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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 2, 1998
ARADIGM CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation)
0-28402 94-3133088
(Commission File No.) (IRS Employer Identification No.)
26219 EDEN LANDING ROAD
HAYWARD, CALIFORNIA 94545
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (510) 783-0100
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Item 5. Other Events.
On August 4, 1998 the Board of Directors of Aradigm Corporation
(the "Company") approved the adoption of a Share Purchase Rights Plan (the
"Plan"). Terms of the Plan provide for a dividend distribution of one preferred
share purchase right (a "Right") for each outstanding share of common stock,
without par value per share (the "Common Shares"), of the Company. The dividend
is payable on September 8, 1998 (the "Record Date") to the shareholders of
record on that date. Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, without par value per share (the "Preferred Shares"), at a
price of $65 per one one-hundredth of a Preferred Share (the "Purchase Price"),
subject to adjustment. Each one one-hundredth of a share of Preferred Shares has
designations and powers, preferences and rights, and the qualifications,
limitations and restrictions which make its value approximately equal to the
value of a Common Share. The description and terms of the Rights are set forth
in a Rights Agreement (the "Rights Agreement"), dated as of August 31, 1998
entered into between the Company and BankBoston, N.A., as rights agent (the
"Rights Agent").
Initially, the Rights will be evidenced by the stock certificates
representing the Common Shares then outstanding, and no separate Right
Certificates (as defined in the Rights Agreement) will be distributed. Until the
earlier to occur of (i) the date of a public announcement that a person, entity
or group of affiliated or associated persons have acquired beneficial ownership
of 15% or more of the outstanding Common Shares (an "Acquiring Person") or (ii)
10 business days (or such later date as may be determined by action of the Board
of Directors prior to such time as any person or entity becomes an Acquiring
Person) following the commencement of, or announcement of an intention to
commence, a tender offer or exchange offer the consummation of which would
result in any person or entity becoming an Acquiring Person (the earlier of such
dates being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Record
Date, by such Common Share certificate with or without a copy of the Summary of
Rights, which is included in the Rights Agreement as Exhibit C thereof (the
"Summary of Rights").
Until the Distribution Date, the Rights will be transferable with
and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date, upon transfer or new issuance of Common Shares, will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender or transfer of any certificates for Common Shares outstanding as of
the Record Date, even without such notation or a copy of the 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.
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The Rights are not exercisable until the Distribution Date. The
Rights will expire on September 8, 2008 (the "Final Expiration Date"), unless
the Rights are earlier redeemed or exchanged by the Company, in each case, as
described below.
The Purchase Price payable, and the number of Preferred Shares or
other securities or other property, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above). The exercise of Rights
for Preferred Shares is at all times subject to the availability of a sufficient
number of authorized but unissued Preferred Shares.
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,
consolidation or combinations of the Common Shares occurring, in any case, prior
to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not
be redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1.00 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 would be entitled to a minimum
preferential liquidation payment of $100 per share, but would be entitled to
receive an aggregate payment equal to 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 of consideration received per Common Share. These
rights are protected by customary anti-dilution provisions. Because of the
nature of the Preferred Shares' dividend and liquidation rights, the value of
one one-hundredth of a Preferred Share should approximate the value of one
Common Share. The Preferred Shares would rank junior to any other series of the
Company's preferred stock.
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
and its associates and affiliates (which will thereafter be void), will for a
60-day period 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 (or,
if such number of shares is not and cannot be authorized, the Company may issue
Preferred Shares, cash, debt, stock or a combination thereof in exchange for the
Rights). This right will terminate 60 days after the date on which the Rights
become nonredeemable (as described below), unless
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there is an injunction or similar obstacle to exercise of the Rights, in which
event this right will terminate 60 days after the date on which the Rights again
become exercisable.
Generally, under the Plan, an "Acquiring Person" shall not be
deemed to include (i) the Company, (ii) a subsidiary of the Company, (iii) any
employee benefit or compensation plan of the Company, or (iv) any entity holding
Common Shares for or pursuant to the terms of any such employee benefit or
compensation plan. In addition, except under limited circumstances, no person or
entity shall become an Acquiring Person as the result of the 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 or entity to 15% or more of the Common Shares then outstanding.
Further, except under certain circumstances, no person shall become an Acquiring
Person due to the acquisition of Common Shares directly from the Company.
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 associates or affiliates or
certain other persons in which such persons have an interest, proper provision
will be made so that each holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right.
At any time after an Acquiring Person becomes an Acquiring Person
and prior to the acquisition by such Acquiring Person 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 have become
void), in whole or in part, at an exchange ratio of one Common Share, or one
one-hundredth of a Preferred Share, per Right (or, at the election of the
Company, the Company may issue cash, debt, stock or a combination thereof in
exchange for the Rights), subject to adjustment.
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 the number of one one-hundredths of a
Preferred Share issuable upon the exercise of one Right, which may, at the
election of the Company, be evidenced by depositary receipts), and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Shares on the last trading day prior to the date of exercise.
At any time prior to the earliest of (i) 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"). Following the expiration of the above periods, the Rights become
nonredeemable. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
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The terms of the Rights may be amended by the Board of Directors
of the Company without the consent of the holders of the Rights, except that
from and after such time as the rights are distributed no such amendment may
adversely affect the interest of the holders of the Rights excluding the
interests of an Acquiring Person.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a shareholder of the Company, including, without limitation,
the right to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will
cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Company's Board of Directors. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors since the Rights may be amended to permit such
acquisition or redeemed by the Company at $.001 per Right prior to the earliest
of (i) the time that a person or group has acquired beneficial ownership of 15%
or more of the Common Shares or (ii) the final expiration date of the rights.
Item 7. Exhibits.
99.1 Press Release, dated as of September 2, 1998.
99.2 Rights Agreement dated as of August 31, 1998 among Aradigm
Corporation and BankBoston, N.A..
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ARADIGM CORPORATION
Dated: August 31, 1998 By: /s/ Mark A. Olbert
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Mark A. Olbert
Title: Vice President, Finance and
Administration and Chief
Financial Officer
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INDEX TO EXHIBITS
99.1 Press Release, dated as of September 2, 1998.
99.2 Rights Agreement dated as of August 31, 1998 among Aradigm
Corporation and BankBoston, N.A.
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