EXHIBIT 99.2
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KOSAN BIOSCIENCES INCORPORATED
AND
MELLON INVESTOR SERVICES LLC
AS RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF OCTOBER 5, 2001
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RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT ("Agreement"), dated as of October 5, 2001, between KOSAN
BIOSCIENCES Incorporated, a Delaware corporation (the "Company"), and MELLON
INVESTOR SERVICES LLC, a New Jersey limited liability company ("Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as such term is hereinafter defined) outstanding at the close of business on
October 29, 2001 (the "Record Date"), each Right representing the right to
purchase one one-hundredth of a Preferred Share (as such term is hereinafter
defined), upon the terms and subject to the conditions herein set forth, and has
further authorized and directed the issuance of one Right with respect to each
Common Share that shall become outstanding between the Record Date and the
earliest to occur of the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are hereinafter defined); provided, however, that
Rights may be issued with respect to Common Shares that shall become outstanding
after the Distribution Date and prior to the earlier of the Redemption Date and
the Final Expiration Date in accordance with the provisions of Section 22
hereof.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 20% or more of the Common Shares
then outstanding. Notwithstanding the foregoing, (A) the term Acquiring Person
shall not include (i) the Company, (ii) any Subsidiary (as such term is
hereinafter defined) of the Company, (iii) any employee benefit or compensation
plan of the Company or any Subsidiary of the Company or (iv) any entity holding
Common Shares for or pursuant to the terms of any such employee benefit or
compensation plan of the Company or any Subsidiary of the Company and (B) no
Person shall become an "Acquiring Person" either (x) as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 20% or more of the Common Shares then outstanding;
provided, however, that if a Person shall become the Beneficial Owner of 20% or
more of the Common Shares then outstanding by reason of share purchases by the
Company and shall, following written notice from, or public disclosure by the
Company of such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares without the prior consent of the Company and shall
then Beneficially Own more than 20% of the Common Shares then outstanding, then
such Person shall be deemed to be an "Acquiring Person," or (y) as the result of
the acquisition of Common Shares directly from the Company, provided however
that if a Person shall become the Beneficial Owner of 20% or more of the Common
Shares then outstanding by reason of share purchases directly from the Company
and shall, after that date, become Beneficial Owner of any additional Common
Shares without the prior written consent of the Company and shall then
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Beneficially Own more than 20% of the Common Shares then outstanding, then such
Person shall be deemed to be an "Acquiring Person" or (z) if the Board of
Directors determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests, as
promptly as practicable (as determined in good faith by the Board of Directors),
following receipt of written notice from the Company of such event, of
Beneficial Ownership of a sufficient number of Common Shares so that such Person
would no longer be an Acquiring Person, as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement; provided, however, that
if such Person shall again become the Beneficial Owner of 20% or more of the
Common Shares then outstanding, such Person shall be deemed an "Acquiring
Person," subject to the exceptions set forth in this Section 1(a).
(b) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement; provided, however, that the limited
partners of a limited partnership shall not be deemed to be Associates of such
limited partnership solely by virtue of their limited partnership interests.
(c) A Person shall be deemed the "BENEFICIAL OWNER" of and shall
be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates is deemed to beneficially own, within the meaning of Rule 13d-3 of
the General Rules and Regulations under the Exchange Act as in effect on the
date of this Rights Agreement;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities and other than agreements between the Company and any
corporate partner pursuant to which the right to purchase shares is conditioned
upon the achievement of research or development milestones), or upon the
exercise of conversion rights, exchange rights, rights (other than these
Rights), warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
any security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations promulgated under
the Exchange Act and (2) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement,
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arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting (except to
the extent contemplated by the proviso to Section 1(c)(ii)(B) hereof) or
disposing of any securities of the Company; provided, however, an agreement,
arrangement or understanding for purposes of this Section 1(c)(iii) shall not be
deemed to include actions, including any agreement, arrangement or
understanding, or statements by any member of the Company's Board of Directors
on the date of this Agreement, any subsequent directors of the Company (the
"Successor Directors") who have been nominated by a majority of directors who
are directors as of the date of this Agreement or who are Successor Directors,
or by any Person of whom such a director is an Affiliate or Associate, provided,
however that this exception shall not apply to a particular Person or Persons if
and to the extent that such Person or Persons, after the date of this Agreement,
acquires Beneficial Ownership of more than an additional 5% of the then
outstanding Common Shares of the Company unless (A) the shares are acquired
directly from the Company or as part of an employee benefit or compensation plan
of the Company or a subsidiary of the Company or (B) the Person establishes to
the satisfaction of the directors of the Company that it is acting on its own
behalf and not in concert with any other Person and will not, upon completion of
any purchases, be the Beneficial Owner of 20% or more of the outstanding Common
Shares.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase, "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.
(d) "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of California are
authorized or obligated by law or executive order to close.
(e) "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,
Pacific Time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., Pacific Time, on the next succeeding
Business Day.
(f) "COMMON SHARES" shall mean the shares of common stock, par
value $.001 per share, of the Company; provided, however, that, "Common Shares,"
when used in this Agreement in connection with a specific reference to any
Person other than the Company, shall mean the capital stock (or equity interest)
with the greatest voting power of such other Person or, if such other Person is
a Subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person.
(g) "DISTRIBUTION DATE" shall have the meaning set forth in
Section 3 hereof.
(h) "FINAL EXPIRATION DATE" shall have the meaning set forth in
Section 7 hereof.
(i) "INTERESTED STOCKHOLDER" shall mean any Acquiring Person or
any Affiliate or Associate of an Acquiring Person or any other
Person in which any such
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Acquiring Person, Affiliate or Associate has an interest, or
any other Person acting directly or indirectly on behalf of or
in concert with any such Acquiring Person, Affiliate or
Associate.
(j) "PERSON" shall mean any individual, firm, corporation, limited
liability company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
(k) "PREFERRED SHARES" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.001 per share, of
the Company having the designations and the powers,
preferences and rights, and the qualifications, limitations
and restrictions set forth in the Form of Certificate of
Designation attached to this Agreement as Exhibit A.
(l) "PURCHASE PRICE" shall have the meaning set forth in Section
7(b) hereof.
(m) "REDEMPTION DATE" shall have the meaning set forth in Section
7 hereof.
(n) "SHARES ACQUISITION DATE" shall mean the first date of public
announcement by the Company or an Acquiring Person that an
Acquiring Person has become such provided, however that, if
such Person is determined not to have become an Acquiring
Person pursuant to clause (z) of Subsection 1(a)(B) hereof,
then no Shares Acquisition Date shall be deemed to have
occurred.
(o) "SUBSIDIARY" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting
equity securities or equity interest is owned, directly or
indirectly, by such Person.
(p) "TRANSACTION" shall mean any merger, consolidation or sale of
assets described in Section 13(a) hereof or any acquisition of
Common Shares which would result in a Person becoming an
Acquiring Person or a Principal Party (as such term is
hereinafter defined).
(q) "TRANSACTION PERSON" with respect to a Transaction shall mean
(i) any Person who (x) is or will become an Acquiring Person
or a Principal Party (as such term is hereinafter defined) if
the Transaction were to be consummated and (y) directly or
indirectly proposed or nominated a director of the Company
which director is in office at the time of consideration of
the Transaction, or (ii) an Affiliate or Associate of such a
Person.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable. The Rights Agent shall have no duty to supervise, and
shall in no event be liable for, the acts or omissions of any co-Rights Agents.
SECTION 3. ISSUE OF RIGHT CERTIFICATES.
4.
