EXHIBIT 4.1


 


RIGHTS AGREEMENT


 


This Rights Agreement (this “AGREEMENT”),
dated as of July 21, 1999, is by and between Cubist Pharmaceuticals, Inc.
(the “COMPANY”), a Delaware corporation, and BankBoston, N.A. (the “RIGHTS
AGENT”), a national banking association.


 


The Company’s Board of Directors has declared
a dividend of one preferred share purchase right (a “RIGHT”) in respect of each
share of the Company’s Common Stock outstanding of record as of the close of
business, Boston time, on August 3, 1999 (the “RECORD DATE”), each Right
representing the right to purchase one one-hundredth of a Preferred Share, upon
the terms and subject to the conditions set forth in this Agreement, 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 of the Distribution Date, the Redemption Date and the Final Expiration
Date.


 


The parties hereby agree as follows:


 


1.             CERTAIN
DEFINITIONS. For purposes of this Agreement:


 


(a)           “ACQUIRING
PERSON” means any Person who, together with all Affiliates and Associates of
such Person, is the Beneficial Owner of 15% or more of the Common Shares of the
Company then outstanding or who was such a Beneficial Owner at any time after
the date hereof, whether or not such Person continues to be the Beneficial
Owner of 15% or more of the Common Shares then outstanding, but will not
include the Company, any Subsidiary of the Company, any employee benefit plan
of the Company or any Subsidiary of the Company, or any entity holding
securities of the Company organized, appointed, or established by the Company
or any Subsidiary for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, (i) Sofinov Societe Financiere D’Innovation
(“Sofinov”) will not be deemed to be an “Acquiring Person” so long as Sofinov
and its Affiliates together own less than 18.2% of the then outstanding Common
Shares of the Company, and (ii) no Person will become an “Acquiring Person”
solely 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 of the Company then outstanding; PROVIDED, HOWEVER, that if a Person
becomes the Beneficial Owner of 15% or more of the Common Shares of the Company
then outstanding by reason of share purchases by the Company, and after such
share purchases by the Company, becomes the Beneficial Owner of any additional
Common Shares of the Company, then such Person will be deemed to be an “Acquiring
Person.” Notwithstanding the foregoing, if the Board of Directors of the
Company 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 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 Rights Agreement.


 


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(b)           “ADJUSTMENT
SHARES” shall have the meaning ascribed thereto in Section 11(a)(ii) hereof.


 


(c)           “AFFILIATE”
and “ASSOCIATE” 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.


 


(d)           A
Person will be deemed the “BENEFICIAL OWNER” of and will be deemed to “beneficially
own” any securities:


 


(i)            that
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement, or understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or options, or
otherwise; PROVIDED, HOWEVER, that a Person will not be deemed the “Beneficial
Owner” of, or to “beneficially own,” (A) securities tendered pursuant to a
tender or exchange offer made by such Person or any of such Person’s Affiliates
or Associates until such tendered securities are accepted for payment, purchase,
or exchange, or (B) at any time prior to the occurrence of a Triggering
Event, securities issuable upon exercise of Rights, or (C) from and after the
occurrence of a Triggering Event, securities issuable upon exercise of Rights,
which Rights were acquired by such Person or any of such Person’s Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a) or
Section 23 hereof (the “ORIGINAL RIGHTS”) or pursuant to Section 11(i) hereof
in connection with an adjustment made with respect to any Original Rights; 


 


(ii)           that
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial ownership”
of (as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including without limitation pursuant to
any agreement, arrangement, or understanding, whether or not in writing;
PROVIDED, HOWEVER, that a Person will not be deemed the “Beneficial Owner” of,
or to “beneficially own,” any security under this subparagraph (ii) as a result
of an oral or written agreement, arrangement, or understanding to vote such
security if such agreement, arrangement, or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act,
and (B) is not also then reportable by such Person on Schedule 13D
under the Exchange Act (or any comparable or successor report); or 


 


(iii)          that
are beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s
Affiliates or Associates) has any agreement, arrangement or understanding
(whether or not in writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (d)) or disposing of any voting
securities of the Company.


 


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PROVIDED, HOWEVER, that nothing in this paragraph (d) will cause a
Person engaged in business as an underwriter of securities to be the “Beneficial
Owner” of, or to “beneficially own,” any securities acquired through such
Person’s participation in good faith in a firm commitment underwriting until
the expiration of forty days after the date of such acquisition.


 


(e)           “BUSINESS
DAY” means any day other than a Saturday, a Sunday, or a day on which banking
institutions in The Commonwealth of Massachusetts are authorized or obligated
by law or executive order to close.


 


(f)            “CLOSE
OF BUSINESS” on any given date means 5:00 P.M., Boston time, on such date;
PROVIDED, HOWEVER, that if such date is not a Business Day it means 5:00 P.M.,
Boston time, on the next succeeding Business Day.


 


(g)           “COMMON
SHARES” when used with reference to the Company means the shares of common
stock, par value $0.001 per share, of the Company. “Common Shares” when used
with reference to any Person other than the Company means the capital stock
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such other Person,
or if such other Person is a Subsidiary of another Person, of the Person or
Persons that ultimately control such first-mentioned Person and which have issued
and outstanding such capital stock, equity securities, or equity interests.


 


(h)           “DISTRIBUTION
DATE” has the meaning set forth in Section 3 hereof.


 


(i)            “EXPIRATION
DATE” has the meaning set forth in Section 7(a)(iii) hereof.


 


(j)            “FINAL
EXPIRATION DATE” has the meaning set forth in Section 7(a)(i) hereof.


 


(k)           “PERSON”
means any individual, firm, corporation, partnership, limited liability
company, trust, or other entity, and includes any successor (by merger or
otherwise) of such entity.


 


(l)            “PREFERRED
SHARES” means shares of Series A Junior Participating Preferred Stock, par
value $0.001 per share, of the Company having rights and preferences set forth
in the Form of Certificate of Designations attached to this Rights
Agreement as EXHIBIT A.


 


(m)          “PURCHASE
PRICE” has the meaning set forth in Section 7(b) hereof.


 


(n)           “REDEMPTION
DATE” has the meaning set forth in Section 7(a)(ii) hereof.


 


(o)           “RIGHT”
has the meaning set forth in the second paragraph hereof.


 


(p)           “RIGHTS
CERTIFICATE” shall have the meaning ascribed thereto in Section 3(a) hereof.


 


(q)           “SECTION 7(E) PERSON”
has the meaning set forth in Section 7(e) hereof.


 


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(r)            “SECTION 11(A)(II)
EVENT” means any event described in Section 11 (a)(ii) hereof.


 


(s)           “SECTION 13
EVENT” means any event described in clauses (x), (y), or (z) of Section 13(a) hereof.


 


(t)            “SHARES
ACQUISITION DATE” means the first date of public announcement (which, for
purposes of this definition, includes without limitation a report filed
pursuant to Section 13(d) under the Exchange Act) by the Company or
an Acquiring Person that an Acquiring Person has become such.


 


(u)           “SUBSIDIARY”
of any Person means any other Person of which a majority of the voting power of
the voting equity securities or equity interest is owned, directly or
indirectly, by such first-mentioned Person, or which is otherwise controlled by
such first-mentioned Person.


 


(v)           “SUMMARY
OF RIGHTS” shall have the meaning ascribed thereto in Section 3(b) hereof.


 


(w)          “TRIGGERING
EVENT” means any Section 11(a)(ii) Event or any Section 13
Event.


 


(x)            “VOTING
STOCK” means (i) the Common Shares of the Company, and (ii) any other
shares of capital stock of the Company entitled to vote generally in the
election of directors or entitled to vote together with the Common Shares in respect
of any merger, consolidation, sale of all or substantially all of the Company’s
assets, liquidation, dissolution, or winding-up. Whenever any provision of this
Agreement requires a determination of whether a number of shares of Voting
Stock constituting a specified percentage of such Voting Stock has been voted,
tendered, acquired, sold or otherwise disposed of, or a determination of
whether a Person has offered or proposed to acquire a number of shares of
Voting Stock constituting such specified percentage, the number of shares of
Voting Stock constituting such specified percentage of Voting Stock will in
every such case be deemed to be the number of shares of Voting Stock constituting
the specified percentage of the Company’s entire voting power then entitled to
vote generally in the election of directors or then entitled to vote together
with the Common Shares in respect of any merger, consolidation, sale of all or
substantially all of the Company’s assets, liquidation, dissolution, or winding-up.


