificates that
evidence fractional preferred Shares, except in each case for fractions
which are integral multiples of Preferred Share Fractions. The Company
may, in lieu of fractional Preferred Shares which are not integral
multiples of Preferred Share Fractions, pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one Preferred Share. For purposes of this Section 14(b), the
current market value of a Preferred Share shall be as determined pursuant
to Section 11(d)(ii) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event and at or after a
Section 11(a)(ii) Election or Section 24(a) Election, the Company shall not
be required to issue fractions of Common Shares upon exercise of the Rights
or to distribute certificates that evidence fractional Common Shares. The
Company may, in lieu of fractional Common Shares, pay to the registered
holders of Rights Certificates at the time such Rights are exercised as
herein provided an amount in cash equal to the same fraction of the current
market value of one Common Share. For purposes of this Section 14(c), the
current market value of one Common Share shall be as determined pursuant to
Section 11(d)(i) for the Trading Day immediately prior to the date of such
exercise.
(d) In the event the Company determines it advisable to issue
fractions of Rights, fractions of Preferred Shares for fractions which are
not integral multiples of Preferred Share Fractions or fractions of Common
Shares as permitted in this Agreement, the Company shall immediately so
notify the Rights Agent, and in no event later than five Business Days
prior to the date such fractions are to be issued. The Company and the
Rights Agent shall then adopt mutually agreeable procedures with respect to
any such issuance. In the event the Company and the Rights Agent are
unable to agree upon such procedures, the Rights Agent may resign and be
discharged from its duties under this Agreement or the Company may remove
the Rights Agent, both as set forth in Section 21; provided, however, that
only one day's prior written notice need be given of such resignation or
removal.
(e) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights, or any fractions of
Preferred Shares for fraction which are not integral multiples of a
Preferred Share Fraction, or any fractional Common Shares (if applicable)
upon exercise of a Right, except as permitted by this Section 14.
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Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
associated Common Share certificates). Any registered holder of any Rights
Certificate (or, prior to the Distribution Date, the associated Common Share
certificate), without the consent of the Rights Agent or of the holder of any
other Rights Certificate (or, prior to the Distribution Date, the associated
Common Share certificate), 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 in the manner provided 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 shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Shares;
(b) on or after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office or offices of the Rights Agent designated for such purposes,
duly endorsed or accompanied by a proper instrument of transfer and with
the appropriate forms and certificates duly completed and fully executed
and otherwise complying with any other requirements set forth in this
Agreement;
(c) subject to Section 6(a) and Section 7(f), the Company and the
Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Share certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificate or the associated Common Share
certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent,
subject to the last sentence of Section 7(e), shall be required to be
affected by any notice or knowledge to the contrary; and
(d) Notwithstanding anything in this Agreement or the Rights to the
contrary, the Company, the Board and the Rights Agent shall not have any
liability to any holder of a Right or other Person as a result of the
inability of the Company or the Rights Agent to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of Preferred
Share Fractions or any other securities of the Company
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<PAGE>
(including the Common Shares) which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to 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 shareholders (except as provided in Section 25), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to
time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and disbursements and other disbursements incurred in the acceptance,
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 administration and execution of this Agreement
and the exercise and performance of its duties hereunder, including without
limitation the costs and expenses of defending against and appealing any
such claim of liability.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, instruction, direction, consent,
certificate, statement or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided, however, that such
Person would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the
Rights Certificates shall have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
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<PAGE>
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates
(or, prior to the Distribution Date, the associated Common Share 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 advice of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken, suffered or omitted by it in good faith and in accordance with such
advice.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter (including without limitation, the identity of any Acquiring Person
or Adverse Person and the determination of "Current Market Price") be
proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the Chief Executive
Officer, the President and Chief Operating Officer, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and any such
certificate shall be full and complete authorization and protection to the
Rights Agent for any action taken, suffered or omitted in good faith by it
under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall not be liable or responsible hereunder
except for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Agreement or in
any Rights Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11, Section 13 or Section 24 or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such
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<PAGE>
adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after receipt of a certificate delivered pursuant to
Section 12 describing any such adjustment); nor shall it be deemed to make
any representation or warranty as to the authorization or reservation of
any Preferred Shares or Common Shares to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any Preferred Shares
or Common Shares will, when so issued, be validly authorized and issued,
fully paid and non-assessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions or direction with respect to the administration of this
Agreement and the exercise and performance of its duties hereunder from the
Chief Executive Officer, the President and Chief Operating Officer, any
Vice President, the Treasurer, any Assistant Treasurer, the Secretary or
any Assistant Secretary of the Company, and to apply to such officers for
advice, instructions or direction in connection with its duties, and it
shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions or direction of any such
officer.
(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 or any shareholder, director, officer or employee of the
Rights Agent from acting in any other capacity for the Company or for any
other Person.
(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
liable or responsible for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss or damages to the Company
resulting from any such act, default, neglect or misconduct; provided,
however, reasonable care was exercised in the selection and continued
employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights or powers if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to exercise, as the case may be, has
either not been duly completed and executed or indicates an affirmative
response to clause 1 and/or 2 thereof, the Rights Agent shall not take any
further action with respect to such requested exercise or transfer until it
has received instructions with respect thereto from the Company.
