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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
ALZA CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 77-0142070
- ----------------------------------------- -------------------------------------
(State of incorporation or organization) (I.R.S. Employer Identification No.)
1900 Charleston Road
Mountain View, California 94043
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(Address of principal executive offices and zip code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- --------------------- --------------------------------
Not Applicable New York Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Share Purchase Rights
Pursuant to Rights Agreement
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(Title of Class)
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Item 1. Description of Securities to be Registered.
------------------------------------------
On December 17, 1999, the Board of Directors (the "Board") of ALZA
Corporation (the "Corporation") declared a dividend distribution of one
preferred share purchase right (a "Right") for each outstanding share of Common
Stock, par value $.01 (the "Common Stock"), of the Corporation. The dividend is
payable to the stockholders of record on January 5, 1999 (the "Record Date")
with respect to shares of Common Stock outstanding on the Record Date or issued
thereafter until the Distribution Date (as defined below) and, in certain
circumstances, with respect to shares of Common Stock issued after the
Distribution Date. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Corporation one
one ten-thousandth (1/10,000th) of a share of Preferred Stock of the
Corporation, $.01 par value per share (the "Preferred Stock"), at a price of
$200 per one one ten-thousandth (1/10,000th) of a share of Series RP Preferred
Stock (the "Purchase Price"), subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Corporation and BankBoston, N.A., as Rights Agent (the "Rights
Agent"), dated as of December 17, 1999.
Initially, the Rights will be attached to certificates representing shares
of Common Stock then outstanding, and no separate certificates representing the
Rights ("Right Certificates") will be distributed. The Rights will separate
from the Common Stock upon the earlier to occur of (i) a person or group of
affiliated or associated persons having acquired, without the prior approval of
the Board, beneficial ownership of 15% or more of the outstanding shares of
Common Stock or (ii) 10 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 the consummation of which would result in a person or
group of affiliated or associated persons becoming an Acquiring Person (as
hereinafter defined) except pursuant to a Permitted Offer (as hereinafter
defined) (the "Distribution Date"). A person or group whose acquisitions of
shares of Common Stock cause a Distribution Date pursuant to clause (i) above is
an "Acquiring Person," with certain exceptions as set forth in the Rights
Agreement. The date that a person or group is first publicly announced to have
become such by the Corporation or such Acquiring Person is the "Shares
Acquisition Date."
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the associated shares of Common Stock.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
new Common Stock certificates issued after the Record Date upon transfer or new
issuance of shares of Common Stock will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for shares of Common Stock outstanding as of the Record Date, even
without attaching thereto such notation or a copy of the Summary
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of Rights attached to the Rights Agreement as Exhibit C, will also constitute
the transfer of the Rights associated with the shares of Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, Right Certificates will be mailed to the holders of record of
shares of the Common Stock as of the Close of Business (as defined in the Rights
Agreement) on the Distribution Date (and to each initial record holder of
certain shares of Common Stock issued after the Distribution Date), and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 17, 2009, unless earlier redeemed by the
Corporation as described below.
In the event that any person becomes an Acquiring Person (except pursuant
to a tender or exchange offer which is for all outstanding shares of Common
Stock at a price and on terms which a majority of certain members of the Board
determines to be adequate and in the best interests of the Corporation, its
stockholders and other relevant constituencies, other than such Acquiring
Person, its affiliates and associates (a "Permitted Offer")), each holder of a
Right will thereafter have the right (the "Flip-In Right") to receive upon
exercise the number of shares of Common Stock (or, in certain circumstances, of
one ten-thousandths (1/10,000ths) of a share of Preferred Stock or other
securities of the Corporation) having a value (immediately prior to such
triggering event) equal to two times the then-applicable Purchase Price of the
Right. Notwithstanding the foregoing, following the occurrence of the event
described above, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person or any
affiliate or associate thereof will be null and void. The Board has the option,
at any time after any person becomes an Acquiring Person, to exchange all or
part of the then-exercisable Rights (excluding those that have become void, as
described in the immediately preceding sentence) for shares of Common Stock, at
an exchange ratio determined by dividing the then-applicable Purchase Price by
the then-current market price per share of Common Stock as determined in
accordance with the Rights Agreement. However, this option generally terminates
if any person becomes the beneficial owner of 50% or more of the Common Stock.
In the event that, at any time following the Shares Acquisition Date, (i)
the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding shares of Common
Stock immediately prior to the consummation of the transaction are not the
holders of all of the surviving corporation's voting power, or (ii) more than
50% of the Corporation's assets or earning power is sold or transferred, in
either case with or to (x) an Acquiring Person or any affiliate or associate
thereof or (y) any other person in which such Acquiring Person, affiliate or
associate has an interest or any person acting on behalf of or in concert with
such Acquiring Person, affiliate or associate, or (z) if, in such transaction,
all holders of shares
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of Common Stock are not treated alike, any other person, then each holder of a
Right (except Rights which previously have been voided as set forth above) shall
thereafter have the right (the "Flip-Over Right") to receive, upon exercise,
common shares of the acquiring company (or, in certain circumstances, its
parent) having a value equal to two times the exercise price of the Right. The
holder of a Right will continue to have the Flip-Over Right whether or not such
holder exercises or surrenders the Flip-In Right.
The Purchase Price payable, and the number of shares of Preferred Stock,
shares of Common Stock or other securities issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Preferred Stock, (ii) upon the grant to holders of shares of the Preferred
Stock of certain rights or warrants to subscribe for or purchase shares of
Preferred Stock at a price, or securities convertible into Preferred Stock with
a conversion price, less than the then current market price of the Preferred
Stock or (iii) upon the distribution to holders of shares of the Preferred Stock
of evidences of indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other than those referred to
above).
The number of outstanding Rights and the number of one one ten-thousandths
(1/10,000ths) of a share of Preferred Stock issuable upon exercise of each Right
are also subject to adjustment in the event of a stock split of the Common Stock
or a stock dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock 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.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, and under certain other
circumstances, the Corporation may redeem the Rights in whole, but not in part,
at a price (payable in cash or, at the Corporation's election, in Common Stock)
of $.001 per Right (the "Redemption Price"), which redemption shall be effective
upon the action of the Board. Additionally, following the Shares Acquisition
Date, the Corporation may redeem the then outstanding Rights in whole, but not
in part, at the Redemption Price, provided that such redemption is in connection
with a merger or other business combination transaction or series of
transactions involving the Corporation in which all holders of shares of Common
Stock are treated alike but not involving an Acquiring Person or its affiliates
or associates.
Other than those provisions relating to the rights, duties and obligations
of the Rights Agent and certain principal economic terms of the Rights, all of
the provisions of the Rights Agreement may be amended by the Board prior to the
Distribution Date. After
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the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, defect or inconsistency, to make
changes that do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or, subject to certain
limitations, to shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders of the Corporation, stockholders may,
depending upon the circumstances, recognize taxable income should the Rights
become exercisable or upon the occurrence of certain events thereafter.
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
As of December 17, 1999, there were 102,163,171 shares of Common Stock
outstanding. Each share of Common Stock outstanding on the Record Date will
receive one Right. As long as the Rights are attached to the shares of Common
Stock, the Corporation will issue one Right with each new share of Common Stock
so that all such shares will have attached rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Corporation without conditioning the offer on the Rights being redeemed or a
substantial number of Rights being acquired. However, the Rights should not
interfere with any tender offer or merger approved by the Corporation (other
than with an Acquiring Person) because the Rights do not become exercisable in
the event of a Permitted Offer or other acquisition exempted by the Board.
Attached hereto as Exhibit 4.1 and incorporated herein by reference are
copies of the Rights Agreement and the exhibits thereto, as follows: Exhibit A
- -- Form of Certificate of Designation, Preferences and Rights of Series RP
Preferred Stock of ALZA Corporation; Exhibit B -- Form of Right Certificate; and
Exhibit C -- Summary of Rights to Purchase Series RP Preferred Stock. The
foregoing description of the Rights is qualified in its entirety by reference to
the Rights Agreement and such exhibits thereto.
Item 2. Exhibits.
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4.1 Rights Agreement, dated as of December 17, 1999, between ALZA
Corporation and BankBoston, N.A. as Rights Agent, which includes: as
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Exhibit A thereto, the Form of Certificate of Designation, Preferences
and Rights of Series RP Preferred Stock of ALZA Corporation; Exhibit B
thereto, the Form of Right Certificate; and, as Exhibit C thereto, the
Summary of Rights to Purchase Series RP Preferred Stock.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
ALZA CORPORATION
By: /s/ Bruce C. Cozadd
--------------------------------
Bruce C. Cozadd
Senior Vice President and Chief
Financial Officer
Date: December 20, 1999
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EXHIBIT INDEX
Exhibit Description
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4.1 Rights Agreement, dated as of December 17, 1999, between
ALZA Corporation and BankBoston, N.A. as Rights Agent,
which includes: as Exhibit A thereto, the Form of
Certificate of Designation, Preferences and Rights of
Series RP Preferred Stock of ALZA Corporation; as Exhibit B
thereto, the Form of Right Certificate; and, as Exhibit C
thereto, the Summary of Rights to Purchase Series RP Preferred
Stock.
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EXHIBIT 4.1
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ALZA CORPORATION
and
BANKBOSTON, N.A., AS RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF DECEMBER 17, 1999
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<TABLE>
<S> <C>
1. Certain Definitions......................................................................... 1
2. Appointment Of Rights Agent................................................................. 6
3. Issuance Of Right Certificates.............................................................. 7
4. Form Of Right Certificate................................................................... 9
5. Countersignature And Registration........................................................... 9
6. Transfer, Split-Up, Combination And Exchange Of Right Certificates; Mutilated, Destroyed,
Lost Or Stolen Right Certificates.......................................................... 10
7. Exercise Of Rights; Purchase Price; Expiration Date Of Rights............................... 11
8. Cancellation And Destruction Of Right Certificates.......................................... 13
9. Reservation And Availability Of Preferred Stock............................................. 14
10. Preferred Stock Record Date................................................................. 15
11. Adjustment Of Purchase Price, Number And Kind Of Shares Or Number Of Rights................. 15
12. Certificate Of Adjusted Purchase Price Or Number Of Shares.................................. 22
13. Consolidation, Merger Or Sale Or Transfer Of Assets Or Earning Power........................ 23
14. Fractional Rights And Fractional Shares..................................................... 25
15. Rights Of Action............................................................................ 27
16. Agreement Of Right Holders.................................................................. 27
17. Right Certificate Holder Not Deemed A Stockholder........................................... 28
18. Concerning The Rights Agent................................................................. 28
19. Merger Or Consolidation Or Change Of Name Of Rights Agent................................... 29
</TABLE>
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<TABLE>
<S> <C>
20. Duties Of Rights Agent...................................................................... 30
21. Change Of Rights Agent...................................................................... 32
22. Issuance Of New Right Certificates.......................................................... 33
23. Redemption And Termination.................................................................. 34
24. Notice Of Certain Events.................................................................... 35
25. Miscellaneous............................................................................... 36
26. Exchange.................................................................................... 39
</TABLE>
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RIGHTS AGREEMENT
This RIGHTS AGREEMENT (this "Agreement") is made as of this 17th day of
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December, 1999 by and between ALZA Corporation, a Delaware corporation (the
"Corporation"), and BankBoston, N.A., a national banking association (the
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"Rights Agent"), with respect to the following facts and circumstances.
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A. The Board of Directors of the Corporation has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each share of
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Common Stock (as hereinafter defined) of the Corporation outstanding at the
Close of Business (as hereinafter defined) on January 5, 2000 (the "Record
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Date"), each Right representing the right to purchase one ten-thousandth
- ----
(1/10,000th) of a share of Preferred Stock (as hereinafter defined), upon the
terms and subject to the conditions herein set forth.
