1
EXHIBIT 99.2
-----------------------------------------------------------
ARADIGM CORPORATION
AND
BANKBOSTON, N.A.
AS RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF AUGUST 31, 1998
-----------------------------------------------------------
2
TABLE OF CONTENTS
PAGE
SECTION 1. CERTAIN DEFINITIONS.............................................................1
SECTION 2. APPOINTMENT OF RIGHTS AGENT.....................................................4
SECTION 3. ISSUE OF RIGHT CERTIFICATES.....................................................4
SECTION 4. FORM OF RIGHT CERTIFICATES......................................................6
SECTION 5. COUNTERSIGNATURE AND REGISTRATION...............................................7
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED,
DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES....................................8
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS...................8
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES.............................10
SECTION 9. AVAILABILITY OF PREFERRED SHARES...............................................10
SECTION 10. PREFERRED SHARES RECORD DATE...................................................11
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS.............12
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.....................20
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER...........20
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES........................................24
SECTION 15. RIGHTS OF ACTION...............................................................25
SECTION 16. AGREEMENT OF RIGHT HOLDERS.....................................................26
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER..............................26
SECTION 18. CONCERNING THE RIGHTS AGENT....................................................26
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT......................27
SECTION 20. DUTIES OF RIGHTS AGENT.........................................................27
SECTION 21. CHANGE OF RIGHTS AGENT.........................................................30
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES.............................................30
SECTION 23. REDEMPTION.....................................................................31
SECTION 24. EXCHANGE.......................................................................33
SECTION 25. NOTICE OF CERTAIN EVENTS.......................................................35
SECTION 26. NOTICES........................................................................36
SECTION 27. SUPPLEMENTS AND AMENDMENTS.....................................................36
SECTION 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.......................37
SECTION 29. SUCCESSORS.....................................................................37
3
TABLE OF CONTENTS (Continued)
PAGE
SECTION 30. BENEFITS OF THIS AGREEMENT.....................................................37
SECTION 31. SEVERABILITY...................................................................37
SECTION 32. GOVERNING LAW..................................................................37
SECTION 33. COUNTERPARTS...................................................................38
SECTION 34. DESCRIPTIVE HEADINGS...........................................................38
SECTION 35.
Exhibit A -- Certificate of Determination
Exhibit B -- Form of Right Certificate
Exhibit C -- Summary of Rights to Purchase Preferred Shares
4
RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT ("AGREEMENT"), dated as of August 31, 1998, between
ARADIGM CORPORATION, a California corporation (the "Company"), and BankBoston,
N.A. ("Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as such term is hereinafter defined) outstanding at the close of business on
September 8, 1998 (the "Record Date"), each Right representing the right to
purchase one one-hundredth of a Preferred Share (as such term is hereinafter
defined), upon the terms and subject to the conditions herein set forth, and has
further authorized and directed the issuance of one Right with respect to each
Common Share that shall become outstanding between the Record Date and the
earliest to occur of the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are hereinafter defined); provided, however, that
Rights may be issued with respect to Common Shares that shall become outstanding
after the Distribution Date and prior to the earlier of the Redemption Date and
the Final Expiration Date in accordance with the provisions of Section 22
hereof.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as
such terms are hereinafter defined) of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of 15% or more
of the Common Shares then outstanding. Notwithstanding the foregoing,
(A) the term Acquiring Person shall not include (i) the Company, (ii)
any Subsidiary (as such term is hereinafter defined) of the Company,
(iii) any employee benefit or compensation plan of the Company or any
Subsidiary of the Company, or (iv) any entity holding Common Shares
for or pursuant to the terms of any such employee benefit or
compensation plan, and (B) no Person shall become an "Acquiring
Person" either (x) as the result of an acquisition of Common Shares by
the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by
such Person to 15% or more of the Common Shares 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
share purchases by the Company and shall, following written notice
from, or public disclosure by the Company of such share purchases by
the Company, become the Beneficial Owner of any additional Common
Shares without the prior consent of the Company and shall then
Beneficially Own more than 15% of the Common Shares then outstanding,
then such Person shall be deemed to be an "Acquiring Person," or (y)
if the Board of Directors determines in good faith that a Person who
would otherwise be an "Acquiring Person," as defined
1
5
pursuant to the foregoing provisions of this paragraph (a), has become
such inadvertently, and such Person divests, as promptly as
practicable (as determined in good faith by the Board of Directors),
but in any event within five Business Days, following receipt of
written notice from the Company of such event, of Beneficial Ownership
of a sufficient number of Common Shares so that such Person would no
longer be an Acquiring Person, as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement.
(b) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date of this Agreement; provided,
however, that the limited partners of a limited partnership shall not
be deemed to be Associates of such limited partnership solely by
virtue of their limited partnership interests.
(c) A Person shall be deemed the "BENEFICIAL OWNER" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates is deemed to beneficially own, within the meaning of
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Rights Agreement;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering
of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or
options, or otherwise; provided, however, that a Person shall not
be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made
by or on behalf of such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or
successor report); or
2
6
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona
fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso
to Section 1(c)(ii)(B) hereof) or disposing of any securities of
the Company.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase, "then outstanding," when used with reference
to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and outstanding
together with the number of such securities not then actually issued
and outstanding which such Person would be deemed to own beneficially
hereunder.
(d) "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in the Commonwealth of
Massachusetts are authorized or obligated by law or executive order to
close.
(e) "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m., Eastern
Time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., Eastern Time, on the next
succeeding Business Day.
(f) "COMMON SHARES" shall mean the shares of common stock, no par value,
of the Company; provided, however, that, "Common Shares," when used in
this Agreement in connection with a specific reference to any Person
other than the Company, shall mean the capital stock (or equity
interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(g) "DISTRIBUTION DATE" shall have the meaning set forth in Section 3
hereof.
(h) "FINAL EXPIRATION DATE" shall have the meaning set forth in Section 7
hereof.
(i) "INTERESTED SHAREHOLDER" shall mean any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or any other Person in
which any such Acquiring Person, Affiliate or Associate has an
interest, or any other Person acting directly or indirectly on behalf
of or in concert with any such Acquiring Person, Affiliate or
Associate.
(j) "PERSON" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such
entity.
3
7
(k) "PREFERRED SHARES" shall mean shares of Series A Junior Participating
Preferred Stock, without par value, of the Company having the rights
and preferences set forth in the form of Certificate of Determination
attached to this Agreement as Exhibit A.
(l) "PURCHASE PRICE" shall have the meaning set forth in Section 7(b)
hereof.
(m) "REDEMPTION DATE" shall have the meaning set forth in Section 7
hereof.
(n) "SHARES ACQUISITION DATE" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring
Person has become such provided, however that, if such Person is
determined not to have become an Acquiring Person pursuant to clause
(y) of Subsection 1(a)(B) hereof, then no Shares Acquisition Date
shall be deemed to have occurred.
(o) "SUBSIDIARY" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by
such Person.
(p) "TRANSACTION" shall mean any merger, consolidation or sale of assets
described in Section 13(a) hereof or any acquisition of Common Shares
which would result in a Person becoming an Acquiring Person or a
Principal Party (as such term is hereinafter defined).
(q) "TRANSACTION PERSON" with respect to a Transaction shall mean (i) any
Person who (x) is or will become an Acquiring Person or a Principal
Party (as such term is hereinafter defined) if the Transaction were to
be consummated and (y) directly or indirectly proposed or nominated a
director of the Company which director is in office at the time of
consideration of the Transaction, or (ii) an Affiliate or Associate of
such a Person.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-Rights Agents as it may
deem necessary or desirable, upon ten (10) days' prior written notice to
the Rights Agent. The Rights Agent shall have no duty to supervise, and in
no event be liable for, the acts or omissions of any such co-Rights Agent.