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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 and the Preferred Shares the existence of which the
Rights Agent has received notice from the Company, by registered or certified
mail, and to the registered holders of the Rights Certificates (or, prior to the
Distribution Date, the associated Common Share 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 and
the Preferred Shares, by registered or certified mail, and to the registered
holders of the Rights Certificates (or, prior to the Distribution Date, the
associated Common Share 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 registered
holder of a Rights Certificate (or, prior to the Distribution Date, the
associated Common Share certificate) who shall, with such notice, submit his
Rights Certificate (or, prior to the Distribution Date, the associated Common
Share certificate) for inspection by the Company, then the registered holder may
apply to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such
a court, shall be a corporation organized and doing business under the laws of
the United States, the State of Minnesota or the State of New York (or of any
other state of the United States so long as such corporation is authorized to do
business as a banking institution in the State of Minnesota or the State of New
York) in good standing, having an office in the State of Minnesota or the State
of New York, which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $5 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 such purpose. Not later than the effective date of any such appointment,
the Company shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Shares and the Preferred Shares, and
mail a notice thereof in writing to the registered holders of the Rights
Certificates (or, prior to the Distribution Date, the associated Common Share
certificates). Failure to give any notice provided for in this Section 21 or to
appoint a successor Rights Agent, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, but subject
to Section 7(e), the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be specified by at least a majority of the
Continuing Directors to reflect any adjustment or change in the Purchase Price
and the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the provisions
of this Agreement. In addition, in connection with the issuance or sale of
Common Shares following the Distribution Date and prior to the Expiration Date,
the Company (a) shall, with respect to Common Shares so issued or sold pursuant
to the exercise of stock options, grants or awards outstanding as of the
Distribution Date under any benefit plan or arrangement for employees or
directors, or upon the exercise, conversion
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or exchange of securities issued by the Company prior to the Distribution
Date, and (b) may, in any other case, if deemed necessary or appropriate by
at least a majority of the Continuing Directors, issue Rights Certificates
representing the appropriate number of Rights in connection with such
issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance could create a significant risk of material
adverse tax consequences to the Company or the Person to whom such Rights
Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise
have been made in lieu of issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board, acting by at least a majority of the Continuing
Directors, may, at its option, at any time prior to the first to occur of
the close of business on (i) the tenth Business Day following the Stock
Acquisition Date (or, if the Stock Acquisition Date shall have occurred
prior to the Record Date, the close of business on the tenth Business Day
following the Record Date), (ii) the tenth Business Day after a
determination, pursuant to Section 11(a)(ii)(B), that a person is an
Adverse Person, or (iii) the Final Expiration Date, redeem all but not less
than all of the then outstanding Rights at a redemption price of $.001 per
Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the
"Redemption Price") and the Company may, at its option, pay the Redemption
Price in Preferred Shares (based on the "Current Market Price," as defined
in Section 11(d)(ii) of the Preferred Shares at the time of redemption),
Common Shares (based on the "Current Market Price," as defined in Section
11(d)(i) of the Common Shares at the time of redemption), cash or any other
form of consideration deemed appropriate by the Board, acting by a majority
of the Continuing Directors. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the
first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired. The Company shall
promptly notify the Rights Agent following the action of the Board ordering
redemption of the Rights.
(b) Immediately upon the action of the Board ordering the redemption
of the Rights pursuant to 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 for each Right so held. Promptly after the action of the
Board ordering the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and the registered holders of the
then outstanding Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Rights
Agent for the Common Shares; provided, however, the failure to give or any
defect in any such notice shall not affect the validity of such redemption.
Any notice which is mailed in the manner provided in Section 26 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.
Section 24. EXCHANGE.
(a) The Board, acting by at least a majority of the Continuing
Directors, may, at its option, at any time after a Section 11(a)(ii) Event,
exchange all or part of the then
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outstanding and exercisable Rights (which (i) shall not include
Rights that have become void pursuant to the provisions of Section 7(e))
for Preferred Share Fractions (or, at the election of at least a
majority of the Continuing Directors (a "Section 24(a) Election"),
Common Shares) at an exchange ratio of one Preferred Share Fraction
(or Common Share, as the case may be) 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").
(b) Immediately upon the action of the Board ordering the exchange of
any Rights pursuant to Section 24(a) 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 Preferred Share Fractions (or Common Shares, as the case may
be) equal to the number of such Rights held by such holder multiplied by
the Exchange Ratio. The Company shall promptly notify the Rights Agent and
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 provided in Section 26 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 Preferred Share
Fractions (or Common Shares, as the case may be) for Rights will be
effected and, in the event of any partial exchange, shall be effected pro
rata based on the number of Rights (other than Rights which have become
void pursuant to the provision of Section 7(e)) held by each holder of
Rights.
(c) In the event that there shall not be sufficient Preferred Shares
(or Common Shares, if applicable) 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 Preferred Shares (or Common Shares, as
the case may be) for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of Common
Shares or Preferred Shares or to distribute certificates which evidence
fractional Common Shares or Preferred Shares, except in each case for
fractions of Preferred Shares which are integral multiples of Preferred
Share Fractions. In lieu of such fractional Preferred Shares which are not
integral multiples of Preferred Share Fractions, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Preferred Shares would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Preferred
Share, as determined pursuant to the second sentence of Section 11(d)(ii),
for the Trading Day immediately prior to the date of exchange pursuant to
this Section 24.