B. The Board of Directors of the Corporation has further authorized and
directed the issuance of one Right with respect to each share of Common Stock
that shall become outstanding between the Record Date and the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may be issued
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with respect to shares of Common Stock 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 of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein set forth, the parties hereby agree as follows:
1. Certain Definitions.
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For purposes of this Agreement, the following terms have the meanings
indicated:
1.1. "Acquiring Person" means any Person who or which, together with
----------------
all Affiliates and Associates of such Person, without the prior approval of the
Corporation's Board of Directors, shall be the Beneficial Owner of 15% or more
of the then outstanding shares of Common Stock (other than as a result of a
Permitted Offer) or was such a Beneficial Owner at any time after the date
hereof, whether or not such person continues to be the Beneficial Owner of 15%
or more of the then outstanding shares of Common Stock. Notwithstanding the
foregoing: (A) the term "Acquiring Person" shall not include (i) the
Corporation, (ii) any Subsidiary of the Corporation, (iii) any employee benefit
plan of the Corporation or of any Subsidiary of the Corporation, (iv) any Person
or entity organized, appointed or established by the Corporation or any
Subsidiary of the Corporation for or pursuant to the terms of any such plan, or
(v) any Person who or which, together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 15% or more of the then outstanding
shares of Common Stock as a result of the acquisition of shares of Common Stock
directly from the Corporation; and (B) no Person shall be deemed to be an
"Acquiring Person" either (i) as a result of the acquisition of
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Common Stock by the Corporation which, by reducing the number of shares of
Common Stock outstanding, increases the proportional number of shares
beneficially owned by such Person together with all Affiliates and Associates of
such Person; provided, however, that if (X) a Person would become an Acquiring
-------- -------
Person (but for the operation of this subclause (B)(i)) as a result of the
acquisition of shares of Common Stock by the Corporation, and (Y) after such
share acquisition by the Corporation, such Person, or an Affiliate or Associate
of such Person, becomes the Beneficial Owner of any additional shares of Common
Stock, then such Person shall be deemed an Acquiring Person, or (ii) if (X)
within eight (8) days after such Person would otherwise have become an Acquiring
Person (but for the operation of this subclause (B)(ii)), such Person notifies
the Board of Directors of the Corporation that such Person did so inadvertently
and (Y) within two (2) Business Days (as defined in Section 1.8 hereof) after
such notification, such Person is the Beneficial Owner of shares representing
less than 15% of the Voting Power; further provided, that neither Abbott
------- --------
Laboratories Corporation ("Abbott") nor any of its Affiliates shall be an
Acquiring Person solely by reason of having executed and delivered and being a
party to, that certain Agreement and Plan of Merger, dated as of June 21, 1999,
among the Corporation, Abbott and AC Merger Sub Inc. or by reason of the
existence of such agreement.
1.2. "Act" means the Securities Act of 1933, as amended.
---
1.3. "Adjusted Number of Shares" and "Adjusted Purchase Price" have
------------------------- -----------------------
the respective meanings set forth in Section 11.1.3 hereof.
1.4. "Adjustment Shares" has the meaning set forth in Section
-----------------
11.1.2 hereof.
1.5. "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
1.6. The term "current per share market price" shall have the meaning
------------------------------
set forth in Section 11.4.1 hereof when used with respect to a "Security" (as
defined in said Section 11.4.1) and shall have the meaning set forth in Section
11.4.2 when used with respect to the Preferred Stock.
1.7. A Person is the "Beneficial Owner" of and "beneficially owns"
---------------- -----------------
any securities which:
1.7.1. such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
<PAGE>
1.7.2. 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, or upon the exercise of conversion rights,
exchange rights, rights (other than the 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
1.7.3. are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any agreement, arrangement or
understanding relating to the acquisition, holding, voting (except to the extent
contemplated by the proviso to subclause (B) of Section 1.7.2), or disposing of
any securities of the Corporation.
Notwithstanding anything in this Section 1.7 to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Corporation, 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.
Notwithstanding anything in this Section 1.7 to the
contrary, no Person shall be deemed to beneficially own any securities solely by
reason of such Person being a party to a customary agreement pursuant to which
such Person acts or agrees to act as an underwriter with respect to a bona fide
public offering of securities.
No decision reached, or action taken, by the Board of
Directors of the Corporation or any committee thereof shall cause any Person (or
any Affiliate or Associate of such Person) who is a member of the Board of
Directors of the Corporation or such committee to be deemed, for the purposes of
this Agreement, to be a Beneficial Owner of any securities beneficially owned by
any other Person (or any Affiliate or Associate of such Person) who is a member
of the Board of Directors of the Corporation or any committee thereof solely by
reason of such membership of the Board of Directors or any committee thereof or
participation in the decisions or actions thereof on the part of either or both
of such Persons.
1.8. "Business Day" means any day other than a Saturday, a Sunday, a
------------
day on which banking institutions in the State of Massachusetts or the city in
which the office of the
<PAGE>
Rights Agent is located are obligated by law or executive order to close, or a
United States federal holiday.
1.9. "Capital Stock Equivalents" has the meaning set forth in Section
-------------------------
11.1.3 hereof.
1.10. "Close of Business" on any given date means 5:00 P.M., Eastern
-----------------
time, on such date; provided, however, that if such date is not a Business Day
-------- -------
it means 5:00 P.M., Eastern time, on the next succeeding Business Day.
1.11. "Common Stock" when used with reference to the Corporation means
------------
the Common Stock of the Corporation or, in the event of a subdivision,
combination or consolidation with respect to such shares of Common Stock, the
shares of Common Stock resulting from such subdivision, combination or
consolidation. "Common Stock" when used with reference to any Person other than
the Corporation means 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.
1.12. "Corporation" means ALZA Corporation, a Delaware corporation, and
-----------
also means a Principal Party to the extent provided in Section 13.1 hereof.
1.13. "Distribution Date" has the meaning set forth in Section 3.1
-----------------
hereof.
1.14. "Equivalent Preferred Stock" has the meaning set forth in Section
--------------------------
11.2 hereof.
1.15. "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
1.16. "Exchange Ratio" has the meaning set forth in Section 26.1
--------------
hereof.
1.17. "Final Expiration Date" has the meaning set forth in Section 7.1
---------------------
hereof.
1.18. "Interested Stockholder" means any Acquiring Person or any
----------------------
Affiliate or Associate of an Acquiring Person or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
<PAGE>
1.19. "NASDAQ" has the meaning set forth in Section 11.4.1 hereof.
------
1.20. "Permitted Offer" means a tender or exchange offer which is for
---------------
all outstanding shares of Common Stock of the Corporation at a price and on
terms determined, prior to the purchase of shares under such tender or exchange
offer, by at least a majority of the members of the Board of Directors who are
not officers of the Corporation and who are not Acquiring Persons or Affiliates,
Associates, nominees or representatives of an Acquiring Person, to be adequate
(taking into account all factors that such directors deem pertinent including,
without limitation, prices that could reasonably be achieved if the Corporation
or its assets were sold on an orderly basis designed to realize maximum value)
and otherwise in the best interests of the Corporation, its stockholders (other
than the Person or any Affiliate or Associate thereof on whose basis the offer
is being made) and other relevant constituencies, taking into account all
factors that such directors may deem pertinent.
1.21. "Person" means any individual, firm, partnership, corporation,
------
limited liability company, limited liability partnership, trust, association,
joint venture or other entity, and includes any successor (by merger or
otherwise) of such entity.
1.22. "Preferred Stock" means shares of the Corporation's Series RP
---------------
Preferred Stock, par value $0.01 per share, having the relative rights,
preferences and limitations set forth in the Form of Certificate of Designation,
Preferences and Rights of Series RP Preferred Stock attached to this Agreement
as Exhibit A.
1.23. "Principal Party" has the meaning set forth in Section 13.2
---------------
hereof.
1.24. "Proration Factor" has the meaning set forth in Section 11.1.3
----------------
hereof.
1.25. "Purchase Price" has the meaning set forth in Section 4.1 hereof.
--------------
1.26. "Record Date" has the meaning set forth in Recital A hereof.
-----------
1.27. "Redemption Date" has the meaning set forth in Section 7.1
---------------
hereof.
1.28. "Redemption Price" has the meaning set forth in Section 23.1.1
----------------
hereof.
1.29. "Right Certificate" has the meaning set forth in Section 3.1
-----------------
hereof.
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1.30. "Rights" has the meaning set forth in Recital A hereof.
------
1.31. "Rights Agent" means BankBoston, N.A., a national banking
------------
association, as Rights Agent hereunder, and, from the time of its succession,
any successor Rights Agent under Section 19 or Section 21 hereof.
1.32. "Section 11.1.2 Event" has the meaning set forth in Section
--------------------
11.1.2 hereof.
1.33. "Section 13 Event" means any event described in clause (x), (y)
----------------
or (z) of Section 13.1 hereof.
1.34. "Shares Acquisition Date" means the first date of public
-----------------------
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring Person has become such or that facts exist
as a result of which there exists an Acquiring Person; provided, that, if such
--------
Person is determined by the Board of Directors of the Corporation not to have
become an Acquiring Person pursuant to subclause (B)(ii) of Section 1.1 hereof,
then no Shares Acquisition Date shall be deemed to have occurred.
1.35. "Subsidiary" of any Person means any corporation or other Person
----------
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
1.36. "Summary of Rights" has the meaning set forth in Section 3.2
-----------------
hereof.
1.37. "Trading Day" has the meaning set forth in Section 11.4.1 hereof.
-----------
1.38. "Triggering Event" means any Section 11.1.2 Event or any Section
----------------
13 Event.
1.39. The term "voting securities" has the meaning set forth in Section
-----------------
13.1 hereof.
2. Appointment of Rights Agent.
---------------------------
2.1. The Corporation hereby appoints the Rights Agent to act as agent
for the Corporation in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Corporation may from time to
time appoint such co-Rights
<PAGE>
Agents as it may deem necessary or desirable, upon ten (10) days' prior written
notice to the Rights Agent. The Rights Agent shall have no duty to supervise,
and in no event shall be liable for, the acts or omissions of any such co-Rights
Agent.
3. Issuance of Right Certificates.
------------------------------
3.1. Until the earlier of (i) the Shares Acquisition Date or (ii) the
Close of Business on the tenth (10th) day (or such later date as may be
determined by action of the Corporation's Board of Directors) after the date of
the commencement by any Person (other than the Corporation, any Subsidiary of
the Corporation, any employee benefit plan of the Corporation or of any
Subsidiary of the Corporation or any Person or entity organized, appointed or
established by the Corporation or any Subsidiary of the Corporation for or
pursuant to the terms of any such plan) of, or after the date of the first
public announcement of the intention of any Person (other than the Corporation,
any Subsidiary of the Corporation, any employee benefit plan of the Corporation
or of any Subsidiary of the Corporation or any Person or entity organized,
appointed or established by the Corporation or any Subsidiary of the Corporation
for or pursuant to the terms of any such plan) to commence (which intention to
commence remains in effect for five (5) Business Days after such announcement),
a tender or exchange offer the consummation of which would result in any Person
becoming an Acquiring Person (including, in the case of both (i) and (ii), any
such date which is after the date of this Agreement and prior to the issuance of
the Rights) (the "Distribution Date"), (x) the Rights will be evidenced (subject
-----------------
to the provisions of Section 3.2 hereof) by the certificates for shares of
Common Stock 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 right to receive Right Certificates will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Corporation); provided, however, that
-------- -------
if a tender or exchange offer is terminated prior to the occurrence of a
Distribution Date, then no Distribution Date shall occur as a result of such
tender or exchange offer. As soon as practicable after the Distribution Date,
the Corporation will prepare and execute, the Rights Agent will countersign, and
the Corporation will send or cause to be sent by first-class, postage-prepaid
mail, to each record holder of shares of Common Stock as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Corporation, a Right Certificate, substantially in the form of
Exhibit B hereto (a "Right Certificate"), evidencing one Right for each share of
-----------------
Common Stock so held. As of and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
3.2. As promptly as practicable following the Record Date, the
Corporation will send a copy of a Summary of Rights to Purchase Preferred Stock,
in substantially the form of Exhibit C hereto (the "Summary of Rights"), by
-----------------
first-class, postage-prepaid mail, to each record holder of shares of Common
Stock as of the Close of Business on the Record Date, at the address of such
holder shown on the records of the Corporation. With respect to certificates
for shares of Common Stock 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
<PAGE>
together with a copy of the Summary of Rights attached thereto. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for shares of Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with such shares of Common Stock.
