SHAREHOLDER PROTECTION RIGHTS AGREEMENT
THIS AGREEMENT made as of January 13, ▇▇▇▇
▇ ▇ ▇ ▇ ▇ ▇ ▇:
SALIX PHARMACEUTICALS, LTD., a corporation
existing under the laws of the British Virgin Islands
(the "Corporation")
- and -
MONTREAL TRUST COMPANY OF CANADA, a trust
company incorporated under the laws of
Canada, as Rights Agent
(the "Rights Agent").
WHEREAS the Board of Directors has determined that it is advisable and
in the best interests of the Corporation to adopt a shareholder protection
rights plan (the "Rights Plan") to ensure, to the extent possible, that all
shareholders of the Corporation are treated fairly in connection with any
take-over offer for the Corporation;
AND WHEREAS in order to implement the Rights Plan the Board of
Directors has:
(a) authorized and declared a distribution of one (1) right (a
"Right") effective at the Record Time in respect of each
Common Share outstanding at that time;
(b) authorized the issuance of one (1) Right in respect of each
Common Share issued after the Record Time and prior to the
earlier of the Separation Time and the Expiration Time;
(c) authorized the issuance of Rights Certificates to holders of
Rights pursuant to the terms and subject to the conditions set
forth herein;
AND WHEREAS each Right entitles the holder thereof, after the
Separation Time, to purchase securities of the Corporation pursuant to the terms
and subject to the conditions set forth herein;
AND WHEREAS the Corporation desires to appoint the Rights Agent to act
on behalf of the Corporation, and the Rights Agent is willing to so act, in
connection with the issuance, transfer, exchange and replacement of Rights
Certificates, the exercise of Rights and other matters referred to herein;
NOW THEREFORE in consideration of the premises and their respective
covenants and agreements set forth herein, the parties hereby agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "ACQUIRING PERSON" means any Person who is the Beneficial
Owner of 20% or more of the outstanding Voting Shares, but
shall not include:
(i) the Corporation or any Subsidiary of the Corporation;
(ii) any Person who becomes the Beneficial Owner of 20% or more
of the outstanding Voting Shares as a result of:
A. a Voting Share Reduction;
B. a Permitted Bid Acquisition;
C. an Exempt Acquisition; or
D. a Pro Rata Acquisition;
provided, however, that if a Person becomes the Beneficial
Owner of 20% or more of the outstanding Voting Shares by
reason of a Voting Share Reduction, a Permitted Bid
Acquisition, an Exempt Acquisition or a Pro Rata
Acquisition, and thereafter becomes the Beneficial Owner of
a number of additional Voting Shares exceeding 1% of the
number of Voting Shares outstanding (other than pursuant to
a Voting Share Reduction, a Permitted Bid Acquisition, an
Exempt Acquisition or a Pro Rata Acquisition), then, as of
the date that such Person becomes the Beneficial Owner of
such additional Voting Shares, such Person shall become an
"Acquiring Person";
(iii) for the period of 10 days after the Disqualification Date
(as defined below), any Person who becomes the Beneficial
Owner of 20% or more of the outstanding Voting Shares as a
result of such Person becoming disqualified from relying on
Clause 1.1(d)(vii) solely because such Person or the
Beneficial Owner of such Voting Shares is making or has
announced an intention to make a Take-over Bid, either alone
or by acting jointly or in concert with any other Person.
For the purposes of this definition, "DISQUALIFICATION DATE"
means the first date of public announcement of facts
indicating that any Person is making or has announced an
intention to make a Take-over Bid;
(iv) an underwriter or member of a banking or selling group that
becomes the Beneficial Owner of 20% or more of the Voting
Shares in connection with a bona fide distribution to the
public of securities; or
(v) a Person (a "Grandfathered Person") who is the Beneficial
Owner of 20% or more of the outstanding Voting Shares of the
Corporation determined as at the date hereof, provided,
however, that this exception shall not be, and shall cease
to
-2-
be, applicable to a Grandfathered Person in the event that
such Grandfathered Person shall, after the date hereof,
become the Beneficial Owner of additional Voting Shares of
the Corporation that increases its Beneficial Ownership of
Voting Shares by more than 1% of the number of Voting Shares
outstanding, other than through a Permitted Bid Acquisition
or a Pro Rata Acquisition.
(b) "AFFILIATE", when used to indicate a relationship with a specified
Person, means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, such specified Person.
(c) "ASSOCIATE", when used to indicate a relationship with any Person,
means:
(i) any body corporate of which the Person beneficially owns,
directly or indirectly, voting securities carrying more than
10 per cent of the voting rights attached to all voting
securities of the body corporate for the time being
outstanding;
(ii) any partner, spouse or child of that Person;
(iii) any trust or estate in which the Person has a substantial
beneficial interest or as to which the Person serves as
trustee or in a similar capacity;
(iv) any relative of the Person, where the relative has the same
home as the Person; or
(v) any relative of the spouse of the Person where the relative
has the same home as the Person.
(d) A Person is deemed the "BENEFICIAL OWNER" and to have "BENEFICIAL
OWNERSHIP" of, and to "BENEFICIALLY Own":
(i) any securities as to which such Person or any of such
Person's Affiliates or Associates is the beneficial owner
(and, for the purposes of this Agreement, a "beneficial
owner" of securities shall include a Person who is the owner
at law or in equity of such securities);
(ii) any securities as to which such Person or any of such
Person's Affiliates or Associates has, directly or
indirectly:
A. the right to become beneficial owner (whether such right is
exercisable immediately or after the passage of time or upon the
occurrence of a contingency or payment of instalments or otherwise)
pursuant to any agreement, arrangement, pledge or understanding or
otherwise, whether or not in writing (other than (x) customary
agreements with and between underwriters and/or banking group and/or
selling group members with respect to a bona fide distribution to the
public of securities and (y) pledges of securities in the ordinary
course of business that meet all of the conditions specified in Rule
13d-3(d)(3) under the 1934 Exchange Act), or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; or
-3-
B. the right to vote (whether such right is exercisable immediately or
after the passage of time or upon the occurrence of a contingency or
payment of instalments or otherwise) pursuant to any agreement,
arrangement or understanding or otherwise whether or not in writing
(other than (x) pledges of securities in the ordinary course of
business that meet all of the circumstances specified in Rule
13-3(d)(3) under the 1934 Exchange Act other than the condition in
Rule 13d-3(3)(3)(ii) and (y) a pledge agreement with a registered
securities dealer relating to the extension of credit for purchases of
securities on margin in the ordinary course of the dealer's business);
and
(iii) any securities which are beneficially owned by any other Person with
which such Person or any of such Person's Affiliates is acting jointly
or in concert (other than pursuant to (x) customary agreements with
and between underwriters and/or banking group and/or selling group
members with respect to a bona fide distribution to the public of
securities and (y) pledges of securities in the ordinary course of
business that meet all of the conditions specified in Rule 13d-3(d)(3)
under the 1934 Exchange Act);
provided, however, that a Person shall NOT be deemed the "Beneficial Owner" or
to have "Beneficial Ownership" of, or to "Beneficially Own", any security:
(iv) solely because such security has been deposited or tendered pursuant
to a tender or exchange offer or Take-over Bid made by such Person or
any of such Person's Affiliates or Associates until the earlier of
such deposited or tendered security being accepted unconditionally for
payment or exchange or being taken up and paid for;
(v) solely because such Person or any of such Person's Affiliates or
Associates has or shares the power to vote or direct the voting of
such security pursuant to a revocable proxy given in response to a
public proxy solicitation made pursuant to, and in accordance with,
the applicable rules and regulations under the Corporations Act, the
Securities Act and the 1934 Exchange Act, except if such power (or the
arrangements relating thereto) is then reportable under Section 101 of
the Securities Act or under Item 6 of Schedule 13D under the 1934
Exchange Act;
(vi) solely because such Person or any of such Person's Affiliates or
Associates has or shares the power to vote or direct the voting of
such security in connection with, or in order to participate in, a
public proxy solicitation made or to be made pursuant to, and in
accordance with, the applicable rules and regulations referred to in
Clause 1.1(d)(v), except if such power (or the arrangements relating
thereto) is then reportable under Section 101 of the Securities Act or
under Item 6 of Schedule 13D under the 1934 Exchange Act;
(vii) solely because such Person (hereinafter in this Clause 1.1(d)(vii)
referred to as the "MANAGER"), being principally engaged in the
business of managing investment funds for other Persons (which others,
for greater certainty, may include and be limited to one or more
employee benefit plans or pension plans) who are not Affiliates or
Associates of the Manager and who do not act jointly or
-4-
in concert with the Manager as part of the Manager's duties as agent
for fully managed accounts, holds or exercises voting or dispositive
power over such security and such voting or dispositive power over
such security is held in the ordinary course of such business in the
performance of the duties of the Manager for the account of the other
Person; provided, however, that:
A. such security shall be deemed, in such case, to be
Beneficially Owned by such other Persons; and
B. neither the Manager nor any Person acting jointly or in
concert with the Manager is then making a Take-over Bid or
has not then publicly announced an intention to make a
Take-over Bid, either alone or by acting jointly or in
concert with any other Person;
and provided further that, notwithstanding the foregoing, the Board of
Directors shall have the right to and may determine, acting in good
faith, that conditions exist which should disentitle the Manager from
relying on this Clause 1.1(d)(vii) and, in such event, the Manager's
Beneficial Ownership of securities shall be determined without
reference to this Clause 1.1(d)(vii); or
(viii) solely because such Person (hereinafter in this Clause 1.1(d)(viii)
referred to as the "TRUST COMPANY") holds or exercises voting or
dispositive power over such securities, provided that:
A. the Trust Company is licensed to carry on the business of a
trust company under applicable law and, as such, acts as
trustee or administrator or in similar capacity in relation
to the estates of deceased or incompetent Persons (each an
"ESTATE ACCOUNT") or in relation to other accounts (each an
"OTHER ACCOUNT") and holds such voting or dispositive power
over such security in the ordinary course of such duties for
the estate of any such deceased or incompetent Person or for
such other accounts; and
B. the Trust Company is not then making a Take-over Bid or has
not then publicly announced an intention to make a Take-over
Bid, either alone or by acting jointly or in concert with
any other Person;
and provided further that, notwithstanding the foregoing, the Board of
Directors shall have the right to and may determine, acting in good
faith, that conditions exist which should disentitle the Trust Company
from relying on this Clause 1.1(d)(viii) and, in such event, the Trust
Company's Beneficial Ownership of securities shall be determined
without reference to this Clause 1.1(d)(viii); or
(ix) solely because such Person is a client of the same Manager as another
Person on whose account the Manager holds or exercises voting or
dispositive power over such security, or solely because such Person is
an Estate Account or an Other Account of the same Trust Company as
another Person on whose account the Trust Company holds or exercises
voting or dispositive power over such security; or
-5-
(x) solely because any such Person, any of such Person's
Affiliates or Associates or any other Person referred to in
paragraph (iii) of this definition has an agreement,
arrangement or understanding, whether or not in writing (but
other than of the nature otherwise referred to in this
Subsection 1.1(d)), with respect to one or more shareholder
proposals or a matter or matters to come before a particular
meeting of shareholders, including the election of
directors.
For purposes of this Agreement, in determining the percentage of the
outstanding Voting Shares with respect to which a Person is or is
deemed to be the Beneficial Owner, all Voting Shares as to which such
Person is deemed the Beneficial Owner shall be deemed outstanding.
(e) "BOARD OF DIRECTORS" means the board of directors of the Corporation.
(f) "BUSINESS DAY" means any day other than a Saturday, Sunday or a day on
which chartered banks in the City of Toronto, Ontario or banks in the
City of Raleigh, North Carolina or Palo Alto, California (or, if the
Corporation's principal place of business ceases to be in Palo Alto,
California, such other city in which the principal place of business
of the Corporation is located) are authorized or obliged by law to
close.
(g) "CANADIAN DOLLAR EQUIVALENT" of any amount which is expressed in
United States dollars means, on any date, the Canadian dollar
equivalent of such amount determined by multiplying such amount by the
U.S.-Canadian Exchange Rate in effect on such date.
(h) "CANADIAN-U.S. EXCHANGE RATE" means, on any date, the inverse of the
U.S.-Canadian Exchange Rate in effect on such date.
(i) "CLOSE OF BUSINESS" on any given date means the time on such date (or,
if such date is not a Business Day, the time on the next succeeding
Business Day) at which the office of the transfer agent for the Common
Shares in the City of Toronto (or, after the Separation Time, the
office of the Rights Agent in the City of Toronto), is closed to the
public.
