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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 15, 2006
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A.P. Pharma, Inc.
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(Exact name of registrant as specified in its charter)
000-16109
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(Commission File Number)
Delaware 94-2875566
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
123 Saginaw Drive
Redwood City, CA 94063
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(Address of principal executive offices, with zip code)
(650) 366-2626
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
Effective as of December 15, 2006, the Board of Directors of
A.P. Pharma, Inc. (the "Company") declared a dividend of one
preferred share purchase right (a "Right") for each outstanding
share of Common Stock, $0.01 par value (the "Common Shares"), of
the Company. The dividend is payable on January 2, 2007 (the
"Record Date") to stockholders of record as of the close of
business on that date. Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share of
Series A Participating Preferred Stock, $0.01 par value, of the
Company (the "Preferred Shares"), subject to adjustment, at a
price of $11.00 per one-thousandth of a preferred share, subject
to adjustment (the "Purchase Price"). The description and terms
of the Rights are set forth in a Preferred Shares Rights
Agreement (the "Rights Agreement") dated as of December 18, 2006
between the Company and Computershare Trust Company, N.A., as
Rights Agent (the "Rights Agent").
The following is a general description only and is subject
to the detailed terms and conditions of the Rights Agreement. A
copy of the Rights Agreement, including the exhibits thereto, the
Amended and Restated Certificate of Designation, Preferences and
Rights of Series A Preferred Stock, and the Form of Rights
Certificate, are attached as Exhibits to this Form 8-K and are
incorporated herein by reference.
Rights Evidenced by Common Share Certificates
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The Rights will not be exercisable until the Distribution
Date (defined below). Accordingly, Common Share certificates
outstanding on the Record Date will evidence the Rights related
thereto, and Common Share certificates issued after the Record
Date will contain a notation incorporating the Rights Agreement
by reference. Until the Distribution Date (or earlier
redemption, exchange or expiration of the Rights), the surrender
or transfer of any certificates for Common Shares, even without
notation or a copy of the Summary of Rights being attached
thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such
certificate.
Distribution Date
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The Rights will separate from the Common Shares,
certificates for the rights ("Rights Certificates") will be
issued and the Rights will become exercisable upon the earlier
of: (i) the close of business on the tenth day (or such later
date as may be determined by a majority of the Board of
Directors) following a public announcement that a person or group
of affiliated or associated persons has acquired, or obtained the
right to acquire, beneficial ownership of 20% or more of the
outstanding Common Shares (an "Acquiring Person") or (ii) the
close of business on the tenth day (or such later date as may be
determined by a majority of the Board of Directors) following the
commencement of a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by
a person or group of 20% or more of the outstanding Common
Shares. The earlier of such dates is referred to as the
"Distribution Date".
Issuance of Rights Certificates, Expiration of Rights
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As soon as practicable following the Distribution Date,
separate Rights Certificates will be mailed to holders of record
of the Common Shares as of the close of business on the
Distribution Date and such separate Rights Certificates alone
will evidence the Rights from and after the Distribution Date.
Unless otherwise determined by the Board of Directors, all Common
Shares issued prior to the Distribution Date will be issued with
Rights. Common Shares issued after the Distribution Date may be
issued with Rights if such shares are issued (i) upon the
exercise, conversion or exchange of securities issued after
adoption of the Rights Agreement or (ii) pursuant to the exercise
of stock options or under any employee benefit plan or
arrangement. Except as otherwise determined by the Board of
Directors, no other Common Shares issued after the Distribution
Date will be issued with Rights. In addition, no Common Shares
issued after the Distribution Date will be issued with Rights if
such issuance would result in (or create a significant risk) (i)
of material adverse tax consequences to the Company or the person
to whom such Rights Certificate would be issued or (ii) that such
options or plans would not qualify for otherwise available
special tax treatment. The Rights will expire on December 31,
2016 (the "Final Expiration Date"), unless the Final Expiration
Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company or expire upon consummation of certain
mergers, consolidations or sales of assets, as described below.
Initial Exercise of the Rights
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Following the Distribution Date, and until the occurrence of
one of the subsequent events described below, holders of the
Rights will be entitled to receive, upon exercise and the payment
of $11.00 (the "Purchase Price") per Right, one one-thousandth of
a Preferred Share.
Exchange Provision
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At any time after an Acquiring Person has become such and
prior to the Acquiring Person beneficially owning 50% or more of
the outstanding Common Shares, the Board of Directors may
exchange the Rights (other than Rights owned by the Acquiring
Person or its affiliates), in whole or in part, at an exchange
ratio of one Common Share per Right (subject to adjustment).
Right to Buy Common Shares at Half Price
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Unless the Rights are earlier redeemed or exchanged, in the
event that an Acquiring Person becomes such, other than pursuant
to a tender offer which is made for all of the outstanding Common
Shares and approved by a majority of the Board of Directors after
determining that the offer is both adequate and otherwise in the
best interests of the Company and its stockholders (a "Permitted
Offer"), then proper provision will be made so that each holder
of a Right which has not theretofore been exercised (other than
Rights beneficially owned by the Acquiring Person, which will
thereafter be void) will thereafter have the right to receive,
upon exercise of a Right, a number of Common Shares having a then
current value equal to two times the Purchase Price. In the
event that the Company does not have a sufficient number of
Common Shares available, or the Board of Directors decides that
such action is necessary or appropriate and not contrary to the
interests of Rights holders, the Company may, among other things,
instead substitute cash, assets or other securities for the
Common Shares into which the Rights would have otherwise been
exercisable.
Right to Buy Acquiring Company Stock at Half Price
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Similarly, unless the Rights are earlier redeemed or
exchanged, in the event that, after the Shares Acquisition Date
(as defined below), (i) the Company consolidates with or merges
into another entity, (ii) another entity consolidates with or
merges into the Company or (iii) the Company sells or otherwise
transfers 50% or more of its consolidated assets or earning
power, proper provision must be made so that each holder of a
Right which has not theretofore been exercised (other than Rights
beneficially owned by the Acquiring Person, which will thereafter
be void) will thereafter have the right to receive, upon
exercise, a number of shares of common stock of the acquiring
company having a then current value equal to two times the
Purchase Price (unless the transaction satisfies certain
conditions and is consummated with a person who acquired shares
pursuant to a Permitted Offer, in which case the Rights will
expire).
Adjustments to Prevent Dilution
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The Purchase Price payable, the number of Rights and the
number of Preferred Shares, Common Shares or other securities or
property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution as set forth in
the Rights Agreement. 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.
Rights and Preferences of the Preferred Shares
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Preferred Shares purchasable upon exercise of the Rights
will not be redeemable. Each Preferred Share will be entitled to
an aggregate dividend of 1,000 times the dividend declared per
Common Share. In the event of liquidation, the holders of the
Preferred Shares will be entitled to a preferential liquidation
payment equal to accrued but unpaid dividends plus the greater of
$1,000 per share or 1,000 times the aggregate per share amount to
be distributed to the holders of Common Shares. Each Preferred
Share will have 1,000 votes, voting together with the holders of
Common Shares, except as required by law or the Amended and
Restated Certificate of Designation, Preferences and Rights of
Series A Preferred Stock. In the event of any merger,
consolidation or other transaction in which Common Shares are
changed or exchanged, each Preferred Share will be entitled to
receive 1,000 times the amount received per Common Share. These
rights are protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting
rights of the Preferred Shares, the value of the one one-
thousandth interest in a Preferred Share purchasable upon
exercise of each Right should approximate the value of one Common
Share.
Redemption
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At any time prior to the close of business on the earlier of
(i) the tenth day following the date (the "Shares Acquisition
Date") of public announcement that an Acquiring Person has become
such or such later date as may be determined by a majority of the
Board of Directors and publicly announced by the Company or (ii)
the Final Expiration Date of the Rights, the Company may redeem
the Rights in whole, but not in part, at a price of $0.01 per
Right ("Redemption Price").
No Stockholders' Rights Prior to Exercise
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Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company (other than
any rights resulting from such holder's ownership of Common
Shares), including, without limitation, the right to vote or to
receive dividends.
Amendment of Rights Agreement
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The provisions of the Rights Agreement may be supplemented
or amended by the Board of Directors in any manner prior to the
Distribution Date without the approval of Rights holders. After
the Distribution Date, the provisions of the Rights Agreement may
be supplemented or amended by the Board of Directors in order to
(i) cure any ambiguity, defect or inconsistency, (ii) to make
changes which are deemed necessary or advisable and do not
adversely affect the interests of holders of Rights (excluding
the interests of any Acquiring Person), or (iii) to shorten or
lengthen any time period under the Rights Agreement; provided,
however, that no amendment to lengthen (A) the time period
governing redemption shall be made at such time as the Rights are
not redeemable, or (B) any other period unless for the purpose of
protecting, enhancing or clarifying the rights of, and/or
benefits to, the holders of Rights.
Certain Anti-takeover Effects
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The Rights approved by the Board of Directors are designed
to protect and maximize the value of the outstanding equity
interests in the Company in the event of an unsolicited attempt
by an acquiror to take over the Company, in a manner or on terms
not approved by the Board of Directors. Takeover attempts
frequently include coercive tactics to deprive a corporation's
Board of Directors and its stockholders of any real opportunity
to determine the destiny of the corporation. The Rights have
been declared by the Board of Directors in order to deter such
tactics, including a gradual accumulation of shares in the open
market of a 20% or greater position to be followed by a merger or
a partial or two-tier tender offer that does not treat all
stockholders equally. These tactics unfairly pressure
stockholders, squeeze them out of their investment without giving
them any real choice and deprive them of the full value of their
shares.
The Rights are not intended to prevent a takeover of the
Company and will not do so. The Rights are not exercisable in
the event of a Permitted Offer, as described above. The Rights
may be redeemed by the Company at $0.01 per Right within ten days
(or such later date as may be determined by a majority of the
Board of Directors) after the accumulation of 20% or more of the
Company's outstanding Common Shares by a single acquiror or
group. Accordingly, the Rights should not preclude any merger or
business combination approved by the Board of Directors.
Issuance of the Rights does not in any way weaken the financial
strength of the Company or interfere with its business plans. The
issuance of the Rights has no immediate dilutive effect, will not
affect reported earnings per share, should not be taxable to the
Company or to its stockholders and will not change the way in
which the Company's shares are presently traded. The Board of
Directors believes that the Rights represent a sound and
reasonable means of addressing the complex issues of corporate
policy created by the current takeover environment. However, the
Rights may have the effect of rendering more difficult or
discouraging an acquisition of the Company deemed undesirable by
the Board of Directors. The Rights may cause substantial
dilution to a person or group that attempts to acquire the
Company on terms or in a manner not approved by the Board of
Directors, except pursuant to an offer conditioned upon the
negation, purchase or redemption of the Rights.
Item 3.03 Material Modifications to Rights of Security Holders
The information set forth in Item 1.01 and in Item 5.03 is
incorporated by reference.
Item 5.03 Amendment to Articles of Incorporation or Bylaws;
Change in Fiscal Year
In connection with the adoption of the Rights Agreement
referenced in Item 1.01 above, the Board of Directors approved a
Amended and Restated Certificate of Designation, Preferences and
Rights of Series A Preferred Stock (the "Certificate of
Designation") classifying and designating the Series A
Participating Preferred Stock. The Certificate of Designation
was filed with the Secretary of State of the State of Delaware,
and became effective, on December 19, 2006. The Certificate of
Designation is attached as Exhibit 3.C to this Current Report on
Form 8-K and is incorporated herein by reference. The
information set forth in Item 1.01 is incorporated by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
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3.C Amended and Restated Certificate of Designation,
Preferences and Rights of Series A Preferred
Stock filed with the Secretary of State of the
State of Delaware on December 19, 2006.
