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SOMATOGEN, INC.
AND
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
AS RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF JUNE 5, 1997
RIGHTS AGREEMENT
This Rights Agreement ("Agreement"), dated as of
June 5, 1997, between Somatogen, Inc., a Delaware corpora-
tion (the "Company"), and ChaseMellon Shareholder
Services, L.L.C. ("Rights Agent").
The Board of Directors of the Company has authorized
and declared a dividend of one preferred share purchase
right (a "Right") for each Common Share (as such term
is hereinafter defined) outstanding at the close of busi-
ness on June 12, 1997 (the "Record Date"), each Right
representing the right to purchase one one-hundredth of
a Preferred Share (as such term is hereinafter defined),
upon the terms and subject to the conditions herein set
forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share
that shall become outstanding between the Record Date and
the earliest to occur of the Distribution Date, the
Redemption Date and the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that
Rights may be issued with respect to Common Shares that
shall become outstanding after the Distribution Date and
prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of
Section 22 hereof.
Accordingly, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby
agree as follows:
1. Certain Definitions For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as
such term is hereinafter defined) who or which, together
with all Affiliates and Associates (as such terms are here-
inafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more
of the Common Shares then outstanding. Notwithstanding
the foregoing, (A) the term Acquiring Person shall not
include (i) the Company, (ii) any Subsidiary (as such term
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is hereinafter defined) of the Company, (iii) any employee
benefit or compensation plan of the Company or any
Subsidiary of the Company, or (iv) any entity holding
Common Shares for or pursuant to the terms of any such
employee benefit or compensation plan, and (B) no Person
shall become an "Acquiring Person" either (x) as the
result of an acquisition of Common Shares by the Company
which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the Common Shares
then outstanding; provided, however, that if a Person shall
become the Beneficial Owner of 15% or more of the Common
Shares then outstanding by reason of share purchases by
the Company and shall, following written notice from, or
public disclosure by the Company of such share purchases
by the Company, become the Beneficial Owner of any
additional Common Shares without the prior consent of the
Company and shall then Beneficially Own more than 15% of
the Common Shares then outstanding, then such Person shall
be deemed to be an "Acquiring Person," or (y) if the
Board of Directors determines in good faith that a Person
who would otherwise be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this paragraph
(a) has become such inadvertently, and such Person divests,
as promptly as practicable (as determined in good faith by
the Board of Directors), but in any event within five
Business Days, following receipt of written notice from
the Company of such event, of a sufficient number of Common
Shares so that such Person would no longer be an Acquiring
Person, as defined pursuant to the foregoing provisions of
this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this
Agreement.
(b) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
as in effect on the date of this Agreement; provided,
however, that the limited partners of a limited partnership
shall not be deemed to be Associates of such limited
partnership solely by virtue of their limited partnership
interest.
(c) A Person shall be deemed the "Beneficial
Owner" of and shall be deemed to "beneficially own" any
securities:
(i) which such Person or any of such Person's
Affiliates or Associates is deemed to beneficially own,
within the meaning of Rule 13d-3 of the General Rules and
Regulations under the Exchange Act as in effect on the
date of this Rights Agreement;
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(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire
(whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary
agreements with and between underwriters and selling
group members with respect to a bona fide public offering
of securities and other than agreements between the
Company and any corporate partner pursuant to which the
right to purchase shares is conditioned upon the achieve-
ment of research or development milestones), or upon the
exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options, or other-
wise; provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or
on behalf of such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted
for purchase or exchange; or (B) the right to vote pursuant
to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy
or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable
on Schedule 13D under the Exchange Act (or any comparable
or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or
any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than
customary agreements with and between underwriters and
selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the
proviso to Section 1(c)(ii)(B) hereof) or disposing of any
securities of the Company.
Notwithstanding anything in this definition of
Beneficial Ownership to the contrary, the phrase, "then
outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and out-
standing together with the number of such securities not
then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than
a Saturday, a Sunday, or a day on which banking institu-
tions in the State of New York are authorized or obligated
by law or executive order to close.
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(e) "Close of Business" on any given date shall
mean 5:00 p.m., Mountain Time, on such date; provided,
however, that if such date is not a Business Day it shall
mean 5:00 p.m., Mountain Time, on the next succeeding
Business Day.
(f) "Common Shares" shall mean the shares of
common stock, par value $.001 per share, of the Company;
provided, however, that, "Common Shares," when used in
this Agreement in connection with a specific reference to
any Person other than the Company, shall mean the capital
stock (or equity interest) with the greatest voting power
of such other Person or, if such other Person is a Sub-
sidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(g) "Distribution Date" shall have the meaning
set forth in Section 3 hereof.
(h) "Final Expiration Date" shall have the
meaning set forth in Section 7 hereof.
(i) "Interested Stockholder" shall mean any
Acquiring Person or any Affiliate or Associate of an
Acquiring Person or any other Person in which any such
Acquiring Person, Affiliate or Associate has an interest,
or any other Person acting directly or indirectly on
behalf of or in concert with any such Acquiring Person,
Affiliate or Associate.
(j) "Person" shall mean any individual, firm,
corporation or other entity, and shall include any succes-
sor (by merger or otherwise) of such entity.
(k) "Preferred Shares" shall mean shares of
Series A Junior Participating Preferred Stock, par value
$.001 per share, of the Company having the designations
and the powers, preferences and rights, and the qualifica-
tions, limitations and restrictions set forth in the Form
of Certificate of Designation attached to this Agreement
as Exhibit A.
(l) "Purchase Price" shall have the meaning set
forth in Section 7(b) hereof.
(m) "Redemption Date" shall have the meaning set
forth in Section 7 hereof.
(n) "Shares Acquisition Date" shall mean the first
date of public announcement by the Company or an Acquiring
Person that an Acquiring Person has become such provided,
however that, if such Person is determined not to have
become an Acquiring Person pursuant to clause (y) of Sub-
section 1(a) hereof, then no Shares Acquisition Date shall
be deemed to have occurred.
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(o) "Subsidiary" of any Person shall mean any
corporation or other entity of which a majority of the
voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
(p) "Transaction" shall mean any merger, ▇▇▇▇▇▇▇-
dation or sale of assets described in Section 13(a) hereof
or any acquisition of Common Shares which would result in
a Person becoming an Acquiring Person or a Principal Party
(as such term is hereinafter defined).
(q) "Transaction Person" with respect to a
Transaction shall mean (i) any Person who (x) is or will
become an Acquiring Person or a Principal Party (as such
term is hereinafter defined) if the Transaction were to
be consummated and (y) directly or indirectly proposed or
nominated a director of the Company which director is in
office at the time of consideration of the Transaction,
or (ii) an Affiliate or Associate of such a Person.
2. Appointment of Rights Agent
The Company hereby appoints the Rights Agent to act
as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint
such co-Rights Agents as it may deem necessary or desirable.
3. Issue of Right Certificates.
(a) Until the earlier of (i) the Shares Acquisi-
tion Date or (ii) the tenth Business Day (or such later
date as may be determined by action of the Board of
Directors prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement
(determined in accordance with Rule 14d-2 under the
Exchange Act) by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company or any
entity holding Common Shares for or pursuant to the terms
of any such plan) of, or of the first public announcement
of the intention of any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan
of the Company or of any Subsidiary of the Company or any
entity holding Common Shares for or pursuant to the terms
of any such plan) to commence, a tender or exchange offer
(which intention to commence remains in effect for five
Business Days after such announcement), the consummation
of which would result in any Person becoming an Acquiring
Person (including any such date which is after the date of
this Agreement and prior to the issuance of the Rights, the
earlier of such dates being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced by
the certificates for Common Shares registered in the names
of the holders thereof (which certificates shall also be
deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the Rights (and the right to receive
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Right Certificates therefor) will be transferable only in
connection with the transfer of Common Shares. As soon as
practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and the
Rights Agent will, if requested, send) by first-class,
insured, postage-prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Distri-
bution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substan-
tially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common
Share so held, subject to the adjustment provisions of
Section 11 of this Rights Agreement. As of the Distri-
bution Date, the Rights will be evidenced solely by such
Right Certificates.
(b) On the Record Date, or as soon as practicable
thereafter, the Company will send (directly or through the
Rights Agent or its transfer agent) a copy of a Summary of
Rights to Purchase Preferred Shares, in substantially the
form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder
of Common Shares as of the Close of Business on the Record
Date, at the address of such holder shown on the records
of the Company. With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distri-
bution Date, the Rights will be evidenced by such
certificates registered in the names of the holders
thereof. Until the Distribution Date (or the earlier of
the Redemption Date and the Final Expiration Date), the
surrender for transfer of any certificate for Common
Shares outstanding on the Record Date shall also consti-
tute the transfer of the Rights associated with the Common
Shares represented thereby.
(c) Certificates for Common Shares which become
outstanding (including, without limitation, reacquired
Common Shares referred to in the last sentence of this
paragraph (c)) after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or
the Final Expiration Date shall have impressed on, printed
on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the
holder hereof to certain rights as set forth in a Rights
Agreement between Somatogen, Inc. (the "Company") and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent
(the "Rights Agent"), dated as of June 5, 1997, as amended
from time to time (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a
copy of which is on file at the principal executive offices
of the Company. Under certain circumstances, as set forth
in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by
this certificate. The Company will mail to the holder of
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this certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor. As
described in the Rights Agreement, Rights issued to any
Person who becomes an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement)
and certain related persons, whether currently held by or
on behalf of such Person or by any subsequent holder, shall
become null and void.
With respect to such certificates containing the
foregoing legend, until the Distribution Date, the Rights
associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate
shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby. In the event
that the Company purchases or acquires any Common Shares
after the Record Date but prior to the Distribution Date,
any Rights associated with such Common Shares shall be
deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with the
Common Shares which are no longer outstanding. Notwith-
standing this Section 3(c), the omission of a legend shall
not affect the enforceability of any part of this Rights
Agreement or the rights of any holder of the Rights.