(e) If applicable, the Company shall not be required to issue
fractions of Common Shares or to distribute certificates which evidence
fractional Common Shares. In lieu of such fractional Common Shares, there
shall be paid to the registered holders of the Rights Certificates with
regard to which such fractional Common Shares would otherwise be issuable,
an amount in cash equal to the same fraction of the current market value of
a whole Common Share. For the purposes of this Section 24(e), the current
market value of
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<PAGE>
a whole Common Share shall be as determined pursuant to Section 11(d)(i)
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, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to
the holders of Preferred Shares or to make any other distribution to the
holders of Preferred Shares (other than a regular quarterly cash dividend
out of earnings or retained earnings of the Company), (ii) to offer to the
holders of 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 the Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to
effect any consolidation or merger into or with any other Person (other
than a Subsidiary of the Company in a transaction which complies with
Section 11(o)), 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
transaction or a series of related transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which complies with
Section 11(o)), or (v) to effect the liquidation, dissolution or winding up
of the Company, then, in each such case, the Company shall give to each
registered holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26, 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 Preferred Shares, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered
by Section 25(a)(i) or (ii) at least ten Business Days prior to the record
date for determining holders of Preferred Shares for purposes of such
action, and in the case of any such other action, at least ten Business
Days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Preferred Shares, whichever shall
be the earlier.
(b) In case any Triggering Events shall occur, then, in any such
case, (i) the Company shall as soon as practicable thereafter give to each
registered holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26, a notice of the occurrence of such event, which
shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) or Section 13, and (ii) in the event of an
appropriate Section 11(a)(ii) Election or Section 24(a) Election, all
references, in Section 25(a) shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.
Section 26. NOTICES.
(a) Notices, communications or demands authorized by this Agreement
to be given or made by the Rights Agent or by the registered holder of any
Rights Certificate (or, prior to the Distribution Date, the associated
Common Share 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:
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<PAGE>
AVECOR Cardiovascular Inc.
13010 County Road 6
Plymouth, MN 55441
Attention: Chief Executive Officer
with a copy to:
Oppenheimer Wolff & Donnelly
Plaza VII, Suite 3400
45 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Richard G. Lareau
(b) Subject to the provisions of Section 21, notices, communications
or demands authorized by this Agreement to be given or made by the Company
or by the holder of any Rights Certificate (or, prior to the Distribution
Date, the associated Common Share 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:
Norwest Bank Minnesota, N.A.
161 North Concord Exchange
South St. Paul, Minnesota 55075-0738
Attention: Stock Transfer Department
(c) Notices, communications or demands authorized by this Agreement
to be given or made by the Company or the Rights Agent to the registered
holder of any Rights Certificate (or, prior to the Distribution Date, the
associated Common Share 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
maintained by the Company, the Rights Agent or the transfer agent for the
Common Shares, as appropriate.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company may
(acting by at least a majority of the Continuing Directors), and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement, including without limitation to modify or amend the definition
of Acquiring Person set forth in Section 1(a) hereof and to change the Purchase
Price set forth in Section 4(a) and Section 7(b) hereof, without the approval of
any holders of certificates representing Common Shares and without the approval
of any holders of Rights or holders of certificates representing Rights. From
and after the Distribution Date and subject to the penultimate sentence of this
Section 27, the Company may (acting by at least a majority of the Continuing
Directors), and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order (a) to cure any ambiguity herein, (b) to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision herein, (c) to otherwise shorten or lengthen any
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<PAGE>
time period hereunder, or (d) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person, an Adverse Person or an
Affiliate or Associate of any such Person); provided, however, that this
Agreement may not be supplemented or amended to lengthen (i) a time period
relating to when the rights may be redeemed at such time as the Rights are
not then redeemable, or (ii) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or
the benefits to, the holders of Rights (other than an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person). Upon the
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 anything contained in this Agreement to the
contrary, no supplement or amendment shall be made which changes the
Redemption Price, the Final Expiration Date or the number of Preferred Share
Fractions for which a Right is exercisable. Prior to the Distribution Date,
the interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Shares.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD. For all purposes
of this Agreement, any calculation of the number of Common Shares outstanding at
any particular time, including for purposes of determining the particular
percentage of such outstanding Common Shares of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3d(d)(1)(i) of the General Rules and Regulations under the Exchange Act,
whether or not the Common Shares are registered under the Exchange Act. The
Board (where specifically provided for herein, acting by at least a majority of
the Continuing Directors) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board (where specifically provided for herein, acting by at least
a majority of the Continuing Directors) or to the Company (where specifically
provided for herein, acting by at least a majority of the Continuing Directors),
or as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (a) interpret the
provisions of this Agreement, and (b) make all calculations and determinations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights or to amend or
supplement this Agreement). All such actions, calculations, interpretations and
determinations (including for purposes of clause (ii) below, all omissions with
respect to the foregoing) which are done or made by the Board (where
specifically provided for herein, acting by at least a majority of the
Continuing Directors) in good faith shall (i) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (ii) not subject the Board or any director to any liability to the
holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the associated Common Share certificates) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Shares).