 


SECTION 2.           APPOINTMENT
OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent
for the Company and the holders of the Rights (who, until the Distribution
Date, will also be the holders of the Common Shares in accordance with Section 3
hereof) 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, upon ten (10) days’
prior written notice to the Rights Agent. The Rights Agent shall have no duty
to supervise, and shall in no event be liable for, the acts or omissions of any
such co-Rights Agent. In the event the Company appoints one or more co-Rights
Agents, the respective duties of the Rights Agents and any co-Rights Agents
will be as the Company may determine.


 


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SECTION 3.           ISSUE
OF RIGHTS CERTIFICATES.


 


(a)           Until
the earliest of:


 


(i)    the
close of business on the tenth Business Day after the Shares Acquisition 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 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, the consummation of which
would result in any Person becoming the Beneficial Owner of Common Shares
aggregating 15% or more of the then outstanding Common Shares; 


 


(including any such date which is after the date of this Agreement and
prior to the issuance of the Rights; the earliest of such dates being herein
referred to as the “DISTRIBUTION DATE”):


 


(x)    no
right may be exercised;


 


(y)   the
Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates will also be deemed to be certificates for Rights)
and not by separate certificates; and


 


(z)    the
Rights (and the right to receive certificates therefor) will be transferable
only in connection with the transfer of the underlying 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 if requested, the Rights Agent will send) by
first-class, postage-prepaid mail or other appropriate means, to each record
holder of Common Shares as of the Close of Business on the Distribution Date,
at the address of such holder shown on the records of the Company, a
certificate for Rights, in substantially the form of the attached EXHIBIT B
(collectively, “RIGHTS CERTIFICATES”), evidencing one Right for each Common
Share so held. As of and after the Distribution Date, the Rights will be
evidenced solely by Rights Certificates.


 


(b)           On
the Record Date, or as soon as practicable thereafter, the Company will send a
copy of a Summary of Rights to Purchase Preferred Shares, in substantially the
form of the attached EXHIBIT C (the “SUMMARY OF RIGHTS”), by first-class,
postage-prepaid mail, or other appropriate means, to each record holder of
Common Shares as of the Close


 


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of Business on the Record Date, at the address of such holder shown on
the records of the Company or its transfer agent.


 


With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distribution Date (or
earlier redemption, expiration or termination of the Rights), the Rights will
be evidenced by such certificates registered in the names of the holders
thereof together with a copy of the Summary of Rights attached thereto, and the
registered holders of the Common Shares will also be the registered holders of
the associated Rights. With respect to uncertificated Common Shares outstanding
as of the Record Date, until the Distribution Date, the Rights will be
evidenced by the registration of the Common Shares in the Company’s share
register in the names of the holders thereof.


 


Until the Distribution Date (or earlier
redemption, expiration or termination of the Rights), the surrender for
transfer of any certificate for Common Shares outstanding on the Record Date,
even without a copy of the Summary of Rights attached thereto, will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate.


 


(c)           Certificates
issued for Common Shares (including without limitation certificates issued upon
transfer or exchange of Common Shares) after the Record Date but prior to the
earlier of the Distribution Date, the Redemption Date, the Expiration Date or
the Final Expiration Date will be deemed also to be certificates for Rights and
will have impressed, printed, or written thereon, or otherwise affixed thereto,
the following legend:


 


“This certificate also evidences and entitles
the holder hereof to certain rights as set forth in a Rights Agreement between
Cubist Pharmaceuticals, Inc. and BankBoston, N.A., dated as of July 21,
1999, (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 Cubist Pharmaceuticals, Inc. Under certain circumstances, as set forth
in the Rights Agreement, such Rights may be redeemed, may expire, or may be
evidenced by separate certificates and will no longer be evidenced by this
certificate. Cubist Pharmaceuticals, Inc. will mail to the registered
holder of this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. As described in the Rights Agreement, under
certain circumstances, Rights held by Acquiring Persons (as defined in the
Rights Agreement), or certain related Persons, and any subsequent holder of
such Rights, may become null and void.” 


 


and, in the case of the initial transaction or subsequent periodic
statements with respect to uncertificated Common Shares, the following legend:


 


“The registration in the share register of
Cubist Pharmaceuticals, Inc. of the shares of common stock to which this
initial transaction or subsequent periodic statement relates also evidences and
entitles the registered holder of such shares to certain rights as set forth in
a Rights Agreement between Cubist Pharmaceuticals, Inc. and BankBoston, N.A.,
dated as of July 21, 1999, (the “RIGHTS AGREEMENT”), the terms of which
are hereby incorporated 


 


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herein by reference and a copy of which is on
file at the principal executive offices of Cubist Pharmaceuticals, Inc.
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
such registration in the share register of Cubist Pharmaceuticals, Inc. Cubist
Pharmaceuticals, Inc. will mail to the holder of this certificate a copy
of the Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances, as set forth in the Rights Agreement,
Rights issued to any Person who becomes an Acquiring Person (as defined in the
Rights Agreement) may become null and void.” 


 


Until the Distribution Date, the Rights
associated with Common Shares will be evidenced only by the certificates
representing such Common Shares, and the surrender for transfer of any such
certificate will also constitute the transfer of the Rights associated with the
Common Shares represented thereby. However, with respect to such initial
transaction or subsequent periodic statements containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Shares with
respect to which such statements are issued shall be evidenced solely by the
registration of ownership of such Common Shares in the share register of the
Company, and the registration of transfer of ownership in such share register
shall also constitute the transfer of the Rights associated with the Common
Shares whose ownership is so transferred. 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 will be deemed
cancelled and retired so that the Company will not be entitled to exercise any
Rights associated with the Common Shares that are no longer outstanding.


 


Notwithstanding anything to the contrary
stated herein, no Rights Certificate shall be issued pursuant to this Section 3
that represents Rights “beneficially owned” by an Acquiring Person whose Rights
would be void pursuant to Section 7(e) or any Associate or Affiliate
of any such Acquiring Person; no Rights Certificate shall be issued at any time
upon the transfer of any Rights to an Acquiring Person whose Rights would be
void pursuant to Section 7(e) or any Associate or Affiliate thereof
or to any nominee of such Acquiring Person, Associate or Affiliate; any Rights
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be void pursuant to Section 7(e) shall be
canceled.


 


SECTION 4.           FORM OF
RIGHTS CERTIFICATES. The Rights Certificates (and the forms of election to
purchase shares and of assignment to be printed on the reverse thereof) will be
substantially in the form of the attached EXHIBIT B, and may have such
marks of identification or designation and such legends, summaries, or
indorsements 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 or securities
quotation system on or by which the Rights may from time to time be listed or
quoted, or to conform to usage. Subject to the provisions of Section 11
and Section 23 hereof, the Rights Certificates initially will entitle the holders
thereof to purchase such number of one one-hundredths of a Preferred Share as
may be set forth therein at the price per one one-hundredth of a Preferred
Share set forth therein (the


 


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“PURCHASE PRICE”), but the number of such one one-hundredths of a
Preferred Share and the Purchase Price will be subject to adjustment as
provided herein.


 


SECTION 5.           COUNTERSIGNATURE
AND REGISTRATION. The Rights Certificates will be executed on behalf of the
Company by such officer or officers who would be entitled to sign certificates
representing Preferred Shares, either manually or by facsimile signature, may
(but need not) have affixed thereto the Company’s seal or a facsimile thereof,
and may (but need not) be attested by the Secretary or an Assistant Secretary
of the Company, either manually or by facsimile signature. The Rights
Certificates will be countersigned by the Rights Agent and will not be valid
for any purpose unless so countersigned. If any officer of the Company who
signed any of Rights Certificate ceases to be such officer of the Company
before countersignature by the Rights Agent and issuance and delivery by the
Company, such Rights Certificate, 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 Rights Certificate had not ceased to be such
officer of the Company; and any Rights Certificate may be signed on behalf of the
Company by any Person who, at the actual date of the execution of such Rights
Certificate, will be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such Person was not such an officer.


 


Following the Distribution Date, the Rights
Agent will keep or cause to be kept books for registration and transfer of the
Rights Certificates, showing the names and addresses of the respective holders
of the Rights Certificates, the number of Rights evidenced on its face by each
of the Rights Certificates, and the date of each Rights Certificate.


 


SECTION 6.           TRANSFER,
SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES; MUTILATED,
DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES. Subject to the provisions of
Sections 3(c), 4, 7(e), and 15 hereof, at any time after the close of business
on the Distribution Date, and before the close of business on the Expiration
Date, any Rights Certificate(s) may be transferred, split up, combined, or exchanged
for one or more new Rights Certificates entitling the registered holder to
purchase the same number of one one-hundredths of a Preferred Share as the
Rights Certificate(s) surrendered then entitled such holder to purchase.


