Document:

Filed by sedaredgar.com - Aqua Society, Inc. - Exhibit 10.2

MANAGEMENT CONSULTING SERVICES AGREEMENT

THIS AGREEMENT dated effective as of the
1stday of September, 2009.

BETWEEN: 

  
    
      FRANK IDING, of Hydethorpe Road 105, London, England
        SW12 OJF, United Kingdom 

      (hereinafter called the “Manager”) 

    

  

OF THE FIRST PART

AND: 

  
    
      AQUA SOCIETY, INC., a Nevada corporation, having
        a business address at Konrad-Adenauer Strasse 9-13, 45699, Herten, Germany
      

      (hereinafter called the “Company”) 

    

  

OF THE SECOND PART

WHEREAS: 

	A. 	
      The Company wishes to retain the services of the Manager
      to act as the Company’s Chief Financial Officer and Treasurer;
  and

	 	 
	B. 	
      The Manager has the business and management experience
      and expertise to provide the desired services to the
  Company,

NOW THEREFORE THIS AGREEMENT WITNESSES that, in
consideration of the following mutual covenants and agreements, the sufficiency
of which is hereby acknowledged, the parties hereto agree as follows: 

	1. 	
      The Manager hereby agrees to act as the Company’s Chief
      Financial Officer and Treasurer (the “Management Services”).

	 	 
	2. 	
      In consideration of the Manager providing the Management
      Services to the Company, the Company agrees to pay to the Manager a
      consulting fee equal to $9,000 US per month (the “Consulting Fee”) payable
      on the 1st day of each month, beginning on September 1,
      2009.

	 	 
	3. 	
      For each fiscal year of the Company that started and
      completed during the term of this Agreement (and for greater clarity,
      beginning with the Company’s fiscal year ending September 30, 2010)
      (hereinafter referred to as a “Qualifying Year”), the Company shall pay to
      the Manager a bonus (the “Bonus”) equal to 2% of the amount, if any, by
      which the Company’s net income before taxes for the particular Qualifying
      Year exceeds $1,000,000 US. The Bonus shall be paid by the Company on or
      before January 31 of the year following the particular Qualifying
    Year.

	 	 
	4. 	
      For the purposes of this Agreement, “net income before
      taxes” shall mean the Company’s net income before taxes as set out in the
      financial statements of the Company as audited by the Company’s auditors
      for the particular Qualifying Year. The amount so set out in the Company’s
      audited financial statements for the particular Qualifying Year shall be
      final and binding on the Company and the Manager.

	 	 
	5. 	
      In order to be entitled to receive the Bonus, the Manager
      must provide the Management Services to the Company for the entire
      Qualifying Year. If the Manger ceases to provide the Management Services
      to the Company prior to the end of the particular Qualifying Year for any
      reason whatsoever, the Manager’s entitlement to the Bonus shall be
      forfeited, and the Company’s obligation to pay the Bonus shall
    cease.

	 	 
	6. 	
      At the end of each Qualifying Year, provided that a
      majority of the Company’s Board of Directors, not including the Manager,
      determines that the Manager has reasonably fulfilled his duties and
      obligations

-2-

		
      under this Agreement during that particular Qualifying
      Year, the Company shall grant to the Manager options (the “Options”) to
      purchase 200,000 shares of the Company’s common stock, and exercisable at
      a price equal to 80% of the market price of the Company’s common
    stock.

	 	 	 
	7. 	
      Any Options granted to the Manager pursuant to this
      Agreement shall be exercisable for a period of three years from the date
      such Options are granted, except that:

	 	 	 
		(a) 	
      Subject to subsection (b) below, if the Manager ceases to
      provide the Management Services to the Company for any reason other than a
      reason set out in subsection (b) below, the Options shall cease to be
      exercisable thirty days after the date the Manager ceases to provide the
      Management Services to the Company; and

	 	 	 
		(b) 	
      If the Manager ceases to provide the Management Services
      to the Company as a result of a breach of the Manager’s duties and
      obligations to Company, whether arising out of this Agreement or
      otherwise, the Options shall cease to be exercisable on the date the
      Manager ceases to provide Management Services to the Company.

	 	 	 
	8. 	
      For the purposes of calculating the exercise price for
      the Options, “market price” shall be determined as follows:

	 	 	 
		(a) 	
      if the Company’s common stock is listed on an established
      stock exchange or exchanges or the NASDAQ National Market, the lesser of
      (i) the closing price per share on the date immediately preceding the
      grant date of the Options (the “Grant Date”), and (ii) the average closing
      price per share as quoted on the principal exchange on which the Company’s
      common stock is traded or as reported by the NASDAQ National Market, as
      the case may be, during the ten (10) trading days immediately preceding
      the Grant Date;

	 	 	 
		(b) 	
      if the Company’s common stock is not then listed on an
      exchange or the NASDAQ National Market, but is quoted on the NASDAQ
      Capital Market, the OTC Bulletin Board service or the Pink Sheets, the
      lesser of (i) the closing price per share on the date immediately
      preceding the Grant Date, or (ii) the average of the closing bid and ask
      prices per share for the Common Stock as quoted by the NASDAQ Capital
      Market, the OTC Bulletin Board or the Pinks Sheets, as the case may be,
      during the ten (10) trading days immediately preceding the Grant Date;
      or

	 	 	 
		(c) 	
      if there is no such reported market for the Company’s
      common stock for the date in question, then an amount determined in good
      faith by the Company’s Board of Directors.

	 	 	 
	9. 	
      The Company agrees to reimburse the Manager for any
      properly receipted expenses directly attributable to performing his
      obligations to the Company pursuant to this Agreement, provided that any
      expenses in excess of $1,000 shall require the prior written approval of
      the Company (the “Reimbursable Expenses”).

	 	 	 
	10. 	
      The parties agree that the Manager will provide the
      Management Services to the Company as, and when, needed. The Manager will
      not be restricted from participating in other business activities that do
      not conflict with his duties and obligations to the Company under this
      Agreement.

	 	 	 
	11. 	
      The Manager covenants and agrees with the Company to, at
      all times, use his best efforts to advance the interests of the Company
      and to faithfully, industriously and, to the best of his abilities,
      perform the Management Services and the Manager further covenants and
      agrees with the Company that it will not engage in any activities that
      would bring the Company’s reputation into disrepute.

	 	 	 
	12. 	
      The Manager represents and warrants to the Company as
      follows, and acknowledges that the Company is relying upon these
      representations and warranties in entering into this
  Agreement:

	 	(a) 	
      the Manager has the necessary expertise to effectively
      provide the Management Services;

2

-3-

	 	(b) 	
      the Manager is not aware of any fact or matter which
      would prevent the Manager from carrying out his duties and obligations
      pursuant to this Agreement;

	 	 	 
	 	(c) 	
      No bankruptcy petitions have been filed within the last
      five years by or against any business of which the Manager was a general
      partner or executive officer either at the time of the bankruptcy or
      within two years prior to that time;

	 	 	 
	 	(d) 	
      Within the past five years, the Manager has not been
      convicted in any criminal proceeding or been the subject of any pending
      criminal proceeding (excluding traffic violations and other minor
      offenses);

	 	 	 
	 	(e) 	
      Within the past five years, the Manager has not been
      subject to any order, judgment, or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently
      or temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      and

	 	 	 
	 	(f) 	
      Within the past five years, the Manager has not been
      found by a court of competent jurisdiction (in a civil action) or any
      securities regulatory body to have violated any federal or state
      securities or commodities laws.

	13. 	
      The Manager acknowledges and agrees with the Company that
      he will at all times be an independent contractor and shall not at any
      time be or be deemed to be an employee of the Company.

	 	 
	14. 	
      This Agreement shall commence on the date first written
      above and may be terminated by either party by written notice given not
      less than three (3) months from the date of termination or such shorter
      period as may be agreed by the parties, in writing.

	 	 
	15. 	
      No amendment of this Agreement shall be valid unless such
      amendment is made in writing and executed by both parties.

	 	 
	16. 	
      This Agreement shall be deemed to have been entered into
      in, and shall be governed by, the laws of the State of Nevada.

	 	 
	17. 	
      The failure of any party to insist, whether in one or
      more instances, upon the performance of any of the terms or conditions of
      this Agreement or to exercise any right granted under this Agreement,
      shall not be construed as a waiver of the party’s right to demand the
      future performance of any such term or condition or of such party’s
      entitlement to exercise such right.

	 	 
	18. 	
      The parties may not transfer, subcontract or otherwise
      assign any of the rights or obligations created under this Agreement
      without the prior written consent of the other party.

	 	 
	19. 	
      Time shall be of the essence of this
  Agreement.

-- THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK --

3

-4-

	20. 	
      The Manager acknowledges that this Agreement has been
      prepared by O’Neill Law Group PLLC acting on behalf of the Company only
      and that he has been advised to obtain independent legal
  advice

IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written. 

	 	 
	/s/ Frank Iding
      	 
	Frank Iding 	 
	 	 
	 	 
	AQUA SOCIETY, INC. 	 
	by its authorized signatory 	 
	 	 
	 	 
	/s/ Hubert Hamm
      	 
	Hubert Hamm 	 
	President, CEO, Secretary, Treasurer & Director 	 

4Exhibit 4.1

 

FACET
BIOTECH CORPORATION

 

AND

 

MELLON
INVESTOR SERVICES LLC

 

as Rights Agent

 

 

RIGHTS AGREEMENT

 

Dated as of September 7,
2009

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Certain Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Appointment of Rights Agent

  	
  6

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Issuance of Right Certificates

  	
  6

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Form of Right Certificates

  	
  8

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Countersignature and Registration

  	
  9

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Transfer, Split Up, Combination and Exchange of Right
  Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates

  	
  10

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Exercise of Rights; Purchase Price; Expiration Date of
  Rights

  	
  11

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Cancellation and Destruction of Right Certificates

  	
  12

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Reservation and Availability of Shares of Preferred Stock

  	
  13

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Preferred Stock Record Date

  	
  14

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Adjustments to Number and Kind of Shares, Number of Rights
  or Purchase Price

  	
  14

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Certification of Adjustments or Number of Shares

  	
  22

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Consolidation, Merger or Sale or Transfer of Assets or
  Earning Power

  	
  23

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Fractional Rights and Fractional Shares

  	
  26

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Rights of Action

  	
  27

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Agreement of Right Holders

  	
  28

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Right Certificate Holder Not Deemed a Stockholder

  	
  28

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Concerning the Rights Agent

  	
  28

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Merger or Consolidation or Changed Name of Rights Agent

  	
  29

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Duties of Rights Agent

  	
  30

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Change of Rights Agent

  	
  32

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Issuance of New Right Certificates

  	
  33

  
	
   

  	
   

  	
   

  
	
  23.

