RIGHTS AGREEMENT
dated as of
March 7, 2003
between
THERASENSE, INC.
and
COMPUTERSHARE INVESTOR SERVICES
as Rights Agent
TABLE OF CONTENTS
Page
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Section 1. Definitions........................................................................1
Section 2. Issuance of Rights and Right Certificates..........................................5
Section 3. Form of Right Certificates.........................................................7
Section 4. Registration; Transfer and Exchange of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates..................................................7
Section 5. Exercise of Rights.................................................................8
Section 6. Cancellation and Destruction of Right Certificates................................10
Section 7. Reservation and Availability of Capital Stock.....................................10
Section 8. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.......12
Section 9. Certificate of Adjusted Purchase Price or Number of Shares........................19
Section 10. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..............20
Section 11. Fractional Rights and Fractional Shares...........................................22
Section 12. Rights of Action..................................................................23
Section 13. Agreement of Right Holders........................................................23
Section 14. Right Certificate Holder Not Deemed a Stockholder.................................24
Section 15. Appointment of Rights Agent.......................................................24
Section 16. Merger or Consolidation or Change of Name of Rights Agent.........................25
Section 17. Duties of the Rights Agent........................................................25
Section 18. Change of Rights Agent............................................................28
Section 19. Redemption........................................................................29
Section 20. Exchange..........................................................................29
Section 21. Notice of Proposed Actions........................................................30
Section 22. Notices...........................................................................31
Section 23. Supplements and Amendments........................................................32
Section 24. Successors........................................................................32
Section 25. Determinations and Actions by the Board, etc......................................32
Section 26. Benefits of This Agreement........................................................33
Section 27. Severability......................................................................33
Section 28. Governing Law.....................................................................33
Section 29. Counterparts......................................................................33
Section 30. Descriptive Headings..............................................................33
Exhibit A - Form of Certificate of Designation of Preferred Stock
Exhibit B - Summary Description of the Stockholder Rights Plan
Exhibit C - Form of Right Certificate
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RIGHTS AGREEMENT
AGREEMENT dated as of March 7, 2003, between TheraSense, Inc., a Delaware
corporation (the "Company"), and Computershare Investor Services, as Rights
Agent (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on February 25, 2003, the Board of Directors of the Company
authorized and declared a dividend of one preferred stock purchase right (a
"Right") for each share of Common Stock (as defined below) outstanding at the
close of business (as defined below) on March 14, 2003 (the "Record Date") and
authorized the issuance, upon the terms and subject to the conditions herein, of
one Right (subject to adjustment) in respect of each share of Common Stock
issued after the Record Date, each Right representing the right to purchase,
upon the terms and subject to the conditions herein, one one-thousandth (subject
to adjustment) of a share of Preferred Stock (as defined below);
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. (a) The following terms, as used herein, have the
following meanings:
"Acquiring Person" means any Person who, together with all Affiliates and
Associates of such Person, is the Beneficial Owner of the Specified Percentage
of shares of outstanding Common Stock; provided that "Acquiring Person" shall
not include:
(i) an Exempt Person;
(ii) any Person that the Board determines in good faith became the
Beneficial Owner of the Specified Percentage of shares of outstanding
Common Stock inadvertently (including, without limitation, because such
Person was unaware that it Beneficially Owned the Specified Percentage of
shares of outstanding Common Stock, or such Person was aware of the extent
of its Beneficial Ownership of Common Stock but had no actual knowledge of
the consequences of such Beneficial Ownership under this Agreement) and
without any intention of changing or influencing control of the Company,
unless such Person fails to divest itself, as soon as practicable (as
determined in good faith by the Board), of Beneficial Ownership of a
sufficient number of shares of Common Stock so that such Person would own
less than the Specified Percentage of shares of outstanding Common Stock;
and
(iii) any Person that, as the result of an acquisition of shares of
Common Stock by the Company that, by reducing the number of shares of
Common Stock outstanding, increases the proportionate number of shares
of Common Stock Beneficially Owned by such Person to the Specified
Percentage of shares of Common Stock then outstanding; provided, however,
that if such Person shall thereafter become the Beneficial Owner of any
additional shares of Common Stock (other than pursuant to a dividend or
distribution paid or made by the Company or pursuant to a split or
subdivision of the outstanding Common Stock), then such Person shall be
deemed to be an "Acquiring Person" unless upon becoming the Beneficial
Owner of such additional shares of Common Stock such Person does not
Beneficially Own the Specified Percentage of the shares of Common Stock
then outstanding.
"Affiliate" has the meaning ascribed to such term in Rule 12b-2 under the
Exchange Act as in effect on the date hereof.
"Associate" has the meaning ascribed to such term in Rule 12b-2 of the
Exchange Act as in effect on the date hereof.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
have "Beneficial Ownership" of and to "Beneficially Own", any securities:
(i) which such Person or any of its Affiliates or Associates, directly
or indirectly, beneficially owns (as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date hereof);
(ii) which such Person or any of its Affiliates or Associates,
directly or indirectly, has
(A) the right to acquire (whether such right is exercisable
immediately or only upon the occurrence of certain events or the
passage of time or both) 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 such securities); provided that a Person shall not
be deemed the "Beneficial Owner" of or to "Beneficially Own", (1)
securities tendered pursuant to a tender or exchange offer made by or
on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, (2) securities that such Person has a right to acquire upon
the exercise of Rights at any time prior to the time that any Person
becomes an Acquiring Person or (3) securities issuable upon the
exercise of Rights from and after the time that any Person becomes an
Acquiring Person if such Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date
or pursuant to Sections 2(b), 3(b), 8(i) or 8(p); or
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(B) the right to vote (whether such right is exercisable
immediately or only upon the occurrence of certain events or the
passage of time or both) pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided that a Person
shall not be deemed the "Beneficial Owner" of or to "Beneficially Own"
any security under this clause (B) as a result of an agreement,
arrangement or other understanding to vote such security if such
agreement, arrangement or understanding (1) arises solely from a
revocable proxy or consent given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations under the Exchange Act and (2) is not
also then reportable by such Person on Schedule 13D under the Exchange
Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) and with respect to
which the Person or any of its Affiliates or Associates has any agreement,
arrangement or other understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona
fide public offering of such securities) for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy or consent as
described in clause (ii)(B) immediately above) or disposing of any such
securities;
provided, however, that no Person who is an officer, director or employee of an
Exempt Person shall be deemed, solely by reason of such position, to be the
"Beneficial Owner" of, to have "Beneficial Ownership" of or to "Beneficially
Own" any securities that are "Beneficially Owned", including, without
limitation, in a fiduciary capacity, by an Exempt Person or by any other such
officer, director or employee of an Exempt Person.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or a day on
which the New York Stock Exchange or banking institutions in the State of New
York are generally authorized or obligated by law or executive order to close.
"close of business" on any given date means 5:00 p.m., New York City time,
on such date; provided that if such date is not a Business Day "close of
business" means 5:00 p.m., New York City time, on the next succeeding Business
Day.
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Company, except that, when used with reference to any Person other than the
Company, "Common Stock" means the equity securities or other equity interest
having power to control or direct the management of such Person.
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"Distribution Date" means the earlier of (i) the close of business on the
tenth day after the Stock Acquisition Date and (ii) the close of business on the
tenth Business Day (or such later day as may be designated prior to the
occurrence of a Section 8(a)(ii) Event by the Board) after the date of the
commencement of a tender or exchange offer by any Person if, upon consummation
thereof, such Person would be an Acquiring Person; provided, however, that if
either of such dates occurs after the date of this Agreement and on or prior to
the Record Date, then the Distribution Date shall be the Record Date.
"Exempt Person" means the Company or any Subsidiary of the Company (in each
case including, without limitation, in any fiduciary capacity), any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity or
trustee holding Common Stock for or pursuant to the terms of any such plan or
for the purpose of funding any such plan or other benefits for employees of the
Company or of any Subsidiary of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
unless otherwise expressly specified.
"Expiration Date" means the earlier of (i) the Final Expiration Date and
(ii) the time at which all Rights are redeemed as provided in Section 19 or
exchanged as provided in Section 20.
"Final Expiration Date" means the close of business on February 25, 2013.
"Person" means an individual, entity or organization.
"Preferred Stock" means the Series A Participating Cumulative Preferred
Stock, par value $0.001 per share, of the Company, having the terms set forth in
the form of certificate of designation attached hereto as Exhibit A.
"Purchase Price" means the price (subject to adjustment as provided herein)
at which a holder of a Right may purchase one one-thousandth of a share of
Preferred Stock (subject to adjustment as provided herein) upon exercise of a
Right, which price shall initially be $100.00.
"Securities Act" means the Securities Act of 1933, as amended, unless
otherwise expressly specified.
"Specified Percentage" means 15% or more.
"Stock Acquisition Date" means the date of the first public announcement
(including the filing of a report on Schedule 13D under the Exchange Act (or any
comparable or successor report)) by the Company or an Acquiring Person
indicating that an Acquiring Person has become such.