(a) Until the earlier of the Close of Business on (i) the Shares
Acquisition Date or (ii) the tenth Business Day (or such later
date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement (determined in accordance
with Rule 14d-2 under the Exchange Act) by any Person (other
than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares for or pursuant to
the terms of any such plan) of, or of the first public
announcement of the intention of any Person (other than the
Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company or any
entity holding Common Shares for or pursuant to the terms of
any such plan) to commence, a tender or exchange offer (which
intention to commence remains in effect for five Business Days
after such announcement), the consummation of which would
result in any Person becoming an Acquiring Person (including
any such date which is after the date of this Agreement and
prior to the issuance of the Rights, the earlier of such dates
being herein referred to as the "Distribution Date"), (x) the
Rights will be evidenced by the certificates for Common Shares
registered in the names of the holders thereof (which
certificates shall also be deemed to be Right Certificates)
and not by separate Right Certificates, and (y) the Rights
(and the right to receive Right Certificates therefor) will be
transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date,
the Company will promptly notify the Rights Agent thereof, and
prepare and execute, the Rights Agent will countersign, and
the Company will send or cause to be sent (and the Rights
Agent will, if requested and provided with a shareholder list
and all other relevant information, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date,
at the address of such holder shown on the records of the
Company, a Right Certificate, in substantially the form of
Exhibit B hereto (a "Right Certificate"), evidencing one Right
for each Common Share so held, subject to the adjustment
provisions of Section 11 of this Rights Agreement. As of and
after the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send (directly or through the Rights Agent or its
transfer agent) a copy of a Summary of Rights to Purchase
Preferred Shares, in substantially the form of Exhibit C
hereto (the "Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of Common Shares
as of the Close of Business on the Record Date, at the address
of such holder shown on the records of the Company. With
respect to certificates for Common Shares outstanding as of
the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of
the holders thereof. Until the Distribution Date (or the
earlier of the Redemption Date and the Final Expiration Date),
the surrender for transfer of any certificate for Common
Shares outstanding on the Record Date shall also constitute
the transfer of the Rights associated with the Common Shares
represented thereby.
5.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares
referred to in the last sentence of this paragraph (c)) after
the Record Date but prior to the earliest of the Distribution
Date, the Redemption Date or the Final Expiration Date shall
have impressed on, printed on, written on or otherwise affixed
to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Kosan
Biosciences Incorporated (the "Company") and Mellon Investor Services
LLC as Rights Agent (the "Rights Agent"), dated as of October 5, 2001,
as amended from time to time (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. As described in the Rights
Agreement, Rights issued to any Person who becomes an Acquiring Person
or an Affiliate or Associate thereof (as defined in the Rights
Agreement) and certain related persons, whether currently held by or on
behalf of such Person or by any subsequent holder, shall become null
and void.
With respect to such certificates containing the foregoing
legend, until the Distribution Date (or, if earlier, the
earlier of the Redemption Date or the Final Expiration Date),
the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any such certificate
shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights
associated with such Common Shares shall be deemed canceled
and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares which
are no longer outstanding. Notwithstanding this Section 3(c),
the omission of a legend shall not affect the enforceability
of any part of this Rights Agreement or the rights of any
holder of the Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES.
(a) The Right Certificates (and the form of election to purchase
Preferred Shares, the form of assignment and the form of
certification to be printed on the reverse thereof) shall be
substantially the same as Exhibit B hereto and may have such
marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may
deem appropriate (but that do not affect the rights, duties or
responsibilities of the Rights Agent) and as are not
inconsistent with the provisions of this Agreement, or as may
be required to comply with any applicable law or with any rule
or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or quotation system
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on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Sections 7, 11
and 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-hundredths
of a Preferred Share as shall be set forth therein at the
Purchase Price (as defined in Section 7(b)), but the number of
such one one-hundredths of a Preferred Share and the Purchase
Price shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and
void pursuant to the second paragraph of Section 11(a)(ii)
hereof and any Right Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this
sentence, shall contain (to the extent feasible and to the
extent the Rights Agent has been notified thereof) the
following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Right Certificate and the Rights represented hereby are
null and void.
The provisions of Section 11(a)(ii) hereof shall be operative
whether or not the foregoing legend is contained on any such
Right Certificate.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, its Vice Chairman of the Board, its
Chief Financial Officer, or any of its Vice Presidents, either manually or by
facsimile signature, shall have affixed thereto the Company's seal or a
facsimile thereof, and shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Agreement any such person was not such an officer.
Following the Distribution Date and receipt by the Rights
Agent of all necessary information, the Rights Agent will keep
or cause to be kept, at its office designated for such
purpose, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Right
Certificates, the
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number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject
to the provisions of Section 11(a)(ii), Section 14 and Section 24 hereof, at any
time after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of one
one-hundredths of a Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Right Certificate
or Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Right Certificate until the registered holder shall have properly
completed and signed the certificate contained in the form of assignment on the
reverse side of such Right Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company or the Rights Agent shall
reasonably request. Thereupon the Rights Agent shall, subject to Section
11(a)(ii), Section 14 and Section 24 hereof, countersign and deliver to the
person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates. The Rights
Agent shall have no duty or obligation to take any action under any Section of
this Agreement that requires the payment by a Rights holder of applicable taxes
and governmental charges unless and until the Rights Agent is reasonably
satisfied that all such taxes and/or charges have been paid.
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
satisfactory to them, and, at the Company's or Rights Agent's
request, reimbursement to the Company and the Rights Agent of
all reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Right Certificate
if mutilated, the Company will issue, execute and deliver a
new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered holder in lieu
of the Right Certificate so lost, stolen, destroyed or
mutilated.
Notwithstanding any other provisions hereof, the Company and
the Rights Agent may amend this Rights Agreement to provide
for uncertificated Rights in addition to or in place of Rights
evidenced by Rights Certificates.
8.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided
herein) in whole or in part at any time after the Distribution
Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights
Agent designated for such purpose, together with payment of
the Purchase Price for each one one-hundredth of a Preferred
Share (or such other number of shares or other securities) as
to which the Rights are exercised, at or prior to the earliest
of (i) the Close of Business on October 29, 2011 (the "Final
Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption
Date"), or (iii) the time at which such Rights are exchanged
as provided in Section 24 hereof.
(b) The purchase price for each one one-hundredth of a Preferred
Share pursuant to the exercise of a Right shall initially be
$70.00 (the "Purchase Price") and shall be subject to
adjustment from time to time as provided in Sections 11 and 13
hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares to
be purchased and an amount equal to any applicable tax or
charge required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified
check, cashier's check, bank draft or money order payable to
the order of the Company, the Rights Agent shall thereupon
promptly (i) (A) requisition from any transfer agent for the
Preferred Shares certificates for the number of Preferred
Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such
requests, or (B) if the Company, in its sole discretion, shall
have elected to deposit the Preferred Shares issuable upon
exercise of the Rights hereunder into a depository,
requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred
Share as are to be purchased (in which case certificates for
the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and
the Company hereby directs the depositary agent to comply with
such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of
fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder and
(iv) when appropriate, after receipt, deliver such cash to or
upon the order of the registered holder of such Right
Certificate. In the event that the Company is obligated to
issue securities of the Company other than Preferred Shares
(including Common Shares) of the Company pursuant to Section
11(a) hereof, the Company will make all arrangements necessary
so that such other securities are available for
9.
distribution by the Rights Agent, if and when necessary to
comply with this Agreement.
In addition, in the case of an exercise of the Rights by a
holder pursuant to Section 11(a)(ii) hereof, the Rights Agent
shall return such Right Certificate to the registered holder
thereof after imprinting, stamping or otherwise indicating
thereon that the rights represented by such Right Certificate
no longer include the rights provided by Section 11(a)(ii)
hereof, and, if fewer than all the Rights represented by such
Right Certificate were so exercised, the Rights Agent shall
indicate on the Right Certificate the number of Rights
represented thereby which continue to include the rights
provided by Section 11(a)(ii) hereof.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby (other
than a partial exercise of rights pursuant to Section
11(a)(ii) as described in Section 7(c) hereof), a new Right
Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to
the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Sections 6
and 14 hereof.