3.3. Certificates for shares of Common Stock that become outstanding
(including, without limitation, reacquired shares of Common Stock referred to in
the last sentence of this Section 3.3) after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date, shall be deemed also to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agreement
between ALZA Corporation and BankBoston, N.A., a national
banking association, as Rights Agent, dated as of December
17, 1999 (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 ALZA
Corporation. 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. ALZA Corporation will mail to the holder
of this certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor. Under
certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and certain
related persons, whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and
void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date the Rights associated with the shares of Common Stock
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 shares of Common Stock represented
thereby. In the event that the Corporation purchases or acquires any shares of
Common Stock after the Record Date but prior to the Distribution Date (or the
earlier of the Redemption Date or the Final Expiration Date), any Rights
associated with such shares of Common Stock shall be deemed canceled and retired
so that the Corporation shall not be entitled to exercise any Rights associated
with the Common Stock that are no longer outstanding.
<PAGE>
4. Form of Right Certificate.
-------------------------
4.1. The Right Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall be substantially in
the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Corporation may deem appropriate (which may not affect the duties and
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 on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Right Certificates shall entitle the holders thereof
to purchase such number of one ten-thousandths (1/10,000ths) of a share of
Preferred Stock as shall be set forth therein at the price per one ten-
thousandth (1/10,000th) of a share of Preferred Stock set forth therein in
accordance with Section 7.2 hereof (the "Purchase Price"), but the amount and
--------------
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
4.2. Any Right Certificate issued pursuant to Section 3.1 or Section
22 hereof that represents Rights that are null and void pursuant to Section 7.6
of this Agreement 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 upon notice by the Corporation to the Rights Agent that this
Section 4.2 has become applicable) 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 7.6 of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Right Certificate.
5. Countersignature and Registration.
---------------------------------
5.1. The Right Certificates shall be executed on behalf of the
Corporation by its President or any Vice President and the Secretary or an
Assistant Secretary, either manually or by facsimile signature, shall have
affixed thereto the Corporation's seal or a facsimile thereof, and shall be
attested by the Secretary or an Assistant Secretary of the Corporation, either
manually or by facsimile signature. The Right Certificates shall be
countersigned, either manually or by facsimile signature, by the Rights Agent
and shall not be valid for any purpose
<PAGE>
unless so countersigned. In case any officer of the Corporation who shall have
signed any of the Right Certificates shall cease to be such officer of the
Corporation before countersignature by the Rights Agent and issuance and
delivery by the Corporation, such Right Certificates may nevertheless be
countersigned by the Rights Agent and issued and delivered by the Corporation
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Corporation; and any Right
Certificate may be signed on behalf of the Corporation by any Person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Corporation to sign such Right Certificate, although at the date
of the execution of this Rights Agreement any such Person was not such an
officer.
5.2. Following the Distribution Date, and receipt by the Rights Agent
of a list of record holders of Rights, the Rights Agent will keep or cause to be
kept, at its office designated pursuant to Section 25 hereof as the appropriate
place for surrender or transfer of the Right Certificates, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on the face of each of the Right
Certificates and the certificate number and the date of each of the Right
Certificates.
6. Transfer, Split-Up, Combination and Exchange of Right Certificates;
-------------------------------------------------------------------
Mutilated, Destroyed, Lost or Stolen Right Certificates.
-------------------------------------------------------
6.1. Subject to the provisions of Section 4.2, Section 7.6 and Section
14 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 ten-thousandths (1/10,000ths) of a share of Preferred Stock (or, following a
Triggering Event, other securities, as the case may be) as the Right Certificate
or Right Certificates surrendered then entitled such holder (or former holder in
the case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any 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 Corporation shall be obligated to take
any action whatsoever with respect to the transfer of any such surrendered Right
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Right Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Corporation or the Rights Agent shall reasonably
request. Thereupon the Rights Agent shall, subject to Section 4.2, Section 7.6
and Section 14 hereof, countersign and deliver to the Person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Corporation may require payment of a sum sufficient to cover any tax or
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates. The
<PAGE>
Rights Agent may in its sole discretion require the Corporation or the Person
entitled to such Right Certificate to provide evidence that such tax or charge
has been paid prior to countersigning and delivering any Right Certificate
pursuant to this Section 6.1.
6.2. Upon receipt by the Corporation and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Corporation's request,
reimbursement to the Corporation 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 Corporation will make 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.
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
7.1. Subject to Section 7.6 hereof, 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
and the certificate on the reverse side thereof duly and properly executed, to
the Rights Agent at the office of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price for the total number of
one ten-thousandths (1/10,000ths) of a share of Preferred Stock (or other
securities, as the case may be) as to which such surrendered Rights are
exercised, at or prior to the earlier to occur of (i) the Close of Business on
December 17, 2009 (the "Final Expiration Date"), or (ii) the time at which the
---------------------
Rights are redeemed as provided in Section 23 hereof (the "Redemption Date").
---------------
7.2. The Purchase Price for each one ten-thousandth (1/10,000th) of a
share of Preferred Stock pursuant to the exercise of a Right shall initially be
$200.00, shall be subject to adjustment from time to time as provided in the
next sentence and in Sections 11 and 13.1 hereof and shall be payable in
accordance with paragraph 7.3 below. Anything in this Agreement to the contrary
notwithstanding, in the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Corporation shall (i) declare or pay any
dividend on the Common Stock payable in Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then, in any
such case, each share of Common Stock outstanding following such subdivision,
combination or consolidation shall continue to have a Right associated therewith
and the Purchase Price following any such event shall be proportionately
adjusted to equal the result obtained by multiplying the Purchase Price
immediately prior to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of Common Stock outstanding immediately following the occurrence of
such event. The
<PAGE>
adjustment provided for in the preceding sentence shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
7.3. Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side thereof duly and properly executed, accompanied by payment of the Purchase
Price for the Preferred Stock (or other securities, as the case may be) 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 6 hereof
by certified check, cashier's check or money order payable to the order of the
Corporation, the Rights Agent shall thereupon promptly (i) (A) requisition from
any transfer agent of the Preferred Stock certificates for the number of shares
of Preferred Stock to be purchased, and the Corporation hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Corporation, in its sole discretion, shall have elected to deposit the Preferred
Stock issuable upon exercise of the Rights hereunder into a depositary,
requisition from the depositary agent depositary receipts representing such
number of one ten-thousandths (1/10,000ths) of a share of Preferred Stock as are
to be purchased (in which case certificates for the Preferred Stock represented
by such receipts shall be deposited by the transfer agent with the depositary
agent) and the Corporation will direct the depositary agent to comply with such
requests, (ii) when appropriate, requisition from the Corporation 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 thereof,
deliver such cash to or upon the order of the registered holder of such Right
Certificate. In the event that the Corporation is obligated to issue other
securities (including shares of Common Stock) of the Corporation pursuant to
Section 11.1 hereof, the Corporation will make all arrangements necessary so
that such other securities are available for distribution by the Rights Agent,
if and when necessary to comply with this Agreement.
7.4. In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11.1.2, 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 11.1.2 of the Rights Agreement and
if less 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 that continue to include the rights provided by
Section 11.1.2.
7.5. In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 6 and Section 14
hereof, or the Rights Agent shall place an appropriate notation on the Right
Certificate with respect to those Rights exercised.
<PAGE>
7.6. Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11.1.2 Event, any Rights
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person (or from
any Affiliate or Associate thereof) to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has a
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Directors of the Corporation has
determined is part of a plan, arrangement or understanding that has as a primary
purpose or effect the avoidance of this Section 7.6, 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 Corporation shall notify the Rights Agent when this
Section 7.6 applies and shall use all reasonable efforts to insure that the
provisions of this Section 7.6 and Section 4.2 hereof are complied with, but
neither the Corporation nor the Rights Agent shall have any liability to any
holder of Right Certificates or other Person as a result of the Corporation's
failure to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.
7.7. Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Corporation 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) properly completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Corporation or the Rights Agent shall reasonably
request.
8. Cancellation and Destruction of Right Certificates.
--------------------------------------------------
8.1. All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Corporation or to any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall
be cancelled by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by the provisions of this Rights Agreement. The
Corporation 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 Corporation otherwise than upon the exercise
thereof. The Rights Agent shall deliver all cancelled Right Certificates to the
Corporation, or shall, at the written request of the Corporation, destroy such
cancelled Right Certificates, and in such case shall deliver a certificate of
destruction thereof to the Corporation.
<PAGE>
9. Reservation and Availability of Preferred Stock.
-----------------------------------------------
9.1. The Corporation covenants and agrees that, at all times prior to
the occurrence of a Section 11.1.2 Event, it will cause to be reserved and kept
available out of its authorized and unissued Preferred Stock, or any authorized
and issued Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding Rights and, after the occurrence of a Section 11.1.2 Event, shall,
to the extent reasonably practicable, so reserve and keep available a sufficient
number of shares of Common Stock (and/or other securities) that may be required
to permit the exercise in full of the Rights pursuant to this Agreement.
9.2. So long as the shares of Preferred Stock (and, after the
occurrence of a Section 11.1.2 Event, shares of Common Stock or any other
securities) issuable upon the exercise of the Rights may be listed on any stock
exchange, the Corporation shall use its best efforts to cause, from and after
such time as the Rights become exercisable, all shares or other securities
reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
9.3. The Corporation covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock (or
shares of Common Stock and/or other securities, as the case may be) delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares or other securities (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and non-assessable shares
or securities.
9.4. The Corporation covenants and agrees that it will pay when due
and payable any and all taxes and charges that may be payable in respect of the
issuance or delivery of the Right Certificates or of any shares of Preferred
Stock (or shares of Common Stock and/or other securities, as the case may be)
upon the exercise of Rights. The Corporation 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 shares of Preferred Stock (or shares
of Common Stock and/or other securities, as the case may be) 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 shares of Preferred Stock (or shares of Common Stock
and/or other securities, as the case may be) 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 Corporation's reasonable satisfaction that
no such tax or charge is due.
<PAGE>
9.5. The Corporation shall use its best efforts to (i) file, as soon
as practicable following the Shares Acquisition Date, a registration statement
under the Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act and the rules and regulations thereunder)
until the date of the expiration of the period for exercise of the Rights
provided by Section 11.1.2. The Corporation will also take such action as may be
appropriate under the blue sky laws of the various states.
10. Preferred Stock Record Date.
---------------------------
10.1. Each Person in whose name any certificate for shares of
Preferred Stock (or shares of Common Stock and/or other securities, as the case
may be) is issued upon the exercise of Rights shall for all purposes be deemed
to have become the holder of record of the shares of Preferred Stock (or shares
of Common Stock and/or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable taxes and charges) was made; provided,
--------
however, that, if the date of such surrender and payment is a date upon which
- -------
the shares of Preferred Stock (or shares of Common Stock and/or other
securities, as the case may be) transfer books of the Corporation 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 shares of Preferred Stock (or shares of Common Stock and/or other
securities, as the case may be) transfer books of the Corporation are open.
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of
--------------------------------------------------------------------
Rights.
------
The Purchase Price, the number and kind of 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.
11.1. Adjustment Events.
-----------------
11.1.1. In the event the Corporation shall at any time after
the date of this Agreement (A) declare a dividend on the Preferred Stock payable
in Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller number of Preferred Stock or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing or surviving corporation),
except as otherwise provided in this Section 11.1 and Section 7.6 hereof, 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
<PAGE>
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 that, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books of the Corporation
were open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
-------- -------
be paid upon the exercise of one Right be less than the aggregate par value, if
any, of the shares of capital stock of the Corporation issuable upon exercise of
one Right. If an event occurs that would require an adjustment under both
Section 11.1.1 and Section 11.1.2, the adjustment provided for in this Section
11.1.1 shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11.1.2.