 


Any registered holder desiring to transfer,
split up, combine, or exchange any Rights Certificate(s) will make such request
in writing delivered to the Rights Agent, and will surrender the Rights
Certificate or Rights 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, split up, combination or exchange of
any such surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights 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 will countersign and deliver to the Person entitled
thereto one or more Rights Certificates, as the case may be,


 


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as so requested. The Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer, split-up, combination, or exchange of Rights 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 Rights Certificate, and in case of loss, theft,
or destruction, of indemnity and/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 Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights Agent
for delivery to the registered holder in lieu of the Rights Certificate so
lost, stolen, destroyed, or mutilated.


 


SECTION 7.           EXERCISE
OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.


 


(a)           Subject
to Section 7(e) hereof, the registered holder of any Rights 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 Rights 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 other securities) as to
which the Rights are being exercised, at or prior to the earliest of:


 


(i)    the
close of business on August 3, 2009 (the “FINAL EXPIRATION DATE”);


 


(ii)   the
time at which the Rights are redeemed as provided in Section 24 hereof
(the “REDEMPTION DATE”); or


 


(iii)  the
time at which such Rights are exchanged as provided in Section 25 hereof
(such earliest time being herein referred to as the “EXPIRATION DATE”).


 


(b)           The
Purchase Price for each one one-hundredth of a Preferred Share upon the
exercise of a Right will initially be $20.00, will be subject to adjustment
from time to time as provided in Sections 11 and 13 hereof, and will be payable
in lawful money of the United States of America in accordance with Section 7(c) hereof
(the “PURCHASE PRICE”).


 


(c)           Upon
receipt of a Rights Certificate representing exercisable Rights, with the
appropriate 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 Rights
Certificate in accordance with Section 9 hereof, in cash or by certified
check, cashier’s check, money order, or bank draft paid or payable to the order
of the Company, the Rights Agent will thereupon promptly:


 


(i)            (A) requisition from
any transfer agent of the Preferred Shares (or make available, if the Rights
Agent is the transfer agent) 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, elects to deposit the Preferred Shares issuable upon


 


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conversion of the Rights hereunder into a
depository, requisition from the depository agent depository 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 will be deposited by the transfer agent with the depository agent)
and the Company will direct the depository agent to comply with such request; 


 


(ii)           when appropriate,
requisition from the Company the amount of cash, if any, to be paid in lieu of
issuance of fractional shares in accordance with Section 15 hereof; 


 


(iii)          promptly after receipt
of such certificates or depository receipts, cause the same to be delivered to
or upon the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder; and 


 


(iv)          when appropriate, after
receipt, promptly deliver such cash to or upon the order of the registered
holder of such Rights Certificate. In the event that the Company is obligated
to issue other securities of the Company pursuant to Section 11(a), the
Company will make all arrangements necessary so that such other securities are
available for distribution by the Rights Agent, if, as, and when appropriate. 


 


(d)           Subject
to the provisions of Section 15 hereof, if the registered holder of any
Rights Certificate exercises less than all of the Rights evidenced thereby, a
new Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised will be issued by the Rights Agent to the registered holder of such
Rights Certificate.


 


(e)           Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Section 11(a)(ii) Event, any Rights acquired or beneficially
owned by any:


 


(i)            Acquiring
Person or Associate or Affiliate of an Acquiring Person;


 


(ii)           transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes such a transferee after the Acquiring Person becomes such; or 


 


(iii)          transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and who receives such Rights pursuant to either (A) a
transfer (regardless of whether for consideration) from such Acquiring Person,
Associate, or Affiliate to holders of equity interests in such Acquiring
Person, Associate, or Affiliate, or to any Person with whom such Acquiring Person,
Associate, or Affiliate has any continuing oral or written plan, agreement,
arrangement, or understanding regarding the transferred Rights, or (B) a
transfer that the Board of Directors of the Company has determined is part of
an oral or written plan, agreement, arrangement, or understanding that has as a
primary 


 


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purpose or effect avoidance of this Section 7(e);


 


(each Person described in the preceding clauses (i) through (iii) of
this Section 7(e), a “SECTION 7(E) PERSON”) will become null and
void without any further action being required therefor, and no holder of such
Rights will have any rights whatsoever with respect to such Rights, whether
under this Agreement or otherwise.


 


The Company will use reasonable efforts to
insure that the provisions of this Section 7(e) and Sections 3(c) and
4 hereof are complied with, but will have no liability to any holder of Rights
Certificates or any other Person as a result of its failure to make or
erroneous making of any determination with respect to an Acquiring Person,
Affiliate or Associate of an Acquiring Person, or transferee of any such
Person.


 


(f)            Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company will 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 the certificate contained in the form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise
will have been properly completed and duly executed by the registered holder
thereof and the Company will have been provided with such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company may reasonably request.


 


SECTION 8.           CANCELLATION
AND DESTRUCTION OF RIGHTS CERTIFICATES. All Rights Certificates surrendered for
the purpose of exercise, transfer, split up, combination, or exchange will, if
surrendered to the Company or to any of its agents, be delivered to the Rights
Agent for cancellation or in cancelled form, or if surrendered to the Rights
Agent, will be cancelled by it; and no Rights Certificates will be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Rights Agreement. The Company will deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent will so cancel and retire, any other
Rights Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent will deliver all cancelled Rights
Certificates to the Company, or at the written request of the Company, will
destroy such cancelled Rights Certificates and certify such destruction to the
Company.


 


SECTION 9.           RESERVATION
AND AVAILABILITY OF PREFERRED SHARES.


 


(a)           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, a number of Preferred Shares (or other securities)
sufficient to permit the exercise in full of all outstanding Rights in
accordance with Section 7 of this Agreement.


 


(b)           The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares or other securities delivered
upon due exercise of Rights and payment of the purchase price therefor will be
duly and validly authorized and issued, fully paid, and nonassessable at the
time of delivery of the certificates for such Preferred Shares or other securities.


 


11





















 


(c)           The
Company further covenants and agrees that it will pay when due and payable any
and all federal and state transfer taxes and charges payable in respect of the
issuance or delivery of the Rights Certificates or of any Preferred Shares or
other securities upon the exercise of Rights. The Company will not, however, be
required to pay any transfer tax payable in respect of any transfer or delivery
of Rights Certificates to a Person other than, or the issuance or delivery of
certificates or depository receipts for the Preferred Shares or other
securities in a name other than that of, the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise; or to issue or to
deliver any certificates or depository receipts for Preferred Shares or other
securities upon the exercise of any Rights until any such tax has been paid
(any such tax being payable by the holder of such Rights Certificate at the time
of surrender) or until it has been established to the Company’s reasonable satisfaction
that no such tax is due.


 


(d)           The
Company may temporarily suspend the exercisability of the Rights in order to
prepare and file any registration statement as may be required to be filed
pursuant to applicable law with respect to securities purchasable upon exercise
of the Rights. Upon any such suspension, the Company will issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended. The Company will thereafter issue a public announcement at such time
as the suspension is no longer in effect.


 


SECTION 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 will 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 will be
dated, the date upon which the Rights Certificate evidencing such Rights was
duly surrendered 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 will be deemed to have
become the record holder of such shares on, and such certificate will be dated,
the next succeeding Business Day on which the Preferred Shares (or other
securities) transfer books of the Company are open.


 


Until a Rights
Certificate has been duly exercised, the holder thereof will not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights may be exercisable (including without limitation the rights to vote and
to receive dividends and other distributions) and will not be entitled to
receive any notice of any proceedings of the Company, except as specifically
provided herein.


 


SECTION 11.
ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS.
The Purchase Price, the number and kind of 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.


 


(a)           (i)
Except as otherwise provided in this Section 11(a) and in Section 7(e),
if the Company at any time after the date of this Agreement (A) declares a
dividend on the Preferred Shares payable in Preferred Shares, (B) subdivides
the outstanding Preferred Shares, (C) combines the outstanding 


 


12





















 


Preferred Shares into a smaller number of
shares, or (D) issues 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), then 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, as the case may be, and the number and kind
of shares of capital stock issuable on such date, each will be proportionately
adjusted so that the holder of any Right duly exercised after such applicable
time will be entitled to receive, upon payment of the Purchase Price then in effect,
the aggregate number and kind of shares of capital stock that, if such Right
had been exercised immediately prior to such applicable time 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 will 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. If an event occurs that would require
an adjustment under both this Section 11(a)(i) and Section 11(a)(ii),
the adjustment provided for in this Section 11(a)(i) will be in
addition to, and will be made prior to, any adjustment required pursuant to Section 11(a)(ii).