(e) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued
Preferred Shares or any Preferred Shares held in its treasury,
the number of Preferred Shares that will be sufficient to
permit the exercise in full of all outstanding Rights in
accordance with this Section 7.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon
the occurrence of any purported exercise as set forth in this
Section 7 unless such registered holder shall have (i) duly
and properly completed and signed the certification following
the form of election to purchase set forth on the reverse side
of the Rights Certificate surrendered for such exercise, (ii)
tendered the Purchase Price (and an amount equal to any
applicable transfer tax required to be paid by the holder of
such Right Certificate in accordance with Section 9) to the
Company in the manner set forth in Section 7(c) and (iii)
provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall
reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if delivered or surrendered to the Rights Agent, shall be canceled by it,
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise
10.
thereof. The Rights Agent shall deliver all canceled Right Certificates to the
Company approximately one and one-half years after the cancellation date, or
shall, at the written request of the Company, destroy such canceled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
SECTION 9. AVAILABILITY OF PREFERRED SHARES. The Company covenants and
agrees that so long as the Preferred Shares (and, after the time a person
becomes an Acquiring Person, Common Shares or any other securities) issuable
upon the exercise of the Rights may be listed on any national securities
exchange or quotation system, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed on such exchange or quotation system upon
official notice of issuance upon such exercise.
The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares
(or Common Shares and other securities, as the case may be)
delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such Preferred Shares
(subject to payment of the Purchase Price), be duly and
validly authorized and issued and fully paid and nonassessable
shares or other securities.
The Company further covenants and agrees that it will pay when
due and payable any and all taxes and governmental charges
which may be payable in respect of the issuance or delivery of
the Right Certificates or of any Preferred Shares upon the
exercise of Rights. The Company shall not, however, be
required to pay any tax or charge that may be payable in
respect of any transfer or delivery of Right Certificates to a
Person other than, or the issuance or delivery of certificates
or depositary receipts for the Preferred Shares in a name
other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to
issue or to deliver any certificates or depositary receipts
for Preferred Shares upon the exercise of any Rights until any
such tax or charge shall have been paid (any such tax or
charge being payable by the holder of such Right Certificate
at the time of surrender) or until it has been established to
the Company's reasonable satisfaction that no such tax or
charge is due.
As soon as practicable after the Distribution Date, the
Company shall use its best efforts to:
(i) prepare and file a registration statement under the
Securities Act of 1933, as amended (the "Act"), with
respect to the securities purchasable upon exercise
of the Rights on an appropriate form, will use its
best efforts to cause such registration statement to
become effective as soon as practicable after such
filing and will use its best efforts to cause such
registration statement to remain effective (with a
prospectus at all times meeting the requirements of
the Act) until the Final Expiration Date; and
11.
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise
of the Rights under the blue sky laws of such
jurisdictions as may be necessary or appropriate.
SECTION 10. PREFERRED SHARES RECORD DATE. Each person in whose name any
certificate for Preferred Shares or other securities is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Preferred Shares or other securities represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered with the forms of election and certification
duly executed and payment of the Purchase Price (and any applicable taxes and
charges) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Shares or other securities transfer
books of the Company are closed, such person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares or other securities
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate, as such, shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a)
(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the
Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a
smaller number of Preferred Shares or (D) issue any
shares of its capital stock in a reclassification of
the Preferred Shares (including any such
reclassification in connection with a consolidation
or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided
in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or
of the effective date of such subdivision,
combination or reclassification, and the number and
kind of shares of capital stock issuable on such
date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall
be entitled to receive the aggregate number and kind
of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at
a time when the Preferred Shares transfer books of
the Company were open, such holder would have owned
upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event
shall the consideration to be paid upon
12.
the exercise of one Right be less than the aggregate
par value of the shares of capital stock of the
Company issuable upon exercise of one Right. If an
event occurs which would require an adjustment under
both Section 11(a)(i) and Section 11(a)(ii) hereof,
the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to
any adjustment required pursuant to Section 11(a)(ii)
hereof.
(ii) Subject to Section 24 hereof and the provisions of
the next paragraph of this Section 11(a)(ii), in the
event any Person shall become an Acquiring Person,
each holder of a Right shall, for a period of 60 days
after the later of such time any Person becomes an
Acquiring Person or the effective date of an
appropriate registration statement filed under the
Act pursuant to Section 9 hereof (provided, however
that, if at any time prior to the expiration or
termination of the Rights there shall be a temporary
restraining order, a preliminary injunction, an
injunction, or temporary suspension by the Board of
Directors, or similar obstacle to exercise of the
Rights (the "Injunction") which prevents exercise of
the Rights, a new 60-day period shall commence on the
date the Injunction is removed), have a right to
receive, upon exercise thereof at a price equal to
the then current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with
the terms of this Agreement and in lieu of Preferred
Shares, such number of Common Shares as shall equal
the result obtained by (A) multiplying the then
current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right
is then exercisable and dividing that product by (B)
50% of the then current per share market price of the
Common Shares (determined pursuant to Section 11(d)
hereof) on the date such Person became an Acquiring
Person; provided, however, that if the transaction
that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of
Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall
be made pursuant to this Section 11(a)(ii). In the
event that any Person shall become an Acquiring
Person and the Rights shall then be outstanding, the
Company shall not take any action that would
eliminate or diminish the benefits intended to be
afforded by the Rights.
Notwithstanding anything in this Agreement to the contrary,
from and after the time any Person becomes an Acquiring
Person, any Rights beneficially owned by (i) such Acquiring
Person or an Associate or Affiliate of such Acquiring Person,
(ii) a transferee of such Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the
Acquiring Person became such, or (iii) a transferee of such
Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the
Acquiring Person's becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom
the
13.
Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors has determined is part
of a plan, arrangement or understanding which has as a primary
purpose or effect the avoidance of this Section 11(a)(ii),
shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable
efforts to insure that the provisions of this Section
11(a)(ii) and Section 4(b) hereof are complied with, but shall
have no liability to any holder of Right Certificates or other
Person as a result of its failure to make any determinations
with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder. No Right Certificate
shall be issued at any time upon the transfer of any Rights to
an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to
any nominee of such Acquiring Person, Associate or Affiliate;
and any Right Certificate delivered to the Rights Agent for
transfer to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence shall be canceled.
(iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if a
majority of the Board of Directors then in office
determines that such action is necessary or
appropriate and not contrary to the interests of
holders of Rights, elect to (and, in the event that
the Board of Directors has not exercised the exchange
right contained in Section 24(c) hereof and there are
not sufficient treasury shares and authorized but
unissued Common Shares to permit the exercise in full
of the Rights in accordance with the foregoing
subparagraph (ii), the Company shall) take all such
action as may be necessary to authorize, issue or
pay, upon the exercise of the Rights, cash (including
by way of a reduction of the Purchase Price),
property, Common Shares, other securities or any
combination thereof having an aggregate value equal
to the value of the Common Shares which otherwise
would have been issuable pursuant to Section
11(a)(ii) hereof, which aggregate value shall be
determined by a nationally recognized investment
banking firm selected by a majority of the Board of
Directors then in office. For purposes of the
preceding sentence, the value of the Common Shares
shall be determined pursuant to Section 11(d) hereof.
Any such election by the Board of Directors must be
made within 60 days following the date on which the
event described in Section 11(a)(ii) hereof shall
have occurred. Following the occurrence of the event
described in Section 11(a)(ii) hereof, a majority of
the Board of Directors then in office may suspend the
exercisability of the Rights for a period of up to 60
days following the date on which the event described
in Section 11(a)(ii) hereof shall have occurred to
the extent that such directors have not determined
whether to exercise their rights of election under
this Section 11(a)(iii). In the event of any such
suspension, the Company shall issue a public
announcement
14.
stating that the exercisability of the Rights has
been temporarily suspended.
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred
Shares entitling them (for a period expiring within 45
calendar days after such record date) to subscribe for or
purchase Preferred Shares (or shares having the same
designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions as the Preferred
Shares ("equivalent preferred shares")) or securities
convertible into Preferred Shares or equivalent preferred
shares at a price per Preferred Share or equivalent preferred
share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred
shares) less than the then current per share market price of
the Preferred Shares (as such term is hereinafter defined) on
such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the
number of Preferred Shares which the aggregate offering price
of the total number of Preferred Shares and/or equivalent
preferred shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to
be offered) would purchase at such current market price and
the denominator of which shall be the number of Preferred
Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares
to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital
stock of the Company issuable upon exercise of one Right. In
case such subscription price may be paid in a consideration
part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good
faith by the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent.