(j) "COMMON SHARES" means the common shares in the capital of the
Corporation and "COMMON SHARES", when used with reference to any
Person other than the Corporation, means the class or classes of
shares (or similar equity interest) with the greatest per share voting
power entitled to vote generally in the election of all directors of
such other Person or the equity securities or other equity interest
having power (whether or not exercised) to control or direct the
management 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 other Person.
(k) "COMPETING PERMITTED BID" means a Take-over Bid made while another
Permitted Bid is in existence and that satisfies all of the provisions
of a Permitted Bid except that the condition set forth in subparagraph
1.1(bb)(ii) may provide that the Voting Shares may be taken up or paid
for on, and may not be withdrawn after, a date which is not earlier
than the later of 21 days after the date of the Take-over Bid or the
earliest date on which Voting Shares may be taken up or paid for under
any other Permitted Bid that is then in existence for the Voting
Shares.
-6-
(l) "CONTROLLED" means, in determining whether a corporation is deemed to
be "CONTROLLED" by another Person or Persons, a situation where a
Person is controlled by another Person or Persons in any manner
whatsoever that results in control in fact by that other Person or
Persons, whether directly or indirectly, and whether through share
ownership, a trust, a contract or otherwise, including in the case of
control of a corporation where
(i) (A) securities entitled to vote in the election of directors
carrying more than 50% of the votes for the election of
directors are held, directly or indirectly, by or on behalf
of the other Person or Persons; and
(B) the votes carried by such securities are entitled, if
exercised, to elect a majority of the board of directors of
such corporation; or
(ii) the corporation is otherwise controlled by such other Person
or Persons;
and "CONTROL" and "CONTROLLING" shall be interpreted
accordingly.
(m) "CORPORATIONS ACT" means the International Business Companies Act
(Cap.291) of the British Virgin Islands, as amended, or such other
corporate legislation under which the Corporation may exist under or
be subject to from time to time, and the regulations made thereunder,
as now in effect or as the same may from time to time be amended,
re-enacted or replaced.
(n) "ELECTION TO EXERCISE" has the meaning attributed thereto in Clause
2.2(d)(i).
(o) "EXEMPT ACQUISITION" means a share acquisition in respect of which the
Board of Directors has waived the application of Section 3.1 pursuant
to the provisions of Subsection 5.1(d) or 5.1(e).
(p) "EXERCISE PRICE" means, as of any date, the price at which a holder of
a Right may purchase the securities issuable upon exercise of one
whole Right. Until adjustment thereof in accordance with the terms
hereof, the Exercise Price shall be $60.
(q) "EXPIRATION TIME" means the earlier of (i) the Termination Time and
(ii) the Close of Business on the fifth anniversary of the date of
this Agreement.
(r) "EXPIRY DATE OF THE PERMITTED BID" means the date, which shall not be
less than 60 days following the date on which the proper Take-over Bid
documentation relating to such Permitted Bid is sent to the
shareholders of the Corporation, which is indicated in such
documentation as the date until which such Permitted Bid is open for
acceptance.
(s) "FLIP-IN EVENT" means a transaction or event in or pursuant to which
any Person becomes an Acquiring Person.
(t) "INDEPENDENT SHAREHOLDERS" means beneficial owners of Voting Shares,
other than (i) any Acquiring Person, (ii) any Offeror, (iii) any
Affiliate or Associate of any Acquiring Person or Offeror, (iv) any
Person acting jointly or in concert with any Acquiring Person or
Offeror or any Affiliate of any Acquiring Person or Offeror, in each
case in respect of Voting Shares beneficially owned by such persons.
-7-
(u) "MARKET PRICE" per security of any securities on any date of
determination means the average of the daily closing prices per
security of such securities (determined as described below) on each of
the 20 consecutive Trading Days through and including the Trading Day
immediately preceding such date; provided, however, that if an event
of a type analogous to any of the events described in Section 2.3
hereof shall have caused the closing prices used to determine the
Market Price on any Trading Day not to be fully comparable with the
closing price on the Trading Day immediately preceding such date of
determination each such closing price so used shall be appropriately
adjusted in a manner analogous to the applicable adjustment provided
for in Section 2.3 in order to make it fully comparable with the
closing price on the Trading Day immediately preceding such date of
determination. The closing price per security of any securities on any
date shall be:
(i) the closing board lot sale price or, in case no such sale
takes place on such date, the average of the closing bid and
asked prices for each of such securities as reported by the
principal stock exchange or quotation system (as determined
by the Board of Directors) on which such securities are
listed or admitted to trading;
(ii) if for any reason none of such prices is available on such
day or the securities are not listed or admitted to trading
on a stock exchange or quotation system, the last sale
price, or in case no sale takes place on such date, the
average of the high bid and low asked prices for each of
such securities in the over-the-counter market, as quoted by
any reporting system then in use (as determined by the Board
of Directors); or
(iii) if for any reason none of such prices is available on such
day or the securities are not listed or admitted to trading
on a stock exchange or quotation system or quoted by any
such reporting system, the average of the closing bid and
asked prices as furnished by a professional market maker
making a market in the securities selected by the Board of
Directors;
provided, however, that if for any reason none of such prices is
available on such day, the closing price per security of such
securities on such date means the fair value per security of such
securities on such date as determined by the Board of Directors, after
consultation with a nationally recognized investment dealer or
investment banker with respect to the fair value per security of such
securities. The Market Price shall be expressed in Canadian dollars
and, if initially determined in respect of any day forming part of the
20 consecutive Trading Day period in question in United States
dollars, such amount shall be translated into Canadian dollars on such
date at the Canadian Dollar Equivalent thereof.
Notwithstanding the foregoing, where the Board is Directors is
satisfied that the Market Price of securities as determined herein was
affected by an anticipated or actual Take-over Bid or by improper
manipulation, the Board of Directors may determine the Market Price of
securities, such determination to be based upon a finding as to the
price at which a holder of securities of that class could reasonably
have expected to dispose of his securities immediately prior to the
relevant date excluding any change in price reasonably attributable to
the anticipated or actual Take-over Bid or to the improper
manipulation.
-8-
(v) "1934 EXCHANGE ACT" means the SECURITIES EXCHANGE ACT OF 1934 of the
United States, as amended, and the rules and regulations thereunder as
now in effect or as the same may from time to time be amended,
re-enacted or replaced.
(w) "1933 SECURITIES ACT" means the SECURITIES ACT OF 1933 of the United
States, as amended and the rules and regulations thereunder as now in
effect or as the same may from time to time be amended, re-enacted or
replaced.
(x) "OFFER TO ACQUIRE" includes:
(i) an offer to purchase or a solicitation of an offer to sell Voting
Shares, or a public announcement of an intention to make such an
offer or solicitation; and
(ii) an acceptance of an offer to sell Voting Shares, whether or not
such offer to sell has been solicited;
or any combination thereof, and the Person accepting an offer to sell
shall be deemed to be making an Offer to Acquire to the Person that
made the offer to sell.
(y) "OFFEROR" means a Person who has publicly announced an intention to
make, or who has made, a Take-over Bid, including a Permitted Bid.
(z) "OFFEROR'S SECURITIES" means the aggregate of the Voting Shares
Beneficially Owned on the date of a Take-over Bid by an Offeror.
(aa) "OFFICER'S CERTIFICATE" of a Person shall mean a certificate signed by
the Chairman of the board of directors, the President or any Vice
President and by the Secretary, the Treasurer, and Assistant Secretary
or an Assistant Treasurer of such Person.
(bb) "PERMITTED BID" means a Take-over Bid made in compliance with, and not
on a basis which is exempt from or otherwise not subject to, the
provisions of Sections 95 through 98, inclusive, and Section 100 of
the Securities Act and, if applicable, Sections 10, 13(d) and 14 of
the 1934 Exchange Act and the rules and regulations thereunder (or in
each case such comparable or successor laws or regulations as shall
then be in effect, or if all such provisions shall be repealed and
there shall be no comparable or successor laws then in effect,
pursuant to Sections 95 through 98, inclusive, and Section 100 of the
Securities Act as in effect on the date of this Agreement) and in
compliance with all other applicable laws (including the securities
laws and regulations of all other relevant jurisdictions) and which is
also made in compliance with the following additional provisions and
conditions:
(i) the Take-over Bid shall be made for all of the Common Shares to all
holders of record of Common Shares wherever resident or registered on
the books of the Corporation;
(ii) the Take-over Bid contains, and the take-up and payment for securities
tendered or deposited is subject to, an irrevocable and unqualified
provision that no Voting Shares will be taken up or paid for pursuant
to the Take-over Bid prior to the close of business on the date which
is not less than 60 days following the date of the Take-over Bid and
only if at such date more than 50%
-9-
of the Voting Shares held by Independent Shareholders shall have been
deposited or tendered pursuant to the Take-over Bid and not withdrawn;
(iii) unless the Take-over Bid is withdrawn in accordance with applicable
law, the Take-over Bid contains an irrevocable and unqualified
provision that Voting Shares may be deposited pursuant to such
Take-over Bid at any time during the period of time described in
Clause 1.1(bb)(ii) and that any Voting Shares deposited pursuant to
the Take-over Bid may be withdrawn until taken up and paid for;
(iv) the Take-over Bid contains an irrevocable and unqualified provision
that in the event that the deposit condition set forth in Clause
1.1(bb)(ii) is satisfied the Offeror will make a public announcement
of that fact and the Take-over Bid will remain open for deposits and
tenders of Voting Shares for not less than ten Business Days from the
date of such public announcement; and
(v) the Offeror shall make arrangements reasonably required by
the Board of Directors of the Corporation to allow for the
deposit in acceptance of such Take-over Bid of shares issued
on exercise of options held by employees of the Corporation
and its subsidiaries;
and the Board of Directors acting in good faith determines,
prior to the expiry of the Take-over Bid, that the Take-over
Bid complies with the provisions of this Subsection 1.1(bb).
For purposes of this Agreement, if a Permitted Bid ceases to
be a Permitted Bid because it ceases to meet any or all of the
requirements mentioned above at any time, any acquisition of
Voting Shares made pursuant to such Permitted Bid, including
any acquisition of Voting Shares theretofore made, shall cease
to be a Permitted Bid Acquisition.
(cc) "PERMITTED BID ACQUISITION" means an acquisition of Common Shares or
Voting Shares made pursuant to a Permitted Bid or a Competing
Permitted Bid made after the Board of Directors, acting in good faith,
has determined, that the Take-over Bid complies with the provisions of
Subsection 1.1(bb).
(dd) "PERSON" includes any individual, firm, partnership, association,
trust, trustee, executor, administrator, legal personal
representative, government, governmental body or authority, group (as
such term is used in Rule 13d-5 under the 1934 Exchange Act, as in
effect on the date of this Agreement), corporation or other
incorporated or unincorporated organization.
(ee) "PRO RATA ACQUISITION" means an acquisition by a Person of Voting
Shares pursuant to (w) any dividend reinvestment plan or share
purchase plan of the Corporation, (x) a stock dividend, a stock split
or other event pursuant to which such Person becomes the Beneficial
Owner of Voting Shares on the same pro rata basis as all other holders
of Voting Shares of the same class or series, (y) the exercise
(including the grant) of rights granted to such Person to purchase
Voting Shares distributed to all holders of Voting Shares pursuant to
a bona fide rights offering which complies with the requirements of
-10-
Policy 6.2 of the Ontario Securities Commission or is made pursuant to
a prospectus or (z) a distribution to the public of Voting Shares, or
securities convertible into or exchangeable for Voting Shares, made
pursuant to a prospectus or by way of a private placement completed in
accordance with applicable securities legislation; provided, however,
in the case of an acquisition referred to in Subclauses (y) or (z),
such acquisitions are made for not more than such number of Voting
Shares or of such securities as is necessary for such Person to
maintain the percentage of Voting Shares it held immediately prior to
the announcement of such rights offering or distribution to the public
or private placement, as the case may be.
(ff) "RECORD TIME" means the Close of Business on January 13, 2000.
(gg) "REDEMPTION PRICE" has the meaning attributed thereto in Subsection
5.1(a).