SECTION 3. ISSUE OF RIGHT CERTIFICATES.
(a) Until the earlier of (i) the Shares Acquisition Date or (ii) the tenth
Business Day (or such later date as may be determined by action of the
Board of Directors prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement (determined in
accordance with Rule 14d-2 under the Exchange Act) by any Person
(other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any
entity holding
4
8
Common Shares for or pursuant to the terms of any such plan) of, or of
the first public announcement of the intention of any Person (other
than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan)
to commence, a tender or exchange offer (which intention to commence
remains in effect for five Business Days after such announcement), the
consummation of which would result in any Person becoming an Acquiring
Person (including any such date which is after the date of this
Agreement and prior to the issuance of the Rights, the earlier of such
dates being herein referred to as the "Distribution Date"), (x) the
Rights will be evidenced by the certificates for Common Shares
registered in the names of the holders thereof (which certificates
shall also be deemed to be Right Certificates) and not by separate
Right Certificates, and (y) the Rights (and the right to receive Right
Certificates therefor) will be transferable only in connection with
the transfer of Common Shares. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights
Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common Shares
as of the Close of Business on the Distribution Date, at the address
of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held,
subject to the adjustment provisions of Section 11 of this Rights
Agreement. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send (directly or through the Rights Agent or its transfer agent)
a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Record Date, at the address
of such holder shown on the records of the Company. With respect to
certificates for Common Shares outstanding as of the Record Date,
until the Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof. Until the
Distribution Date (or the earlier of the Redemption Date and the Final
Expiration Date), the surrender for transfer of any certificate for
Common Shares outstanding on the Record Date shall also constitute the
transfer of the Rights associated with the Common Shares represented
thereby.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
5
9
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Aradigm
Corporation (the "Company") and BankBoston, N.A. as Rights Agent (the
"Rights Agent"), dated as of August 31, 1998, as amended from time to
time (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of 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 without charge after
receipt of a written request therefor. As described in the Rights
Agreement, Rights issued to any Person who becomes an Acquiring Person
or an Affiliate or Associate thereof (as defined in the Rights
Agreement) and certain related persons, whether currently held by or
on behalf of such Person or by any subsequent holder, shall become
null and void.
With respect to such certificates containing the foregoing legend, until
the Distribution Date, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any such certificate shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby. In the event that the Company purchases or acquires
any Common Shares after the Record Date but prior to the Distribution Date,
any Rights associated with such Common Shares shall be deemed canceled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
Notwithstanding this Section 3(c), the omission of a legend shall not
affect the enforceability of any part of this Rights Agreement or the
rights of any holder of the Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES.
(a) The Right Certificates (and the form of election to purchase Preferred
Shares, the form of assignment and the form of certification to be
printed on the reverse thereof) shall be substantially the same as
Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed
thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which the Rights may from time to time be listed, or
to conform to usage. Subject to the provisions of Sections 7, 11 and
22 hereof, the Right Certificates shall entitle the holders thereof to
purchase such number of one one-hundredths of a Preferred
6
10
Share as shall be set forth therein at the price per one one-hundredth
of a Preferred Share set forth therein (the "Purchase Price"), but the
number of such one one-hundredths of a Preferred Share and the
Purchase Price shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to
Section 11(a)(ii) hereof and any Right Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Right Certificate and the Rights represented hereby are null
and void.
The provisions of Section 11(a)(ii) hereof shall be operative whether
or not the foregoing legend is contained on any such Right
Certificate.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates shall be
executed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President, its Vice Chairman of the Board, its Chief
Financial Officer, or any of its Vice Presidents, either manually or by
facsimile signature, shall have affixed thereto the Company's seal or a
facsimile thereof, and shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The
Right Certificates shall be manually countersigned by the Rights Agent and
shall not be valid for any purpose unless countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates
shall cease to be such officer of the Company before countersignature by
the Rights Agent and issuance and delivery by the Company, such Right
Certificates, nevertheless, may be countersigned by the Rights Agent and
issued and delivered by the Company with the same force and effect as
though the person who signed such Right Certificates had not ceased to be
such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the
Company to sign such Right Certificate, although at the date of the
execution of this Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its office designated for such purpose, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the
Right Certificates and the date of each of the Right Certificates.
7
11
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject to the
provisions of Section 11(a)(ii), Section 14 and Section 24 hereof, at any
time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates may be
transferred, split up, combined or exchanged for another Right Certificate
or Right Certificates, entitling the registered holder to purchase a like
number of one one-hundredths of a Preferred Share as the Right Certificate
or Right Certificates surrendered then entitled such holder to purchase.
Any registered holder desiring to transfer, split up, combine or exchange
any Right Certificate or Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered
Right Certificate until the registered holder shall have completed and
signed the certificate contained in the form of assignment on the reverse
side of such Right 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 11(a)(ii),
Section 14 and Section 24 hereof, countersign and deliver to the person
entitled thereto a Right Certificate or Right Certificates, as the case may
be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with
any transfer, split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a
Right Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company will issue,
execute and deliver a new Right Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered holder in lieu of
the Right Certificate so lost, stolen, destroyed or mutilated.
Notwithstanding any other provisions hereof, the Company and the Rights
Agent may amend this Rights Agreement to provide for uncertificated Rights
in addition to or in place of Rights evidenced by Rights Certificates.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the
Right Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at the office
of the Rights Agent designated for such purpose, together with payment
of the Purchase
8
12
Price for each one one-hundredth of a Preferred Share (or such other
number of shares or other securities) as to which the Rights are
exercised, at or prior to the earliest of (i) the Close of Business on
September 8, 2008 (the "Final Expiration Date"), (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date"), or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
(b) The purchase price (the "Purchase Price") for each one one-hundredth
of a Preferred Share pursuant to the exercise of a Right shall
initially be $65 and shall be subject to adjustment from time to time
as provided in Sections 11 and 13 hereof and shall be payable in
lawful money of the United States of America in accordance with
paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an
amount equal to any applicable transfer tax required to be paid by the
holder of such Right Certificate in accordance with Section 9 hereof
by certified check, cashier's check, bank draft or money order payable
to the order of the Company, the Rights Agent shall thereupon promptly
(i) (A) requisition from any transfer agent for the Preferred Shares
certificates for the number of Preferred Shares to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply
with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the Preferred Shares issuable upon
exercise of the Rights hereunder into a depository, requisition from
the depositary agent depositary receipts representing such number of
one on hundredths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such
receipts shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, requisition from the Company
the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to
or upon the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such holder
and (iv) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate. In the
event that the Company is obligated to issue securities of the Company
other than Preferred Shares (including Common Shares) of the Company
pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities are available for
distribution by the Rights Agent, if and when appropriate.
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii) hereof, the Rights Agent shall return
such Right Certificate to the registered holder thereof after
imprinting, stamping or otherwise indicating thereon that the rights
represented by such Right
9
13
Certificate no longer include the rights provided by Section 11(a)(ii)
hereof, and, if fewer than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the
Right Certificate the number of Rights represented thereby which
continue to include the rights provided by Section 11(a)(ii) hereof.
(d) In case the registered holder of any Right Certificate shall exercise
fewer than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall
be issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the
provisions of Section 14 hereof.
(e) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Preferred Shares,
the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with this
Section 7.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the
certification following the form of election to purchase set forth on
the reverse side of the Rights Certificate surrendered for such
exercise and (ii) provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if delivered or surrendered to the Rights Agent, shall
be canceled by it, and no Right Certificates shall be issued in lieu
thereof except as expressly permitted by any of the provisions of this
Agreement. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any other
Right Certificate purchased or acquired by the Company otherwise than upon
the exercise thereof. The Rights Agent shall deliver all canceled Right
Certificates to the Company, or shall, at the written request of the
Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
SECTION 9. AVAILABILITY OF PREFERRED SHARES. The Company covenants and agrees
that so long as the Preferred Shares (and, after the time a person becomes
an Acquiring Person, Common Shares or any other securities) issuable upon
the exercise of the Rights may be listed on any national securities
exchange or quotation system, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange or
quotation system upon official notice of issuance upon such exercise.