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"Subsidiary" of any Person means any other Person of which securities or
other ownership interests having ordinary voting power, in the absence of
contingencies, to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned by
such first Person.
"Trading Day" means a day on which the principal national securities
exchange or over-the-counter market on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange or over-the-counter market, a Business Day.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Adjustment Shares 8
Company Preamble
equivalent preferred stock 8
Exchange Ratio 20
Principal Party 10
Record Date Recitals
Redemption Price 19
Right Recitals
Rights Agent Preamble
Right Certificate 3
Event 8(a)(ii)
Event 10
Substitution Period 8
Section 2. Issuance of Rights and Right Certificates. (a) As soon as
practicable after the Record Date, the Company will send a summary of the Rights
substantially in the form of Exhibit B hereto, by first-class mail, postage
prepaid, to each record holder of the Common Stock as of the close of business
on the Record Date. Certificates for the Common Stock issued after the Record
Date but prior to the earlier of the Distribution Date and the Expiration Date
shall have printed or written on or otherwise affixed to them the following
legend:
This certificate also evidences certain Rights as set forth in a Rights
Agreement between TheraSense, Inc. (the "Company") and Computershare
Investor Services, as Rights Agent, dated as of March 7, 2003, and 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. The Company will mail to
the holder of this certificate a copy of the Rights Agreement without
charge promptly after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights
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Agreement, such Rights may be evidenced by separate certificates instead of
by this certificate and may be redeemed or exchanged or may expire. As set
forth in the Rights Agreement, Rights issued or transferred to, or held by,
any Person who is, was or becomes an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement),
whether currently held by or on behalf of such Person or by any subsequent
holder, may be null and void.
(b) Prior to the Distribution Date, (i) the Rights will be evidenced by the
certificates for the Common Stock and not by separate Right Certificates (as
hereinafter defined) and the registered holders of the Common Stock shall be
deemed to be the registered holders of the associated Rights, and (ii) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock.
(c) From and after the Distribution Date, the Rights will be evidenced
solely by separate Right Certificates and will be transferable only in
connection with the transfer of the Right Certificates pursuant to Section 4. As
soon as practicable after the Company has notified the Rights Agent of the
occurrence of the Distribution Date, the Rights Agent will send, by first-class,
insured, postage prepaid mail, to each record holder of the Common Stock as of
the close of business on the Distribution Date (other than any Acquiring Person
or any Affiliate or Associate thereof), one or more Right Certificates
evidencing one Right (subject to adjustment as provided herein) for each share
of Common Stock so held. If an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 8, the Company shall, at the time
of distribution of the Right Certificates, make the necessary and appropriate
rounding adjustments in accordance with Section 11(a) so that Right Certificates
representing only whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Rights.
(d) Rights shall be issued in respect of all shares of Common Stock
outstanding as of the Record Date or issued (on original issuance or out of
treasury) after the Record Date but prior to the earlier of the Distribution
Date and the Expiration Date. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
Expiration Date, the Company (i) shall, with respect to shares of Common Stock
so issued or sold (A) pursuant to the exercise of stock options or under any
employee plan or arrangement or (B) upon the exercise, conversion or exchange of
other securities issued by the Company prior to the Distribution Date, and (ii)
may, in any other case, if deemed appropriate by the Board, issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided that no such Right Certificate shall be issued
if, and to the extent that, (i) the Company is 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 or (ii)
appropriate adjustment shall otherwise be made in lieu of the issuance thereof.
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Section 3. Form of Right Certificates. (a) The certificates evidencing the
Rights (and the forms of assignment, election to purchase and certificates to be
printed on the reverse thereof) (the "Right Certificates") shall be
substantially in the form of Exhibit C 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, rule or regulation 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. The Right Certificates, whenever distributed, shall be dated as of the
Record Date.
(b) The Right Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its President or any Vice President, either manually
or by facsimile signature, and shall have affixed thereto the Company's seal or
a facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company whose manual or facsimile signature is affixed to the Right Certificates
ceases to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates may,
nevertheless, be countersigned by the Rights Agent and issued and delivered 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. Any Right
Certificate may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such Person was not such an officer.
(c) 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 to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares of stock issuable upon exercise of the Rights made in accordance
with the provisions of this Agreement.
Section 4. Registration; Transfer and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates. (a) Following the
Distribution Date, the Rights Agent shall keep or cause to be kept, at its
principal office or offices designated as the place for surrender of Right
Certificates upon exercise, transfer or exchange, books for registration and
transfer of the Right Certificates. Such books shall show with respect to each
Right Certificate the name and address of the registered holder thereof, the
number of Rights indicated on the certificate and the certificate number.
(b) At any time after the Distribution Date and prior to the Expiration
Date, any Right Certificate or Certificates may, upon the terms and subject to
the
7
conditions set forth in this Agreement, be transferred or exchanged for
another Right Certificate or Certificates evidencing a like number of Rights as
the Right Certificate or Certificates surrendered. Any registered holder
desiring to transfer or exchange any Right Certificate or Certificates shall
surrender such Right Certificate or Certificates (with, in the case of a
transfer, the form of assignment and certificate on the reverse side thereof
duly executed) to the Rights Agent at the principal office or offices 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 or Certificates until the
registered holder of the Rights has complied with the requirements of Section
5(f). Upon satisfaction of the foregoing requirements, the Rights Agent shall,
subject to Sections 5(e), 5(f), 7(e), 11 and 20, countersign and deliver to the
Person entitled thereto a Right Certificate or Certificates as so requested. The
Company may require payment of a sum sufficient to cover any transfer tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of any Right Certificate or Certificates.
(c) 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 and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 5. Exercise of Rights. (a) The registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein, including Sections 5(e), 5(f), 7(c) and 8(a)) in whole or in
part at any time after the Distribution Date and prior to the Expiration Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose, together with payment (in lawful money of the United States of America
by certified check or bank draft payable in immediately available or next day
funds to the order of the Company) of the aggregate Purchase Price with respect
to the Rights then to be exercised and an amount equal to any applicable
transfer tax or other governmental charge.
(b) Upon satisfaction of the requirements of Section 5(a) and subject to
Section 17(k), the Rights Agent shall thereupon promptly (i)(A) requisition from
any transfer agent of the Preferred Stock (or make available, if the Rights
Agent is the transfer agent therefor) certificates for the total number of one
one-thousandths of a share of Preferred Stock to be purchased (and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests)
8
or (B) if the Company shall have elected to deposit the shares of Preferred
Stock issuable upon exercise of the Rights with a depositary agent, requisition
from the depositary agent depositary receipts representing interests in such
number of one one-thousandths of a share of Preferred Stock to be purchased (in
which case certificates for the shares of Preferred Stock represented by such
receipts shall be deposited by the transfer agent with the depositary agent and
the Company will direct the depositary agent to comply with such request), (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
issuance of fractional shares in accordance with Section 11 and (iii) after
receipt of such certificates or depositary receipts and cash, if any, cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate (with such certificates or receipts registered in such name or names
as may be designated by such holder). If the Company is obligated to deliver
Common Stock or other securities or assets pursuant to this Agreement, the
Company will make all arrangements necessary so that such securities and assets
are available for delivery by the Rights Agent, if and when appropriate.
(c) Each Person (other than the Company) in whose name any certificate for
Preferred Stock is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of such Preferred Stock represented
thereby on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any transfer taxes or other governmental charges) was made;
provided that if the date of such surrender and payment is a date upon which the
transfer books of the Company relating to the Preferred Stock are closed, such
Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated, the next succeeding Business Day on which the
applicable transfer books of the Company are open. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including 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.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
the number of Rights remaining unexercised shall be issued by the Rights Agent
and 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, subject to the provisions of Section 11.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 8(a)(ii) Event, any Rights Beneficially
Owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate of an Acquiring Person) who (A) becomes a transferee after a Section
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8(a)(ii) Event,(B) becomes a transferee prior to or concurrently with a Section
8(a)(ii) Event and receives such Rights pursuant to either (1) a transfer
(whether or not for consideration) from the Acquiring Person (or any such
Associate or Affiliate) to holders of equity interests in such Acquiring Person
(or in any such Associate or Affiliate) or to any Person with whom the Acquiring
Person (or any such Associate or Affiliate) has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (2) a transfer
which the Board determines in good faith is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 5(e), 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 this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 5(e) 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 and Associates or any
transferee of any of them hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to any purported transfer pursuant to Section 4 or exercise pursuant to
this Section 5 unless the registered holder of the applicable Rights (i) shall
have completed and signed the certificate contained in the form of assignment or
election to purchase, as the case may be, set forth on the reverse side of the
Right Certificate surrendered for such transfer or exercise, as the case may be,
(ii) shall not have indicated an affirmative response to clause 1 or 2 thereof
and (iii) 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.