  	
  Redemption

  	
  33

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  24.

  	
  Exchange of Rights for Common Stock

  	
  34

  
	
   

  	
   

  	
   

  
	
  25.

  	
  Notice of Proposed Actions

  	
  36

  
	
   

  	
   

  	
   

  
	
  26.

  	
  Notices

  	
  36

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Supplements and Amendments

  	
  37

  
	
   

  	
   

  	
   

  
	
  28.

  	
  Successors

  	
  38

  
	
   

  	
   

  	
   

  
	
  29.

  	
  Benefits of this Rights Agreement

  	
  38

  
	
   

  	
   

  	
   

  
	
  30.

  	
  Determinations and Actions by the Board of Directors

  	
  38

  
	
   

  	
   

  	
   

  
	
  31.

  	
  Governing Law

  	
  38

  
	
   

  	
   

  	
   

  
	
  32.

  	
  Counterparts

  	
  38

  
	
   

  	
   

  	
   

  
	
  33.

  	
  Descriptive Headings

  	
  39

  
	
   

  	
   

  	
   

  
	
  34.

  	
  Severability

  	
  39

  
	
   

  	
   

  	
   

  
	
  35.

  	
  Force Majeure

  	
  39

  

 

ii

 

RIGHTS AGREEMENT

 

This
Rights Agreement (the “Rights Agreement”), is dated as of September 7,
2009, between Facet Biotech Corporation, a Delaware corporation (the “Company”),
and Mellon Investor Services LLC, a New Jersey limited liability company (the “Rights
Agent”).

 

W  I  T  N  E  S  S
E  T  H:

 

WHEREAS,
the Board of Directors of the Company on September 7, 2009 (i) authorized
the issuance and declared a dividend of one right (“Right”) for each share of
the common stock, par value $0.01
per share, of the Company outstanding as of the Close of Business (as such term
is hereinafter defined) on September 21, 2009 (the “Record Date”), each
Right representing the right to purchase one one-thousandth of a share of Series A
Preferred Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Designation attached hereto as Exhibit A
upon the terms and subject to the conditions hereinafter set forth, and (ii) further
authorized and directed the issuance of one Right with respect to each share of
Common Stock of the Company that shall become outstanding between the Record Date, and the Distribution
Date (as such term is hereinafter defined);

 

NOW,
THEREFORE, in consideration of the premises and the mutual agreements herein
set forth, the parties agree as follows:

 

1.             Certain Definitions.  For purposes
of this Rights Agreement the following terms shall have the meanings indicated:

 

(a)           “Acquiring Person” shall mean any Person
(as such term is hereinafter defined) who or which, together with all
Affiliates (as such term is hereinafter defined) and Associates (as such term
is hereinafter defined) of such Person shall be the Beneficial Owner (as such
term is hereinafter defined) of fifteen percent (15%) or more of the
outstanding Common Stock of the Company, without the prior approval of the
Board of Directors; provided, however, that in no event shall a Person who or
which, together with all Affiliates and Associates of such Person, is the
Beneficial Owner of less than 15% of the Company’s outstanding Common Stock,
become an Acquiring Person solely as a result of a reduction of the number of
shares of outstanding Common Stock, including repurchases of outstanding shares
of Common Stock by the Company, which reduction increases the percentage of
outstanding shares of Common Stock Beneficially Owned by such Person, provided,
further, that if a Person shall become the Beneficial Owner of 15% or
more of the Company’s outstanding Common Stock then outstanding solely by
reason of a reduction of the number of shares of outstanding Common Stock, and
shall thereafter become the Beneficial Owner of any additional shares of Common
Stock of the Company, then such Person shall be deemed to be an Acquiring
Person unless upon the consummation of the acquisition of such additional
shares of Common Stock such person does not own 15% or more of the shares of
Common Stock then outstanding.  An
Acquiring Person shall not include an Exempt Person (as such term is
hereinafter defined) or a Grandfathered Person (as such term is hereinafter
defined); provided further that a Grandfathered Person shall become an
Acquiring Person if, without the prior approval of the Board of Directors, the
Grandfathered Person, together with all Affiliates and Associates of such 

 

 

Grandfathered
Person, becomes the Beneficial Owner of an additional number of shares, in
addition to such Grandfathered Person’s shares of Common Stock Beneficially
Owned at the time of public announcement of the adoption of this Rights
Agreement, equal in the aggregate to 1% or more of the Common Stock then
outstanding; provided, however, that a Grandfathered Person shall not become an
Acquiring Person solely by reason of a reduction of the number of shares
of outstanding Common Stock, including repurchases of outstanding shares of
Common Stock by the Company, which reduction increases the percentage of
outstanding shares of Common Stock Beneficially Owned by such Grandfathered
Person; provided, further, that if a Grandfathered
Person shall thereafter become the Beneficial Owner of any additional shares of
Common Stock of the Company which, together with any additional shares of
Common Stock of the Company which the Grandfathered Person became a Beneficial
Owner of since the time of the public announcement of the adoption of this
Rights Agreement, aggregate to 1% or more of the Company’s outstanding Common
Stock then outstanding, then such Grandfathered Person shall be deemed to be an
Acquiring Person unless upon the consummation of the acquisition of such
additional shares of Common Stock such person does not own 15% or more of the
shares of Common Stock then outstanding.  Notwithstanding the foregoing, if (i) either
(X) the Board of Directors determines in good faith that a Person who
would otherwise be an Acquiring Person, as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently
(including, without limitation, because (A) such Person was unaware that
it Beneficially Owned a percentage of Common Stock that would otherwise cause such Person to be an Acquiring Person or
(B) such Person was aware of the extent of its Beneficial Ownership but
had no actual knowledge of the consequences of such Beneficial Ownership under
this Rights Agreement) and without any intention of changing or influencing
control of the Company, or (Y) within two Business Days of being requested
by the Company to advise the Company regarding same, such Person certifies in
writing that such Person acquired Beneficial Ownership of 15%  or more of the Company’s outstanding Common Stock
inadvertently or without knowledge of the terms of the Rights, and (ii) such
Person divests as promptly as practicable a sufficient number of shares of
Common Stock 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 or to have become an “Acquiring Person”
for any purposes of this Rights Agreement.

 

(b)           “Affiliate” and “Associate” shall have
the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act as in effect on the
date of this Rights Agreement.

 

(c)           A Person shall be deemed the “Beneficial
Owner” of, shall be deemed to “Beneficially Own” and shall be deemed to have “Beneficial
Ownership” of, any securities

 

(i)            which such Person or any of such Person’s
Affiliates or Associates beneficially owns, directly or indirectly;

 

(ii)           which such Person or any of such Person’s
Affiliates or Associates, directly or indirectly, has (A) the right to
acquire (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), whether or
not in writing, or upon the exercise of conversion rights, exchange rights,
rights (other than the Rights), 

 

2

 

warrants or
options, or otherwise; provided, however, that a Person shall not be deemed the
Beneficial Owner of, to Beneficially Own or to have Beneficial Ownership of,
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 purchase or exchange; or (B) 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, or any
comparable or successor rule), including pursuant to any agreement, arrangement
or understanding (whether or not in writing); provided, however, that a Person
shall not be deemed the Beneficial Owner of, to Beneficially Own, or to have
Beneficial Ownership of, any securities if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable
proxy or consent given in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then reportable by
such Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or

 

(iii)          which
are beneficially owned, directly or indirectly, by any other Person with which
such Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting except as described in the proviso to clause (B) of
subparagraph (ii) of this Section 1(c) or disposing of any
securities of the Company; provided, however, that no Person who
is an officer, director or employee of an Exempt Person shall be deemed, solely
by reason of such Person’s status or authority as such, to be the Beneficial
Owner of, to have Beneficial Ownership of or to Beneficially Own any securities
that are Beneficially Owned (as defined in this Section 1(c)), including,
without limitation, in a fiduciary capacity, by an Exempt Person or by any
other such officer, director or employee of an Exempt Person.

 

For
all purposes of this Rights Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including any calculation
for purposes of determining the particular percentage of such outstanding
shares of Common Stock of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of
the General Rules and Regulations under the Exchange Act as in effect on
the date hereof.

 

(d)           “Board of Directors” shall mean the
Company’s Board of Directors.

 

(e)           “Business Day” shall mean any day other
than a Saturday, Sunday, or a day on which NASDAQ or banking institutions in the State of New York, the State of New Jersey or the State of California
are authorized or obligated by law or executive order to close.

 

(f)            “Close of Business” on any given date
shall mean 5:00 P.M., Pacific time, on such date; provided, however, that
if such date is not a Business Day it shall mean 5:00 P.M., Pacific time,
on the next succeeding Business Day.

 

(g)           “Common Stock” when used with reference
to the Company shall mean the common stock, par value $0.01 per share, of the Company. 
“Common Stock” when used with reference to any Person other than the
Company which shall be organized in corporate form shall mean the capital stock
or other equity security with the greatest per share voting power of 

 

3

 

such
Person or, if such Person is a Subsidiary of or is controlled by another
Person, the Person which ultimately controls such first-mentioned Person.  “Common Stock” when used with reference to
any Person other than the Company which shall not be organized in corporate
form shall mean units of beneficial interest which shall represent the right to
participate in profits, losses, deductions and credits of such Person and which
shall be entitled to exercise the greatest voting power per unit of such
Person.