Preferred Shares owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for the making of
a distribution to all holders of the Preferred Shares
(including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebtedness or
assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights
or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction,
the numerator of which shall be the then current per
15.
share market price of the Preferred Shares (as such term is
hereinafter defined) on such record date, less the fair market
value (as determined in good faith by the Board of Directors,
whose determination shall be described in a statement filed
with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one Preferred
Share and the denominator of which shall be such current per
share market price of the Preferred Shares; provided, however,
that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company to be issued upon
exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which
would then be in effect if such record date had not been
fixed.
(d)
(i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a
"Security" for the purpose of this Section 11(d)(i))
on any date shall be deemed to be the average of the
daily closing prices per share of such Security for
the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current
per share market price of the Security is determined
during a period following the announcement by the
issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of
such Security or securities convertible into such
shares, or (B) any subdivision, combination or
reclassification of such Security or securities
convertible into such shares, or (C) any subdivision,
combination or reclassification of such Security and
prior to the expiration of 30 Trading Days after the
ex-dividend date for such dividend or distribution,
or the record date for such subdivision, combination
or reclassification, then, and in each such case, the
current per share market price shall be appropriately
adjusted to reflect the current market price per
share equivalent of such Security. The closing price
for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices,
regular way, in either case as reported in the
principal consolidated transaction reporting system
with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the
Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with
respect to securities listed on the principal
national securities exchange on which the Security is
listed or admitted to trading or as reported on the
Nasdaq National Market or, if the Security is not
listed or admitted to trading on any national
securities exchange or reported on the Nasdaq
National Market, the last quoted price or, if not so
quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc.
16.
Automated Quotations System ("Nasdaq") or such other
system then in use, or, if on any such date the
Security is not quoted by any such organization, the
average of the closing bid and asked prices as
furnished by a professional market maker making a
market in the Security selected by the Board of
Directors or, if on any such date no professional
market maker is making a market in the Security, the
price as determined in good faith by the Board of
Directors. The term "Trading Day" shall mean a day on
which the principal national securities exchange on
which the Security is listed or admitted to trading
is open for the transaction of business or, if the
Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred
Shares shall be determined in accordance with the
method set forth in Section 11(d)(i) hereof. If the
Preferred Shares are not publicly traded, the
"current per share market price" of the Preferred
Shares shall be conclusively deemed to be the current
per share market price of the Common Shares as
determined pursuant to Section 11(d)(i) hereof
(appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after
the date hereof) multiplied by one hundred. If
neither the Common Shares nor the Preferred Shares
are publicly held or so listed or traded, "current
per share market price" shall mean the fair value per
share as determined in good faith by the Board of
Directors, whose determination shall be described in
a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at
least 1% in the Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the
nearest one one-hundredth of a Preferred Share or one
ten-thousandth of any other share or security as the case may
be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date of the
transaction which requires such adjustment or (ii) the date of
the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of
such other shares so receivable upon exercise of any Right
shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in
Sections 11(a) through 11(c) hereof, inclusive, and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
to the Preferred Shares shall apply on like terms to any such
other shares.
17.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the
number of one one-hundredths of a Preferred Share purchasable
from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i) hereof, upon each adjustment of the
Purchase Price as a result of the calculations made in Section
11(b) and Section 11(c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth
of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-hundredths of a Preferred Share covered by a
Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment
of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of one
one-hundredths of a Preferred Share purchasable upon the
exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for
the number of one one-hundredths of a Preferred Share for
which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment
of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the
adjustment to be made, and shall promptly give the Rights
Agent a copy of such announcement. This record date may be the
date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued,
shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of
such adjustment, or, at the option of the Company, shall cause
to be distributed to such holders of record in substitution
and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender
thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be
distributed shall be issued, executed and countersigned in the
manner provided for herein and shall be
18.
registered in the names of the holders of record of Right
Certificates on the record date specified in the public
announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredths of a Preferred Share
issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of one
one-hundredths of a Preferred Share which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the
then par value, if any, of the Preferred Shares issuable upon
exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully
paid and nonassessable Preferred Shares at such adjusted
Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to
defer (and shall give prompt written notice of such election
to the Rights Agent) until the occurrence of such event the
issuing to the holder of any Right exercised after such record
date of the Preferred Shares and other capital stock or
securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver
to such holder a due 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) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or
Section 27 hereof, take (or permit any Subsidiary to take) any
action the purpose of which is to, or if at the time such
action is taken it is reasonably foreseeable that the effect
of such action is to, materially diminish or eliminate the
benefits intended to be afforded by the Rights. Any such
action taken by the Company during any period after any Person
becomes an Acquiring Person but prior to the Distribution Date
shall be null and void unless such action could be taken under
this Section 11(m) from and after the Distribution Date.
(n) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in
its sole discretion shall determine to be advisable in order
that any consolidation or subdivision of the Preferred Shares,
issuance wholly for cash of any Preferred Shares at less than
the current market price, issuance wholly for cash of
Preferred Shares or securities which by their terms are
convertible into or exchangeable for Preferred Shares,
dividends on Preferred Shares payable in Preferred Shares or
issuance of rights, options or warrants referred to
hereinabove in Section 11(b),
19.
hereafter made by the Company to holders of its Preferred
Shares shall not be taxable to such stockholders.
(o) In the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i)
declare or pay any dividend on the Common Shares payable in
Common Shares or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into
a greater or lesser number of Common Shares, then in any such
case (A) the number of one one-hundredths of a Preferred Share
purchasable after such event upon proper exercise of each
Right shall be determined by multiplying the number of one
one-hundredths of a Preferred Share so purchasable immediately
prior to such event by a fraction, the numerator of which is
the number of Common Shares outstanding immediately before
such event and the denominator of which is the number of
Common Shares outstanding immediately after such event, and
(B) each Common Share outstanding immediately after such event
shall have issued with respect to it that number of Rights
which each Common Share outstanding immediately prior to such
event had issued with respect to it. The adjustments provided
for in this Section 11(o) shall be made successively whenever
such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.
(p) The exercise of Rights under Section 11(a)(ii) hereof shall
only result in the loss of rights under Section 11(a)(ii)
hereof to the extent so exercised and shall not otherwise
affect the rights represented by the Rights under this
Agreement, including the rights represented by Section 13
hereof.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts and computations accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Common Shares or the Preferred Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate in accordance with
Section 25 hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein contained and shall have no duty
with respect to and shall not be deemed to have knowledge of any adjustment
unless and until it shall have received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
(a) In the event that, following the Shares Acquisition Date or,
if a Transaction is proposed, the Distribution Date, directly
or indirectly (x) the Company shall consolidate with, or merge
with and into, any Interested Stockholder, or if in such
merger or consolidation all holders of Common Stock are not
treated alike, any other Person, (y) any Interested
Stockholder, or if in such merger or consolidation all holders
of Common Stock are not treated alike, any other Person shall
consolidate with the Company, or merge with and into the
Company, and the
20.