 


(ii)           Subject
to Section 25 of this Agreement, if any Person becomes an Acquiring Person
then, and in each such case, proper provision will be made promptly so that,
following the Distribution Date, each holder of a Right, except as provided in Section 7(e)
hereof, will 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 Agreement and in lieu of Preferred Shares, such number of
Common Shares of the Company as is equal to the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which following such first occurrence will thereafter be referred to as
the “PURCHASE PRICE” for each Right and for all purposes of this Agreement) by
50% of the then current per share market price of the Company’s Common Shares
(determined pursuant to Section 11(d) hereof) on the date of such
first occurrence (such number of shares, the “ADJUSTMENT SHARES”); 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 will apply and no
adjustment will be made pursuant to this Section 11(a)(ii). If 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. 


 


(iii)          If
the number of Common Shares that are authorized by the Company’s certificate of
incorporation (as amended and in effect as of the relevant time) but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights, are not sufficient to permit the exercise in full of the Rights 


 


13





















 


in accordance with the foregoing subparagraph
(ii) of this Section 11(a), the Company shall take all such action as may
be necessary to authorize additional Common Shares for issuance upon exercise
of the Rights. If the Company shall, after good faith effort, be unable to take
all such action as may be necessary to authorize such additional Common Shares,
the Company shall then substitute, for each Common Share that would otherwise
be issuable upon exercise of a Right, a number of Preferred Shares or fraction
thereof such that the current per share market price of one Preferred Share
multiplied by such number or fraction is equal to the current per share market
price of one Common Share as of the date of issuance of such Preferred Shares or
fraction thereof. 


 


(b)           If
the Company fixes 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 or more favorable rights,
privileges, and preferences 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 defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date will be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which will be the number of
Preferred Shares outstanding on such record date plus the number of Preferred
Shares that 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 will
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 will 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 will be in a form other than cash, the value
of such consideration will be as determined in good faith by the Board of Directors
of the Company, whose determination will be described in a statement filed with
the Rights Agent. Preferred Shares owned by or held for the account of the
Company will not be deemed outstanding for the purpose of any such computation.
Such adjustment will 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 will be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.


 


(c)           If
the Company fixes 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 cash, evidences of indebtedness, or other assets (other
than 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 will be determined by


 


14





















 


multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which will be the then current per
share market price of the Preferred Shares on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination will be described in a statement filed with the
Rights Agent) of the portion of the cash, evidences of indebtedness, or other
assets so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which will be such
current per share market price of the Preferred Shares; PROVIDED, HOWEVER, that
in no event will 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 will be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price will again be adjusted to be
the Purchase Price that 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 will be deemed to be the average of the daily closing prices per
share of such Security for the 30 consecutive Trading Days (as hereinafter
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 and prior to the expiration
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 will be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day will 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 National Association
of Securities Dealers, Inc. (the “NASDAQ”) National Market System, or if
the Security is not listed or admitted to trading on the NASDAQ, 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 if the Security is not listed or admitted
to trading on any national securities exchange, 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 NASDAQ Automated Quotations System 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. The term “TRADING DAY” means
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 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


 


15





















 


per share market price” of the Preferred
Shares will be determined in accordance with the method set forth in Section 11(d)(i).
If the Preferred Shares are not publicly traded, the “current per share market
price” of the Preferred Shares shall be conclusively deemed to be the current
per share market price of the Common Shares as determined pursuant to Section 11(d)(i) (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” means the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination will be described
in a statement filed with the Rights Agent. 


 


(e)           Subject
to the final sentence of this Section 11(e), no adjustment in the Purchase
Price will be required unless such adjustment would require an increase or
decrease of at least 1% in the Purchase Price; PROVIDED, HOWEVER, that any
adjustments that by reason of this Section 11(e) are not required to
be made will be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 will be made to the nearest cent or
to the nearest one-millionth of a Preferred Share or one ten-thousandth of any
other share or security, as the case may be. Notwithstanding the first sentence
of this Section 11(e), any adjustment required by this Section 11
will be made no later than the earlier of (i) three years from the date of
the transaction that requires such adjustment or (ii) the Expiration Date.


 


(f)            If
as a result of an adjustment made pursuant to Section 11(a) hereof,
the holder of any Right thereafter exercised will 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 will
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 Section 11(a) through (c), (e), (h) through
(k), and (m), and the provisions of Sections 7, 9, 10, 13, 14, and 15 with
respect to the Preferred Shares will 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 will 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 hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.


 


(h)           Unless
the Company has exercised its election as provided in Section 11(i), upon
each adjustment of the Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each Right outstanding immediately prior to the
making of such adjustment will 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 (calculated to the nearest one millionth 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.


 


16





















 


(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 will 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 will
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 will 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 Rights Certificates have been
issued, will be at least 10 days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company as promptly as
practicable will cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to Section 15
hereof, the additional Rights to which such holders will be entitled as a
result of such adjustment, or at the Company’s option, will cause to be distributed
to such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders are entitled after such
adjustment. Rights Certificates so to be distributed will be issued, executed,
and countersigned in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Purchase Price) and will be registered in
the names of the holders of record of Rights 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 Rights Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of one one-hundredths of a Preferred
Share that were expressed in the initial Rights Certificates issued hereunder. 


 


(k)           Before
taking any action that would cause an adjustment reducing the Purchase Price
below one one-hundredths of the then par value, if any, of the Preferred Shares
issuable upon exercise of the Rights, the Company will take any corporate
action that may be necessary, in the opinion of its counsel, 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 requires that an adjustment in the
Purchase Price be made effective as of a record date for a specified event, the
Company may 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 


 


17





















 


exercise over and above 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, HOWEVER, that the Company will deliver to such holder an appropriate
instrument evidencing such holder’s right to receive such additional shares
upon the occurrence of the event requiring such adjustment. 


 


(m)          Anything
in this Section 11 to the contrary notwithstanding, the Company will 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 determines to be advisable in order that any
consolidation 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 that by their terms are convertible
into or exchangeable for Preferred Shares, stock dividends, or issuance of
rights, options, or warrants referred to hereinabove in this Section 11,
hereafter made by the Company to holders of its Preferred Shares will not be taxable
to such stockholders.


 


(n)           If
at any time after the date of this Rights 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 subdivision,
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
outstanding 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(n) shall be made successively whenever
such a dividend is declared or paid or such a subdivision, combination or
consolidation is effected.


 


SECTION 12.         CERTIFICATE
OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever an adjustment is made
pursuant to Sections 11 or 13 hereof, the Company will 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
Rights Certificate (or if prior to the Distribution Date, to each holder of a
certificate representing Preferred Shares) in accordance with Section 27
hereof. The Rights Agent may rely on such certificate without further inquiry
and may assume that no such adjustment has been made unless and until it will
have received such certificate.


 


SECTION 13.         CONSOLIDATION,
MERGER, OR SALE OR TRANSFER OF ASSETS OR EARNING POWER OF THE COMPANY.


 


(a)           If,
following the Shares Acquisition Date, directly or indirectly:


 


18





















 


(x)            the
Company consolidates with, or merges with and into, any other Person (other
than a Subsidiary of the Company in a transaction that complies with Section 14(b) hereof),
and the Company is not the continuing or surviving corporation of such
consolidation or merger; 


 


(y)           any
Person (other than a Subsidiary of the Company in a transaction that complies
with Section 14(b) hereof) consolidates with the Company, or merges
with and into the Company and the Company is the continuing or surviving
corporation of such merger, and in connection with such merger, all or part of
the Common Shares will be changed into or exchanged for stock or other
securities of any other Person (or the Company) or cash or any other property; 


 


(z)            the
Company sells or otherwise transfers (or one or more of its Subsidiaries sells
or otherwise transfers), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person (other than to the Company or one
or more of its Subsidiaries, in one or more transactions that complies with Section 14
hereof); 


 


then, and in each such case, proper provision will be made so that (i) following
the Distribution Date, and subject to Section 7(e) hereof, each
holder of a Right will have the right to receive, upon the exercise thereof at
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 tradable Common Shares of the Principal Party (as hereinafter defined),
free and clear of liens, rights of call or first refusal, encumbrances, and
other adverse claims, as is equal to the result obtained by (1) multiplying
the then current Purchase Price by the number of one one-hundredths of a
Preferred Share for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such shares for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event,
by the Purchase Price in effect immediately prior to such first occurrence),
and (2) dividing that product (which following the first occurrence of a Section 13
Event, will be referred to as the “PURCHASE PRICE” for each Right and for all
purposes of this Agreement) by 50% of the current per share market price of the
Common Shares of such Principal Party (determined pursuant to Section 11(d) hereof)
on the date of consummation of such Section 13 Event; (ii) such
Principal Party will thereafter be liable for, and will 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” will
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof will apply to such
Principal Party; and (iv) such Principal Party will take such steps (including
without limitation the reservation of a sufficient number 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 will thereafter be
applicable, as nearly as reasonably may be, in relation to the Common Shares
thereafter deliverable upon the exercise of the Rights.