10
14
The Company covenants and agrees that it will take all such action as may
be necessary to ensure that all Preferred Shares (or Common Shares and
other securities, as the case may be) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares or other
securities.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates
or of any Preferred Shares upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts
for the Preferred Shares in a name other than that of, the registered
holder of the Right Certificate evidencing Rights surrendered for exercise
or to issue or to deliver any certificates or depositary receipts for
Preferred Shares upon the exercise of any Rights until any such tax shall
have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to
the Company's reasonable satisfaction that no such tax is due.
As soon as practicable after the Shares Acquisition Date, the Company shall
use its best efforts to:
(i) prepare and file a registration statement under the Securities
Act of 1933, as amended (the "Act"), with respect to the Rights
and the securities purchasable upon exercise of the Rights on an
appropriate form, will use its best efforts to cause such
registration statement to become effective as soon as practicable
after such filing and will use its best efforts to cause such
registration statement to remain effective (with a prospectus at
all times meeting the requirements of the Act) until the Final
Expiration Date; and
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or
appropriate.
SECTION 10. PREFERRED SHARES RECORD DATE. Each person in whose name any
certificate for Preferred Shares or other securities is issued upon the
exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Preferred Shares or other securities represented
thereby on, and such certificate shall be dated, the date upon which the
Right Certificate evidencing such Rights was duly surrendered with the
forms of election and certification duly executed and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon
which the Preferred Shares or other securities transfer books of the
Company are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day
11
15
on which the Preferred Shares or other securities transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Right Certificate, as such, shall not be entitled to any
rights of a holder of Preferred Shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS.
The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to
time as provided in this Section 11.
(a)
(i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Shares payable
in Preferred Shares, (B) subdivide the outstanding Preferred
Shares, (C) combine the outstanding Preferred Shares into a
smaller number of Preferred Shares or (D) issue any shares of its
capital stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this
Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and
kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if
such Right had been exercised immediately prior to such date and
at a time when the Preferred Shares transfer books of the Company
were open, such holder would have owned upon such exercise and
been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no
event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right.
If an event occurs which would require an adjustment under both
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addition to,
and shall be made prior to any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) Subject to Section 24 hereof and the provisions of the next
paragraph of this Section 11(a)(ii), in the event any Person
shall become an Acquiring Person, each holder of a Right shall,
for a period of 60 days after the later of such time any Person
becomes an Acquiring Person or the effective date of an
appropriate
12
16
registration statement under the Act pursuant to Section 9 hereof
(provided, however that, if at any time prior to the expiration
or termination of the Rights there shall be a temporary
restraining order, a preliminary injunction, an injunction, or
temporary suspension by the Board of Directors, or similar
obstacle to exercise of the Rights (the "Injunction") which
prevents exercise of the Rights, a new 60-day period shall
commence on the date the Injunction is removed), have a right to
receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement and
in lieu of Preferred Shares, such number of Common Shares as
shall equal the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share
market price of the Common Shares (determined pursuant to Section
11(d) hereof) on the date such Person became an Acquiring Person;
provided, however, that if the transaction that would otherwise
give rise to the foregoing adjustment is also subject to the
provisions of Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall be made
pursuant to this Section 11(a)(ii). In the event that any Person
shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would
eliminate or diminish the benefits intended to be afforded by the
Rights.
Notwithstanding anything in this Agreement to the contrary, from
and after the time any Person becomes an Acquiring Person, any
Rights beneficially owned by (i) such Acquiring Person or an
Associate or Affiliate of such Acquiring Person, (ii) a
transferee of such Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person
became such, or (iii) a transferee of such Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person's becoming
such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any
Person with whom the Acquiring Person has any continuing
agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the
Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the
avoidance of this Section 11(a)(ii), shall become null and void
without any further action and no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether
under any
13
17
provision of this Agreement or otherwise. The Company shall use
all reasonable efforts to insure that the provisions of this
Section 11(a)(ii) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Right Certificates or
other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder. No Right
Certificate shall be issued at any time upon the transfer of any
Rights to an Acquiring Person whose Rights would be void pursuant
to the preceding sentence or any Associate or Affiliate thereof
or to any nominee of such Acquiring Person, Associate or
Affiliate; and any Right Certificate delivered to the Rights
Agent for transfer to an Acquiring Person whose Rights would be
void pursuant to the preceding sentence shall be canceled.
(iii) In lieu of issuing Common Shares in accordance with Section
11(a)(ii) hereof, the Company may, if a majority of the Board of
Directors then in office determines that such action is necessary
or appropriate and not contrary to the interests of holders of
Rights, elect to (and, in the event that the Board of Directors
has not exercised the exchange right contained in Section 24(c)
hereof and there are not sufficient authorized but unissued
Common Shares to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii), the Company
shall) take all such action as may be necessary to authorize,
issue or pay, upon the exercise of the Rights, cash (including by
way of a reduction of the Purchase Price), property, Common
Shares, other securities or any combination thereof having an
aggregate value equal to the value of the Common Shares which
otherwise would have been issuable pursuant to Section 11(a)(ii)
hereof, which aggregate value shall be determined by a nationally
recognized investment banking firm selected by a majority of the
Board of Directors then in office. For purposes of the preceding
sentence, the value of the Common Shares shall be determined
pursuant to Section 11(d) hereof. Any such election by the Board
of Directors must be made within 60 days following the date on
which the event described in Section 11(a)(ii) hereof shall have
occurred. Following the occurrence of the event described in
Section 11(a)(ii) hereof, a majority of the Board of Directors
then in office may suspend the exercisability of the Rights for a
period of up to 60 days following the date on which the event
described in Section 11(a)(ii) hereof shall have occurred to the
extent that such directors have not determined whether to
exercise their rights of election under this Section 11(a)(iii).
In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights
has been temporarily suspended.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares
entitling them (for a
14
18
period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same
designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions 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 then current per share
market price of the Preferred Shares (as such term is hereinafter
defined) 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); provided, however, that in
no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital
stock of the Company issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed
with the Rights Agent. Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such
rights, options or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any
such distribution made in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly
cash dividend or a dividend payable in Preferred Shares) or
subscription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the
numerator of which shall be the then current per share market price of
the Preferred Shares (as such term is hereinafter defined) on such
record date, less the fair market value (as determined in good faith
by the
15
19
Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion
of the assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one Preferred Share
and the denominator of which shall be such current per share market
price of the Preferred Shares; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of
the Company to be issued upon exercise of one Right. Such adjustments
shall be made successively whenever such a record date is fixed; and
in the event that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price which would then be
in effect if such record date had not been fixed.
(d)
(i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security
for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that
in the event that the current per share market price of the
Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution
on such Security payable in shares of such Security or securities
convertible into such shares, or (B) any subdivision, combination
or reclassification of such Security or securities convertible
into such shares, or (C) any subdivision, combination or
reclassification of such Security and prior to the expiration of
30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such
Security. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the
Security is not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security
is listed or admitted to trading or as reported on the Nasdaq
National Market or, if the Security is not listed or admitted to
trading on any national securities exchange or reported on the
Nasdaq National Market, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as
16
20
reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("Nasdaq") or such other system then
in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the Security selected by the Board of Directors of the
Company or, if on any such date no professional market maker is
making a market in the Security, the price as determined in good
faith by the Board of Directors. The term "Trading Day" shall
mean a day on which the principal national securities exchange on
which the Security is listed or admitted to trading is open for
the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a
Business Day.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined
in accordance with the method set forth in Section 11(d)(i)
hereof. If the Preferred Shares are not publicly traded, the
"current per share market price" of the Preferred Shares shall be
conclusively deemed to be the current per share market price of
the Common Shares as determined pursuant to Section 11(d)(i)
hereof (appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof)
multiplied by one hundred. If neither the Common Shares nor the
Preferred Shares are publicly held or so listed or traded,
"current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a
statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by
reason of this Section 11(e) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-hundredth of a Preferred Share or one
ten-thousandth of any other share or security as the case may be.