4.A Preferred Shares Rights Agreement, dated as of
December 18, 2006, between A.P. Pharma, Inc. and
Computershare Trust Company, N.A., including the
Amended and Restated Certificate of Designation,
Preferences and Rights of Series A Preferred
Stock, the form of Rights Certificate and the
Summary of Rights attached thereto as Exhibits
A, B and C, respectively.
4.B Form of Rights Certificate.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
A.P. PHARMA, INC.
Date: December 19, 2006 By: /s/ Gregory Turnbull
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Name: Gregory Turnbull
Title: President and
Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description
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3.C Amended and Restated Certificate of Designation,
Preferences and Rights of Series A Preferred
Stock filed with the Secretary of State of the
State of Delaware on December 19, 2006.
4. A Preferred Shares Rights Agreement, dated as of
December 18, 2006, between A.P. Pharma, Inc. and
Computershare Trust Company, N.A., including the
Amended and Restated Certificate of Designation,
Preferences and Rights of Series A Preferred
Stock, the form of Rights Certificate and the
Summary of Rights attached thereto as Exhibits
A, B and C, respectively.
4.B Form of Rights Certificate.
Exhibit 4.A
A.P. PHARMA, INC.
and
COMPUTERSHARE TRUST COMPANY, N.A.
Rights Agent
PREFERRED SHARES RIGHTS AGREEMENT
---------------------------------
Dated as of December 18, 2006
TABLE OF CONTENTS
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1. Certain Definitions
2. Appointment of Rights Agent
3. Issuance of Rights Certificates
4. Form of Rights Certificates
5. Countersignature and Registration
6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates
7. Exercise of Rights; Purchase Price; Expiration Date of
Rights
8. Cancellation and Destruction of Rights Certificates
9. Reservation and Availability of Preferred Shares
10. Preferred Shares Record Date
11. Adjustment of Purchase Price, Number of Shares or Number of
Rights
12. Certificate of Adjusted Purchase Price or Number of Shares
13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power
14. Fractional Rights and Fractional Shares
15. Rights of Action
16. Agreement of Rights Holders
17. Rights Certificate Holder Not Deemed a Shareholder
18. Concerning the Rights Agent
19. Merger or Consolidation or Change of Name of Rights Agent
20. Duties of Rights Agent
21. Change of Rights Agent
22. Issuance of New Rights Certificates
23. Redemption
24. Exchange
25. Notice of Certain Events
26. Notices
27. Supplements and Amendments
28. Successors
29. Determinations and Actions by the Board of Directors, etc
30. Benefits of this Agreement
31. Severability
32. Governing Law
33. Counterparts
34. Descriptive Headings
35. Force Majeure
EXHIBITS
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Exhibit A Form of Certificate of Designation
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
A.P. PHARMA, INC.
PREFERRED SHARES RIGHTS AGREEMENT
---------------------------------
This Preferred Shares Rights Agreement, dated as of December
18, 2006, is made between A.P. Pharma, Inc., a Delaware
corporation (the "Company"), and Computershare Trust Company,
N.A. (the "Rights Agent").
RECITALS
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On December 15, 2006 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and
declared a dividend of one Preferred Share purchase right (a
"Right") for each Common Share (as hereinafter defined) of the
Company outstanding as of the Close of Business (as hereinafter
defined) on January 2, 2007 (the "Record Date"), each Right
representing the right to purchase one one-thousandth of a share
of Series A Participating Preferred Stock (as such number may be
adjusted pursuant to the provisions of this Agreement), having
the rights, preferences and privileges set forth in the form of
Certificate of Designation attached to this Agreement as Exhibit
A, upon the terms and subject to the conditions herein set forth,
and further authorized and directed the issuance of one Right (as
such number may be adjusted pursuant to the provisions of this
Agreement) with respect to each Common Share that shall become
outstanding between the Record Date and the earlier of the
Distribution Date and the Expiration Date (as such terms are
hereinafter defined), and in certain circumstances after the
Distribution Date.
AGREEMENT
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The parties agree as follows:
1. Certain Definitions For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 20% or more of the
Common Shares then outstanding, but shall not include the
Company, any Subsidiary of the Company or any employee benefit
plan of the Company or of any Subsidiary of the Company, or any
entity holding Common Shares for or pursuant to the terms of any
such plan. Notwithstanding the foregoing, no Person shall be
deemed to be an Acquiring Person either (i) as the result of an
acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 20% or more
of the Common Shares of the Company then outstanding; provided,
however, that if a Person shall become the Beneficial Owner of
20% or more of the Common Shares of the Company then outstanding
by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company, (other than pursuant
to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split
or subdivision of the outstanding Common Shares), then such
Person shall be deemed to be an Acquiring Person unless upon
becoming the Beneficial Owner of such additional Common Shares of
the Company such Person does not beneficially own 20% or more of
the Common Shares of the Company then outstanding.
Notwithstanding the foregoing, (i) if the Board of Directors of
the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person" as defined pursuant to the
foregoing provisions of this Section 1(a) has become such
inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of the
Common Shares that would otherwise cause such Person to be an
"Acquiring Person", as defined pursuant to the foregoing
provisions of this Section 1(a) or (B) such Person was aware of
the extent of the Common Shares it beneficially owned but had no
actual knowledge of the consequences of such beneficial ownership
under this Agreement) and without any intention of changing of
influencing control of the Company, and if such Person divested
or divests as promptly as practicable a sufficient number of
Common Shares to that such Person would no longer be an
"Acquiring Person", as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be
deemed to be or to have become an "Acquiring Person" for any
purposes of this Agreement; and (ii) if, as of the date hereof,
any Person is the Beneficial Owner of 20% or more of the Common
Shares outstanding, such Person shall not be or become an
"Acquiring Person", as defined pursuant to the foregoing
provisions of this Section 1(a), unless and until such time as
such Person shall become the Beneficial Owner of additional
Common Shares (other than pursuant to a dividend or distribution
paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the
outstanding Common Shares), unless, upon becoming the Beneficial
Owner of such additional Common Shares, such Person is not then
the Beneficial Owner of 20% or more of the Common Shares then
outstanding.
(b) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as in effect on the
date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of
and shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, including a group of which such Person
or any of such Person's Affiliates or Associates is a member
(within the meaning of Section 13(d)(3) of the Exchange Act of
1934), beneficially owns, directly or indirectly, for purposes of
Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or
any comparable or successor law or regulation);
(ii) which such Person or any of such Person's
Affiliates or Associates, including a group of which such Person
or any of such Person's Affiliates or Associates is a member
(within the meaning of Section 13(d)(3) of the Exchange Act of
1934), 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, whether
or not in writing (other than customary agreements with and
between underwriters and selling group members with respect to a
bona fide public offering of securities), or upon the exercise of
conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed pursuant to this Section
l(c)(ii)(A) to be the Beneficial Owner of, or to beneficially
own, (1) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are
accepted for purchase or exchange or (2) securities which a
Person or any of such Person's Affiliates or Associates may be
deemed to have the right to acquire pursuant to any merger or
other acquisition agreement between the Company and such Person
(or one or more of its Affiliates or Associates) if such
agreement has been approved by the Board of Directors prior to a
Triggering Event; 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 under this Section l(c)(ii)(B) 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 of the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly
or indirectly, by any other Person (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 (whether or not in writing) (other than customary
agreements with and between underwriters and selling group
members with respect to a bona fide public offering of
securities) for the purpose of acquiring, holding, voting (except
to the extent contemplated by the proviso to Section l(c)(ii)(B))
or disposing of any securities of the Company; provided, however,
that in no case shall an officer or director of the Company be
deemed (x) the Beneficial Owner of any securities beneficially
owned by another officer or director of the Company solely by
reason of actions undertaken by such persons in their capacity as
officers or directors of the Company or (y) the Beneficial Owner
of securities held of record by the trustee of any employee
benefit plan of the Company or any Subsidiary of the Company for
the benefit of any employee of the Company or any Subsidiary of
the Company, other than the officer or director, by reason of any
influence that such officer or director may have over the voting
of the securities held in the plan.
(d) "Board of Directors" shall mean the Board of
Directors of the Company then in office.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in New
York are authorized or obligated by law or executive order to
close.
(f) "Close of Business" on any given date shall mean
5:00 P.M., New York time, on such date; provided, however, that
if such date is not a Business Day it shall mean 5:00 P.M., New
York time, on the next succeeding Business Day.
(g) "Common Shares" when used with reference to the
Company shall mean the shares of Common Stock of the Company,
$0.01 par value. "Common Shares" when used with reference to any
Person other than the Company shall mean the capital stock (or
equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such
first-mentioned Person.
(h) "Distribution Date" shall mean the earlier of (i)
the Close of Business on the tenth day after the Shares
Acquisition Date (or, if the tenth day after the Shares
Acquisition Date occurs before the Record Date, the Close of
Business on the Record Date) or (ii) the Close of Business on the
tenth day (or such later date as may be determined by action of a
majority of the Board of Directors) after the date that a tender
or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General
Rules and Regulations under the Exchange Act, if, assuming the
successful consummation thereof, such Person would be the
Beneficial Owner of 20% or more of the shares of Common Stock
then outstanding.
(i) "Equivalent Shares" shall mean Preferred Shares
and any other class or series of capital stock of the Company
that is entitled to participate in dividends and other
distributions, including distributions upon the liquidation,
dissolution or winding up of the Company, on a proportional basis
with the Common Shares. In calculating the number of any class
or series of Equivalent Shares for purposes of Section 11 of this
Agreement, the number of shares, or fractions of a share, of such
class or series of capital stock that is entitled to the same
dividend or distribution as a whole Common Share shall be deemed
to be one share.
(j) "Expiration Date" shall mean the earliest of (i)
the Close of Business on the Final Expiration Date, (ii) the
Redemption Date, (iii) the time at which the Board of Directors
orders the exchange of the Rights as provided in Section 24 of
this Agreement or (iv) the consummation of a transaction
contemplated by Section 13(d) of this Agreement.
(k) "Final Expiration Date" shall mean December 31,
2016.
(l) "Person" shall mean any individual, firm,
corporation or other entity, and shall include any successor (by
merger or otherwise) of such entity.
(m) "Preferred Shares" shall mean shares of Series A
Participating Preferred Stock of the Company.
(n) "Purchase Price" shall have the meaning set forth
in Section 4(a) of this Agreement.
(o) "Record Date" shall have the meaning set forth in
the recitals at the beginning of this Agreement.
(p) "Redemption Date" shall mean the time at which the
Board of Directors of the Company orders redemption of the Rights
as provided in Section 23 of this Agreement.
(q) "Redemption Price" shall have the meaning set
forth in Section 23(a) of this Agreement.
(r) "Right" shall have the meaning set forth in the
recitals at the beginning of this Agreement.
(s) "Rights Dividend Declaration Date" shall have the
meaning set forth in the recitals at the beginning of this
Agreement.
(t) "Section 13 Event" shall mean any event described
in clause (i), (ii) or (iii) of Section 13(a) of this Agreement.
(u) "Shares Acquisition Date" shall mean the first
date of public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed
pursuant to Section 13(d) of the Exchange Act) by the Company or
an Acquiring Person that an Acquiring Person has become such;
provided that, if such person is determined not to have become an
Acquiring Person pursuant to Section l(a)(ii) of this Agreement,
then no Shares Acquisition Date shall be deemed to have occurred.
(v) "Subsidiary" of any Person shall mean any
corporation or other entity of which an amount of voting
securities sufficient to elect a majority of the directors or
Persons having similar authority of such corporation or other
entity is beneficially owned, directly or indirectly, by such
Person, or any corporation or other entity otherwise controlled
by such Person.
