AbbVie : to Acquire Allergan

NORTH CHICAGO - AbbVie Inc. (NYSE: ABBV) and Allergan plc (NYSE: AGN) announced that the companies have entered into a definitive transaction agreement under which AbbVie will acquire Allergan in a cash and stock transaction for a transaction equity value of approximately $63 billion, based on the closing price of AbbVie's common stock of $78.45 on June 24, 2019.

Under the terms of the Transaction Agreement, Allergan Shareholders will receive 0.8660 AbbVie Shares and $120.30 in cash for each Allergan Share that they hold, for a total consideration of $188.24 per Allergan Share.2 The transaction represents a 45% premium to the closing price of Allergan's Shares on June 24, 2019.

If the Acquisition would otherwise result in the issuance of AbbVie Shares in excess of 19.99% of the AbbVie Shares outstanding immediately prior to the Completion (as reasonably determined by AbbVie) (the "Share Cap"), the Exchange Ratio shall be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of AbbVie Shares issuable in the Acquisition to not exceed the Share Cap (the "Exchange Ratio Modification Number"), and the Cash Consideration shall be increased by an amount in cash equal to (x) the Exchange Ratio Modification Number multiplied by (y) the VWAP of the AbbVie Shares.

Questions: 1. Can someone please explain paragraph 3. Not getting it at all. 2. Is it fair to say that in this acquisition, there are no "arbitrage" opportunities? 3. Is this a fixed exchange ratio or floating based on paragraph 3?

Thank you kindly for any help.