(hh) "REGULAR PERIODIC CASH DIVIDEND" means cash dividends paid at regular
intervals in any fiscal year of the Corporation to the extent that
such cash dividends do not, in the aggregate, exceed in any fiscal
year the greatest of:
(i) 200% of the aggregate amount of cash dividends declared
payable by the Corporation on its Common Shares in its
immediately preceding fiscal year;
(ii) 300% of the arithmetic mean of the aggregate amounts of cash
dividends declared payable by the Corporation on its Common
Shares in its three immediately preceding fiscal years; and
(iii) 100% of the aggregate consolidated net income of the
Corporation, before extraordinary items, for its immediately
preceding fiscal year.
(ii) "RIGHTS CERTIFICATE" means the certificates representing the Rights
after the Separation Time which shall be substantially in the form
attached hereto as Exhibit A.
(jj) "RIGHTS REGISTER" has the meaning attributed thereto in Subsection
5.1(a).
(kk) "SECURITIES ACT" means the SECURITIES ACT, R.S.O. 1990, c. S.5, as
amended, and the regulations made thereunder, as now in effect or as
the same may from time to time be amended, re-enacted or replaced.
(ll) "SEPARATION TIME" means the Close of Business on the tenth day after
the earlier of:
(i) the Stock Acquisition Date; and
(ii) the date of the commencement of, or first public
announcement of the intent of any Person (other than the
Corporation or any Subsidiary of the Corporation) to
commence, a Take-over Bid (other than a Permitted Bid, so
long as such Take-over Bid continues to satisfy the
requirements of a Permitted Bid or a Competing Permitted
Bid);
or such earlier or later date as may from time to time be
determined by the Board of Directors, provided that:
-11-
(A) if any such Take-over Bid expires, is cancelled, is terminated or
is otherwise withdrawn prior to the Separation Time, such offer
shall be deemed, for the purposes of this Subsection 1.1(kk),
never to have been made; and
(B) if the Board of Directors determines pursuant to Subsection
5.1(d) or (e) to waive the application of Section 3.1 to a
Flip-in Event, the Separation Time in respect of such Flip-in
Event shall be deemed never to have occurred.
(mm) "SPECIAL MEETING" means a special meeting of the holders of Voting
Shares called by the Board of Directors for the purpose of:
(i) ratifying the distribution and continued existence of the Rights
in accordance with Subsection 5.4(f); or
(ii) approving an amendment, variation or rescission of any of the
provisions of this Agreement pursuant to Subsections 5.4(b),
5.4(c) or 5.4(e).
(nn) "STOCK ACQUISITION DATE" means the first date of public
announcement (which for purposes of this definition
includes, without limitation, a report filed pursuant to
Section 101 of the Securities Act or Section 13(d) of the
1934 Exchange Act) of facts indicating that a Person has
become an Acquiring Person.
(oo) "SUBSIDIARY" means a corporation which, in respect of another
corporation, is:
(i) controlled by:
A. that other; or
B. that other and one or more corporations each of which is controlled by
that other; or
C. two or more corporations each of which is controlled by that other; or
(ii) a Subsidiary of a corporation that is that other's Subsidiary;
(pp) "TAKE-OVER BID" means an Offer to Acquire Voting Shares or other
securities which (assuming the Voting Shares or other securities
subject to the Offer to Acquire are acquired at the date of the Offer
to Acquire by the Person making the Offer to Acquire), together with
the Offeror's Securities, would constitute in the aggregate 20% or
more of the outstanding Voting Shares at the date of the Offer to
Acquire (including all Voting Shares that may be acquired upon
exercise of all rights of conversion, exchange or purchase attaching
to the other securities.
(qq) "TERMINATION TIME" means the time at which the right to
exercise Rights shall terminate pursuant to Subsections
3.2(b) or 5.1(c).
-12-
(rr) "TRADING DAY", when used with respect to any securities, means any day
on which the principal securities exchange or quotation system (as
determined by the Board of Directors) on which such securities are
listed or admitted to trading or quotation is open for the transaction
of business or, if the securities are not listed or admitted to
trading or quotation on any Canadian or United States securities
exchange, a Business Day.
(ss) "U.S.-CANADIAN EXCHANGE RATE" means, on any date:
(i) if on such date the Bank of Canada sets an average noon spot
rate of exchange for the conversion of one United States
dollar into Canadian dollars, such rate; and
(ii) in any other case, the rate for such date for the conversion
of one United States dollar into Canadian dollars calculated
in such manner as may be determined by the Board of
Directors from time to time acting in good faith.
(tt) "U.S. DOLLAR EQUIVALENT" of any amount which is expressed in Canadian
dollars means, on any date, the United States dollar equivalent of
such amount determined by multiplying such amount by the Canadian-U.S.
Exchange Rate in effect on such date.
(uu) "VOTING SHARES" means the Common Shares of the Corporation and any
other shares of capital stock or voting interests of the Corporation
entitled to vote generally in the election of directors and "VOTING
SHARES", when used with reference to any Person other than the
Corporation, means common shares of such other Person and any other
shares of capital stock or voting interests of such other Person
entitled to vote generally in the election of the directors of such
other Person. For purposes of this Agreement, the percentage of Voting
Shares Beneficially Owned by any Person shall be, and be deemed to be,
the product determined by the formula:
A
---
100 X B
where
A= the aggregate number of votes for the election of all
directors generally attaching (or which would be attached)
to the Voting Shares Beneficially Owned by such Person; and
B= the aggregate number of votes for the election of all
directors generally attaching to all outstanding Voting
Shares.
Where any Person is deemed to Beneficially Own unissued Voting Shares,
such Voting Shares shall be deemed to be outstanding for the purpose
of both A and B above.
(vv) "VOTING SHARE REDUCTION" means an acquisition or redemption by the
Corporation of Voting Shares which, by reducing the number of Voting
Shares outstanding, increases the proportionate number of Voting
Shares Beneficially Owned by any Person to 20% or more of the Common
Shares or Voting Shares then outstanding.
1.2 ACTING JOINTLY OR IN CONCERT
-13-
For the purposes of this Agreement, whether Persons are acting jointly
or in concert is a question of fact in each circumstance. Notwithstanding the
foregoing, a Person shall be deemed to be acting jointly or in concert with
another Person if such Person is presumed to be acting jointly or in concert
with such other Person for purposes of Section 91 of the Securities Act.
Notwithstanding the foregoing, and for greater certainty, the phrase,
"acting jointly or in concert", wherever used in this Agreement, shall not
include conduct:
(a) unrelated to Voting Shares of the Corporation; or
(b) consisting solely of:
(i) voting or directing the vote of securities of the Corporation pursuant
to a revocable proxy given in response to a public proxy solicitation;
(ii) voting or directing the vote of securities of the Corporation in
connection with or in order to participate in a public proxy
solicitation made or to be made; or
(iii) having an agreement, arrangement or understanding with respect to a
shareholder proposal or a matter or matters to come before a
particular meeting of shareholders, including the election of
directors.
1.3 CURRENCY
All sums of money which are referred to in this Agreement are expressed
in lawful money of Canada, unless otherwise specified.
1.4 NUMBER AND GENDER
Wherever the context so requires, terms used herein importing the
singular number only shall include the plural and vice versa and words importing
any one gender shall include all others.
1.5 SECTIONS AND HEADINGS
The division of this Agreement into Articles, Sections, Subsections,
Clauses and Subclauses and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement. The terms "this Agreement", "hereof", "hereunder" and similar
expressions refer to this Agreement and not to any particular Article, Section
or other portion hereof and include any agreement or instrument supplemental or
ancillary hereto. Unless something in the subject matter or context is
inconsistent therewith, references herein to Articles, Sections, Subsections,
Clauses and Subclauses are to Articles, Sections, Subsections, Clauses and
Subclauses of this Agreement.
1.6 STATUTORY REFERENCES
Unless the context otherwise requires, any reference herein to a
specific Section, Subsection, Clause or Rule of any act or regulation shall be
deemed to refer to the same as it may be renumbered, amended, re-enacted or
replaced or, if repealed and there shall be no replacement therefor, to the same
as it is in effect on the date of this Agreement.
-14-
ARTICLE 2 -- THE RIGHTS
2.1 THE RIGHTS; LEGEND ON COMMON SHARE CERTIFICATES
(a) Certificates representing Common Shares that are issued and
outstanding at the later of the Record Time shall evidence
one Right for each Common Share evidenced thereby,
notwithstanding the absence of the legend referred to below,
until the earlier of (i) the Separation Time and (ii) the
Expiration Time. Certificates for Common Shares issued after
the later of (i) the Record Time and (ii) the date on which
all regulatory approvals for this Agreement have been
received but prior to the earlier of (i) the Separation Time
and (ii) the Expiration Time shall also evidence one Right
for each Common Share represented thereby.
(b) All such certificates for Common Shares shall have impressed
on, printed on, written on or otherwise affixed to them the
following legend:
"Until the Separation Time (as defined in the Rights Agreement
referred to below), this certificate also evidences and entitles the
holder hereof to certain Rights as set forth in a Shareholder
Protection Rights Agreement made as of January 13, 2000 (the "Rights
Agreement"), between Salix Pharmaceuticals, Ltd. (the "Corporation")
and Montreal Trust Company of Canada (the "Rights Agent"), the terms
of which are incorporated herein by this reference and a copy of which
is on file at the principal office of the Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such Rights may
be amended or redeemed, may expire, may become void (if, in certain
cases, they are "Beneficially Owned" by an "Acquiring Person", as such
terms are defined in the Rights Agreement, or a transferee thereof),
or may be evidenced by separate certificates and may no longer be
evidenced by this certificate. The Corporation will mail, or arrange
for the mailing of, a copy of the Rights Agreement to the holder of
this certificate without charge promptly after the receipt of a
written request therefor."
Certificates representing Common Shares issued and outstanding at the
Record Time shall also evidence one Right for each Common Share
evidenced thereby, notwithstanding the absence of the foregoing
legend, until the Close of Business on the earlier of the Separation
Time and the Expiration Time.
2.2 INITIAL EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS
(a) Subject to adjustment as herein set forth, each Right will
entitle the holder thereof, after the Separation Time and
prior to the Expiration Time, to purchase one Common Share
for the Exercise Price, or the U.S. Dollar Equivalent of the
Exercise Price as at the Business Day immediately preceding
the Separation Time (which Exercise Price and number of
Common Shares are subject to adjustment as set forth below).
Notwithstanding any other provision of this Agreement, any
Rights held by the Corporation or any of its Subsidiaries
shall be void.
-15-
(b) Until the Separation Time, (i) the Rights shall not be
exercisable and no Right may be exercised and (ii) for
administrative purposes, each Right will be evidenced by the
certificate for the associated Common Share registered in the
name of the holder thereof (which certificate shall be deemed
to represent a Rights Certificate) and will be transferable
only together with, and will be transferred by a transfer of,
such associated Common Share.
(c) After the Separation Time and prior to the Expiration Time,
the Rights may be exercised and the registration and transfer
of the Rights shall be separate from and independent of Common
Shares. Promptly following the Separation Time, the Rights
Agent will mail to each holder of record of Common Shares as
of the Separation Time (other than an Acquiring Person and, in
respect of any Rights Beneficially Owned by such Acquiring
Person which are not held of record by such Acquiring Person,
the holder of record of such Rights), at such holder's address
as shown on the records of the Corporation (the Corporation
hereby agreeing to furnish copies of such records to the
Rights Agent for this purpose):
(i) a Rights Certificate appropriately completed,
representing the number of Rights held by such holder
at the Separation Time and having such marks of
identification or designation and such legends,
summaries or endorsements printed thereon as the
Corporation may deem appropriate and as are not
inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with
any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange or
quotation system on which the Rights may from time to
time be listed or traded, or to conform to usage; and
(ii) a disclosure statement prepared by the Corporation
describing the Rights.
(d) Rights may be exercised in whole or in part on any Business
Day after the Separation Time and prior to the Expiration Time
by submitting to the Rights Agent at its principal office in
the City of Toronto or any other office of the Rights Agent
designated for that purpose from time to time by the
Corporation:
(i) the Rights Certificate evidencing such Rights, with
an Election to Exercise (an "ELECTION TO EXERCISE")
substantially in the form attached to the Rights
Certificate appropriately completed and duly executed
by the holder or his executors or administrators or
other legal personal representatives or his or their
attorney duly appointed by an instrument in writing
in form and executed in a manner satisfactory to the
Rights Agent; and
(ii) payment by certified cheque, bank draft or money
order payable to the order of the Corporation, of a
sum equal to the Exercise Price multiplied by the
number of Rights being exercised and a sum sufficient
to cover any transfer tax or charge which may be
payable in respect of any transfer involved in the
transfer or delivery of Rights Certificates or the
issuance or delivery of certificates for Common
Shares in a name other than that of the holder of the
Rights being exercised.