Section 6. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for exercise, transfer or exchange shall, if
surrendered to the Company or to any of its agents, be delivered to the Rights
Agent in canceled form, or, if 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 this Agreement. The Company shall deliver to the
Rights Agent for cancellation, and the Rights Agent shall cancel, 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 7. Reservation and Availability of Capital Stock. (a) The Company
covenants and agrees that it will cause to be reserved and kept available a
number of authorized but not outstanding shares of Preferred Stock sufficient to
permit the exercise in full of all outstanding Rights as provided in this
Agreement.
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(b) So long as the Preferred Stock issuable upon the exercise of Rights may
be listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
securities reserved for such issuance to be listed on any such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall (i) file, as soon as practicable following the
earliest date after the occurrence of a Section 8(a)(ii) Event and determination
of the consideration to be delivered by the Company upon exercise of the Rights
in accordance with Section 8(a)(iii), or as soon as is required by law following
the Distribution Date, as the case may be, a registration statement under the
Securities Act with respect to the securities issuable upon exercise of the
Rights, (ii) to cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the Expiration Date. The Company
shall also take such action as may be appropriate to ensure compliance with the
securities or blue sky laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed 90 days after the date set forth in Section 7(c)(i), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement when the
suspension is no longer in effect. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable for securities in
any jurisdiction if the requisite qualification in such jurisdiction has not
been obtained, such exercise is not permitted under applicable law or a
registration statement in respect of such securities has not been declared
effective.
(d) The Company shall take all such action as may be necessary to insure
that all one one-thousandths of a share of Preferred Stock issuable upon
exercise of Rights shall, at the time of delivery of the certificates for such
securities (subject to payment of the Purchase Price), be duly authorized,
validly issued, fully paid and nonassessable.
(e) The Company shall pay when due and payable any and all federal and
state transfer taxes and other governmental charges which may be payable in
respect of the issuance or delivery of the Right Certificates and of any
certificates for Preferred Stock upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax or other governmental charge
which may be payable in respect of any transfer involved in the issuance or
delivery of any Right Certificates or any certificates for Preferred Stock to a
Person other than the registered holder of the applicable Right Certificate.
Prior to any such issuance or delivery of any Right Certificates or any
certificates for Preferred Stock, any such transfer tax or other governmental
charge shall have been paid by
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the holder of such Right Certificate or it shall have been established to the
Company's satisfaction that no such tax or other governmental charge is due.
Section 8. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. (a)(i) If the Company at any time after the date of this
Agreement (A) pays a dividend on the Preferred Stock in shares of Preferred
Stock, (B) subdivides the outstanding Preferred Stock into a greater number of
shares, (C) combines the outstanding Preferred Stock into a smaller number of
shares or (D) issues any shares of its capital stock in a reclassification of
the Preferred Stock (including any such reclassification in connection with a
consolidation or merger involving the Company), the Purchase Price in effect
immediately prior to the record date for such dividend or the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of Preferred Stock or other capital stock issuable on such date, shall be
proportionately adjusted so that each holder of a Right shall (except as
otherwise provided herein, including Section 5(e)) thereafter be entitled to
receive, upon exercise of such Right at the Purchase Price in effect immediately
prior to such date, the aggregate number and kind of shares of Preferred Stock
or other capital stock, as the case may be, which such holder would have been
entitled to receive upon such exercise and by virtue of such dividend,
subdivision, combination or reclassification as if such Right had been exercised
immediately prior to the record date for such dividend or the effective date of
such subdivision, combination or reclassification. If an event occurs which
requires an adjustment under both this Section 8(a)(i) and Section 8(a)(ii), the
adjustment provided for in this Section 8(a)(i) shall be made prior to, and in
addition to, any adjustment required pursuant to Section 8(a)(ii).
(ii) If any Person, alone or together with its Affiliates and
Associates, becomes, at any time after the date of this Agreement, an
Acquiring Person (a "Section 8(a)(ii) Event"), then each holder of a Right
shall (except as otherwise provided herein, including Section 5(e))
thereafter be entitled to receive, upon exercise thereof at the Purchase
Price in effect immediately prior to the first occurrence of a Section
8(a)(ii) Event, in lieu of Preferred Stock, such number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock of the
Company (such shares being referred to herein as the "Adjustment Shares")
equal to the result obtained by dividing
(x) the product obtained by multiplying the Purchase Price in
effect immediately prior to the first occurrence of a Section 8(a)(ii)
Event by the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such
first occurrence (such product being from such time on the "Purchase
Price" for each Right and for all purposes of this Agreement) by
12
(y) 50% of the current market price per share of Common Stock
(determined pursuant to Section 8(d)(i)) on the date of such first
occurrence;
provided, however, that the Purchase Price (as so adjusted pursuant to the
foregoing clause (ii)(x)) and the number of Adjustment Shares so receivable
upon exercise of a Right shall be subject to further adjustment as
appropriate in accordance with Section 8(f). From and after the occurrence
of a Section 10 Event, any Rights that have not theretofore been exercised
pursuant to this Section 8(a)(ii) shall thereafter be exercisable only in
accordance with Section 10 and not pursuant to this Section 8(a)(ii).
(iii) If the number of shares of Common Stock which are authorized by
the Company's certificate of incorporation but not outstanding or reserved
for issuance other than upon exercise of the Rights is not sufficient to
permit the exercise in full of the Rights in accordance with Section
8(a)(ii), the Company shall, with respect to each Right, make adequate
provision to substitute for the Adjustment Shares, upon payment of the
Purchase Price then in effect, (A) (to the extent available) Common Stock,
then (B) (to the extent available) such number of one one-hundredths of a
share of Preferred Stock as are then equivalent in value to the value of
the Adjustment Shares and then (C) other equity or debt securities of the
Company, cash or other assets, a reduction in the Purchase Price or any
combination of the foregoing, having an aggregate value (as determined by
the Board based upon the advice of a nationally recognized investment
banking firm) equal to the value of the Adjustment Shares; provided that
(1) the Company may, (2) if the Company shall not have made adequate
provision as required above to deliver value within 30 days following the
first occurrence of a Section 8(a)(ii) Event (the "Substitution Period"),
then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price,
(x) (to the extent available) Common Stock, then (y) (to the extent
available) one-thousandths of a share of Preferred Stock and then, (z)
other equity or debt securities of the Company, cash or other assets or any
combination of the foregoing, having an aggregate value (as determined by
the Board based upon the advice of a nationally recognized investment
banking firm) equal to the excess of the value of the Adjustment Shares
over the Purchase Price. To the extent that the Company determines that
some action is to be taken pursuant to the preceding sentence, the Company
(A) shall provide, subject to Section 5(e), that such action shall apply
uniformly to all outstanding Rights and (B) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to
decide the appropriate form and value of any consideration to be delivered
as referred to in such sentence.
13
If any such suspension occurs, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 8(a)(iii),
the value of the Common Stock shall be the current market price per share
of Common Stock (as determined pursuant to Section 8(d)(i)) on the date of
the first occurrence of a Section 8(a)(ii) Event; any common stock
equivalent shall be deemed to have the same value as the Common Stock on
such date; and the value of other securities or assets shall be determined
pursuant to Section 8(d)(iii).
(b) If the Company fixes a record date for the issuance of rights, options
or warrants to all holders of Preferred Stock entitling them to subscribe for or
purchase (for a period expiring within 45 calendar days after such record date)
Preferred Stock (or securities having the same rights, privileges and
preferences as the shares of Preferred Stock ("equivalent preferred stock")) or
securities convertible into or exercisable for Preferred Stock (or equivalent
preferred stock) at a price per share of Preferred Stock (or equivalent
preferred stock) (in each case, taking account of any conversion or exercise
price) less than the current market price per share of Preferred Stock (as
determined pursuant to Section 8(d)(ii)), then 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 date by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Preferred
Stock outstanding on such record date plus (ii) the number of shares of
Preferred Stock which the aggregate price (taking account of any conversion or
exercise price) of the total number of shares of Preferred Stock (and/or
equivalent preferred stock) so to be offered would purchase at such current
market price and the denominator of which shall be the sum of (i) number of
shares of Preferred Stock outstanding on such record date plus (ii) the number
of additional shares of Preferred Stock (and/or equivalent preferred stock) so
to be offered. If such subscription price may be paid by delivery of
consideration part or all of which will be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. Shares of Preferred Stock 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 if 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) If the Company fixes a record date for the making of a distribution to
all holders of Preferred Stock (including any such distribution in connection
with a consolidation or merger involving the Company) of evidences of
indebtedness, equity securities other than Preferred Stock, assets (other than a
regular periodic cash dividend out of the earnings or retained earnings of the
Company) or rights, options or warrants (excluding those referred to in Section
14
8(b)), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price per share of Preferred Stock (as determined pursuant to Section 8(d)(iii))
on such record date, less the value (as determined pursuant to Section
8(d)(iii)) of such evidences of indebtedness, equity securities, assets, rights,
options or warrants so to be distributed with respect to one share of Preferred
Stock and the denominator of which shall be such current market price per share
of Preferred Stock. Such adjustment shall be made successively whenever such a
record date is fixed, and if such distribution is not so made, 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.