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which
requires such adjustment or (ii) the date of the expiration of the
right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) hereof,
the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than
Preferred Shares, thereafter the number of such other shares so
receivable upon exercise of any Right shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect
17
21
to the Preferred Shares contained in Sections 11(a) through 11(c)
hereof, inclusive, and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Shares shall apply on like terms
to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the
right to purchase, at the adjusted Purchase Price, the number of one
one-hundredths of a Preferred Share purchasable from time to time
hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a
result of the calculations made in Section 11(b) and Section 11(c)
hereof, each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth of a
Preferred Share) obtained by (i) multiplying (x) the number of one
one-hundredths of a Preferred Share covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii)
dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one one-hundredths of a Preferred Share
for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the
nearest one ten-thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to
be made. This record date may be the date on which the Purchase Price
is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the
public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement
for the Right Certificates held by
18
22
such holders prior to the date of adjustment, and upon surrender
thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall
be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the
number of one one-hundredths of a Preferred Share which were expressed
in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-hundredth of the then par value, if any,
of the Preferred Shares issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Preferred Shares at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence
of such event the issuing to the holder of any Right exercised after
such record date of the Preferred Shares and other capital stock or
securities of the Company, if any, issuable upon such exercise 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
xxxx or other appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the event
requiring such adjustment.
(m) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action the purpose of which is
to, or if at the time such action is taken it is reasonably
foreseeable that the effect of such action is to, materially diminish
or eliminate the benefits intended to be afforded by the Rights. Any
such action taken by the Company during any period after any Person
becomes an Acquiring Person but prior to the Distribution Date shall
be null and void unless such action could be taken under this Section
11(m) from and after the Distribution Date.
(n) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase
Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall
determine to be advisable in order that any consolidation or
subdivision of the Preferred Shares, issuance wholly for cash of any
Preferred Shares at less than the current market
19
23
price, issuance wholly for cash of Preferred Shares or securities
which by their terms are convertible into or exchangeable for
Preferred Shares, dividends on Preferred Shares payable in Preferred
Shares or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders
of its Preferred Shares shall not be taxable to such shareholders.
(o) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay
any dividend on the Common Shares payable in Common Shares or (ii)
effect a subdivision, combination or consolidation of the Common
Shares (by reclassification or otherwise than by payment of dividends
in Common Shares) into a greater or lesser number of Common Shares,
then in any such case (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of
each Right shall be determined by multiplying the number of one
one-hundredths of a Preferred Share so purchasable immediately prior
to such event by a fraction, the numerator of which is the number of
Common Shares outstanding immediately before such event and the
denominator of which is the number of Common Shares outstanding
immediately after such event, and (B) each Common Share outstanding
immediately after such event shall have issued with respect to it that
number of Rights which each Common Share outstanding immediately prior
to such event had issued with respect to it. The adjustments provided
for in this Section 11(o) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or
consolidation is effected.
(p) The exercise of Rights under Section 11(a)(ii) hereof shall only
result in the loss of rights under Section 11(a)(ii) hereof to the
extent so exercised and shall not otherwise affect the rights
represented by the Rights under this Agreement, including the rights
represented by Section 13 hereof.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever
an adjustment is made as provided in Sections 11 and 13 hereof, the Company
shall promptly (a) prepare a certificate setting forth such adjustment, and
a brief statement of the facts accounting for such adjustment, (b) file
with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with
Section 25 hereof. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained and shall not
be deemed to have knowledge of any adjustment unless and until it shall
have received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
(a) In the event that, following the Shares Acquisition Date or, if a
Transaction is proposed, the Distribution Date, directly or indirectly
(x) the Company shall consolidate with, or merge with and into, any
Interested Shareholder, or if in such merger or consolidation all
holders of Common Stock are not treated alike, any other Person, (y)
any Interested Person, or if in such merger or consolidation all
holders of
20
24
Common Stock are not treated alike, any other Person shall consolidate
with the Company, or merge with and into the Company, and the Company
shall be the continuing or surviving corporation of such merger (other
than, in the case of either transaction described in (x) or (y), a
merger or consolidation which would result in all of the voting power
represented by the securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or by being converted into securities of the surviving entity) all of
the voting power represented by the securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation and the holders of such securities not having changed as
a result of such merger or consolidation), or (z) the Company shall
sell, mortgage or otherwise transfer (or one or more of its
subsidiaries shall sell, mortgage or otherwise transfer), in one or
more 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 Interested Shareholder or Shareholders, or
if in such transaction all holders of Common Stock are not treated
alike, any other Person, (other than the Company or any Subsidiary of
the Company in one or more transactions each of which individually and
the aggregate does not violate Section 13(d) hereof) then, and in each
such case, proper provision shall be made so that (i) each holder of a
Right, subject to Section 11(a)(ii) hereof, shall have the right to
receive, upon the exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable in
accordance with the terms of this Agreement and in lieu of Preferred
Shares, such number of freely tradeable Common Shares of the Principal
Party (as such term is hereinafter defined), free and clear of liens,
rights of call or first refusal, encumbrances or other adverse claims,
as shall be equal to the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable (without taking
into account any adjustment previously made pursuant to Section
11(a)(ii) hereof) and dividing that product by (B) 50% of the then
current per share market price of the Common Shares of such Principal
Party (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; (ii)
such Principal Party shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply to such Principal Party; and (iv) such
Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of shares of its Common Shares
in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in
relation
21
25
to its Common Shares thereafter deliverable upon the exercise of the
Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a) hereof, 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 the merger
or consolidation (or, if applicable, the Company, if it is the
surviving corporation); and
(ii) in the case of any transaction described in (z) of the first
sentence of Section 13(a) hereof, 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 case, (1) 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 or Affiliate
of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (2) if
such Person is a subsidiary, directly or indirectly, or Affiliate 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; and (3) if such Person is owned,
directly or indirectly, by a joint venture formed by two or more
Persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in (1) and (2) above shall apply to each
of the chains of ownership having an interest in such joint venture as
if such party were a "subsidiary" of both or all of such joint
venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their
direct or indirect interests in such Person bear to the total of such
interests.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number
of authorized Common Shares that have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and each
Principal Party and each other Person who may become a Principal Party
as a result of such consolidation, merger, sale or transfer shall have
(i) executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b)
of this Section 13 and (ii) prepared, filed and had declared and
remain effective a registration statement under the Act on the
appropriate form with respect to the Rights and the securities
exercisable upon exercise of the Rights and further providing that, as
soon as practicable after the date of any consolidation,
22
26
merger, sale or transfer of assets mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense will:
(i) cause the registration statement under the Act with respect to
the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form to remain effective (with a
prospectus at all times meeting the requirements of the Act)
until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or
appropriate;
(iii) list the Rights and the securities purchasable upon exercise of
the Rights on each national securities exchange on which the
Common Shares were listed prior to the consummation of the
Business Combination or on the Nasdaq National Market if the
Common Shares were listed on the Nasdaq National Market or, if
the Common Shares were not listed on a national securities
exchange or the Nasdaq National Market prior to the consummation
of the Business Combination, on a national securities exchange or
the Nasdaq National Market; and
(iv) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply
in all material respects with the requirements for registration
on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
(d) After the Distribution Date, the Company covenants and agrees that it
shall not (i) consolidate with, (ii) merge with or into, or (iii) sell
or transfer to, in one or more 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, any other Person (other
than a Subsidiary of the Company in a transaction which does not
violate Section 11(m) hereof), if (x) at the time of or after such
consolidation, merger or sale there are any charter or bylaw
provisions or any rights, warrants or other instruments or securities
outstanding, agreements in effect or any other action taken which
would diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the shareholders
of the Person who constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its
Affiliates and Associates. The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto the
Company and such other Person shall have executed and delivered to the
Rights Agent a
23
27
supplemental agreement evidencing compliance with this Section 13(d).