11.1.2. In the event (a "Section 11.1.2 Event") that any
--------------------
Person, alone or together with its Affiliates and Associates, shall become an
Acquiring Person, then proper provision shall be made so that each holder of a
Right (except as provided below and in Section 7.6 hereof) shall, for a period
of sixty (60) days (or such longer period as the Corporation's Board of
Directors may determine at any time prior to or during such period of sixty (60)
days) after the later of the occurrence of any such event or the effective date
of an appropriate registration statement under the Act pursuant to Section 9.5
hereof, have a right to receive, upon exercise thereof at a price equal to the
then current Purchase Price, in accordance with the terms of this Agreement,
such number of shares of Common Stock (or, in the discretion of the
Corporation's Board of Directors, one ten-thousandths (1/10,000ths) of a share
of Preferred Stock) as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the then number of one ten-thousandths
(1/10,000ths) of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11.1.2 Event, and (y)
dividing that product by 50% of the then current per share market price of the
Common Stock (determined pursuant to Section 11.4 hereof) on the date of such
first occurrence (such number of shares being referred to as the "Adjustment
----------
Shares"); 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 11.1.2.
11.1.3. In the event that there shall not be sufficient
treasury or authorized but unissued (and unreserved) Common Stock to permit the
exercise in full of the Rights in accordance with Section 11.1.2 and the Rights
become so exercisable (and the Board of Directors of the Corporation has not
determined to make the Rights exercisable solely into fractions of a share of
Preferred Stock), notwithstanding any other provision of this Agreement, to the
extent necessary and permitted by applicable law, each Right except as provided
below and in Section 7.6 hereof shall thereafter represent the right to receive,
upon exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, (x) a number of (or fractions of) shares of Common
Stock calculated by dividing the maximum number of shares of Common Stock that
may permissibly be issued by the number of outstanding Rights and (y) a number
of one ten-thousandths (1/10,000ths) of shares of Preferred Stock or a number
of, or fractions of, other equity securities of the Corporation (or, in the
discretion of the Board of Directors of the
<PAGE>
Corporation, debt) that the Board of Directors of the Corporation has determined
to have an aggregate current market value (determined pursuant to Section 11.1.1
and Section 11.1.2 hereof, to the extent applicable) equal to the difference
between (1) the aggregate current market value of the Adjustment Shares
(assuming such shares of Common Stock could be issued pursuant to Section 11.1.2
hereof) and (2) the aggregate current market value of the shares of Common Stock
issued in respect of such Right pursuant to the preceding clause (x) (such
number of, or fractions of, shares of Preferred Stock, debt or other equity
securities or debt of the Corporation being referred to as a "Capital Stock
-------------
Equivalent"); provided, however, if sufficient shares of Common Stock and/or
- ---------- -------- -------
Capital Stock Equivalents are unavailable, then the Corporation shall, to the
extent permitted by applicable law, take all such action as may be necessary to
authorize additional shares of Common Stock or Capital Stock Equivalents for
issuance upon exercise of the Rights, including the calling of a meeting of
stockholders; and provided, further, that if the Corporation is unable to cause
-------- -------
sufficient shares of Common Stock and/or Capital Stock Equivalents to be
available for issuance upon exercise in full of the Rights, then each Right
shall thereafter represent the right to receive the Adjusted Number of Shares
upon exercise at the Adjusted Purchase Price (as such terms are hereinafter
defined). As used herein, the term "Adjusted Number of Shares" shall be equal to
-------------------------
that number of (or fractions of) shares of Common Stock (and/or Capital Stock
Equivalents) equal to the product of (x) the number of Adjustment Shares and (y)
a fraction, the numerator of which is the number of shares of Common Stock
(and/or Capital Stock Equivalents) available for issuance upon exercise of the
Rights and the denominator of which is the aggregate number of Adjustment Shares
otherwise issuable upon exercise in full of all Rights (assuming there were a
sufficient number of shares of Common Stock available) (such fraction being
referred to as the "Proration Factor"). The "Adjusted Purchase Price" shall mean
---------------- -----------------------
the product of the Purchase Price and the Proration Factor. The Board of
Directors of the Corporation may, but shall not be required to, establish
procedures to allocate the right to receive shares of Common Stock and Capital
Stock Equivalents upon exercise of the Rights among holders of Rights.
11.2. In case the Corporation shall fix a record date for the issuance
of rights (other than the Rights), options or warrants to all holders of
Preferred Stock entitling them (for a period expiring within 60 calendar days
after such record date) to subscribe for or purchase shares of Preferred Stock
(or shares having the same rights, privileges and preferences as the Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred
--------------------------
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into shares of Preferred Stock or Equivalent Preferred
Stock) less than the then current per share market price of the Preferred Stock
(as determined pursuant to Section 11.4 hereof) 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 shares of Preferred
Stock outstanding on such record date plus the number of shares of Preferred
Stock that the aggregate offering price of the total number of shares of
Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current per share market price, and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date plus the number of additional shares of
Preferred Stock and/or Equivalent
<PAGE>
Preferred Stock 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, if any, of the shares of
capital stock of the Corporation 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
determined in good faith by the Board of Directors of the Corporation, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Preferred
Stock owned by or held for the account of the Corporation 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 that would then be in effect if such record
date had not been fixed.
11.3. In case the Corporation shall fix a record date for the making of
a distribution to all holders of the Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation 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 Stock) or subscription rights or warrants
(excluding those referred to in Section 11.2 hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the then current per share market price (as
determined pursuant to Section 11.4 hereof) of the Preferred Stock on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one share of Preferred Stock, and the denominator of which shall
be such current per share market price of the Preferred Stock; 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, if any, of the shares of
capital stock of the Corporation 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 that would then be in effect if such
record date had not been fixed.
11.4. Computation of "Current Per Share Market Price."
----------------------------------------------
11.4.1. For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11.4.1) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to and not including 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
<PAGE>
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 and prior to the expiration of thirty (30)
Trading Days after (but not including) 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, if the Security is
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
------
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Corporation. If on any such date no such market maker
is making a market in the Security, the fair value of the Security on such date
as determined in good faith by the Board of Directors of the Corporation shall
be used. 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.
11.4.2. For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Stock shall be determined in
accordance with the method set forth in Section 11.4.1. If the shares of
Preferred Stock are not publicly traded, the "current per share market price" of
the Preferred Stock shall be conclusively deemed to be the current per share
market price of the Common Stock as determined pursuant to Section 11.4.1
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by 10,000. If neither
the Common Stock nor the Preferred Stock are publicly held or so listed or
traded, "current per share market price" shall mean, with respect to the
Preferred Stock, the fair value per share as determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights.
11.5. Anything herein to the contrary notwithstanding, 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 that by reason of this Section 11.5 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
<PAGE>
or to the nearest one ten-thousandth (1/10,000th) of a share of Preferred
Stock or of any other share or security as the case may be. Notwithstanding the
first sentence of this Section 11.5, any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years from the date of
the transaction that mandates such adjustment or (ii) the Final Expiration Date.
11.6. If as a result of an adjustment made pursuant to Section 11.1.2
or Section 13.1 hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Corporation other
than Preferred Stock, thereafter the number of 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 Stock contained in Section 11.1 through 11.3,
inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Stock shall apply on like terms to any such other shares.
11.7. All Rights originally issued by the Corporation 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 ten-thousandths
(1/10,000ths) of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
11.8. The Corporation may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of one ten-thousandths (1/10,000ths) of a share of Preferred Stock
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 ten-thousandths (1/10,000ths) of a share of Preferred Stock 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 hundred-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 Corporation 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 deliver a copy of such public announcement to the Rights Agent. 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
ten (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 11.8, the Corporation 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 Corporation, 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 Corporation, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
<PAGE>
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
11.9. Irrespective of any adjustment or change in the Purchase Price or
the number of one ten-thousandths (1/10,000ths) of a share of Preferred Stock
issuable upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the number of
one ten-thousandths (1/10,000ths) of a share of Preferred Stock that were
expressed in the initial Right Certificates issued hereunder.
11.10. Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the number of one ten-
thousandths (1/10,000ths) of a share of Preferred Stock, share of Common Stock
or other securities issuable upon exercise of the Rights, the Corporation shall
take any corporate action that may, in the opinion of its counsel, be necessary
in order that the Corporation may validly and legally issue such number of fully
paid and non-assessable one ten-thousandths (1/10,000ths) of a share of
Preferred Stock, share of Common Stock or other securities at such adjusted
Purchase Price.
11.11. 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 Corporation may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
of the Preferred Stock, shares of Common Stock or other securities of the
Corporation, if any, issuable upon such exercise over and above the Preferred
Stock, shares of Common Stock or other securities of the Corporation, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Corporation 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 and shall deliver to the Rights Agent a notice
describing the terms of such due bill or other appropriate instrument.
11.12. Anything in this Section 11 to the contrary notwithstanding, the
Corporation 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 the Corporation in its sole discretion shall determine to be
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of Preferred Stock at less than the current
market price, (iii) issuance wholly for cash of Preferred Stock or securities
that by their terms are convertible into or exchangeable for Preferred Stock,
(iv) stock dividends or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Corporation to holders of its
Preferred Stock shall not be taxable to such holders.
<PAGE>
11.13. The Corporation covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Corporation in a transaction that does not violate
Section 11.14 hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Corporation in a transaction that does not violate Section
11.14 hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11.14 hereof), if (x)
at the time of or immediately after such consolidation, merger, sale or
transfer, there are any charter or bylaw provisions or any rights, warrants or
other instruments or securities outstanding or agreements in effect or other
actions taken that would materially 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, sale or transfer, the shareholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13.1 hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates. The
Corporation shall not consummate any such consolidation, merger, sale or
transfer unless prior thereto the Corporation and such other Person shall have
executed and delivered to the Rights Agent a supplemental agreement evidencing
compliance with this Section 11.13.
11.14. The Corporation covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section
25.2 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 otherwise eliminate
the benefits intended to be afforded by the Rights.
11.15. The exercise of Rights under Section 11.1.2 shall only result
in the loss of rights under Section 11.1.2 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.
12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
12.1. Whenever an adjustment is made as provided in Section 11 or
Section 13 hereof, the Corporation shall promptly (a) prepare a certificate
setting forth such adjustment and a brief, reasonably detailed statement of the
facts, computations and methodology accounting for such adjustment, (b) file
with the Rights Agent and with each transfer agent for the Common Stock and the
Preferred Stock a copy of such certificate and (c) if such adjustment is made
after the Distribution Date, mail a brief summary thereof to each holder of a
Right Certificate in accordance with Section 25.1 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, such adjustment unless and until it shall
have received such certificate.
<PAGE>
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
--------------------------------------------------------------------
13.1. In the event that, on or following the Shares Acquisition Date,
directly or indirectly, (x) the Corporation shall consolidate with, or merge
with and into, any Interested Stockholder or, if in such merger or consolidation
all holders of shares of Common Stock are not treated alike, any other Person,
(y) the Corporation shall consolidate with, or merge with, any Interested
Stockholder or, if in such merger or consolidation all holders of shares of
Common Stock are not treated alike, any other Person, and the Corporation shall
be the continuing or surviving corporation of such consolidation or merger
(other than, in a case of any transaction described in (x) or (y), a merger or
consolation that would result in all of the securities generally entitled to
vote in the election of directors of the Corporation ("voting securities")
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 securities of the Corporation or such voting 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 Corporation shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Corporation 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 Corporation or any Subsidiary of
the Corporation in one or more transactions each of which does not violate
Section 11.14 hereof), then, and in each such case (except as provided in
Section 13.4 hereof), proper provision shall be made so that (i) each holder of
a Right, except as provided in Section 7.6 hereof, shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price, in accordance with the terms of this Agreement and in lieu of
Preferred Stock, such number of freely tradable shares of Common Stock of the
Principal Party, not subject to any liens, encumbrances, rights of first refusal
or other adverse claims, as shall equal the result obtained by (A) multiplying
the then current Purchase Price by the number of one ten-thousandths
(1/10,000ths) of a share of Preferred Stock for which a Right is then
exercisable (without taking into account any adjustment previously made pursuant
to Section 11.1.2) and dividing that product by (B) 50% of the then current per
share market price of the Common Stock of such Principal Party (determined
pursuant to Section 11.4 hereof) on the date of consummation of such Section 13
Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Corporation pursuant to this Agreement; (iii) the term "Corporation" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its shares of Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to the shares of Common Stock thereafter deliverable upon
the exercise of the Rights.