4. Form of Right Certificates
(a) The Right Certificates (and the form of
election to purchase Preferred Shares, the form of assign-
ment and the form of certification to be printed on the
reverse thereof) shall be substantially the same as
Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as
are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange on which the
Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Sections 7,11 and 22
hereof, the Right Certificates shall entitle the holders
thereof to purchase such number of one one-hundredths of a
Preferred Share as shall be set forth therein at the price
per one one-hundredth of a Preferred Share set forth
therein (the "Purchase Price"), but the number of such
one one-hundredths of a Preferred Share and the Purchase
Price shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to
Section 3(a) or Section 22 hereof that represents Rights
which are null and void pursuant to Section 11(a)(ii)
hereof and any Right Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Right Certificate
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referred to in this sentence, shall contain (to the extent
feasible) the following legend:
The Rights represented by this Right Certificate are
or were beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Right Certificate and the
Rights represented hereby are null and void.
The provisions of Section 11(a)(ii) hereof shall be
operative whether or not the foregoing legend is contained
on any such Right Certificate.
5. Countersignature and Registration
The Right Certificates shall be executed on behalf of
the Company by its Chairman of the Board, its Chief Execu-
tive Officer, its President, its Vice Chairman of the
Board, its Chief Financial Officer, or any of its Vice
Presidents, either manually or by facsimile signature,
shall have affixed thereto the Company's seal or a
facsimile thereof, and shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually
or by facsimile signature. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any
officer of the Company who shall have signed any of the
Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right
Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed
such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on
behalf of the Company by any person who, at the actual
date of the execution of such Right Certificate, shall be
a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of
this Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its office designated for such
purpose, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by
each of the Right Certificates and the date of each of
the Right Certificates.
6. Transfer, Split Up, Combination and Exchange
of Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates
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Subject to the provisions of Section 11(a)(ii),
Section 14 and Section 24 hereof, at any time after the
Close of Business on the Distribution Date, and at or prior
to the Close of Business on the earlier of the Redemption
Date or the Final Expiration Date, any Right Certificate
or Right Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to
purchase a like number of one one-hundredths of a Preferred
Share as the Right Certificate or Right Certificates
surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine
or exchange any Right Certificate or Right Certificates
shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent designated
for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right
Certificate until the registered holder shall have com-
pleted and signed the certificate contained in the form of
assignment on the reverse side of such Right Certificate
and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial
Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent
shall, subject to Section 11(a)(ii), Section 14 and
Section 24 hereof, countersign and deliver to the person
entitled thereto a Right Certificate or Right Certificates,
as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with
any transfer, split up, combination or exchange of Right
Certificates.
Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss,
theft, destruction or mutilation of a Right Certificate,
and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the
Company's request, reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will issue,
execute and deliver a new Right Certificate of like tenor
to the Rights Agent for countersignature and delivery to
the registered holder in lieu of the Right Certificate so
lost, stolen, destroyed or mutilated.
Notwithstanding any other provisions hereof, the
Company and the Rights Agent may amend this Rights Agree-
ment to provide for uncertificated Rights in addition to
or in place of Rights evidenced by Rights Certificates.
7. Exercise of Rights; Purchase Price; Expiration
Date of Rights
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(a) The registered holder of any Right Certificate
may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time
after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at
the office of the Rights Agent designated for such purpose,
together with payment of the Purchase Price for each one
one-hundredth of a Preferred Share (or such other number
of shares or other securities) as to which the Rights are
exercised, at or prior to the earliest of (i) the Close of
Business on June 5, 2007 (the "Final Expiration Date"),
(ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the "Redemption Date"), or (iii) the
time at which such Rights are exchanged as provided in
Section 24 hereof.
(b) The purchase price (the "Purchase Price") for
each one one-hundredth of a Preferred Share pursuant to the
exercise of a Right shall initially be $44.00 shall be
subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with
paragraph (c) below.
(c) Upon receipt of a Right Certificate repre-
senting exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the
Purchase Price for the shares to be purchased and an amount
equal to any applicable transfer tax required to be paid
by the holder of such Right Certificate in accordance with
Section 9 hereof by certified check, cashier's check, bank
draft or money order payable to the order of the Company,
the Rights Agent shall thereupon promptly (i) (A) requi-
sition from any transfer agent for the Preferred Shares
certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or
(B) if the Company, in its sole discretion, shall have
elected to deposit the Preferred Shares issuable upon
exercise of the Rights hereunder into a depositary,
requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a
Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such
receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the
depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 hereof, (iii) after receipt
of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name
or names as may be designated by such holder and (iv) when
appropriate, after receipt, deliver such cash to or upon
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the order of the registered holder of such Right Certifi-
cate. In the event that the Company is obligated to issue
securities of the Company other than Preferred Shares
(including Common Shares) of the Company pursuant to
Section 11(a) hereof, the Company will make all arrange-
ments necessary so that such other securities are
available for distribution by the Rights Agent, if and
when appropriate.
In addition, in the case of an exercise of the Rights
by a holder pursuant to Section 11(a)(ii) hereof, the
Rights Agent shall return such Right Certificate to the
registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented
by such Right Certificate no longer include the rights
provided by Section 11(a)(ii) hereof, and, if fewer than
all the Rights represented by such Right Certificate were
so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby
which continue to include the rights provided by
Section 11(a)(ii) hereof.
(d) In case the registered holder of any Right
Certificate shall exercise fewer than all the Rights
evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to his duly authorized
assigns, subject to the provisions of Section 14 hereof.
(e) The Company covenants and agrees that it will
cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred
Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of
all outstanding Rights in accordance with this Section 7.
(f) Notwithstanding anything in this Agreement to
the contrary, neither the Rights Agent nor the Company
shall be obligated to undertake any action with respect to
a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the
certification following the form of election to purchase
set forth on the reverse side of the Rights Certificate
surrendered for such exercise and (ii) provided such
additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
8. Cancellation and Destruction of Right
Certificates
All Right Certificates surrendered for the purpose of
exercise, transfer, split up, combination or exchange
shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation
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or in canceled form, or, if delivered or surrendered to
the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this
Agreement. The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent
shall so cancel and retire, any other Right Certificate
purchased or acquired by the Company otherwise than upon
the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company, or shall, at
the written request of the Company, destroy such canceled
Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
9. Availability of Preferred Shares
The Company covenants and agrees that so long as the
Preferred Shares (and, after the time a person becomes an
Acquiring Person, Common Shares or any other securities)
issuable upon the exercise of the Rights may be listed on
any national securities exchange or quotation system, the
Company shall use its best efforts to cause, from and after
such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange
or quotation system upon official notice of issuance upon
such exercise.
The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all
Preferred Shares (or Common Shares and other securities,
as the case may be) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for
such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and
fully paid and nonassessable shares or other securities.
The Company further covenants and agrees that it will
pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect
of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer
tax which may be payable in respect of any transfer or
delivery of Right Certificates to a person other than,
or the issuance or delivery of certificates or depositary
receipts for the Preferred Shares in a name other than
that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or
to deliver any certificates or depositary receipts for
Preferred Shares upon the exercise of any Rights until
any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the
time of surrender) or until it has been established to
the Company's reasonable satisfaction that no such tax is due.
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As soon as practicable after the Shares Acquisition
Date, the Company shall use its best efforts to:
(i) prepare and file a registration statement
under the Securities Act of 1933, as amended (the "Act"),
with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, will
use its best efforts to cause such registration statement
to become effective as soon as practicable after such
filing and will use its best efforts to cause such
registration statement to remain effective (with a
prospectus at all times meeting the requirements of
the Act) until the Final Expiration Date; and
(ii) use its best efforts to qualify or register
the Rights and the securities purchasable upon exercise
of the Rights under the blue sky laws of such jurisdic-
tions as may be necessary or appropriate.
10. Preferred Shares Record Date
Each person in whose name any certificate for
Preferred Shares or other securities is issued upon the
exercise of Rights shall for all purposes be deemed to
have become the holder of record of the Preferred Shares
or other securities represented thereby on, and such
certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered
with the forms of election and certification duly executed
and payment of the Purchase Price (and any applicable
transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which
the Preferred Shares or other securities transfer books
of the Company are closed, such person shall be deemed to
have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business
Day on which the Preferred Shares or other securities
transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a
Right Certificate, as such, shall not be entitled to any
rights of a holder of Preferred Shares for which the
Rights shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distribu-
tions or to exercise any preemptive rights, and shall not
be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
11. Adjustment of Purchase Price, Number of
Shares or Number of Rights
The Purchase Price, the number of Preferred Shares
covered by each Right and the number of Rights outstanding
are subject to adjustment from time to time as provided in
this Section 11.
14
(a) (i) In the event the Company shall at any
time after the date of this Agreement (A) declare a
dividend on the Preferred Shares payable in Preferred
Shares, (B) subdivide the outstanding Preferred Shares,
(C) combine the outstanding Preferred Shares into a
smaller number of Preferred Shares or (D) issue any shares
of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection
with a consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in
effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of
capital stock issuable on such date, shall be proportion-
ately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive the aggregate
number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and
at a time when the Preferred Shares transfer books of the
Company were open, such holder would have owned upon such
exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the considera-
tion to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital
stock of the Company issuable upon exercise of one Right.