Company shall be the continuing or surviving corporation of
such merger (other than, in the case of either transaction
described in (x) or (y), a merger or consolidation which would
result in all of the voting power represented by the
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into securities of the
surviving entity) all of the voting power represented by the
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation and the holders
of such securities not having changed as a result of such
merger or consolidation), or (z) the Company shall sell,
mortgage or otherwise transfer (or one or more of its
subsidiaries shall sell, mortgage or otherwise transfer), in
one or more transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company
and its subsidiaries (taken as a whole) to any Interested
Stockholder or Stockholders, or if in such transaction all
holders of Common Stock are not treated alike, any other
Person, (other than the Company or any Subsidiary of the
Company in one or more transactions each of which individually
and the aggregate does not violate Section 13(d) hereof) then,
and in each such case, proper provision shall be made so that
(i) each holder of a Right, subject to Section 11(a)(ii)
hereof, shall have the right to receive, upon the exercise
thereof at a price equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable in accordance with
the terms of this Agreement and in lieu of Preferred Shares,
such number of freely tradeable Common Shares of the Principal
Party (as such term is hereinafter defined), free and clear of
liens, rights of call or first refusal, encumbrances or other
adverse claims, as shall be equal to the result obtained by
(A) multiplying the then current Purchase Price by the number
of one one-hundredths of a Preferred Share for which a Right
is then exercisable (without taking into account any
adjustment previously made pursuant to Section 11(a)(ii)
hereof) and dividing that product by (B) 50% of the then
current per share market price of the Common Shares of such
Principal Party (determined pursuant to Section 11(d) hereof)
on the date of consummation of such consolidation, merger,
sale or transfer; (ii) such Principal Party shall thereafter
be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply to such Principal
Party; and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a
sufficient number of shares of its Common Shares in accordance
with Section 9 hereof) in connection with such consummation as
may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in
relation to its Common Shares thereafter deliverable upon the
exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause
(x) or (y) of Section 13(a) hereof, the Person that
is the issuer of any securities into
21.
which Common Shares are converted in such merger or
consolidation, and if no securities are so issued,
the Person that is the other party to the merger or
consolidation (or, if applicable, the Company, if it
is the surviving corporation); and
(ii) in the case of any transaction described in clause
(z) of Section 13(a) hereof, the Person that is the
party receiving the greatest portion of the assets or
earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any case, (1) if the Common Shares of such Person are
not at such time and have not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary or Affiliate of another Person the Common Shares
of which are and have been so registered, "Principal Party" shall refer to such
other Person; (2) if such Person is a Subsidiary, directly or indirectly, or
Affiliate of more than one Person, the Common Shares of two or more of which are
and have been so registered, "Principal Party" shall refer to whichever of such
Persons is the issuer of the Common Shares having the greatest aggregate market
value; and (3) if such Person is owned, directly or indirectly, by a joint
venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in (1) and (2) above shall
apply to each of the chains of ownership having an interest in such joint
venture as if such party were a "Subsidiary" of both or all of such joint
venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have
a sufficient number of authorized Common Shares that have not
been issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and each Principal Party and
each other Person who may become a Principal Party as a result
of such consolidation, merger, sale or transfer shall have (i)
executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a)
and (b) of this Section 13 and (ii) prepared, filed and had
declared and remain effective a registration statement under
the Act on the appropriate form with respect to the Rights and
the securities exercisable upon exercise of the Rights and
further providing that, as soon as practicable after the date
of any consolidation, merger, sale or transfer of assets
mentioned in paragraph (a) of this Section 13, the Principal
Party at its own expense will:
(i) cause the registration statement under the Act with
respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form to
remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Final
Expiration Date;
22.
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise
of the Rights under the blue sky laws of such
jurisdictions as may be necessary or appropriate;
(iii) list the Rights and the securities purchasable upon
exercise of the Rights on each national securities
exchange on which the Common Shares were listed prior
to the consummation of such consolidation, merger,
sale or transfer of assets or on the Nasdaq National
Market if the Common Shares were listed on the Nasdaq
National Market or, if the Common Shares were not
listed on a national securities exchange or the
Nasdaq National Market prior to the consummation of
such consolidation, merger, sale or transfer of
assets, on a national securities exchange or the
Nasdaq National Market; and
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its
Affiliates that comply in all material respects with
the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other
transfers.
(d) After the Distribution Date, the Company covenants and agrees
that it shall not (i) consolidate with, (ii) merge with or
into, or (iii) sell or transfer to, in one or more
transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its
subsidiaries taken as a whole, any other Person (other than a
Subsidiary of the Company in a transaction which does not
violate Section 11(m) hereof), if (x) at the time of or after
such consolidation, merger or sale there are any charter or
bylaw provisions or any rights, warrants or other instruments
or securities outstanding, agreements in effect or any other
action taken which would diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior
to, simultaneously with or immediately after such
consolidation, merger or sale, the stockholders of the Person
who constitutes, or would constitute, the "Principal Party"
for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any
of its Affiliates and Associates. The Company shall not
consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such other Person shall
have executed and delivered to the Rights Agent a supplemental
agreement evidencing compliance with this Section 13(d).
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid
to the registered holders of the Right Certificates with
regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For
23.
the purposes of this Section 14(a), the current market value
of a whole Right shall be the closing price of the Rights for
the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The
closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if
the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed
on the principal national securities exchange on which the
Rights are listed or admitted to trading or as reported on the
Nasdaq National Market or, if the Rights are not listed or
admitted to trading on any national securities exchange or
reported on the Nasdaq National Market, the last quoted price
or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by
Nasdaq or such other system then in use or, if on any such
date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights
selected by the Board of Directors. If on any such date no
such market maker is making a market in the Rights, the fair
value of the Rights on such date as determined in good faith
by the Board of Directors shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share) upon
exercise of the Rights or to distribute certificates which
evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a
Preferred Share). Fractions of Preferred Shares in integral
multiples of one one-hundredth of a Preferred Share may, at
the election of the Company, be evidenced by depositary
receipts; provided, however, that holders of such depositary
receipts shall have all of the designations and the powers,
preferences and rights, and the qualifications, limitations
and restrictions to which they are entitled as beneficial
owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share,
the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For the purposes
of this Section 14(b), the current market value of a Preferred
Share shall be the current per share market price of the
Preferred Shares (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise (or, if not
publicly traded, in accordance with Section 11(d)(ii) hereof).
(c) Following the occurrence of one of the transactions or events
specified in Section 11 hereof giving rise to the right to
receive Common Shares, capital stock equivalents (other than
Preferred Shares) or other securities upon the exercise of a
Right, the Company shall not be required to issue fractions of
Common Shares or units of such Common Shares, capital stock
equivalents or other securities upon
24.
exercise of the Rights or to distribute certificates which
evidence fractional Common Shares, capital stock equivalents
or other securities. In lieu of fractional Common Shares,
capital stock equivalents or other securities, the Company
shall pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current
market value of one Common Share or unit of such Common
Shares, capital stock equivalents or other securities. For
purposes of this Section 14(c), the current market value shall
be the current per share market price (as determined pursuant
to Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise and, if such capital stock
equivalent is not traded, each such capital stock equivalent
shall have the value of one one-hundredth of a Preferred
Share.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right (except as provided
above).
(e) Whenever a payment for fractional Rights or fractional shares
is to be made by the Rights Agent, the Company shall (i)
promptly prepare and deliver to the Rights Agent a certificate
setting forth in reasonable detail the facts related to such
payments and the prices and/or formulas utilized in
calculating such payments and (ii) provide sufficient monies
to the Rights Agent in the form of fully collected funds to
make such payments. The Rights Agent shall be fully protected
in relying upon such a certificate and shall have no duty with
respect to, and shall not be deemed to have knowledge of any
payment for fractional Rights or fractional shares under any
Section of this Agreement relating to the payment of
fractional Rights or fractional shares unless and until the
Rights Agent shall have received such a certificate and
sufficient monies.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Sections 18 and 20 hereof, are vested in the respective registered holders of
the Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares) and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Shares), without the consent
of the Rights Agent or of the holder of any other Right Certificate (or, prior
to the Distribution Date, of the Common Shares), may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement. Holders
of Rights shall be entitled to recover the reasonable costs and expenses,
including attorneys fees, incurred by them in any action to enforce the
provisions of this Agreement.
25.
SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the
Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable (subject to the provisions of this Agreement)
only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company and the Rights Agent may deem and treat the person
in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership
or writing on the Right Certificates or the associated Common
Shares certificate made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice
to the contrary.
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the preparation,
administration, execution, delivery and amendment of this Agreement and the
exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or
expense, incurred without gross negligence, bad faith or willful misconduct
(each as determined by a final, non-appealable order, judgment, decree or ruling
of a court of competent jurisdiction) on the part of the Rights Agent, for any
action taken, suffered or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including, without limitation,
the costs and expenses of defending against any claim of liability hereunder.