(e) Upon receipt of a Rights Certificate, with an Election to
Exercise appropriately completed and duly executed, which does
not indicate that such Right is void (or which is not
otherwise void) as provided by Subsection 3.1(b), accompanied
by payment as set
-16-
forth in Clause 2.2(d)(ii), the Rights Agent (unless otherwise
instructed by the Corporation) will thereupon promptly:
(i) requisition from the transfer agent of the Common
Shares certificates for the number of Common Shares
to be purchased (the Corporation hereby irrevocably
agreeing to authorize such transfer agent to comply
with all such requisitions);
(ii) after receipt of such Common Share certificates,
deliver such certificates to, or to the order of, the
registered holder of such Rights Certificate,
registered in such name or names as may be designated
by such holder;
(iii) when appropriate, requisition from the Corporation
the amount of cash, if any, to be paid in lieu of
issuing fractional Common Shares;
(iv) after receipt of such cash, deliver such cash
to, or to the order of, the registered holder of
the Rights Certificate; and
(v) tender to the Corporation all payments received on
exercise of the Rights.
(f) If the holder of any Rights exercises less than all the Rights
evidenced by such holder's Rights Certificate, a new Rights
Certificate evidencing the Rights remaining unexercised will
be issued by the Rights Agent to such holder or to such
holder's duly authorized assigns.
(g) The Corporation covenants and agrees that it will:
(i) take all such action as may be necessary and within
its power to ensure that all Common Shares delivered
upon exercise of Rights shall, at the time of
delivery of the certificates for such Common Shares
(subject to payment of the Exercise Price and subject
further to the provisions of Subsection 3.1(b)), be
duly and validly authorized, executed, issued and
delivered as fully paid and non-assessable;
(ii) take all such action as may reasonably be considered
to be necessary and within its power to comply with
any applicable requirements of the Corporations Act,
the Securities Act and the securities legislation of
each of the other provinces and territories of
Canada, the 1933 Securities Act and the 1934 Exchange
Act, and the rules and regulations thereunder or any
other applicable law, rule or regulation, in
connection with the issuance and delivery of the
Rights Certificates and the issuance of any Common
Shares upon exercise of Rights;
(iii) use reasonable efforts to cause all Common Shares
issued upon exercise of Rights to be listed upon
issuance on the stock exchange(s) or quotation
system(s) where the Common Shares may be listed at
that time;
(iv) pay when due and payable, any and all Canadian and
United States federal, provincial and state taxes
(not in the nature of income or withholding taxes)
and charges which may be payable in respect of the
original issuance or delivery of the Rights
Certificates or certificates for Common Shares
issued upon exercise of Rights, provided that
the Corporation shall not be required to pay any
transfer tax or charge which may be payable in
respect of any transfer of Rights or the
-17-
issuance or delivery of certificates for Common
Shares issued upon exercise of Rights in a name
other than that of the holder of the Rights being
exercised; and
(v) cause to be reserved and kept available out of its
authorized and unissued Shares the number of Shares
that, as provided in this Agreement, will from time
to time be sufficient to permit the exercise in full
of all outstanding Rights.
2.3 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS
(a) The Exercise Price, the number and kind of securities subject
to purchase upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time
as provided in this Section 2.3.
(b) In the event that the Corporation at any time after the Record
Time and prior to the Expiration Time:
(i) declares or pays a dividend on the Common Shares
payable in Common Shares (or other securities
exchangeable for or convertible into or giving a
right to acquire Common Shares) other than pursuant
to any dividend reinvestment plan;
(ii) subdivides or changes the then outstanding Common
Shares into a greater number of Common Shares;
(iii) consolidates or changes the then outstanding Common
Shares into a smaller number of Common Shares; or
(iv) issues any Common Shares (or other securities
exchangeable for or convertible into or giving a
right to acquire Common Shares) in respect of, in
lieu of, or in exchange for existing Common Shares,
except as otherwise provided in this Section 2.3,
then
A. the Exercise Price shall be adjusted so
that the Exercise Price in effect after such
adjustment will be equal to the Exercise
Price in effect immediately prior to such
adjustment divided by the number of Common
Shares (the "ADJUSTMENT FACTOR") that a
holder of one Common Share immediately prior
to such dividend, subdivision, change,
consolidation or issuance would hold
thereafter as a result thereof (assuming the
exercise of all such exchange or conversion
rights, if any); and
B. in a case to which clause (ii) or (iii)
applies or if clause (i) or (iv) applies to
an issue of securities made after the
Separation Time, the number of Rights
outstanding shall be adjusted so that each
Right held prior to such adjustment will
become that number of Rights equal to the
Adjustment Factor, and the adjusted number
of Rights will be deemed to be distributed
among the Common Shares with respect to
which the original Rights were associated
(if they remain outstanding) and the shares
issued in respect of such dividend,
-18-
subdivision, change, consolidation or
issuance, so that each such Common Share
will have exactly one Right associated with
it.
In the event the Corporation shall at any time after the
Record Time and prior to the Separation Time issue any Common
Shares otherwise than in a transaction referred to in the
preceding paragraph, each such Common Share so issued shall
automatically have one new Right associated with it, which
Right shall be evidenced by the certificate representing such
share.
(c) In the event that the Corporation at any time after the
Record Time and prior to the Expiration Time fixes a record
date for the making of a distribution to substantially all
holders of Common Shares of rights or warrants entitling them
(for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Common Shares (or
securities convertible into or exchangeable for or carrying a
right to purchase or subscribe for Common Shares) at a price
per Common Share (or, in the case of a security convertible
into or exchangeable for or carrying a right to purchase or
subscribe for Common Shares, having a conversion, exchange or
exercise price per share (including the price required to be
paid to purchase such convertible or exchangeable security or
right)) less than 90 percent of the Market Price per Common
Share on such record date, the Exercise Price shall be
adjusted. The Exercise Price in effect after such record date
will equal the Exercise Price in effect immediately prior to
such record date multiplied by a fraction, of which the
numerator shall be the number of Common Shares outstanding on
such record date plus the number of Common Shares which the
aggregate offering price of the total number of Common Shares
so to be offered (and/or the aggregate initial conversion,
exchange or exercise price of the convertible or exchangeable
securities or rights so to be offered, including the price
required to be paid to purchase such convertible or
exchangeable securities or rights) would purchase at such
Market Price per Common Share and of which the denominator
shall be the number of Common Shares outstanding on such
record date plus the number of additional Common Shares to be
offered for subscription or purchase (or into which the
convertible or exchangeable securities or rights to be so
offered are initially convertible, exchangeable or
exercisable). In case such subscription price may be paid in
a consideration part or all of which will be in a form other
than cash, the value of such consideration shall be as
determined by the Board of Directors. To the extent that such
rights or warrants are not exercised prior to the expiration
thereof, the Exercise Price shall be readjusted on the
expiration thereof to the Exercise Price which would then be
in effect based on the number of Common Shares (or securities
convertible into or exchangeable for Common Shares) actually
issued upon the exercise of such rights. For purposes of this
Agreement, the granting of the right to purchase Common
Shares (whether from treasury shares or otherwise) pursuant
to any dividend reinvestment plan and/or any share purchase
plan providing for the reinvestment of dividends or interest
payable on securities of the Corporation and/or the
investment of periodic optional payments and/or employee
benefit, stock option or similar plans (so long as such right
to purchase is in no case evidenced by the delivery of rights
or warrants by the Corporation) shall not be deemed to
constitute an issue of rights or warrants by the Corporation;
provided, however, that, in the case of any dividend
reinvestment plan or share purchase plan, the right to
purchase Common Shares is at a price per share of not less
than 90 percent of the current market price per share
(determined in accordance with such plans) of the Common
Shares.
-19-
(d) In the event that the Corporation at any time after the
Record Time and prior to the Expiration Time fixes a record
date for the making of a distribution to substantially all
holders of Common Shares of evidences of indebtedness or
assets (other than a Regular Periodic Cash Dividend or a
dividend paid in Common Shares but including any dividend
payable in securities other than a dividend or distribution
referred to in Subsection 2.3(b)(i) or 2.3(b)(iv)) or rights
or warrants entitling them to subscribe for or purchase
Common Shares (or securities convertible into or exchangeable
for or carrying a right to purchase or subscribe for Common
Shares) at a price per Common Share (or, in the case of a
security convertible into or exchangeable for or carrying a
right to purchase or subscribe for Common Shares, having a
conversion, exchange or exercise price per share (including
the price required to be paid to purchase such convertible or
exchangeable security or right)) less than 90 percent of the
Market Price per Common Share on such record date (excluding
rights or warrants referred to in Subsection 2.3(c)), the
Exercise Price in effect after such record date shall be
equal to the Exercise Price in effect immediately prior to
such record date less the fair market value (as determined by
the Board of Directors) of the portion of the assets,
evidences of indebtedness, rights or warrants so to be
distributed applicable to a Common Share.
(e) Each adjustment made pursuant to this Section 2.3 shall be
made as of:
(i) the record or effective date for the applicable
dividend, subdivision, change, consolidation or
issuance, in the case of an adjustment made pursuant
to Subsection 2.3(b); and
(ii) the record date for the applicable dividend or
distribution, in the case of an adjustment made
pursuant to Subsection 2.3(c) or (d).
(f) In the event that the Corporation shall at any time after
the Record Time and prior to the Separation Time issue any
shares of capital stock (other than Common Shares), or rights
or warrants to subscribe for or purchase any such capital
stock, or securities convertible into or exchangeable for any
such capital stock, in a transaction referred to in Clauses
2.3(b)(i) or (iv), if the Board of Directors determines that
the adjustments contemplated by Subsections 2.3(b), (c) and
(d) in connection with such transaction will not
appropriately protect the interests of the holders of Rights,
the Corporation may determine what other adjustments to the
Exercise Price, number of Rights and/or securities
purchasable upon exercise of Rights would be appropriate and,
notwithstanding Subsections 2.3(b), (c) and (d), such
adjustments, rather than the adjustments contemplated by
Subsections 2.3(b), (c) and (d), shall be made. The
Corporation and the Rights Agent shall amend this Agreement
as appropriate to provide for such adjustments.
(g) Notwithstanding anything herein to the contrary, no adjustment
of the Exercise Price shall be required unless such adjustment
would require an increase or decrease of at least one per cent
in such Exercise Price; provided, however, that any
adjustments which by reason of this Subsection 2.3(g) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All adjustments made
pursuant to this Section 2.3 shall be made to the nearest cent
or to the nearest one ten-thousandth of a Common Share or a
Right, as the case may be.
(h) All Rights originally issued by the Corporation subsequent to
any adjustment made to an Exercise Price hereunder shall
evidence the right to purchase, at the adjusted Exercise
-20-
Price, the number of Common Shares purchasable from time to
time hereunder upon exercise of the Rights, all subject to
further adjustment as provided herein.
(i) Unless the Corporation shall have exercised its election, as
provided in Subsection 2.3(j), upon each adjustment of an
Exercise Price as a result of the calculations made in
Subsections 2.3(c) and (d), each Right outstanding immediately
prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Exercise
Price, that number of Common Shares obtained by:
(i) multiplying (A) the number of Common Shares covered
by a Right immediately prior to this adjustment, by
(B) the relevant Exercise Price in effect immediately
prior to such adjustment of the relevant Exercise
Price; and
(ii) dividing the product so obtained by the relevant
Exercise Price in effect immediately after such
adjustment of the relevant Exercise Price.
(j) The Corporation may elect prior to or after the date of
any adjustment of an Exercise Price to adjust the number of
Rights, in lieu of any adjustment in the number of Common
Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of Common Shares
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 the number of
Rights obtained by dividing the relevant Exercise Price in
effect immediately prior to adjustment of the relevant
Exercise Price by the relevant Exercise Price in effect
immediately after adjustment of the relevant Exercise Price.
The Corporation shall make a public announcement of its
election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time,
the amount of the adjustment to be made. This record date may
be the date on which the relevant Exercise Price is adjusted
or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 10 calendar 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 Subsection 2.3(j), the Corporation
shall, as promptly as practicable, cause to be distributed to
holders of record of Rights on such record date, Rights
Certificates evidencing, subject to Section 5.5, the
additional Rights to which such holders shall be entitled as
a result of such adjustment, or, at the option of the
Corporation, shall cause to be distributed to such holders of
record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the
Corporation, 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 Corporation, the
relevant adjusted Exercise Price and shall be registered in
the names of holders of record of Rights Certificates on the
record date specified in the public announcement.