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered
holders of the Right Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For the
purposes of this Section 14(a), the current market value of a whole
Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be
the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange,
as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading or as
reported on the Nasdaq National Market or, if the Rights are not
listed or admitted to trading on any national securities exchange or
reported on the Nasdaq National Market, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by Nasdaq or such other system
then in use or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date
no such market maker is making a market in the Rights, the fair value
of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares
(other than fractions which are integral multiples of one
one-hundredth of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-hundredth of a Preferred Share may, at
the election of the Company, be evidenced by depositary receipts;
provided, however, that holders of such depositary receipts shall have
all of the designations and the powers, preferences and rights, and
the qualifications, limitations and restrictions to which they are
entitled as beneficial owners of the Preferred Shares represented by
such depositary receipts. In lieu of fractional Preferred Shares that
are not integral multiples of one one-hundredth of a Preferred Share,
the Company shall pay to the registered holders of Right Certificates
at the time such Rights are exercised as herein provided an amount in
cash equal
24
28
to the same fraction of the current market value of one Preferred
Share. For the purposes of this Section 14(b), the current market
value of a Preferred Share shall be the current per share market price
of the Preferred Shares (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise (or, if not publicly traded, in accordance
with Section 11(d)(ii) hereof).
(c) Following the occurrence of one of the transactions or events
specified in Section 11 hereof giving rise to the right to receive
Common Shares, capital stock equivalents (other than Preferred Shares)
or other securities upon the exercise of a Right, the Company shall
not be required to issue fractions of Common Shares or units of such
Common Shares, capital stock equivalents or other securities upon
exercise of the Rights or to distribute certificates which evidence
fractional Common Shares, capital stock equivalents or other
securities. In lieu of fractional Common Shares, capital stock
equivalents or other securities, the Company shall pay to the
registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Common Share or unit of
such Common Shares, capital stock equivalents or other securities. For
purposes of this Section 14(c), the current market value shall be the
current per share market price (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise and, if such capital stock equivalent is not traded,
each such capital stock equivalent shall have the value of one
one-hundredth of a Preferred Share.
(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares
upon exercise of a Right (except as provided above).
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement,
excepting the rights of action given to the Rights Agent under Sections 18
and 20 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders
of the Common Shares) and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Shares), without the
consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Shares), may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this
Agreement and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened violations of the
obligations of any Person subject to, this Agreement. Holders of Rights
shall be entitled to recover the reasonable costs and expenses, including
attorneys fees, incurred by them in any action to enforce the provisions of
this Agreement.
25
29
SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by accepting
the same, consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable
(subject to the provisions of this Rights Agreement) only on the
registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper
instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right
Certificates or the associated Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder, as
such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder
of any Right Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting shareholders (except as provided in Section 25
hereof), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by such Right Certificate shall have
been exercised in accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT. The Company agrees to pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability,
or expense, incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by
the Rights Agent in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending against any
claim of liability in the premises. The indemnity provided herein shall
survive the expiration of the Rights and the termination of this Agreement.
26
30
The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate
or certificate for the Preferred Shares or Common Shares or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons, or otherwise upon the advice
of counsel as set forth in Section 20 hereof. In no case will the Rights
Agent be liable for special, indirect, incidental or consequential or
consequential loss or damage at any kind whatsoever (including but not
limited to lost profits), even if the Rights Agent has been advised of such
loss or damage.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. Any
corporation into which the Rights Agent or any successor Rights Agent may
be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to
the shareholder services or corporate trust business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this
Agreement any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent
may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and
in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Right Certificates so countersigned; and in case at
that time any of the Right Certificates shall not have been countersigned,
the Rights Agent may countersign such Right Certificates either in its
prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its choice (who may
27
31
be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate
signed by any one of the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice
President, the Treasurer or the Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by
it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements and recitals are
and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach
by the Company of any covenant or condition contained in this
Agreement or in any Right Certificate; nor shall it be responsible for
any change in the exercisability of the Rights (including the Rights
becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment
in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13, 23 or 24 hereof, or the
ascertaining of the existence of facts that would require any such
change or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of a certificate
pursuant to Section 12 hereof describing such change or adjustment);
nor shall it by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any Preferred
Shares to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Preferred Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered
28
32
all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice
President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered by
it in good faith in accordance with instructions of any such officer
or for any delay in acting while waiting for those instructions. Any
application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken or omitted by the Rights Agent with
respect to its duties or obligations under this Agreement and the date
on and/or after which such action shall be taken or omitted and the
Rights Agent shall not be liable for any action taken or omitted in
accordance with a proposal included in any such application on or
after the date specified therein (which date shall not be less than
three business days after the date indicated in such application
unless any such officer shall have consented in writing to an earlier
date) unless, prior to taking or omitting any such action, the Rights
Agent has received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with
or lend money to the Company or otherwise act as fully and freely as
though it were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other capacity for
the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct
of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued
employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for
believing that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.
29
33
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has
not been executed, the Rights Agent shall not take any further action
with respect to such requested exercise of transfer without first
consulting with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer
agent for the Common Shares or Preferred Shares by registered or certified
mail, and to the holders of the Right 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 for the Common Shares
or Preferred Shares by registered or certified mail, and to the holders of
the Right Certificates by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit
his Right Certificate for inspection by the Company), then the registered
holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be
either (a) a corporation business trust or limited liability company
organized and doing business under the laws of the United States or of any
other state of the United States which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at
the time of its appointment as Rights Agent a combined capital and surplus
of at least $50 million or (b) a direct or indirect wholly owned subsidiary
of such an entity or its wholly owning parent. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent
without further act or deed; but the predecessor Rights Agent shall deliver
and transfer to the successor Rights Agent any property at the time held by
it hereunder, and execute and deliver any further assurance, conveyance,
act or deed necessary for the purpose. Not later than the effective date of
any such appointment the Company shall file notice thereof in writing with
the predecessor Rights Agent and each transfer agent for the Common Shares
or Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for
in this Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Rights Agent or
the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such
form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price
30
34
and the number or kind or class of shares or other securities or property
purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance
or sale of Common Shares following the Distribution Date and prior to the
earlier of the Redemption Date and the Final Expiration Date, the Company
(a) shall with respect to Common Shares so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement in
existence prior to the Distribution Date, or upon the exercise, conversion
or exchange of securities, notes or debentures issued by the Company and in
existence prior to the Distribution Date, and (b) may, in any other case,
if deemed necessary or appropriate by the Board of Directors of the
Company, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that
(i) the Company shall not be obligated to issue any such Right Certificates
if, and to the extent that, the Company shall be advised by counsel that
such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Right Certificate
would be issued, and (ii) no Right Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.
SECTION 23. REDEMPTION.
(a) The Rights may be redeemed by action of the Board of Directors
pursuant to Section 23(b) hereof and shall not be redeemed in any
other manner.