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<PAGE>
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 for any purpose or under
any set of circumstances or as applied to any Person, such invalid, void or
unenforceable term, provision, covenant or restriction shall continue in effect
to the maximum extent possible for all other purposes, under all other
circumstances and as applied to all other Persons, and the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement or the Rights
to the contrary, if any such term, provision, covenant or restriction is held by
such court or authority to be invalid, void or unenforceable and at least a
majority of the Continuing Directors determines in its good faith judgment that
severing the invalid language from this Agreement would adversely affect the
purpose of effect of this Agreement, the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the close of
business on the tenth Business Day following the date of such determination by
such Continuing Directors. Without limiting the foregoing, if any provisions
requiring that a determination be made by less than the entire Board (or at a
time or with the concurrence of a group of directors consisting of less than the
entire Board) is held by a court of competent jurisdiction or other authority to
be invalid, void or unenforceable, such determination shall then be made by the
Board in accordance with applicable law and the Company's Articles of
Incorporation and Bylaws.
Section 32. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Minnesota and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be 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 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.
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<PAGE>
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.
Attest: AVECOR CARDIOVASCULAR INC.
By: By:
-------------------------------- ----------------------------------
Name: GREGORY J. MELSEN Name: ANTHONY BADOLATO
------------------------------ ---------------------------------
Title: CHIEF FINANCIAL OFFICER Title: CHIEF EXECUTIVE OFFICER
AND TREASURER
----------------------------- --------------------------------
Attest: NORWEST BANK MINNESOTA, N.A.
By: By:
-------------------------------- ----------------------------------
Name: Name:
------------------------------ ---------------------------------
Title: Title:
----------------------------- --------------------------------
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<PAGE>
EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
of
SERIES A JUNIOR PREFERRED STOCK
of
AVECOR CARDIOVASCULAR INC.
Pursuant to Section 302A.401 of the
Minnesota Business Corporations Act
of the State of Minnesota
----------------------
We, Anthony Badolato, Chief Executive Officer, and Gregory J. Melsen,
Chief Financial Officer and Treasurer, of AVECOR Cardiovascular Inc., a
corporation organized and existing under the Business Corporations Act of the
State of Minnesota (the "Corporation"), in accordance with the provisions
thereof, DO HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors by the
Articles of Incorporation of the Corporation, the said Board of Directors on
June 26, 1996, adopted the following resolution creating a series of two
hundred thousand (200,000) shares of Preferred Stock designated as Series A
Junior Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Articles of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
voting powers, preferences and relative, participation, optional and other
special rights of the shares of such series, and the qualifications,
limitation or restrictions thereof are as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as Series A Junior Preferred Stock, par value $.01 per share (the
"Series A Junior Preferred Shares"), and the number of shares constituting
such series shall be two hundred thousand (200,000).
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to
Series A Junior Preferred Shares with respect to dividends, the holders
of Series A Junior Preferred Shares 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 January, March, July and October in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date,"
commencing on the
<PAGE>
first Quarterly Dividend Payment Date after the first issuance of a
share or fraction of a Series A Junior Preferred Share, in an amount per
share (rounded to the nearest cent) equal to (subject to the provision
for adjustment hereinafter set forth), 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or
a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, par value
$.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a Series A Junior Preferred Share. In the
event the Corporation shall at any time after June 26, 1996 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of Series A
Junior Preferred Shares 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 Shares as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue and be cumulative on outstanding
Series A Junior Preferred Shares from the Quarterly Dividend Payment Date
next preceding the date of issue of such Series A Junior Preferred Shares,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of Series A Junior Preferred
Shares 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
Series A Junior Preferred Shares 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 Series A Junior Preferred Shares entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 30 days prior to the date fixed for the payment
thereof.
Section 3. VOTING RIGHTS. In addition to any other voting rights
required by law, the holders of Series A Junior Preferred Shares shall have
the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
Series A Junior Preferred Share shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or
(iii) combine the outstanding shares of Common Stock into a smaller number of
shares, then in each such case the number of votes per share to which holders
of Series A Junior Preferred Shares were entitled immediately
2
<PAGE>
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) If, on the date used to determine stockholders of record for any
meeting of stockholders for the election of directors, a default in dividends
on the Series A Junior Preferred Shares shall exist, the number of directors
constituting the Board of Directors of the Corporation shall be increased by
two, and the holders of the Series A Junior Preferred Shares shall have the
right at such meeting, voting together as a single class, to elect two
directors of the Corporation to fill such newly created directorships. Each
director elected by the holders of Series A Junior Preferred Shares (herein
called a "Series A Preferred Director") shall continue to serve as such
director for the full term for which he shall have been elected,
notwithstanding that prior to the end of such term a default in dividends
shall cease to exist. Any Series A Preferred Director may be removed by, and
shall not be removed except by, the vote of the holders of record of the
outstanding Series A Junior Preferred Shares, voting together as a single
class, at a meeting of the stockholders, or of the holders of Series A Junior
Preferred Shares called for such purpose. Thereafter, so long as a default
in dividends on the Series A Preferred Shares shall exist (i) any vacancy in
the office of a Series A Preferred Director may be filled (except as provided
in the following clause (ii)) by an instrument in writing signed by the
remaining Series A Preferred Director and filed with the Corporation and (ii)
in the case of the removal of any Series A Preferred Director, the vacancy
may be filled by the vote of the holders of the outstanding Series A Junior
Preferred Shares, voting together as a class, at the same meeting at which
such removal shall be voted. Each director appointed as aforesaid by the
remaining Series A Preferred Director shall be deemed, for all purposes
hereof, to be a Series A Preferred Director. Whenever the term of office of
the Series A Preferred Directors shall end and no default in dividends on the
Series A Junior Preferred Shares shall exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by
two. For the purposes of this Section 3(b), a "default in dividends" on the
Series A Junior Preferred Shares shall be deemed to have occurred whenever
there shall be an arrearage in the payment of any dividends to which the
holders of the Series A Junior Preferred Shares are entitled to receive,
whether or not any such dividends have been declared by the Board of
Directors, for six consecutive quarters, and, having so occurred, such
default shall be deemed to exist thereafter until, but only until, all
accrued dividends on all shares of Series A Junior Preferred Shares then
outstanding shall have been paid through the last Quarterly Dividend Payment
Date.