If an event occurs which would require an adjustment under
both Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 hereof and the pro-
visions of the next paragraph of this Section 11(a)(ii),
in the event any Person shall become an Acquiring Person,
each holder of a Right shall, for a period of 60 days after
the later of such time any Person becomes an Acquiring
Person or the effective date of an appropriate registra-
tion statement under the Act pursuant to Section 9 hereof
(provided, however that, if at any time prior to the
expiration or termination of the Rights there shall be a
temporary restraining order, a preliminary injunction, an
injunction, or temporary suspension by the Board of
Directors, or similar obstacle to exercise of the Rights
(the "Injunction") which prevents exercise of the Rights,
a new 60-day period shall commence on the date the
Injunction is removed), have a right to receive, upon
exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-
hundredths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agree-
ment and in lieu of Preferred Shares, such number of
Common Shares as shall equal the result obtained by
(A) multiplying the then current Purchase Price by the
number of one one-hundredths of a Preferred Share for
15
which a Right is then exercisable and dividing that product
by (B) 50% of the then current per share market price of
the Common Shares (determined pursuant to Section 11(d)
hereof) on the date such Person became an Acquiring Person;
provided, however, that if the transaction that would
otherwise give rise to the foregoing adjustment is also
subject to the provisions of Section 13 hereof, then only
the provisions of Section 13 hereof shall apply and no
adjustment shall be made pursuant to this Section 11(a)
(ii). In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding,
the Company shall not take any action which would eliminate
or diminish the benefits intended to be afforded by the
Rights.
Notwithstanding anything in this Agreement to the
contrary, from and after the time any Person becomes an
Acquiring Person, any Rights beneficially owned by (i) such
Acquiring Person or an Associate or Affiliate of such
Acquiring Person, (ii) a transferee of such Acquiring
Person (or of any such Associate or Affiliate) who becomes
a transferee after the Acquiring Person became such, or
(iii) a transferee of such Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person's
becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring
Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of
this Section 11(a)(ii), shall become null and void without
any further action and no holder of such Rights shall have
any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The
Company shall use all reasonable efforts to insure that
the provisions of this Section 11(a)(ii) and Section 4(b)
hereof are complied with, but shall have no liability to
any holder of Right Certificates or other Person as a
result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder. No Right Certificate
shall be issued at any time upon the transfer of any Rights
to an Acquiring Person whose Rights would be void pursuant
to the preceding sentence or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate
or Affiliate; and any Right Certificate delivered to the
Rights Agent for transfer to an Acquiring Person whose Rights
would be void pursuant to the preceding
sentence shall be canceled.
16
(iii) In lieu of issuing Common Shares in
accordance with Section 11(a)(ii) hereof, the Company may,
if a majority of the Board of Directors then in office
determines that such action is necessary or appropriate and
not contrary to the interests of holders of Rights, elect
to (and, in the event that the Board of Directors has not
exercised the exchange right contained in Section 24(c)
hereof and there are not sufficient treasury shares and
authorized but unissued Common Shares to permit the
exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Company shall) take all
such action as may be necessary to authorize, issue or pay,
upon the exercise of the Rights, cash (including by way of
a reduction of the Purchase Price), property, Common
Shares, other securities or any combination thereof having
an aggregate value equal to the value of the Common Shares
which otherwise would have been issuable pursuant to
Section 11(a)(ii) hereof, which aggregate value shall be
determined by a nationally recognized investment banking
firm selected by a majority of the Board of Directors then
in office. For purposes of the preceding sentence, the
value of the Common Shares shall be determined pursuant to
Section 11(d) hereof. Any such election by the Board of
Directors must be made within 60 days following the date
on which the event described in Section 11(a)(ii) hereof
shall have occurred. Following the occurrence of the
event described in Section 11(a)(ii) hereof, a majority of
the Board of Directors then in office may suspend the
exercisability of the Rights for a period of up to 60 days
following the date on which the event described in
Section 11(a)(ii) hereof shall have occurred to the extent
that such directors have not determined whether to exercise
their rights of election under this Section 11(a)(iii).
In the event of any such suspension, the Company shall
issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended.
(b) In case the Company shall fix a record date
for the issuance of rights, options or warrants to all
holders of Preferred Shares entitling them (for a period
expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares
having the same designations and the powers, preferences
and rights, and the qualifications, limitations and
restrictions as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into
Preferred Shares or equivalent preferred shares at a
price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred
shares) less than the then current per share market price
of the Preferred Shares (as such term is hereinafter
defined) on such record date, the Purchase Price to be
in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior
to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares outstanding on such
17
record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred
Shares and/or equivalent preferred shares so to be offered
(and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase
at such current market price and the denominator of which
shall be the number of Preferred Shares outstanding on
such record date plus the number of additional Preferred
Shares and/or equivalent preferred shares to be offered
for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible);
provided, however, that in no event shall the consideration
to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the
Company issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part or
all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determina-
tion shall be described in a statement filed with the
Rights Agent. Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed;
and in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to be
the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for
the making of a distribution to all holders of the
Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular
quarterly cash dividend or a dividend payable in Preferred
Shares) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price
to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of
which shall be the then current per share market price of
the Preferred Shares (as such term is hereinafter defined)
on such record date, less the fair market value (as
determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of
the assets or evidences of indebtedness so to be dis-
tributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of
which shall be such current per share market price of the
Preferred Shares; provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right
be less than the aggregate par value of the shares of
capital stock of the Company to be issued upon exercise
of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event
18
that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price which
would then be in effect if such record date had not been
fixed.
(d) (i) For the purpose of any computation
hereunder, the "current per share market price" of any
security (a "Security" for the purpose of this Section 11
(d)(i)) on any date shall be deemed to be the average of
the daily closing prices per share of such Security for
the 30 consecutive Trading Days (as such term is herein-
after defined) immediately prior to such date; provided,
however, that in the event that the current per share
market price of the Security is determined during a period
following the announcement by the issuer of such Security
of (A) a dividend or distribution on such Security payable
in shares of such Security or securities convertible into
such shares, or (B) any subdivision, combination or
reclassification of such Security or securities convertible
into such shares, or (C) any subdivision, combination or
reclassification of such Security and prior to the expira-
tion of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in
each such case, the current per share market price shall be
appropriately adjusted to reflect the current market price
per share equivalent of such Security. The closing price
for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction
reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if
the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to
securities listed on the principal national securities
exchange on which the Security is listed or admitted to
trading or as reported on the Nasdaq National Market or,
if the Security is not listed or admitted to trading on
any national securities exchange or reported on the Nasdaq
National Market, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated
Quotations System ("Nasdaq") or such other system then
in use, or, if on any such date the Security is not quoted
by any such organization, the average of the closing bid
and asked prices as furnished by a professional market
maker making a market in the Security selected by the
Board of Directors of the Company or, if on any such date
no professional market maker is making a market in the
Security, the price as determined in good faith by the
Board of Directors. The term "Trading Day" shall mean
a day on which the principal national securities exchange
on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security
19
is not listed or admitted to trading on any national
securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder
the "current per share market price" of the Preferred
Shares shall be determined in accordance with the method
set forth in Section 11(d)(i) hereof. If the Preferred
Shares are not publicly traded, the "current per share
market price" of the Preferred Shares shall be conclu-
sively deemed to be the current per share market price of
the Common Shares as determined pursuant to Section 11
(d)(i) hereof (appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring
after the date hereof) multiplied by one hundred. If
neither the Common Shares nor the Preferred Shares are
publicly held or so listed or traded, "current per share
market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a
statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall
be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price;
provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall
be made to the nearest cent or to the nearest one one-
hundredth of a Preferred Share or one ten-thousandth of any
other share or security as the case may be. Notwith-
standing the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no
later than the earlier of (i) three years from the date
of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any
Rights.
(f) If as a result of an adjustment made pursuant
to Section 11(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of
capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable
upon exercise of any Right shall be subject to adjustment
from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to
the Preferred Shares contained in Sections 11(a) through
11(c) hereof, inclusive, and the provisions of Sections 7,
9, 10, 13 and 14 hereof with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the
adjusted Purchase Price, the number of one one-hundredths
of a Preferred Share purchasable from time to time here-
20
under upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i) hereof, upon each
adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and Section 11(c)
hereof, each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that
number of one one-hundredths of a Preferred Share
(calculated to the nearest one one-millionth of a
Preferred Share) obtained by (i) multiplying (x) the
number of one one-hundredths of a Preferred Share covered
by a Right immediately prior to this adjustment by (y)
the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of
any adjustment of the Purchase Price to adjust the number
of Rights, in substitution for any adjustment in the number
of one one-hundredths of a Preferred Share purchasable upon
the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be
exercisable for the number of one one-hundredths of a
Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held
of record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the
nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment
of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date
for the adjustment, and, if known at the time, the amount
of the adjustment to be made. This record date may be the
date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been
issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders
of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of
record in substitution and replacement for the Right
Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights
to which such holders shall be entitled after such adjust-
ment. Right Certificates so to be distributed shall be
21
issued, executed and countersigned in the manner provided
for herein and shall be registered in the names of the
holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in
the Purchase Price or the number of one one-hundredths of
a Preferred Share issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number
of one one-hundredths of a Preferred Share which were
expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below one one-
hundredth of the then par value, if any, of the Preferred
Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable
Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made
effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised
after such record date of the Preferred Shares and other
capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, how-
ever, that the Company shall deliver to such holder a due
▇▇▇▇ or other appropriate instrument evidencing such
holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) The Company covenants and agrees that, after
the Distribution Date, it will not, except as permitted by
Section 23 or Section 27 hereof, take (or permit any Sub-
sidiary to take) any action the purpose of which is to, or
if at the time such action is taken it is reasonably
foreseeable that the effect of such action is to, material-
ly diminish or eliminate the benefits intended to be
afforded by the Rights. Any such action taken by the
Company during any period after any Person becomes an
Acquiring Person but prior to the Distribution Date shall
be null and void unless such action could be taken under
this Section 11(m) from and after the Distribution Date.
(n) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make
such reductions in the Purchase Price, in addition to
those adjustments expressly required by this Section 11,
as and to the extent that it in its sole discretion shall
determine to be advisable in order that any consolidation
22
or subdivision of the Preferred Shares, issuance wholly for
cash of any Preferred Shares at less than the current
market price, issuance wholly for cash of Preferred Shares
or securities which by their terms are convertible into or
exchangeable for Preferred Shares, dividends on Preferred
Shares payable in Preferred Shares or issuance of rights,
options or warrants referred to hereinabove in Section 11
(b), hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such stockholders.