 


19





















 


 


(b)           “PRINCIPAL
PARTY” means


 


(i)            in
the case of any transaction described in clause (x) or (y) of the first
sentence of subsection (a) of this Section 13, the Person that
is the issuer of any securities into which Common Shares of the Company are
converted in such merger of consolidation, and if no securities are so issued,
the Person that is the other party to the merger or consolidation (including,
if applicable, the Company, if it is the surviving corporation); and 


 


(ii)           in
the case of any transaction described in clause (z) of the first sentence of
paragraph (a) of this Section 13, the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; 


 


PROVIDED, HOWEVER, that in any such case (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 Securities
Exchange Act of l934, as amended (the “EXCHANGE ACT”), and such Person is a
direct or indirect subsidiary or Affiliate of another Person, then “Principal
Party” will refer to such other Person; (2) in case 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” will refer to whichever of such Persons is the issuer of the Common
Shares having the greatest aggregate market value; and (3) in case 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 the preceding clauses (1) and (2) will
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 ventures and
the Principal Parties in each such chain will bear the obligations set forth in
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 will not consummate any such consolidation, merger, sale or transfer
unless the Principal Party has 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 first execute and deliver to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any Section 13
Event, the Principal Party at its own expense will:


 


(i)            prepare
and file a registration statement under the Securities Act with respect to the
Rights and the securities purchasable upon the exercise of the Rights, 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 meeting the
requirements of the Securities Act) until the Expiration Date; 


 


(ii)           use
its best efforts to qualify or register the Rights and the securities


 


20





















 


purchasable upon exercise of the Rights under
the blue sky laws of such jurisdictions as may be necessary;


 


(iii)          use
its best efforts to list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on a national securities
exchange or to meet the eligibility requirements for quotation on the NASDAQ
National Market System; and 


 


(iv)          deliver
to holders of the Rights historical financial statements for the Principal
Party and each of its Affiliates, which financial statements comply in all
material respects with the requirements for registration on Form 10 under
the Exchange Act. 


 


The provisions of this Section 13 will similarly apply to
successive mergers or consolidations or sales or other transfers. If a Section 13
Event occurs at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights that have not theretofore been exercised will thereafter become
exercisable solely in the manner described in paragraph (a) of this Section 13.


 


SECTION 14.         ADDITIONAL
COVENANTS.


 


(a)           The
Company covenants and agrees that it will not at any time after the
Distribution Date (i) consolidate with, (ii) merge with or into, or (iii) sell
or 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 other Person, if at the time of or after such
consolidation, merger, or sale there are any charter or by-law provisions or
any rights, warrants, or other instruments outstanding or any other action taken
or circumstances extant that would diminish or otherwise eliminate the benefits
intended to be afforded by the Rights. The Company will not consummate any such
consolidation, merger, or sale unless the Company and such other Person first
execute and deliver to the Rights Agent a supplemental agreement evidencing
compliance with this subsection.


 


(b)           The
Company covenants and agrees that, after the Distribution Date, it will not,
except as permitted by Section 24 or Section 28 hereof, take any action
if at the time such action is taken it is reasonably foreseeable that such
action will substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights.


 


SECTION 15.         FRACTIONAL
RIGHTS AND FRACTIONAL SHARES.


 


(a) The Company will not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(i), or to distribute
Rights Certificates that evidence fractional Rights. In lieu of such fractional
Rights, there will be paid to the registered holders of the Rights 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 15(a), the current market
value of a whole Right will 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


 


21





















 


issuable. The closing price for any day will 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 NASDAQ National Market System,
or if the Rights are not listed or admitted to trading on the NASDAQ National
Market System, 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 if the
Rights are not listed or admitted to trading on any national securities
exchange, 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 NASDAQ
or such other system then in use, or if on any such date the Rights are 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
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 will be used.


 


(b)           The
Company will not be required to issue fractions of Preferred Shares (other than
fractions which are integral multiples of one one-hundredths of a Preferred
Share) upon exercise of the Rights or to distribute certificates that evidence
fractional Preferred Shares (other than fractions which are integral multiples
of one one-hundredths of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-hundredths of a Preferred Share may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences 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-hundredths of a Preferred Share, the Company will
pay to the registered holders of Rights 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 15(b),
the current market value of a Preferred Share will be the closing price of a
Preferred Share (as determined pursuant to Section 11(d)(ii) hereof)
for the Trading Day immediately prior to the date of such exercise.


 


(c)           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.


 


SECTION 16.         RIGHTS
OF ACTION. Excepting the rights of action given to the Rights Agent under Section 19
hereof, all rights of action in respect of this Agreement are vested in the
respective registered holders of the Rights Certificates (and prior to the
Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Rights 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 Rights 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 Rights Certificate in the manner provided in such Rights
Certificate and


 


22





















 


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 will 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.


 


SECTION 17.         AGREEMENT
OF RIGHTS 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
Rights Certificates are transferable only on the registry books of the Rights
Agent if surrendered at the principal office of the Rights Agent, duly indorsed
or accompanied by a proper instrument of transfer;


 


(c)           subject
to Section 6 and Section 7(f) hereof, the Company and the Rights
Agent may deem and treat the Person in whose name the Rights 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 (notwithstanding
any notations of ownership or writing on the Rights 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 will be affected by any notice to the contrary; and


 


(d)           notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent will have any liability to any holder of a Right or a beneficial interest
in a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree, or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory, or administrative agency or
commission, or any statute, rule, regulation, or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; PROVIDED, HOWEVER, the Company must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.


 


SECTION 18.         RIGHTS
CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Rights
Certificate will be entitled to vote, receive dividends or be deemed for any
purpose to be the holder of the Preferred Shares or any other securities of the
Company that may at any time be issuable on the exercise of the Rights
represented thereby, nor will anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights 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 withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders


 


23





















 


(except as provided in Section 26 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate have been exercised in accordance with the provisions
hereof.


 


SECTION 19.       CONCERNING THE RIGHTS AGENT. The Company agrees to pay to the
Rights Agent reasonable 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 disbursements 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 gross
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 arising directly
therefrom.


 


The Rights Agent will be protected and will
incur no liability for or in respect of any action taken, suffered, or omitted
by it in connection with its administration of this Agreement in reliance upon
any Rights Certificate or certificate for Common Shares or 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 if necessary, verified or acknowledged, by the proper
Person or Persons.


 


SECTION 20.       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 may be a party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
will be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, PROVIDED that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 22
hereof. In case at the time such successor Rights Agent succeeds to the agency
created by this Agreement, any of the Rights Certificates will have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights Certificates
have not been countersigned, any successor Rights Agent may countersign such
Rights Certificates either in the name of the predecessor Rights Agent or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates will have the full force provided in the Rights Certificates and
in this Agreement.


 


In case at any time the name of the Rights
Agent is changed and at such time any of the Rights Certificates have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates have not
been countersigned, the Rights Agent may countersign such Rights Certificates
either in its prior name or in its changed name; and in all such cases such
Rights Certificates will have the full force provided in the Rights
Certificates and in this Agreement.


 


24





















 


SECTION 21.       DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, will be bound:


 


(a)           The
Rights Agent may consult with legal counsel (who may be legal counsel for the
Company), and the opinion of such counsel will be full and complete
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.


 


(b)           Whenever
in the performance of its duties under this Agreement the Rights Agent deems it
necessary or desirable that any fact or matter (including without limitation
the identity of any Acquiring Person) 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 is specifically prescribed herein) may be
deemed to be conclusively proved and established by a certificate signed by the
Chief Executive Officer, President, any Vice President, the Treasurer, or the
Secretary of the Company and delivered to the Rights Agent; and such
certificate will be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.


 


(c)           The
Rights Agent will be liable hereunder to the Company and any other Person only
for its own gross negligence, bad faith, or willful misconduct.


 


(d)           The
Rights Agent will not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the Rights Certificates
(except its countersignature thereof) or be required to verify the same, but
all such statements and recitals are and will be deemed to have been made by
the Company only.


 


(e)           The
Rights Agent will not be under any responsibility in respect of the validity of
this Agreement or the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the validity or execution of any
Rights Certificate (except its countersignature thereof); nor will it be
responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor will it be
responsible for any adjustment required under the provisions of Section 11
or Section 13 hereof or for the manner, method, or amount of any
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after receipt of a certificate furnished pursuant to Section 12
describing any such adjustment); nor will it be responsible for any
determination by the Board of Directors of the Company of the current market value
of the Rights, Common Shares or Preferred Shares; nor will it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares, Common Shares or other
securities to be issued pursuant to this Agreement or any Rights Certificate or
as to whether any Preferred Shares, Common Shares or other securities will,
when issued, be validly authorized and issued, fully paid, and nonassessable.