(d) For purposes of computations hereunder other than computations made
pursuant to Sections 8(a)(iii) or 11, the "current market price" per share of
Common Stock on any date shall be the average of the daily closing prices per
share of such Common Stock at the close of the regular session of trading for
the 30 Trading Days immediately prior to such date; for purposes of computations
made pursuant to Section 8(a)(iii), the "current market price" per share of
Common Stock on any date shall be deemed to be the average of the daily closing
prices per share of such Common Stock at the close of the regular session of
trading for the 10 Trading Days immediately following such date; and for
purposes of computations made pursuant to Section 11, the "current market price"
per share of Common Stock for any Trading Day shall be the closing price per
share of Common Stock at the close of the regular session of trading for such
Trading Day; provided that if the current market price per share of the Common
Stock is determined during a period that is in whole or in part following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities exercisable for or convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or reclassification
of such Common Stock, and prior to 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 market price" shall
be properly adjusted to take into account ex-dividend trading. The closing price
for each day shall be the last sale price, regular way, at the close of the
regular session of trading or, if 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 at the close
of the regular session of trading with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if the shares of Common Stock are
not listed or admitted to trading on the New York Stock Exchange, on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if the shares of Common Stock are not listed
or admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as
15
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use or, if on any such date the
shares of Common Stock are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board (in each case prices
which are not identified as having been reported late to such system). If on any
such date, no market maker is making a market in the Common Stock or the Common
Stock is not publicly held or not so listed or traded, the "current market
value" of such shares on such date shall be as determined in good faith by the
Board (or, if at the time of such determination there is an Acquiring Person, by
a nationally recognized investment banking firm selected by the Board) which
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current market
price" per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in Section 8(d)(i) (other than the
last sentence thereof). If the current market price per share of Preferred
Stock cannot be determined in such manner, the "current market price" per
share of Preferred Stock shall be conclusively deemed to be an amount equal
to 1,000 (as such number may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect to the
Common Stock occurring after the date of this Agreement) multiplied by the
current market price per share of Common Stock (as determined pursuant to
Section 8(d)(i)). For all purposes of this Agreement, the "current market
price" of one one-thousandth of a share of Preferred Stock shall be equal
to the "current market price" of one share of Preferred Stock divided by
1,000.
(iii) For the purpose of any computation hereunder, the value of any
securities or assets other than Common Stock or Preferred Stock shall be
the fair value as determined in good faith by the Board, or, if at the time
of such determination there is an Acquiring Person, by a nationally
recognized investment banking firm selected by the Board, which
determination shall be described in a statement filed with the Rights Agent
and shall be conclusive for all purposes.
(e) Notwithstanding any provision of this Agreement to the contrary, 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
that any adjustments which by reason of this Section 8(e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 8 shall be made to the nearest
cent or to the nearest ten-thousandth of a share of Common Stock or other share
or one-millionth of a share of Preferred Stock, as the case may be.
16
(f) If at any time, as a result of an adjustment made pursuant to Sections
8(a)(ii) or 10(a), the holder of any Right is entitled to receive upon exercise
of such Right any shares of capital stock other than Preferred Stock, thereafter
the number of such other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Section 8, and the provisions of
Sections 5, 7, 10 and 11 with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made hereunder shall evidence the right to purchase, at the Purchase
Price then in effect, the then applicable number of one one-thousandths of a
share of Preferred Stock and other capital stock issuable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company has exercised its election as provided in Section
8(i), upon each adjustment of the Purchase Price as a result of the calculations
made in Sections 8(b) and 8(c), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Purchase Price, that number of one one-thousandths of a share of
Preferred Stock (calculated to the nearest one-millionth) obtained by (i)
multiplying (x) the number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable 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 lieu of any adjustment in the
number of one one-thousandths of a share of Preferred Stock issuable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which such Right was exercisable immediately prior
to such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the 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 8(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on
17
such record date Right Certificates evidencing, subject to Section 11, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such adjustment.
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and may bear, at the option of
the Company, the adjusted Purchase Price) and shall be registered in the names
of the holders of record of Right Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price per one one-thousandth of a share and
the number of shares which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the par value, if any, of the number of one one-thousandths
of a share of Preferred Stock 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 such number of one one-thousandths of a share of Preferred Stock
at such adjusted Purchase Price.
(l) In any case in which this Section 8 shall require that an adjustment in
the Purchase Price be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event the issuance
to the holder of any Right exercised after such record date the number of one
one-thousandths of a share of Preferred Stock or other capital stock, if any,
issuable upon such exercise over and above the number of one one-thousandths of
a share of Preferred Stock or other capital stock, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 8 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 8, as and to the extent
that it, in its sole discretion, determines to be advisable so that any
consolidation or subdivision of the Preferred Stock, issuance wholly for cash of
any Preferred Stock at less than the current market price, issuance wholly for
cash of any Preferred Stock or securities which by their terms are convertible
into or exercisable for Preferred Stock, stock dividends or issuance of rights,
options or
18
warrants referred to in this Section 8 hereafter made by the Company to the
holders of its Preferred Stock, shall not be taxable to such stockholders.
(n) The Company shall not at any time after the Distribution Date (i)
consolidate, merge or otherwise combine with, or (ii) sell or otherwise transfer
(or permit any of its Subsidiaries to sell or otherwise transfer), directly or
indirectly in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries, taken as a whole, to, any other Person or Persons
if (x) at the time of or immediately after such consolidation, merger,
combination, sale or transfer there are any rights, warrants or other
instruments or securities outstanding or any agreements or arrangements in
effect which would substantially 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, combination, sale or transfer, the
stockholders of a Person who constitutes, or would constitute, the "Principal
Party" for the purposes of Section 10 shall have received a distribution of
Rights previously owned by such Person or any of its Affiliates and Associates.
(o) The Company agrees that after the Distribution Date, it will not,
except as permitted by Sections 19, 20 or 23, take (or permit any Subsidiary to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) Notwithstanding anything in this Agreement to the contrary, if at any
time after the date hereof and prior to the Distribution Date the Company (i)
pays a dividend on the outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivides the outstanding Common Stock into a larger number
of shares or (iii) combines the outstanding Common Stock into a smaller number
of shares, the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter as contemplated by Section 2,
shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event equals the
product obtained by multiplying the number of Rights associated with each share
of Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
Section 9. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 8 or 10, the Company
shall (a) promptly prepare a certificate setting forth such adjustment and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Preferred Stock and
the Common Stock a copy of such certificate and (c) mail a brief summary thereof
to
19
each holder of a Right Certificate (or, if prior to the Distribution Date, to
each holder of a certificate representing shares of Common Stock) in the manner
set forth in Section 22. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained.
Section 10. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. (a) If, following the occurrence of a Section 8(a)(ii) Event, directly or
indirectly,
(x) the Company consolidates with, merges into or otherwise
combines with, any Acquiring Person or any Affiliate or Associate of
an Acquiring Person, and the Company is not the continuing or
surviving corporation of such consolidation, merger or combination;
(y) any Acquiring Person or any Affiliate or Associate of an
Acquiring Person merges into, or otherwise combines with, the Company,
and the Company is the continuing or surviving corporation of such
merger or combination and, in connection with such merger or
combination, all or part of the outstanding shares of Common Stock is
changed into or exchanged for other stock or securities of the Company
or of any Acquiring Person or any Affiliate or Associate of an
Acquiring Person, cash or any other property; or
(z) the Company and/or one or more of its Subsidiaries sells or
otherwise transfers, in one transaction or a series of related
transactions, to any Acquiring Person or any Affiliate or Associate of
an Acquiring Person, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its Subsidiaries,
taken as a whole,
(each of the above, a "Section 10 Event") then, and in each such case, proper
provision shall promptly be made so that
(i) each holder of a Right shall thereafter be entitled to receive,
upon exercise thereof at the Purchase Price in effect immediately prior to
the first occurrence of a Section 8(a)(ii) Event, such number of duly
authorized, validly issued, fully paid and nonassessable shares of freely
tradeable Common Stock of the Principal Party (as hereinafter defined), not
subject to any rights of call or first refusal, liens, encumbrances or
other claims, as shall be equal to the result obtained by dividing
(A) the product obtained by multiplying the Purchase Price in
effect immediately prior to the first occurrence of a Section 8(a)(ii)
Event by the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such
first occurrence (such product being from such time on the "Purchase
Price" for each Right and for all purposes of this Agreement) by
20
(B) 50% of the current market price (determined pursuant to
Section 8(d)(i)) per share of the Common Stock of such Principal Party
on the date of consummation of such consolidation, merger,
combination, sale or transfer;
provided, however, that the Purchase Price (as so adjusted pursuant to the
foregoing clause (i)(A)) and the number of shares of Common Stock of such
Principal Party so receivable upon exercise of a Right shall be subject to
further adjustment as appropriate in accordance with Section 8(f) to
reflect any events occurring in respect of the Common Stock of such
Principal Party after the occurrence of such consolidation, merger, sale or
transfer;
(ii) the Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, combination, 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 8 shall apply only to such Principal Party following the first
occurrence of a Section 10 Event; and
(iv) such Principal Party shall take such steps (including the
authorization and reservation of a sufficient number of shares of its
Common Stock to permit exercise of all outstanding Rights in accordance
with this Section 10(a)) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to
the shares of its Common Stock thereafter deliverable upon the exercise of
the Rights.