(w) "Total Exercise Price" shall have the meaning set
forth in Section 4(a) of this Agreement.
(x) "Trading Day" shall have the meaning set forth in
Section 11(d) of this Agreement.
(y) A "Triggering Event" shall be deemed to have
occurred upon any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or any
Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becoming an Acquiring
Person.
2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in
accordance with the terms and conditions of this Agreement, and
the Rights Agent hereby accepts such appointment. The Company
may from time to time appoint such co-Rights Agents as it may
deem necessary or desirable, upon ten (10) days' prior written
notice to the Rights Agent. The Rights Agent shall have no duty
to supervise, and in no event be liable for, the acts or
omissions of any such co-Rights Agent.
3. Issuance of Rights Certificates.
(a) Until the Distribution Date, (i) the Rights will
be evidenced (subject to the provisions of Sections 3(b) and 3(c)
of this Agreement) by the certificates for Common Shares
registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and
not by separate Rights Certificates and (ii) the right to receive
Rights Certificates will be transferable only in connection with
the transfer of Common Shares. Until the earlier of the
Distribution Date or the Expiration Date, the surrender for
transfer of such certificates for Common Shares shall also
constitute the surrender for transfer of the Rights associated
with the Common Shares represented thereby. As soon as
practicable after the Distribution Date, the Company will prepare
and execute, the Rights Agent will countersign, and the Company
will send or cause to be sent (and the Rights Agent will, if
requested, send) by first-class, postage-prepaid mail, to each
record holder of Common Shares as of the close of business on the
Distribution Date, at the address of such holder shown on the
records of the Company, a Rights Certificate in substantially the
form of Exhibit B to this Agreement (a "Rights Certificate"),
evidencing one Right for each Common Share so held, subject to
adjustment as provided herein. In the event that an adjustment
in the number of Rights per Common Share has been made pursuant
to Section 11(a)(i), Section 11(i) or Section 11(p) of this
Agreement, then at the time of distribution of the Rights
Certificates, the Company shall make the necessary and
appropriate rounding adjustments (in accordance with Section
14(a) of this Agreement) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Rights. As of the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates and
may be transferred by the transfer of the Rights Certificates as
permitted hereby, separately and apart from any transfer of one
or more Common Shares, and the holders of such Rights
Certificates as listed in the records of the Company or any
transfer agent or registrar for the Rights shall be the record
holders thereof.
(b) On the Record Date or as soon as practicable
thereafter, the Company will send (or cause to be sent) a copy of
a Summary of Rights in substantially the form of Exhibit C to
this Agreement (the "Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of Common Shares as
of the close of business on the Record Date, at the address of
such holder shown on the records of the Company.
(c) Unless the Board of Directors, by resolution
adopted at or before the time of the issuance (including pursuant
to the exercise of rights under the Company's benefit plans) of
any Common Shares, specifies to the contrary, Rights shall be
issued in respect of all Common Shares that are issued after the
Record Date but prior to the earlier of the Distribution Date or
the Expiration Date or, in certain circumstances provided in
Section 22 of this Agreement, after the Distribution Date.
Certificates representing such Common Shares shall also be deemed
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 Preferred
Shares Rights Agreement between A.P. Pharma, Inc. and
Computershare Trust Company, N.A., as the Rights Agent,
dated as of December 18, 2006 (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 A.P. Pharma, Inc. 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. A.P. Pharma, Inc. 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
any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently
held by or on behalf of such Person or by any
subsequent holder, may become null and void.
With respect to such certificates containing the foregoing
legend, until the earlier of (i) the Distribution Date or (ii)
the Expiration Date, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby. In the
event that the Company purchases or acquires any Common Shares
after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed
canceled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares which are
no longer outstanding.
4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election
to purchase Common Shares and of assignment to be printed on the
reverse thereof) shall be substantially in the form of Exhibit B
to this Agreement and may have such marks of identification or
designation and such legends, summaries or endorsements printed
thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time
be listed, or to conform to usage. Subject to the provisions of
Section 11 and Section 22 of this Agreement, the Rights
Certificates, whenever distributed, shall be dated as of the
Record Date (or in the case of Rights issued with respect to
Common Shares issued by the Company after the Record Date, as of
the date of issuance of such Common Shares), shall show the date
of countersignature by the Rights Agent, and on their face shall
entitle the holders thereof to purchase such number of one-
thousandths of a Preferred Share as shall be set forth therein at
the price set forth therein (such exercise price per one one-
thousandth of a Preferred Share being hereinafter referred to as
the "Purchase Price" and the aggregate exercise price of all
Preferred Shares issuable upon exercise of one Right being
hereinafter referred to as the "Total Exercise Price"), but the
number and type of securities purchasable upon the exercise of
each Right and the Purchase Price shall be subject to adjustment
as provided herein.
(b) Any Rights Certificate issued pursuant to Section
3(a) or Section 22 of this Agreement that represents Rights
beneficially owned by: (i) an Acquiring Person or any Associate
or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such (a
"Post Transferee"), (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) 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 to
holders of equity interests in such Acquiring Person or to any
Person with whom such Acquiring Person has any continuing
agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Directors of the
Company has determined is part of a plan, arrangement or
understanding that has as a primary purpose or effect avoidance
of Section 7(e) of this Agreement (a "Prior Transferee" or (iv)
any subsequent transferee received transferred Rights from a Post
Transferee or a Prior Transferee, shall become null and void ,
and any Rights Certificate issued pursuant to Section 6 or
Section 11 of this Agreement upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following
legend:
The Rights represented by this Rights 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 Rights
Certificate and the Rights represented hereby are null
and void in the circumstances specified in Section 7(e)
of the Rights Agreement.
In the event that the Rights become exercisable, the Rights Agent
and the Company will agree upon a procedure for determining which
Rights will be so legended.
5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President or any Vice President, either
manually or by facsimile signature, and by the Secretary or an
Assistant Secretary of the Company, either manually or by
facsimile signature, and shall have affixed thereto the Company's
seal (if any) or a facsimile thereof. The Rights Certificates
shall be manually countersigned by an authorized signatory of the
Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have
signed any of the Rights Certificates shall cease to be such
officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Rights
Certificates nevertheless, may be countersigned by the Rights
Agent and issued and delivered by the Company with the same force
and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company;
and any Rights Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to
sign such Rights Certificate, although at the date of the
execution of this Rights Agreement any such person was not such
an officer.
(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at its office designated for such
purposes, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each
of the Rights Certificates and the date of each of the Rights
Certificates.
6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.
(a) Subject to the provisions of Sections 7(e), 14 and
24 of this Agreement, at any time after the Close of Business on
the Distribution Date, and at or prior to the Close of Business
on the Expiration Date, any Rights Certificate or Rights
Certificates may be transferred, split up, combined or exchanged
for another Rights Certificate or Rights Certificates, entitling
the registered holder to purchase a like number of one-
thousandths of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets, as the case may
be) as the Rights Certificate or Rights Certificates surrendered
then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights
Certificate or Rights Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Rights Certificates to be transferred,
split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and
signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided
such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof
as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Sections 7(e), 14 and 24 of this
Agreement, countersign and deliver to the person entitled thereto
a Rights Certificate or Rights Certificates, as the case may be,
as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Rights Certificate, and, in case
of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will make and deliver a new Rights
Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Sections 7(e), 23(b) or 24 of this
Agreement, the registered holder of any Rights 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 Rights Certificate, with
the form of election to purchase on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the
Purchase Price for each one-thousandth of a Preferred Share as to
which the Rights are exercised, at or prior to the Expiration
Date.
(b) The Purchase Price for each one-thousandth of a
Preferred Share issuable pursuant to the exercise of a Right
shall initially be $11.00, shall be subject to adjustment from
time to time as provided in Sections 11 and 13 of this Agreement
and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase duly
executed, accompanied by payment of the Purchase Price for the
number of one-thousandths of a Preferred Share (or other
securities or property, as the case may be) to be purchased and
an amount equal to any applicable transfer tax required to be
paid by the holder of such Rights Certificate in accordance with
Section 9 of this Agreement in cash, or by certified check or
cashier's check payable to the order of the Company, the Rights
Agent shall, subject to Section 20(k) of this Agreement,
thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Shares (or make available, if the Rights Agent is
the transfer agent for the Preferred Shares) a certificate or
certificates for the number of one-thousandths of a Preferred
Share to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests or
(B) if the Company shall have elected to deposit the total number
of one-thousandths of a Preferred Share issuable upon exercise of
the Rights hereunder with a depository agent, requisition from
the depository agent of depository receipts representing such
number of one-thousandths of a Preferred Share as are to be
purchased (in which case certificates for the Preferred Shares
represented by such receipts shall be deposited by the transfer
agent with the depository agent) and the Company hereby directs
the depository agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to
be paid in lieu of issuance of fractional shares in accordance
with Section 14 of this Agreement, (iii) after receipt of such
certificates or depository receipts, cause the same to be
delivered to or upon the order of the registered holder of such
Rights 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 Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced (including to zero)
pursuant to Section 11(a)(iii) of this Agreement) may be made in
cash or by certified check or cashier's check payable to the
order of the Company. In the event that the Company is obligated
to issue other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) of this
Agreement, the Company will make all arrangements necessary so
that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced
thereby, a new Rights Certificate evidencing Rights equivalent to
the Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Rights Certificate or to
his or her duly authorized assigns, subject to the provisions of
Section 14 of this Agreement.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Triggering
Event or a Section 13 Event, any Rights beneficially owned by (i)
an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such (a "Post Transferee"), (iii) a
transferee of an Acquiring Person (or of any such Associate or
Affiliate) 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 to holders of equity
interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors has determined is part of a plan,
arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e) (a "Prior Transferee")
or (iv) any subsequent transferee receiving transferred Rights
from a Post Transferee or a Prior Transferee, either directly or
through one or more intermediate transferees, shall become null
and void without any further action and no holder of such Rights
shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The
Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) of this
Agreement are complied with, but shall have no liability to any
holder of Rights Certificates or to any other Person as a result
of its failure to make any determinations with respect to an
Acquiring Person or any of such Acquiring Person's Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth
in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as
the Company shall reasonably request.
8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered
to the Company or to any of its agents, be delivered to the
Rights Agent for cancellation or in canceled form, or, if
surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement.
The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire,
any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or
shall, at the written request of the Company, destroy such
canceled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
9. Reservation and Availability of Preferred Shares.
(a) The Company covenants and agrees that it will use
its best efforts to cause to be reserved and kept available out
of and to the extent of its authorized and unissued shares of
preferred stock not reserved for another purpose (and, following
the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Shares and/or other securities), the
number of Preferred Shares (and, following the occurrence of the
Triggering Event, Common Shares and/or other securities) that
will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) If the Company shall hereafter list any of its
Preferred Shares on a national securities exchange, then so long
as the Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) issuable
and deliverable upon exercise of the Rights may be listed on a
national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become
exercisable (but only to the extent that it is reasonably likely
that the Rights will be exercised), all shares reserved for such
issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the earliest date after
the first occurrence of a Triggering Event in which the
consideration to be delivered by the Company upon exercise of the
Rights has been determined in accordance with Sections 11(a)(ii)
or 11(a)(iii) of this Agreement, or as soon as is required by law
following the Distribution Date, as the case may be, a
registration statement under the Securities Act of 1933, as
amended (the "Securities 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 Securities Act) until
the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the date of expiration of
the Rights. The Company may temporarily suspend, for a period
not to exceed ninety (90) days after the date set forth in clause
(i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon
any such suspension, the Company shall issue a public
announcement stating, and notify the Rights Agent, that the
exercisability of the Rights has been temporarily suspended, as
well as a public announcement and notification to the Rights
Agent at such time as the suspension is no longer in effect. The
Company will also take such action as may be appropriate under,
or to ensure compliance with, the securities or "blue sky" laws
of the various states in connection with the exercisability of
the Rights. Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any
jurisdiction, unless the requisite qualification in such
jurisdiction shall have been obtained, or an exemption therefrom
shall be available, and until a registration statement has been
declared effective.