At any time when such right to elect directors separately as a
class shall have so vested, the Corporation may, and upon the written request
of the holders of record of not less than 20% of the then outstanding total
number of the Series A Junior Preferred Shares shall, call a special meeting
of holders of such Series A Junior Preferred Shares for the election of
directors. In the case of such a written request, such special meeting shall
be held within 90 days after the delivery of such request, and, in either
case, at the place and upon the notice provided by law and in the Bylaws of
the Corporation; provided that the Corporation shall not be required to call
such a special meeting if such request is received less than 120 days before
the date fixed for the next ensuing annual or special meeting of stockholders
of the Corporation. After the number of directors of the Corporation shall
have been increased by two as hereinabove provided, the number as so
increased may thereafter be further increased or decreased in such manner as
may be permitted by the Articles of Incorporation or By-laws, provided that
no such action shall impair the
3
<PAGE>
right of the holders of Series A Junior Preferred Shares to elect and to
be represented by two directors as herein provided.
(c) Except as otherwise provided herein, in the Articles of
Incorporation of the Corporation or by law, the holders of Series A Junior
Preferred Shares and the holders of Common Stock (and the holders of shares
of any other series or class entitled to vote thereon) shall vote together as
one class on all matters submitted to a vote of stockholders of the
Corporation.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever any dividends or other distributions payable on the Series
A Junior Preferred shares as provided in Section 2 are in arrears, thereafter
and until all accrued and unpaid dividends and distributions, whether or not
declared, on Series A Junior Preferred Shares outstanding shall have been
paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any share
ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Junior Preferred Shares;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Junior
Preferred Shares, except dividends paid ratably on the Series A Junior
Preferred Shares and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Preferred Shares, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Junior Preferred Shares; or
(iv) purchase or otherwise acquire for consideration any Series A
Junior Preferred Shares, 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.
4
<PAGE>
Section 5. REACQUIRED SHARES. Any Series A Junior Preferred
Shares 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 Preferred Stock and may be reissued as part of a
new series of Preferred Stock to be created by resolution or resolutions
of the Board of Directors.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. In the event
of any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, the holders of Series A Junior Preferred Shares
shall be entitled to receive the greater of (a) $1,000.00 per share,
plus accrued dividends to the date of distribution, whether or not
earned or declared, or (b) an 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 Common Stock. In the
event the Corporation shall at any time after the Rights Declaration
Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or
(iii) combine the outstanding shares of Common Stock into a smaller
number of shares, then in each such case the amount to which holders of
Series A Junior Preferred Shares were entitled immediately prior to such
event pursuant to 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.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property,
then in any such case the Series A Junior Preferred Shares shall at the
same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to
1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the event
the Corporation shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares,
then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of Series A Junior Preferred
Shares 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 Series A Junior Preferred Shares
shall not be redeemable.
Section 9. RANKING. The Series A Junior Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.
Section 10. FRACTIONAL SHARES. Series A Junior Preferred Shares
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the
benefit of all other rights of holders of Series A Junior Preferred
Shares.
5
<PAGE>
Section 11. AMENDMENT. The Articles of Incorporation of the
Corporation shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights of
the Series A Junior Preferred Shares so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding Series A Junior Preferred Shares, voting separately as a
class.
IN WITNESS WHEREOF, the undersigned have executed and subscribed
this Certificate and do affirm the foregoing as true under penalties of
perjury this ____ day of ___________, 199__.
-----------------------------------------
Anthony Badolato
Chief Executive Officer
ATTEST:
- -----------------------------------------
Gregory J. Melsen
Chief Financial Officer
and Treasurer
6
<PAGE>
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER JUNE 25, 2006 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.001 PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT REFERRED TO HEREIN. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON OR AN ADVERSE PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN [ACQUIRING] [ADVERSE] PERSON OR AN AFFILIATE OR ASSOCIATE OF AN [ACQUIRING]
[ADVERSE] PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.] THE RIGHTS SHALL NOT BE EXERCISABLE AND SHALL BE VOID SO LONG AS
HELD 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.*
____________________
*The portion of the legend in brackets shall be inserted only if applicable,
shall be modified to apply to an Acquiring Person or an Adverse Person, as
applicable, and shall replace the preceding sentence.
<PAGE>
AVECOR CARDIOVASCULAR INC.
RIGHTS CERTIFICATE
This certifies that _______________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions
of the Rights Agreement, dated as of June 26, 1996 (the "Rights Agreement"),
between AVECOR Cardiovascular Inc., a Minnesota corporation (the "Company"),
and Norwest Bank Minnesota, N.A., a national banking association (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.