(b) "Principal Party" means
(i) in the case of any transaction described in Sections 10(a)(x) or
10(a)(y), the Person that is the issuer of any securities into which shares
of Common Stock of the Company are converted in such merger, consolidation
or combination, and if no securities are so issued, the Person that
survives or results from such merger, consolidation or combination; or
(ii) in the case of any transaction described in Section 10(a)(z), the
Person that is receiving the greatest portion of the assets or earning
power transferred pursuant to such transaction or transactions;
provided that in any such case, (A) if the Common Stock of such Person is
not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and
21
such Person is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, "Principal Party" shall refer
to such other Person; and (B) in case such Person is a Subsidiary, directly
or indirectly, of more than one Person, the Common Stocks 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 Stock having the
greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
combination, sale or transfer unless the Principal Party has a sufficient number
of authorized shares of its Common Stock which are not outstanding or otherwise
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 10 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in Sections 10(a) and 10(b) and
providing that, as soon as practicable after the date of any consolidation,
merger, combination, sale or transfer mentioned in Section 10(a), the Principal
Party shall (i) prepare and file a registration statement under the Securities
Act with respect to the securities issuable upon exercise of the Rights, and
shall use its best efforts to cause such registration statement (A) to become
effective as soon as practicable after such filing and (B) to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date, and (ii) deliver to holders of the Rights historical
financial statements for the Principal Party which comply in all respects with
the requirements for registration on Form 10 under the Exchange Act.
Section 11. Fractional Rights and Fractional Shares. (a) The Company is not
required to issue fractions of Rights, except prior to the Distribution Date as
provided in Section 8(p), or to distribute Right Certificates which evidence
fractional Rights. In lieu of any such fractional Rights, the Company shall pay
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 price of a whole Right. For purposes of this
Section 11(a), the current market price of a whole Right shall be the closing
price of a Right at the close of the regular session of trading for the Trading
Day immediately prior to the date on which such fractional Rights would
otherwise have been issuable. The closing price of a Right for any day shall be
determined in the manner set forth for the Common Stock in Section 8(d)(i).
(b) The Company is not required to issue fractions of shares of Preferred
Stock (other than fractions which are multiples of one one-thousandth of a share
of Preferred Stock) upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Preferred Stock (other than fractions which
are multiples of one one-thousandth of a share of Preferred Stock). In lieu of
any such fractional shares of Preferred Stock, 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
22
current market price of one one-thousandth of a share of Preferred Stock. For
purposes of this Section 11(b), the current market price of one one-thousandth
of a share of Preferred Stock shall be one one-thousandth of the closing price
of a share of Preferred Stock (as determined pursuant to Section 8(d)) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of any Section 8(a)(ii) Event or Section 10
Event or upon any exchange pursuant to Section 20, the Company shall not be
required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock, the Company shall pay to
the registered holders of Right Certificates at the time such Rights are
exercised or exchanged as herein provided an amount in cash equal to the same
fraction of the current market price of a share of Common Stock. For purposes of
this Section 11(c), the current market price of a share of Common Stock shall be
the closing price of a share of Common Stock (as determined pursuant to Section
8(d)) for the Trading Day immediately prior to the date of such exercise or
exchange.
(d) Each holder of a Right, by his acceptance of the Right, expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right except as permitted by this Section 11.
Section 12. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing Common Stock); and any such holder, without the
consent of any other such holder or the Rights Agent, 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.
Section 13. Agreement of Right Holders. Each holder of a Right, by his
acceptance of the Right, 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 evidenced by
and transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights will be evidenced by Right
Certificates and transferable only on the registry books of the Rights
Agent pursuant to Section 4;
23
(c) subject to Sections 4 and 5, the Company and the Rights Agent may
deem and treat the Person in whose name a Right Certificate (or, prior to
the Distribution Date, a certificate representing shares of Common Stock)
is registered as the absolute owner of such certificate and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on
the Right Certificate or the certificate representing shares of Common
Stock made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent, subject
to the last sentence of Section 5(e), shall be affected by any notice to
the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority prohibiting or
otherwise restraining performance of such obligation; provided that the
Company must use its best efforts to have any such order, decree or ruling
lifted or otherwise overturned as soon as possible.
Section 14. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the shares of capital stock which may
at any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company (including any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
to give or withhold consent to any corporate action, to receive notice of
meetings or other actions affecting stockholders (except as provided in Section
21), 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 15. Appointment of Rights Agent. (a) The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
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. If the Company appoints
one or more co-rights agents, the respective duties of the Rights Agent and any
co-rights agents shall be as the Company shall determine.
(b) The Company shall pay to the Rights Agent reasonable compensation for
all services rendered by it hereunder and, from time to time, on
24
demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the execution or
administration of this Agreement and the exercise and performance of its duties
hereunder. The Company also shall 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
administration of this Agreement or the exercise or performance of its duties
hereunder, including the costs and expenses of defending against any claim of
liability.
Section 16. Merger or Consolidation or Change of Name of Rights Agent. (a)
Any corporation into or with which the Rights Agent or any successor Rights
Agent may be merged, consolidated or combined, any corporation resulting from
any merger, consolidation or combination to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any party hereto; provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 18. If
at the time such successor Rights Agent succeeds to the agency created by this
Agreement any of the Right Certificates have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of a
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and if at that time any of the Right Certificates have not 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.
(b) If at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and if at that time any of the
Right Certificates have not been countersigned, the Rights Agent may countersign
such Right Certificates either in its prior name or 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 17. Duties of the Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall
25
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 deems it necessary that any fact or matter (including, without
limitation, the identity of any "Acquiring Person" and the determination of
"current market price") be proved or established by the Company prior to
taking, suffering or omitting to take any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, 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, suffered or omitted in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder 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 responsible (i) 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),
(ii) for any breach by the Company of any covenant or condition contained
in this Agreement or in any Right Certificate, (iii) for any change in the
exercisability of the Rights (including the Rights becoming void pursuant
to Section 5(e)) or (iv) any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided herein or the
ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice of any such adjustment). The Rights
Agent shall not by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any shares of
Preferred Stock or other securities to be issued pursuant to this Agreement
or any Right Certificate or as to whether any shares of Preferred Stock or
other securities will, when issued, be duly authorized, validly issued,
fully paid and nonassessable.
26
(f) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered,
all such 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
the Chairman of the Board, the President, any Vice President or the
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for
any action taken, suffered or omitted to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not the 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 Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company or to any
holders of Rights resulting from any such act, default, neglect or
misconduct; provided that reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is
not reasonably assured to it.
(k) If, with respect to any 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 cases may be, has
either not been completed or indicates an affirmative response to clause 1
or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting
with the Company.
27
(l) 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 the administration of this Agreement or the exercise or
performance of its duties hereunder in reliance upon any Right Certificate
or certificate for Common Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, instruction, direction, consent, certificate,
statement or other paper or document reasonably believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.
Section 18. 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 to the Company and to each transfer agent of the Common
Stock and Preferred Stock, and, after the Distribution Date, to the holders of
the Right Certificates. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Common Stock and Preferred
Stock by registered or certified mail, and, after the Distribution Date, to the
holders of the Right Certificates. If the Rights Agent resigns or is removed or
otherwise becomes incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company fails to make such appointment within a period
of 30 days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Company), then the
registered holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
corporation organized, in good standing and doing business under the laws of the
United States or of any state of the United States, authorized under such laws
to exercise stock transfer or corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50,000,000 or (b) an Affiliate of a corporation described in Section
18(a). 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 with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and, subsequent to the Distribution Date, mail a notice thereof
to the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 18, or any defect therein, shall not affect the
legality or validity of the resignation
28
or removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 19. Redemption. (a) At any time prior to the occurrence of a
Section 8(a)(ii) Event, the Board may, at its option, redeem all but not less
than all of the then outstanding Rights at a redemption price of $0.001 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board in its sole discretion may establish. The
Redemption Price shall be payable, at the option of the Company, in cash, shares
of Common Stock, or such other form of consideration as the Board shall
determine.