The costs and expenses incurred by the Rights Agent in enforcing this right of
indemnification shall be paid by the Company unless it is determined by a final,
non-appealable order, judgment, decree or ruling of a court of
26.
competent jurisdiction that the Rights Agent is not entitled to indemnification
due to the Rights Agent's gross negligence, bad faith or willful misconduct. The
provisions of this Section 18 and Section 20 below shall survive the expiration
of the Rights, the resignation or removal of the Rights Agent and the
termination of this Agreement.
The Rights Agent shall be authorized and protected and shall
incur no liability for, or in respect of any action taken,
suffered or omitted by it in connection with, its acceptance
and administration of this Agreement in reliance upon any
Right Certificate or certificate for the Preferred Shares or
Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by
it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or
persons, or otherwise upon the advice of counsel as set forth
in Section 20 hereof. In no case will the Rights Agent be
liable for special, indirect, incidental, punitive or
consequential loss or damage of any kind whatsoever
(including, but not limited, to lost profits), even if the
Rights Agent has been advised of such loss or damage. The
Rights Agent shall not be deemed to have knowledge of any
event of which it was supposed to receive notice thereof
hereunder, and the Rights Agent shall be fully protected and
shall incur no liability for failing to take any action in
connection therewith unless and until it has received such
notice in writing.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any Person succeeding to the shareholder services or corporate trust
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such Person would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement any
of the Right Certificates shall have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of the predecessor
Rights Agent and deliver such Right Certificates so countersigned; and in case
at that time any of the Right Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall
have been countersigned but not delivered, the Rights Agent
may adopt the countersignature under its prior name and
deliver Right Certificates so countersigned; and in case at
that time any of the Right Certificates shall not have been
countersigned,
27.
the Rights Agent may countersign such Right Certificates
either in its prior name or in its changed name; and in all
such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes only the
duties and obligations expressly imposed by this Agreement (and no implied
duties and obligations) upon the following terms and conditions, by all of which
the Company and the holders of Right Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal counsel of its choice
(who may be legal counsel for the Company), and the advice or
opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent, and the
Rights Agent shall incur no liability for, or in respect of,
any action taken, suffered or omitted by it in accordance with
such advice or opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any
fact or matter be proved or established by the Company prior
to taking, 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
any one of the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice
President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be
full authorization and protection to the Rights Agent for any
action taken, suffered or omitted by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith
or willful misconduct (each as determined by a final,
non-appealable order, judgment, decree or ruling of a court of
competent jurisdiction). Any liability of the Rights Agent
under this Agreement shall be limited to five times the amount
of fees paid by the Company to the Rights Agent.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its
countersignature thereof) or be required to verify the same,
but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility or have
any liability in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained
in this Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights
(including the Rights
28.
becoming void pursuant to Section 11(a)(ii) hereof), a
transfer to an Acquiring Person or any adjustment in the terms
of the Rights (including the manner, method or amount thereof)
provided for in Sections 3, 11, 13, 23 or 24 hereof, or the
ascertaining of the existence of facts that would require any
such change or adjustment (except with respect to the exercise
of Rights evidenced by Right Certificates after receipt of a
certificate pursuant to Section 12 hereof describing such
change or adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be
issued pursuant to this Agreement or any Right Certificate or
as to whether any Preferred Shares will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged
and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent
for the carrying out or performing by the Rights Agent of the
provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties
hereunder from any one of the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Financial Officer,
any Vice President, the Secretary or the Treasurer of the
Company, and to apply to such officers for advice or
instructions in connection with its duties, and such
instructions shall be full authorization and protection to the
Rights Agent, and the Rights Agent shall not be liable for any
action taken, suffered or omitted by it in accordance with
instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Company may, at
the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent
with respect to its duties or obligations under this Agreement
and the date on and/or after which such action shall be taken
or omitted and the Rights Agent shall not be liable for any
action taken or omitted in accordance with a proposal included
in any such application on or after the date specified therein
(which date shall not be less than three Business Days after
the date indicated in such application unless any such officer
shall have consented in writing to an earlier date) unless,
prior to taking or omitting any such action, the Rights Agent
has received written instructions in response to such
application specifying the action to be taken, suffered or
omitted.
(h) The Rights Agent and any stockholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal
in any of the Rights or other securities of the Company or
become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to
the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other Person.
29.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and
the Rights Agent shall not be answerable or accountable for
any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any
such act, default, neglect or misconduct, absent gross
negligence, bad faith or willful misconduct (each as
determined by a final, non-appealable order, judgment, decree
or ruling of a court of competent jurisdiction) 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 it believes 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 case may be, has not been executed, the
Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting
with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
for the Common Shares or Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent for the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be
either (a) a Person organized and doing business under the laws of the United
States or of any other state of the United States that is authorized under such
laws to conduct shareholder services business and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million or (b) an Affiliate of a Person described in clause (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
30.
thereof in writing with the predecessor Rights Agent and each transfer agent for
the Common Shares or Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Shares following the Distribution Date and prior to the earlier
of the Redemption Date and the Final Expiration Date, the Company (a) shall with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement in existence prior to the
Distribution Date, or upon the exercise, conversion or exchange of securities,
notes or debentures issued by the Company and in existence prior to the
Distribution Date, and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) the Company shall not be obligated to issue any such Right
Certificates if, and to the extent that, the Company shall be advised by counsel
that such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Right Certificate would
be issued, and (ii) no Right Certificate shall be issued if, and to the extent
that, appropriate adjustment shall otherwise have been made in lieu of the
issuance thereof.
SECTION 23. REDEMPTION.
(a) The Rights may be redeemed by action of the Board of Directors
of the Company pursuant to Section 23(b) hereof and shall not
be redeemed in any other manner.
(b)
(i) The Board of Directors may, at its option, at any
time prior to the earlier of (A) such time as any
Person becomes an Acquiring Person, or (B) the Final
Expiration Date, redeem all but not less than all of
the then outstanding Rights at a redemption price of
$.001 per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar
transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the
"Redemption Price"), and the Company may, at its
option, pay the Redemption Price in Common Shares
(based on the "current per-share market price," as
such term is defined in Section 11(d) hereof, of the
Common Shares at the time of redemption), cash or any
other form of consideration deemed appropriate by the
Board of Directors. The redemption of the Rights by
the Board of Directors may be made effective at such
time, on such basis and subject to such conditions as
the Board of Directors in its sole discretion may
establish. Notwithstanding
31.
anything contained in this Agreement to the contrary,
the Rights shall not be exercisable pursuant to
Section 11(a)(ii) hereof prior to the expiration or
termination of the Company's right of redemption
under this Section 23(b)(i).
(ii) In addition, the Board of Directors may, at its
option, at any time after the time a Person becomes
an Acquiring Person and after the expiration of any
period during which the holder of Rights may exercise
the rights under Section 11(a)(ii) hereof but prior
to any event described in clause (x), (y) or (z) of
the first sentence of Section 13 hereof, redeem all
but not less than all of the then outstanding Rights
at the Redemption Price (x) in connection with any
merger, consolidation or sale or other transfer (in
one transaction or in a series of related
transactions) of assets or earning power aggregating
50% or more of the assets or earning power of the
Company and its subsidiaries (taken as a whole) in
which all holders of Common Shares are treated alike
and not involving (other than as a holder of Common
Shares being treated like all other such holders) an
Interested Stockholder or a Transaction Person or
(y)(A) if and for so long as the Acquiring Person is
not thereafter the Beneficial Owner of 20% or more of
the then outstanding Common Shares, and (B) at the
time of redemption no other Persons are Acquiring
Persons.
(c) Immediately upon the action of the Board of Directors ordering
the redemption of the Rights pursuant to Section 23(b) hereof,
and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within 10 days after
such action of the Board of Directors ordering the redemption
of the Rights pursuant to Section 23(b) hereof, the Company
shall mail a notice of redemption to all the holders of the
then outstanding Rights (and shall give prompt written notice
of such redemption to the Rights Agent) at their last
addresses as they appear upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Shares, provided,
however, that failure to give, or any defect in, any such
notice shall not affect the validity of such redemption. Any
notice that is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which
the payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in this Section
23 or in Section 24 hereof, and other than in connection with
the purchase of Common Shares prior to the Distribution Date.