<PAGE>
13.2. "Principal Party" shall mean:
---------------
13.2.1. in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13.1, the Person that is the issuer of
any securities into which shares of Common Stock of the Corporation are
converted in such merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or consolidation (including,
if applicable, the Corporation if it is the surviving corporation); and
13.2.2. in the case of any transaction described in clause (z)
of the first sentence of Section 13.1, 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 of the foregoing cases, (1) if the Common Stock
- -------- -------
of such Person is not at such time and has not been continuously over the
preceding twelve (12) month period registered under Section 12 of the Exchange
Act, and such Person is a direct or indirect Subsidiary of another Person the
shares of Common Stock of which are and have been so registered, "Principal
Party" shall refer to such other Person; (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the shares of
Common Stock of two or more of which are and have been so registered, "Principal
Party" shall refer to whichever of such Persons is the issuer of the Common
Stock having the greatest aggregate market value; and (3) in case 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.
13.3. The Corporation shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of its authorized shares of Common Stock 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 Corporation and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in Sections 13.1 and 13.2 and
further providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer mentioned in Section 13.1, the Principal
Party at its own expense shall:
13.3.1. prepare and file a registration statement under the Act
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date;
<PAGE>
13.3.2. 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; and
13.3.3. deliver to holders of the Rights historical financial
statements for the Principal Party that comply in all 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. The rights
under this Section 13 shall be in addition to the rights to exercise Rights and
adjustments under Section 11.1.2 and shall survive any exercise thereof.
13.4. Notwithstanding anything in this Agreement to the contrary, the
foregoing provisions of this Section 13 shall not be applicable to a transaction
described in clauses (x) and (y) of Section 13.1 if: (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a Permitted Offer (or a wholly owned Subsidiary of any such Person
or Persons); (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of shares of Common Stock whose shares were purchased pursuant to such
Permitted Offer; and (iii) the form of consideration offered in such transaction
is the same as the form of consideration paid pursuant to such Permitted Offer.
Upon consummation of any such transaction contemplated by this Section 13.4, all
Rights hereunder shall expire.
14. Fractional Rights and Fractional Shares.
---------------------------------------
14.1. The Corporation shall not be required to issue fractions of
Rights or to distribute Right Certificates that evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14.1,
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, if
the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by
<PAGE>
NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Corporation. If on any such date no
such market maker is making a market in the Rights, the fair value of the Rights
on such date as determined in good faith by the Board of Directors of the
Corporation shall be used.
14.2. The Corporation shall not be required to issue fractions of
shares of Preferred Stock (other than fractions that are one ten-thousandth
(1/10,000th) or integral multiples of one ten-thousandth (1/10,000th) of a share
of Preferred Stock, or such other fraction determined pursuant to adjustment
provisions of Section 11 hereof) upon exercise of the Rights or to distribute
certificates that evidence fractional shares of Preferred Stock (other than
fractions that are one ten-thousandth (1/10,000th), or integral multiples of one
ten-thousandth (1/10,000th) of a share of Preferred Stock or such other fraction
determined pursuant to adjustment provisions of Section 11 hereof). Fractions
of shares of Preferred Stock in integral multiples of one ten-thousandth
(1/10,000th) of a share of Preferred Stock may, at the election of the
Corporation, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Corporation and a depositary selected by it; provided that
--------
such agreement shall provide that the holders of such depositary receipts shall
have the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Stock represented by such depositary
receipts. In lieu of fractional shares of Preferred Stock that are not one ten-
thousandth (1/10,000th) or integral multiples of one ten-thousandth (1/10,000th)
of a share of Preferred Stock, the Corporation 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 share of Preferred Stock. For the purposes of this Section 14.2,
the current market value of a share of Preferred Stock shall be the closing
price of a share of Preferred Stock (as determined pursuant to Section 11.4.2
hereof) for the Trading Day immediately prior to the date of such exercise.
14.3. Following the occurrence of one of the transactions or events
specified in Section 11 giving rise to the right to receive shares of Common
Stock, Capital Stock Equivalents (other than Preferred Stock) or other
securities upon the exercise of a Right, the Corporation shall not be required
to issue fractions of shares or units of such shares of Common Stock, Capital
Stock Equivalents or other securities upon exercise of the Rights or to
distribute certificates that evidence fractions of such shares of Common Stock,
Capital Stock Equivalents or other securities. In lieu of fractional shares or
units of such shares of Common Stock, Capital Stock Equivalents or other
securities, the Corporation may 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 a share or
unit of such shares of Common Stock, Capital Stock Equivalents or other
securities. For purposes of this Section 14.3, the current market value shall
be determined in the manner set forth in Section 11.4 hereof for the Trading Day
immediately prior to the date of such exercise and, if such Capital Stock
Equivalent is not
<PAGE>
traded, each such Capital Stock Equivalent shall have the value of one ten-
thousandth (1/10,000th) of a share of Preferred Stock.
14.4. The holder of a Right by the acceptance of the Right expressly
waives such holder's right to receive any fractional Rights or any fractional
share upon exercise of a Right (except as provided above). The Rights Agent
shall not be deemed to have knowledge of, and shall have no duty in respect of,
the issuance of fractional Rights or fractional shares unless and until it shall
have received instructions from the Corporation concerning the issuance of such
fractional Rights or fractional shares.
15. Rights of Action.
----------------
15.1. All rights of action in respect of this Agreement, excepting
the rights of action given to the Rights Agent under this Agreement are vested
in the respective registered holders of the Right Certificates (and, prior to
the Distribution Date, the registered holders of shares of the Common Stock);
and any registered holder of any Right Certificate (or, prior to the
Distribution Date, of shares of the Common Stock), without the consent of the
Rights Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of shares of the Common Stock), may, in such registered
holder's own behalf and for such registered holder's own benefit, enforce, and
may institute and maintain any suit, action or proceeding against the
Corporation to enforce, or otherwise act in respect of, such registered holder's
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. Nothing
in this Section 15 is intended to modify or limit the authority of the Board of
Directors under Section 25.3.
16. Agreement of Right Holders.
--------------------------
Every holder of a Right, by accepting the same, consents and agrees with
the Corporation and the Rights Agent and with every other holder of a Right
that:
16.1. prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the associated shares of Common Stock;
16.2. after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate form
fully executed;
<PAGE>
16.3. subject to Section 6 and Section 7.7 hereof, the Corporation
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 Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificate or the associated Common Stock certificate made by anyone
other than the Corporation or the Rights Agent) for all purposes whatsoever, and
neither the Corporation nor the Rights Agent, subject to the last sentence of
Section 7.6 hereof, shall be required to be affected by any notice to the
contrary; and
16.4. Notwithstanding anything in this Agreement to the contrary,
neither the Corporation nor the Rights Agent shall have any liability to any
holder of a Right or a beneficial interest in a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree,
judgment or ruling (whether interlocutory or final) issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, that the Corporation must use
-------- -------
its best efforts to have any such order, decree, judgment or ruling lifted or
otherwise overturned as soon as practicable.
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 shares of the
Preferred Stock or any other securities of the Corporation that 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 Corporation 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
24 hereof), or to receive dividends or other distributions or to exercise any
preemptive 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.
18. Concerning the Rights Agent.
---------------------------
18.1. The Corporation agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration, preparation, delivery,
amendment and execution of this Agreement and the exercise and performance of
its duties hereunder. The Corporation also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, damage, judgment,
fine,
<PAGE>
penalty, claim, demand, settlement, cost or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent
(which gross negligence, bad faith or willful misconduct must be determined by a
final, non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction), 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 in respect of any such action. The costs and expenses of enforcing
this right of indemnification shall also be paid by the Corporation. The
indemnity provided for herein shall survive the expiration of the Rights and the
termination of this Agreement.
18.2. The Rights Agent may conclusively rely upon and 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 the acceptance and
administration of this Agreement in reliance upon any Right Certificate or
certificate for shares of Common Stock or for other securities of the
Corporation, 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. The Rights Agent shall not be deemed to have knowledge of,
and shall have no duty in respect of, any fact contained in such Right
Certificate or certificate for shares of Common Stock or for other securities of
the Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document unless and until it shall have received the
same.
18.3. Anything in this Agreement to the contrary notwithstanding, in
no event shall the Rights Agent be liable for special, indirect, punitive
incidental 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 the
likelihood of such loss or damage and regardless of the form of the action.
19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
19.1. 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 stock
transfer or all or substantially all of the shareholder services 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.
<PAGE>
19.2. In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
20. Duties of Rights Agent.
----------------------
20.1. The Rights Agent undertakes those duties and obligations, and
only the duties and obligations, expressly imposed by this Agreement (and no
implied duties or obligations) upon the following terms and conditions, and no
implied duties or obligations shall be read into this Agreement against the
Rights Agent, by all of which the Corporation and the holders of Right
Certificates, by their acceptance thereof, shall be bound.
20.2. Before the Rights Agent acts or refrains from acting, the Rights
Agent may consult with legal counsel (who may be legal counsel for the
Corporation), 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 good faith and in accordance with such advice or opinion.
20.3. Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination of the current market price of any security) be proved or
established by the Corporation prior to taking, suffering or omitting 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, any Vice President, the Treasurer or the
Secretary of the Corporation and delivered to the Rights Agent; and such
certificate shall be full 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 in good faith by it under the provisions of this Agreement
in reliance upon such certificate.
20.4. The Rights Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct (which gross negligence, bad
faith or willful misconduct must be determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction).
20.5. 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
<PAGE>
countersignature on such Right Certificates) or be required to verify the same,
but all such statements and recitals are and shall be deemed to have been made
by the Corporation only.
20.6. The Rights Agent shall not be under any liability or
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be liable or responsible for any breach
by the Corporation of any covenant or condition contained in this Agreement or
in any Rights Certificate; nor shall it be liable or responsible for any change
in the exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 7.6 hereof) or any adjustment required under the provisions
of Section 11, Section 13 or Section 26 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after receipt of the
certificate described in Section 12 hereof); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Preferred Stock or shares of Common Stock to be
issued pursuant to this Agreement or any Right Certificate or as to whether any
Preferred Stock or shares of Common Stock will, when issued, be validly
authorized and issued, fully paid and non-assessable.
20.7. The Corporation 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.
20.8. 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,
any Vice President, the Treasurer or the Secretary of the Corporation, and to
apply to such officers for advice or instructions in connection with its duties,
and such instructions shall be full authorization and protection of 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 good faith or lack of action in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. The Rights Agent shall incur no liability
for or in respect of its reliance upon the most recent instructions received by
any such officer. Any application by the Rights Agent for written instructions
from the Corporation may, at the option of the Rights Agent, set forth in
writing any action proposed to be taken or omitted by the Rights Agent under
this Agreement and the date on or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any
action taken or suffered by, or omission of, the Rights Agent in accordance with
a proposal included in any such application on or after the date specified in
such application (which date shall not be less than five (5) Business Days after
the date any officer of the Corporation actually receives such application,
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of an
omission), the
<PAGE>
Rights Agent shall have received written instruction in response to such
application specifying the action to be taken, suffered or omitted.
20.9. The Rights Agent and any shareholder, Affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Corporation or become pecuniarily interested
in any transaction in which the Corporation may be interested, or contract with
or lend money to the Corporation 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 Corporation or for
any other Person or legal entity.
20.10. 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, negligence or misconduct of any such attorneys
or agents or for any loss to the Corporation or any other Person resulting from
any such act, default, negligence or misconduct, absent gross negligence, bad
faith or willful misconduct as determined by a court of competent jurisdiction,
in the selection and continued employment thereof.