(d) The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all Preferred
Shares delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such Preferred Shares (subject
to payment of the Purchase Price), be duly and validly authorized
and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it
will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the
original issuance or delivery of the Rights Certificates or of
any Preferred Shares upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax which may
be payable in respect of any transfer or delivery of Rights
Certificates to a person other than, or the issuance or delivery
of certificates or depository receipts for the Preferred Shares
in a name other than that of, the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise or to
issue or to deliver any certificates or depository receipts for
Preferred Shares upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the
holder of such Rights Certificate at the time of surrender) or
until it has been established to the Company's satisfaction that
no such tax is due.
10. Preferred Shares Record Date. Each person in whose
name any certificate for a number of one-thousandths of a
Preferred Share is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of
Preferred Shares represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the
Purchase Price multiplied by the number of one-thousandths of a
Preferred Share with respect to which the Rights have been
exercised (and any applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date
upon which the Preferred Shares transfer books of the Company are
closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the Preferred Shares
transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a holder of Preferred
Shares for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or
other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
11. Adjustment of Purchase Price, Number of Shares or
Number of Rights. The Purchase Price, the number and kind of
shares or other property covered by each Right and the number of
Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the
Common Shares payable in Common Shares, (B) subdivide the
outstanding Common Shares, (C) combine the outstanding Common
Shares (by reverse stock split or otherwise) into a smaller
number of Common Shares, or (D) issue any shares of its capital
stock in a reclassification of the Common Shares (including any
such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving
corporation), then, in each such event, except as otherwise
provided in this Section 11(a) and Section 7(e) of this
Agreement: (1) each of the Rights outstanding at the time of the
record date for such dividend or the effective date of such
subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to
the nearest one ten-thousandth (1/10,000) of a Right) equal to a
fraction (the "Exchange Ratio"), the numerator of which shall be
the total number of Common Shares or shares of capital stock
issued in such dividend, subdivision, combination or
reclassification of the Common Shares outstanding immediately
following such dividend, subdivision, combination or
reclassification and the denominator of which shall be the total
number of Common Shares outstanding immediately prior to such
time, and the number of Rights that shall thereafter be issued
with respect to each Common Share or share of such other capital
stock that shall become outstanding thereafter prior to the
Distribution Date shall be equal to the total number of
outstanding Rights immediately after such event (as adjusted
pursuant to this clause (1)) divided by the total number of
outstanding Common Shares or shares of such other capital stock
immediately after such event (subject to further adjustment
pursuant to the provisions of this Agreement); (2) 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 shall be adjusted so that the Purchase Price
thereafter shall equal the result obtained by dividing the
Purchase Price in effect immediately prior to such time by the
Exchange Ratio; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of such Right; and (3) the
number of Preferred Shares or shares of such other capital stock
issuable upon the exercise of each Right shall remain unchanged
immediately after such event, but, in the event of a
reclassification, the kind of shares issuable upon the exercise
of each Right immediately after such reclassification shall be
adjusted to be the kind of shares of such other capital stock
issued in such reclassification, rather than Preferred Shares.
If an event occurs which would require an adjustment under both
this Section 11(a)(i) and Section 11(a)(ii) of this Agreement,
the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii) of this Agreement.
(ii) Subject to Section 24 of this Agreement, in
the event a Triggering Event shall have occurred, then promptly
following such Triggering Event, proper provision shall be made
so that each holder of a Right, except as provided in Section
7(e) of this Agreement, shall thereafter have the right to
receive for each Right, upon exercise thereof in accordance with
the terms of this Agreement and payment of the then-current Total
Exercise Price, in lieu of a number of one-thousandths of a
Preferred Share, such number of Common Shares of the Company as
shall equal the result obtained by multiplying the then-current
Purchase Price by the then number of one-thousandths of a
Preferred Share for which a Right was exercisable (or would have
been exercisable if the Distribution Date had occurred)
immediately prior to the first occurrence of a Triggering Event,
and dividing that product by 50% of the current per share market
price (determined pursuant to Section 11(d) of this Agreement)
for Common Shares on the date of occurrence of the Triggering
Event (such number of shares being hereinafter referred to as the
"Adjustment Shares").
(iii) In lieu of issuing Common Shares in
accordance with Section 11(a)(ii) of this Agreement, the Company
may, if the Board of Directors determines that such action is
necessary or appropriate and not contrary to the interest of
holders of Rights (and, in the event that the number of Common
Shares which are authorized by the Company's Amended and Restated
Certificate of Incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights, or
if any necessary regulatory approval for such issuance has not
been obtained by the Company, the Company shall): (A) determine
the excess of (1) the value of the Common Shares issuable upon
the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess, the "Spread") and (B) with respect
to each Right, make adequate provision to substitute for such
Common Shares, upon exercise of the Rights, (1) cash, (2) a
reduction in the Purchase Price, (3) other equity securities of
the Company (including, without limitation, shares or units of
shares of any series of Preferred Stock which the Board of
Directors has deemed to have the same value as Common Shares
(such shares or units of shares of Preferred Stock are herein
called "common stock equivalents")), except to the extent that
the Company has not obtained any necessary stockholder or
regulatory approval for such issuance, (4) debt securities of the
Company, except to the extent that the Company has not obtained
any necessary stockholder or regulatory approval for such
issuance, (5) other assets or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value,
where such aggregate value has been determined by the Board of
Directors based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors;
provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within
thirty (30) days following the later of (x) the first occurrence
of a Triggering Event and (y) the date on which the Company's
right of redemption pursuant to Section 23(a) expires (the later
of (x) and (y) being referred to herein as the "Section 11(a)(ii)
Trigger Date"), then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, Common Shares (to the extent
available), except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for
such issuance, and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Board
of Directors shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for
issuance upon exercise in full of the Rights or that any
necessary regulatory approval for such issuance will be obtained,
the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may
seek stockholder approval for the authorization of such
additional shares or take action to obtain such regulatory
approval (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) of this Agreement, that such
action shall apply uniformly to all outstanding Rights and (y)
may suspend the exercisability of the Rights until the expiration
of the Substitution Period in order to seek any authorization of
additional shares, to take any action to obtain any required
regulatory approval and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Shares shall be the current
per share market price (as determined pursuant to Section 11(d)
of this Agreement) of the Common Shares on the Section 11(a)(ii)
Trigger Date and the value of any "common stock equivalent" shall
be deemed to have the same value as the Common Shares on such
date.
(b) In case the Company shall, at any time after the
date of this Agreement, fix a record date for the issuance of
rights, options or warrants to all holders of Common Shares or of
any class or series of Equivalent Shares entitling such holders
(for a period expiring within forty-five (45) calendar days after
such record date) to subscribe for or purchase Common Shares or
Equivalent Shares or securities convertible into Common Shares or
Equivalent Shares at a price per share (or having a conversion
price per share, if a security convertible into Common Shares or
Equivalent Shares) less than the then current per share market
price of the Common Shares or Equivalent Shares (as defined in
Section 11(d)) on such record date, then, in each such case, 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 Common Shares and
Equivalent Shares (if any) outstanding on such record date, plus
the number of Common Shares or Equivalent Shares, as the case may
be, which the aggregate offering price of the total number of
Common Shares or Equivalent Shares, as the case may be, so to be
offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such
current market price, and the denominator of which shall be the
number of Common Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional
Common Shares or Equivalent Shares, as the case may be, to be
offered for subscription or purchase (or into which the
convertible securities so to be offered are initially
convertible). In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in
good faith by the Board of Directors, whose determination shall
be described in a statement filed with the Rights Agent and shall
be binding on the Rights Agent and the holders of the Rights.
Common Shares and Equivalent Shares owned by or held for the
account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed, and in the
event that such rights, options or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall, at any time after the
date of this Agreement, fix a record date for the making of a
distribution to all holders of the Common Shares or of any class
or series of Equivalent Shares (including any such distribution
made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences
of indebtedness or assets (other than a regular quarterly cash
dividend, if any, or a dividend payable in Common Shares) or
subscription rights, options or warrants (excluding those
referred to in Section 11(b)), then, in each such case, the
Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as
determined pursuant to Section 11(d) of this Agreement) of a
Common Share or an Equivalent Share on such record date, less the
fair market value (as determined in good faith by the Board of
Directors, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the cash, assets
or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a Common Share or
Equivalent Share, as the case may be, and the denominator of
which shall be such current market price (as determined pursuant
to Section 11(d) of this Agreement) of a Common Share or
Equivalent Share on such record date. 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 be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder,
other than computations made pursuant to Section 11(a)(iii) of
this Agreement, the "current per share market price" of any
security (a "Security" for the purpose of this Section 11(d)) 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 (as such term is hereinafter defined) immediately
prior to such date, and for purposes of computations made
pursuant to Section 11(a)(iii) of this Agreement, the "current
per share market price" of any Security on any date shall be
deemed to be the average of the daily closing prices per share of
such Security for the ten (10) consecutive Trading Days
immediately prior to such date; provided, however, that in the
event that the current per share market price of the Security is
determined during a period following the announcement by the
issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities
convertible into such shares or (ii) any subdivision, combination
or reclassification of such Security, and prior to the expiration
of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such
Security. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the
Security is not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security
is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities
exchange, the last sale price or, if such last sale price is not
reported, the average of the high bid and low asked prices in the
over-the-counter market, as reported by The NASDAQ Stock Market
LLC ("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. If on any such date no
market maker is making a market in the Common Shares, the fair
value of such shares on such date as determined in good faith by
the Board of Directors 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. If the Common Shares are not publicly
held or so listed or traded, "current per share market price"
shall mean the fair value per share as determined in good faith
by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(e) 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
which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a Common
Share or other share or one hundred-thousandth of a Preferred
Share, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years
from the date of the transaction which requires such adjustment
or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Sections 11(a) or 13(a) of this Agreement, the holder of any
Right thereafter exercised shall become entitled to receive any
shares of capital stock other than Preferred Shares, thereafter
the number of such other shares so receivable upon exercise of
any Right and if required, the Purchase Price thereof, shall be
subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with
respect to the Common Shares contained in Sections 11(a), (b),
(c), (e), (h), (i), (j), (k), (1) and (m), and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase
Price, the number of one-thousandths of a Preferred Share
purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of
the Purchase Price as a result of the calculations made in
Section 11(b), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of
Preferred Shares (calculated to the nearest one hundred-
thousandth of a share) obtained by (i) multiplying (x) the number
of Preferred Shares covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price, and (ii) dividing the
product so obtained by the Purchase Price in effect immediately
after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price as a result of the calculations
made in Section 11(b) to adjust the number of Rights, in
substitution for any adjustment in the number of Preferred Shares
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-thousandths of a Preferred
Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment
of the number of Rights shall become that number of Rights
(calculated to the nearest ten-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates
have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of
Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 of this Agreement, the
additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender
thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled
after such adjustment. Rights Certificates so to be distributed
shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company,
the adjusted Purchase Price) and shall be registered in the names
of the holders of record of Rights Certificates on the record
date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of Preferred Shares issuable upon
the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price
per one one-thousandth of a Preferred Share and the number of
one-thousandths of a Preferred Share which were expressed in the
initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the par or stated
value, if any, of the number of one-thousandths of a Preferred
Share issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and
legally issue as fully paid and nonassessable shares such number
of one-thousandths of a Preferred Share at such adjusted Purchase
Price.