(d) The Company may, at its option, discharge all of its
obligations with respect to any redemption of the Rights by
(i) issuing a press release announcing the manner
32.
of redemption of the Rights and (ii) mailing payment of the
Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of
the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares,
and upon such action, all outstanding Right Certificates shall
be null and void without any further action by the Company.
SECTION 24. EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at
any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become null
and void pursuant to the provisions of Section 11(a)(ii)
hereof) for Common Shares at an exchange ratio of one Common
Share per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after
the date hereof (such exchange ratio being hereinafter
referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than
the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any
entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of 50% or more of
the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to Section 24(a) hereof
and without any further action and without any notice, the
right to exercise such Rights shall terminate and the only
right thereafter of holders of such Rights shall be to receive
that number of Common Shares equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio.
The Company shall promptly give public notice of any such
exchange (with prompt written notice thereof to the Rights
Agent); provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such
exchange. The Company promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights
Agent; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such
exchange. Any notice that is mailed in the manner herein
provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state
the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void
pursuant to the provisions of Section 11(a)(ii) hereof) held
by each holder of Rights.
(c) In lieu of issuing Common Shares in accordance with Section
24(a) hereof, the Company may, if a majority of the Board of
Directors then in office determines
33.
that such action is necessary or appropriate and not contrary
to the interests of the holders of Rights, elect to (and, in
the event that there are not sufficient treasury shares and
authorized but unissued Common Shares to permit any exchange
of the Rights in accordance with Section 24(a) hereof, the
Company shall) take all such action as may be necessary to
authorize, issue or pay, upon the exchange of the Rights,
cash, property, Common Shares, other securities or any
combination thereof having an aggregate value equal to the
value of the Common Shares which otherwise would have been
issuable pursuant to Section 24(a) hereof, which aggregate
value shall be determined by a nationally recognized
investment banking firm selected by a majority of the Board of
Directors then in office. For purposes of the preceding
sentence, the value of the Common Shares shall be determined
pursuant to Section 11(d) hereof. Any election pursuant to
this Section 24(c) by the Board of Directors must be made by
resolution within 60 days following the date on which the
event described in Section 11(a)(ii) hereof shall have
occurred. Following the occurrence of the event described in
Section 11(a)(ii) hereof, a majority of the Board of Directors
then in office may suspend the exercisability of the Rights
for a period of up to 60 days following the date on which the
event described in Section 11(a)(ii) hereof shall have
occurred to the extent that such directors have not determined
whether to exercise their rights of exchange under this
Section 24(c). In the event of any such suspension, the
Company shall issue a public announcement (with prompt written
notice thereof to the Rights Agent) stating that the
exercisability of the Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional
Common Shares. In lieu of such fractional Common Shares, the
Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole
Common Share. For the purposes of this Section 24(d), the
current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading
Day immediately after the date of the first public
announcement by the Company that an exchange is to be effected
pursuant to this Section 24.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred
Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash
dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or
any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a
reclassification involving only the subdivision of outstanding
Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to
34.
effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of
the Company and its Subsidiaries (taken as a whole), to any
other Person, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any
dividend on the Common Shares payable in Common Shares or to
effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such
case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of
such proposed action, which shall specify the record date for
the purpose of such stock dividend, or distribution of rights
or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of
participation therein by the holders of the Common Shares
and/or the Preferred Shares, if any such date is to be fixed,
and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to
the record date for determining holders of the Preferred
Shares for purposes of such action, and in the case of any
such other action, at least 10 days prior to the date of the
taking of such proposed action or the date of participation
therein by the holders of the Common Shares and/or the
Preferred Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable
thereafter give to each holder of a Right Certificate (and to
the Rights Agent), in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall
describe the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof.
SECTION 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) or by facsimile transmission as follows:
Kosan Biosciences Incorporated
3832 Bay Center Place
Hayward, California 94545
Attn: Chief Financial Officer
Fax: (510) 732-8401
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Attn: Suzanne Sawochka Hooper, Esq.
Fax: (650) 849-7400
35.
Subject to the provisions of Section 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the
Company or by the holder of any Right Certificate to or on the
Rights Agent shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) or by facsimile
transmission as follows:
MELLON INVESTOR SERVICES LLC
235 Montgomery Street, 23rd Floor
San Francisco, California 94104
Attn: Relationship Manager
Fax: (415)989-5241
With a copy to:
MELLON INVESTOR SERVICES LLC
85 Challenger Road
Ridgefield Park, New Jersey 07660
Attn: General Counsel
Fax: (201)296-4004
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any
Right Certificate shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed to such holder
at the address of such holder as shown on the registry books
of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date,
the Company and the Rights Agent shall, if the Company so directs but subject to
the other provisions of this Section, supplement or amend any provision of this
Agreement without the approval of any holders of the Rights. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, from time to time supplement or amend any provision of this Agreement
without the approval of any holders of Right Certificates in order to (i) cure
any ambiguity, (ii) correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein, or (iii)
change any other provisions with respect to the Rights which the Company may
deem necessary or desirable; provided, however, that no such supplement or
amendment shall be made which would adversely affect the interests of the
holders of Rights (other than the interests of an Acquiring Person or its
Affiliates or Associates). Any supplement or amendment adopted during any period
after any Person has become an Acquiring Person but prior to the Distribution
Date shall become null and void unless such supplement or amendment could have
been adopted by the Company from and after the Distribution Date. Any such
supplement or amendment shall be evidenced by a writing signed by the Company
and the Rights Agent. Upon delivery of a certificate from an appropriate officer
of the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, and provided such supplement or
amendment does not change or
36.
increase the Rights Agent's rights, duties, liabilities or obligations, the
Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
SECTION 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For
all purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares or any other securities
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement. The Board of
Directors shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board, or the Company, or as may be necessary or advisable in the administration
of this Agreement, including without limitation, the right and power to (i)
interpret the provisions of this Agreement, and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights or to amend the
Agreement). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (x) be
final, conclusive and binding on the Rights Agent and the holders of the Rights,
and (y) not subject the Board to any liability to the holders of the Rights. The
Rights Agent shall always be entitled to assume that the Company's Board of
Directors acted in good faith and shall be fully protected and incur no
liability in reliance thereon.
SECTION 29. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
SECTION 31. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
SECTION 32. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of 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; provided, however, that all provisions
regarding the rights, duties and obligations of the Rights Agent shall be
37.
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within such state.
SECTION 33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
38.
IN WITNESS WHEREOF, parties whereto have caused this Agreement
to be duly executed, all as of the day and year first above
written.
ATTEST: KOSAN BIOSCIENCES INCORPORATED
By: /s/ Susan M. Kanaya By: /s/ Daniel V. Santi, M.D., Ph.D.
------------------------------------ ------------------------------------
SUSAN M. KANAYA DANIEL V. SANTI, M.D., PH.D.
SECRETARY CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ATTEST: MELLON INVESTOR SERVICES LLC
By: /s/ William A. Dougherty By: /s/ Kerri S. Jones
------------------------------------ ------------------------------------
WILLIAM A. DOUGHERTY KERRI S. JONES
ASSISTANT VICE PRESIDENT ASSISTANT VICE PRESIDENT
39.
