Redemption and Waiver Clause (Shareholder Rights Plan)

Summary

This redemption and waiver clause is intended to be used in a shareholder rights plan. This clause includes practical guidance and drafting notes. Shareholder (or securityholder) rights plans (also called "poison pill" plans) are a defensive tactic often adopted by boards of directors of targets ("Targets") in anticipation of or in response to hostile takeover bids. A typical rights plan provides for the issuance of rights that permit shareholders (or securityholders) of the Target, other than the entity pursuing the takeover bid (the "Offeror"), to acquire additional shares of the Target at a deep discount to market price if a specified ownership threshold is triggered (usually 20% of a class of equity securities). A rights plan deters potential Offerors from making a takeover bid because the exercise of the rights makes it prohibitively expensive for the Offeror to acquire the Target's shares. As a result, where a rights plan exists, an Offeror can take-up shares under the takeover ...