20.11. No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if it believes that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
20.12. If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the
Corporation.
20.13. The Rights Agent shall not be required to take notice or be
deemed to have notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement or the designee of a
Person as an Acquiring Person, Affiliate or Associate), under this Agreement
unless and until the Rights Agent shall be specifically notified in writing by
the Corporation of such fact, event or determination.
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 thirty (30) days' notice in writing
mailed to the Corporation and to each transfer agent of the Common Stock or
Preferred Stock by registered or certified
<PAGE>
mail, and, at the expense of the Corporation, to the holders of the Right
Certificates by first-class mail. The Corporation may remove the Rights Agent or
any successor Rights Agent upon sixty (60) days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock or Preferred Stock by registered or certified
mail, and to 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 Corporation shall appoint a successor to the Rights Agent. If the
Corporation shall fail to make such appointment within a period of sixty (60)
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 Corporation), 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 Corporation or by such a court, shall be
(i) a Person organized and doing business under the laws of the United States or
of any of the States of New York, New Jersey or California (or of any other
state of the United States so long as such Person is authorized to do business
in any of the States of New York, New Jersey or California), in good standing,
having an office in any of such States, which is subject to supervision or
examination by federal or state authority and which (or the parent corporation
of which) has at the time of its appointment as Rights Agent a combined capital
and surplus of at least $50,000,000 or (ii) an affiliate of such a Person. 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. 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 a 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 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. Not later than the effective date of any
such appointment, the Corporation shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock, 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.
22. Issuance of New Right Certificates.
----------------------------------
22.1. Notwithstanding any of the provisions of this Agreement or of
the Rights to the contrary, the Corporation 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
<PAGE>
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.
22.2. In connection with the issuance or sale of Common Stock
following the Distribution Date and prior to the earlier of the Redemption Date
and the Final Expiration Date, the Corporation (a) shall with respect to shares
of Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Corporation, and (b)
may in any other case, if deemed necessary or appropriate by the Board of
Directors of the Corporation, issue Right Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) the Corporation shall not be obligated to issue any
- -------- -------
such Right Certificates if, and to the extent that, the Corporation shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Corporation 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.
23. Redemption and Termination.
--------------------------
23.1. Redemption
----------
23.1.1. The Board of Directors of the Corporation may, at its
option, redeem all but not less than all of the then outstanding Rights at a
redemption price of $.001 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"), at any time prior to the earlier of the
----------------
occurrence of a Section 11.1.2 Event or the Final Expiration Date. The
Corporation may, at its option, pay the Redemption Price either in shares of
Common Stock (based on the current per share market price of the Common Stock at
the time of redemption) or cash; provided that if the Corporation elects to pay
--------
the Redemption Price in shares of Common Stock, the Corporation shall not be
required to issue any fractional shares of Common Stock and the number of shares
of Common Stock issuable to each holder of Rights shall be rounded down to the
next whole share.
23.1.2. In addition, the Board of Directors of the Corporation
may, at its option, at any time following the occurrence of a Section 11.1.2
Event and the expiration of any period during which the holder of Rights may
exercise the Rights under Section 11.1.2 but prior to any Section 13 Event
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 earning power of the
Corporation and its Subsidiaries (taken as a whole) in which
<PAGE>
all holders of shares of Common Stock are treated alike and not involving (other
than as a holder of shares of Common Stock being treated like all other such
holders) an Interested Stockholder or (y) (i) if and for so long as the
Acquiring Person is not thereafter the Beneficial Owner of securities
representing 15% or more of the Voting Power, and (ii) at the time of redemption
no other Persons are Acquiring Persons.
23.2. In the case of a redemption permitted under Section 23.1.1,
immediately upon the date for redemption set forth in (or determined in the
manner specified in) a resolution of the Board of Directors of the Corporation
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price for each Right so held. In the case of a redemption permitted only under
Section 23.1.2, the right to exercise the Rights will terminate and represent
only the right to receive the Redemption Price upon the later of ten (10)
Business Days following the giving of such notice or the expiration of any
period during which the Rights may be exercised under Section 11.1.2. The
Corporation shall promptly give public notice of any such redemption; with
prompt notice thereof to the Rights Agent provided, however, that the failure to
-------- -------
give, or any defect in, any such notice shall not affect the validity of such
redemption. Within ten (10) days after such date for redemption set forth in a
resolution of the Board of Directors of the Corporation ordering the redemption
of the Rights, the Corporation shall mail a notice of redemption to the Rights
Agent and all the holders of the then outstanding Rights at (in the case of
notice to holders) their 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 Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Corporation nor any
of its Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than as specifically set forth in this
Section 23 and other than in connection with the purchase of shares of Common
Stock prior to the Distribution Date.
23.3. The Corporation may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights in accordance with this Agreement and
(ii) mailing payment of the Redemption Price to the registered holders of the
Rights at their 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 of the Common Stock, and upon such action, all outstanding Rights and
Right Certificates shall be null and void without any further action by the
Corporation.
24. Notice of Certain Events.
------------------------
24.1. In case the Corporation shall propose after the Distribution
Date (i) to pay any dividend payable in stock of any class to the holders of its
Preferred Stock or to make any
<PAGE>
other distribution to the holders of its Preferred Stock (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred Stock
rights or warrants to subscribe for or to purchase any additional Preferred
Stock or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Preferred Stock (other than
a reclassification involving only the subdivision of outstanding Preferred
Stock), (iv) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Corporation in a transaction which does not
violate Section 11.14 hereof), or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or other transfer) in
one or more transactions, of 50% or more of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11.14 hereof), or (v)
to effect the liquidation, dissolution or winding up of the Corporation, then,
in each such case, the Corporation shall give the Rights Agent and to each
holder of a Right Certificate, in accordance with Section 25 hereof, a notice of
such proposed action which shall specify the record date for the purposes of
such stock dividend or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the Preferred Stock, 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 twenty (20) days prior to the record date for determining holders
of the Preferred Stock for purposes of such action, and in the case of any such
other action, at least twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Preferred Stock, whichever shall be the earlier.
24.2. In case of a Section 11.1.2 Event, then (i) the Corporation
shall as soon as practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 25.1.3 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11.1.2 hereof, and
(ii) all references in the preceding Section 24.1 to Preferred Stock shall be
deemed thereafter to refer also to shares of Common Stock and/or, if
appropriate, other securities of the Corporation.
25. Miscellaneous.
-------------
25.1. Notices.
-------
25.1.1. 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 Corporation shall be sufficiently given or made if sent by registered
or certified mail and shall be deemed given upon receipt, addressed (until
another address is filed in writing with the Rights Agent) as follows:
ALZA Corporation
<PAGE>
1900 Charleston Road
P.O. Box 7210
Mountain View, CA 94039-7210
Attention: Corporate Secretary
25.1.2. Subject to the provisions of Section 21 hereof, any
notice or demand authorized by this Agreement to be given or made by the
Corporation or by the holder of any Right Certificate to or on the Rights Agent
shall be sufficiently given or made if sent by registered or certified mail and
shall be deemed given upon receipt, postage prepaid, addressed (until another
address is filed in writing with the Corporation) as follows:
BankBoston, N.A.
c/o EquiServe Limited Partnership
150 Royall Street
Canton, Massachusetts 02021
Attention: Client Administration
25.1.3. Notices or demands authorized by this Agreement to be
given or made by the Corporation or the Rights Agent to the holder of any Right
Certificate or, if prior to the Distribution Date, to the holder of certificates
representing shares of Common Stock 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 Corporation.
25.2. Supplements and Amendments. The Corporation may from time to
--------------------------
time supplement or amend any provision of this Agreement without the approval of
any holders of Rights in order to cure any ambiguity, to correct, supplement or
amend any provision herein, or to make any other provision with respect to the
Rights which the Corporation may deem necessary or desirable, any such
supplement or amendment to be evidenced by a writing signed by the Corporation
and the Rights Agent; provided, however, that from and after any Shares
-------- -------
Acquisition Date this Agreement shall not be amended in any manner which will
adversely affect the interests of the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Corporation which states that the
proposed supplement or amendment is in compliance with the terms of this Section
25.2, and, if requested by the Rights Agent, an opinion of counsel, 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 shares of Common Stock. This Agreement shall not be
amended, without the prior written consent of the Rights Agent, in any manner
that changes or increases the duties, liabilities or obligations of the Rights
Agent.
25.3. Determination and Actions by the Board of Directors, etc. The
--------------------------------------------------------
Board of Directors of the Corporation 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
<PAGE>
Corporation, 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,
without limitation, a determination to redeem or not redeem the Rights or to
amend the Agreement and whether any proposed amendment adversely affects the
interests of the holders of Right Certificates). For all purposes of this
Agreement, any calculation of the number of shares of Common Stock or other
securities outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
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. 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 Corporation, the Rights Agent, the holders
of the Right Certificates and all other Persons, and (y) not subject the Board
to any liability to the holders of the Right Certificates. The Rights Agent
shall be fully protected and shall incur no liability for or in respect of its
reliance on the good faith of the Corporation's Board of Directors with respect
to actions done or made in connection with such calculation. Nothing in Section
15 hereof is intended to modify or limit this Section 25.3.
25.4. Successors. All the covenants and provisions of this Agreement
----------
by or for the benefit of the Corporation or the Rights Agent shall bind and
inure to the benefit of their respective successors and assigns hereunder.
25.5. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any Person or corporation other than the Corporation, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the shares of Common Stock) any legal or equitable right,
remedy or claim under this Agreement. This Agreement shall be for the sole and
exclusive benefit of the Corporation, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
shares of Common Stock).
25.6. 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.
25.7. Governing Law. This Agreement, each Right and each Right
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
<PAGE>
25.8. 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.
25.9. 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.
26. Exchange.
--------
26.1. Notwithstanding any other provision hereof, the Board of
Directors of the Corporation 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 7.6 hereof) for shares of Common
Stock of the Corporation at an exchange ratio determined by dividing the then-
applicable exercise price of the Rights determined under Section 7.2 by the
"current per share market price" as defined in Section 11.4.1 (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
--------------
the foregoing, the Corporation's Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Corporation,
any Subsidiary of the Corporation, any employee benefit plan of the Corporation
or any such Subsidiary, or any Person organized, appointed or established by the
Corporation for or pursuant to the terms of any such plan or any trustee,
administrator or fiduciary of such a plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of shares representing
50% or more of the Voting Power.
26.2. Immediately upon the action of the Board of Directors of the
Corporation ordering the exchange of any Rights pursuant to Section 26.1 and
without any further action and without any notice, the right to exercise such
rights shall terminate and the only right thereafter of the holder of such
Rights (other than a holder of Rights that have become null and void pursuant to
the provisions of Section 7.6 hereof) shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Corporation shall promptly give public
notice, and shall promptly give notice to the Rights Agent, of any such
exchange; provided, however, that the failure to give, or any defect in, such
-------- -------
notice shall not affect the validity of such exchange. The Corporation promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
shall state the method by which the exchange of the Common Stock 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 7.6) held by each holder of Rights.
<PAGE>
26.3. In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 26, the
Corporation shall take all such action as may be necessary to issue additional
shares of Common Stock, Preferred Stock and/or Capital Stock Equivalents with an
aggregate current market value (as determined by the Board of Directors of the
Corporation) equal to the aggregate current market value of a number of shares
of Common Stock equal to the Exchange Ratio.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the date and year first above written.
ALZA CORPORATION
Attest:
By: /s/ Ernest Mario
-------------------------------------
Ernest Mario, Chairman and
Chief Executive Officer
BANKBOSTON, N.A.,
as Rights Agent
By: /s/ Margaret M. Prentice
-------------------------------------
Name: Margaret M. Prentice
Title: Administration Manager
<PAGE>
Exhibit A
---------
Form of
Certificate of Designation, Preferences and
Rights of Series RP Preferred Stock
of
ALZA Corporation
(Pursuant to (S)151 of the Delaware General Corporation Law)
I, Julian N. Stern, Secretary of ALZA Corporation (the "Corporation"), a
-----------
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by the Restated Certificate of Incorporation of the Corporation, the
said Board of Directors on December 17, 1999 has adopted the following
resolutions creating a series of 30,000 shares of Preferred Stock designated as
Series RP Preferred Stock.