 


25





















 


(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 the Chief Executive
Officer, President, any Vice President, the Treasurer, or the Secretary of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it will 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 instructions 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 under this Rights Agreement and the date on and/or
after which such action will be taken or such omission will be effective. The
Rights Agent will not be liable for any action taken by, or omission of, the
Rights Agent in accordance with a proposal included in any such application on
or after the date specified in such application (which date will not be less
than ten (10) Business Days after the date the Chief Executive Officer,
President, any Vice President, the Treasurer, or the Secretary of the Company
actually receives such application, unless any such officer of the Company
consents in writing to an earlier date) unless, prior to taking any such action
(or the effective date in the case of an omission), the Rights Agent receives
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 act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein will 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 will not be answerable or accountable
for any act, default, neglect, or misconduct of any such attorneys or agents or
for any loss to the Company resulting from any the act, default, neglect, or
misconduct of any such attorney or agent, provided reasonable care was
exercised in the selection and continued employment thereof.


 


(j)            No
provision of this Agreement will require the Rights Agent to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder or in the exercise of its rights if there will 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 Rights Certificate surrendered to the Rights Agent for
exercise or transfer, the certification attached to the form of assignment or
form of election


 


26





















 


to purchase, as the case may be, has either not been completed or
indicates an affirmative response to clause l and/or 2 thereof, the Rights
Agent will not take any further action with respect to such requested exercise
of transfer without first consulting with the Company.


 


SECTION 22.       CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days’ prior notice in writing to the Company and to each transfer agent
of the Common Shares or Preferred Shares in accordance with Section 27
hereof, and to the holders of the Rights Certificates by first-class mail at
the expense of the Company.


 


The Company may remove the Rights Agent or
any successor Rights Agent upon 30 days’ prior notice in writing sent to the
Rights Agent or successor Rights Agent, as the case may be, and each transfer
agent of the Common Shares or Preferred Shares in accordance with Section 27
hereof, and to the holders of the Rights Certificates by first-class mail.


 


If the Rights Agent resigns or is removed or
otherwise becomes incapable of acting, the Company will appoint a successor to
the Rights Agent. If the Company fails 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 Rights Certificate (who will, with such
notice, submit his Rights Certificate for inspection by the Company), then the
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent.


 


Any successor Rights Agent, whether appointed
by the Company or by a court, will be an entity organized and doing business
under the laws of the United States or any state of the United States (so long
as such entity is in good standing), and which is authorized under such laws to
exercise corporate trust or stock transfer powers and is 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 $100
million. After appointment, the successor Rights Agent will be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent will 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 will file notice thereof in
writing with the predecessor Rights Agent and each transfer agent of the Common
Shares or Preferred Shares, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 22, however, or any defect therein, will not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.


 


SECTION 23.       ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
at its option may issue new Rights Certificates 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 Rights Certificates made in accordance with the
provisions of this Agreement.


 


27





















 


SECTION 24.       REDEMPTION.


 


(a)           The
Rights may be redeemed by action of the Board of Directors pursuant to
paragraph (b) of this Section 24, and will not be redeemed in any other
manner.


 


(b)           The
Board of Directors of the Company may, at its option, at any time prior to the
earliest of (x) the close of business on the tenth day following a Shares
Acquisition Date, or (y) 5:00 p.m., E.S.T., on the Final Expiration Date,
redeem all but not less than all of the then outstanding Rights at a redemption
price of $0.0001 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof. The
redemption of the Rights by the Board of Directors may be made effective at
such time, on such basis, and with such conditions as the Board of Directors in
its sole discretion may establish.


 


(c)           Immediately
upon the action of the Board of Directors of the Company ordering the
redemption of the Rights pursuant to paragraph (b) of this Section 24, 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
will be to receive the Redemption Price. The Company will promptly give public
notice of any such redemption; PROVIDED, HOWEVER, that the failure to give, or
any defect in, any such notice will not affect the validity of such redemption.
Within 10 days after such action ordering the redemption of the Rights pursuant
to paragraph (b) or (c), as the case may be, the Company will 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 Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice mailed in the manner herein provided will be deemed
duly 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. The Company may, at its option, pay the Redemption Price in cash,
Common Shares (based on the current per share market price of the Common Shares
as of the time of redemption) or any other form of consideration deemed
appropriate by the Board of Directors. Notwithstanding anything contained in
this Agreement to the contrary, the Rights will not be exercisable after the
first occurrence of a Section 11(a)(ii) Event until such time as the
Company’s right of redemption under Section 24(b) has expired.


 


SECTION 25.       EXCHANGE.


 


(a)           The
Company’s Board of Directors, at its option, at any time after the occurrence
of a Section 11(a)(ii) Event may exchange all or part of the then
outstanding and exercisable Rights (which will not include Rights that have
become void pursuant to the provisions of Section 7(e) 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 Company’s Board
of Directors may not 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


 


28





















 


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 Company’s Board of Directors ordering the exchange of
any Rights pursuant to subsection (a) of this Section 25, and without
any further action and without any notice, the right to exercise such Rights
will terminate and the only right thereafter of a holder of such Rights will 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 will promptly give
public notice of any such exchange; PROVIDED, HOWEVER, that the failure to
give, or any defect in, such notice will not affect the validity of such
exchange. The Company promptly will 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. Any notice which is mailed in the manner
herein provided will 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 that will be exchanged. Any partial
exchange will be effected PRO RATA based on the number of Rights (other than
Rights that have become void pursuant to the provisions of Section 7(e)
hereof) held by each holder of Rights.


 


(c)           If
there are not sufficient Common Shares issued but not outstanding or authorized
but unissued to permit any exchange of Rights as contemplated in accordance
with this Section 25, the Company will take all such action as may be
necessary to authorize additional Common Shares for issuance upon exchange of
the Rights. If the Company shall, after good faith effort, be unable to take
all such action as may be necessary to authorize such additional Common Shares,
the Company shall substitute, for each Common Share that would otherwise be
issuable upon exchange of a Right, a number of Preferred Shares or fraction
thereof such that the current per share market price of one Preferred Share multiplied
by such number or fraction is equal to the current per share market price of
one Common Share as of the date of issuance of such Preferred Shares or
fraction thereof.


 


(d)           The
Company will not be required to issue fractions of Common Shares or to distribute
certificates that evidence fractional Common Shares. In lieu of such fractional
Common Shares, the Company will pay to the registered holders of the Rights
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 paragraph (e), the
current market value of a whole Common Share will be the closing price of a
Common Share (as determined pursuant to Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section 25.


 


SECTION 26.       NOTICE OF CERTAIN EVENTS.


 


(a)           In
case the Company proposes, at any time after the Distribution Date, (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, (ii) to offer to the holders of its Preferred Shares rights or warrants
to subscribe for or to purchase any


 


29





















 


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 will give to each holder of a Rights
Certificate, in accordance with Section 27 hereof, a notice of such
proposed action, which will specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding-up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any
such date is to be fixed, and such notice will 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 Preferred Shares, whichever will be
the earlier.


 


(b)           If
a Section 11(a)(ii) Event shall occur, (i) the Company will as soon as
practicable thereafter give to each holder of a Rights Certificate, in
accordance with Section 27 hereof, a notice of the occurrence of such
event, which notice will describe such event and the consequences of such event
to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Common Shares will be deemed
thereafter to refer to Preferred Shares or, if appropriate, other securities.


 


SECTION 27.       NOTICES. Any notice or demand authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company will be sufficiently given or made if sent by reputable
overnight courier or by registered, certified, or first-class mail, postage or
delivery charges prepaid and addressed (until another address is filed in
writing with the Rights Agent) as follows:


 


Cubist Pharmaceuticals, Inc.


14 Emily Street


Cambridge, Massachusetts  02148


Attn: President and CEO


 


Any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent will be sufficiently given or made if
sent by reputable overnight courier or by registered, certified, or first-class
mail, postage or delivery charges prepaid and addressed (until another address
is filed in writing with the Company) as follows:


 


30





















 


BankBoston, N.A.


c/o Equiserve Limited Partnership


150 Royall Street


Canton, Massachusetts  02021


Attn: 
Client Administration 


 


Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Rights Certificate or
certificate representing Common Shares or Preferred Shares will 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.


 


SECTION 28.       SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date, if
the Company so directs, the Company and the Rights Agent will supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing Preferred Shares. From and after the Distribution
Date, if the Company so directs, the Company and the Rights Agent will
supplement or amend this Agreement without the approval of any holders of
Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein that may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder in any
manner that the Company may deem necessary or desirable and that will not
adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person or any Affiliate or Associate of an Acquiring Person).