 

(h)           “Common Stock Equivalents” shall have the
meaning set forth in Section 11(a)(iii) hereof.

 

(i)            “Company” shall have the meaning set
forth in the preamble hereto.

 

(j)            “Current Market Price” shall have the
meaning set forth in Section 11(d) hereof.

 

(k)           “Current Value” shall have the meaning
set forth in Section 11(a)(iii) hereof.

 

(l)            “Distribution Date” shall have the
meaning set forth in Section 3(a) hereof.

 

(m)          “Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended.

 

(n)           “Exempt Person” shall mean the Company or
any Subsidiary of the Company, including, without limitation, in its fiduciary
capacity, any employee benefit plan or employee or director stock plan of the
Company or of any Subsidiary of the Company, or any Person, organized,
appointed, established or holding Common Stock for or pursuant to the terms of
any such plan or any Person funding other employee benefits for employees of
the Company or any Subsidiary of the Company.

 

(o)           “Expiration Date” shall have the meaning
set forth in Section 7(a) hereof.

 

(p)           “Final Expiration Date” shall have the
meaning set forth in Section 7(a) hereof.

 

(q)           “Flip-In Event” shall have the meaning
set forth in Section 11(a)(ii) hereof.

 

(r)            [Intentionally Omitted]

 

(s)           “Flip-In Trigger Date” shall have the
meaning set forth in Section 11(a)(iii) hereof.

 

(t)            “Flip-Over Event” shall mean any event
described in clause (x), (y) or (z) of Section 13(a) hereof.

 

(u)           [Intentionally Omitted]

 

4

 

(v)           “Grandfathered Person” shall mean any Person
who would otherwise qualify as an Acquiring Person as of the date of this
Rights Agreement, provided that such Person shall cease to be a
Grandfathered Person at such time as such Person, together with such Person’s
Affiliates and Associates, ceases to Beneficially Own in excess of 15% of the
Company’s Common Stock, after which such Person shall be subject to all of
the provisions of this Rights Agreement in the same manner as any Person who is
not and was not a Grandfathered Person.

 

(w)          “NASDAQ” shall have the meaning set forth
in Section 9(b) hereof.

 

(x)            “Person” shall mean any individual, firm,
corporation, partnership, trust, limited liability company or other entity, and
shall include any successor (by merger or otherwise) thereof or thereto.

 

(y)           “Preferred Stock” shall mean the Series A
Preferred Stock, $0.01 par value per share of the Company having the rights,
powers and preferences set forth in Exhibit A hereto, and, to the
extent that there is not a sufficient number of shares of Series A
Preferred Stock authorized to permit the full exercise of the Rights, any other
series of Preferred Stock, $0.01 par value per share, of the Company designated
for such purpose containing terms substantially similar to the terms of the Series A
Preferred Stock.

 

(z)            “Preferred Stock Equivalent” shall have
the meaning set forth in Section 11(b) hereof.

 

(aa)         “Principal Party” shall have the meaning
set forth in Section 13(b) hereof.

 

(bb)         “Purchase Price” shall have the meaning
set forth in Section 4(a) hereof.

 

(cc)         “Record Date” shall have the meaning set
forth in the Recitals within this Rights Agreement.

 

(dd)         “Redemption Date” shall have the meaning
set forth in Section 7(a) hereof.

 

(ee)         “Redemption Price” shall have the meaning
set forth in Section 23(a) hereof.

 

(ff)           “Right Certificate” shall have the meaning
set forth in Section 3(a) hereof.

 

(gg)         “Securities Act” shall mean the
Securities Act of 1933, as amended.

 

(hh)         “Spread” shall have the meaning set forth
in Section 11(a)(iii) hereof.

 

(ii)           “Stock Acquisition Date” shall mean the
first date of public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such or such earlier date as a majority of the
directors shall become aware of the existence of an Acquiring Person.

 

5

 

(jj)           “Substitution Period” shall have the
meaning set forth in Section 11(a)(iii) hereof.

 

(kk)         “Subsidiary” of a Person shall mean any
corporation or other entity of which securities or other ownership interests
having ordinary voting power sufficient to elect a majority of the board of
directors or other persons performing similar functions are Beneficially Owned,
directly or indirectly, by such Person and any corporation or other entity that
is otherwise controlled by such Person.

 

(ll)           “Summary of Rights” shall have the
meaning set forth in Section 3(b) hereof.

 

(mm)       “Trading Day” shall mean a day on which
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business or,
if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange , a Business Day.

 

(nn)         “Triggering Event” shall have the meaning
set forth in Section 11(a)(ii) hereof.

 

(oo)         “Trust” shall have the meaning set forth
in Section 24 hereof.

 

(pp)         “Trust Agreement” shall have the meaning
set forth in Section 24 hereof.

 

(qq)         “Voting Power” shall mean the voting
power of all securities of the Company then outstanding and generally entitled
to vote for the election of directors of the Company.

 

Any
determination required by the definitions contained in this Section 1
shall be made by the Board of Directors in its good faith judgment, which
determination shall be binding on the Rights Agent and the holders of the Rights.  The Rights Agent is entitled always to assume
the Company’s Board of Directors acted in good faith and shall be fully
protected and incur no liability in reliance thereon.

 

2.             Appointment of Rights Agent. 
The Company hereby appoints the Rights Agent to act as rights agent for
the Company in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. 
The Company may from time to time appoint a co-rights agent as it may
deem necessary or desirable.  In the event
the Company appoints one or more co-rights agents, the respective duties of the
Rights Agents and any co-rights agents shall be as the Company shall
determine.  The Rights Agent shall have
no duty to supervise, and in no event shall be liable for, the acts or
omissions of any such co-rights agent.

 

3.             Issuance of Right Certificates.

 

(a)           Until the earlier of the Close of
Business (i) the 10th day after the Stock Acquisition Date (or, if the
10th day after the Stock Acquisition Date occurs before the Record Date, the
Close of Business on the Record Date) or (ii) the 10th Business Day (or
such later date as may be determined by action of the Board of Directors prior
to such time as any Person 

 

6

 

becomes
an Acquiring Person) after the date of the commencement by any Person (other
than an Exempt Person) of, or of the first public announcement of the intent of
any Person (other than an Exempt Person) to commence, a tender or exchange
offer upon the successful consummation of which any Person would be an
Acquiring Person, (irrespective of whether any shares are actually purchased
pursuant to any such offer) (including any such date which is after the date of
this Rights Agreement and prior to the issuance of the Rights; the earlier of
such dates being herein referred to as the “Distribution Date”), (x) the
Rights will be evidenced (subject to the provisions of Sections 3(b) and 3(c) below)
by the certificates for the Common Stock registered in the names of the holders
of the Common Stock and not by separate Right Certificates, and (y) each
Right will be transferable only in connection with the transfer of a share
(subject to adjustment as hereinafter provided) of Common Stock.  As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and the Rights Agent will, if
requested and provided with all necessary information, send) by first-class,
insured, postage prepaid mail, to each record holder of the Common Stock as of
the Close of Business on the Distribution Date (other than any Acquiring Person
or any Associate or Affiliate of an Acquiring Person), as shown by the records
of the Company, to the address of such holder shown on such records of the
Company or the transfer agent or registrar for the Common Stock, a Right
certificate in substantially the form of Exhibit B hereto (a “Right
Certificate”) evidencing one Right for each share of Common Stock so held.  In the event that an adjustment in the number
of Rights per share of Common Stock has been made pursuant to Sections 11 or 13
hereof, at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof), so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights.  As of and after the
Distribution Date the Rights will be evidenced solely by such Right
Certificates.  The Company shall promptly
notify the Rights Agent in writing upon the occurrence of the Distribution Date
and, if such notification is given orally, the Company shall confirm the same
in writing on or prior to the Business Day next following.  Until such notice is received by the Rights
Agent, the Rights Agent may presume conclusively for all purposes that the
Distribution Date has not occurred.

 

(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 Stock, substantially in the form attached hereto as Exhibit C
(a “Summary of Rights”), by first-class, postage prepaid mail, to each record
holder of Common Stock as of the Close of Business on the Record Date, at the
address of such holder shown on the records of the Company or the transfer
agent or registrar for the Common Stock.

 

(c)           Rights shall be issued in respect of all
shares of Common Stock that are issued (either as an original issuance or from
the Company’s treasury) after the Record Date prior to the earlier of the
Distribution Date or the Expiration Date. 
With respect to certificates representing such shares of Common Stock
outstanding as of the Record Date, until the Distribution Date the Rights will
be evidenced by such certificates for Common Stock registered in the names of
the holders thereof together with the Summary of Rights.  Until the Distribution Date (or, if earlier,
the Expiration Date), the surrender for transfer of any certificate for Common Stock
outstanding on the Record Date (with or without a copy of the Summary of
Rights), shall 

 

7

 

also
constitute the surrender for transfer of the Rights associated with the Common
Stock represented thereby.

 

(d)           Certificates issued for Common Stock
(including, without limitation, certificates issued upon transfer or exchange
of Common Stock) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date shall have impressed on, printed on,
written on or otherwise affixed to them a legend in substantially the following
form:

 

This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Facet Biotech
Corporation and Mellon Investor Services LLC, as Rights Agent, dated as of September 7,
2009, as the same may be amended or supplemented from time to time (the “Rights
Agreement”), the terms of which hereby are incorporated herein by reference and
a copy of which is on file at the principal executive office of Facet Biotech
Corporation.  Under certain
circumstances, as set forth in the Rights Agreement, such Rights (as such term
is defined in the Rights Agreement) will be evidenced by separate certificates
and will no longer be evidenced by this certificate.  Facet Biotech Corporation will mail to the
holder of this certificate a copy of the Rights Agreement without charge after
receipt by it of a written request therefor. 
Under certain circumstances as provided in
the Rights Agreement, Rights issued to, Beneficially Owned by or transferred to
any Person who is or becomes an Acquiring Person (as such terms are defined in
the Rights Agreement) or an Associate or Affiliate (as such terms are defined
in the Rights Agreement) thereof and certain transferees thereof will be null
and void and will no longer be transferable.