(o) In the event that at any time after the date
of this Agreement and prior to the Distribution Date, the
Company shall (i) declare or pay any dividend on the Common
Shares payable in Common Shares or (ii) effect a sub-
division, combination or consolidation of the Common Shares
(by reclassification or otherwise than by payment of
dividends in Common Shares) into a greater or lesser
number of Common Shares, then in any such case (A) the
number of one one-hundredths of a Preferred Share
purchasable after such event upon proper exercise of each
Right shall be determined by multiplying the number of one
one-hundredths of a Preferred Share so purchasable
immediately prior to such event by a fraction, the
numerator of which is the number of Common Shares out-
standing immediately before such event and the denominator
of which is the number of Common Shares outstanding
immediately after such event, and (B) each Common Share
outstanding immediately after such event shall have issued
with respect to it that number of Rights which each Common
Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for
in this Section 11(o) shall be made successively whenever
such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.
(p) The exercise of Rights under Section 11(a)(ii)
hereof shall only result in the loss of rights under
Section 11(a)(ii) hereof to the extent so exercised and
shall not otherwise affect the rights represented by the
Rights under this Agreement, including the rights
represented by Section 13 hereof.
12. Certificate of Adjusted Purchase Price or
Number of Shares
Whenever an adjustment is made as provided in
Sections 11 and 13 hereof, the Company shall promptly
(a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each
transfer agent for the Common Shares or the Preferred
Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof. The Rights Agent shall
be fully protected in relying on any such certificate and
on any adjustment therein contained and shall not be
23
deemed to have knowledge of any adjustment unless and
until it shall have received such certificate.
13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power
(a) In the event that, following the Shares
Acquisition Date or, if a Transaction is proposed, the
Distribution Date, directly or indirectly (x) the Company
shall consolidate with, or merge with and into, any
Interested Stockholder, or if in such merger or consolida-
tion all holders of Common Stock are not treated alike, any
other Person, (y) any Interested Person, or if in such
merger or consolidation all holders of Common Stock are not
treated alike, any other Person shall consolidate with the
Company, or merge with and into the Company, and the
Company shall be the continuing or surviving corporation of
such merger (other than, in the case of either transaction
described in (x) or (y), a merger or consolidation which
would result in all of the voting power represented by the
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining out-
standing or by being converted into securities of the
surviving entity) all of the voting power represented by
the securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation
and the holders of such securities not having changed as a
result of such merger or consolidation), or (z) the Company
shall sell, mortgage or otherwise transfer (or one or more
of its subsidiaries shall sell, mortgage or otherwise
transfer), in one or more transactions, assets or earning
power aggregating more than 50% of the assets or earning
power of the Company and its subsidiaries (taken as a
whole) to any Interested Stockholder or Stockholders, or
if in such transaction all holders of Common Stock are not
treated alike, any other Person, (other than the Company or
any Subsidiary of the Company in one or more transactions
each of which individually and the aggregate does not
violate Section 13(d) hereof) then, and in each such case,
proper provision shall be made so that (i) each holder of
a Right, subject to Section 11(a)(ii) hereof, shall have
the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which
a Right is then exercisable in accordance with the terms of
this Agreement and in lieu of Preferred Shares, such number
of freely tradeable Common Shares of the Principal Party
(as such term is hereinafter defined), free and clear of
liens, rights of call or first refusal, encumbrances or
other adverse claims, as shall be equal to the result
obtained by (A) multiplying the then current Purchase Price
by the number of one one-hundredths of a Preferred Share
for which a Right is then exercisable (without taking into
account any adjustment previously made pursuant to Section
11(a)(ii) hereof) and dividing that product by (B) 50% of
the then current per share market price of the Common
24
Shares of such Principal Party (determined pursuant to
Section 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company"
shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions
of Section 11 hereof shall apply to such Principal Party;
and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a
sufficient number of shares of its Common Shares in
accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as
nearly as reasonably may be, in relation to its Common
Shares thereafter deliverable upon the exercise of the
Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a)
hereof, the Person that is the issuer of any securities
into which Common Shares are converted in such merger or
consolidation, and if no securities are so issued, the
Person that is the other party to the merger or consolida-
tion (or, if applicable, the Company, if it is the
surviving corporation); and
(ii) in the case of any transaction described in
(z) of the first sentence of Section 13(a) hereof, the
Person that is the party receiving the greatest portion
of the assets or earning power transferred pursuant to such
transaction or transactions;
(1) if the Common Shares of such Person are not at
such time and have not been continuously over the preceding
12-month period registered under Section 12 of the Exchange
Act, and such Person is a direct or indirect subsidiary or
Affiliate of another Person the Common Shares of which are
and have been so registered, "Principal Party" shall refer
to such other Person; (2) if such Person is a subsidiary,
directly or indirectly, or Affiliate of more than one
Person, the Common Shares of two or more of which are and
have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common
Shares having the greatest aggregate market value; and
(3) if such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the
rules set forth in (1) and (2) above shall apply to each
of the chains of ownership having an interest in such joint
venture as if such party were a "subsidiary" of both or
all of such joint venturers and the Principal Parties in
each such chain shall bear the obligations set forth in
25
this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of
such interests.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the
Principal Party shall have a sufficient number of
authorized Common Shares that have not been issued or
reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless
prior thereto the Company and each Principal Party and
each other Person who may become a Principal Party as a
result of such consolidation, merger, sale or transfer
shall have (i) executed and delivered to the Rights Agent
a supplemental agreement providing for the terms set forth
in paragraphs (a) and (b) of this Section 13 and (ii)
prepared, filed and had declared and remain effective a
registration statement under the Act on the appropriate
form with respect to the Rights and the securities
exercisable upon exercise of the Rights and further
providing that, as soon as practicable after the date of
any consolidation, merger, sale or transfer of assets
mentioned in paragraph (a) of this Section 13, the
Principal Party at its own expense will:
(i) cause the registration statement under the Act
with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form to
remain effective (with a prospectus at all times meeting
the requirements of the Act) until the Final Expiration
Date;
(ii) use its best efforts to qualify or register
the Rights and the securities purchasable upon exercise of
the Rights under the blue sky laws of such jurisdictions as
may be necessary or appropriate;
(iii) list the Rights and the securities purchas-
able upon exercise of the Rights on each national
securities exchange on which the Common Shares were listed
prior to the consummation of the Business Combination or
on the Nasdaq National Market if the Common Shares were
listed on the Nasdaq National Market or, if the Common
Shares were not listed on a national securities exchange
or the Nasdaq National Market prior to the consummation of
the Business Combination, on a national securities exchange
or the Nasdaq National Market; and
(iv) deliver to holders of the Rights historical
financial statements for the Principal Party and each of
its Affiliates which comply in all material respects with
the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or
other transfers.
26
(d) After the Distribution Date, the Company
covenants and agrees that it shall not (i) consolidate
with, (ii) merge with or into, or (iii) sell or transfer
to, in one or more transactions, assets or earning power
aggregating more than 50% of the assets or earning power
of the Company and its subsidiaries taken as a whole, any
other Person (other than a Subsidiary of the Company in a
transaction which does not violate Section 11(m) hereof),
if (x) at the time of or after such consolidation, merger
or sale there are any charter or bylaw provisions or any
rights, warrants or other instruments or securities out-
standing, agreements in effect or any other action taken
which would diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolida-
tion, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party"
for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or
any of its Affiliates and Associates. The Company shall
not consummate any such consolidation, merger, sale or
transfer unless prior thereto the Company and such other
Person shall have executed and delivered to the Rights
Agent a supplemental agreement evidencing compliance with
this Section 13(d).
14. Fractional Rights and Fractional Shares
(a) The Company shall not be required to issue
fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such frac-
tional Rights, there shall be paid to the registered
holders of the Right Certificates with regard to which
such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current
market value of a whole Right. For the purposes of this
Section 14(a), the current market value of a whole Right
shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated
transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to
trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with
respect to securities listed on the principal national
securities exchange on which the Rights are listed or
admitted to trading or as reported on the Nasdaq National
Market or, if the Rights are not listed or admitted to
trading on any national securities exchange or reported
on the Nasdaq National Market, the last quoted price or,
if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported
27
by Nasdaq or such other system then in use or, if on any
such date the Rights are not quoted by any such organiza-
tion, the average of the closing bid and asked prices as
furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the
Company. If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights
on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue
fractions of Preferred Shares (other than fractions which
are integral multiples of one one-hundredth of a Preferred
Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares
(other than fractions which are integral multiples of one
one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth
of a Preferred Share may, at the election of the Company,
be evidenced by depositary receipts; provided, however,
that holders of such depositary receipts shall have all of
the designations and the powers, preferences and rights,
and the qualifications, limitations and restrictions to
which they are entitled as beneficial owners of the
Preferred Shares represented by such depositary receipts.
In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of
Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred
Share. For the purposes of this Section 14(b), the current
market value of a Preferred Share shall be the current per
share market price of the Preferred Shares (as determined
pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of such
exercise (or, if not publicly traded, in accordance with
Section 11(d)(ii) hereof).
(c) Following the occurrence of one of the trans-
actions or events specified in Section 11 hereof giving
rise to the right to receive Common Shares, capital stock
equivalents (other than Preferred Shares) or other securi-
ties upon the exercise of a Right, the Company shall not
be required to issue fractions of Common Shares or units
of such Common Shares, capital stock equivalents or other
securities upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares,
capital stock equivalents or other securities. In lieu of
fractional Common Shares, capital stock equivalents or
other securities, the Company shall pay to the registered
holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one Common
Share or unit of such Common Shares, capital stock
equivalents or other securities. For purposes of this
28
Section 14(c), the current market value shall be the
current per share market price (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise and, if such capital
stock equivalent is not traded, each such capital stock
equivalent shall have the value of one one-hundredth of a
Preferred Share.
(d) The holder of a Right by the acceptance of the
Right expressly waives his right to receive any fractional
Rights or any fractional shares upon exercise of a Right
(except as provided above).