 


SECTION 29.       SUCCESSORS.  All the
covenants and provisions of this Agreement by or for the benefit of the Company
or the Rights Agent will bind and inure to the benefit of their respective
successors and assigns hereunder.


 


SECTION 30.       BENEFITS OF THIS AGREEMENT. Nothing in this Agreement will be
construed to give to any Person or corporation other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and prior
to the Distribution Date, of the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement will be for the sole
and exclusive benefit of the Company, the Rights Agent, and the registered
holders of the Rights Certificates (and, prior to the Distribution Date, of the
Common Shares).


 


SECTION 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 will remain in full
force and effect and will in no way be affected, impaired or invalidated.


 


SECTION 32.       GOVERNING LAW. This Agreement and each Rights Certificate
issued hereunder will be deemed to be a contract made under the laws of the
State of Delaware and for all purposes will 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.


 


SECTION 33.       COUNTERPARTS. This Agreement may be executed in any number of


 


31





















 


counterparts and each of such counterparts will for all purposes be
deemed to be an original, and all such counterparts will together constitute
but one and the same agreement.


 


SECTION 34.       DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and will not
control or affect the meaning or construction of any of the provisions hereof.


 


IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and attested, as an agreement under
seal, as of the date first above written.


 


	
   

  	
  CUBIST PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas A. Shea

  
	
   

  	
  Name: Thomas A. Shea

  
	
   

  	
  Title: CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BANKBOSTON, N.A.,

  
	
   

  	
  as Rights Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carol Mulvey - Eori

  
	
   

  	
  Name: Carol Mulvey - Eori

  
	
   

  	
  Title: Administration Manager

  



 





















 


EXHIBIT A


 


FORM


 


of


 


CERTIFICATE OF DESIGNATIONS


 


of


 


SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK


 


of


 


CUBIST PHARMACEUTICALS, INC.


 


(Pursuant to Section 151
of the


Delaware General Corporation
Law)


 


Cubist Pharmaceuticals, Inc., a corporation
organized and existing under the General Corporation Law (the “DGCL”) of the
State of Delaware (hereinafter called the “CORPORATION”), hereby certifies that
the following resolution was adopted by the Board of Directors of the
Corporation as required by Section 151 of the DGCL at a meeting duly
called and held on July 21, 1999: 


 


	
  RESOLVED:

  	
  That pursuant to Section 4 of
  Article IV of the Certificate of Incorporation, as amended, of the
  Corporation, the Board of Directors hereby establishes a series of Preferred
  Stock, par value $0.001 per share (the “SERIES A PREFERRED STOCK”), of the
  Corporation and hereby states the designation and number of shares, and fixes
  the preferences, voting powers, qualifications and special or relative rights
  or privileges thereof, as follows:

  



 


Series A Junior Participating Preferred
Stock:


 


Section 1. Designation and Amount. The
shares of such series shall be designated as “Series A Junior Participating
Preferred Stock” (the “SERIES A PREFERRED STOCK”) and the number of shares
constituting the Series A Preferred Stock shall be 500,000. 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 Series A
Preferred Stock to a number less than the number of shares of Series A
Preferred Stock then outstanding, PLUS the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
conversion of any outstanding securities issued by the Corporation and
convertible into Series A Preferred Stock.


 


Section 2. 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 Series A 


 


2





















 


Preferred Stock with respect to dividends,
the holders of shares of Series A Preferred Stock, in preference to the holders
of the Common Stock of the Corporation, par value $0.001 per share (“COMMON
STOCK”), 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 March, June, September and
December 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 Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $1 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 Series A Preferred Stock. In the event the Corporation 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 amount to which holders of shares
of Series A 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
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) The
Corporation shall declare a dividend or distribution on the Series A 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 per share
on the Series A 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 Series A
Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such 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
Series A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly


 


3





















 


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 Series A 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 Series A 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.


 


Section 3. Voting Rights. The holders of
shares of Series A Preferred Stock shall have the following voting rights:


 


(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the stockholders
of the Corporation. In the event the Corporation 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 Series A 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 Designations creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Series A Preferred Stock
and the holders, of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.


 


(C) Except as set forth herein, or as
otherwise provided by law, holders of Series A 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.


 


Section 4. Certain Restrictions.


 


(A) Whenever
quarterly dividends or other dividends or distributions payable on the Series A
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 Series A Preferred Stock outstanding shall have been
paid in full, the Corporation shall not:


 


4





















 


(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 Series A 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 Series A Preferred Stock, except dividends paid ratably on
the Series A 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 Series A Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation ranking junior (either as
to dividends or upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or


 


(iv) redeem or
purchase or otherwise acquire for consideration any shares of Series A
Preferred Stock, or any shares of stock ranking on a parity with the Series A
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.


 


(B) The
Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.  


 


Section 5. Reacquired Shares. Any shares
of Series A Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled 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 Certificate of Incorporation, or in any
other Certificate of Designations creating a series of Preferred Stock or any
similar stock or as otherwise required by law.


 


Section 6. Liquidation, Dissolution or
Winding Up. Upon any liquidation, dissolution or winding up of the Corporation,
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 Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A 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
Series A Preferred Stock


 


5





















 


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 Series A
Preferred Stock, except distributions made ratably on the Series A 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 Corporation 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
Series A 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
outstanding immediately prior to such event.


 


Section 7. Consolidation, Merger, etc.
In case the Corporation 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 Series A 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 Corporation 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 amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A 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.


 


Section 8. No Redemption. The shares of
Series A Preferred Stock shall not be redeemable.


 


Section 9. Rank. The Series A Preferred
Stock shall rank, with respect to the payment of dividends and the distribution
of assets, junior to all series of any other class of the Corporation’s
Preferred Stock.


 


Section 10. Amendment. The Certificate
of Incorporation of the Corporation shall not be amended in any manner which
would materially alter or change the powers, preferences or special rights of
the Series A Preferred Stock so as to affect them adversely


 


6





















 


without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Series A Preferred Stock, voting together as a single
class.


 


IN WITNESS WHEREOF, this Certificate of
Designations is executed on behalf of the Corporation by its Chief Executive
Officer and attested by its Secretary as of        ,
1999.


 


ATTEST:


 


	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Justin P. Morreale

  
	
   

  	
  Title:

  	
  Secretary

  
				



 





















 


EXHIBIT B


 


[FORM OF RIGHTS CERTIFICATE]


 


 


	
  CERTIFICATE NO. R-

  	
  RIGHTS

  



 


 


NOT EXERCISABLE AFTER AUGUST 3, 2009, OR
EARLIER IF NOTICE OF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT, AT
THE OPTION OF THE COMPANY, TO REDEMPTION AT $0.0001 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND
VOID. 


 


RIGHTS CERTIFICATE


 


CUBIST PHARMACEUTICALS, 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 April 30,
1999 (the “RIGHTS AGREEMENT”), by and between Cubist Pharmaceuticals, Inc. (the
“COMPANY”), a Delaware corporation, and BankBoston, N.A. (the “RIGHTS AGENT”),
to purchase from the Company at any time after the Distribution Date (as
defined in the Rights Agreement) and prior to 5:00 P.M., Boston time, on August 3,
2009, at the office of the Rights Agent designated for such purpose, or at the
office of its successor as Rights Agent designated for such purpose, one
one-hundredth of a share of the Series A Junior Participating Preferred Stock,
par value $0.001 per share (the “PREFERRED SHARES”), of the Company, at a
purchase price of $20.00 per one one-hundredth of a Preferred Share (the “PURCHASE
PRICE”), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase duly executed. The number of Rights evidenced by
this Rights Certificate (and the number of one one-hundredths of a


 


2





















 


Preferred Share that may be purchased upon exercise hereof) set forth
above, and the Purchase Price set forth above, are the number of Rights and
Purchase Price as of August 3***, 1999, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-hundredths of a Preferred Share that may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain
events.


 


This Rights Certificate is subject to all of
the terms, provisions, and conditions of the Rights Agreement, which terms,
provisions, and conditions are hereby incorporated herein by reference and made
a part hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties, and
immunities of the Rights Agent, the Company and the holders of the Rights
Certificates. Copies of the Rights Agreement are on file at the principal
executive offices of the Company and the above-mentioned office of the Rights
Agent.


 


This Rights Certificate, with or without
other Rights Certificates, may be surrendered at the principal office of the Rights
Agent in exchange for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase the same
aggregate number of one one-hundredths of a Preferred Share as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered entitled
such holder to purchase. If this Rights Certificate is exercised in part, the
holder will be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not
exercised.