 

With respect to such certificates containing the
foregoing legend, the Rights associated with the Common Stock represented by
such certificates shall, until the Distribution Date, be evidenced by such
certificates alone, and registered holders of Common Stock shall also be the
registered holders of the associated Rights, and the surrender for transfer of
any such certificate shall also constitute the surrender for transfer of the
Rights associated with the Common Stock represented thereby.  In the event that the Company purchases or
acquires any shares of Common Stock after the Record Date but prior to the
earlier of the Distribution Date, the Redemption Date or the Expiration Date,
any Rights associated with such shares of Common Stock shall be deemed
cancelled and retired so that the Company shall not be entitled to exercise any
Rights associated with the shares of Common Stock no longer outstanding.

 

Notwithstanding
this subsection (d), the omission of a legend shall not affect the
enforceability of any part of this Rights Agreement or the rights of any holder
of the Rights.

 

4.             Form of Right Certificates.

 

(a)           The Right Certificates (and the forms of
election to purchase shares and of assignment to be printed on the reverse
thereof), when, as and if issued, shall be substantially in the form set forth
in Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate (but which do not affect the rights, duties or
responsibilities of the Rights Agent) and as are not inconsistent with the
provisions of this Rights Agreement, or as may be required to comply with any
law or with any rule or

 

8

 

regulation
made pursuant thereto or with any rule or regulation of any stock exchange
on which the Rights may from time to time be listed, or to conform to
usage.  Subject to the provisions of
Sections 11, 13 and 22 hereof, the Right Certificates evidencing the
Rights issued on the Record Date whenever such certificates are issued, shall
be dated as of the Record Date and the Right Certificates evidencing Rights to
holders of record of Common Stock issued after the Record Date shall be dated
as of the Record Date but shall also be dated to reflect the date of issuance
of such Right Certificate.  On their
face, Right Certificates shall entitle the holders thereof to purchase, for
each Right, one one-thousandth of a share of Preferred Stock, or other
securities or property as provided herein, as the same may from time to time be
adjusted as provided herein, at the price per one one-thousandth of a share of
Preferred Stock of $50.00, as the same may from time to time be adjusted as
provided herein (the “Purchase Price”).

 

(b)           Notwithstanding any other provision of
this Rights Agreement, any Right Certificate that represents Rights that are or
were at any time on or after the earlier of the Stock Acquisition Date or the
Distribution Date Beneficially Owned by an Acquiring Person or any Affiliate or
Associate thereof (or any transferee of such Rights) shall have impressed on,
printed on, written on or otherwise affixed to it (if the Company or the Rights
Agent has knowledge that such Person is an Acquiring Person or an Associate or
Affiliate thereof or transferee of such Persons or a nominee of any of the
foregoing) a legend in substantially the following form:

 

The Beneficial Owner of the Rights represented by this Right
Certificate is an Acquiring Person or an Affiliate or Associate  of an Acquiring Person or a subsequent holder
of such Right Certificates Beneficially Owned by such Persons (as such terms
are defined in the Rights Agreement). 
Accordingly, this Right Certificate and the Rights represented hereby
are null and void and will no longer be transferable as provided in the Rights
Agreement.

 

The provisions of Section 11(a)(ii) and Section 24
of this Rights Agreement shall be operative whether or not the foregoing legend
is contained on any such Right Certificates.

 

5.             Countersignature and Registration.

 

(a)           The Right Certificates shall be executed
on behalf of the Company by its Chief Executive Officer, its President or any
Vice President, either manually or by facsimile signature, and have affixed
thereto the Company’s seal or a facsimile thereof which shall be attested by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature.  The Right
Certificates shall be countersigned, either manually or by facsimile signature,
by the Rights Agent and shall not be valid for any purpose unless so
countersigned.  In case any officer of
the Company who shall have signed any of the Right Certificates shall cease to
be such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the
Company with the same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.

 

9

 

(b)           Following the Distribution Date and
receipt by the Rights Agent of notice to that effect and all other relevant
information referred to in Section 3(a), the Rights Agent will keep or
cause to be kept, at its office designated for such purpose, records for
registration and transfer of the Right Certificates issued hereunder.  Such records shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates, the date of
each of the Right Certificates and the certificate numbers for each of the
Right Certificates.

 

6.             Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.

 

(a)           Subject to the provisions of
Sections 7(e), 11(a)(ii) and 14 hereof, at any time after the Close
of Business on the Distribution Date and at or prior to the Close of Business
on the Expiration Date, and following receipt in writing by the Rights Agent of
notice to that effect, any Right Certificate or Certificates (other than Right
Certificates representing Rights that have become null and void pursuant to Section 11(a)(ii) hereof
or that have been exchanged pursuant to Section 24 hereof) may be (i) transferred
or (ii) split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number
of shares of Preferred Stock or other securities as the Right Certificate or
Right Certificates surrendered then entitled such holder to purchase.  Any registered holder desiring to transfer
any Right Certificate shall surrender the Right Certificate at the office of
the Rights Agent designated for such purposes with the form of assignment on
the reverse side thereof duly endorsed (or enclose with such Right Certificate
a written instrument of transfer in form satisfactory to the Company and the
Rights Agent), duly executed by the registered holder thereof or his attorney
duly authorized in writing, and with such signature guaranteed by a member of a
securities approved medallion program. 
Any registered holder desiring to split up, combine or exchange any
Right Certificate or Right Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Right Certificate or
Right Certificates to be split up, combined or exchanged at the office of the
Rights Agent designated for such purpose. 
The Right Certificates are transferable only on the registry books of
the Rights Agent.  Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate or Right
Certificates until the registered holder thereof shall have (i) properly
completed and duly signed the certificate contained in the form of assignment
set forth on the reverse side of each such Right Certificate, (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) thereof and of the Rights evidenced thereby and the
Affiliates and Associates of such Beneficial Owner (or former Beneficial Owner)
as the Company or the Rights Agent shall reasonably request, and (iii) paid
a sum sufficient to cover any tax or charge that may be imposed in connection
with any transfer, split up, combination or exchange of Right Certificates as
required by Section 9(d) hereof. 
Thereupon the Rights Agent shall, subject to Sections 4(b), 7(e),
11 and 14 hereof, manually countersign and deliver to the Person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested, registered in such name or names as may be designated by the surrendering
registered holder.  The Company may
require payment from the holder of a Right Certificate of a sum sufficient to
cover any tax or charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.  The Rights Agent shall have no duty or
obligation to take any action under this Section or any other section of
this Rights Agreement which requires the

 

10

 

payment
by a Rights holder of applicable taxes or charges unless and until the Rights
Agent is satisfied that all such taxes and/or charges have been paid.

 

(b)           Subject to the provisions of Section 11(a)(ii) hereof,
upon receipt by the Company and the Rights Agent of evidence satisfactory to
them of the loss, theft, destruction or mutilation of a Right Certificate, and,
in case of loss, theft or destruction, of indemnity or security satisfactory to
them, and, if requested by the Company or the Rights Agent, reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Right
Certificate if mutilated, the Company will make, execute and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.

 

7.             Exercise of Rights; Purchase Price; Expiration Date of
Rights.

 

(a)           Subject to Section 11(a)(ii) hereof,
the Rights shall become exercisable, and may be exercised to purchase Preferred
Stock, except as otherwise provided herein, in whole or in part at any time on
or after the Distribution Date upon surrender of the Right Certificate, with
the form of election to purchase on the reverse side thereof properly completed
and duly executed (with such signature duly guaranteed), to the Rights Agent at
the office of the Rights Agent designated for such purpose, together with
payment of the Purchase Price with respect to each Right exercised, subject to
adjustment as hereinafter provided, and an amount equal to any tax or charge
required to be paid under Section 9(d) hereof, by certified check,
cashier’s check, bank draft or money order payable to the order of the Company,
at or prior to the Close of Business on the earlier of (i) September 6,
2010 (the “Final Expiration Date”), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (such date being herein referred
to as the “Redemption Date”) or (iii) the time at which all such Rights
are exchanged as provided in Section 24 hereof (the earliest of (i), (ii) and
(iii) being herein referred to as the “Expiration Date”).  Except for those provisions herein which
expressly survive the termination of this Rights Agreement, this Rights
Agreement shall terminate at such time as the Rights are no longer exercisable
hereunder.

 

(b)           The Purchase Price and the number of
shares of Preferred Stock or other securities or consideration to be acquired
upon exercise of a Right shall be subject to adjustment from time to time as
provided in Sections 11 and 13 hereof. 
The Purchase Price shall be payable in lawful money of the United States
of America, in accordance with Section 7(c) hereof.

 

(c)           Except as provided in Section 11(a)(ii) hereof,
upon receipt of a Right Certificate with the form of election to purchase
properly completed and duly executed, accompanied by payment of the Purchase
Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof)
or so much thereof as is necessary for the shares to be purchased and an amount
equal to any applicable tax or charge required to be paid under Section 9(d) hereof,
by certified check, cashier’s check, bank draft or money order payable to the
order of the Company or the Rights Agent, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) requisition from any transfer agent of the
Preferred Stock (or make available if the Rights Agent is the transfer agent)
certificates for the number of shares of Preferred Stock so elected to be
purchased and the Company will comply and hereby authorizes and directs such
transfer

 

11

 

agent
to comply with all such requests, (ii) when necessary, requisition from
the Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14(b) hereof, and (iii) promptly
after receipt of such Preferred Stock certificates cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and, when necessary, after receipt of the cash requisitioned from the
Company promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.  In the
event of a purchase of securities, other than Preferred Stock, pursuant to Section 11(a) or
Section 13 hereof, the Company shall promptly provide written notice to
the Rights Agent and the Rights Agent, relying on such notice, shall promptly
take the appropriate actions corresponding to the foregoing clauses (i) through
(iii).  In the event that the Company is
obligated to issue other securities of the Company, pay cash and/or distribute
other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
necessary to comply with this Rights Agreement.