15. Rights of Action.
All rights of action in respect of this Agreement,
excepting the rights of action given to the Rights Agent
under Sections 18 and 20 hereof, are vested in the
respective registered holders of the Right Certificates
(and, prior to the Distribution Date, the registered
holders of the Common Shares) and any registered holder of
any Right Certificate (or, prior to the Distribution Date,
of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or,
prior to the Distribution Date, of the Common Shares), may,
in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Cer-
tificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders
of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of
any Person subject to, this Agreement. Holders of Rights
shall be entitled to recover the reasonable costs and
expenses, including attorneys fees, incurred by them in
any action to enforce the provisions of this Agreement.
16. Agreement of Right Holders.
Every holder of a Right, by accepting the same,
consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights
will be transferable only in connection with the transfer
of the Common Shares;
(b) after the Distribution Date, the Right
Certificates are transferable (subject to the provisions
of this Rights Agreement) only on the registry books of
the Rights Agent if surrendered at the principal office
29
of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and
treat the person in whose name the Right Certificate (or,
prior to the Distribution Date, the associated Common
Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstand-
ing any notations of ownership or writing on the Right
Certificates or the associated Common Shares certificate
made by anyone other than the Company or the Rights Agent)
for all purposes whatsoever, and neither the Company nor
the Rights Agent shall be affected by any notice to the
contrary.
17. Right Certificate Holder Not Deemed a Stock-
holder
No holder, as such, of any Right Certificate shall
be entitled to vote, receive dividends or be deemed for
any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be
issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder
of any Right Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or with-
hold consent to any corporate action, or to receive notice
of meetings or other actions affecting stockholders (except
as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been
exercised in accordance with the provisions hereof.
18. Concerning the Rights Agent
The Company agrees to pay to the Rights Agent reason-
able compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disburse-
ments incurred in the administration and execution of this
Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights
Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without negligence, bad
faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent
in connection with the acceptance and administration of
this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
In no case will the Rights Agent be liable for special,
indirect, incidental or consequential loss or damage of
any kind whatsoever (including but not limited to lost
profits), even if the Rights Agent has been advised of
30
the possibility of such loss or damage. The indemnity
provided herein shall survive the expiration of the Rights
and the termination of this Agreement.
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 adminis-
tration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares or
Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person
or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
19. Merger or Consolidation or Change of Name of
Rights Agent
Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may
be consolidated, or any corporation resulting from any
merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation
succeeding to the shareholder services or corporate trust
business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provi-
sions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created
by this Agreement any of the Right Certificates shall have
been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the prede-
cessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certifi-
▇▇▇▇▇ either in the name of the predecessor Rights Agent
or in the name of the successor Rights Agent; and in all
such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall
be changed and at such time any of the Right Certificates
shall have been countersigned but not delivered, the Rights
Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign
such Right Certificates either in its prior name or in its
31
changed name; and in all such cases such Right Certificates
shall have the full force provided in the Right Certifi-
▇▇▇▇▇ and in this Agreement.
20. Duties of Rights Agent.
The Rights Agent undertakes the duties and obliga-
tions imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders
of Right Certificates, by their acceptance thereof, shall
be bound:
(a) The Rights Agent may consult with legal
counsel of its choice (who may be legal counsel for the
Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.
(b) Whenever in the performance of its duties
under this Agreement the Rights Agent shall deem it neces-
sary or desirable that any fact or matter be proved or
established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, any Vice President,
the Treasurer or the Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to
the Company and any other Person only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or
by reason of any of the statements of fact or recitals
contained in this Agreement or in the Right Certificates
(except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are
and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement
or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except
its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition
contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercis-
ability of the Rights (including the Rights becoming void
32
pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or
amount thereof) provided for in Sections 3, 11, 13, 23 or
24 hereof, or the ascertaining of the existence of facts
that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Right
Certificates after receipt of a certificate pursuant to
Section 12 hereof describing such change or adjustment);
nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or
reservation of any Preferred Shares to be issued pursuant
to this Agreement or any Right Certificate or as to whether
any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be performed,
executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the
performance of its duties hereunder from any one of the
Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, any Vice President,
the Secretary or the Treasurer of the Company, and to
apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable
for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for
any delay in acting while waiting for those instructions.
Any application by the Rights Agent for written instruc-
tions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be
taken or omitted by the Rights Agent with respect to its
duties or obligations under this Agreement and the date on
and/or after which such action shall be taken or omitted
and the Rights Agent shall not be liable for any action
taken or omitted in accordance with a proposal included
in any such application on or after the date specified
therein (which date shall not be less than three business
days after the date indicated in such application unless
any such officer shall have consented in writing to an
earlier date) unless, prior to taking or omitting any
such action, the Rights Agent has received written
instructions in response to such application specifying
the action to be taken or omitted.
(h) The Rights Agent and any stockholder,
director, officer or employee of the Rights Agent may
buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise
33
act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the
Company or for any other legal entity.
(i) The Rights Agent may execute and exercise
any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its
attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect
or misconduct of any such attorneys or agents or for any
loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment
thereof.
(j) No provision of this Agreement shall require
the Rights Agent to expend or risk its own funds or other-
wise incur any financial liability in the performance of
any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing
that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured
to it.
(k) If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise or transfer,
the certificate attached to the form of assignment or
form of election to purchase, as the case may be, has not
been executed, the Rights Agent shall not take any further
action with respect to such requested exercise of transfer
without first consulting with the Company.
21. Change of Rights Agent.
The Rights Agent or any successor Rights Agent may
resign and be discharged from its duties under this Agree-
ment upon 30 days' notice in writing mailed to the Company
and to each transfer agent for the Common Shares or
Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail.
The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case
may be, and to each transfer agent for the Common Shares
or Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period
of 30 days after giving notice of such removal or after it
has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent
or by the holder of a Right Certificate (who shall, with
such notice, submit his Right Certificate for inspection
by the Company), then the registered holder of any Right
34
Certificate may apply to any court of competent jurisdic-
tion for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company
or by such a court, shall either be (i) a corporation
organized and doing business under the laws of the United
States or of any state of the United States, in good
standing, authorized under such laws to exercise corporate
trust or stock transfer powers, and subject to supervision
or examination by federal or state authority and which has
at the time of its appointment as Rights Agent a combined
capital and surplus of at least $50 million or (ii) an
affiliate of such corporation. After appointment, the
successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act
or deed; but the predecessor Rights Agent shall deliver
and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any
such appointment the Company shall file notice thereof in
writing with the predecessor Rights Agent and each transfer
agent for the Common Shares or Preferred Shares, and mail
a notice thereof in writing to the registered holders of
the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appoint-
ment of the successor Rights Agent, as the case may be.
22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agree-
ment or of the Rights to the contrary, the Company may, at
its option, issue new Right Certificates evidencing Rights
in such form as may be approved by its Board of Directors
to reflect any adjustment or change in the Purchase Price
and the number or kind or class of shares or other
securities or property purchasable under the Right
Certificates made in accordance with the provisions of
this Agreement. In addition, in connection with the
issuance or sale of Common Shares following the Distribu-
tion Date and prior to the earlier of the Redemption Date
and the Final Expiration Date, the Company (a) shall with
respect to Common Shares so issued or sold pursuant to the
exercise of stock options or under any employee plan or
arrangement in existence prior to the Distribution Date, or
upon the exercise, conversion or exchange of securities,
notes or debentures issued by the Company and in existence
prior to the Distribution Date, and (b) may, in any other
case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Right Certificates
representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) the
Company shall not be obligated to issue any such Right
Certificates if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a
35
significant risk of material adverse tax consequences to
the Company or the Person to whom such Right Certificate
would be issued, and (ii) no Right Certificate shall be
issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
23. Redemption
(a) The Rights may be redeemed by action of the
Board of Directors pursuant to Section 23(b) hereof and
shall not be redeemed in any other manner.
(b) (i) The Board of Directors of the Company
may, at its option, at any time prior to the earlier of
such time as any Person becoming an Acquiring Person or
the Final Expiration Date, redeem all but not less than
all of the then outstanding Rights at a redemption price
of $.01 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being herein-
after referred to as the "Redemption Price"), and the
Company may, at its option, pay the Redemption Price in
Common Shares (based on the "current per share market
price," as such term is defined in Section 11(d) hereof,
of the Common Shares at the time of redemption), cash or
any other form of consideration deemed appropriate by the
Board of Directors. The redemption of the Rights by the
Board of Directors may be made effective at such time, on
such basis and subject to such conditions as the Board of
Directors in its sole discretion may establish. Notwith-
standing anything contained in this Agreement to the
contrary, the Rights shall not be exercisable pursuant
to Section 11(a)(ii) hereof prior to the expiration or
termination of the Company's right of redemption under
this Section 23(b)(i).
(ii) In addition, the Board of Directors of
the Company may, at its option, at any time after the time a
Person becomes an Acquiring Person and the expiration of
any period during which the holder of Rights may exercise
the rights under Section 11(a)(ii) hereof but prior to
any event described in clause (x), (y) or (z) of the first
sentence of Section 13 hereof, redeem all but not less than
all of the then outstanding Rights at the Redemption Price
(x) in connection with any merger, consolidation or sale
or other transfer (in one transaction or in a series of
related transactions) of assets or earning power
aggregating 50% or more of the assets or earning power
of the Company and its subsidiaries (taken as a whole)
in which all holders of Common Shares are treated alike
and not involving (other than as a holder of Common Shares
being treated like all other such holders) an Interested
Stockholder or a Transaction Person or (y)(A) if and for
so long as the Acquiring Person is not thereafter the
Beneficial Owner of 15% or more of the then outstanding
Common Shares, and (B) at the time of redemption no other
Persons are Acquiring Persons.