(b) Immediately upon the action of the Board electing to redeem the Rights
(or at such later time as the Board may establish for the effectiveness of such
redemption) and without any further action and without any notice, the right to
exercise the Rights will terminate and thereafter the only right of the holders
of Rights shall be to receive the Redemption Price for each Right so held. The
Company shall promptly thereafter give notice of such redemption to the Rights
Agent and the holders of the Rights in the manner set forth in Section 22;
provided that the failure to give, or any defect in, 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.
Section 20. Exchange. (a) At any time after the occurrence of a Section
8(a)(ii) Event, the Board may, at its option, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to Section 5(e)) for shares of Common Stock at an exchange
ratio of one share of Common Stock per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). The exchange of the Rights by the Board may be made effective at such
time, on such basis and with such conditions as the Board in its sole discretion
may establish. Notwithstanding the foregoing, (i) the Board shall not be
empowered to effect such exchange at any time after an Acquiring Person,
together with all Affiliates and Associates of such Acquiring Person, becomes
the Beneficial Owner of 50% or more of the shares of Common Stock then
outstanding and (ii) from and after the occurrence of a Section 10 Event, any
Rights that theretofore have not been exchanged pursuant to this Section 20(a)
shall thereafter be exercisable only in accordance with Section 10 and may not
be exchanged pursuant to this Section 20(a).
(b) Immediately upon the effectiveness of the action of the Board to
exchange any Rights pursuant to Section 20(a) (or at such later time as the
Board
29
may establish) and without any further action and without any notice, the
right to exercise such Rights will terminate and thereafter the only right of a
holder of such Rights shall be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly thereafter give notice of such
exchange to the Rights Agent and the holders of the Rights to be exchanged in
the manner set forth in Section 22; provided 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 Rights for shares of Common Stock 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
Section 5(e)) held by each holder of Rights.
(c) The Company may at its option substitute, and, if there shall not be
sufficient shares of Common Stock authorized but not outstanding to permit the
exchange of Rights for Common Stock in accordance with Section 20(a), shall
substitute to the extent of such insufficiency, for each share of Common Stock
that would otherwise be issuable upon exchange of a Right, a number of one
one-thousandths of a share of Preferred Stock such that the current market price
(determined pursuant to Section 8(d)) of such number of one one-thousandths of a
share of Preferred Stock is equal to the current market price (determined
pursuant to Section 8(d)) of one share of Common Stock as of the date of such
exchange.
Section 21. Notice of Proposed Actions. (a) If the Company proposes, at any
time after the Distribution Date, (i) bution (other than a regular quarterly
cash dividend out of earnings or retained earnings of the Company) to the
holders of Preferred Stock, (ii) to offer to the holders of its Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Stock (other
than a reclassification involving only the subdivision or combination of
outstanding shares of Preferred Stock), (iv) to effect, or permit any of its
Subsidiaries to effect, any consolidation, merger or combination with any other
Person, or to effect any sale or other transfer, in one transaction or a series
of related transactions, of assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries, taken as a
whole, or (v) to effect the liquidation, dissolution or winding-up of the
Company, then, in each such case, the Company shall give to each holder of a
Right, a notice of such proposed action specifying the record date for the
purposes of any such dividend, distribution or offering of rights or warrants,
or the date on which any such reclassification, consolidation, merger,
combination, sale, transfer, liquidation, dissolution or winding-up is to take
place and the date of participation therein by the holders of Preferred Stock,
if any such
30
date is to be fixed, and such notice shall be so given in the case of any action
covered by Sections 21(a)(i) or 21(a)(ii) above at least 20 days prior to the
record date for determining holders of the Preferred Stock entitled to
participate in such dividend, distribution or offering, and in the case of any
such other action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of Preferred
Stock, whichever shall be earlier. The failure to give notice required by this
Section or any defect therein shall not affect the legality or validity of the
action taken by the Company or the vote upon any such action.
(b) If a Section 8(a)(ii) Event or Section 10 Event occurs, then, in any
such case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Right, in accordance with Section 22, a notice of the occurrence of
such event, which shall specify the event and the consequences of the event to
holders of Rights under Sections 8(a)(ii) or 10, as the case may be, and (ii)
all references in Section 21(a) to Preferred Stock shall be deemed thereafter to
refer to Common Stock or other capital stock, as the case may be.
Section 22. Notices. Except as set forth below, all notices, requests and
other communications to any party hereunder and to the holder of any Right shall
be in writing unless otherwise expressly specified herein. Notices or demands
authorized by this Agreement to be given or made to or on the Company or
(subject to Section 18) the Rights Agent shall be sufficiently given or made if
sent by registered or certified mail (postage prepaid) to the addresses set
forth below (or such other address as such party specifies in writing to the
other party):
if to the Company, to:
TheraSense, Inc.
1360 South Loop Road
Alameda, CA 94502
Attention: General Counsel
Facsimile Number: (510) 749-5486
if to the Rights Agent, to:
Computershare Investor Services
1601 Elm Street
Tower Suite 4340
Dallas, TX 75201
Attention: Mark Asbury
Facsimile Number: (214) 969-1859
with copy to:
Computershare Investor Services
31
2 North LaSalle
Chicago, Illinois 60602
Attn: Senior Relationship Manager
Except as otherwise expressly set forth in this Agreement, 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 any certificate representing
shares of Common Stock is sufficiently given or made if sent by first-class mail
(postage prepaid) to each record holder of such Certificate at the address of
such holder shown on the registry books of the Company. Notwithstanding anything
in this Agreement to the contrary, prior to the Distribution Date a public
filing by the Company with the Securities and Exchange Commission shall
constitute sufficient notice to the holders of securities of the Company,
including the Rights, for purposes of this Agreement and no other notice need be
given to such holders.
Section 23. Supplements and Amendments. At any time prior to the occurrence
of a Section 8(a)(ii) Event, the Company may, and the Rights Agent shall if the
Company so directs, supplement or amend any provision of this Agreement in any
respect without the approval of any holders of certificates representing shares
of Common Stock. At any time after the occurrence of a Section 8(a)(ii) Event,
the Company may, and the Rights Agent shall if the Company so directs,
supplement or amend this Agreement without the approval of any holders of
Rights; provided, however, that no such supplement or amendment may (a)
adversely affect the interests of the holders of Rights as such (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person), (b) cause
this Agreement again to become amendable other than in accordance with this
sentence or (c) cause the Rights again to become redeemable. Upon the delivery
of a certificate from the Chairman of the Board, the President, any Vice
President or the Secretary of the Company stating that the proposed supplement
or amendment is in compliance with the terms of this Agreement, the Rights Agent
shall execute such supplement or amendment. Notwithstanding the foregoing, the
Company may not amend this Agreement as it relates to the duties, rights or
liabilities of the Rights Agent without the Rights Agent's prior written
consent.
Section 24. 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 25. Determinations and Actions by the Board, etc. For all purposes
of this Agreement, any calculation of the number of shares of Common Stock
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding shares of Common Stock of which any
Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) under the Exchange Act as in effect on the date
of this Agreement. The Board shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
32
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including 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 exchange or not to redeem or exchange
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 Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board to any liability to the holders of the Rights.
Section 26. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the certificates representing the shares of Common Stock) 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 certificates representing the shares of Common Stock).
Section 27. 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 28. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State, except that the rights and
obligations of the Rights Agent shall be governed by the law of the State of New
York.
Section 29. 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 one and the
same instrument.
Section 30. Descriptive Headings. The captions herein are included for
convenience of reference only, do not constitute a part of this Agreement and
shall be ignored in the construction and interpretation hereof.
33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THERASENSE, INC.
By: /s/ Charles T. Liamos
----------------------------------
Name: Charles T. Liamos
Title: Chief Financial Officer and
Chief Operating Officer
COMPUTERSHARE INVESTOR SERVICES
By: /s/ Mark Asbury
----------------------------------
Name: Mark Asbury
Title: Relationship Manager
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
THERASENSE, INC.
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
I, W. Mark Lortz, President and Chief Executive Officer of TheraSense,
Inc., a corporation organized and existing under the General Corporation Law of
the State of Delaware ("Delaware Law"), in accordance with the provisions
thereof, HEREBY CERTIFY that pursuant to the authority conferred upon the Board
of Directors by the Amended and Restated Certificate of Incorporation of the
Corporation, the Board of Directors on February 25, 2003, adopted the following
resolution creating a series of Preferred Stock in the amount and having the
designation, voting powers, preferences and relative, participating, optional
and other special rights and qualifications, limitations and restrictions
thereof as follows:
Section 1. Designation and Number of Shares. The shares of such series
shall be designated as "Series A Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), and the number of shares constituting such series
shall be 200,000. Such number of shares of the Series A Preferred Stock may be
increased or decreased by resolution of the Board of Directors; provided that no
decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
issuable upon exercise or conversion of outstanding rights, options or other
securities issued by the Corporation.