 

(d)           Except as otherwise provided herein, in
case the registered holder of any Right Certificate shall exercise less than
all the Rights evidenced thereby, a new Right Certificate evidencing Rights
equivalent to the Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Sections 6 and 14 hereof.

 

(e)           Notwithstanding anything in this Rights
Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated
to undertake any action with respect to a registered holder of Rights or other
securities upon the occurrence of any purported exercise as set forth in this Section 7
unless such registered holder shall have (i) properly completed and duly
signed the certificate contained in the form of election to purchase set forth
on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof and the rights evidenced
thereby as the Company or the Rights Agent shall reasonably request.

 

8.             Cancellation and Destruction of Right Certificates. 
All Right Certificates surrendered for the purpose of exercise. transfer,
split up, combination or exchange shall, if surrendered to the Company or to
any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Right Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Rights Agreement.  The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any Right Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof.  The
Rights Agent shall deliver all cancelled Right Certificates to the Company, or
shall, at the written request of the Company, destroy such cancelled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.

 

12

 

9.             Reservation and Availability of Shares of Preferred
Stock.

 

(a)           The Company covenants and agrees that at
all times it will cause to be reserved and kept available, out of and to the
extent of its authorized and unissued shares of Preferred Stock not reserved
for another purpose (and, following the occurrence of a Triggering Event, other
securities) or held in its treasury, the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, other securities) that,
as provided in this Rights Agreement, including Section 11(a)(iii) hereof,
will be sufficient to permit the exercise in full of all outstanding Rights; provided,
however, that the Company shall be required to reserve and keep
available shares of Preferred Stock or other securities sufficient to permit
the exercise in full of all outstanding Rights pursuant to the adjustments set
forth in Section 11(a)(ii), Section 11(a)(iii) or Section 13
hereof only if, and to the extent that, the Rights become exercisable pursuant
to such adjustments.

 

(b)           The Company shall use its best efforts (i) to
cause, from and after such time as the Rights become exercisable, the Rights
and all shares of Preferred Stock (and following the occurrence of a Triggering
Event, other securities) issued or reserved for issuance upon exercise thereof
to be reported by the NASDAQ Stock Market (“NASDAQ”) or such other system then
in use, and if the Preferred Stock shall become listed on any national
securities exchange, to cause, from and after such time as the Rights become
exercisable, the Rights and all shares of Preferred Stock (and, following the
occurrence of a Triggering Event, other securities) issued or reserved for
issuance upon exercise thereof to be listed on such exchange upon official
notice of issuance upon such exercise and (ii) if then necessary, to
permit the offer and issuance of such shares of Preferred Stock (and, following
the occurrence of a Triggering Event, other securities), register and qualify
such share of Preferred Stock (and, following the occurrence of a Triggering
Event, other securities) under the Securities Act and any applicable state
securities or “blue sky” laws (to the extent exemptions therefrom are not
available), cause such registration statement and qualifications to become
effective as soon as possible after such filing and keep such registration and
qualifications effective until the earlier of (x) the date as of
which the Rights are no longer exercisable for such securities and (y)  the Expiration Date of the Rights.  The Company may temporarily suspend, for a
period of time not to exceed ninety (90) days, the exercisability of the Rights
in order to prepare and file a registration statement under the Securities Act
and permit it to become effective.  Upon
any such suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.  The Company shall notify the Rights Agent
whenever it makes a public announcement pursuant to this Section 9(b) and
give the Rights Agent a copy of such announcement.  Notwithstanding any provision of this Rights
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification or exemption in such
jurisdiction shall have been obtained and until a registration statement under
the Securities Act (if required) shall have been declared effective.

 

(c)           The Company covenants and agrees that it
will take all such action as may be necessary to ensure that all shares of
Preferred Stock (and following the occurrence of a Triggering Event, other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such securities (subject to payment of the Purchase Price
in respect

 

13

 

thereof),
be duly and validly authorized and issued and fully paid and nonassessable
shares in accordance with applicable law.

 

(d)           The Company further covenants and agrees
that it will pay when due and payable any and all federal and state transfer
taxes and charges which may be payable in respect of the issuance or delivery
of the Right Certificates or of any shares of Preferred Stock (or other
securities, as the case may be) upon the exercise of Rights.  The Company shall not, however, be required
to pay any tax or charge which may be payable in respect of any transfer or
delivery of Right Certificates to a Person other than, or the issuance or
delivery of certificates for Preferred Stock (or other securities, as the case
may be) upon exercise of Rights in a name other than that of, the registered
holder of the Right Certificate, and the Company shall not be required to issue
or deliver a Right Certificate or certificate for Preferred Stock (or other
securities, as the case may be) to a Person other than such registered holder
until any such tax and charge shall have been paid (any such tax or charge
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company’s or the Rights Agent’s
satisfaction that no such tax or charge is due.

 

10.           Preferred Stock Record Date. 
Each Person in whose name any certificate for shares of Preferred Stock
(or other securities, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
shares of Preferred Stock (or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable taxes or charges) was duly made.  Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate, as such, shall not be entitled to
any rights of a stockholder of the Company with respect to the shares for which
the Rights shall be exercisable, including, without limitation, the right to
vote, to receive dividends or other distributions or to exercise any preemptive
rights, if any, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.

 

11.           Adjustments to Number and Kind of Shares, Number of
Rights or Purchase Price.  The number and kind of shares of Preferred
Stock or other securities or property subject to purchase upon the exercise of each Right,
the number of Rights outstanding and the Purchase Price are subject to
adjustment from time to time as follows:

 

(a)

 

(i)            In the event the Company shall at any
time after the date of this Rights Agreement (A) declare or pay any
dividend on Preferred Stock payable in shares of Preferred Stock, (B) subdivide
or split the outstanding shares of Preferred Stock into a greater number of
shares, (C) combine or consolidate the outstanding shares of Preferred
Stock into a smaller number of shares or effect a reverse split of the
outstanding shares of Preferred Stock, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of Preferred 

 

14

 

Stock or capital
stock, as the case may be, issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in effect, the
aggregate number and kind of shares of capital stock or other securities,
which, if such Right had been exercised immediately prior to such date, the
holder thereof would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or reclassification.  If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof,
the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).

 

(ii)           Subject to Section 24, in the event
that any Person becomes an Acquiring Person (a “Flip-In Event” or a “Triggering
Event”), then upon the first occurrence of such Flip-In Event (i) the
Purchase Price shall be adjusted to be the Purchase Price in effect immediately
prior to the Flip-In Event multiplied by the number of one one-thousandth of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such Flip-In Event, whether or not such Right was then exercisable, and (ii) each
holder of a Right, except as otherwise provided in this Section 11(a)(ii) and
Section 11(a)(iii) hereof, shall thereafter have the right to
receive, upon exercise thereof at a price equal to the Purchase Price (as so
adjusted), in accordance with the terms of this Rights Agreement and in lieu of
shares of Preferred Stock, such number of shares of Common Stock as shall equal
the result obtained by dividing the Purchase Price (as so adjusted) by 50% of
the Current Market Price per share of the Common Stock (determined pursuant to Section 11(d) hereof)
on the date of such Flip-In Event; provided, however, that the
Purchase Price (as so adjusted) and the number of shares of Common Stock so
receivable upon the exercise of a Right shall, following the Flip-In Event, be
subject to further adjustment as appropriate in accordance with Section 11(f) hereof.  Notwithstanding anything in this Rights
Agreement to the contrary, however, from and after the Flip-In Event, any
Rights that are Beneficially Owned by (x) any Acquiring Person (or any
Affiliate or Associate of any Acquiring Person), (y) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who becomes a transferee
after the Flip-In Event or (z) a transferee of any Acquiring Person (or
any such Affiliate or Associate) who became a transferee prior to or concurrently
with the Flip-In Event pursuant to either (I) a transfer from the
Acquiring Person to holders of its equity securities or to any Person with whom
it has any continuing agreement, arrangement or understanding, whether written
or otherwise, regarding the transferred Rights or (II) a transfer which
the Board of Directors has determined is part of a plan, agreement, arrangement
or understanding, whether written or otherwise, which has the purpose or effect
of avoiding the provisions of this paragraph, and subsequent transferees of
such Persons, shall be null and void without any further action and any holder
of such Rights shall thereafter have no rights whatsoever with respect to such
Rights under any provision of this Rights Agreement.  The Company shall notify the Rights Agent
when this Section 11(a)(ii) applies and shall use all reasonable
efforts to ensure that the provisions of this Section 11(a)(ii) are
complied with, but neither the Company nor the Rights Agent shall have any
liability to any holder of Right Certificates or other Person as a result of
the Company’s failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.  From and after the Flip-In Event, no Right
Certificate shall be issued pursuant to Section 3 or Section 6 hereof
that represents Rights that are or have become null and void pursuant to the
provisions of this paragraph, and any Right Certificate delivered to the Rights
Agent that represents Rights that are or have become null and void pursuant to
the provisions of this paragraph shall be cancelled.  

 

15

 

The Company shall
give the Rights Agent written notice of the identity of any such Acquiring
Person, Associate or Affiliate, or the nominee of any of the foregoing, and the
Rights Agent may rely on such notice in carrying out its duties under this
Rights Agreement and shall be deemed not to have any knowledge of the identity
of any such Acquiring Person, Associate or Affiliate, or the nominee of any of
the foregoing unless and until it shall have received such notice.