(b)
(i) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of such time as any Person becoming an
Acquiring Person or the Final Expiration Date, redeem all but not
less than all of the then outstanding Rights at a redemption
price of $0.001 per Right, 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 Common Shares (based on the
"current per-share market price," as such term is defined in
Section 11(d) hereof, of the Common Shares at the time of
redemption), cash or any other form of consideration deemed
appropriate by the Board of Directors. The redemption of the
Rights by the Board of Directors may be made effective at such
time, on such basis and subject to such conditions as the Boar of
Directors in its sole discretion may establish. Notwithstanding
anything contained in this Agreement to the contrary, the Rights
shall not be exercisable pursuant to Section 11(a)(ii) hereof
prior to the expiration or termination of the Company's right of
redemption under this Section 23(b)(i).
(ii) In addition, the Board of Directors of the Company may, at its
31
35
option, at any time after the time a Person becomes an Acquiring
Person and the expiration of any period during which the holder
of Rights may exercise the rights under Section 11(a)(ii) hereof
but prior to any event described in clause (x), (y) or (z) of the
first sentence of Section 13 hereof, redeem all but not less than
all of the then outstanding Rights at the Redemption Price (x) in
connection with any merger, consolidation or sale or other
transfer (in one transaction or in a series of related
transactions) of assets or earning power aggregating 50% or more
of the assets or earning power of the Company and its
subsidiaries (taken as a whole) in which all holders of Common
Shares are treated alike and not involving (other than as a
holder of Common Shares being treated like all other such
holders) an Interested Shareholder or a Transaction Person or
(y)(A) if and for so long as the Acquiring Person is not
thereafter the Beneficial Owner of 15% or more of the then
outstanding Common Shares, and (B) at the time of redemption no
other Persons are Acquiring Persons.
(c) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to Section
23(b) hereof, and without any further action and without any
notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Company shall promptly give
public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within 10 days after such
action of the Board of Directors ordering the redemption of the
Rights pursuant to Section 23(b) hereof, the Company shall mail a
notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Shares,
provided, however, that 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 herein provided shall be
deemed given, whether or not the holder receives the notice. Each
such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section
24 hereof, and other than in connection with the purchase of
Common Shares prior to the Distribution Date.
(d) The Company may, at its option, discharge all of its obligations
with respect to any redemption of the Rights by (i) issuing a
press release announcing the manner of redemption of the Rights
and (ii) mailing payment of the Redemption Price to the
registered holders of the Rights at their last addresses as they
appear on the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent
for the Common Shares, and upon such action, all
32
36
outstanding Right Certificates shall be null and void without any
further action by the Company.
SECTION 24. EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of
the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common
Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board of Directors shall
not be empowered to effect such exchange at any time after any Person
(other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes
the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to Section 24(a) hereof
and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of
a holder of such Rights shall be to receive that number of Common
Shares equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall mail a notice of
any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent;
provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. Any notice
which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common
Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions
of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In lieu of issuing Common Shares in accordance with Section 24(a)
hereof, the Company may, if a majority of the Board of Directors then
in office determines that such action is necessary or appropriate and
not contrary to the interests of the holders of Rights, elect to (and,
in the event that there are not sufficient authorized but unissued
Common Shares to permit any exchange of the Rights in accordance with
Section 24(a)
33
37
hereof, the Company shall) take all such action as may be necessary to
authorize, issue or pay, upon the exchange of the Rights, cash
(including by way of a reduction of the Purchase Price), property,
Common Shares, other securities or any combination thereof having an
aggregate value equal to the value of the Common Shares which
otherwise would have been issuable pursuant to Section 24(a) hereof,
which aggregate value shall be determined by a nationally recognized
investment banking firm selected by a majority of the Board of
Directors then in office. For purposes of the preceding sentence, the
value of the Common Shares shall be determined pursuant to Section
11(d) hereof. Any election pursuant to this Section 24(c) by the Board
of Directors must be made within 60 days following the date on which
the event described in Section 11(a)(ii) hereof shall have occurred.
Following the occurrence on the event described in Section 11(a)(ii)
hereof, a majority of the Board of Directors then in office may
suspend the exercisability of the Rights for a period of up to 60 days
following the date on which the event described in Section 11(a)(ii)
hereof shall have occurred to the extent that such directors have not
determined whether to exercise their rights of election under this
Section 24(c). In the event of any such suspension, the Company shall
issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right 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(d), the current
market value of a whole Common Share shall be the closing price of a
Common Share (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately after the date of the
first public announcement by the Company that an exchange is to be
effected pursuant to this Section 24.
(e) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exchange of the Rights or to
distribute certificates which evidence fractional Preferred Shares
(other than fractions which are integral multiples of one
one-hundredth of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-hundredth of a Preferred Share may, at
the election of the Company, be evidenced by depositary receipts;
provided, however, that holders of such depositary receipts shall have
all of the rights, privileges, and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by
such depositary receipts. In lieu of fractional Preferred Shares that
are not integral multiples of one one-hundredth of a Preferred Share,
the Company shall pay to the registered holders of Right Certificates
at the time such Rights are exercised as herein provided an amount in
cash equal
34
38
to the same fraction of the current market value of one Preferred
Share. For the purposes of this Section 24(e), the current market
value of a Preferred Share shall be one hundred (100) times the
closing price of a Common Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately
after the date of the first public announcement by the Company that an
exchange is to be effected pursuant to this Section 24.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose (i) to pay any dividend payable in
stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other
than a regular quarterly cash dividend), (ii) to offer to the holders
of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any
class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a
reclassification involving only the subdivision of outstanding
Preferred Shares), (iv) to effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or
more of its Subsidiaries to effect any sale or other transfer), in one
or more transactions, of 50% or more of the assets or earning power of
the Company and its Subsidiaries (taken as a whole), to any other
Person, (v) to effect the liquidation, dissolution or winding up of
the Company, or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision,
combination or consolidation of the Common Shares (by reclassification
or otherwise than by payment of dividends in Common Shares), then, in
each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purpose
of such stock dividend, or distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and
the date of participation therein by the holders of the Common Shares
and/or the 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 clause
(i) or (ii) above at least 10 days prior to the record date for
determining holders of the Preferred Shares for purposes of such
action, and in the case of any such other action, at least 10 days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or the
Preferred Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall occur,
then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe
the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof.
35
39
SECTION 26. NOTICES. Notices or demands authorized by this Agreement to be given
or made by the Rights Agent or by the holder of any Right Certificate to or
on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
Aradigm Corporation
00000 Xxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000 Attn:
Chief Financial Officer
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
BankBoston, N.A.
c/o Boston Equiserve Limited Partnership
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Client Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the
registry books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date, the
Company and the Rights Agent shall, if the Company so directs, supplement
or amend any provision of this Agreement without the approval of any
holders of the Rights. From and after the Distribution Date, the Company
and the Rights Agent shall, if the Company so directs, from time to time
supplement or amend any provision of this Agreement without the approval of
any holders of Right Certificates in order to (i) cure any ambiguity, (ii)
correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, or (iii) change any other
provisions with respect to the Rights which the Company may deem necessary
or desirable; provided, however, that no such supplement or amendment shall
be made which would adversely affect the interests of the holders of Rights
(other than the interests of an Acquiring Person or its Affiliates or
Associates). Any supplement or amendment adopted during any period after
any Person has become an Acquiring Person but prior to the Distribution
Date shall become null and void unless such supplement or amendment could
have been adopted by the Company from and after the Distribution Date. Any
such supplement or amendment shall be evidenced by a writing signed by the
Company and the Rights Agent. Upon delivery of a certificate from an
appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 27,
the Rights Agent
36
40
shall execute such supplement or amendment unless the Rights Agent shall
have determined in good faith that such supplement or amendment would
adversely affect its interest under this Agreement. 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. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all
purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares or any other
securities of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General
Rules and Regulations under the Exchange Act as in effect on the date of
this Agreement. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise
all rights and powers specifically granted to the Board, or the Company, or
as may be necessary or advisable in the administration of this Agreement,
including without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including
a determination to redeem or not redeem the Rights or to amend the
Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) which are done or made by the Board in good
faith, shall (x) be final, conclusive and binding on the Rights Agent and
the holders of the Rights, and (y) not subject the Board to any liability
to the holders of the Rights.