(1) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of
a record date for a specified event, the Company may elect to
defer until the occurrence of such event the issuing to the
holder of any Right exercised after such record date of the
number of one-thousandths of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such
exercise over and above the number of one-thousandths of a
Preferred Share and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill
or other appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise) upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, prior to the Distribution Date, the Company
shall be entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred or Common Shares,
(ii) issuance wholly for cash of any Preferred or Common Shares
at less than the current market price, (iii) issuance wholly for
cash of Preferred or Common Shares or securities which by their
terms are convertible into or exchangeable for Preferred or
Common Shares, (iv) stock dividends or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter
made by the Company to holders of its Preferred or Common Shares
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall
not, at any time after the Distribution Date, effect or permit to
occur any Triggering Event or Section 13 Event, if (i) at the
time or immediately after such Triggering Event or Section 13
Event there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (ii) prior to,
simultaneously with or immediately after such Section 13 Event,
the stockholders of the Person who constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(b)
of this Agreement shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and
Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Sections
23, 24 or 27 of this Agreement, take (or permit to be taken) any
action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on the
Preferred Shares payable in Preferred Shares, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares (by reverse stock split or otherwise) into a
smaller number of Preferred Shares, or (D) issue any shares of
its capital stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then, in each such event, except as
otherwise provided in this Section 11 and Section 7(e) of this
Agreement: (1) each of the Rights outstanding at the time of the
record date for such dividend or the effective date of such
subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to
the nearest one ten-thousandth (1/10,000) of a Right) equal to a
fraction (the "Exchange Fraction"), the numerator of which shall
be the total number of Preferred Shares or shares of capital
stock issued in such reclassification of the Preferred Shares
outstanding immediately following such time and the denominator
of which shall be the total number of Preferred Shares
outstanding immediately prior to such time, and the number of
Rights that shall thereafter be issued with respect to each
Common Share or share of other capital stock that shall be issued
in a reclassification of the Common Shares prior to the
Distribution Date shall be equal to the total number of
outstanding Rights immediately after such event (as adjusted
pursuant to this clause (1)) divided by the total number of
outstanding Common Shares or shares of such other capital stock
immediately after such event (subject to further adjustment
pursuant to the provisions of this Agreement); (2) 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 shall be adjusted so that the Purchase Price
thereafter shall equal the result obtained by dividing the
Purchase Price in effect immediately prior to such time by the
Exchange Fraction; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of such Right; and (3) the
number of one-thousandths of a Preferred Share or share of such
other capital stock issuable upon the exercise of each Right
shall remain unchanged immediately after such event, but, in the
event of a reclassification, the kind of shares issuable upon the
exercise of each Right immediately after such reclassification
shall be adjusted to be the kind of shares of such other capital
stock issued in such reclassification, rather than Preferred
Shares.
12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Sections
11 and 13 of this Agreement, the Company shall promptly (a)
prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment, (b) file
with the Rights Agent and with each transfer agent for the
Preferred Shares a copy of such certificate and (c) if such
adjustment occurs following the Distribution Date, mail a brief
summary thereof to each holder of a Rights Certificate in
accordance with Section 26 of this Agreement. Notwithstanding
the foregoing sentence, the failure of the Company to make such
certification or give such notice shall not affect the validity
of such adjustment or the force or effect of the requirement for
such adjustment. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment contained
therein and shall not be deemed to have knowledge of such
adjustment unless and until it shall have received such
certificate.
13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Shares
Acquisition Date, directly or indirectly:
(i) the Company shall consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the
Company in a transaction the principal purpose of which is to
change the state of incorporation of the Company or that complies
with Section 11(o) of this Agreement);
(ii) any Person (other than a Subsidiary of the
Company in a transaction that complies with Section 11(o) of this
Agreement) shall consolidate with the Company, or merge with and
into the Company and the Company shall be the continuing or
surviving corporation of such consolidation or merger; or
(iii) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one or more transactions, assets or
earning power aggregating 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to
any other Person or Persons (other than the Company or one or
more of its wholly owned Subsidiaries in one or more
transactions, each of which complies with Section 11(o) of this
Agreement),
then, and in each such case, proper provision
shall be made so that
(A) each holder of a Right (except as
otherwise provided herein) shall thereafter have the right to
receive, upon the exercise thereof in accordance with the terms
of this Agreement, such number of validly authorized and issued,
fully paid and nonassessable Common Shares of the Principal Party
(as hereinafter defined), free of any liens, encumbrances, rights
of first refusal or other adverse claims, as shall be equal to
the result obtained by (1) multiplying the then current Purchase
Price by the number of one-thousandths of a Preferred Share for
which a Right was exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Triggering Event has
occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such one-thousandths of a Preferred
Share for which a Right was exercisable immediately prior to the
first occurrence of a Triggering Event by the Purchase Price in
effect immediately prior to such first occurrence) and (2)
dividing that product (which, following the first occurrence of a
Section 13 Event, shall be referred to as the "Total Exercise
Price" for each Right and for all purposes of this Agreement) by
50% of the current per share market price (determined pursuant to
Section 11(d) of this Agreement) of the Common Shares of such
Principal Party on the date of consummation of such Section 13
Event;
(B) 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 Company pursuant to this
Agreement;
(C) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 of this Agreement
shall apply only to such Principal Party following the first
occurrence of a Section 13 Event;
(D) such Principal Party shall take such
steps (including, but not limited to, the reservation of a
sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to
assure that the provisions of this Agreement shall thereafter be
applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the
Rights.
(b) "Principal Party" shall mean, in the case of any
transaction described in clause (i), (ii) or (iii) of Section
13(a), the Person referred to therein or such Person's successor,
including, if applicable, the Company, if it is the surviving
corporation), provided, however, that in any such case, (i) if
such Person is a direct or indirect Subsidiary of another Person,
"Principal Party" shall refer to such other Person and (ii) in
case such Person is a Subsidiary, directly or indirectly, of more
than one Person, "Principal Party" shall refer to whichever of
such Persons is the issuer of the Common Shares having the
greatest aggregate value, and provided, further, that for
purposes of transactions described in Section 13(a)(iii),
"Principal Party" shall refer to that Person receiving the
greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions.
(c) If, for any reason, the Rights cannot be exercised
for Common Shares of such Principal Party as provided in Section
13(a), then each holder of Rights shall have the right to
exchange its Rights for cash from such Principal Party in an
amount equal to the number of Common Shares that it would
otherwise be entitled to purchase times 50% of the current per
share market price, as determined pursuant to Section 11(d) of
this Agreement, of such Common Shares of such Principal Party.
If, for any reason, the foregoing formulation cannot be applied
to determine the cash amount into which the Rights are
exchangeable, then the Board of Directors, based upon the advice
of one or more nationally recognized investment banking firms,
and based upon the total value of the Company, shall determine
such amount reasonably and with good faith to the holders of
Rights. Any such determination shall be final and binding on the
Rights Agent.
(d) The Company shall not consummate any Section 13
Event unless the Principal Party shall have a sufficient number
of authorized Common Shares that have not been issued or reserved
for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered to the
Rights Agent a supplemental agreement confirming that such
Principal Party shall, upon consummation of such Section 13
Event, assume this Agreement in accordance with Sections 13(a)
and (b) of this Agreement, that all rights of first refusal or
preemptive rights in respect of the issuance of Common Shares of
such Principal Party upon exercise of outstanding Rights have
been waived, that there are no rights, warrants, instruments or
securities outstanding or any agreements or arrangements which,
as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be
afforded by the Rights and that such transaction shall not result
in a default by such Principal Party under this Agreement, and
further providing that, as soon as practicable after the date of
such Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement
under the Securities Act with respect to the Rights and the
securities purchasable upon exercise of the Rights on an
appropriate form, use its best efforts to cause such registration
statement to become effective as soon as practicable after such
filing and use its best efforts to cause such registration
statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the
Expiration Date, and similarly comply with applicable state
securities laws;
(ii) use its best efforts to list (or continue the
listing of) the Rights and the securities purchasable upon
exercise of the Rights on a national securities exchange or to
meet the eligibility requirements for quotation on Nasdaq; and
(iii) deliver to holders of the Rights
historical financial statements for such Principal Party which
comply in all respects with the requirements for registration on
Form 10 (or any successor form) under the Exchange Act.
In the event that at any time after the occurrence
of a Triggering Event some or all of the Rights shall not have
been exercised at the time of a transaction described in this
Section 13, the Rights which have not theretofore been exercised
shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment
required by Section 11(a)(ii)).
(e) The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or other
transfers.
14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue
fractions of Rights or to distribute Rights Certificates that
evidence fractional Rights. In lieu of such fractional Rights,
there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For the
purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable, as
determined pursuant to the second sentence of Section 11(d) of
this Agreement.
(b) The Company shall not be required to issue
fractions of Preferred Shares (other than fractions that are
integral multiples of one one-thousandth of a Preferred Share)
upon exercise of the Rights or to distribute certificates which
evidence fractional Preferred Shares (other than fractions that
are integral multiples of one one-thousandth of a Preferred
Share). In lieu of fractional Preferred Shares that are not
integral multiples of one one-thousandth of a Preferred Share,
the Company shall pay to the registered holders of Rights
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 Common Share. For purposes of this
Section 14(b), the current market value of a Common Share shall
be the closing price of a Common Share (as determined pursuant to
the second sentence of Section 11(d) of this Agreement) for the
Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the
Right expressly waives his or her right to receive any fractional
Rights or any fractional shares upon exercise of a Right.
15. Rights of Action. All rights of action in respect of
this Agreement, excepting the rights of action given to the
Rights Agent under Section 18 of this Agreement, are vested in
the respective registered holders of the Rights Certificates
(and, prior to the Distribution Date, the registered holders of
the Common Shares); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common
Shares), without the consent of the Rights Agent or of the holder
of any other Rights Certificate (or, prior to the Distribution
Date, of the Common Shares), may, in his or her own behalf and
for his or her own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his or her right to
exercise the Rights evidenced by such Rights Certificate in the
manner provided in such Rights 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.
16. Agreement of Rights Holders. Every holder of a Right,
by accepting the same, consents and agrees with the Company and
the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common
Shares;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of the
Rights Agent if surrendered at the office or offices of the
Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed; and
(c) subject to Sections 6(a) and 7(f) of this
Agreement, the Company and the Rights Agent may deem and treat
the person in whose name the Rights Certificate (or, prior to the
Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common
Shares certificate made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to
the contrary.
17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder
of the Preferred Shares or any other securities of the Company
which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in
any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in Section 25 of this
Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights
Certificate shall have been exercised in accordance with the
provisions of this Agreement.
18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense,
incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the
premises.
(b) The Rights Agent shall be protected and shall
incur no liability for, or in respect of any action taken,
suffered or omitted by it in connection with, its administration
of this Agreement in reliance upon any Rights Certificate or
certificate for the Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it
to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20
of this Agreement.
19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the
shareholder services 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 to
this Agreement; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the
provisions of Section 21 of this Agreement. In case at the time
such successor Rights Agent shall succeed to the agency created
by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent
and deliver such Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have
been countersigned, any successor Rights Agent may countersign
such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates
shall have been countersigned but not delivered, the Rights Agent
may adopt the countersignature under its prior name and deliver
Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned,
the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases
such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
20. Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and
the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion or
advice of such counsel shall be full and complete authorization
and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion
or advice.