(k) Irrespective of any adjustment or change in the Exercise Price
or the number of securities issuable upon exercise of the
Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Exercise Price per Common
Share and the number of Common Shares so issuable which were
expressed in the initial Rights Certificates issued hereunder.
(l) In any case in which this Section 2.3 shall require that
an adjustment in an Exercise Price be made effective as of a
record date for a specified event, the Corporation may elect
to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date of
the number of Common Shares and other securities of the
Corporation, if any, issuable upon such exercise over and
above the number of Common Shares and other securities of the
Corporation, if any, issuable upon such exercise on the basis
of the relevant Exercise Price in effect prior to such
adjustment; provided, however, that the Corporation shall
deliver to such holder a due ▇▇▇▇ or other appropriate
instrument evidencing such holder's right to receive such
additional Common Shares (fractional or otherwise) or other
securities upon the occurrence of the event requiring such
adjustment.
(m) Notwithstanding anything in this Section 2.3 to the
contrary, the Corporation shall be entitled to make such
reductions in the Exercise Price, in addition to those
adjustments expressly required by this Section 2.3, as and to
the extent that in its good faith judgment the Board of
Directors shall determine to be advisable in order that any
(i) subdivision or consolidation of the Common Shares, (ii)
issuance wholly for cash of any Common Shares at less than
the applicable Market Price, (iii) issuance wholly for cash
of any Common Shares or securities that by their terms are
exchangeable for or convertible into or give a right to
acquire Common Shares, (iv) stock dividends or (v) issuance
of rights, options or warrants referred to in this Section
2.3, hereafter made by the Corporation to holders of its
Common Shares, subject to applicable taxation laws, shall not
be taxable to such shareholders.
(n) The Corporation covenants and agrees that, after the
Separation Time, it will not, except as permitted by Section
5.1 or 5.4, take (or permit any Subsidiary of the Corporation
to take) 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.
-21-
(o) If an event occurs which would require an adjustment
under both this Section 2.3 and Section 3.1, the adjustment
provided for in this Section 2.3 shall be in addition to and
shall be made prior to, any adjustment required pursuant to
Section 3.1.
(p) Whenever an adjustment to the Exercise Price or a change in
the securities purchasable upon exercise of the Rights is made
pursuant to this Section 2.3, the Corporation shall promptly:
(i) file with the Rights Agent and with the transfer
agent for the Common Shares a certificate specifying
the particulars of such adjustment or change; and
(ii) cause notice of the particulars of such adjustment
or change to be given to the holders of the Rights.
Failure to file such certificate or to cause such notice to be
given as aforesaid, or any defect therein, shall not affect
the validity of any such adjustment or change.
2.4 DATE ON WHICH EXERCISE IS EFFECTIVE
Each Person in whose name any certificate for Common Shares is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Common Shares
-22-
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly surrendered (together
with an appropriately completed and duly executed Election to Exercise) and
payment of the Exercise Price for such Rights (and any applicable transfer taxes
or charges payable by such Person hereunder) was made in accordance with
Subsection 2.2(d); provided, however, that if the date of such surrender and
payment is a date upon which the Common Share transfer books of the Corporation
are closed, such Person shall be deemed to have become the holder of record of
such shares on, and such certificate shall be dated, the next succeeding
Business Day on which the Common Share transfer books of the Corporation are
open.
2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS CERTIFICATES
(a) The Rights Certificates shall be executed on behalf of the
Corporation by its Chief Executive Officer and its Chief
Financial Officer. The signature of these officers on the
Rights Certificates may be manual or facsimile. Rights
Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the
Corporation shall bind the Corporation, notwithstanding that
such individuals or any of them have ceased to hold such
offices prior to the countersignature and delivery of such
Rights Certificates.
(b) Promptly following the Separation Time, the Corporation will
notify the Rights Agent of such Separation Time and will
deliver Rights Certificates executed by the Corporation to the
Rights Agent for countersignature and a disclosure statement
describing the Rights, and the Rights Agent will manually
countersign such Rights Certificates and deliver such Rights
Certificates and statement to the holders of the Rights
pursuant to Subsection 2.2(c). No Rights Certificate shall be
valid for any purpose until countersigned by the Rights Agent
as aforesaid.
(c) Each Rights Certificate shall be dated the date of
countersignature thereof.
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
(a) After the Separation Time, the Corporation will cause to be
kept a register (the "RIGHTS REGISTER") in which, subject to
such reasonable regulations as it may prescribe, the
Corporation will provide for the registration and transfer of
Rights. The Rights Agent is hereby appointed "Rights
Registrar" for the purpose of maintaining the Rights Register
for the Corporation and registering Rights and transfers and
exchanges of Rights as herein provided. In the event that the
Rights Agent shall cease to be the Rights Registrar, the
Rights Agent will have the right to examine the Rights
Register at all reasonable times.
(b) After the Separation Time and prior to the Expiration Time,
upon surrender for registration of transfer or exchange of any
Rights Certificate, and subject to the provisions of
Subsection 2.6(d) and 3.1(b), the Corporation will execute,
and the Rights Agent will countersign, deliver and register,
in the name of the holder or the designated transferee or
transferees, as required pursuant to the holder's
instructions, one or more new Rights Certificates evidencing
the same aggregate number of Rights as did the Rights
Certificates so surrendered.
(c) All Rights issued upon any registration of transfer or
exchange of Rights Certificates shall be the valid obligations
of the Corporation, and such Rights shall be entitled to the
-23-
same benefits under this Agreement as the Rights surrendered
upon such registration of transfer or exchange.
(d) Every Rights Certificate surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to
the Corporation or the Rights Agent, as the case may be, duly
executed by the holder thereof or such holder's attorney duly
authorized in writing. As a condition to the issuance of any
new Rights Certificate under this Section 2.6, the Corporation
may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and
expenses of the Rights Agent) connected therewith.
2.7 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES
(a) If any mutilated Rights Certificate is surrendered to the
Rights Agent prior to the Expiration Time, the Corporation
shall execute and the Rights Agent shall countersign and
deliver in exchange therefor a new Rights Certificate
evidencing the same number of Rights as did the Rights
Certificate so surrendered.
(b) If there shall be delivered to the Corporation and the
Rights Agent prior to the Expiration Time (i) evidence to
their satisfaction of the destruction, loss or theft of any
Rights Certificate and (ii) such security or indemnity as may
be required by them to save each of them and any of their
agents harmless, then, in the absence of notice to the
Corporation or the Rights Agent that such Rights Certificate
has been acquired by a bona fide purchaser, the Corporation
shall execute and upon its request the Rights Agent shall
countersign and deliver, in lieu of any such destroyed, lost
or stolen Rights Certificate, a new Rights Certificate
evidencing the same number of Rights as did the Rights
Certificate so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate
under this Section 2.7, the Corporation may require the
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto
and any other expenses (including the fees and expenses of the
Rights Agent) connected therewith.
(d) Every new Rights Certificate issued pursuant to this Section
2.7 in lieu of any destroyed, lost or stolen Rights
Certificate shall evidence a contractual obligation of the
Corporation, whether or not the destroyed, lost or stolen
Rights Certificate shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Agreement
equally and proportionately with any and all other Rights duly
issued hereunder.
2.8 PERSONS DEEMED OWNERS
Prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) for registration of
transfer, the Corporation and any agent of the Corporation or, if so authorized
by the Corporation, the Rights Agent may deem and treat the person in whose name
such Rights Certificate (or, prior to the Separation Time, such Common Share
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement, unless
the context otherwise requires, the term "holder" of any Rights means the
registered holder of such Rights (or, prior to the Separation Time, the
associated Common Shares).
-24-
2.9 DELIVERY AND CANCELLATION OF CERTIFICATES
All Rights Certificates surrendered upon exercise or for redemption, or
for registration of transfer or exchange shall, if surrendered to any person
other than the Rights Agent, be delivered to the Rights Agent and, in any case,
shall be promptly cancelled by the Rights Agent. The Corporation may at any time
deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired in
any manner whatsoever, and all Rights Certificates so delivered shall be
promptly cancelled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates cancelled as
provided in this Section 2.9, except as expressly permitted by this Agreement.
The Rights Agent shall destroy all cancelled Rights Certificates and deliver a
certificate of destruction to the Corporation.
2.10 AGREEMENT OF RIGHTS HOLDERS
Every holder of Rights, by accepting such Rights, consents and agrees
with the Corporation and the Rights Agent and with every other holder of Rights
that:
(a) such holder shall be bound by and subject to the provisions of
this Agreement, as amended from time to time in accordance
with the terms hereof, in respect of all Rights held;
(b) prior to the Separation Time, each Right will be transferable
only together with, and will be transferred by a transfer of,
the associated Common Share;
(c) after the Separation Time, the Rights will be
transferable only on the Rights Register as provided
herein;
(d) prior to due presentment of a Rights Certificate (or,
prior to the Separation Time, the associated Common Share
certificate) for registration of transfer, the Corporation
and any agent of the Corporation or, if so authorized by the
Corporation, the Rights Agent may deem and treat the person
in whose name the Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) is
registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership
or writing on such Rights Certificate or the associated
Common Share certificate made by anyone other than the
Corporation or the Rights Agent) for all purposes whatsoever,
and neither the Corporation nor the Rights Agent shall be
affected by any notice to the contrary;
(e) such holder is not entitled to receive any fractional
Rights or fractional Common Shares upon the
exercise of Rights;
(f) without the approval of any holder of Rights and upon the
sole authority of the Board of Directors, this Agreement may
be supplemented or amended from time to time as provided
herein; and
(g) notwithstanding anything in this Agreement to the
contrary, neither the Corporation nor the Rights Agent shall
have any liability to any holder of a Right or any other
Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary
or permanent injunction or other order, decree or ruling
issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or
-25-
commission, or any statute, rule, regulation or executive
order promulgated or enacted by a governmental authority,
prohibiting or otherwise restraining performance of such
obligations.
ARTICLE 3 -- ADJUSTMENTS TO THE RIGHTS
3.1 FLIP-IN EVENT
(a) Subject to Section 3.1(b) and Subsections 5.1(d)
and 5.1(e), and except as provided below, if prior to the
Expiration Time a Flip-in Event shall occur, each Right shall
constitute, effective at the Close of Business on the 10th day
after the Stock Acquisition Date, the right to purchase from
the Corporation, upon exercise thereof in accordance with the
terms hereof, that number of Common Shares having an aggregate
Market Price on the date of consummation or occurrence of such
Flip-in Event equal to twice the Exercise Price for an amount
in cash equal to the Exercise Price (such Right to be
appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 in the event that,
after such date of consummation or occurrence, or event, an
event of a type analogous to any of the events described in
Section 2.3 shall have occurred with respect to such Common
Shares).
(b) Notwithstanding anything to the contrary in this
Agreement, upon the occurrence of any Flip-in Event, any
Rights that are or were Beneficially Owned on or after the
earlier of the Separation Time or the Stock Acquisition Date
by:
(i) (A) an Acquiring Person;
(B) any Affiliate or Associate of an Acquiring
Person;
(C) any Person acting jointly or in concert with an
Acquiring Person or any of its Affiliates;
(D) any other Person whose securities are deemed to
be Beneficially Owned by an Acquiring Person
(each such Person being herein referred to as the
"INELIGIBLE SHAREHOLDER"); or
(ii) a transferee, direct or indirect, of an
Ineligible Shareholder who becomes a transferee in a
transfer, whether or not for consideration, that the
Board of Directors has determined is part of a plan,
arrangement or scheme of an Ineligible Shareholder
that has the purpose or effect of avoiding Clause
3.1(b)(i),
shall become null and void without any further action, and any
holder of such Rights (including a transferee of, or other
successor to, such Rights, whether directly or indirectly)
shall thereafter have no right to exercise such Rights under
any provision of this Agreement and shall not have thereafter
any right whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The holder
of any Rights represented by a Rights Certificate which is
submitted to the Rights Agent upon exercise or for
registration of transfer or exchange which does not contain
the necessary certifications set forth in the Rights
Certificate establishing that such Rights are not void
-26-
under this Subsection 3.1(b), shall be deemed to be an
Acquiring Person or other Ineligible Shareholder for the
purposes of this Subsection 3.1(b) and such Rights shall
become null and void.