Section 2. Dividends and Distributions. (a) The holders of shares of Series
A Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable on March 31, June 30, September 30 and December 31 of 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 any share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00
and
(ii) subject to the provision for adjustment hereinafter set forth, 1,000 times
the aggregate per share amount of all cash dividends or other distributions and
1,000 times the aggregate per share amount of all non-cash dividends or other
distributions (other than (A) a dividend payable in shares of Common Stock, par
value $0.001 per share, of the Corporation (the "Common Stock") or (B) a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise)), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. If the Corporation, at any time after
February 25, 2003 (the "Rights Declaration Date"), pays any dividend on Common
Stock payable in shares of Common Stock or effects a subdivision or combination
of the outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each such
case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under Section 2(a)(ii) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in Section 2(a) above immediately
after it declares a dividend or distribution on the Common Stock (other
than as described in Sections 2(a)(ii)(A) and 2(a)(ii)(B) above); provided
that if 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 (or, with respect to the
first Quarterly Dividend Payment Date, the period between the first
issuance of any share or fraction of a share of Series A Preferred Stock
and such first Quarterly Dividend Payment Date), a dividend of $1.00 per
share on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issuance of such shares of Series A Preferred
Stock, unless the date of issuance of such shares is on or before the
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue and be cumulative from the
date of issue of such shares, or unless the date of issue is a date after
the record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a quarterly dividend and on or before
such Quarterly Dividend Payment Date, in which case 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 shares of Series A Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of Directors
may fix a record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall not be more than 60 days prior to
the date fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting rights required
by law, the holders of shares of Series A Preferred Stock shall have the
following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
1,000 votes on all matters submitted to a vote of stockholders of the
Corporation. If the Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of
Common Stock or effect a subdivision or combination of the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then in each such case the number
of votes per share to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common
Stock shall vote together as a single class on all matters submitted to a
vote of stockholders of the Corporation.
(c) (i) If at any time dividends on any Series A Preferred Stock shall
be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods
and for the current quarterly dividend period on all shares of Series A
Preferred Stock then outstanding shall have been declared and paid or set
apart for payment. During each default period, all holders of Preferred
Stock and any other series of Preferred Stock then entitled as a class to
elect directors, voting together as a single class, irrespective of series,
shall have the right to elect two Directors.
(ii) During any default period, such voting right of the holders
of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to Section 3(c)(iii) hereof or at any annual
meeting of stockholders, and thereafter at annual meetings of
stockholders; provided that neither such voting right nor the right of
the holders of any other series of Preferred Stock, if any, to
increase, in certain cases, the authorized number of Directors shall
be exercised unless the holders of 10% in number of shares of
Preferred Stock outstanding shall be present in person or by proxy.
The absence of a quorum of holders of Common Stock shall not affect
the exercise by holders of Preferred Stock of such voting right. At
any meeting at which holders of Preferred Stock shall initially
exercise such voting right, they shall have the right, voting as a
class, to elect Directors to fill such vacancies, if any, in the Board
of Directors as may then exist up to two Directors or, if such right
is exercised at an annual meeting, to elect two Directors. If the
number which may be so elected at any special meeting does not amount
to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be
necessary to permit the election by them of the required number. After
the holders of the Preferred Stock shall have exercised their right to
elect Directors in any default period and during the continuance of
such period, the number of Directors shall not be increased or
decreased except by vote of the holders of Preferred Stock as herein
provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series A Preferred Stock.
(iii) Unless the holders of Preferred Stock shall have previously
exercised their right to elect Directors during an existing default
period, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than 10% of the total
number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of holders of
Preferred Stock, which meeting shall thereupon be called by the
President, a Vice President or the Secretary of the Corporation.
Notice of such meeting and of any annual meeting at which holders of
Preferred Stock are entitled to vote pursuant to this Section
3(c)(iii) shall be given to each holder of record of Preferred Stock
by mailing such notice to him at the address of such holder shown on
the registry books of the Corporation. Such meeting shall be called
for a time not earlier than 20 days and not later than 60 days after
such order or request or in default of the calling of such meeting
within 60 days after such order or request, such meeting may be called
on similar
notice by any stockholder or stockholders owning in the aggregate not
less than 10% of the total number of shares of Preferred Stock
outstanding, irrespective of series. Notwithstanding the provisions of
this Section 3(c)(iii), no such special meeting shall be called during
the period within 60 days immediately preceding the date fixed for the
next annual meeting of stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall
continue to be entitled to elect the whole number of Directors until
the holders of Preferred Stock shall have exercised their right to
elect two Directors voting as a class, after the exercise of which
right (x) the Directors so elected by the holders of Preferred Stock
shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided
in Section 3(c)(ii) hereof) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of
stock which elected the Director whose office shall have become
vacant. References in this Section 3(c) to Directors elected by the
holders of a particular class of stock shall include Directors elected
by such Directors to fill vacancies as provided in clause (y) of the
foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of
Preferred Stock as a class shall terminate, and (z) the number of
Directors shall be such number as may be provided for in the
certificate of incorporation or bylaws irrespective of any increase
made pursuant to the provisions of Section 3(c)(ii) (such number being
subject, however, to change thereafter in any manner provided by law
or in the certificate of incorporation or bylaws). Any vacancies in
the Board of Directors effected by the provisions of clauses (y) and
(z) in the preceding sentence may be filled by a majority of the
remaining Directors.
(d) The Certificate of Incorporation of the Corporation shall not be
amended in any manner (whether by merger or otherwise) so as to adversely
affect the powers, preferences or special rights of the Series A Preferred
Stock without the affirmative vote of the holders of a majority of the
outstanding shares of Series A Preferred Stock, voting separately as a
class.
(e) Except as otherwise provided herein, holders of Series A Preferred
Stock shall have no special voting rights, and their consent shall not be
required for taking any corporate action.
Section 4. Certain Restrictions. (a) Whenever quarterly dividends or other
dividends or distributions payable on the Series A 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 outstanding shares of
Series A Preferred Stock shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, or make any other distributions on,
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding-up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions on,
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding-up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
other 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, purchase or otherwise acquire for value any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding-up) to the Series A 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 stock of the
Corporation ranking junior (as to dividends and upon dissolution,
liquidation or winding-up) to the Series A Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding-up)
with the Series A 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 Series A Preferred Stock and all such other
parity stock 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 value any shares of
stock of the Corporation unless the Corporation could, under paragraph
4(a), purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock without designation as to series and may be reissued
as part of a new series of Preferred Stock to be created by the Board of
Directors as permitted by the Certificate of Incorporation or as otherwise
permitted under Delaware Law.
Section 6. Liquidation, Dissolution and Winding-up. Upon any liquidation,
dissolution or winding-up of the Corporation, no distribution shall be made (a)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding-up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $1.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment;
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to
be distributed per share to holders of Common Stock, or (b) to the holders of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding-up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all such other
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. If the
Corporation shall at any time after the Rights Declaration Date pay any dividend
on Common Stock payable in shares of Common Stock or effect a subdivision or
combination of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (a) 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. If 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 or any other property, then in any such case the shares of Series A
Preferred Stock
shall at the same time be similarly exchanged for or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount of stock, securities, cash or any other
property, as the case may be, into which or for which each share of Common Stock
is changed or exchanged. If the Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series A
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 Series A Preferred Stock shall not be
redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank junior (as to
dividends and upon liquidation, dissolution and winding-up) to all other series
of the Corporation's preferred stock except any series that specifically
provides that such series shall rank junior to the Series A Preferred Stock.
Section 10. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate this
__ day of March, 2003.
------------------------------
Name: W. Mark Lortz
Title: President and Chief
Executive Officer
Attest:
- ------------------------------
Name:
Title:
EXHIBIT B
AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED OR TRANSFERRED TO, OR HELD
BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER
CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY
BE NULL AND VOID.
SUMMARY OF TERMS
----------------
THERASENSE, INC.
STOCKHOLDER RIGHTS PLAN
Form of Security The Board of Directors has declared a dividend
of one preferred stock purchase right for each
outstanding share of the Company's Common
Stock, payable to holders of record as of the
close of business on March 14, 2003 (each a
"Right" and collectively, the "Rights").
Issuance of Right Certificates; Prior to the Distribution Date1, (i) the
Transfer Rights will be evidenced by the certificates
for the common stock, par value $0.001 per
share ("Common Stock") of the Company and not
separate certificates evidencing the Rights (a
"Right Certificate"), and the registered
holders of the Common Stock shall be deemed to
be the registered holders of the associated
Rights; and (ii) the Rights will be
transferable only in connection with the
transfer of the underlying shares of Common
Stock.
After the Distribution Date, the Rights Agent
will mail separate Right Certificates to each
record holder of the Common Stock as of the
close of business on the Distribution Date,
and thereafter the Rights will be transferable
separately from the Common Stock.
Exercise Prior to the Distribution Date, the Rights are
not exercisable.
After the Distribution Date, but prior to the
occurrence of an event described below under
"Flip-In" or "Flip-Over", each Right shall be
exercisable to purchase, for $100.00, subject
to adjustment (the "Purchase Price"), one
one-thousandth of a share of Series A
Participating Cumulative Preferred Stock, par
value $0.001 per share, of the Company.