(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without limitation,
the identity of any Acquiring Person and the determination of
"current per share market price") be proved or established by the
Company prior to taking or suffering any action hereunder, such
fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer, the
Secretary or any Assistant Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own gross negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in
this Agreement or in the Rights Certificates (except its
countersignature thereof) or be required to verify the same, but
all such statements and recitals are and shall be deemed to have
been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or
the execution and delivery of this Agreement (except the due
execution of this Agreement by the Rights Agent) or in respect of
the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in
this Agreement or in any Rights Certificate; nor shall it be
responsible for any change in the exercisability of the Rights or
any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Sections 3, 11, 13, 23
or 24, or the ascertaining of the existence of facts that would
require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after receipt
by the Rights Agent of a certificate furnished pursuant to
Section 12 describing such change or adjustment); nor shall it by
any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred
Shares to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any Preferred Shares will, when
issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of its
duties hereunder from any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Secretary or any Assistant Secretary
of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be
liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay
in acting while waiting for those instructions. Any application
by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under
this Rights Agreement and the date on and/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 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 Company 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 Rights Agent shall have received written
instructions in response to such application specifying the
action to be taken or omitted.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in
any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents,
and the Rights Agent shall not be answerable or accountable for
any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder or in the exercise of its rights if there shall be
reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) 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 either not been
completed or indicates an affirmative response to clause 1 and/or
2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first
consulting with the Company.
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 Company and to each transfer agent of the
Preferred Shares and the Common Shares by registered or certified
mail, and to the holders of the Rights Certificates by first-
class mail. In the event the transfer agency relationship in
effect between the Company and the Rights Agent terminates, the
Rights Agent will be deemed to resign automatically on the
effective date of such termination; and any required notice will
be sent by the Company. The Company may remove the Rights Agent
or any successor Rights Agent upon thirty (30) 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 Preferred
Shares and the Common Shares by registered or certified mail, and
to the holders of the Rights Certificates by first-class mail.
If the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a successor
to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing
of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights
Certificate (who shall, with such notice, submit his or her
Rights Certificate for inspection by the Company), then the
registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by
the Company or by such a court, shall either (a) be a corporation
organized and doing business under the laws of the United States
or of any state of the United States, in good standing, which is
authorized under such laws to exercise corporate trust or
shareholder services powers and is subject to supervision or
examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million or (b) an affiliate of such a
corporation. After appointment, the successor Rights Agent shall
be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent
any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary
for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the
Preferred Shares and the Common Shares, and mail a notice thereof
in writing to the registered holders of the Rights 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 Rights Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by
its Board of Directors to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates
made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common
Shares following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall,
with respect to Common Shares so issued or sold pursuant to the
exercise of stock options or under any employee plan or
arrangement or upon the exercise, conversion or exchange of
securities hereinafter issued by the Company and (b) may, in any
other case, if deemed necessary or appropriate by the Board of
Directors, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be
issued and this sentence shall be null and void ab initio if, and
to the extent that, such issuance or this sentence would create a
significant risk of or result in material adverse tax
consequences to the Company or the Person to whom such Rights
Certificate would be issued or would create a significant risk of
or result in such options' or employee plans' or arrangements'
failing to qualify for otherwise available special tax treatment
and (ii) no such Rights 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.
(a) The Company may, at its option and with the
approval of the Board of Directors, at any time prior to the
Close of Business on the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption
price of $0.01 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring
after the date of this Agreement (such redemption price being
herein referred to as the "Redemption Price") and the Company
may, at its option, pay the Redemption Price either in Common
Shares (based on the current per share market price thereof (as
determined pursuant to Section 11(d) of this Agreement) at the
time of redemption) or cash. Such redemption by the Company may
be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may
establish.
(b) Immediately upon the action of the Board of
Directors ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent, and without
any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The
Company shall promptly give public notice of any such redemption,
provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such redemption.
Within ten (10) days after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of
the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Shares.
Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in this Section 23
or in Section 24 of this Agreement, and other than in connection
with the purchase of Common Shares prior to the Distribution
Date.
24. Exchange.
(a) Subject to applicable laws, rules and regulations,
and subject to subsection (c) below, the Company may, at its
option, by majority vote of the Board of Directors, at any time
after the occurrence of a Triggering Event, exchange all or part
of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions
of Section 7(e) of this Agreement) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date of this Agreement (such
exchange ratio being hereinafter referred to as the "Ratio of
Exchange"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant
to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of
Directors ordering the exchange of any Rights pursuant to
subsection (a) of this Section 24 and without any further action
and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to
the number of such Rights held by such holder multiplied by the
Ratio of Exchange. The Company shall give public notice of any
such exchange; provided, however, that the failure to give, or
any defect in, such notice shall not affect the validity of such
exchange. The Company 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 will state the method by which the
exchange of the Common Shares for Rights will be effected and, in
the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) of this
Agreement) held by each holder of Rights.
(c) In the event that there shall not be sufficient
Common Shares issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in
accordance with Section 24(a), the Company shall either take such
action as may be necessary to authorize additional Common Shares
for issuance upon exchange of the Rights or alternatively, at the
option of a majority of the Board of Directors, with respect to
each Right (i) pay cash in an amount equal to the Current Value
(as hereinafter defined), in lieu of issuing Common Shares in
exchange therefor, or (ii) issue debt or equity securities or a
combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right,
where the value of such securities shall be determined by a
nationally recognized investment banking firm selected by the
Board of Directors by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares
and/or other securities having a value equal to the Current Value
in exchange for each Right. For purposes of this Section 24(c)
only, the Current Value shall mean the product of the current per
share market price of Common Shares (determined pursuant to
Section 11(d) on the date of the occurrence of the event
described above in subparagraph (a)) multiplied by the number of
Common Shares for which the Right otherwise would be exchangeable
if there were sufficient shares available. To the extent that
the Company determines that some action need be taken pursuant to
clauses (i), (ii) or (iii) of this Section 24(c), the Board of
Directors may temporarily suspend the exercisability of the
Rights for a period of up to sixty (60) days following the date
on which the event described in Section 24(a) shall have
occurred, in order to seek any authorization of additional Common
Shares and/or to decide the appropriate form of distribution to
be made pursuant to the above provision and to determine the
value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended.
(d) The Company shall not be required to issue
fractions of Common Shares or to distribute certificates that
evidence fractional Common Shares. In lieu of such fractional
Common Shares, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional
Common Shares would otherwise be issuable, an amount in cash
equal to the same fraction of the current per share market value
of a whole Common Share (as determined pursuant to the second
sentence of Section 11(d) of this Agreement).
(e) The Company may, at its option, by majority vote
of the Board of Directors, at any time before any Person has
become an Acquiring Person, exchange all or part of the then
outstanding Rights for rights of substantially equivalent value,
as determined reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally
recognized investment banking firms.
(f) Immediately upon the action of the Board of
Directors ordering the exchange of any Rights pursuant to
subsection (e) of this Section 24 and without any further action
and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of rights in exchange
therefor as has been determined by the Board of Directors in
accordance with subsection (e) above. The Company shall give
public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect
the validity of such exchange. The Company 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 transfer agent for the Common Shares of the Company. Any
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the
exchange of the Rights will be effected.
25. Notice of Certain Events.
(a) In case the Company shall propose to effect or
permit to occur any Section 13 Event, the Company shall give
notice thereof to each holder of Rights in accordance with
Section 26 of this Agreement at least twenty days prior to
occurrence of such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event
shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to each holder of a Rights
Certificate, in accordance with Section 26 of this Agreement, a
notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights
under Sections 11(a)(ii) and 13 of this Agreement.
26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the
holder of any Rights Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
A.P. Pharma, Inc.
123 Saginaw Drive
Redwood City, California 94063
Attention: Chief Executive Officer
Subject to the provisions of Section 21 of this Agreement, any
notice or demand authorized by this Agreement to be given or made
by the Company or by the holder of any Rights Certificate to or
on the Rights Agent shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021
Attention: Client Administration
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any
Rights Certificate shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the
Company.
27. Supplements and Amendments. Prior to the Distribution
Date, the Company may supplement or amend this Agreement in any
respect without the approval of any holders of Rights and the
Rights Agent shall, if the Company so directs, execute such
supplement or amendment. From and after the Distribution Date,
the Company and the Rights Agent may from time to time supplement
or amend this Agreement without the approval of any holders of
Rights in order to (i) cure any ambiguity, (ii) correct or
supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, (iii) shorten
or lengthen any time period hereunder or (iv) change or
supplement the provisions hereunder in any manner that the
Company may deem necessary or desirable and that shall not
adversely affect the interests of the holders of Rights (other
than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of
this sentence, (A) a time period relating to when the Rights may
be redeemed at such time as the Rights are not then redeemable or
(B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of,
and/or the benefits to, the holders of Rights. Upon the delivery
of a certificate from an appropriate officer of the Company that
states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution Date,
the interests of the holders of Rights shall be deemed coincident
with the interests of the holders of Common Shares.
28. Successors All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights
Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
29. Determinations and Actions by the Board of Directors,
etc. For all purposes of this Agreement, any calculation of the
number of Common Shares outstanding at any particular time,
including for purposes of determining the particular percentage
of such outstanding Common Shares 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. The Board of Directors shall
have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically
granted to the Board of Directors, or the Company, or as may be
necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i)
interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to
redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of
Directors in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the
Rights Certificates and all other parties and (y) not subject the
Board of Directors to any liability to the holders of the Rights.
30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company,
the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common
Shares) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares).
31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant
or restriction is held by such court or authority to be invalid,
void or unenforceable and the Board of Directors determines in
its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23
of this Agreement shall be reinstated and shall not expire until
the close of business on the tenth day following the date of such
determination by the Board of Directors.
32. Governing Law. This Agreement and each Right and each
Rights 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.
33. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction
of any of the provisions of this Agreement.
35. Force Majeure. Notwithstanding anything to the
contrary contained herein, Rights Agent shall not be liable for
any delays or failures in performance resulting from acts beyond
its reasonable control including, without limitation, acts of
God, terrorist acts, shortage of supply, breakdowns or
malfunctions, interruptions or malfunction of computer
facilities, or loss of data due to power failures or mechanical
difficulties with information storage or retrieval systems, labor
difficulties, war, or civil unrest.
* * *
The parties have caused this Agreement to be duly executed as of
the date first written above.
A.P. PHARMA, INC.
By: /s/ Gregory Turnbull
----------------------
Name: Gregory Turnbull
------------------
Title: Chief Executive
-----------------
Officer
-------
COMPUTERSHARE TRUST COMPANY, N.A.
By: /s/ Carol Mulvey-Eori
-----------------------
Name: Carol Mulvey-Eori
-------------------
Title: Managing Director
-------------------
[Signature Page to Preferred Shares Rights Agreement]
EXHIBIT A
---------
FORM OF CERTIFICATE OF DESIGNATION
----------------------------------
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF
SERIES A PREFERRED STOCK
OF
A.P. PHARMA, INC.
Pursuant to Section 151(g) and Section 103 of the General
Corporation Law of the State of Delaware, I, Gregory Turnbull,
the President and Chief Executive Officer of A.P. Pharma, Inc.
(the "Corporation"), a corporation organized and existing under
the General Corporation Law of the State of Delaware hereby
certifies:
A. That by resolution of the Board of Directors of the
Corporation adopted on August 19, 1996, and by a Certificate of
Designation, Preferences and Rights of Series A Preferred Stock
filed in the office of the Secretary of State of the State of
Delaware on September 20, 1996, the Corporation authorized the
issuance of Seven Hundred Fifty Thousand (750,000) shares of
Series A Preferred Stock designated as Series A Participating
Preferred Stock and established the designation, voting powers,
preferences and relative, participating, optional and other
special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof.