SECTION 1 Certain Definitions ............................................. 1
SECTION 2 Appointment of Rights Agent ..................................... 4
SECTION 3 Issue of Right Certificates ..................................... 4
SECTION 4 Form of Right Certificates ...................................... 6
SECTION 5 Countersignature and Registration ............................... 7
SECTION 6 Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates .................................................... 7
SECTION 7 Exercise of Rights; Purchase Price; Expiration Date of Rights ... 8
SECTION 8 Cancellation and Destruction of Right Certificates .............. 10
SECTION 9 Availability of Preferred Shares ................................ 10
SECTION 10 Preferred Shares Record Date .................................... 11
SECTION 11 Adjustment of Purchase Price, Number of Shares or Number
of Rights ....................................................... 11
SECTION 12 Certificate of Adjusted Purchase Price or Number of Shares ...... 18
SECTION 13 Consolidation, Merger or Sale or Transfer of Assets or
Earning Power ................................................... 18
SECTION 14 Fractional Rights and Fractional Shares ......................... 21
SECTION 15 Rights of Action ................................................ 22
SECTION 16 Agreement of Right Holders ...................................... 23
SECTION 17 Right Certificate Holder Not Deemed a Stockholder ............... 23
SECTION 18 Concerning the Rights Agent ..................................... 23
SECTION 19 Merger or Consolidation or Change of Name of Rights Agent ....... 24
SECTION 20 Duties of Rights Agent .......................................... 25
SECTION 21 Change of Rights Agent .......................................... 27
SECTION 22 Issuance of New Right Certificates .............................. 27
SECTION 23 Redemption ...................................................... 28
SECTION 24 Exchange ........................................................ 29
SECTION 25 Notice of Certain Events ........................................ 31
SECTION 26 Notices ......................................................... 31
SECTION 27 Supplements and Amendments ...................................... 32
SECTION 28 Determination and Actions by the Board of Directors, Etc. ....... 33
SECTION 29 Successors ...................................................... 33
SECTION 30 Benefits of this Agreement ...................................... 33
SECTION 31 Severability .................................................... 33
SECTION 32 Governing Law ................................................... 34
SECTION 33 Counterparts .................................................... 34
SECTION 34 Descriptive Headings ............................................ 34
i.
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
ii.
KOSAN BIOSCIENCES INCORPORATED
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
(Exhibit C to Rights Plan)
On October 5, 2001, the Board of Directors of KOSAN
BIOSCIENCES INCORPORATED (the "Company") declared a dividend
of one preferred share purchase right (a "Right") for each
outstanding share of common stock, par value $.001 per share
(the "Common Shares"), of the Company. The dividend is
effective as of October 29, 2001 (the "Record Date") with
respect to the stockholders of record on that date. The Rights
will also attach to new Common Shares issued after the Record
Date. Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock, par value $.001 per
share (the "Preferred Shares"), of the Company at a price of
$70.00 per one one-hundredth of a Preferred Share (the
"Purchase Price"), subject to adjustment. Each Preferred Share
is designed to be the economic equivalent of 100 Common
Shares. The description and terms of the Rights are set forth
in a Rights Agreement dated as of October 5, 2001 (the "Rights
Agreement"), between the Company and Mellon Investor Services
LLC (the "Rights Agent").
DETACHMENT AND TRANSFER OF RIGHTS
Initially, the Rights will be evidenced by the stock
certificates representing Common Shares then outstanding, and
no separate Right Certificates will be distributed. Until the
earlier to occur of (i) a public announcement that a person or
group of affiliated or associated persons, has become an
"Acquiring Person" (as such term is defined in the Rights
Agreement) or (ii) 10 business days (or such later date as the
Board may determine) following the commencement of, or
announcement of an intention to make, a tender offer or
exchange offer which would result in the beneficial ownership
by an Acquiring Person of 20% or more of the outstanding
Common Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as
of the Record Date, by such Common Share certificate. In
general, an "Acquiring Person" is a person, the affiliates or
associates of such person, or a group, which has acquired
beneficial ownership of 20% or more of the outstanding Common
Shares.
The Rights Agreement provides that, until the Distribution
Date (or earlier redemption or expiration of the Rights), the
Rights will be transferable with and only with the Common
Shares. Until the Distribution Date (or earlier redemption or
expiration of the Rights), new Common Share
iii.
certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation
incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the
Rights) the surrender or transfer of any certificates for
Common Shares outstanding as of the Record Date, even without
such notation or a copy of this Summary of Rights being
attached thereto, will also constitute the transfer of the
Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution
Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution
Date and such separate Right Certificates alone will evidence
the Rights.
EXERCISABILITY OF RIGHTS
The Rights are not exercisable until the Distribution Date.
The Rights will expire on October 29, 2011 (the "Final
Expiration Date"), unless the Final Expiration Date is
extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.
The Purchase Price payable, and the number of Preferred Shares
or other securities or property issuable or payable, upon
exercise of the Rights are subject to adjustment from time to
time to prevent dilution. The number of outstanding Rights and
the number of one one-hundredths of a Preferred Share issuable
upon exercise of each Right are also subject to adjustment in
the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares, or
subdivisions, consolidations or combinations of the Common
Shares occurring, in any such case, prior to the Distribution
Date. With certain exceptions, no adjustment in the Purchase
Price will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price. No
fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of
a Preferred Share, which may, at the election of the Company,
be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of
the Preferred Shares on the last trading day prior to the date
of exercise.
TERMS OF PREFERRED SHARES
Preferred Shares purchasable upon exercise of the Rights will
not be redeemable. Each Preferred Share will be entitled to a
minimum preferential quarterly dividend payment of $l per
share but will be entitled to an aggregate dividend of 100
times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will
C-2
be entitled to a minimum preferential liquidation payment of
$100 per share but will be entitled to an aggregate payment of
100 times the payment made per Common Share. Each Preferred
Share will have 100 votes, voting together with the Common
Shares. Finally, in the event of any merger, consolidation or
other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 100 times the
amount received per Common Share. These rights are protected
by customary anti-dilution provisions. Because of the nature
of the Preferred Shares' dividend, liquidation and voting
rights, the value of the one one-hundredth interest in a
Preferred Share purchasable upon exercise of each Right should
approximate the value of one Common Share. The Preferred
Shares would rank junior to any other series of the Company's
preferred stock.
TRIGGER OF FLIP-IN AND FLIP-OVER RIGHTS
In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other
than Rights beneficially owned by the Acquiring Person or any
affiliate or associate thereof (which will thereafter be
void), will thereafter have the right to receive upon exercise
that number of Common Shares having a market value of two
times the exercise price of the Right. This right will
commence on the date of public announcement that a person has
become an Acquiring Person (or the effective date of a
registration statement relating to distribution of the rights,
if later) and terminate 60 days later (subject to adjustment
in the event exercise of the rights is enjoined).
In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its
consolidated assets or earning power are sold to an Acquiring
Person, its affiliates or associates or certain other persons
in which such persons have an interest, proper provision will
be made so that each such holder of a Right will thereafter
have the right to receive, upon the exercise thereof at the
then current exercise price of the Right, that number of
shares of common stock of the acquiring company which at the
time of such transaction will have a market value of two times
the exercise price of the Right.
REDEMPTION AND EXCHANGE OF RIGHTS
At any time prior to the earliest of (i) the close of business
on the day of the first public announcement that a person has
become an Acquiring Person or (ii) the Final Expiration Date,
the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.001 per Right (the
"Redemption Price"). In general, the redemption of the Rights
may be made effective at such time on such basis with such
conditions as the Board of Directors in its sole discretion
may establish Immediately upon any redemption of the Rights,
the right to exercise the
C-3
Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
At any time after any Person becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or
more of the outstanding Common Shares, the Board of Directors
of the Company may exchange the Rights (other than Rights
owned by such person or group which will have become void), in
whole or in part, at an exchange ratio of one Common Share,
or, under circumstances set forth in the Rights Agreement,
cash, property or other securities of the Company, including
fractions of a Preferred Share (or of a share of a class or
series of the Company's preferred stock having equivalent
designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions), per Right (with
value equal to such Common Shares).
AMENDMENT OF RIGHTS
The terms of the Rights generally may be amended by the Board
of Directors of the Company without the consent of the holders
of the Rights, except that from and after such time as the
Rights are distributed no such amendment may adversely affect
the interests of the holders of the Rights (excluding the
interest of any Acquiring Person).
ADDITIONAL INFORMATION
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Current
Report on Form 8-K dated October ___, 2001. A copy of the
Rights Agreement is available from the Company by writing to:
Kosan Biosciences Incorporated, 3832 Bay Center Place,
Hayward, California 94545, Attn: Investor Relations. This
summary description of the Rights is not intended to be
complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by
reference.
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