(c) Any Rights Certificates that represent Rights Beneficially
Owned by a Person described in either Clause (i) or (ii) of
Subsection 3.1(b) or transferred to any nominee of any such
Person, and any Rights Certificate issued upon transfer,
exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain the
following legend:
"The Rights represented by this Rights Certificate
were issued to a Person who was an Acquiring Person
or an Affiliate or an Associate of an Acquiring
Person or other Ineligible Shareholder (as such terms
are defined in the Rights Agreement), including a
Person, or an Affiliate or Associate of a Person, who
was acting jointly or in concert with any of them or
any other Person whose securities are deemed to be
Beneficially Owned by such Acquiring Person. This
Rights Certificate and the Rights represented hereby
shall become void in the circumstances specified in
Subsection 3.1(b) of the Rights Agreement."
Provided, however, that the Rights Agent shall not be under
any responsibility to ascertain the existence of facts that
would require the imposition of such legend but shall impose
such legend only if instructed to do so by the Corporation in
writing of if a holder fails to certify upon transfer or
exchange in the space provided on the Rights Certificate that
such holder is not a Person described in such legend.
(d) From and after the Separation Time, the Corporation shall do
all such acts and things as shall be necessary and within its
power to ensure compliance with the provisions of this Section
3.1 including, without limitation, all such acts and things as
may be required to satisfy the requirements of the
Corporations Act and the Securities Act and any other
applicable laws in respect of the issue of Common Shares upon
the exercise of Rights in accordance with this Agreement.
3.2 EXCHANGE OPTION
(a) In the event that the Board of Directors determines that
conditions exist which would eliminate or otherwise materially
diminish in any respect the benefits intended to be afforded
to the holders of Rights pursuant to this Agreement, the Board
of Directors may, at its option and without seeking the
approval of the holders of Common Shares or Rights, at any
time after a Flip-in Event has occurred, authorize the
Corporation to issue or deliver in respect of each Right which
is not void pursuant to Subsection 3.1(b), either:
(i) in return for the Exercise Price and the Right, cash,
debt or equity securities or other assets (or a
combination thereof) having a cash value equal to
twice the Exercise Price; or
(ii) in return for the Right and without further charge,
subject to any amounts that may be required to be
paid under applicable law, cash, debt or equity
securities or other assets (or a combination thereof)
having a cash value equal to the Exercise Price,
-27-
in full and final settlement of all rights attaching to the
Rights, where in either case the value of such debt or equity
securities or other assets shall be determined by the Board of
Directors who may rely upon the advice of a nationally
recognized investment dealer or investment banker selected by
the Board of Directors. To the extent that the Board of
Directors determines that some action need be taken pursuant
to this Section 3.2, the Board of Directors may suspend the
exercisability of the Rights for a period of up to 90 days
following the date of the occurrence of the relevant Flip-in
Event in order to decide the appropriate form of distribution
to be made and to determine the value thereof. In the event of
any such suspension, the Corporation shall notify the Rights
Agent and issue as promptly as practicable a public
announcement stating that the exercisability of the Rights has
been temporarily suspended.
(b) If the Board of Directors authorizes the exchange of debt or
equity securities or other assets (or a combination thereof)
for Rights pursuant to Subsection 3.2(a), then, without any
further action or notice, the right to exercise the Rights
will terminate and the only right thereafter of a holder of
Rights shall be to receive such debt or equity securities or
other assets (or a combination thereof) in accordance with the
exchange formula authorized by the Board of Directors. Within
10 Business Days after the Board of Directors has authorized
the exchange of debt or equity securities or other assets (or
a combination thereof) for Rights pursuant to Subsection
3.2(a), the Corporation shall give notice of such exchange to
the holders of such Rights. Each such notice of exchange will
state the method by which the exchange of debt or equity
securities or other assets (or a combination thereof) for
Rights will be effected.
(c) The Corporation shall not be required to issue fractions of
securities or to distribute certificates evidencing fractional
securities. In lieu of issuing such fractional securities,
there shall be paid to the registered holders of Rights to
whom such fractional securities would otherwise be issuable,
an amount in cash equal to the same fraction of the Market
Price of a whole security.
3.3 FIDUCIARY DUTIES OF THE BOARD OF DIRECTORS OF THE CORPORATION
For clarification it is understood that nothing contained
in this Article 3 shall be considered to affect the obligations of the members
of the Board of Directors to exercise their fiduciary duties. Without limiting
the generality of the foregoing, nothing contained herein shall be construed to
suggest or imply that the Board of Directors shall not be entitled to recommend
that holders of the Voting Shares of the Corporation reject or accept any
Take-over Bid or take any other action (including, without limitation, the
commencement, prosecution, defence or settlement of any litigation and the
submission of additional or alternative Take-over Bids or other proposals to the
Special Meeting) with respect to any Take-over Bid that the Board of Directors
believes is necessary or appropriate in the exercise of the fiduciary duties of
its members.
-28-
ARTICLE 4 -- THE RIGHTS AGENT
4.1 GENERAL
(a) The Corporation hereby appoints the Rights Agent to act as
agent for the Corporation and the holders of Rights in
accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Corporation
may from time to time appoint such Co-Rights Agents as it may
deem necessary or desirable subject to the prior approval of
the Rights Agent. In the event the Corporation appoints one or
more Co-Rights Agents, the respective duties of the Rights
Agents and Co-Rights Agents shall be as the Corporation may
determine with the approval of the Rights Agent. The
Corporation agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder (as per
the attached Fee Schedule) 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 (including the fees and disbursements
of any expert or advisor retained by the Rights Agent with the
approval of the Corporation). The Corporation also agrees to
indemnify the Rights Agent, its officers, directors and
employees for, and to hold them harmless against, any loss,
liability, or expense, incurred without negligence, bad faith
or wilful 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, which right to indemnification will
survive the termination of this Agreement or the resignation
or removal of the Rights Agent. The Corporation shall inform
the Rights Agent in a reasonably timely manner of events which
may materially affect the administration of this Agreement by
the Rights Agent and at any time, upon request, shall provide
to the Rights Agent an incumbency certificate with respect to
the then current directors of the Corporation.
(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 certificate for Common Shares,
Rights Certificate, certificate for other securities of the
Corporation, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper
Person or Persons.
4.2 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 amalgamated or with which it may
be consolidated, or any corporation resulting from any merger,
amalgamation or consolidation to which the Rights Agent or any
successor Rights Agent is a party, or any corporation
succeeding to the shareholder or stockholder services business
of the Rights Agent or any successor Rights Agent, will be the
successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 4.4 hereof. In
case at the time such successor Rights Agent succeeds to the
agency created by this Agreement any of the Rights
Certificates have
-29-
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 have not 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 will 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 is 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.
4.3 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
Corporation and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may retain and consult with legal counsel
(who may be legal counsel for the Corporation), and the
opinion of such counsel will 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; the Rights Agent may also, with the
approval of the Corporation (where such approval may
reasonably be obtained and such approval not to be
unreasonably withheld), consult with such other experts as the
Rights Agent shall consider necessary or appropriate to
properly carry out the duties and obligations imposed under
this Agreement and the Rights Agent shall be entitled to rely
in good faith on the advice of any such expert;
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent deems it necessary or desirable that any fact
or matter be proved or established by the Corporation 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 a person
reasonably believed by the Rights Agent to be a senior officer
of the Corporation and delivered to the Rights Agent; and such
certificate will 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 will be liable hereunder only for its own
negligence, bad faith or wilful misconduct;
(d) The Rights Agent will not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement
or in the certificates for Common Shares or the Rights
Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements and
recitals are and will be deemed to have been made by the
Corporation only;
-30-
(e) The Rights Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution and
delivery hereof (except the due authorization, execution and
delivery hereof by the Rights Agent) or in respect of the
validity or execution of any Common Share certificate or
Rights Certificate (except its countersignature thereof); nor
will it be responsible for any breach by the Corporation of
any covenant or condition contained in this Agreement or in
any Rights Certificate; nor will it be responsible for any
change in the exercisability of the Rights (including the
Rights becoming void pursuant to Subsection 3.1(b)) or any
adjustment required under the provisions of Section 2.3 or
responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the
exercise of Rights after receipt of the certificate
contemplated by Subsection 2.3(p) hereof describing any such
adjustment); nor will it by any act hereunder be deemed to
make any representation or warranty as to the authorization of
any Common Shares to be issued pursuant to this Agreement or
any Rights or as to whether any Common Shares will, when
issued, be duly and validly authorized, executed, issued and
delivered and fully paid and non-assessable;
(f) The Corporation agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by
the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement;
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties
hereunder from any Person designated in writing by the
Corporation, and to apply to such persons 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 person;
(h) The Rights Agent and any shareholder or stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal
in Common Shares, Rights or other securities of the
Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or
contract with or lend money to the Corporation or otherwise
act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Corporation or
for any other legal entity; and
(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 will not be answerable or accountable for any
act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Corporation resulting from any
such act, default, neglect or misconduct, provided reasonable
care was exercised in the selection and continued employment
thereof.
-31-
4.4 CHANGE OF RIGHTS AGENT
The Rights Agent may resign and be discharged from its duties under
this Agreement upon 30 days' notice (or such lesser notice as is acceptable to
the Corporation) in writing mailed to the Corporation and to the transfer agent
of Common Shares by registered or certified mail, and to the holders of the
Rights in accordance with Section 5.8. The Corporation may remove the Rights
Agent upon 30 days' notice in writing, mailed to the Rights Agent and to the
transfer agent of the Common Shares by registered or certified mail, and to the
holders of the Rights in accordance with Section 5.8. If the Rights Agent should
resign or be removed or otherwise become incapable of acting, the Corporation
will appoint a successor to the Rights Agent. If the Corporation fails to make
such appointment within a period of 30 days after 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 any Rights (which holder shall,
with such notice, submit such holder's Rights Certificate for inspection by the
Corporation), then the resigning Rights Agent or the holder of any Rights may
apply to any court of competent jurisdiction for the appointment of a new Rights
Agent at the Corporation's expense. Any successor Rights Agent, whether
appointed by the Corporation or by such a court, shall be a corporation
incorporated under the laws of Canada or a province thereof. After appointment,
the successor Rights Agent will 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 upon receipt of all outstanding fees and expenses
owing by the Corporation to the predecessor Rights Agent under this Agreement,
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 Corporation will file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares, and mail a notice thereof in writing to the holders
of the Rights. Failure to give any notice provided for in this Section 4.4,
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.
ARTICLE 5 -- MISCELLANEOUS
5.1 REDEMPTION AND WAIVER
(a) The Board of Directors may, at its option, at any time prior
to the occurrence of a Flip-in Event, elect to redeem all but
not less than all of the then outstanding Rights at a
redemption price of $0.0001 per Right appropriately adjusted
in a manner analogous to the applicable adjustment provided
for in Section 2.3 in the event that an event of the type
analogous to any of the events described in Section 2.3 shall
have occurred (such redemption price being herein referred to
as the "REDEMPTION PRICE"). The redemption of the Rights by
the Board of Directors 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) If an Offeror successfully completes a Permitted Bid by having
taken up and paid for not less than 50 per cent of the Voting
Shares held by Independent Shareholders pursuant to Permitted
Bid Acquisitions, the Board of Directors shall, without
further formality, be deemed to have elected to redeem the
Rights at the Redemption Price on the Expiry Date of the
Permitted Bid.
(c) If the Board of Directors elects to or is deemed to
have elected to redeem the Rights, the right to exercise the
Rights will thereupon without further action and without
-32-
notice terminate and the only right thereafter of the holder
of a Right shall be to receive the Redemption Price. Within 10
days of the Board of Directors electing or being deemed to
have elected to redeem the Rights, the Corporation shall give
notice of such redemption to the holders of the then
outstanding Rights. Each such notice of redemption shall state
the method by which the payment of the Redemption Price shall
be made.
(d) The Board of Directors may until the occurrence of a Flip-in
Event determine, upon prior written notice delivered to the
Rights Agent, to waive the application of Section 3.1 to any
particular Flip-in Event (which for greater certainty shall
not include the circumstances described in Subsection 5.1(e));
provided that if the Board of Directors waives the application
of Section 3.1 to a particular Flip-in Event pursuant to this
Subsection 5.1(d), subject to as provided below the Board of
Directors shall be deemed to have waived the application of
Section 3.1 to any other Flip-in Event occurring by reason of
any Take-over Bid which is made by means of a take-over bid
circular (i) prior to the granting of such waiver, (ii)
thereafter and prior to the expiry of any Take-over Bid (as
the same may be extended from time to time) outstanding at the
time of the granting of such waiver or (iii) thereafter and
prior to the expiry of any Take-over Bid in respect of which a
waiver is, or is deemed to have been, granted under this
Subsection 5.1(d); provided further that if the first waiver
pursuant to this Subsection 5.1(d) is in respect of any bid
which would have been a Permitted Bid but for the absence of
one or more of the elements of a Permitted Bid set out in
subclauses 1.1(bb) (i), (ii), (iii) or (iv) (the "Waived
Conditions"), any such second or further waiver which is
deemed to occur by reason of Subsection 5.1(d) shall only be
deemed to occur if each such second or further Take-over Bid
would also be a Permitted Bid but for the Waived Conditions.