B. That no shares of Series A Participating Preferred
Stock of the Corporation have been issued.
C. That pursuant to the authority conferred upon the Board
of Directors by the Certificate of Incorporation of the
Corporation, the Board of Directors of the Corporation adopted on
December 15, 2006 the following resolution amending and restating
the provisions of the Series A Preferred Stock:
"RESOLVED: that pursuant to the authority vested upon the
Board of Directors of the Corporation by the Certificate of
Incorporation of the Corporation (the "Restated Certificate"),
the Certificate of Designation, Preferences and Rights of Series
A Preferred Stock of A.P. Pharma, Inc. is hereby amended and
restated in its entirety as follows:
1. Designation and Amount. The shares of such series
shall be designated as "Series A Participating Preferred Stock",
par value $0.01 per share, and the number of shares constituting
such series shall be Two Hundred Thousand (200,000). Such number
of shares may be increased or decreased by resolution of the
Board of Directors; provided, however, that no decrease shall
reduce the number of shares of Series A Participating Preferred
Stock to a number of shares less than the number of shares then
outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the
Corporation convertible into Series A Participating Preferred
Stock.
2. Dividends and Distributions.
(A) Subject to the prior and superior right of the
holders of any shares of any series of Preferred Stock ranking
prior and superior to the shares of Series A Participating
Preferred Stock with respect to dividends, the holders of shares
of Series A Participating Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends
payable in cash on the last 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 A Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal
to, subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 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 or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock
of the Corporation (the "Common Stock") since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A
Participating Preferred Stock. In the event the Corporation
shall at any time after December 15, 2006 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine or consolidate the outstanding
Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series A
Participating Preferred Stock were entitled immediately prior to
such event under the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Participating Preferred Stock as
provided in paragraph (A) above immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Participating Preferred Stock
from the Quarterly Dividend Payment Date next preceding the date
of issue of such shares of Series A Participating 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 A
Participating 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 A Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting
rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Participating
Preferred Stock shall entitle the holder thereof to 1,000 votes
on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare or pay 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 number of votes per share to which holders of shares of
Series A Participating Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number
by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the
Restated Certificate, or by law, the holders of shares of Series
A Participating Preferred Stock and the holders of shares of
Common Stock, and any other capital stock of the Corporation
having general voting rights, shall vote together as one class on
all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as required by law, holders of Series A
Participating Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
4. Certain Restrictions.
(A) The Corporation shall not declare any dividend on,
make any distribution on, or redeem or purchase or otherwise
acquire for consideration any shares of Common Stock after the
first issuance of a share or fraction of a share of Series A
Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred
Stock as required by Section 2 hereof.
(B) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating 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 A Participating Preferred
Stock outstanding shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A
Participating Preferred Stock;
(ii) declare or pay dividends on, 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 Series A
Participating Preferred Stock, except dividends paid ratably on
the Series A Participating Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Participating Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any
such parity 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 A
Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Participating 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.
(C) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the
Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A
Participating 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 to be created by resolution or
resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein or in the Restated
Certificate, or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, 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 A Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Participating
Preferred Stock shall have received an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, plus an amount equal to
the greater of (1) $1,000 per share, provided that in the event
the Corporation does not have sufficient assets, after payment of
its liabilities and distribution to holders of Preferred Stock
ranking prior to the Series A Participating Preferred Stock,
available to permit payment in full of the $1,000 per share
amount, the amount required to be paid under this Section 6(A)(1)
shall, subject to Section 6(B) hereof, equal the value of the
amount of available assets divided by the number of outstanding
shares of Series A Participating Preferred Stock or (2) subject
to the provisions for adjustment hereinafter set forth, 1,000
times the aggregate per share amount to be distributed to the
holders of Common Stock (the greater of (1) or (2), the "Series A
Liquidation Preference"). In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine or
consolidate the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of
shares of Series A Participating Preferred Stock were entitled
immediately prior to such event under clause (2) of the preceding
sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common
Stock that were outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) In the event, however, that there are not
sufficient assets available to permit payment in full of the
Series A Liquidation Preference and the liquidation preferences
of all other series of Preferred Stock, if any, which rank on a
parity with the Series A Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation
preferences.
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 A
Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 1,000
times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine or consolidate the outstanding Common
Stock into a smaller number of shares, then in each such case the
amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Participating Preferred
Stock shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of common Stock that were
outstanding immediately prior to such event.
8. No Redemption. The shares of Series A Participating
Preferred Stock shall not be redeemable.
9. Ranking. The Series A Participating 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 series shall
provide otherwise.
10. Amendment. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner, including
by merger or consolidation, which would materially alter or
change the powers, preference or special rights of the Series A
Participating 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 A Participating Preferred
Stock, voting together as a single class.
11. Fractional Shares. Series A Participating 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
distrubtions and to have the benefit of all other rights of
holders of Series A Participating Preferred Stock."
Executed this 18th day of December, 2006.
--------------------
Gregory Turnbull
President and Chief Executive
Officer
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
--------------------------
Certificate No. R- Rights
-----
NOT EXERCISABLE AFTER DECEMBER 31, 2016, OR EARLIER IF
TERMINATED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED
BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF
AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS 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 RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH RIGHTS AGREEMENT.]*
RIGHTS CERTIFICATE
------------------
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 Preferred Shares Rights
Agreement, dated as of December 18, 2006 (the "Rights
Agreement"), between A.P. Pharma, Inc., a Delaware corporation
(the "Company"), and the Computershare Trust Company, N.A. (the
"Rights Agent"), to purchase from the Company at any time after
the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., New York time, on December 31,
2016, at the office of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one
one-thousandth (1/1,000) of a fully paid non-assessable share of
Series A Participating Preferred Stock (the "Preferred Shares"),
of the Company, at a purchase price of $11.00 per one-thousandth
of a Preferred Share (the "Purchase Price"), upon presentation
and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The
- -------
* The portion of the legend in bracket shall be inserted only if
applicable and shall replace the preceding sentence.
number of Rights evidenced by this Rights Certificate (and the
number of one-thousandths of a Preferred Share which may be
purchased upon exercise hereof) set forth above, are the number
and Purchase Price as of -------, ----, based on the Preferred
Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number and kind of
Preferred Shares or other securities which may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of
certain events.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are hereby incorporated herein by ref-
erence and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the
Rights 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 Company and the above-mentioned office
of the Rights Agent.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Rights Certificate (i) may be redeemed
by the Company, at its option, at a redemption price of $0.01 per
Right or (ii) may be exchanged by the Company in whole or in part
for Common Shares, substantially equivalent rights or other
consideration as determined by the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office of the Rights Agent
designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like
aggregate amount of securities as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have
entitled such holder to purchase. If this Rights Certificate
shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
No fractional portion less than integral multiples of one
one-thousandth of a Preferred Share will be issued upon the
exercise of any Right or Rights evidenced hereby but in lieu
thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any
purpose the holder of the Preferred Shares or of any other
securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to
receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by this Rights Certificate shall have
been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by an
authorized signatory of the Rights Agent.
WITNESS the facsimile signature of the proper officers of
the Company and its corporate seal. Dated as of --------, ---.
ATTEST: A.P. Pharma, Inc.
By:
- ----------------------------- -----------------------
Secretary President and CEO
Countersigned:
Computershare Trust Company, N.A.
- ------------------------------
as Rights Agent
By:
-------------------------
Authorized Signatory
Date of countersignature:
------------------
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate)
FOR VALUE RECEIVED --------------------------------- hereby
sells, assigns and transfers unto -------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------
this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint ----------------- Attorney, to transfer the Rights
Certificate on the books of the within-named Company, with full
power of substitution.
Dated: ---------, -----
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United
States or any other member of a medallion signature guarantee
program approved by the Securities Transfer Association.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being
sold, assigned and transferred by or on behalf of a Person who is
or was an Acquiring Person, or an Affiliate or Associate of any
such Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was
or subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: ---------, -----
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United
States or any other member of a medallion signature guarantee
program approved by the Securities Transfer Association.
Form of Reverse Side of Rights Certificate - continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights
Certificate)
To: ---------------------
The undersigned hereby irrevocably elects to exercise ------
- ----- Rights represented by this Rights Certificate to purchase
the number of one-thousandths of a Preferred Share issuable upon
the exercise of such Rights and requests that certificates for
such number of one-thousandths of a Preferred Share be issued in
the name of:
Please insert social security or other identifying number
- ---------------------------------------------------------------
(Please print name and address)
- ---------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
- ---------------------------------------------------------------
(Please print name and address)
- ---------------------------------------------------------------
Dated: ---------, -----
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United
States or any other member of a medallion signature guarantee
program approved by the Securities Transfer Association.
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [
] are [ ] are not being exercised by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was
or subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: ---------, -----
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United
States or any other member of a medallion signature guarantee
program approved by the Securities Transfer Association.
Form of Reverse Side of Rights Certificate - continued
NOTICE
------
The signature in the foregoing Forms of Assignment and
Election must conform to the name as written upon the face of
this Rights Certificate in every particular, without alteration
or enlargement or any change whatsoever.
EXHIBIT C
---------
A.P. PHARMA, INC.
PREFERRED SHARES RIGHTS PLAN
Summary of Rights
Distribution and Transfer of Rights;
Rights Certificate:
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The Board of Directors has declared a dividend of one Right for
each share of Common Stock of A.P. Pharma, Inc. (the "Company")
outstanding. Prior to the Distribution Date referred to below,
the Rights will be evidenced by and trade with the certificates
for the Common Stock. After the Distribution Date, the Company
will mail Rights certificates to the Company's stockholders and
the Rights will become transferable apart from the Common Stock.
Distribution Date:
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Rights will separate from the Common Stock and become exercisable
following the tenth day (or such later date as may be determined
by a majority of the Company's Board of Directors) after a person
or group (a) acquires beneficial ownership of 20% or more of the
Company's Common Stock or (b) announces a tender or exchange
offer, the consummation of which would result in ownership by a
person or group of 20% or more of the Company's Common Stock (the
"Distribution Date").
Preferred Stock Purchasable Upon Exercise of Rights:
- ----------------------------------------------------
After the Distribution Date, each Right will entitle the holder
to purchase, for $11.00, a fraction of a share of the Company's
Preferred Stock with economic terms similar to that of one share
of the Company's Common Stock.
Flip-In:
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If an acquiror (an "Acquiring Person") obtains 20% or more of the
Company's Common Stock (other than pursuant to a tender offer
deemed fair by the Board of Directors (a "Permitted Offer")),
then each Right (other than Rights owned by an Acquiring Person
or its affiliates) will entitle the holder thereof to purchase,
for the exercise price, a number of shares of the Company's
Common Stock having a then current market value of twice the
exercise price.
Flip-Over:
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If, after the Shares Acquisition Date (defined below), (a) the
Company merges into another entity, (b) an acquiring entity
merges into the Company or (c) the Company sells more than 50% of
the Company's assets or earning power, then each Right (other
than Rights owned by an Acquiring Person or its affiliates) will
entitle the holder thereof to purchase, for the exercise price, a
number of shares of Common Stock of the person engaging in the
transaction having a then current market value of twice the
exercise price (unless the transaction satisfies certain
conditions and is consummated with a person who acquired shares
pursuant to a Permitted Offer, in which case the Rights will
expire).
