VIVUS, INC. Item 1.01. Entry into a Material Definitive Agreement.
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The Rights Agreement was approved by the Board to mitigate the likelihood of an "ownership change" within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), and thereby preserve the current ability of the Company to utilize certain net operating loss carryovers and other tax benefits of the Company (the "Tax Benefits") to offset future income. If the Company were to experience an "ownership change," as defined in Section 382 of Code, the Company's ability to fully utilize the Tax Benefits on an annual basis would be substantially limited, and the timing of the usage of the Tax Benefits could be substantially delayed, which could therefore significantly impair the potential value of those assets. The Rights Agreement is intended to act as a deterrent to any person or group acquiring "beneficial ownership" of 4.9% or more of the outstanding Common Stock, without the approval of the Board.
The following summary of the terms of the Rights Agreement does not purport to be complete and is qualified in its entirety by the full text of the Rights Agreement, a copy of which is filed as Exhibit 4.1 hereto and is incorporated herein by reference.
Exercise of Rights. On or after the Distribution Date, each Right would
initially entitle the holder to purchase one one-thousandth of a share of the
Company's Series A Participating Preferred Stock, par value
Definition of Acquiring Person. An "Acquiring Person" is a person or group that, together with affiliates and associates of such person or group, acquires beneficial ownership of 4.9% or more of the shares of Common Stock then outstanding, other than: (A) the Company, its subsidiaries and their respective employee benefit plans or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan; (B) any stockholder that, as of the time of the first public announcement of approval of the Rights Agreement, beneficially owns 4.9% or more of the shares of Common Stock then outstanding, unless such person thereafter acquires an additional 1% of the outstanding shares of Common Stock, subject to certain exceptions (including pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Stock or pursuant to a split or subdivision of the outstanding Common Stock); (C) a person who becomes an Acquiring Person solely as a result of the Company repurchasing shares of Common Stock or a stock dividend, stock split, reverse stock split or similar transaction effected by the Company (unless and until such person acquires additional shares, other than in certain specified exempt transactions); (D) certain stockholders who inadvertently or without knowledge of the terms of the Rights, becomes Acquiring Persons and who thereafter reduce the percentage of shares owned below 4.9%; (E) investment advisors to mutual funds, to the extent that such advisor does not hold and no single fund advised by such advisor holds 4.9% or more of the Company's outstanding Common Stock, and (F) any person whose beneficial ownership of Common Stock is determined by the Board not to be inconsistent with the purpose of the Rights Agreement.
Flip-In. In the event that any person or group becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company), having a value equal to two times the exercise price of the Right. The exercise price is the Purchase Price times the number of units associated with each Right (initially, one). Notwithstanding any of the foregoing, following the occurrence of an Acquiring Person becoming such, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person or its affiliates and associates and certain transferees thereof will be null and void.
Exchange. At any time following the Stock Acquisition Date but before the time the Acquiring Person becomes the beneficial owner of 50% or more of the outstanding shares of Common Stock, the Board may, at its option, exchange the Rights (other than Rights
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--------------------------------------------------------------------------------owned by such person or group which have become void), in whole or in part, for Common Stock at an exchange ratio of one share of Common Stock per Right (subject to adjustment); provided, that no holder is entitled to receive pursuant to such exchange Common Stock that would result in a beneficial ownership of more than 4.9% of the Common Stock then outstanding.
Expiration. The Rights and the Rights Agreement will expire on the earliest of
(i)
Redemption. At any time prior to such time as any person becomes an Acquiring
Person, the Company may redeem the Rights in whole, but not in part, at a price
of
Item 3.03. Material Modification to Rights of Security Holders.
The information set forth under "Item 1.01 Entry into a Material Definitive Agreement" is incorporated herein by reference. The Rights Agreement, specifying the terms of the Rights (as defined therein), is attached hereto as Exhibit 4.1 and is incorporated herein by reference.
Item 8.01. Other Events.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The exhibits listed on the Exhibit Index are incorporated herein by reference.
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