(e) The Board of Directors may prior to the Close of Business on
the tenth day following the Stock Acquisition Date determine,
upon prior written notice delivered to the Rights Agent, to
waive or to agree to waive the application of Section 3.1 to
the Flip-in Event giving rise to the Stock Acquisition Date,
provided that the Acquiring Person has (i) reduced its
Beneficial Ownership of Voting Shares or (ii) has entered into
a contractual arrangement with the Corporation, acceptable to
the Board of Directors, to do so within 30 days of the date on
which such contractual arrangement is entered into (the expiry
of which period is herein referred to as the "DISPOSITION
DATE"), such that at the time the waiver becomes effective
pursuant to this Subsection 5.1(e) such Person is no longer an
Acquiring Person. In the event of such a waiver becoming
effective, for the purposes of this Agreement, such Flip-in
Event shall be deemed not to have occurred. Without limiting
the generality of the foregoing, if the Person remains an
Acquiring Person at the close of business on the Disposition
Date, the Disposition Date shall be deemed to be the date of
occurrence of a further Stock Acquisition Date and Section 3.1
shall apply thereto.
(f) Where a Take-over Bid, or other events giving rise to a
Separation Time, is withdrawn or otherwise terminated after
the Separation Time has occurred and prior to the occurrence
of a Flip-in Event, or in any other circumstances prior to the
occurrence of a Flip-in Event, the Board of Directors may
elect to redeem all the outstanding Rights at the Redemption
Price. Without restricting the rights of the Board of
Directors to elect to redeem the Rights pursuant to section
5.1(a) rather than pursuant to section 5.1(f), upon the Rights
being redeemed pursuant to this section 5.1(f), all of the
provisions of this Agreement shall continue to apply as if the
Separation Time had not occurred and Rights Certificates
representing the number of Rights held by each holder of
record of Common
-33-
Shares as of the Separation Time had not been mailed to each
such holder and for all purposes of this Agreement the events
giving rise to the Separation Time shall be deemed not to have
occurred.
(g) The Corporation shall give prompt written notice to the Rights
Agent of any waiver of the application of Section 3.1 made by
the Board of Directors under this Section 5.1.
5.2 EXPIRATION
No Person shall have any rights pursuant to this Agreement or in
respect of any Right after the Expiration Time, except the Rights Agent as
specified in Subsection 4.1(a) hereof.
5.3 ISSUANCE OF NEW RIGHTS CERTIFICATES
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Corporation may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by the Board of
Directors to reflect any adjustment or change in the number or kind or class of
shares purchasable upon exercise of Rights made in accordance with the
provisions of this Agreement.
5.4 SUPPLEMENTS AND AMENDMENTS
(a) Without the approval of any holders of Voting Shares or
Rights, the Corporation may make amendments to this Agreement
to correct any clerical or typographical error, or which are
required to maintain the validity of the Agreement as a result
of any change in any applicable legislation or regulations
thereunder, or which are made to cure any ambiguity, defect or
inconsistency, or which are to make changes which do not
adversely affect the interests of holders of Rights (excluding
the interests of any Acquiring Person or other persons
identified in section 3.1(b) hereof), or which are to shorten
or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to adjust the timer
period governing redemption shall be made at such time as the
Rights are not redeemable.. The Corporation may, prior to the
date of the shareholders' meeting referred to in Section
5.4(f), supplement or amend this Agreement without the
approval of any holders of Rights or Voting Shares in order to
make any changes which the Board of Directors acting in good
faith may deem necessary or desirable. Notwithstanding
anything in this Section 5.4 to the contrary, no supplement or
amendment shall be made to the provisions of Article 4 except
with the written concurrence of the Rights Agent to such
change, supplement or amendment.
(b) Subject to subsection 5.4(a), the Corporation may, with the
prior consent of the holders of Voting Shares obtained as set
forth below, at any time before the Separation Time, amend,
vary or rescind any of the provisions of this Agreement and
the Rights (whether or not such action would materially
adversely affect the interests of the holders of Rights
generally). Such consent shall be deemed to have been given if
the action requiring such approval is approved by the
affirmative vote of a majority of the votes cast by
Independent Shareholders represented in person or by proxy at
the Special Meeting.
(c) The Corporation may, with the prior consent of the holders of
Rights obtained as set forth below, at any time after the
Stock Acquisition Date amend, vary or rescind any of the
provisions of this Agreement and the Rights (whether or not
such action would materially adversely affect the interests of
the holders of Rights generally), provided that no such
-34-
amendment, variation or deletion shall be made to the
provisions of Article 4 except with the written concurrence of
the Rights Agent thereto. Such consent shall be deemed to have
been given if such amendment, variation or deletion is
authorized by the affirmative votes of the holders of Rights
present or represented at and entitled to vote at a meeting of
the holders and representing 50% plus one of the votes cast in
respect thereof.
(d) Any approval of the holders of Rights shall be deemed to have
been given if the action requiring such approval is authorized
by the affirmative votes of the holders of Rights present or
represented and entitled to vote at a meeting of the holders
of Rights and representing a majority of the votes cast in
respect thereof. For purposes hereof, each outstanding Right
(other than Rights which are void pursuant to the provisions
hereof) shall be entitled to one vote, and the procedures for
the calling, holding and conduct of the meeting shall be
those, as nearly as may be, which are provided in the
Corporation's by-laws and the Corporations Act with respect to
meetings of shareholders of the Corporation.
(e) Any amendments made by the Corporation to this Agreement
pursuant to Subsection 5.4(a) which are required to maintain
the validity of this Agreement as a result of any change in
any applicable legislation or regulation thereunder shall:
(i) if made before the Separation Time, be submitted to
the shareholders of the Corporation at the next meeting of
shareholders and the shareholders may, by the majority
referred to in subsection 5.4(b) confirm or reject such
amendment;
(ii) if made after the Separation Time, be submitted to
the holders of Rights at a meeting to be called for on a
date not later than immediately following the next meeting
of shareholders of the Corporation and the holders of
Rights may, by resolution passed by the majority referred
to in Subsection 5.4(d) confirm or reject such amendment.
Any such amendment shall be effective from the date of the
resolution of the Board of Directors adopting such
amendment, until it is confirmed or rejected or until it
ceases to be effective (as described in the next sentence)
and, where such amendment is confirmed, it continues in
effect in the form so confirmed. If such amendment is
rejected by the shareholders or the holders of Rights or is
not submitted to the shareholders or holders of Rights as
required, then such amendment shall cease to be effective
from and after the termination of the meeting at which it
was rejected or to which it should have been but was not
submitted or from and after the date of the meeting of
holders of Rights that should have been but was not held,
and no subsequent resolution of the Board of Directors to
amend this Agreement to substantially the same effect shall
be effective until confirmed by the shareholders or holders
of Rights as the case may be.
(f) The Board of Directors shall call and hold a Special Meeting
of holders of Voting Shares to consider and, if thought
appropriate, ratify the distribution and the continued
existence of the Rights. The Special Meeting shall be held on
a date fixed by the Board of Directors, which date shall be no
later than July 6, 2000 (or such later date as The Toronto
Stock Exchange may approve). The Board of Directors shall fix
a record date for
-35-
determining the holders of Voting Shares entitled to receive
notice of the Special Meeting in accordance with all
applicable laws and the articles and by-laws of the
Corporation. Unless a majority of the votes cast by the
Independent Shareholders on such resolution are voted in
favour of the continued existence of the Rights, then the
Board of Directors shall immediately upon the confirmation by
the Chairman of such shareholders' meeting of the result of
the vote on such resolution, without further formality, be
deemed to have elected to redeem the Rights at the Redemption
Price.
(g) The Corporation shall be required to provide the Rights Agent
with notice in writing of any such amendment, recession or
variation to this Agreement as referred to in this Section 5.4
within five days of effecting such amendment, recession or
variation.
(h) Any supplement or amendment to this Agreement pursuant to
Section 5.4(b) through (g) shall be subject to the receipt of
any requisite approval or consent from any governmental or
regulatory authority having jurisdiction over the Corporation,
including without limitation an requisite approval of stock
exchanges on which the Shares are listed (which supplement or
amendment shall be effective upon receipt of such approval
(whether or not such approval is subject to one or more
conditions which must be satisfied)).
5.5 FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(a) The Corporation shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence
fractional Rights. After the Separation Time, there shall be
paid to the registered holders of the Rights Certificates with
regard to which fractional Rights would otherwise be issuable,
an amount in cash equal to the same fraction of the Market
Price of a whole Right in lieu of such fractional Rights. The
Rights Agent shall have no obligation to make any payments in
lieu of fractional Rights unless the Corporation shall have
provided the Rights Agent with the necessary funds to pay in
full all amounts payable in accordance with Section 2.2 (e).
(b) The Corporation shall not be required to issue fractional
Common Shares upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares. In lieu
of issuing fractional Common Shares, the Corporation shall pay
to the registered holder of Rights Certificates at the time
such Rights are exercised as herein provided, an amount in
cash equal to the same fraction of the Market Price of one
Common Share. The Rights Agent shall have no obligation to
make any payments in lieu of fractional Common Shares unless
the Corporation shall have provided the Rights Agent with the
necessary funds to pay in full all amounts payable in
accordance with Section 2.2 (e).
5.6 RIGHTS OF ACTION
Subject to the terms of this Agreement, rights of action in respect of
this Agreement, other than rights of action vested solely in the Rights Agent,
are vested in the respective holders of the Rights; and any holder of any
Rights, without the consent of the Rights Agent or of the holder of any other
Rights may, on such holder's own behalf and for such holder's own benefit and
the benefit of other holders of Rights, enforce, and may institute and maintain
any suit, action or proceeding against the Corporation to enforce, or otherwise
act in respect of, such holder's right to exercise such holder's Rights to which
such Person is entitled, in the manner provided in such holders 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
-36-
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.
5.7 HOLDER OF RIGHTS DEEMED NOT A SHAREHOLDER
No holder, as such, of any Rights shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Common Shares or any other
securities which may at any time be issuable on the exercise of such Rights, nor
shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights as such, any of the rights of a shareholder
of the Corporation or any right to vote for the election of directors or upon
any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders, or to receive dividends or subscription
rights or otherwise.
5.8 NOTICES
Notices or demands authorized or required by this Agreement to be given
or made by the Rights Agent or by the holder of any Rights to or on the
Corporation shall be sufficiently given or made if delivered personally or if
delivered or sent by registered or certified mail, postage prepaid, or by
facsimile transmission addressed (until another address is filed in writing with
the Rights Agent) as follows:
SALIX PHARMACEUTICALS, LTD.
c/o Wyrick ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
U.S.A.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Any such notice or demand shall be deemed to have been received, if delivered
personally, on the date of delivery (if such date is a Business Day, failing
which it shall be deemed delivered on the next Business Day), if sent by
facsimile, on the next Business Day following transmission or if sent by
registered or certified mail, on the fifth Business Day after the mailing
thereof, except in the case of interruption of regular mail service, in which
case such notice shall be sent by facsimile or personally delivered.
Any notice or demand authorized or required by this Agreement to be
given or made by the Corporation or by the holder of any Rights to or on the
Rights Agent shall be sufficiently given or made if delivered personally or if
delivered or sent by registered or certified mail, postage prepaid, or by
facsimile transmission addressed as follows:
MONTREAL TRUST COMPANY OF CANADA
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Senior Manager, Client Services
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
-37-
Any such notice or demand shall be deemed to have been received, if delivered
personally, on the date of delivery (if such date is a Business Day, failing
which it shall be deemed delivered on the next Business Day), if sent by
facsimile, on the next Business Day following transmission or if sent by
registered or certified mail, on the fifth Business Day after the mailing
thereof, except in the case of interruption of regular mail service, in which
case such notice shall be sent by facsimile or personally delivered.