- --------
1 Distribution Date generally means the earlier of:
(1) the 10th day after public announcement that any person or group has become
an Acquiring Person (as defined below), and
(2) the 10th business day after the date of the commencement of a tender or
exchange offer by any person which would, if consummated, result in such
person becoming an Acquiring Person.
B-2
Acquiring Person Subject to certain exceptions, an "Acquiring
Person" is any person or group who becomes the
beneficial owner of 15% or more of the Common
Stock. The exceptions include: (i) the
Company's employee benefit plans, (ii) any
person that the Company's Board of Directors
determines exceeded the threshold
inadvertently and then promptly divests the
excess shares, and (iii) any person who
becomes an Acquiring Person because the
Company repurchases outstanding shares of
Common Stock unless such person acquires
additional shares of Common Stock.
Flip-In If any person or group becomes an Acquiring
Person, then each Right (other than Rights
beneficially owned by the Acquiring Person and
certain affiliated persons) will entitle the
holder to purchase, for the Purchase Price, a
number of shares of the Company's Common Stock
having a market value of twice the Purchase
Price.
Flip-Over If, after any person or group becomes an
Acquiring Person, (1) the Company is involved
in a merger or other business combination in
which the Company is not the surviving
corporation or its Common Stock is exchanged
for other securities or assets or (2) the
Company and/or one or more of its subsidiaries
sell or otherwise transfer assets or earning
power aggregating more than 50% of the assets
or earning power of the Company and its
subsidiaries, taken as a whole, then each
Right will entitle the holder to purchase, for
the Purchase Price, a number of shares of
common stock of the other party to such
business combination or sale (or in certain
circumstances, an affiliate) having a market
value of twice the Purchase Price.
B-3
Exchange At any time after any person becomes an
Acquiring Person (but before any person
becomes the beneficial owner of 50% or more of
the Company's Common Stock or the occurrence
of a merger, combination, sale or transfer
described in "Flip-Over" above), the Board of
Directors may exchange all or part of the
Rights (other than the Rights beneficially
owned by the Acquiring Person and certain
affiliated persons) for shares of Common Stock
at an exchange ratio of one share of Common
Stock per Right.
Redemption The Board of Directors may redeem all of the
Rights at a price of $0.001 per Right at any
time prior to the time that any person becomes
an Acquiring Person.
Expiration The Rights will expire on February 25, 2013,
unless earlier exchanged or redeemed.
Amendments Prior to any person becoming an Acquiring
Person, the Rights Agreement may be amended in
any respect.
After any person has become an Acquiring
Person, the Rights Agreement may not be
amended in any respect that would adversely
affect the Rights holders (other than any
Acquiring Person and certain affiliated
persons) or cause the Rights again to become
redeemable.
Voting Rights Rights holders have no stockholder rights,
including no right to vote or to receive
dividends.
Antidilution Provisions The Rights Agreement includes standard anti-
dilution provisions designed to protect the
efficacy of the Rights.
B-4
Taxes While the dividend of the Rights will not be
taxable to stockholders or to the Company,
stockholders or the Company may, depending
upon the circumstances, recognize taxable
income in the event that the Rights become
exercisable.
-------------------------------
A copy of the Rights Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to a Registration Statement on Form 8-A. A copy of the
Rights Agreement is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, as amended from time to time,
the complete terms of which are hereby incorporated by reference.
-------------------------------
B-5
EXHIBIT C
[FORM OF RIGHT CERTIFICATE]
No. R - ___________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF _____________, 2013 AND THE DATE ON WHICH
THE RIGHTS EVIDENCED HEREBY ARE REDEEMED OR EXCHANGED BY THE COMPANY AS SET
FORTH IN THE RIGHTS AGREEMENT. AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR
AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, MAY BE NULL AND VOID.
RIGHT CERTIFICATE
THERASENSE, INC.
This Right Certificate certifies that ______________________, or registered
assigns, is the registered holder of the number of Rights set forth above, each
of which entitles the holder (upon the terms and subject to the conditions set
forth in the Rights Agreement dated as of ______________, 2003 (the "Rights
Agreement") between TheraSense, Inc., a Delaware corporation (the "Company"),
and [Agent] (the "Rights Agent")) to purchase from the Company, at any time
after the Distribution Date and prior to the Expiration Date, ___
one-hundredth[s] of a fully paid, nonassessable share of Series A Participating
Cumulative Preferred Stock (the "Preferred Stock") of the Company at a purchase
price of $___ per one one-thousandth of a share (the "Purchase Price"), payable
in lawful money of the United States of America, upon surrender of this Right
Certificate, with the form of election to purchase and related certificate duly
executed, and payment of the Purchase Price at an office of the Rights Agent
designated for such purpose.
Terms used herein and not otherwise defined herein shall have the meanings
given to them in the Rights Agreement.
The number of Rights evidenced by this Right Certificate (and the number
and kind of shares issuable upon exercise of each Right) and the Purchase Price
set forth above are as of ____________, 2003, and may have been or in the future
be adjusted as a result of the occurrence of certain events, as more fully
provided in the Rights Agreement.
C-1
Upon the first occurrence of a Section 8(a)(ii) Event, if the Rights
evidenced by this Right Certificate are beneficially owned by (a) an Acquiring
Person or an Associate or Affiliate of such Acquiring Person, (b) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who (i) becomes a
transferee after a Section 8(a)(ii) Event, (ii) becomes a transferee prior to or
concurrently with a Section 8(a)(ii) Event and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Associate or Affiliate) to holders of equity interests in
such Acquiring Person (or in any Associate or Affiliate) or to any Person with
whom the Acquiring Person (or any such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of these transfer
restrictions, such Rights shall become null and void without any further action,
and no holder hereof shall have any rights whatsoever with respect to such
Rights.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
At any time after the Distribution Date and prior to the Expiration Date,
any Right Certificate or Certificates may, upon the terms and subject to the
conditions set forth below in the Rights Agreement, be transferred or exchanged
for another Right Certificate or Certificates evidencing a like number of Rights
as the Right Certificate or Certificates surrendered. Any registered holder
desiring to transfer or exchange any Right Certificate or Certificates shall
surrender such Right Certificate or Certificates (with, in the case of a
transfer, the form of assignment and certificate on the reverse side thereof
duly executed) to the Rights Agent at the principal office or offices of the
Rights Agent designated for such purpose.
Subject to the provisions of the Rights Agreement, the Board of Directors
of the Company may, at its option,
(a) at any time prior to the occurrence of a Section 8(a)(ii) Event
redeem all but not less than all of the then outstanding Rights at a
redemption price of $0.001 per Right as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date of the Rights Agreement; or
C-2
(b) at any time after the occurrence of a Section 8(a)(ii) Event
exchange all or part of the then outstanding Rights (which shall not
include Rights that have become void pursuant to Section 5(e)) for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right
appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring [after the date of the Rights Agreement]. If
the Rights shall be exchanged in part, the holder of this Right Certificate
shall be entitled to receive upon surrender hereof another Right
Certificate or Certificates for the number of whole Rights not exchanged.
The Company shall not be required to issue fractions of shares of Preferred
Stock (other than fractions which are multiples of one one-thousandth of a share
of Preferred Stock) upon the exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock (other than
fractions which are multiples of one one-thousandth of a share of Preferred
Stock). In lieu of any such fractional shares of Preferred Stock, the Company
shall pay to the registered holders of Right Certificates at the time such
Rights are exercised an amount in cash equal to the same fraction of the current
market price of one one-thousandth of a share of Preferred Stock. If this Right
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Right Certificate or Certificates for the number
of whole Rights not exercised.
No holder of this Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of capital stock
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company
(including any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, to receive notice of meetings or other actions
affecting stockholders (except as provided in the Rights Agreement), to receive
dividends or subscription rights, or otherwise) until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
C-3
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal by its authorized officers.
Dated as of ________________, 2003
THERASENSE, INC.
By:
------------------------
Name:
Title:
[SEAL]
Attest:
-----------------------------
Name:
Title: [Secretary]
Countersigned:
[AGENT],
as Rights Agent
By:
-----------------------------
Name:
Title:
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed if the registered 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: _____________________, 20__
----------------------------------
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ___are ___are not being
assigned by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
___did ___did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: __________, 20 __
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Signature
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The signatures to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
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FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to exercise Rights
represented by the Right Certificate.)
To: TheraSense, Inc.]
The undersigned hereby irrevocably elects to exercise ____________ Rights
represented by this Right Certificate to purchase shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such securities be issued in the name
of and delivered to:
Please insert social security or other identifying number_______________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance of such Rights shall
be registered in the name of and delivered to:
Please insert social security or other identifying number_______________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated:__________________, 20__
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Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ___are ___are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
___did ___did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _________________, 20 __
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Signature
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The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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