 

(iii)          The Company may at its option substitute
for a share of Common Stock issuable upon the exercise of Rights in accordance
with the foregoing subparagraph (ii) such number or fractions of
shares of Preferred Stock having an aggregate current market value equal to the
Current Market Price of a share of Common Stock.  In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Board of Directors shall, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party (A) determine the excess (such excess, the “Spread”)
of (1) the value of the shares of Common Stock issuable upon the exercise
of a Right in accordance with the foregoing subparagraph (ii) (the “Current
Value”) over (2) the Purchase Price (as adjusted in accordance with the
foregoing subparagraph (ii)), and (B) with respect to each Right
(other than Rights which have become null and void pursuant to the foregoing
subparagraph (ii)), make adequate provision to substitute for the shares
of Common Stock issuable in accordance with the foregoing paragraph (ii) upon
exercise of the Right and payment of the Purchase Price (as adjusted in
accordance therewith), (1) cash, (2) a reduction in such Purchase
Price, (3) shares of Preferred Stock or other equity securities of the
Company (including, without limitation, shares or fractions of shares of
preferred stock which, by virtue of having dividend, voting and liquidation
rights substantially comparable to those of the shares of Common Stock, are
deemed in good faith by the Board of Directors to have substantially the same
value as the shares of Common Stock (such shares of Preferred Stock and shares
or fractions of shares of preferred stock being hereinafter referred to as “Common
Stock Equivalents”), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having a value which,
when added to the value of the shares of Common Stock actually issued upon
exercise of such Right, shall have an aggregate value equal to the Current
Value (less the amount of any reduction in such Purchase Price), where such
aggregate value has been determined by the Board of Directors upon the advice
of a nationally recognized investment banking firm selected in good faith by the
Board of Directors; provided, however, that if the Company shall
not make adequate provision to deliver value pursuant to clause (B) above
within 30 days following but not including the date of the Flip-In Event (the “Flip-in
Trigger Date”), then the Company shall be obligated to deliver, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party, upon the surrender for exercise of a Right and without
requiring payment of such Purchase Price, shares of Common Stock (to the extent
available), and then, if necessary, such number or fractions of shares of
Preferred Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread.  If  the
Board of Directors shall determine in good faith that it is likely that
sufficient additional shares of Common Stock and/or Common Stock Equivalents
could be authorized for issuance upon exercise in full of the Rights, the
30-day period set forth above may be extended to the extent necessary, but not
more than 90 days after but not including the Flip-In Trigger Date, in order
that the Company may seek stockholder approval for the authorization of such
additional shares of Common Stock or Common Stock Equivalents (such 30-day
period, as it may be extended being hereinafter referred to as the

 

16

 

“Substitution
Period”).  To the extent that the Company
determines that some action need be taken pursuant to the second and/or third
sentence of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 11(a)(ii) hereof and the last sentence of this Section 11(a)(iii),
that such action shall apply uniformly to all outstanding Rights, and (y) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares and/or
to decide the appropriate form of distribution to be made pursuant to the
second sentence of this Section 11(a)(iii) and to determine the value
thereof.  In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect and
the Company shall promptly provide the Rights Agent with a copy of such
announcements.  For purposes of this Section 11(a)(iii),
the value of the Common Stock shall be the Current Market Price per share of
the Common Stock on the Flip-In Trigger Date and the per share or per unit
value of any Common Stock Equivalent shall be deemed to equal the Current Market
Price per share of the Common Stock on such date.  The Board of Directors may, but shall not be
required to, establish procedures to allocate the right to receive Common Stock
upon the exercise of the Rights among holders of Rights pursuant to this Section 11(a)(iii).

 

(b)           In case the Company shall fix a record
date for the issuance of rights (other than the Rights), options or warrants to
all holders of Preferred Stock entitling them to subscribe for or purchase
Preferred Stock (for a period expiring within 45 calendar days after but not
including such record date), shares having the same rights, privileges and
preferences as the Preferred Stock (a “Preferred Stock Equivalent”) or
securities convertible into Preferred Stock or Preferred Stock Equivalent at a
price per share of Preferred Stock or Preferred Stock Equivalent (or having a
conversion price per share, if a security is convertible into Preferred Stock
or Preferred Stock Equivalent) less than the Current Market Price per share of
Preferred Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock and/or
Preferred Stock Equivalent (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such Current
Market Price, and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number of additional
shares of Preferred Stock and/or Preferred Stock Equivalent to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible).  In
case such subscription price may be paid by delivery of consideration part or
all of which is in a form other than cash, the value of such non-cash
consideration shall be as determined in good faith by the Board of Directors,
whose determination shall be described in a statement filed with the Rights
Agent.  Shares of Preferred Stock owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. 
Such adjustment shall be made successively whenever such a record date
is fixed, and in the event that such rights or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be
in effect if such record date had not been fixed.

 

(c)           In case the Company shall fix a record
date for a distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or 

 

17

 

merger
in which the Company is the continuing corporation) of evidences of
indebtedness, cash, assets (other than a dividend payable in Preferred Stock,
but including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b) hereof),
the Purchase Price to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the Current Market Price
per share of Preferred Stock on such record date, less the fair market value
(as determined in good faith by the Board of Directors, whose determination
shall be described in a statement filed with the Rights Agent) of the portion
of the cash, assets or evidences of indebtedness to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Stock and
the denominator of which shall be such Current Market Price per share of
Preferred Stock.  Such adjustments shall
be made successively whenever such a record date is fixed, and in the event
that such distribution is not so made, the Purchase Price shall be adjusted to
be the Purchase Price which would have been in effect if such record date had
not been fixed.

 

(d)

 

(i)            For the purpose of any computation
hereunder, other than computations made pursuant to Section 11(a)(iii) hereof,
the “Current Market Price” per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of the Common
Stock for the 30 consecutive Trading Days immediately prior to, but not
including, such date, and for purpose of computations made pursuant to Section 11(a)(iii) hereof,
the “Current Market Price” per share of the Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of the Common
Stock for the 10 consecutive Trading Days immediately following, but not
including, such date; provided, however, that in the event that the
Current Market Price per share of the Common Stock is determined during a
period following the announcement by the issuer of the Common Stock of (i) any
dividend or distribution on the Common Stock (other than a regular quarterly
cash dividend and other than the Rights), (ii) any subdivision,
combination or reclassification of the Common Stock, and prior to the
expiration of the requisite 30 Trading Day or 10 Trading Day period, as set
forth above, after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification occurs,
then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading.  The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on NASDAQ or, if the shares
of Common Stock are not listed or admitted to trading on NASDAQ, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted sale 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 shares of
Common Stock 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 Common Stock selected by the Board of Directors.  If on any such date no market maker is making
a market in the Common Stock, the fair value of such shares on such date as
determined in good faith by the

 

18

 

Board of Directors
shall be used and shall be binding on the Rights Agent.  If the Common Stock is not publicly held or
not so listed or traded, “Current Market Price” per share shall mean the fair
value per share as determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

 

(ii)           For the purpose of any computation
hereunder, the “Current Market Price” per share (or one one-thousandth of a
share) of Preferred Stock shall be determined in the same manner as set forth
above for the Common Stock in clause (i) of this Section 11(d) (other
than the last sentence thereof).  If the
Current Market Price per share (or one one-thousandth of a share) of Preferred
Stock cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described in
clause (i) of this Section 11(d), the “Current Market Price” per
share of Preferred Stock shall be conclusively deemed to be an amount equal to
1,000 (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Rights Agreement) multiplied by the Current
Market Price per share of the Common Stock and the “Current Market Price” per
one one-thousandth of a share of Preferred Stock shall, be equal to the Current
Market Price per share of the Common Stock (as appropriately adjusted).  If neither the Common Stock nor the Preferred
Stock is publicly held or so listed or traded, “Current Market Price” shall
mean the fair value per share as determined in good faith by the Board of
Directors, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.

 

(e)           Anything herein to the contrary
notwithstanding, no adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in the Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock or other share or one-hundred-thousandth of a share of
Preferred Stock, as the case may be. 
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.

 

(f)            If as a result of an adjustment made
pursuant to Section 11(a)(ii) or Section 13(a) hereof, the
holder of any Right thereafter exercised shall become entitled to receive any
shares of capital stock other than Preferred Stock, thereafter the number of
such other shares so receivable upon exercise of any Right and the Purchase
Price thereof shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the shares of Preferred Stock contained in Sections 11(a), (b), (c), (e),
(g), (h), (i), (j), (k) and (m) hereof, and the provisions of
Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock
shall apply on like terms to any such other shares.

 

(g)           All Rights originally issued by the
Company subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
shares of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.

 

19

 

(h)           Unless the Company shall have 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
shall thereafter evidence the right to purchase, at the adjusted Purchase
Price, that number of one one-thousandth of a share of Preferred Stock
(calculated to the nearest one-hundred-thousandth) obtained by (i) multiplying
(x) the number of one one-thousandth of a share of Preferred Stock covered
by a Right immediately prior to this adjustment, by (y) the Purchase Price
in effect immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.

 

(i)            The Company may elect on or after the
date of any adjustment of the Purchase Price or any adjustment to the number of
shares of Preferred Stock for which a Right may be exercised made pursuant to
Sections 11(a)(i), 11(b) or 11(c), to adjust the number of Rights in
lieu of any adjustment in the number of shares of Preferred Stock purchasable
upon the exercise of a Right.  Each of
the Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of shares of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment.  Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one hundred-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price.  The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made.  The Company shall
notify the Rights Agent whenever it makes a public announcement pursuant to
this Section 11(i) and shall promptly give the Rights Agent a written
notice of such announcement.  This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
10 days later than the date of the public announcement.  If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i),
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which
such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. 
Right Certificates so to be distributed shall be issued, executed and
delivered by the Company, and countersigned and delivered by the Rights Agent, in
the manner provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.

 

(j)            Irrespective of any adjustment or change
in the Purchase Price or the number of shares of Preferred Stock issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price per share and the number of
shares which were expressed in the initial Right Certificate issued hereunder.

 

20

 

(k)           Before taking any action that would cause
an adjustment reducing the Purchase Price below the then par value, if any, of
the shares of Common Stock, Preferred Stock or other capital stock issuable
upon exercise of the Rights, the Company shall take any corporate action,
including using its best efforts to obtain any required stockholder approvals,
which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock, Preferred Stock or other capital stock at such adjusted Purchase
Price.  If upon any exercise of the
Rights, a holder is to receive a combination of Common Stock and Common Stock
Equivalents, a portion of the consideration paid upon such exercise, equal to
at least the then par value of a share of Common Stock of the Company, shall be
allocated as the payment for each share of Common Stock of the Company so
received.