(Minneapolis, Minnesota time) on June 25, 2006 at the office of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
one-thousandth of one fully paid and non-assessable share of the Company's
Series A Junior Preferred Stock, par value $.01 per share (the "Preferred
Shares"), at a purchase price (the "Purchase Price") of $80.00 per one
one-thousandth of a Preferred Share (such fraction, a "Preferred Share
Fraction") upon presentation and surrender of this Rights Certificate with
the Form of Election to Purchase and related Certificate duly completed and
executed. The Purchase Price may be paid by cash, certified bank check or
money order payable to the order of the Company. The number of Rights
evidenced by this Rights Certificate (and the number of Preferred Share
Fractions which may be purchased upon exercise thereof) set forth above, and
the Purchase Price per Preferred Share Fraction set forth above, are the
number and Purchase Price as of the close of business on August 2, 1996,
based on the Preferred Shares as constituted at such date. Pursuant to the
Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, a number
of Rights be exercised so that only whole Preferred Shares will be issued.
Capitalized terms used herein without definition shall have the meaning
given to them in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights
evidenced by this Rights Certificate are beneficially owned by (i) an
Acquiring Person, an Adverse Person or an Affiliate or Associate of any such
Person, (ii) a transferee of any such Acquiring Person, Adverse Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a Person who, after such transfer, became
an Acquiring Person, an Adverse Person or an Affiliate or Associate of any
such Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the
occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Preferred Shares or other securities which may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events,
including Triggering Events. In certain circumstances and as described in
the Rights Agreement, Common Shares, cash, property or other securities may
be issued by the Company upon the exercise hereof in lieu of Preferred Shares.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and
2
<PAGE>
made a part hereof and to which Rights Agreement reference is hereby made for
a full description of the rights, limitations of rights, obligations, duties
and immunities hereunder of the Rights Agent, the Company and the holders of
the Rights Certificates, which limitations of rights include the temporary
suspension of the exercisability of such Rights under the specific
circumstances set forth in the Rights Agreement. Copies of the Rights
Agreement are on file at the principal offices of the Company and the
above-mentioned office of the Rights Agent and are also available upon
written request to the Company.
Subject to the provisions of the Rights Agreement, this Rights
Certificate, with or without other Rights Certificates, upon surrender at the
office or offices of the Rights Agent designated for such purpose, with the
Form of Election and Certificate set forth on the reverse side duly executed,
may be exchanged for another Rights Certificate or Rights Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Preferred Shares Fractions as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled
such holder to purchase. If this Rights Certificate shall be exercised in
part, the holder shall be entitled to receive upon surrender hereof another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed, subject to the approval of at least a
majority of the Continuing Directors, at a redemption price of $.001 per
Right at any time prior to the earlier of the close of business on (i) the
tenth Business Day following the Stock Acquisition Date (as such time period
may be extended pursuant to the Rights Agreement), (ii) the tenth Business
Day after a determination that a Person is an Adverse Person, or (iii) the
Final Expiration Date.
Subject to the provisions of the Rights Agreement, the Company may, at
its option, at any time after a Section 11(a)(ii) Event, subject to the
approval of at least a majority of the Continuing Directors, exchange all or
part of the Rights evidenced by this Certificate for Preferred Share
Fractions, or, upon an appropriate Section 24(a) election, Common Shares.
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 a Preferred Share Fraction), but in lieu thereof a cash payment
will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of Preferred
Shares or of any other securities of the Company (including Common Shares)
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
3
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company.
Dated:
-------------------------
ATTEST: AVECOR CARDIOVASCULAR INC.
By:
- ----------------------------------- ----------------------------------
Title:
-------------------------------
Countersigned:
NORWEST BANK MINNESOTA, N. A.
By:
-----------------------------------
Authorized Officer
4
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ______________ hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:
------------------------------ -----------------------------------
Signature
Signature Guaranteed:
The signature(s) should be guaranteed by a brokerage firm or a financial
institution that is a member of an approved medallion program, such as
Securities Transfer Agents Medallion Program ("STAMP"), Stock Exchange
Medallion Program ("SEMP") or New York Stock Exchange, Inc. Medallion
Signature Program ("MSP").
5
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such Person.
Dated:
------------------------------ -----------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
6
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: AVECOR Cardiovascular Inc.
The undersigned irrevocably hereby elects to exercise _______ Rights
represented by this Rights Certificate to purchase the Preferred Shares
issuable upon the exercise of the Rights (or Common Shares or such other
securities of the Company or of any other person which may be issuable upon
the exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security
or other identifying number
-------------------------------------------
- ------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
-------------------------------------------
- ------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------
Dated:
------------------------------ -----------------------------------
Signature
Signature Guaranteed:
The signature(s) should be guaranteed by a brokerage firm or a financial
institution that is a member of an approved medallion program, such as
Securities Transfer Agents Medallion Program ("STAMP"), Stock Exchange
Medallion Program ("SEMP") or New York Stock Exchange, Inc. Medallion
Signature Program ("MSP").
7
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such Person (as
such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person.
Dated:
------------------------------ -----------------------------------
Signature
Signature Guaranteed:
NOTICES
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights 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.
8
<PAGE>
EXHIBIT C
AVECOR CARDIOVASCULAR INC.
SUMMARY OF RIGHTS AGREEMENT
On June 26, 1996, the Board of Directors of AVECOR Cardiovascular Inc.