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of the Corporation in accordance with the provisions of the
Restated Certificate of Incorporation of the Corporation, the Board of Directors
hereby creates a series of Series RP Preferred Stock, with a par value of $.01
per share, of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences and limitations thereof as
follows (the following provisions being intended to operate in addition to any
other provisions of said Restated Certificate of Incorporation applicable to any
series of Preferred Stock):
Series RP Preferred Stock
Section 1. Designation, Par Value and Amount. The shares of such series
---------------------------------
shall be designated as "Series RP Preferred Stock" (hereinafter referred to as
"Series RP Preferred Stock"), the shares of such series shall be with par value
- --------------------------
of $.01 per share, and the number of shares constituting such series shall be
30,000; provided, however, that, if more than a total of 30,000 shares of Series
-------- -------
RP Preferred Stock shall be issuable upon the exercise of Rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of December 17, 1999, between
the Corporation and [BankBoston, N.A.], as Rights Agent (as amended from time to
time, the "Rights Agreement"), the Board of Directors of the Corporation shall
----------------
direct by resolution or resolutions that a certificate be properly executed,
acknowledged and filed providing for the total number of shares of Series RP
Preferred Stock authorized to be issued to be increased (to the extent that the
Restated Certificate of Incorporation then permits) to the largest number of
whole shares (rounded up to the nearest whole number) issuable upon exercise of
the Rights.
<PAGE>
Section 2. Dividends and Distributions.
---------------------------
2.1 Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series RP Preferred Stock with respect to dividends, the holders of shares of
Series RP Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of assets legally available for the purpose,
quarterly dividends payable in cash on the first business day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
-------------------------------
Payment Date after the first issuance of a share or fraction of a share of
Series RP Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment
set forth in Section 6.1, 10,000 times the aggregate per share amount of all
cash dividends, and 10,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock, par value $.01 per share, of the Corporation
(the "Common Stock") or a subdivision of the outstanding shares of Common Stock
------------
(by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series RP Preferred Stock.
2.2 The Corporation shall declare a dividend or distribution on the
Series RP Preferred Stock as provided in Section 2.1 above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
-------- ----
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series RP Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
2.3 Dividends shall begin to accrue and be cumulative on
outstanding shares of Series RP Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series RP
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series RP
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series RP Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series RP Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 30 days prior to the date fixed for the payment thereof.
2
<PAGE>
Section 3. Voting Rights. The holders of shares of Series RP Preferred
-------------
Stock shall have the following voting rights:
3.1 Except as provided in Section 3.3 and subject to the provision
for adjustment hereinafter set forth, each share of Series RP Preferred Stock
shall entitle the holder thereof to 10,000 votes on all matters submitted to a
vote of the stockholders of the Corporation.
3.2 Except as otherwise provided herein or by law, the holders of
shares of Series RP Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
3.3 The following additional provisions shall apply with respect to
the voting of shares of Series RP Preferred Stock:
3.3.1 If, on the date used to determine stockholders of record
for any meeting of stockholders for the election of directors, a default in
preference dividends (as defined in Section 3.3.5 below) on the Series RP
Preferred Stock shall exist, the holders of the Series RP Preferred Stock shall
have the right, voting as a class as described in Section 3.3.2 below, to elect
two directors (in addition to the directors elected by holders of Common Stock
of the Corporation). Such right may be exercised (a) at any meeting of
stockholders for the election of directors or (b) at a meeting of the holders of
shares of Voting Preferred Stock (as hereinafter defined), called for the
purpose in accordance with the Bylaws of the Corporation, until all such
cumulative dividends (referred to above) shall have been paid in full or until
non-cumulative dividends have been paid regularly for at least one year.
3.3.2 The right of the holders of Series RP Preferred Stock to
elect two directors, as described above, shall be exercised as a class
concurrently with the rights of holders of any other series of Preferred Stock
upon which voting rights to elect such directors have been conferred and are
then exercisable. The Series RP Preferred Stock and any additional series of
Preferred Stock that the Corporation may issue and that may provide for the
right to vote with the foregoing series of Preferred Stock are collectively
referred to herein as "Voting Preferred Stock."
----------------------
3.3.3 Each director elected by the holders of shares of Voting
Preferred Stock shall be referred to herein as a "Preferred Director." A
------------------
Preferred Director shall continue to serve as such for a term of one year,
except that upon any termination of the right of all holders of Voting Preferred
Stock to vote as a class for Preferred Directors, the term of office of
Preferred Directors then serving shall terminate. Any Preferred Director may be
removed by, and shall not be removed except by, the vote of the holders of
record of a majority of the outstanding shares of Voting Preferred Stock then
entitled to vote for the election of directors, present (in person or by proxy)
and voting together as a single class (a) at a meeting of the stockholders, or
(b) at a meeting of the holders of shares of such Voting Preferred Stock, called
for the purpose in accordance with the Bylaws of the Corporation.
3.3.4 So long as a default in any preference dividends of the
Series RP Preferred Stock shall exist or the holders of any other series of
Voting Preferred Stock shall be
3
<PAGE>
entitled to elect Preferred Directors, (a) any vacancy in the office of a
Preferred Director may be filled (except as provided in the following clause
(b)) by an instrument in writing signed by the remaining Preferred Director and
filed with the Corporation and (b) in the case of the removal of any Preferred
Director, the vacancy may be filled by the vote or written consent of the
holders of a majority of the outstanding shares of Voting Preferred Stock then
entitled to vote for the election of directors, present (in person or by proxy)
and voting together as a single class, at such time as the removal shall be
effected. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
Whenever (x) no default in preference dividends on the Series RP Preferred Stock
shall exist and (y) the holders of other series of Voting Preferred Stock shall
no longer be entitled to elect such Preferred Directors, then the number of
directors constituting the Board of Directors of the Corporation shall be
reduced by two.
3.3.5 For purposes hereof, a "default in preference dividends"
-------------------------------
on the Series RP Preferred Stock shall be deemed to have occurred whenever the
amount of cumulative and unpaid dividends on the Series RP Preferred Stock shall
be equivalent to six full quarterly dividends or more (whether or not
consecutive), and, having so occurred, such default shall be deemed to exist
thereafter until, but only until, all cumulative dividends on all shares of the
Series RP Preferred Stock then outstanding shall have been paid through the last
Quarterly Dividend Payment Date or until, but only until, non-cumulative
dividends have been paid regularly for at least one year.
3.4 Except as set forth herein (or as otherwise required by
applicable law), holders of Series RP Preferred Stock shall have no general or
special voting rights and their consent shall not be required for taking any
corporate action.
Section 4. Certain Restrictions.
--------------------
4.1 Whenever quarterly dividends or other dividends or distributions
payable on the Series RP Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series RP Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
4.1.1 declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series RP Preferred Stock;
4.1.2 declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series RP Preferred Stock,
except dividends paid ratably on the Series RP Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
4.1.3 redeem or purchase or otherwise acquire for consideration
(except as provided in Section 4.1.4 below) shares of any stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series RP Preferred Stock, provided that the
4
<PAGE>
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series RP Preferred Stock;
4.1.4 redeem or purchase or otherwise acquire for consideration
any shares of Series RP Preferred Stock, or any shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series RP Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
4.2 The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Section 4.1,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series RP Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, in any other Certificate of Amendment creating a
series of Preferred Stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
6.1 Subject to the prior and superior rights of holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series RP Preferred Stock with respect to rights upon liquidation, dissolution
or winding up (voluntary or otherwise), no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series RP Preferred Stock unless,
prior thereto, the holders of shares of Series RP Preferred Stock shall have
received per share an amount equal to the greater of 10,000 times $200.00 or
10,000 times the payment made per share of Common Stock, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series RP Liquidation Preference"). Following
--------------------------------
the payment of the full amount of the Series RP Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series RP
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Capital Adjustment") equal to the
------------------
quotient obtained by dividing (i) the Series RP Liquidation Preference by (ii)
10,000 (as appropriately adjusted as set forth in Section 6.3 to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock) (such number in clause (ii) being hereafter referred to as the
"Adjustment Number"). Following the payment of the full amount of the Series RP
-----------------
Liquidation Preference
5
<PAGE>
and the Capital Adjustment in respect of all outstanding shares of Series RP
Preferred Stock and Common Stock, respectively, holders of Series RP Preferred
Stock and holders of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
6.2 In the event, however, that there are not sufficient assets
available to permit payment in full of the Series RP Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series RP Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of Series RP Preferred Stock
and the holders of such parity shares in proportion to their respective
liquidation preferences. In the event, however, that there are not sufficient
assets available to permit payment in full of the Capital Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
6.3 In the event the Corporation shall (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series RP Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share equal to the Adjustment Number (as appropriately
adjusted as set forth in Section 6.3 to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock) times
the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged.
Section 8. No Redemption. The shares of Series RP Preferred Stock shall
-------------
not be redeemable.
Section 9. Ranking. The Series RP Preferred Stock shall rank junior to
-------
all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such other
series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation of the
---------
Corporation shall not be further amended in any manner that would materially
alter or change the powers, preferences or special rights of the Series RP
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding shares of Series RP
Preferred Stock, voting separately as a class.
6
<PAGE>
Section 11. Fractional Shares. Series RP Preferred Stock may be issued in
-----------------
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series RP Preferred Stock.
RESOLVED, that the proper officers of the Corporation be, and each of them
hereby is, authorized to execute a Certificate of Designation with respect to
the Series RP Preferred Stock pursuant to Section 151 of the General Corporation
Law of the State of Delaware and to take all appropriate action to cause such
Certificate to become effective, including, but not limited to, the filing and
recording of such Certificate with and/or by the Secretary of State of the State
of Delaware.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
IN WITNESS WHEREOF, I have executed and subscribed to this Certificate and
do affirm the foregoing as true under penalty of perjury this 17th day of
December, 1999.
_________________________________
Julian N. Stern
Secretary
8
<PAGE>
Exhibit B
---------
Form of Right Certificate
Certificate No. RP- _____ Rights
NOT EXERCISABLE AFTER DECEMBER 17, 2009 OR
EARLIER IF REDEEMED BY THE CORPORATION. THE
RIGHTS ARE SUBJECT TO REDEMPTION AT $.0001 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT.
Right Certificate
ALZA CORPORATION
This certifies that __________, or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of December 17, 1999 (the "Rights Agreement"), between ALZA
Corporation, a Delaware corporation (the "Corporation"), and BankBoston, N.A., a
national banking association (the "Rights Agent"), to purchase from the
Corporation at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M., Eastern time, on December 17,
2009, unless the Rights evidenced hereby shall have been previously redeemed by
the Corporation, at the office of the Rights Agent designated for such purpose,
or at the office of its successor as Rights Agent, one ten-thousandth
(1/10,000th) of a fully paid non-assessable share of Series RP Preferred Stock
(the "Preferred Stock") of the Corporation, at a purchase price of $200.00 per
one ten-thousandth (1/10,000th) of a share of Preferred Stock (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase duly executed. The number of Rights evidenced by this
Right Certificate (and the number of one ten-thousandths (1/10,000ths) of a
share of Preferred Stock that may be purchased upon exercise hereof) set forth
above, and the Purchase Price set forth above, are the number and Purchase Price
as of January 5, 2000, based on the Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11.1.2 Event (as such term is defined in
the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Affiliate
or Associate thereof) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of an Affiliate
or Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person (or from
any Affiliate or Associate thereof) to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has a
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Directors of the Corporation has
determined is part of a plan,
<PAGE>
arrangement or understanding that has as a primary purpose or effect the
avoidance of Section 7.6 of the Rights Agreement, shall become null and void
without any further action and no holder hereof shall have any rights whatsoever
with respect to such Rights, whether under any provision of the Rights Agreement
or otherwise.