 

(l)            In any case in which this Section 11
shall require that an adjustment in the Purchase Price be made effective as of
a record date for a specified event, the Company may elect to defer (with
prompt written notice thereof to the Rights Agent) until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of
Preferred Stock 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 shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder’s
right to receive such additional shares of Preferred Stock and other capital
stock or securities upon the occurrence of the event requiring such adjustment.

 

(m)          Anything in this Section 11 to the
contrary notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly permitted or
required by this Section 11, as and to the extent that in their good faith
judgment the Board of Directors shall determine to be advisable in order that
any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance
for cash of any shares of Preferred Stock at less than the Current Market Price,
(iii) issuance for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights, options or
warrants referred to in this Section 11, hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such stockholders.

 

(n)           The Company covenants and agrees that it
shall not, at any time after the Distribution Date, (i) consolidate with
any other Person, (ii) merge with or into any other Person, or (iii) sell
or transfer (or permit any Subsidiary to sell or transfer), in one transaction
or a series of related 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 or Persons, if (x) at the time of
or immediately after such consolidation, merger or sale there are any charter
or by-law provisions or any rights, warrants or other instruments or securities
outstanding or agreements in effect which substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights or (y) prior
to, simultaneously with or immediately after such consolidation, merger or
sale, the stockholders of the Person who constitutes, or would constitute, the “Principal
Party” for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.  

 

21

 

The
Company shall not consummate any such consolidation, merger or sale unless
prior thereto the Company and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance with
this subsection.

 

(o)           The Company covenants and agrees that,
after the Distribution Date, it will not, except as permitted by Section 23,
Section 24 or Section 27 hereof, take (or permit any Subsidiary to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or eliminate the
benefits intended to be afforded by the Rights.

 

(p)           Anything in this Rights Agreement to the
contrary notwithstanding, in the event that the Company shall at any time after
the Record Date and prior to the Distribution Date (i) declare or pay any
dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding,
or issued or delivered thereafter, shall be proportionately adjusted so that
the number of Rights thereafter associated with each share of Common Stock
following any such event equals the result obtained by multiplying the number
of Rights associated with each share of Common Stock immediately prior to such
event by a fraction, the numerator or which shall be the number of shares of
Common Stock outstanding immediately prior to the occurrence of such event and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately following the occurrence of such event.

 

12.           Certification of Adjustments or Number of Shares. 
Whenever an adjustment is made or any event affecting the Rights or
their exercisability (including, without limitation, an event which causes the
Rights to become null and void) occurs as provided in Sections 11 and 13
hereof, the Company shall (a) promptly prepare a certificate signed by its
Chief Executive Officer, its President or any Vice President and by the
Treasurer or any Assistant Treasurer or the Secretary or any Assistant
Secretary of the Company setting forth such adjustment or describing such
event, and a brief, reasonably detailed statement of the facts, computations
and methodology accounting for such adjustment or event, (b) promptly file
with the Rights Agent and with each transfer agent for the Preferred Stock and
the Common Stock a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate (or, if prior to the Distribution
Date, to each holder of a certificate representing shares of Common Stock) in
accordance with Section 26 hereof. 
Notwithstanding the foregoing sentence, the failure of the Company to
give such notice shall not affect the validity of or the force or effect of or
the requirement for such adjustment.  The
Rights Agent shall be fully protected in relying on any certificate prepared by
the Company pursuant to Sections 11 and 13 and on any adjustment or
statement therein contained and shall have no duty or liability with respect
to, and shall not be deemed to have knowledge of any such adjustment or event unless
and until it shall have received such certificate.  Any adjustment to be made pursuant to
Sections 11 and 13 of this Rights Agreement shall be effective as of the
date of the event giving rise to such adjustment.

 

22

 

13.           Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.

 

(a)           In the event that following the first
occurrence of a Flip-In Event, directly or indirectly, (x) the Company
shall consolidate with, or merge with and into, any other Person or Persons, as
the case may be, and the Company shall not be the surviving or continuing
Person of such consolidation or merger, or (y) any Person or Persons shall
consolidate with, or merge with and into, the Company, and the Company shall be
the continuing or surviving Person of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or of the Company or cash or any other property,
or (z) the Company or one or more of its Subsidiaries shall sell, mortgage
or otherwise transfer to any other Person or any Affiliate or Associate of such
Person (other than the Company or one or more of its wholly-owned
Subsidiaries), in one transaction, or a series of related 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), then, on the first occurrence
of any such event (a “Flip-Over Event”), proper provision shall be made so that
(i) each holder of a Right (other than Rights which have become null and
void pursuant to Section 11(a)(ii) hereof) shall thereafter have the
right to receive, upon the exercise thereof at the Purchase Price (as
theretofore adjusted in accordance with Section 11(a)(ii) hereof), in
accordance with the terms of this Rights Agreement and in lieu of shares of
Preferred Stock or Common Stock of the Company, such number of validly authorized
and issued, fully paid, non-assessable and freely tradeable shares of Common
Stock of the Principal Party (as such term is hereinafter defined), not subject
to any liens, encumbrances, rights of first refusal or other adverse claims, as
shall equal the result obtained by dividing the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof) by 50% of the
Current Market Price per share of the Common Stock of such Principal Party
(determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; provided, however,
that the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof)
and the number of shares of Common Stock of such Principal Party so receivable
upon exercise of a Right shall be subject to further adjustment as appropriate
in accordance with Section 11(f) hereof to reflect any events
occurring in respect of the Common Stock of such Principal Party after the
occurrence of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Flip-Over Event, all the obligations and duties of the Company pursuant to
this Rights Agreement; (iii) the term “Company” for all purposes of this
Rights Agreement shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof
shall only apply to such Principal Party following the first occurrence of a
Flip-Over Event; and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock in accordance with Section 9 hereof) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; provided, however, that, upon the
subsequent occurrence of any merger, consolidation, sale of all or
substantially all assets, recapitalization, reclassification of shares,
reorganization or other extraordinary transaction in respect of such Principal
Party, each holder of a Right shall thereupon be entitled to receive, upon
exercise of a Right, such cash, shares, rights, warrants and other property
which such holder would have been entitled to receive had he, at the time of
such transaction, owned the shares of Common Stock of 

 

23

 

the
Principal Party purchasable upon the exercise of a Right, and such Principal
Party shall take such steps (including, but not limited to, reservation of
shares of stock) as may necessary to permit the subsequent exercise of the
Rights in accordance with the terms hereof for such cash, shares, rights,
warrants and other property.

 

(b)           “Principal Party” shall mean

 

(i)            in the case of any transaction described
in (x) or (y) of the first sentence of Section 13(a) hereof:  (A) the Person that is the issuer of the
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, or, if there is more than one such issuer, the
issuer the Common Stock of which has the greatest aggregate market value of
shares outstanding or (B) if no securities are so issued, (x) the
Person that is the other party to the merger or consolidation and that survives
said merger or consolidation, or, if there is more than one such Person, the
Person the Common Stock of which has the greatest aggregate market value of
shares outstanding or (y) if the Person that is the other party to the
merger or consolidation does not survive the merger or consolidation, the
Person that does survive the merger or consolidation (including the Company if
it survives); and

 

(ii)           in the case of any transaction described
in (z) of the first sentence in Section 13(a) hereof, the Person
that is the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each Person
that is a party to such transaction or transactions receives the same portion
of the assets or earning power so transferred or if the Person receiving the
greatest portion of the assets or earning power cannot be determined, whichever
of such Persons that is the issuer of Common Stock having the greatest
aggregate market value of shares outstanding;

 

provided, however, that in any such case described in the foregoing
paragraphs (b)(i) or (b)(ii), (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, the term “Principal Party” shall refer to such
other Person, or (2) if such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Stocks of all of which are and
have been so registered, the term “Principal Party” shall refer to whichever of
such Persons is the issuer of the Common Stock having the greatest market value
of shares outstanding, or (3) if such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules set forth in
clauses (1) and (2) above shall apply to each of the owners
having an interest in the joint venture as if the Person owned by the joint
venture was a Subsidiary of both or all of such joint venturers, and the
Principal Party in each such case shall bear the obligations set forth in this Section 13
in the same ratio as its interest in such Person bears to the total of such
interests.

 

(c)           The Company shall not consummate any
consolidation, merger, sale, disposition or transfer referred to in Section 13(a) unless
the Principal Party shall have a sufficient number of authorized shares of its
Common Stock 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 the Principal Party involved therein shall
have executed and delivered to the Rights Agent an agreement confirming that
the requirements 

 

24

 

of
Sections 13(a) and (b) hereof shall promptly be performed in
accordance with their terms and that such consolidation, merger, sale,
disposition or transfer of assets shall not result in a default by the Principal
Party under this Rights Agreement as the same shall have been assumed by the
Principal Party pursuant to Sections 13(a) and (b) hereof and
further providing that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party at its own expense shall:

 

(i)            prepare and file a registration statement
under the Securities Act, if necessary, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form, use
its best efforts to cause such registration statement to become effective as
soon as practicable after such filing and use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the date of expiration of
the Rights, and similarly comply with applicable state securities laws;

 

(ii)           use its best efforts, if the Common Stock
of the Principal Party shall become listed on a national securities exchange,
to list (or continue the listing of) the Rights and the securities purchasable
upon exercise of the Rights on such securities exchange and, if the Common
Stock of the Principal Party shall not be listed on a national securities
exchange, to cause the Rights and the securities purchased upon exercise of the
Rights to be reported by NASDAQ or such other system then in use;

 

(iii)          deliver to holders of the Rights
historical financial statements for the Principal Party which comply in all
respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act; and

 

(iv)          obtain waivers of any rights of first
refusal or preemptive rights in respect of the shares of Common Stock of the
Principal Party subject to purchase upon exercise of outstanding Rights.

 

In the event that
any of the transactions described in Section 13(a) hereof shall occur
at any time after the occurrence of a transaction described in Section 11(a)(ii) hereof,
the Rights which have not theretofore been exercised shall thereafter be
exercisable in the manner described in Section 13(a).