(the "Company") declared a dividend distribution of one preferred share
purchase right (a "Right") for each outstanding share of the Company's Common
Stock, par value $.01 per share (the "Common Shares"), payable to
shareholders of record at the close of business on August 2, 1996 (the
"Record Date"). Each Right entitles the registered holder to purchase from
the Company at any time following the Distribution Date (as defined below)
one one-thousandth of a share (a "Preferred Share Fraction") of the Company's
Series A Junior Preferred Stock, par value $.01 per share (the "Preferred
Shares"), or a combination of securities and assets of equivalent value, at a
purchase price of $80.00 per Preferred Share Fraction (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth
in a Rights Agreement (the "Rights Agreement") dated as of June 26, 1996
between the Company and Norwest Bank Minnesota, N.A., as Rights Agent.
Initially, the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificates, and no separate Rights Certificates will be distributed.
The Rights will separate from the Common Shares and will be distributed to
the holders thereof on the "Distribution Date," which shall be the first to
occur of the following: (i) the close of business on the tenth business day
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding
Common Shares, other than as a result of a Permitted Offer, as defined (the
"Stock Acquisition Date"); (ii) the close of business on the tenth business
day (or such later date as the Board of Directors, acting by a majority of
the Continuing Directors, may determine) following the commencement of a
tender offer or exchange offer (other than a Permitted Offer, as defined)
that would result in a person or group beneficially owning 15% or more of the
outstanding Common Shares; or (iii) the close of business on the tenth
business day after a determination by at least a majority of the Continuing
Directors that a Person is an Adverse Person, and that such Person, alone or
together with its affiliates and associates, has become the beneficial owner
of a substantial amount of Common Shares (which amount shall in no event be
less than 10% of the Common Shares then outstanding) and (a) such beneficial
ownership by such Person is intended to cause the Company to repurchase the
Common Shares beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of transactions
intended to provide such Person with short-term financial gain under
circumstances where at least a majority of the Continuing Directors
determines that the best long-term interests of the Company and its
shareholders would not be served by taking such action or entering into such
transaction or series of transactions at that time or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with customers or
impairment of the Company's ability to maintain its competitive position).
<PAGE>
A "Permitted Offer" means a tender or exchange offer which is for all
outstanding Common Shares at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by at least a
majority of the members of the Board who are Continuing Directors, who are
not officers of the Company and who are not Acquiring Persons or Affiliates,
Associates, nominees or representatives of an Acquiring Person, to be
adequate and otherwise in the best interests of the Company and its
shareholders (other than the Person or any Affiliate or Associate thereof on
whose behalf the offer is being made).
A "Continuing Director" is (i) any person who is a member of the Board
of Directors prior to June 26, 1996, while such person is a member of the
Board of Directors, who is not an Acquiring Person or an Adverse Person, or
an affiliate or associate of either of the foregoing, or a representative or
designee of an Acquiring Person or an Adverse Person or any such affiliate or
associate, or (ii) any person who subsequently becomes a member of the Board
of Directors who is not an Acquiring Person or an Adverse Person, or an
affiliate or associate of either of the foregoing, or a representative or
designee of an Acquiring Person, an Adverse Person or any such affiliate or
associate, and whose nomination or election to the Board of Directors is
recommended or approved by a majority of the Continuing Directors.
Until the Distribution Date, (i) the Rights will be evidenced by Common
Share certificates and will be transferred with and only with such Common
Share certificates, (ii) new Common Share certificates issued after August 2,
1996 will contain a notation incorporating the Rights Agreement by reference
and (iii) the surrender for transfer of any certificate for Common Shares
outstanding will also constitute the transfer of the Rights associated with
the Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on June 25, 2006, unless earlier redeemed or
exchanged by the Company as described below (the earliest of all such dates,
the "Expiration Date").
As soon as practical after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Shares as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. All Common Shares issued prior
to the earlier of the Distribution Date and the Expiration Date will be
issued with Rights. Common Shares issued after the Distribution Date upon
the exercise of employee stock options, issuances under other employee stock
benefit plans or the conversion of convertible securities issued prior to the
Distribution Date will be issued with Rights.
In the event (i) that a person or group, with certain exceptions,
becomes the beneficial owner of more than 15% of the then outstanding Common
Shares, other than as a result of a Permitted Offer or (ii) at least a
majority of the Continuing Directors determines that a person is an Adverse
Person, then each holder of a Right will thereafter have the right to
receive, upon exercise, that number of Preferred Share Fractions (or in
certain circumstances that number of Common Shares, cash, property or other
securities of the Company) having a market value equal to two times the
Exercise Price of the Right. The Rights, however, are not exercisable
following the occurrence of either of the events set forth above until such
time as the Rights are no longer redeemable by the Company as set forth
below. Notwithstanding any of the foregoing, following the occurrence of
either of the events set forth above, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person or Adverse Person (or certain related persons and
transferees) will be null and void. The events set forth in this paragraph
are referred to as "Section 11(a)(ii) Events."
<PAGE>
In the event that, at any time following the Stock Acquisition Date,
other than pursuant to a Permitted Offer, (i) the Company is acquired in a
merger or other business combination transaction in which the Company is not
the surviving corporation or the Common Shares are changed or exchanged or
(ii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive that
number of shares of common stock of the acquiring company which equals the
exercise price of the Right divided by one-half of the current market price
of such common stock at the date of the occurrence of the event. The events
set forth in this paragraph are referred to as "Section 13 Events," and the
Section 11(a)(ii) Events and the Section 13 Events are collectively referred
to as the "Triggering Events."