Notices or demands authorized or required by this Agreement to be given
or made by the Corporation or the Rights Agent to or on the holder of any Rights
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as it
appears on the Rights Register or, prior to the Separation Time, on the
registers of the Corporation for the Common Shares. Any notice which is mailed
in the manner herein provided shall be deemed given on the fifth Business Day
after the date of mailing thereof, whether or not the holder receives the
notice. In the event of any interruption of mail service, such notice required
or permitted to be given hereunder will be deemed to be sufficiently given by
advertisement of such notice in a newspaper of general circulation in the City
of Toronto.
5.9 COSTS OF ENFORCEMENT
The Corporation agrees that if the Corporation or any other Person the
securities of which are purchasable upon exercise of Rights fails to fulfil any
of its obligations pursuant to this Agreement, then the Corporation or such
Person will reimburse the holder of any Rights for the costs and expenses
(including legal fees) incurred by such holder in actions to enforce his rights
pursuant to any Rights or this Agreement.
5.10 REGULATORY APPROVALS
Any obligation of the Corporation or action or event contemplated by
this Agreement, or any amendment to this Agreement, shall be subject to the
receipt of any requisite approval or consent from any governmental or regulatory
authority.
5.11 DECLARATION AS TO NON-CANADIAN AND NON-U.S. HOLDERS
-38-
If in the opinion of the Board of Directors (who may rely upon the
advice of counsel) any action or event contemplated by this Agreement would
require compliance with the securities laws or comparable legislation of a
jurisdiction outside Canada and the United States of America, the Board of
Directors acting in good faith may take such actions as it may deem appropriate
to ensure that such compliance is not required, including without limitation
establishing procedures for the issuance to a Canadian resident fiduciary of
Rights, or securities issuable on exercise of Rights, the holding thereof in
trust for the Persons entitled thereto (but reserving to the fiduciary or to the
fiduciary and the Corporation, as the Corporation may determine, absolute
discretion with respect thereto) and the sale thereof and remittance of the
proceeds of such sale, if any, to the Persons entitled thereto. In no event
shall the Corporation or the Rights Agent be required to issue or deliver Rights
or securities issuable on exercise of Rights to Persons who are citizens,
residents or nationals of any jurisdiction other than Canada and any province or
territory thereof and the United States of America in which such issue or
delivery would be unlawful without registration of the relevant Persons or
securities for such purposes.
5.12 SUCCESSORS
All the covenants and provisions of this Agreement by or for the
benefit of the Corporation or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
5.13 BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any Person
other than the Corporation, the Rights Agent and the holders of the Rights any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Corporation, the
Rights Agent and the holders of the Rights.
5.14 GOVERNING LAW
This Agreement and each Right issued hereunder shall be deemed to be a
contract made under the laws of the Province of Ontario and for all purposes
shall be governed by and construed in accordance with the laws of such
jurisdiction applicable to contracts to be made and performed entirely within
such province.
5.15 LANGUAGE
Les parties aux presentes ont exige que la presente convention ainsi que
tous les documents et avis qui s'y rattachent et/ou qui en decoulent soient
rediges en langue anglaise. The parties hereto have required that this Agreement
and all documents and notices related thereto and/or resulting therefrom be
drawn up in English.
5.16 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.
5.17 SEVERABILITY
If any Section, Subsection, paragraph, subparagraph,
term or provision hereof or the application thereof to any circumstance shall,
in any jurisdiction and to any extent, be invalid or unenforceable, such
Section, Subsection, paragraph, subparagraph, term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
Sections, Subsections, paragraphs, subparagraphs, terms and provisions hereof or
the application of such Section, Subsection, paragraph, subparagraph, term or
provision to circumstances other than those as to which it is held invalid or
unenforceable.
5.18 EFFECTIVE DATE
This Agreement is effective from the date hereof.
5.19 TIME OF THE ESSENCE
Time shall be of the essence hereof.
5.20 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS
The Board of Directors shall have the exclusive power and authority to
administer and amend this Agreement in accordance with the terms hereof and to
exercise all rights and powers specifically granted hereunder to the Board of
Directors or the Corporation, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not to redeem the Rights or to
amend the Agreement, in accordance with the terms hereof). All such actions,
calculations 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
Corporation, the Rights Agent, the holders of the Rights, and all other parties
and (y) not subject the Board of Directors to any liability to the holders of
the Rights, or any other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SALIX PHARMACEUTICALS, LTD.
Per:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
Authorized Signing Officer
MONTREAL TRUST COMPANY OF CANADA
Per:
Per:
EXHIBIT A
[FORM OF RIGHTS CERTIFICATE]
Certificate No.__________________________ _________________Rights
UNTIL THE SEPARATION TIME (AS DEFINED IN THE RIGHTS AGREEMENT REFERRED
TO BELOW), THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER
HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A SHAREHOLDER PROTECTION
RIGHTS AGREEMENT MADE AS OF JANUARY 13, 2000 (THE "RIGHTS AGREEMENT"),
BETWEEN SALIX PHARMACEUTICALS, LTD. (THE "CORPORATION") AND MONTREAL
TRUST COMPANY OF CANADA , AS RIGHTS AGENT, THE TERMS OF WHICH ARE
INCORPORATED HEREIN BY THIS REFERENCE AND A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THE CORPORATION. UNDER CERTAIN CIRCUMSTANCES,
AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS MAY BE AMENDED OR
REDEEMED, MAY EXPIRE, MAY BECOME VOID (IF, IN CERTAIN CASES, THEY ARE
"BENEFICIALLY OWNED" BY AN "ACQUIRING PERSON" OR AN "INELIGIBLE
SHAREHOLDER", AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT, OR A
TRANSFEREE THEREOF), OR MAY BE EVIDENCED BY SEPARATE CERTIFICATES AND
MAY NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE CORPORATION WILL
MAIL, OR ARRANGE FOR THE MAILING OF, A COPY OF THE RIGHTS AGREEMENT TO
THE HOLDER OF THIS CERTIFICATE WITHOUT CHARGE PROMPTLY AFTER THE
RECEIPT OF A WRITTEN REQUEST THEREFOR.
RIGHTS CERTIFICATE
This certifies that__________________________________ is the registered holder
of the number of Rights set forth above, each of which entitles the registered
holder thereof, subject to the terms, provisions and conditions of the
Shareholder Protection Rights Agreement made as of January 13, 2000 (the "Rights
Agreement") as amended between SALIX PHARMACEUTICALS, LTD., a corporation
incorporated under the laws of British Virgin Islands (the "Corporation") and
Montreal Trust Company of Canada, a trust company incorporated under the laws of
Canada, as Rights Agent (the "Rights Agent", which term shall include any
successor Rights Agent under the Rights Agreement), to purchase from the
Corporation, at any time after the Separation Time and prior to the Expiration
Time (as such terms are defined in the Rights Agreement), one fully paid common
share of the Corporation (a "Common Share") at the Exercise Price referred to
below, upon presentation and surrender of this Rights Certificate, together with
the Form of Election to Exercise appropriately completed and duly executed, to
the Rights Agent at its principal office in the City of Toronto (or such other
locations as the Corporation and the Rights Agent may from time to time
determine). Until adjustment thereof in certain events as provided in the Rights
Agreement, the Exercise Price shall be $60 per Right (payable by bank draft,
certified cheque or money order payable to the order of the Corporation).
In certain circumstances described in the Rights Agreement, each Right
evidenced hereby may entitle the registered holder thereof to purchase or
receive assets, debt securities or shares in the capital of the Corporation
other than Common Shares, or more or less than one Common Share (or a
combination thereof), all as provided in the Rights Agreement.
A-1
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 reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates. Copies
of the Rights Agreement are on file at the principal office of the Corporation
and are available upon written request.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office of the Rights Agent in the City of
Toronto (or such other locations as the Corporation and the Rights Agent may
from time to time determine), may be exchanged for another Rights Certificate or
Rights Certificates of like tenor evidencing an aggregate number of Rights equal
to the aggregate number of Rights evidenced by the Rights Certificate or Rights
Certificates surrendered. If this Rights Certificate shall be exercised in part,
the registered holder shall be entitled to receive, upon surrender hereof,
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Corporation at a redemption price
of $0.0001 per Right, subject to adjustment in certain events, or (ii) may be
exchanged, at the option of the Corporation, for cash, debt or equity securities
or other assets (or a combination thereof).
No fractional Common Shares 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 Common
Shares or any other securities which may at any time be issuable upon 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
shareholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
any meeting or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights or otherwise,
until the 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 the Rights Agent.
WITNESS the signature of the proper officers of the Corporation.
Date:___________________________
SALIX PHARMACEUTICALS, LTD.
Per:____________________________
Chief Executive Officer
Countersigned:
MONTREAL TRUST COMPANY OF CANADA
A-2
Per:__________________________________
Authorized Signature
A-3
[Continued on Reverse Side]
FORM OF ELECTION TO EXERCISE
TO: SALIX PHARMACEUTICALS, LTD.
The undersigned hereby irrevocably elects to exercise_____________________ whole
Rights represented by this Rights Certificate to purchase the Common Shares
issuable upon the exercise of such Rights and requests that certificates for
such Common Shares be issued in the name of and delivered to:
________________________________________
Name
________________________________________
Address
________________________________________
City and Province/State/Country
________________________________________
Social Insurance No. or other taxpayer
identification number
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
________________________________________
Name
________________________________________
Address
________________________________________
City and Province/State/Country
________________________________________
Social Insurance Number or other
taxpayer identification number
A-4
Date: ______________________________ _______________________________
Signature
(Signature must correspond to
name as written upon the face
of this Rights Certificate in
every particular, without
alteration or enlargement or
any change whatsoever)
_______________________________________
Signature Guaranteed
(THE FOLLOWING IS TO BE COMPLETED ONLY IF TRUE)
The undersigned hereby represents, for the benefit of the Corporation
and all holders of Rights and Common Shares, that the Rights evidenced by this
Rights Certificate are not and, to the knowledge of the undersigned, have never
been, Beneficially Owned by (i) an Acquiring Person, (ii) any Affiliate or
Associate of an Acquiring Person, (iii) any other Person acting jointly or in
concert with an Acquiring Person or any Affiliate of an Acquiring Person, or
(iv) any other Person whose securities are deemed to be Beneficially Owned by an
Acquiring Person. Capitalized terms shall have the meanings ascribed thereto in
the Rights Agreement.
Date: ______________________________ _______________________________
Signature
(Signature must correspond to
name as written upon the face
of this Rights Certificate in
every particular, without
alteration or enlargement or
any change whatsoever)
_______________________________________
Signature Guaranteed
NOTE: Signature must be guaranteed by a major Canadian trust company, Canadian
chartered bank, or a member of the Securities Transfer Agents Medallion Program
(STAMP).
A-5
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
--------------------------------------------------------------------------------
(Please print name and address of transferee)
_________ {INSERT NUMBER} of the Rights represented by this Rights Certificate,
together with all right, title and interest therein.
Date: ______________________________ _______________________________
Signature
(Signature must correspond to
name as written upon the face
of this Rights Certificate in
every particular, without
alteration or enlargement or
any change whatsoever)
_______________________________________
Signature Guaranteed
(THE FOLLOWING IS TO BE COMPLETED ONLY IF TRUE)
The undersigned hereby represents, for the benefit of the Corporation
and all holders of Rights and Common Shares, that the Rights evidenced by this
Rights Certificate are not and, to the knowledge of the undersigned, have never
been, Beneficially Owned by (i) an Acquiring Person, (ii) any Affiliate or
Associate of an Acquiring Person, (iii) any other Person acting jointly or in
concert with an Acquiring Person or any Affiliate of an Acquiring Person, or
(iv) any other Person whose securities are deemed to be Beneficially Owned by an
Acquiring Person. Capitalized terms shall have the meanings ascribed thereto in
the Rights Agreement.
Date: ______________________________ _______________________________
Signature
(Signature must correspond to
name as written upon the face
of this Rights Certificate in
every particular, without
alteration or enlargement or
any change whatsoever)
_______________________________________
Signature Guaranteed
NOTE: Signature must be guaranteed by a major Canadian trust company, Canadian
chartered bank, or a member of the Securities Transfer Agents Medallion Program
(STAMP).
A-6
NOTICE
In the event that the certifications set forth above in the Forms of
Election to Exercise and Assignment are not completed, the Corporation
shall deem the Beneficial Owner of the Rights represented by this
Rights Certificate to be an Acquiring Person or other Ineligible
Shareholder and, accordingly, such Rights shall be null and void.
Capitalized terms shall have the meanings ascribed thereto in the
Rights Agreement.
A-7