36
(iii) Notwithstanding anything to the contrary
in this Agreement, including, without limitation, the provi-
sions of Section 23(b)(i) and (ii), in the event that a
majority of the Board of Directors of the Company is
comprised of (i) persons elected at a meeting of stock-
holders who were not nominated by the Board of Directors
in office immediately prior to such meeting, and/or
(ii) persons elected to the Board of Directors for the
purpose of either facilitating a Transaction with a Trans-
action Person or circumventing directly or indirectly the
provisions of this Section 23(b)(iii) or the last sentence
of Section 27, then the Rights may not be redeemed for a
period of 180 days following the effectiveness of such
election if such redemption is reasonably likely to have
the purpose or effect of facilitating a Transaction with
a Transaction Person.
(c) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the
Rights pursuant to Section 23(b) hereof, and without any
further action and without any notice, the right to
exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive
the Redemption Price. The Company shall promptly give
public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such notice
shall not affect the validity of such redemption. Within
10 days after such action of the Board of Directors
ordering the redemption of the Rights pursuant to
Section 23(b) hereof, the Company shall mail a notice
of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distri-
bution Date, on the registry books of the transfer agent
for the Common Shares, provided, however, that failure to
give, or any defect in, any such notice shall not affect
the validity of such redemption. Any notice which is
mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in this
Section 23 or in Section 24 hereof, and other than in
connection with the purchase of Common Shares prior to
the Distribution Date.
(d) The Company may, at its option, discharge all
of its obligations with respect to any redemption of the
Rights by (i) issuing a press release announcing the
manner of redemption of the Rights and (ii) mailing payment
of the Redemption Price to the registered holders of the
Rights at their last addresses as they appear on the
registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer
37
agent for the Common Shares, and upon such action, all
outstanding Right Certificates shall be null and void
without any further action by the Company.
24. Exchange
(a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an
Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the
provisions of Section 11(a)(ii) hereof) for Common Shares
at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to
as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect
such exchange at any time after any Person (other than the
Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or
any entity holding Common Shares for or pursuant to the
terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of
50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any
Rights pursuant to Section 24(a) hereof and without any
further action and without any notice, the right to
exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive
that number of Common Shares equal to the number of such
Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of
any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall
mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent; provided, however,
that the failure to give, or any defect in, such notice
shall not affect the validity of such exchange. Any
notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method
by which the exchange of the Common Shares for Rights will
be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of
Rights (other than Rights which have become void pursuant
to the provisions of Section 11(a)(ii) hereof) held by each
holder of Rights.
38
(c) In lieu of issuing Common Shares in accordance
with Section 24(a) hereof, the Company may, if a majority
of the Board of Directors then in office determines that
such action is necessary or appropriate and not contrary
to the interests of the holders of Rights, elect to (and,
in the event that there are not sufficient treasury shares
and authorized but unissued Common Shares to permit any
exchange of the Rights in accordance with Section 24(a)
hereof, the Company shall) take all such action as may be
necessary to authorize, issue or pay, upon the exchange
of the Rights, cash (including by way of a reduction of
the Purchase Price), property, Common Shares, other
securities or any combination thereof having an aggregate
value equal to the value of the Common Shares which
otherwise would have been issuable pursuant to
Section 24(a) hereof, which aggregate value shall be
determined by a nationally recognized investment banking
firm selected by a majority of the Board of Directors
then in office. For purposes of the preceding sentence,
the value of the Common Shares shall be determined
pursuant to Section 11(d) hereof. Any election pursuant
to this Section 24(c) by the Board of Directors must be
made within 60 days following the date on which the event
described in Section 11(a)(ii) hereof shall have occurred.
Following the occurrence on the event described in
Section 11(a)(ii) hereof, a majority of the Board of
Directors then in office may suspend the exercisability
of the Rights for a period of up to 60 days following the
date on which the event described in Section 11(a)(ii)
hereof shall have occurred to the extent that such
directors have not determined whether to exercise their
rights of election under this Section 24(c). In the event
of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the
Rights has been temporarily suspended.
(d) The Company shall not be required to issue
fractions of Common Shares or to distribute certificates
which evidence fractional Common Shares. In lieu of such
fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard
to which such fractional Common Shares would otherwise
be issuable an amount in cash equal to the same fraction of
the current market value of a whole Common Share. For
the purposes of this Section 24(d), the current market
value of a whole Common Share shall be the closing price
of a Common Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day
immediately after the date of the first public announcement
by the Company that an exchange is to be effected pursuant
to this Section 24.
(e) The Company shall not be required to issue
fractions of Preferred Shares (other than fractions which
are integral multiples of one one-hundredth of a Preferred
Share) upon exchange of the Rights or to distribute
certificates which evidence fractional Preferred Shares
39
(other than fractions which are integral multiples of one
one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth
of a Preferred Share may, at the election of the Company,
be evidenced by depositary receipts; provided, however,
that holders of such depositary receipts shall have all of
the designations and the powers, preferences and rights,
and the qualifications, limitations and restrictions to
which they are entitled as beneficial owners of the
Preferred Shares represented by such depositary receipts.
In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders
of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one
Preferred Share. For the purposes of this Section 24(e),
the current market value of a Preferred Share shall be
one hundred (100) times the closing price of a Common
Share (as determined pursuant to the second sentence of
Section 11(d)(i) hereof) for the Trading Day immediately
after the date of the first public announcement by the
Company that an exchange is to be effected pursuant to
this Section 24.
25. Notice of Certain Events
(a) In case the Company shall propose (i) to pay
any dividend payable in stock of any class to the holders
of its Preferred Shares or to make any other distribution
to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the
holders of its Preferred Shares rights or warrants to
subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other
securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than
a reclassification involving only the subdivision of
outstanding Preferred Shares), (iv) to effect any
consolidation or merger into or with, or to effect any
sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one
or more transactions, of 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken
as a whole), to any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company,
or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision,
combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends
in Common Shares), then, in each such case, the Company
shall give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date
for the purpose of such stock dividend, or distribution
of rights or warrants, or the date on which such reclassifi-
cation, consolidation, merger, sale, transfer, liquidation,
40
dissolution, or winding up is to take place and the date
of participation therein by the holders of the Common
Shares and/or the Preferred Shares, if any such date is
to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least
10 days prior to the record date for determining holders
of the Preferred Shares for purposes of such action, and
in the case of any such other action, at least 10 days
prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the
Common Shares and/or the Preferred Shares, whichever shall
be the earlier.
(b) In case the event set forth in Section 11(a)
(ii) hereof shall occur, then the Company shall as soon as
practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which notice shall describe
the event and the consequences of the event to holders of Rights
under Section 11(a)(ii) hereof.
26. Notices
Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of
any Right Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
Somatogen, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Subject to the provisions of Section 21 hereof, any
notice or demand authorized by this Agreement to be given
or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with
the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Notices or demands authorized by this Agreement to be
given or made by the Company or the Rights Agent to the
holder of any Right Certificate shall be sufficiently given
or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as
shown on the registry books of the Company.
41
27. Supplements and Amendments.
Prior to the Distribution Date, the Company and the
Rights Agent shall, if the Company so directs, supplement
or amend any provision of this Agreement without the
approval of any holders of the Rights. From and after
the Distribution Date, the Company and the Rights Agent
shall, if the Company so directs, from time to time supple-
ment or amend any provision of this Agreement without the
approval of any holders of Right Certificates in order to
(i) cure any ambiguity, (ii) correct or supplement any
provision contained herein which may be defective or
inconsistent with any other provisions herein, or (iii)
change any other provisions with respect to the Rights
which the Company may deem necessary or desirable;
provided, however, that no such supplement or amendment
shall be made which would adversely affect the interests
of the holders of Rights (other than the interests of an
Acquiring Person or its Affiliates or Associates). Any
supplement or amendment adopted during any period after
any Person has become an Acquiring Person but prior to
the Distribution Date shall become null and void unless
such supplement or amendment could have been adopted by
the Company from and after the Distribution Date. Any
such supplement or amendment shall be evidenced by a
writing signed by the Company and the Rights Agent.
Upon delivery of a certificate from an appropriate officer
of the Company which states that the proposed supplement
or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement
or amendment unless the Rights Agent shall have determined
in good faith that such supplement or amendment would
adversely affect its interest under this Agreement. Prior
to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the
holders of Common Shares. Notwithstanding anything to the
contrary in this Agreement, in the event that a majority
of the Board of Directors of the Company is comprised of
(i) persons elected at a meeting of stockholders who were
not nominated by the Board of Directors in office
immediately prior to such meeting, and/or (ii) persons
elected to the Board of Directors for the purpose of
either facilitating a Transaction with a Transaction
Person or circumventing directly or indirectly the pro-
visions of Section 23(b)(iii) or this provision of this
Section 27, then for a period of 180 days following the
effectiveness of such election, this Agreement shall not
be amended or supplemented in any manner reasonably likely
to have the purpose or effect of facilitating a Transaction
with a Transaction Person.
28. Determination and Actions by the Board of
Directors, etc
For all purposes of this Agreement, any calculation
of the number of Common Shares outstanding at any
42
particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares
or any other securities of which any Person is the
Beneficial Owner, shall be made in accordance with the
last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the
date of this Agreement. The Board of Directors of the
Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and
powers specifically granted to the Board, or the Company,
or as may be necessary or advisable in the administration
of this Agreement, including without limitation, the right
and power to (i) interpret the provisions of this Agree-
ment, and (ii) make all determinations deemed necessary or
advisable for the administration of this Agreement
(including a determination to redeem or not redeem the
Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omis-
sions with respect to the foregoing) which are done or made
by the Board in good faith, shall (x) be final, conclusive
and binding on the Rights Agent and the holders of the
Rights, and (y) not subject the Board to any liability
to the holders of the Rights.
29. Successors
All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective
successors and assigns hereunder.
30. Benefits of this Agreement
Nothing in this Agreement shall be construed to give
to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the
Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be
for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the
Common Shares)
31. Severability
If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated.
43
32. Governing Law
This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws
of such State applicable to contracts to be made and
performed entirely within such State.
33. Counterparts
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counter-
parts shall together constitute but one and the same
instrument.
34. Descriptive Headings
Descriptive headings of the several Sections of this
Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the
provisions hereof.