At any time after the occurrence of a Section 11(a)(ii) Event, at the
election of a majority of the Continuing Directors, the Company may exchange
the Rights (other than Rights which have become void), in whole or in part,
at an exchange ratio of one Preferred Share Fraction per Right (subject to
adjustment).
The Purchase Price payable and the number of Preferred Share Fractions
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, split, combination, consolidation or reclassification of, the
Preferred Shares, (ii) if all holders of any security of the Company are
granted rights, options or warrants to subscribe for or purchase Preferred
Shares or convertible securities at less than the current market price of the
Preferred Shares, or (iii) upon the distribution to holders of Preferred
Shares of evidences of indebtedness or assets (excluding quarterly cash
dividends ) or of subscription rights or warrants (other than those referred
to above).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. The Company will not be required to issue fractional Preferred Shares
other than fractions which are integral multiples of Preferred Share
Fractions (or, in the event of an appropriate election, Common Shares), and,
in lieu of such fractional Common Shares), and, in lieu of such fractional
Preferred Shares (or Common Shares, as the case may be) an adjustment in cash
will be made based on the market price of the Preferred Shares (or Common
Shares, if appropriate) on the last trading date prior to the date of
exercise.
In general, at any time prior to the first to occur of (i) ten days
following the Stock Acquisition Date, (ii) ten days after a person is
determined to be an Adverse Person, or (iii) the Final Expiration Date, the
Company, acting by a majority of the Continuing Directors, may redeem the
Rights in whole, but not in part, at a price of $.001 per Right (payable in
cash, stock or other consideration deemed appropriate by the Board of
Directors). Immediately upon redemption of the Rights, the Rights will
terminate and the only right of the holders of the Rights will be to receive
the $.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or receive dividends. The creation of the Rights should not be
taxable to shareholders. Shareholders may, however, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Preferred Shares (or other consideration) of the Company or
for common stock of an acquiring company as set forth above.
3
<PAGE>
Any of the provisions of the Rights Agreement, including the definition
of Acquiring Person or the Purchase Price, may be amended by at least a
majority of the Continuing Directors prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended
by at least a majority of the Continuing Directors in order to cure any
ambiguity, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person or Adverse
Person), or to shorten or lengthen certain time periods under the Rights
Agreement. However, no amendment to adjust the time period governing
redemption can be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement will be filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement on Form 8-A. 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
incorporated herein by reference.
4
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
AVECOR CARDIOVASCULAR INC.
ADOPTS SHAREHOLDER RIGHTS PLAN
- ------------------------------
MINNEAPOLIS, July 02 -- AVECOR Cardiovascular Inc. (Nasdaq:AVEC)
announced that it has adopted a shareholder rights plan to protect the
company and its shareholders from unsolicited attempts or inequitable offers
to acquire the company. The rights plan has no immediate dilutive effect and
does not diminish the ability of the company or its shareholders to accept a
fair offer for the company.
To implement this shareholder rights plan, the company has
declared a dividend distribution of one preferred share purchase right on
each share of AVECOR common stock outstanding on Aug. 2, 1996. Each right
will entitle shareholders to buy one one-thousandth of a share of the
company's Series A Junior Preferred Stock at an exercise price of $80.00.
The rights will become exercisable following the 10th day after: (a) a person
or group announces acquisition of 15 percent or more of the company's common
stock, (b) a person or group announces commencement of a tender offer the
consummation of which would result in ownership by the person or group of 15
percent or more of the company's common stock, or (c) the company's board of
continuing directors determines that a person is an adverse person, as
defined in the rights agreement.
The company will be entitled to redeem the rights at $.001
(one-tenth of one cent) per right at certain times as provided in the rights
agreement. The rights will expire on June 25, 2006.
If, prior to redemption of the rights, a person or group acquires
15 percent or more of the company's common stock or is determined by a
majority of the company's "continuing directors" to be an "adverse person,"
then each right not owned by such a 15 percent shareholder or adverse person
will entitle its holder to purchase, at the right's then-current exercise
price, that number of preferred share fractions (or, at the election of at
least a majority of the continuing directors, shares of common stock) of the
company having a market value at that time of twice the right's exercise
price. In addition, if the company sells more than 50 percent of its assets
or earning power or is acquired in a merger or other business combination
transaction in which it is not the surviving corporation, the acquiring
person must assume the obligations under the rights and the rights agreement
will become exercisable to acquire common stock of the acquiring person at
the discounted price.
<PAGE>
"This rights agreement is intended to protect our shareholders
should AVECOR become the target of hostile or unfriendly takeover tactics,"
said Anthony Badolato, chief executive officer. "It is designed to assure
that all shareholders of the company receive a fair price for their shares in
the event of an acquisition of the company. It is also designed to make
certain that all AVECOR shareholders receive full and fair treatment in the
event of an attempted takeover. The rights agreement was not adopted in
response to any specific effort to acquire control of the company, and AVECOR
directors are not aware of any such effort."
AVECOR Cardiovascular Inc., headquartered in Minneapolis,
develops, manufactures and markets specialty disposable medical devices for
heart/lung bypass surgery and long-term respiratory support. The company's
current products include membrane oxygenators, blood reservoirs, blood
filters, cardioplegia systems and custom tubing packs.
# # # #
07/02/96