SECTION 29. 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 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be
for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares).
SECTION 31. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.
SECTION 32. GOVERNING LAW. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State
of California and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made
and performed entirely within such State.
37
41
SECTION 33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but
one and the same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections
of this Agreement are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
38
42
IN WITNESS WHEREOF, parties whereto have caused this Agreement to be duly
executed, all as of the day and year first above written.
ATTEST: ARADIGM CORPORATION
By: /s/ XXXX X. XXXXXXXX By: /s/ XXXXXXX X. XXXXXXXX
-------------------------------- -------------------------------------
Xxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxxx
Secretary President and Chief Executive Officer
ATTEST: BANKBOSTON, N.A.
By: /s/ SIGNATURE By: /s/ XXXXXXXX X. XXXXXXXX
-------------------------------- -------------------------------------
Title: Account Manager Title: Director
------------------------------ -----------------------------------
39
43
(EXHIBIT A TO RIGHTS AGREEMENT)
CERTIFICATE OF DETERMINATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
ARADIGM CORPORATION
(Pursuant to Section 401 of the
California General Corporation Law)
The undersigned, Xxxxxxx X. Xxxxxxxx and Xxxx X. Xxxxxxxx hereby certify
that:
1. They are the duly elected and acting Chief Executive Officer and
President, and Secretary, respectively, of Aradigm Corporation (the
"Corporation").
2. Pursuant to authority given by the Corporation's Articles of
Incorporation, the Board of Directors of the Corporation has duly adopted the
following resolutions at a meeting duly called and held on August 4, 1998:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Corporation in accordance with the
provisions of its Restated Articles of Incorporation, the Board of
Directors hereby creates a series of Preferred Stock, without par value,
of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences, privileges and
restrictions thereof (in addition to the provisions set forth in the
Restated Articles of Incorporation of the Corporation, which are
applicable to the Preferred Stock of all classes and series), as
follows:
Series A Junior Participating Preferred Stock:
SECTION 1. DESIGNATION AND AMOUNT. Two Hundred Thirty
Thousand (230,000) shares of Preferred Stock, without par value, are
designated "Series A Junior Participating Preferred Stock" with the
rights, preferences, privileges and restrictions specified herein (the
"Junior Preferred Stock"). Such number of shares may be increased or
decreased by resolution of the Board of Directors;
A-1
44
provided, that no decrease shall reduce the number of shares of Junior
Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the
conversion of any outstanding securities issued by the Corporation
convertible into Junior Preferred Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock) ranking prior
and superior to the Junior Preferred Stock with respect to dividends,
the holders of shares of Junior Preferred Stock, in preference to the
holders of Common Stock, without par value (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash
on the first day of March, June, September and December in each year
(each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Junior
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $l.00 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise) declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Junior Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Junior Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Junior Preferred Stock as provided in paragraph (A)
of this Section immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on
A-2
45
the Junior Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the
date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of
Junior Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events
such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Junior Preferred Stock in
an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Junior Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall
be not more than 60 days prior to the date fixed for the payment
thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of
Junior Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Junior Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
shareholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the number of votes per share to which holders of
shares of Junior Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein, in any other
Certificate of Determination of Preferences creating a series of
Preferred Stock or any similar stock, or by law, the holders of shares
of Junior Preferred Stock and the holders of shares of Common Stock and
any other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
A-3
46
(C) Except as set forth herein, or as otherwise provided
by law, holders of Junior Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Junior Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Junior Preferred Stock, except dividends paid ratably on the Junior
Preferred Stock and all such parity stock on which dividends are payable
or in arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up)
to the Junior Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Junior Preferred Stock, or any shares of
stock ranking on a parity with the Junior Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
A-4
47
SECTION 5. REACQUIRED SHARES. Any shares of Junior
Preferred Stock purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the
Restated Articles of Incorporation, or in any other Certificate of
Determination of Preferences creating a series of Preferred Stock or any
similar stock or as otherwise required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon
any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Junior Preferred Stock unless, prior thereto, the
holders of shares of Junior Preferred Stock shall have received the
greater of: (A) $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to
the date of such payment; or (B) an aggregate amount per share, subject
to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking
on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except distributions made
ratably on the Junior Preferred Stock and all such parity stock in
proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Junior Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the
Corporation shall enter into any consolidation, merger, combination or
other transaction in which the shares of Common Stock are exchanged for
or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Junior Preferred Stock
shall at the same time be similarly exchanged or changed into an amount
per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock
A-5
48
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of
Junior Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
SECTION 8. NO REDEMPTION. The shares of Junior Preferred
Stock shall not be redeemable.
SECTION 9. RANK. The Junior Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of assets,
junior to all other series of the Corporation's Preferred Stock.
SECTION 10. AMENDMENT. The Restated Articles of
Incorporation of the Corporation shall not be amended in any manner
which would materially alter or change the powers, preferences or
special rights of the Junior Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Junior Preferred Stock, voting
together as a single class.
3. The authorized number of shares of Preferred Stock of this
corporation is 5,000,000, and the number of shares of Preferred Stock
constituting Series A Junior Preferred Stock, none of which has been issued, is
230,000.
A-6
49
IN WITNESS WHEREOF, the undersigned have executed this certificate on
August 31, 1998.
/s/ XXXXXXX X. XXXXXXXX
------------------------------------
XXXXXXX X. XXXXXXXX
CHIEF EXECUTIVE OFFICER AND PRESIDENT
/s/ XXXX X. XXXXXXXX
------------------------------------
XXXX X. XXXXXXXX
SECRETARY
The undersigned Xxxxxxx X. Xxxxxxxx, Chief Executive Officer and
President of Aradigm Corporation and Xxxx X. Xxxxxxxx, Secretary of said
corporation, each certifies under penalty of perjury that the matters set forth
in the foregoing Certificate of Determination are true of their own knowledge.
Executed at Hayward, California on August 31, 1998.
/s/ XXXXXXX X. XXXXXXXX
------------------------------------
XXXXXXX X. XXXXXXXX
CHIEF EXECUTIVE OFFICER AND PRESIDENT
Executed at Hayward, California on August 31, 1998.
/s/ XXXX X. XXXXXXXX
------------------------------------
XXXX X. XXXXXXXX
SECRETARY
A-7
50
(EXHIBIT B TO RIGHTS AGREEMENT)
FORM OF RIGHT CERTIFICATE
CERTIFICATE NO. R- ___ RIGHTS
NOT EXERCISABLE AFTER AUGUST 31, 2008, OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHT CERTIFICATE
ARADIGM CORPORATION
This certifies that ___________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of August 31, 1998 (the "Rights Agreement"), between Aradigm
Corporation, a California corporation (the "Company"), and BankBoston, N.A. (the
"Rights Agent"), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m.,
Eastern Time, on September 8, 2008 at the office of the Rights Agent designated
for such purpose, or at the office of its successor as Rights Agent, one
one-hundredth of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock (the "Preferred Shares"), of the Company, at a
purchase price of $65 per one one-hundredth of a Preferred Share (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase duly executed. The number of Rights evidenced by this
Right Certificate (and the number of one one-hundredths of a Preferred Share
which may be purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of
__________________, based on the Preferred Shares as constituted at such date.
From and after the time any Person becomes an Acquiring Person, (as such
terms are defined in the Rights Agreement), if the Rights evidenced by this
Right Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Associate or Affiliate who becomes a transferee after the Acquiring Person
becomes such, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of any such Acquiring Person, Associate or Affiliate who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such, such Rights shall become null and
B-1
51
void without any further action and no holder hereof shall have any right with
respect to such Rights from and after the time any Person becomes an Acquiring
Person.