In Witness Whereof, parties whereto have caused this
Agreement to be duly executed, all as of the day and year
first above written.
Somatogen, Inc.
By: ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Its: President and CEO
ChaseMellon Shareholder Services,
L.L.C.
By: ▇▇▇▇ ▇▇▇▇▇▇▇
Its: Assistant Vice President
44
TABLE OF CONTENTS
Page No.
Certain Definitions. 1
Appointment of Rights Agent. 5
Issue of Right Certificates. 5
Form of Right Certificates. 7
Countersignature and Registration. 8
Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates. 8
Exercise of Rights; Purchase Price; Expiration Date of Rights. 9
Cancellation and Destruction of Right Certificates. 11
Availability of Preferred Shares. 12
Preferred Shares Record Date. 13
Adjustment of Purchase Price, Number of Shares or Number of
Rights. 13
Certificate of Adjusted Purchase Price or Number of Shares. 22
Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. 23
Fractional Rights and Fractional Shares. 26
Rights of Action. 28
Agreement of Right Holders. 28
Right Certificate Holder Not Deemed a Stockholder. 29
Concerning the Rights Agent. 29
Merger or Consolidation or Change of Name of Rights Agent. 30
Duties of Rights Agent. 31
Change of Rights Agent. 33
Issuance of New Right Certificates. 34
Redemption. 35
Exchange. 37
Notice of Certain Events. 39
Notices. 40
Supplements and Amendments. 41
Determination and Actions by the Board of Directors, etc. 41
Successors. 42
Benefits of this Agreement. 42
Severability. 42
Governing Law. 43
Counterparts. 43
Descriptive Headings. 43
Exhibit A - Certificate of Designation 45
Exhibit B - Form of Right Certificate 51
Exhibit C - Summary of Rights to Purchase Preferred Shares 58
45
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATION
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
SOMATOGEN, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Somatogen, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware
(hereinafter called the "Company"), hereby certifies that
the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151
of the General Corporation Law via a duly executed written
consent, dated as of June 2, 1997:
Resolved, that pursuant to the authority granted to
and vested in the Board of Directors of the Company in
accordance with the provisions of its Certificate of
Incorporation, the Board of Directors hereby creates a
series of Preferred Stock, par value $.001 per share,
of the Company and hereby states the designation and
number of shares, and fixes the relative designations
and the powers, preferences and rights, and the
qualifications, limitations and restrictions thereof
(in addition to the provisions set forth in the
Certificate of Incorporation of the Company, which
are applicable to the Preferred Stock of all classes
and series), as follows:
Series A Junior Participating Preferred Stock:
Designation and Amount. Three Hundred Fifty
Thousand (350,000) shares of Preferred Stock, $.001 par
value, are designated "Series A Junior Participating
Preferred Stock" with the designations and the powers,
preferences and rights, and the qualifications, limitations
and restrictions specified herein (the "Junior Preferred
Stock"). Such number of shares may be increased or
decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of
shares of Junior Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of
any outstanding securities issued by the Company
convertible into Junior Preferred Stock.
1. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock)
ranking prior and superior to the Junior Preferred Stock
with respect to dividends, the holders of shares of Junior
Preferred Stock, in preference to the holders of Common
46
Stock, par value $.001 per share (the "Common Stock"), of
the Company, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first
day of April, July, October and January in each year (each
such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Junior Preferred
Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $l.00 or (b) subject
to the provision for adjustment hereinafter set forth,
100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares
of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of
Junior Preferred Stock. In the event the Company shall
at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the out-
standing shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount to
which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock out-
standing immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribu-
tion on the Junior Preferred Stock as provided in
paragraph (A) of this Section immediately after it
declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Junior Preferred Stock
shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative
on outstanding shares of Junior Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date
of issue of such shares, unless the date of issue of such
47
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the
determination of holders of shares of Junior Preferred
Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Junior Preferred Stock
in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of
Directors may fix a record date for the determination
of holders of shares of Junior Preferred Stock entitled
to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
2. Voting Rights. The holders of shares of Junior
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Junior Preferred Stock shall
entitle the holder thereof to 100 votes on all matters
submitted to a vote of the stockholders of the Company.
In the event the Company shall at any time declare or pay
any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such
case the number of votes per share to which holders of
shares of Junior Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designation creating a series of Preferred
Stock or any similar stock, or by law, the holders of
shares of Junior Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Company
having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders
of the Company.
48
(C) Except as set forth herein, or as otherwise
provided by law, holders of Junior Preferred Stock shall
have no special voting rights and their consent shall not
be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein)
for taking any corporate action.
3. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends
or distributions payable on the Junior Preferred Stock
as provided in Section 2 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Junior Preferred
Stock outstanding shall have been paid in full, the Company
shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution
or winding up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except
dividends paid ratably on the Junior Preferred Stock and
all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Junior Preferred Stock, provided that the
Company may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for
shares of any stock of the Company ranking junior (either
as to dividends or upon dissolution, liquidation or winding
up) to the Junior Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Junior Preferred Stock, or any
shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the
Junior Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective
series and classes, shall determine in good faith will
result in fair and equitable treatment among the
respective series or classes.
49
(B) The Company shall not permit any subsidiary of the
Company to purchase or otherwise acquire for consideration
any shares of stock of the Company unless the Company
could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such
manner.
4. Reacquired Shares. Any shares of Junior Preferred
Stock purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued
as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein,
in the Restated Certificate of Incorporation, or in any
other Certificate of Designation creating a series of
Preferred Stock or any similar stock or as otherwise
required by law.
5. Liquidation, Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Company,
no distribution shall be made (1) to the holders of shares
of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior
Preferred Stock unless, prior thereto, the holders of
shares of Junior Preferred Stock shall have received $100
per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the
holders of shares of Junior Preferred Stock shall be
entitled to receive an aggregate amount per share, subject
to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed
per share to holders of shares of Common Stock, or (2) to
the holders of shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding
up) with the Junior Preferred Stock, except distributions
made ratably on the Junior Preferred Stock and all such
parity stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the
Company shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount
to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which
is the number of shares of Common Stock that were out-
standing immediately prior to such event.
50
6. Consolidation, Merger, etc. In case the Company
shall enter into any consolidation, merger, combination or
other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each
share of Junior Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the
event the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolida-
tion of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to
the exchange or change of shares of Junior Preferred Stock
shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such
event.
7. No Redemption. The shares of Junior Preferred
Stock shall not be redeemable.
8. Rank. The Junior Preferred Stock shall rank,
with respect to the payment of dividends and the distribu-
tion of assets, junior to all series of any other class of
the Company's Preferred Stock.
9. Amendment. The Restated Certificate of Incorpora-
tion of the Company shall not be amended in any manner
which would materially alter or change the powers,
preferences or special rights of the Junior Preferred
Stock so as to affect them adversely without the affirma-
tive vote of the holders of at least two-thirds of the
outstanding shares of Junior Preferred Stock, voting
together as a single class.
In Witness Whereof, the undersigned have executed this
certificate as of June 5, 1997.
▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Chairman, President and CEO
▇▇▇▇▇ C.T. Linfield
Secretary
51
EXHIBIT B
FORM OF RIGHT CERTIFICATE
CERTIFICATE NO. R- _____ RIGHTS
NOT EXERCISABLE AFTER JUNE 5, 2007 OR EARLIER IF REDEMPTION
OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION
AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN
THE RIGHTS AGREEMENT.
RIGHT CERTIFICATE
SOMATOGEN, INC.
This certifies that ___________________ or registered
assigns, is the registered owner of the number of Rights
set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the
Rights Agreement, dated as of June 5, 1997 (the "Rights
Agreement"), between SOMATOGEN, INC., a Delaware corpora-
tion (the "Company"), and CHASEMELLON SHAREHOLDER
SERVICES, L.L.C. (the "Rights Agent"), to purchase from
the Company at any time after the Distribution Date (as
such term is defined in the Rights Agreement) and prior
to 5:00 P.M., Mountain Time, on June 5, 2007 at the office
of the Rights Agent designated for such purpose, or at the
office of its successor as Rights Agent, one one-hundredth
of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $.001 per share
(the "Preferred Shares"), of the Company, at a purchase
price of $44.00 per one one-hundredth of a Preferred Share
(the "Purchase Price"), upon presentation and surrender
of this Right Certificate with the Form of Election to
Purchase duly executed. The number of Rights evidenced
by this Right Certificate (and the number of one one-
hundredths of a Preferred Share which may be purchased
upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price
as of _______________ based on the Preferred Shares as
constituted at such date.
From and after the time any Person becomes an Acquiring
Person, (as such terms are defined in the Rights
Agreement), if the Rights evidenced by this Right Certifi-
cate are beneficially owned by (i) an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or
Affiliate who becomes a transferee after the Acquiring
Person becomes such, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of any
such Acquiring Person, Associate or Affiliate who becomes
a transferee prior to or concurrently with the Acquiring
Person becoming such, such Rights shall become null and
void without any further action and no holder hereof
52
shall have any right with respect to such Rights from
and after the time any Person becomes an Acquiring Person.
As provided in the Rights Agreement, the Purchase
Price and the number of one one-hundredths of a Preferred
Share which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject
to modification and adjustment upon the happening of
certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, as
amended from time to time, 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
hereunder of the Rights Agent, the Company and the holders
of the Right Certificates. Copies of the Rights Agreement
are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right
Certificates, upon surrender at the office of the Rights
Agent designated for such purpose, may be exchanged for
another Right Certificate or Right Certificates of like
tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Preferred Shares as
the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder
to purchase. If this Right Certificate shall be exercised
in part, the holder shall be entitled to receive upon
surrender hereof another Right Certificate or Right
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 Company at a redemption price of $.01 per Right or
(ii).may be exchanged in whole or in part for shares of
the Company's Common Stock, par value $.001 per share, or
Preferred Stock.