 


Subject to the provisions of the Rights
Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the
Company at its option at a redemption price of $0.0001 per Right, or (ii) may
be exchanged in whole or in part by the Company, at its option, for the
appropriate number of one one-hundredths of a Preferred Share.


 


Fractional Preferred Shares will be issued
upon the exercise of any Right or Rights evidenced hereby. 


 


No holder of this Rights Certificate, as
such, will be entitled to vote or receive dividends or be deemed for any
purpose the holder of any Preferred Shares or of any other securities of the
Company that may at any time be issuable on the exercise hereof, nor will
anything contained in the Rights 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


 


3





















 


or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate have been exercised as provided in the
Rights Agreement.


 


This Rights Certificate will not be valid or
obligatory for any purpose until it is countersigned by the Rights Agent.


 


Dated as of              ,     .


 


 


	
   

  	
  CUBIST PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


 


Countersigned:


 


 


	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  



 


4





















 


[Form of Reverse Side of Rights
Certificate]


 


FORM OF ASSIGNMENT


 


(To be executed by the registered holder if such

holder desires to transfer the Rights Certificate.)


 


	
  FOR VALUE RECEIVED

  	
   

  	
  hereby
  sells, assigns, and transfers

  
	
  to

  	
   

  
	
   

  	
   

  
				



(Please print name and address
of transferee)


 


this Rights Certificate, together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint                       as
attorney, to transfer the within Rights Certificate on the books of Cubist
Pharmaceuticals, Inc., with full power of substitution. 


 


	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature)

  
						



 


Medallion Signature Guaranty: 


 


 


ASSIGNMENT CERTIFICATION


 


The undersigned hereby certifies by checking
the appropriate boxes that: 


 


(l)   The Rights evidenced by this
Rights Certificate [ ] are [ ] are not being sold, assigned, and transferred by
or on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such term is defined pursuant to the
Rate Agreement); 


 


(2)   After due inquiry and to the
best knowledge of the undersigned, he, she, or it [ ] did [ ] did not acquire
the Rights evidenced by this Rights Certificate from any person who is or was
an Acquiring Person or an Affiliate or Associate of an Acquiring Person. 


 


	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature)

  
						



 


5





















 


NOTICE


 


The signatures to the foregoing Assignment
and Certification must correspond exactly to the name of the registered owner
hereof, as written upon the face of this Rights Certificate, without any change
whatsoever. 


 


 


FORM OF ELECTION TO PURCHASE


 


(To be executed if holder desires to exercise the Rights Certificate.) 


 


To CUBIST PHARMACEUTICALS, INC.:


 


The undersigned hereby irrevocably elects to
exercise                                                  
Rights represented by this Rights Certificate to purchase the Preferred Shares
(or fractions thereof or such other securities of the Company or of any other
person) issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of: 


 


Please insert social security

or other identifying number:


 


 


(Please print name and address)


 


(If the above number of Rights is not all of
the Rights evidenced by this Rights Certificate, then a new Rights Certificate
for the balance remaining of such Rights will be registered and returned to the
undersigned.) 




	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature)

  
						



 


 


Medallion Signature Guaranty: 


 


 


ELECTION CERTIFICATION


 


The undersigned hereby certifies by checking the appropriate boxes
that:


 


6





















 


(1)   The Rights evidenced by
this Rights Certificate [ ] are [ ] are not being sold, assigned, and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any Acquiring Person (as such terms are defined
pursuant to the Rate Agreement).


 


(2)   After due inquiry and to the
best knowledge of the undersigned, he, she, or it [ ] did [ ] did not acquire
the Rights evidenced by this Rights Certificate from any person who is or was
an Acquiring Person or an Affiliate or Associate of any Acquiring Person. 


 


	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature)

  
						



 


 


NOTICE


 


The signatures in the foregoing Election to
Purchase and Certification must correspond exactly to the name of the
registered owner hereof, as written upon the face of this Rights Certificate,
without any change whatsoever.


 


In the event the certification set forth
above in the Assignment or the 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 Rights 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.


 


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EXHIBIT C


 


SUMMARY OF RIGHTS


 


On July 21, 1999, the Board of Directors
of Cubist Pharmaceuticals, Inc. (the “COMPANY”) declared a dividend of one
fractional preferred share purchase right (a “RIGHT”) for each outstanding
share of common stock, par value $0.001 per share (the “COMMON SHARES”), of the
Company. The dividend is payable on Auguat 3, 1999 (the “RECORD DATE”) to the
stockholders of record on that date. Except as described below, each Right,
when exercisable, entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock
of the Company, par value $0.001 per share (the “PREFERRED SHARES”), at a price
of $20.00 per one one-hundredth of a Preferred Share (the “PURCHASE PRICE”),
subject to adjustment or substitution of other securities of the Company in
place of the Preferred Shares. The description and terms of the Rights are set
forth in a Rights Agreement (the “RIGHTS AGREEMENT”) between the Company and
BankBoston, N.A., as Rights Agent (the “RIGHTS AGENT”).


 


Initially, the Rights will be attached to all
certificates representing Common Shares then outstanding, and no separate
Rights certificates will be distributed. Until the earlier to occur of (i) 10
business days following a public announcement that a person or group of
affiliated or associated persons (an “ACQUIRING PERSON”) have acquired
beneficial ownership of 15% or more of the outstanding Common Shares (the date
of such an announcement being a “SHARES ACQUISITION DATE”), or (ii) 10 business
days (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)
following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of such outstanding
Common Shares (in either case, (i) or (ii), 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 certificates together
with a copy of this Summary of Rights.


 


The Rights Agreement provides that, until the
Distribution Date, the Rights will be transferred 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 for 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 (“RIGHTS
CERTIFICATES”) will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date, and the separate Rights
Certificates alone will evidence the Rights.


 


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The Rights are not exercisable until the
Distribution Date. The Rights will expire on August 3, 2009 (the “FINAL
EXPIRATION DATE”), unless the Rights are earlier redeemed by the Company, as
described below.


 


The Purchase Price payable, and the number of
Preferred Shares or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) upon the grant to holders of
the Preferred Shares of certain rights or warrants to subscribe for or purchase
Preferred Shares at a price, or securities convertible into Preferred Shares
with a conversion price, less than the then current market price of the
Preferred Shares or (iii) upon the distribution to holders of the Preferred
Shares of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable in
Preferred Shares) or of subscription rights or warrants (other than those
referred to above).


 


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 subdivisions, consolidations or combinations of the Common Shares occurring,
in any such case, prior to the Distribution Date.


 


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 $1 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, consolidation 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.


 


If, after the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such, the Company is involved in a merger or other business combination
transaction in which the Common Shares are exchanged or changed, or 50% or more
of the Company’s consolidated assets or earning power are sold (in one
transaction or a series of transactions), proper provision will be made so that
each holder of a Right (other than an Acquiring Person) 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 (or, in the event there is more than one acquiring company, the
acquiring company receiving the greatest portion of the assets or


 


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earning power transferred) which at the time of such transaction would
have a market value of two times the exercise price of the Right.


 


If any person becomes an Acquiring Person,
each holder of a Right 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. UPON OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN THE
IMMEDIATELY PRECEDING SENTENCE, ANY RIGHTS THAT ARE, OR (UNDER CERTAIN
CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT) WERE, BENEFICIALLY OWNED BY
ANY ACQUIRING PERSON SHALL IMMEDIATELY BECOME NULL AND VOID.


 


At any time after the occurrence of any such
event and prior to the acquisition by such person or group of 50% or more of
the outstanding Common Shares, the Board of Directors may exchange the Rights
(other than Rights owned by such person or group which 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 rights, preferences and
privileges), per Right (subject to adjustment).


 


With certain exceptions, no adjustment 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 (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) will be issued and in lieu thereof, an adjustment 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.


 


At any time prior to the earlier of (i) the
tenth day after a Shares Acquisition Date, or (ii) the expiration of the
Rights, the Board of Directors may redeem the Rights in whole, but not in part,
at a price of $0.0001 per Right (the “REDEMPTION PRICE”). The redemption of the
Rights may be made effective at such time on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately 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.


 


Other than those provisions relating to the
principal economic terms of the Rights, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company prior to the
Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended by the Board in order to cure any ambiguity, to make
changes that do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen
any time period under the Rights Agreement; PROVIDED, HOWEVER, that no
amendment to adjust the time period governing redemption shall be made at such
time as the Rights are not redeemable.


 


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.


 


A copy of the Rights Agreement has been filed
with the Securities and Exchange


 


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Commission as an Exhibit to a Current Report on Form 8-K dated              ,
1999.


 


A copy of the Rights Agreement
is available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is hereby incorporated herein by
reference.


 


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