As provided in the Rights Agreement, the Purchase Price and the number of
one ten-thousandths (1/10,000ths) of a share of Preferred Stock or other
securities that may be purchased upon the exercise of the Rights evidenced by
this Right Certificate are subject to modification and adjustment upon the
happening of certain events, including Triggering Events (as such term is
defined in the Rights Agreement).
This Right Certificate is subject to all of the terms, covenants and
restrictions of the Rights Agreement, which terms, covenants and restrictions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Corporation and the office of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the designated office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
shares of Preferred Stock or other securities as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Corporation at a redemption price of
$.001 per Right (subject to adjustment as provided in the Rights Agreement)
payable in cash.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions that are one ten-
thousandth (1/10,000th) or integral multiples of one ten-thousandth (1/10,000th)
of a share of Preferred Stock, or such other fraction as provided for by the
adjustment provisions in the Rights Agreement, which may, at the election of the
Corporation, be evidenced by depository receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of the Preferred
Stock or of any other securities of the Corporation that may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Corporation or any right to vote for the
election of
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<PAGE>
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 the
Rights Agreement), or to receive dividends or other distributions or to exercise
any preemptive or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Corporation
and its corporate seal. Dated as of __________, _____.
[SEAL]
ATTEST:
ALZA CORPORATION
By__________________________________ By______________________________________
Name________________________________ Name____________________________________
Title_______________________________ Title___________________________________
Countersigned:
BANKBOSTON, N.A.
By__________________________________
Name________________________________
Title_______________________________
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<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Right Certificate.)
FOR VALUE RECEIVED ________________________________________________________
hereby sells, assigns and transfers unto________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney-in-Fact,
to transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated:__________, _____ ________________________________________
Signature
Signature Guaranteed:
______________________________
Signatures must be guaranteed by an "Eligible Guarantor Institution" as
defined in Rule 17Ad-15 (or any successor rule or regulation) promulgated
pursuant to the Securities Exchange Act of 1934, as amended (this term means, in
general, banks, stock brokers, savings and loan associations, and credit unions,
in each case with membership in an approved signature guarantee medallion
program).
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement), (2) this Right Certificate
is not being sold, assigned or transferred to or on behalf of any such Acquiring
Person, Affiliate or Associate, and (3) after due inquiry and to the best
knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Right Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
______________________________
Signature
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder desires to
exercise Rights represented by the Right Certificate)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise ______________ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock,
shares of Common Stock or other securities issuable upon the exercise of such
Rights and requests that certificates for such shares of Preferred Stock, shares
of Common Stock or other securities be issued in the name of:
Please insert social security number
or other identifying number ____________________________________________________
________________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security number
or other identifying number ____________________________________________________
________________________________________________________________________________
(Please print name and address)
Dated: __________, _____
______________________________
Signature
Signature Guaranteed:
______________________________
Signatures must be guaranteed by an "Eligible Guarantor Institution" as
defined in Rule 17Ad-15 (or any successor rule or regulation) promulgated
pursuant to the Securities Exchange Act of 1934, as amended (this term means, in
general, banks, stock brokers, savings and loan associations, and credit unions,
in each case with membership in an approved signature guarantee medallion
program).
<PAGE>
Form of Reverse Side of Right Certificate -- continued
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), (2) this Right Certificate is not being sold,
assigned or transferred by or on behalf of any such Acquiring Person, Affiliate
or Associate, and (3) after due inquiry and to the best knowledge of the
undersigned, the undersigned did not acquire the Rights evidenced by this Right
Certificate from any Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement).
______________________________
Signature
Notice
The signature on the foregoing Forms of Assignment and Election and
certificates must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Corporation and the Rights Agent will deem the Beneficial Owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Right Agreement) and such
Assignment or Election to Purchase will not be honored.
<PAGE>
Exhibit C
---------
ALZA CORPORATION
1900 Charleston Road
Mountain View, CA 94043
FORM OF
SUMMARY OF RIGHTS TO PURCHASE
SERIES RP PREFERRED SHARES
The Board of Directors (the "Board") of ALZA Corporation (the
"Corporation") has declared a dividend distribution of one preferred share
purchase right (a "Right") for each outstanding share of Common Stock (the
"Common Stock") of the Corporation. The dividend is payable to the stockholders
of record on January 5, 2000 (the "Record Date"), and with respect to shares of
Common Stock issued thereafter until the Distribution Date (as defined below)
and, in certain circumstances, with respect to shares of Common Stock issued
after the Distribution Date. Except as set forth below, each Right, when it
becomes exercisable, entitles the registered holder to purchase from the
Corporation one ten-thousandth (1/10,000th) of a share of Series RP Preferred
Stock, $.01 par value per share (the "Preferred Stock"), of the Corporation at a
price of $200.00 per one ten-thousandth (1/10,000th) of a share of Preferred
Stock (the "Purchase Price"), subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Corporation and BankBoston, N.A., as Rights Agent (the "Rights
Agent"), dated as of December 17, 1999.
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates
representing the Rights ("Right Certificates") will be distributed. The Rights
will separate from the Common Stock upon the earliest to occur of (i) a person
or group of affiliated or associated persons having acquired, without the prior
approval of the Corporation's Board of Directors, beneficial ownership of 15% or
more of the outstanding shares of Common Stock (except pursuant to a Permitted
Offer, as hereinafter defined) or (ii) 10 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 the consummation of which would result in
a person or group of affiliated or associated persons becoming an Acquiring
Person (as hereinafter defined) (the "Distribution Date"). A person or group
whose acquisitions of shares of Common Stock cause a Distribution Date pursuant
to clause (i) above is an "Acquiring Person," with certain exceptions as set
forth in the Rights Agreement. The date that a person or group is first publicly
announced to have become such by the Corporation or such Acquiring Person is the
"Shares Acquisition Date."
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the associated shares of Common Stock.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
new Common Stock certificates issued after the Record Date upon transfer or new
issuance of shares of Common Stock will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for shares of
<PAGE>
Common Stock 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 shares of Common Stock represented by
such certificate. As soon as practicable following the Distribution Date, Right
Certificates will be mailed to the holders of record of the shares of Common
Stock as of the Close of Business (as defined in the Rights Agreement) on the
Distribution Date (and to each initial record holder of certain shares of Common
Stock issued after the Distribution Date), and such separate Right Certificates
alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 17, 2009, unless earlier redeemed by the
Corporation as described below.
In the event that any person becomes an Acquiring Person (except pursuant
to a tender or exchange offer which is for all outstanding shares of Common
Stock at a price and on terms which a majority of certain members of the Board
determines to be adequate and in the best interests of the Corporation, its
stockholders and other relevant constituencies, other than such Acquiring
Person, its affiliates and associates (a "Permitted Offer")), each holder of a
Right will thereafter have the right (the "Flip-In Right") to receive, upon
exercise, the number of shares of Common Stock (or, in certain circumstances, of
one ten-thousandths (1/10,000ths) of a share of Preferred Stock or other
securities of the Corporation) having a value (immediately prior to such
triggering event) equal to two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of the event described
above, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person or any
affiliate or associate thereof will be null and void. The Board has the option,
at any time after any person becomes an Acquiring Person, to exchange all or
part of the then-exercisable Rights (excluding those that have become void, as
described in the immediately preceding sentence) for shares of Common Stock, at
an exchange ratio determined by dividing the then-applicable Purchase Price by
the then-current market price per share of Common Stock as determined in
accordance with the Rights Agreement. However, this option generally terminates
if any person becomes the beneficial owner of 50% or more of the shares of
Common Stock.
In the event that, at any time following the Shares Acquisition Date, (i)
the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding shares of Common
Stock immediately prior to the consummation of the transaction are not the
holders of all of the surviving corporation's voting power, or (ii) more than
50% of the Corporation's assets or earning power is sold or transferred, in
either case with or to (x) an Acquiring Person or any affiliate or associate
thereof or (y) any other person in which such Acquiring Person, affiliate or
associate has an interest or any person acting on behalf of or in concert with
such Acquiring Person, affiliate or associate, or (z) if, in such transaction,
all holders of shares of Common Stock are not treated alike, any other person,
then each holder of a Right (except Rights which previously have been voided as
set forth above) shall thereafter have the right (the "Flip-Over Right") to
receive, upon exercise, common shares of the acquiring company (or, in certain
circumstances, its parent), having a value equal to two times the exercise
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<PAGE>
price of the Right. The holder of a Right will continue to have the Flip-Over
Right whether or not such holder exercises or surrenders the Flip-In Right.
The Purchase Price payable, and the number of shares of Preferred Stock,
shares of Common Stock or other securities issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Preferred Stock, (ii) upon the grant to holders of shares of the Preferred
Stock of certain rights or warrants to subscribe for or purchase Preferred Stock
at a price, or securities convertible into Preferred Stock with a conversion
price, less than the then current market price of the Preferred Stock or (iii)
upon the distribution to holders of shares of the Preferred Stock of evidences
of indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one ten-thousandths
(1/10,000ths) of a share of Preferred Stock issuable upon exercise of each Right
are also subject to adjustment in the event of a stock split of the Common Stock
or a stock dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share but, if greater, will
be entitled to an aggregate dividend per share of 10,000 times the dividend
declared per share of Common Stock. In the event of liquidation, the holders of
shares of the Preferred Stock will be entitled to a minimum preferential
liquidation payment per share in an amount equal to the greater of $200.00 or
10,000 times the payment made per share of Common Stock plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series RP Liquidation Preference");
thereafter, and after the holders of shares of the Common Stock receive a
liquidation payment of an amount equal to the quotient obtained by dividing the
Series RP Liquidation Preference by 10,000 (subject to certain adjustments for
stock splits, stock dividends and recapitalizations with respect to the Common
Stock), the holders of shares of the Preferred Stock and the holders of the
Common Stock will share the remaining assets in the ratio of 10,000 to 1 (as
adjusted) for each share of Preferred Stock and Common Stock so held,
respectively. Finally, in the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each share of
Preferred Stock will be entitled to receive 10,000 times the amount received per
share of Common Stock. These rights are protected by customary antidilution
provisions. In the event that the amount of accrued and unpaid dividends on the
Preferred Stock is equivalent to six full quarterly dividends or more, the
holders of shares of the Preferred Stock shall have the right, voting as a
class, to elect two directors in addition to the directors elected by the
holders of shares of the Common Stock until all cumulative dividends on the
Preferred Stock have been paid or set apart for payment through the last
quarterly dividend payment date. No fractional shares of Preferred Stock will be
issued (other than fractions which are one ten-thousandth (1/10,000th), or
integral multiples of one ten-thousandth (1/10,000th) of a share of Preferred
Stock, which may, at the election of the Corporation, be evidenced by
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<PAGE>
depositary receipts) and in lieu thereof, an adjustment in cash will be made
based on the market price of the Preferred Stock on the last trading day prior
to the date of exercise.
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.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, and under certain other
circumstances, the Corporation may redeem the Rights in whole, but not in part,
at a price (payable in cash or, at the Corporation's election, in Common Stock)
of $.001 per Right (the "Redemption Price"), which redemption shall be
effective upon the action of the Board. Additionally, following the Shares
Acquisition Date, the Corporation may redeem the then outstanding Rights in
whole, but not in part, at the Redemption Price, provided that such redemption
is in connection with a merger or other business combination transaction or
series of transactions involving the Corporation in which all holders of shares
of Common Stock are treated alike but not involving an Acquiring Person or its
affiliates or associates.
Other than those provisions relating to the rights, duties and obligations
of the Rights Agent, all of the provisions of the Rights Agreement may be
amended by the Board of Directors of the Corporation prior to the Distribution
Date. After the Distribution Date, the provisions of the Rights Agreement may be
amended by the Board of Directors of the Corporation in order to cure any
ambiguity, defect or inconsistency, to make changes that do not adversely affect
the interests of holders of Rights (excluding the interests of any Acquiring
Person), or, subject to certain limitations, to shorten or lengthen any time
period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to stockholders of the Corporation, stockholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Corporation.
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is hereby
incorporated herein by reference.
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