No fractional Preferred Shares will be issued upon
the exercise of any Right or Rights evidenced hereby
(other than fractions which are integral multiples of one
one-hundredth of a Preferred Share, which may, at the
election of the Company, be evidenced by depositary
receipts) but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to
vote or receive dividends or be deemed for any purpose the
holder of the Preferred Shares or of any other securities
of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights
53
Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by this
Right Certificate shall have been exercised as provided in
the Rights Agreement.
This Right Certificate shall not be valid or obligatory
for any purpose until it shall have been countersigned by
the Rights Agent.
WITNESS the facsimile signature of the proper officers of
the Company and its corporate seal. Dated as of __________.
ATTEST: Somatogen, Inc.
▇▇▇▇▇ C.T. Linfield ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Secretary Chairman, President and CEO
COUNTERSIGNED:
ChaseMellon Shareholder
Services, L.L.C.
as Rights Agent
By:_____________________
Authorized Signature
54
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ___________________________________
hereby sells, assigns and transfers unto
___________________________________________________________
(Please print name and address of transferee)
_____________________________________________________ this
Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute
and appoint ________________________ Attorney, to transfer
the within Right Certificate on the books of the within-
named Company, with full power of substitution.
Dated: ____________________
________________________________
Signature
55
Form of Reverse Side of Right Certificate -- continued
Signature Guaranteed:
Signatures must be guaranteed by an "eligible
guarantor institution" as defined in Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934,
as amended.
-------------------------------------------------------
The undersigned hereby certifies that (1) the
Rights evidenced by this Right Certificate are not being
sold, assigned or transferred by or on behalf of a Person
who is or was an Acquiring Person, an Interested Stock-
holder or an Affiliate or Associate thereof (as such terms
are defined in the Rights Agreement); and (2) after due
inquiry and to the best of the knowledge of the under-
signed, the undersigned did not acquire the Rights
evidenced by this Right Certificate from any Person who is
or was an Acquiring Person, an Interested Stockholder, or
an Affiliate or Associate thereof.
________________________________
Signature
56
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To ChaseMellon Shareholder Services, L.L.C.
The undersigned hereby irrevocably elects to exercise
___________________________ Rights represented by this
Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the
name of:
Please insert social security
or other identifying number: ______________
_________________________________________________________
(Please print name and address)
_________________________________________________________
If such number of Rights shall not be all the Rights
evidenced by this Right Certificate, a new Right
Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number: ______________
________________________________________________________
(Please print name and address)
________________________________________________________
Dated: _________________
__________________________
Signature
57
Form of Reverse Side of Right Certificate -- continued
Signature Guaranteed:
Signatures must be guaranteed by an "eligible
guarantor institution" as defined in Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934,
as amended.
-------------------------------------------------------
The undersigned hereby certifies that (1) the Rights
evidenced by this Right Certificate are not beneficially
owned by nor are they being exercised on behalf of an
Acquiring Person, an Interested Stockholder or an Affiliate
or Associate thereof (as such terms are defined in the
Rights Agreement); and (2) after due inquiry and to the
best of the knowledge of the undersigned, the undersigned
did not acquire the Rights evidenced by this Right
Certificate from any Person who is or was an Acquiring
Person, an Interested Stockholder, or an Affiliate or
Associate thereof.
_____________________________
Signature
----------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of
Election to Purchase, as the case may be, must conform to
the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or
any change whatsoever.
In the event the certification set forth above in the
Form of Assignment or the Form of Election to Purchase, as
the case may be, is not completed, the Company and the
Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement) and such Assignment or Election to
Purchase will not be honored.
58
Exhibit C
SOMATOGEN, INC.
Summary of Rights to Purchase
Preferred Shares
On June 2, 1997, the Board of Directors of SOMATOGEN,
INC. (the "Company") declared a dividend of one preferred
share purchase right (a "Right") for each outstanding
share of common stock, par value $.001 per share (the
"Common Shares"), of the Company. The dividend is
effective as of June 12, 1997 (the "Record Date") with
respect to the stockholders of record on that date. The
Rights will also attach to new Common Shares issued after
the Record Date. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share
of Series A Junior Participating Preferred Stock, par value
$.001 per share (the "Preferred Shares"), of the Company
at a price of $44.00 per one one-hundredth of a Preferred
Share (the "Purchase Price"), subject to adjustment. Each
Preferred Share is designed to be the economic equivalent
of 100 Common Shares. The description and terms of the
Rights are set forth in a Rights Agreement dated as of
June 5, 1997 (the "Rights Agreement"), between the Company
and ChaseMellon Shareholder Services, L.L.C. (the "Rights
Agent").
Detachment and Transfer of Rights
Initially, the Rights will be evidenced by the stock
certificates representing Common Shares then outstanding,
and no separate Right Certificates will be distributed.
Until the earlier to occur of (i) a public announcement
that a person or group of affiliated or associated persons,
has become an "Acquiring Person" (as such term is defined
in the Rights Agreement) (in general, an "Acquiring Person"
is a person, the affiliates or associates of such person,
or a group, which has acquired beneficial ownership of 15%
or more of the outstanding Common Shares) or (ii) 10
business days (or such later date as the Board may
determine) following the commencement of, or announcement
of an intention to make, a tender offer or exchange offer
which would result in the beneficial ownership by an
Acquiring Person of 15% or more of the outstanding Common
Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding
as of the Record Date, by such Common Share certificate.
59
The Rights Agreement provides that, until the Distribu-
tion Date (or earlier redemption or expiration of the
Rights), the Rights will be transferable with and only
with the Common Shares. Until the Distribution Date (or
earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date
upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement
by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights) the surrender or
transfer of any certificates for Common Shares outstanding
as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto,
will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate. As
soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of
the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates
alone will evidence the Rights.
Exercisability of Rights
The Rights are not exercisable until the Distribution
Date. The Rights will expire on June 5, 2007 (the "Final
Expiration Date"), unless the Final Expiration Date is
extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to
receive dividends.
The Purchase Price payable, and the number of
Preferred Shares or other securities or property issuable
or payable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution. The
number of outstanding Rights and the number of one one-
hundredths of a Preferred Share issuable upon exercise
of each Right are also subject to adjustment in the event
of a stock split of the Common Shares or a stock dividend
on the Common Shares payable in Common Shares, or sub-
divisions, consolidations or combinations of the Common
Shares occurring, in any such case, prior to the
Distribution Date. With certain exceptions, no adjust-
ment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional Preferred Shares
will be issued (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share,
which may, at the election of the Company, be evidenced
by depositary receipts) and in lieu thereof, an adjust-
ment in cash will be made based on the market price of
the Preferred Shares on the last trading day prior to
the date of exercise.
60
Terms of Preferred Shares
Preferred Shares purchasable upon exercise of the
Rights will not be redeemable. Each Preferred Share will
be entitled to a minimum preferential quarterly dividend
payment of $l per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per
Common Share. In the event of liquidation, the holders
of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but
will be entitled to an aggregate payment of 100 times
the payment made per Common Share. Each Preferred Share
will have 100 votes, voting together with the Common
Shares. Finally, in the event of any merger, consolida-
tion or other transaction in which Common Shares are
exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share.
These rights are protected by customary anti-dilution
provisions. Because of the nature of the Preferred
Shares' dividend, liquidation and voting rights, the
value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should
approximate the value of one Common Share. The
Preferred Shares would rank junior to any other series
of the Company's preferred stock.
Trigger of Flip-In and Flip-Over Rights
In the event that any person or group of affiliated
or associated persons becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right,
other than Rights beneficially owned by the Acquiring
Person or any affiliate or associate thereof (which will
thereafter be void), will thereafter have the right to
receive upon exercise that number of Common Shares having
a market value of two times the exercise price of the
Right. This right will commence on the date of public
announcement that a person has become an Acquiring Person
(or the effective date of a registration statement
relating to distribution of the rights, if later) and
terminate 60 days later (subject to adjustment in the
event exercise of the rights is enjoined).
In the event that the Company is acquired in a merger
or other business combination transaction or 50% or more
of its consolidated assets or earning power are sold to
an Acquiring Person, its affiliates or associates or
certain other persons in which such persons have an
interest, proper provision will be made so that each
such holder of a Right will thereafter have the right
to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of
common stock of the acquiring company which at the time
of such transaction will have a market value of two times
the exercise price of the Right.
61
Redemption and Exchange of Rights
At any time prior to the earliest of (i).the close of
business on the day of the first public announcement that
a person has become an Acquiring Person, or (ii).the Final
Expiration Date, the Board of Directors of the Company may
redeem the Rights in whole, but not in part, at a price of
$.01 per Right (the "Redemption Price"). In general, the
redemption of the Rights may be made effective at such time
on such basis with such conditions as the Board of
Directors in its sole discretion may establish. Immediate-
ly upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders
of Rights will be to receive the Redemption Price. How-
ever, in the event that there is a change in the membership
of the Board of Directors such that a majority of the Board
of Directors is no longer comprised of the current
Directors and approved Directors, no such redemption shall
be made for 180 days after such change in the majority of
the Board of Directors.
At any time after any Person becomes an Acquiring
Person and prior to the acquisition by such person or
group of 50% or more of the outstanding Common Shares,
the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such person or group
which will have become void), in whole or in part, at an
exchange ratio of one Common Share, or one one-hundredth
of a Preferred Share (or of a share of a class or series
of the Company's preferred stock having equivalent
designations and the powers, preferences and rights,
and the qualifications, limitations and restrictions),
per Right (subject to adjustment).
Amendment of Rights
The terms of the Rights generally may be amended by
the Board of Directors of the Company without the consent
of the holders of the Rights, except that from and after
such time as the Rights are distributed no such amendment
may adversely affect the interests of the holders of the
Rights (excluding the interest of any Acquiring Person).
Additional Information
A copy of the Rights Agreement has been filed with
the Securities and Exchange Commission as an Exhibit to
a Current Report on Form 8-K dated June 10, 1997. A copy
of the Rights Agreement is available from the Company by
writing to: Investor Relations, Somatogen, Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. This summary
description of the Rights is not intended to be complete
and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein
by reference.
62