Exchange Provision:
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At any time after an Acquiring Person obtains 20% or more of the
Company's Common Stock (other than pursuant to a Permitted Offer)
and prior to the acquisition by the Acquiring Person of 50% or
more of the outstanding Common Stock, the Board of Directors of
the Company may exchange the Rights (other than Rights owned by
the Acquiring Person or its affiliates), in whole or in part, at
an exchange ratio of one Common Share per Right (subject to
adjustment).
Redemption of the Rights:
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Rights will be redeemable at the Company's option for $0.01 per
Right at any time.
Expiration of the Rights:
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The Rights expire on the earliest of (a) December 31, 2006, (b)
exchange or redemption of the Rights as described above, or (c)
consummation of a merger or consolidation or sale of assets
resulting in expiration of the Rights as described above.
Amendment of Terms of Rights:
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The terms of the Rights and the Rights Agreement may be amended
in any respect without the consent of the Rights holders on or
prior to the Distribution Date; thereafter, the terms of the
Rights and the Rights Agreement may be amended without the
consent of the Rights holders in order to cure any ambiguities or
to make changes which do not adversely affect the interests of
Rights holders (other than the Acquiring Person).
Voting Rights:
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Rights will not have any voting rights.
Anti-Dilution Provisions:
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Rights will have the benefit of certain customary anti-dilution
provisions.
Taxes:
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The Rights distribution should not be taxable for federal income
tax purposes. However, following an event which renders the
Rights exercisable or upon redemption of the Rights, stockholders
may recognize taxable income.
The foregoing is a summary of certain principal terms of the
Preferred Shares Rights Plan only and is qualified in its
entirety by reference to the detailed terms of the Rights
Agreement dated as of December 18, 2006, between the Company and
the Rights Agent.
Exhibit 4.B
FORM OF RIGHTS CERTIFICATE
--------------------------
Certificate No. R- Rights
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NOT EXERCISABLE AFTER DECEMBER 31, 2016, OR EARLIER IF
TERMINATED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED
BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF
AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS 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 RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH RIGHTS AGREEMENT.]*
RIGHTS CERTIFICATE
------------------
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 Preferred Shares Rights
Agreement, dated as of December 18, 2006 (the "Rights
Agreement"), between A.P. Pharma, Inc., a Delaware corporation
(the "Company"), and the Computershare Trust Company, N.A. (the
"Rights Agent"), to purchase from the Company at any time after
the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., New York time, on December 31,
2016, at the office of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one
one-thousandth (1/1,000) of a fully paid non-assessable share of
Series A Participating Preferred Stock (the "Preferred Shares"),
of the Company, at a purchase price of $11.00 per one-thousandth
of a Preferred Share (the "Purchase Price"), upon presentation
and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The
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* the portion of the legend in bracket shall be inserted only if
applicable and shall replace the preceding sentence.
number of Rights evidenced by this Rights Certificate (and the
number of one-thousandths of a Preferred Share which may be
purchased upon exercise hereof) set forth above, are the number
and Purchase Price as of -------, ----, based on the Preferred
Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number and kind of
Preferred Shares or other securities which may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of
certain events.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are hereby incorporated herein by ref-
erence and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the
Rights 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 Company and the above-mentioned office
of the Rights Agent.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Rights Certificate (i) may be redeemed
by the Company, at its option, at a redemption price of $0.01 per
Right or (ii) may be exchanged by the Company in whole or in part
for Common Shares, substantially equivalent rights or other
consideration as determined by the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office of the Rights Agent
designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like
aggregate amount of securities as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have
entitled such holder to purchase. If this Rights Certificate
shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
No fractional portion less than integral multiples of one
one-thousandth of a Preferred Share will be issued upon the
exercise of any Right or Rights evidenced hereby but in lieu
thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any
purpose the holder of the Preferred Shares or of any other
securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to
receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by this Rights Certificate shall have
been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by an
authorized signatory of the Rights Agent.
WITNESS the facsimile signature of the proper officers of
the Company and its corporate seal. Dated as of --------, ---.
ATTEST: A.P. Pharma, Inc.
By:
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Secretary President and CEO
Countersigned:
Computershare Trust Company, N.A.
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as Rights Agent
By:
-------------------------
Authorized Signatory
Date of countersignature:
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FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate)
FOR VALUE RECEIVED --------------------------------- hereby
sells, assigns and transfers unto -------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------
this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint ----------------- Attorney, to transfer the Rights
Certificate on the books of the within-named Company, with full
power of substitution.
Dated: ---------, -----
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Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United
States or any other member of a medallion signature guarantee
program approved by the Securities Transfer Association.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being
sold, assigned and transferred by or on behalf of a Person who is
or was an Acquiring Person, or an Affiliate or Associate of any
such Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was
or subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: ---------, -----
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United
States or any other member of a medallion signature guarantee
program approved by the Securities Transfer Association.
Form of Reverse Side of Rights Certificate - continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights
Certificate)
To: ---------------------
The undersigned hereby irrevocably elects to exercise ------
- ----- Rights represented by this Rights Certificate to purchase
the number of one-thousandths of a Preferred Share issuable upon
the exercise of such Rights and requests that certificates for
such number of one-thousandths of a Preferred Share be issued in
the name of:
Please insert social security or other identifying number
- ---------------------------------------------------------------
(Please print name and address)
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If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
- ---------------------------------------------------------------
(Please print name and address)
- ---------------------------------------------------------------
Dated: ---------, -----
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United
States or any other member of a medallion signature guarantee
program approved by the Securities Transfer Association.
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [
] are [ ] are not being exercised by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was
or subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: ---------, -----
------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the National
Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United
States or any other member of a medallion signature guarantee
program approved by the Securities Transfer Association.
Form of Reverse Side of Rights Certificate - continued
NOTICE
------
The signature in the foregoing Forms of Assignment and
Election must conform to the name as written upon the face of
this Rights Certificate in every particular, without alteration
or enlargement or any change whatsoever.
Exhibit 3.C
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF
SERIES A PREFERRED STOCK
OF
A.P. PHARMA, INC.
Pursuant to Section 151(g) and Section 103 of the General
Corporation Law of the State of Delaware, I, Gregory Turnbull,
the President and Chief Executive Officer of A.P. Pharma, Inc.
(the "Corporation"), a corporation organized and existing under
the General Corporation Law of the State of Delaware hereby
certifies:
A. That by resolution of the Board of Directors of the
Corporation adopted on August 19, 1996, and by a Certificate of
Designation, Preferences and Rights of Series A Preferred Stock
filed in the office of the Secretary of State of the State of
Delaware on September 20, 1996, the Corporation authorized the
issuance of Seven Hundred Fifty Thousand (750,000) shares of
Series A Preferred Stock designated as Series A Participating
Preferred Stock and established the designation, voting powers,
preferences and relative, participating, optional and other
special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof.
B. That no shares of Series A Participating Preferred
Stock of the Corporation have been issued.
C. That pursuant to the authority conferred upon the Board
of Directors by the Certificate of Incorporation of the
Corporation, the Board of Directors of the Corporation adopted on
December 15, 2006 the following resolution amending and restating
the provisions of the Series A Preferred Stock:
"RESOLVED: that pursuant to the authority vested upon the
Board of Directors of the Corporation by the Certificate of
Incorporation of the Corporation (the "Restated Certificate"),
the Certificate of Designation, Preferences and Rights of Series
A Preferred Stock of A.P. Pharma, Inc. is hereby amended and
restated in its entirety as follows:
1. Designation and Amount. The shares of such series
shall be designated as "Series A Participating Preferred Stock",
par value $0.01 per share, and the number of shares constituting
such series shall be Two Hundred Thousand (200,000). Such number
of shares may be increased or decreased by resolution of the
Board of Directors; provided, however, that no decrease shall
reduce the number of shares of Series A Participating Preferred
Stock to a number of shares less than the number of shares then
outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the
Corporation convertible into Series A Participating Preferred
Stock.
2. Dividends and Distributions.
(A) Subject to the prior and superior right of the
holders of any shares of any series of Preferred Stock ranking
prior and superior to the shares of Series A Participating
Preferred Stock with respect to dividends, the holders of shares
of Series A Participating Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends
payable in cash on the last 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 A Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal
to, subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 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 or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock
of the Corporation (the "Common Stock") since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A
Participating Preferred Stock. In the event the Corporation
shall at any time after December 15, 2006 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine or consolidate the outstanding
Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series A
Participating Preferred Stock were entitled immediately prior to
such event under the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Participating Preferred Stock as
provided in paragraph (A) above immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Participating Preferred Stock
from the Quarterly Dividend Payment Date next preceding the date
of issue of such shares of Series A Participating 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 A
Participating 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 A Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more
than 60 days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting
rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Participating
Preferred Stock shall entitle the holder thereof to 1,000 votes
on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare or pay 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 number of votes per share to which holders of shares of
Series A Participating Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number
by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the
Restated Certificate, or by law, the holders of shares of Series
A Participating Preferred Stock and the holders of shares of
Common Stock, and any other capital stock of the Corporation
having general voting rights, shall vote together as one class on
all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as required by law, holders of Series A
Participating Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set
forth herein) for taking any corporate action.
4. Certain Restrictions.
(A) The Corporation shall not declare any dividend on,
make any distribution on, or redeem or purchase or otherwise
acquire for consideration any shares of Common Stock after the
first issuance of a share or fraction of a share of Series A
Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred
Stock as required by Section 2 hereof.
(B) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating 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 A Participating Preferred
Stock outstanding shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A
Participating Preferred Stock;
(ii) declare or pay dividends on, 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 Series A
Participating Preferred Stock, except dividends paid ratably on
the Series A Participating Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Participating Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of any
such parity 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 A
Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Participating 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.
(C) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the
Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A
Participating 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 to be created by resolution or
resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein or in the Restated
Certificate, or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, 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 A Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Participating
Preferred Stock shall have received an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, plus an amount equal to
the greater of (1) $1,000 per share, provided that in the event
the Corporation does not have sufficient assets, after payment of
its liabilities and distribution to holders of Preferred Stock
ranking prior to the Series A Participating Preferred Stock,
available to permit payment in full of the $1,000 per share
amount, the amount required to be paid under this Section 6(A)(1)
shall, subject to Section 6(B) hereof, equal the value of the
amount of available assets divided by the number of outstanding
shares of Series A Participating Preferred Stock or (2) subject
to the provisions for adjustment hereinafter set forth, 1,000
times the aggregate per share amount to be distributed to the
holders of Common Stock (the greater of (1) or (2), the "Series A
Liquidation Preference"). In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine or
consolidate the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of
shares of Series A Participating Preferred Stock were entitled
immediately prior to such event under clause (2) of the preceding
sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common
Stock that were outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) In the event, however, that there are not
sufficient assets available to permit payment in full of the
Series A Liquidation Preference and the liquidation preferences
of all other series of Preferred Stock, if any, which rank on a
parity with the Series A Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation
preferences.
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 A
Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 1,000
times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine or consolidate the outstanding Common
Stock into a smaller number of shares, then in each such case the
amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Participating Preferred
Stock shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of common Stock that were
outstanding immediately prior to such event.
8. No Redemption. The shares of Series A Participating
Preferred Stock shall not be redeemable.
9. Ranking. The Series A Participating 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 series shall
provide otherwise.
10. Amendment. The Certificate of Incorporation of the
Corporation shall not be further amended in any manner, including
by merger or consolidation, which would materially alter or
change the powers, preference or special rights of the Series A
Participating 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 A Participating Preferred
Stock, voting together as a single class.
11. Fractional Shares. Series A Participating 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
distrubtions and to have the benefit of all other rights of
holders of Series A Participating Preferred Stock."
Executed this 18th day of December, 2006.
/s/ Gregory Turnbull
--------------------
Gregory Turnbull
President and Chief Executive
Officer