As provided in the Rights Agreement, the Purchase Price and the number of
one one-hundredths of a Preferred Share which may be purchased upon the exercise
of the Rights evidenced by this Right Certificate are subject to modification
and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, as amended from time to time, which terms,
provisions and conditions are hereby incorporated herein by reference and made a
part hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Rights Agreement are on file at the principal
executive offices of the Company and the above-mentioned offices of the Rights
Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$0.001 per Right or (ii) may be exchanged in whole or in part for shares of the
Company's Common Stock, no par value per share, or, upon circumstances set forth
in the Rights Agreement, cash, property or other securities of the Company,
including fractions of a share of Preferred Stock.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts) but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
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 Right Certificate shall have been
exercised as provided in the Rights Agreement.
B-2
52
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of __________.
ATTEST: ARADIGM CORPORATION
------------------------------------- -----------------------------------------
[Signing Company Secretary's Name] [Signing Company Officer's Name]
[Title] [Title]
COUNTERSIGNED:
BANKBOSTON, N.A.,
as Rights Agent
By:
----------------------------------
[Authorized Signature]
B-3
53
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto
--------------------------------------------------------------
(Please print name and address of transferee)
______________________________________________________________ this Right
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ________________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ____________________
----------------------------------------
Signature
Form of Reverse Side of Right Certificate -- continued
B-4
54
Signature Guaranteed:
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended.
---------------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person, an Interested Shareholder or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement); and (2) after due inquiry and to the best of the knowledge of the
undersigned, the undersigned did not acquire the Rights evidenced by this Right
Certificate from any Person who is or was an Acquiring Person, an Interested
Shareholder, or an Affiliate or Associate thereof.
----------------------------------------
Signature
B-5
55
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Right Certificate.)
To __[Rights Agent]__
The undersigned hereby irrevocably elects to exercise
___________________________ Rights represented by this Right Certificate to
purchase the Preferred Shares issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number:
------------------------
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:
------------------------
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
Dated: _________________
----------------------------------------
Signature
Form of Reverse Side of Right Certificate -- continued
B-6
56
Signature Guaranteed:
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended.
---------------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not beneficially owned by nor are they being exercised on
behalf of an Acquiring Person, an Interested Shareholder or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement); and (2)
after due inquiry and to the best of the knowledge of the undersigned, the
undersigned did not acquire the Rights evidenced by this Right Certificate from
any Person who is or was an Acquiring Person, an Interested Shareholder, or an
Affiliate or Associate thereof.
----------------------------------------
Signature
---------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.
B-7
57
(EXHIBIT C TO RIGHTS AGREEMENT)
ARADIGM CORPORATION
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On August 4, 1998, the Board of Directors of ARADIGM CORPORATION
(the "Company") declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, without par value per
share, (the "Common Shares") of the Company. The dividend is effective as of
September 8, 1998 (the "Record Date") with respect to the shareholders of record
on that date. The Rights will also attach to new Common Shares issued after the
Record Date. Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series A Junior Participating Preferred
Stock, without par value per share, (the "Preferred Shares") of the Company at a
price of $65 per one one-hundredth of a Preferred Share (the "Purchase Price"),
subject to adjustment. Each Preferred Share is designed to be the economic
equivalent of 100 Common Shares. The description and terms of the Rights are set
forth in a Rights Agreement dated as of August 31, 1998 (the "Rights
Agreement"), between the Company and BankBoston, N.A. (the "Rights Agent").
DETACHMENT AND TRANSFER OF RIGHTS
Initially, the Rights will be evidenced by the stock certificates
representing Common Shares then outstanding, and no separate Right Certificates
will be distributed. Until the earlier to occur of (i) a public announcement
that a person or group of affiliated or associated persons, has become an
"Acquiring Person" (as such term is defined in the Rights Agreement) or (ii) 10
business days (or such later date as the Board may determine) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer which would result in the beneficial ownership by an Acquiring
Person of 15% or more of the outstanding Common Shares (the earlier of such
dates being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificate. In general, an "Acquiring Person" is a
person, the affiliates or associates of such person, or a group, which has
acquired beneficial ownership of 15% or more of the outstanding Common Shares.
The Rights Agreement provides that, until the Distribution Date
(or earlier redemption or expiration of the Rights), the Rights will be
transferable with and only with the Common Shares. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights) the surrender or transfer of any certificates for Common Shares
outstanding as of the Record Date, even without such notation or a copy of this
Summary of Rights being attached thereto, will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate. As
soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right
58
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
EXERCISABILITY OF RIGHTS
The Rights are not exercisable until the Distribution Date. The
Rights will expire on September 8, 2008 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by the Company, in each case as described below. 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 to receive
dividends.
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable or payable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution. The number of
outstanding Rights and the number of one one-hundredths of a Preferred Share
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of the Common Shares or a stock dividend on the Common Shares
payable in Common Shares, or subdivisions, consolidations or combinations of the
Common Shares occurring, in any such case, prior to the Distribution Date. With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Purchase
Price. No fractional Preferred Shares will be issued (other than fractions which
are integral multiples of one one-hundredth of a Preferred Share, which may, at
the election of the Company, be evidenced by depositary receipts) and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Shares on the last trading day prior to the date of exercise.
TERMS OF PREFERRED SHARES
Preferred Shares purchasable upon exercise of the Rights will not
be redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $l per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each Preferred
Share will have 100 votes, voting together with the Common Shares. Finally, in
the event of any merger, consolidation or other transaction in which Common
Shares are exchanged, each Preferred Share will be entitled to receive 100 times
the amount received per Common Share. These rights are protected by customary
anti-dilution provisions. Because of the nature of the Preferred Shares'
dividend, liquidation and voting rights, the value of the one one-hundredth
interest in a Preferred Share purchasable upon exercise of each Right should
approximate the value of one Common Share. The Preferred Shares would rank
junior to any other series of the Company's preferred stock.
59
TRIGGER OF FLIP-IN AND FLIP-OVER RIGHTS
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
or any affiliate or associate thereof (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right. This right
will commence on the date of public announcement that a person has become an
Acquiring Person (or the effective date of a registration statement relating to
distribution of the rights, if later) and terminate 60 days later (subject to
adjustment in the event exercise of the rights is enjoined).
In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold to an Acquiring Person, its affiliates or associates or
certain other persons in which such persons have an interest, proper provision
will be made so that each such holder of a Right will thereafter have the right
to receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right.
REDEMPTION AND EXCHANGE OF RIGHTS
At any time prior to the earliest of (i) the close of business on
the day of the first public announcement that a person has become an Acquiring
Person, or (ii) the Final Expiration Date, the Board of Directors of the Company
may redeem the Rights in whole, but not in part, at a price of $.001 per Right
(the "Redemption Price"). In general, the redemption of the Rights may be made
effective at such time on such basis with such conditions as the Board of
Directors in its sole discretion may establish. Immediately upon any redemption
of the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
At any time after any Person becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group which will have
become void), in whole or in part, at an exchange ratio of one Common Share, or,
under circumstances set forth in the Rights Agreement, cash, property or other
securities of the Company, including fractions of a Preferred Share (or of a
share of a class or series of the Company's preferred stock having equivalent
designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions), per Right (with value equal to such Common
Shares).
60
AMENDMENT OF RIGHTS
The terms of the Rights generally may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights,
except that from and after such time as the Rights are distributed no such
amendment may adversely affect the interests of the holders of the Rights
(excluding the interest of any Acquiring Person).
ADDITIONAL INFORMATION
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Current Report on Form 8-K dated
September 2, 1998. A copy of the Rights Agreement is available from the Company
by writing to: Xxxx X. Xxxxxx, Aradigm Corporation, 00000 Xxxx Xxxxxxx Xxxx,
Xxxxxxx, XX 00000. This summary description of the Rights is not intended to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