 

(d)           Furthermore, in case the Principal Party
which is to be a party to a transaction referred to in this Section 13 has
a provision in any of its authorized securities or in its Certificate of Incorporation
or Bylaws or other instrument governing its corporate affairs, which provision
would have the effect of (i) causing such Principal Party to issue, in
connection with, or as a consequence of, the consummation of a transaction
referred to in this Section 13, shares of Common Stock of such Principal
Party at less than the then Current Market Price per share (determined pursuant
to Section 11(d) hereof) or securities exercisable for, or
convertible into, Common Stock of such Principal Party at less than such then
current market price (other than to holders of Rights pursuant to this Section 13)
or (ii) providing for any special payment, tax or similar provisions in
connection with the issuance of the Common Stock of such Principal Party
pursuant to the provisions of Section 13; then, in such event, the Company
hereby agrees with each holder of Rights that it shall not consummate any such
transaction unless prior thereto

 

25

 

the
Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been cancelled, waived or amended, or that
the authorized securities shall be redeemed, so that the applicable provision
will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.

 

14.           Fractional Rights and Fractional Shares.

 

(a)           The Company shall not be required to
issue fractions of Rights or to distribute Right Certificates which evidence
fractional Rights.  In lieu of such
fractional Rights, there shall be paid to the holders of record of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the then current
market value of a whole Right.  For the
purposes of this Section 14(a), the then current market value of a Right
shall be determined in the same manner as the Current Market Price of a share
of Common Stock shall be determined pursuant to Section 11(d) hereof.

 

(b)           The Company shall not be required to
issue fractions of shares of Preferred Stock or Preferred Stock Equivalent
(other than fractions which are integral multiples of one one-thousandth of a share
of Preferred Stock) upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Preferred Stock Equivalent (other than
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock).  Fractions of shares of
Preferred Stock in integral multiples of one one-thousandth of a share of
Preferred Stock or Preferred Stock Equivalent 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 shares of Preferred Stock or Preferred Stock
Equivalent represented by such depositary receipts.  In lieu of fractional shares of Preferred
Stock that are not integral multiples of one one-thousandth of a share of
Preferred Stock or Preferred Stock Equivalent, the Company may pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one one-thousandth of a share of Preferred Stock or Preferred
Stock Equivalent.  For purposes of this Section 14(b),
the current market value of one one-thousandth of a share of Preferred Stock or
Preferred Stock Equivalent shall be the Current Market Price of a share of
Common Stock (as determined pursuant to Section 11(d)(ii) hereof) for
the Trading Day immediately prior to the date of such exercise.

 

(c)           Following the occurrence of a Flip-In
Event, the Company shall not be required to issue fractions of shares or units
of Common Stock or Common Stock Equivalents or other securities upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
such Common Stock or Common Stock Equivalents or other securities.  In lieu of fractional shares or units of such
Common Stock or Common Stock Equivalents or other securities, the Company may
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
the Current Market Value of a share or unit of such Common Stock or Common
Stock Equivalent or other securities. 
For purposes of this Section 14(c), the Current Market Value shall
be determined in the manner set forth in Section 11(d) hereof for the
Trading Day immediately prior

 

26

 

to
the date of such exercise and, if such Common Stock Equivalent is not traded,
each such Common Stock Equivalent shall have the value of one one-thousandth of
a share of Preferred Stock.

 

(d)                                 The holder of a Right by the acceptance
of a Right expressly waives his right to receive any fractional Right or any
fractional shares upon exercise of a Right.

 

(e)                                  Whenever a payment for fractional Rights
or fractional shares or other securities of the Company is to be made by the
Rights Agent, the Company shall (i) promptly prepare and deliver to the
Rights Agent a certificate setting forth in reasonable detail the facts related
to such payment and the prices and/or formulas utilized in calculating such
payments, and (ii) provide sufficient monies to the Rights Agent in the
form of fully collected funds to make such payments.  The Rights Agent shall be fully protected in
relying on such a certificate and shall have no duty with respect to, and shall
not be deemed to have knowledge of any payment for fractional Rights or
fractional shares unless and until the Rights Agent shall have received such a
certificate and sufficient monies.

 

15.                                 Rights of Action. 
As of the Record Date, all rights of action in respect of this Rights
Agreement, other than any rights of action vested in the Rights Agent pursuant
to Sections 18 and 20 hereunder, are vested in the respective holders of
record of the Right Certificates (and, prior to the Distribution Date, the
holders of record of the Common Stock); and any holder of record of any Right
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Right Certificate
(or, prior to the Distribution Date, of the Common Stock), may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company or any other Person to enforce,
or otherwise act in respect of, his right to exercise the Rights evidenced by
such Right Certificate in the manner provided in such Right Certificate and in
this Rights 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 Rights Agreement and, accordingly, that
they 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 Rights Agreement. 
Holders of Rights shall be entitled to recover the reasonable costs and
expenses, including attorneys’ fees, incurred by them in any action to enforce
the provisions of this Rights Agreement from the Company.  Notwithstanding anything in this Rights Agreement
to the contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of 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, judgment, decree or ruling
(whether interlocutory or final) issued by a court or by a governmental,
regulatory, self-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, that the Company must use all reasonable
efforts to have any such injunction, order, judgment, decree or ruling lifted
or otherwise overturned as soon as possible.

 

27

 

16.                                 Agreement of Right Holders. 
Every holder of a Right by accepting the same consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:

 

(a)                                  prior to the Distribution Date, the
Rights will not be evidenced by a Right Certificate and will be transferable
only in connection with the transfer of Common Stock;

 

(b)                                 after the Distribution Date, the Right
Certificates will be transferable only on the registry books of the Rights
Agent if surrendered at the office of the Rights Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of transfer with
all required certificates completed;

 

(c)                                  the Company and the Rights Agent may deem
and treat the Person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Right Certificate or the
associated Common Stock certificate made by anyone other than the Company or
the Rights Agent or the transfer agent of the Common Stock) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and

 

(d)                                 notwithstanding anything in this Rights
Agreement to the contrary, neither the Company nor the Rights Agent shall have
any liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Rights Agreement by
reason of any preliminary or permanent injunction or other order, judgment,
decree or ruling (whether interlocutory or final) issued by a court or by a
governmental, regulatory, self-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, that the Company must
use its best efforts to have any such injunction, order, judgment, decree or
ruling lifted or otherwise overturned as soon as possible.

 

17.                                 Right Certificate Holder Not Deemed a
Stockholder.  No holder of a Right, as such, shall be
entitled to vote, receive dividends in respect of or be deemed for any purpose
to be the holder of Common Stock or any other securities of the Company which
may at any time be issuable upon the exercise of the Rights, nor shall anything
contained herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote in 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 Section 25 hereof),
or to receive dividends or subscription rights in respect of any such stock or
securities, or otherwise, until the Right or Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.

 

18.                                 Concerning the Rights Agent.

 

(a)                                  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, 

 

28

 

its
reasonable expenses and counsel fees and other disbursements incurred in the
preparation, negotiation, delivery, administration, amendment and execution of
this Rights 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, damage, judgment, fine, penalty, claim, demand, settlement, cost or
expense (including, without limitation, the reasonable fees and expenses of
legal counsel) incurred without gross negligence, bad faith or willful misconduct
on the part of the Rights Agent (which gross negligence, bad faith or willful
misconduct must be determined by a final, non-appealable judgment of a court of
competent jurisdiction) for any action taken, suffered or omitted to be taken
by the Rights Agent in connection with the acceptance, exercise, performance
and administration of its duties under this Rights Agreement, including the
cost and expenses of defending against any claim of liability in the
premises.  The costs and expenses
(including reasonable attorney’s fees and expenses) incurred in enforcing this
right of indemnification shall be paid by the Company.  The indemnity provided herein shall survive
the expiration of the Rights and the termination of this Rights Agreement and
the resignation, replacement or removal of the Rights Agent.  Notwithstanding anything in this Rights
Agreement to the contrary, in no event shall the Rights Agent be liable for
special, punitive, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the likelihood of such loss damage and regardless of
the form of action.

 

(b)                                 The Rights Agent shall be authorized and
protected and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with its acceptance and administration
of this Rights Agreement and the exercise and performance of its duties
hereunder, in reliance upon any Right Certificate, certificate for Common Stock
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, where necessary, guaranteed, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof. 
The Rights Agent shall not be deemed to have knowledge of any event of
which it was supposed to receive notice thereof hereunder, and the Rights Agent
shall be fully protected and shall incur no liability for failing to take
action in connection therewith unless and until it has received such notice in
writing.

 

19.                                 Merger or Consolidation or Changed Name
of Rights Agent.

 

(a)                                  Any Person into which the Rights Agent or
any successor Rights Agent may be merged or with which it may be consolidated,
or any Person resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any Person succeeding
to the shareholder services business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Rights
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 Person would be
eligible for appointment as a successor Rights Agent under the provisions of Section 21
hereof.  In case at the time such
successor Rights Agent shall succeed to the agency created by this Rights
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and, in case at that time any of the Right Certificates shall
not have been 

 

29

 

countersigned,
any successor Rights Agent may countersign such Right 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 Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.

 

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

 

20.                                 Duties of Rights Agent. 
The Rights Agent undertakes to perform only the duties and obligations
expressly imposed by this Rights Agreement (and no implied duties) upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:

 

(a)                                  The Rights Agent may consult with legal
counsel (who may be legal counsel for the Company or an employee of the Rights
Agent), and the advice or opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability for or in respect of 
any action taken, suffered or omitted to be taken by it in accordance
with such advice or opinion.

 

(b)                                 Whenever in the performance of its duties
under this Rights Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without limitation, the identity
of any Acquiring Person and the determination of Current Market Price) be
proved or established by the Company prior to taking, suffering or omitting to
take any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by certificate signed by the President or
any Vice President and by the Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full and complete authorization and
protection to the Rights Agent and the Rights Agent shall incur no liability
for or in respect of any action taken, suffered or omitted by it under the
provisions of this Rights Agreement in reliance upon such certificate.

 

(c)                                  The Rights Agent shall be liable
hereunder only for its own gross negligence, bad faith or willful misconduct
(which gross negligence, bad faith or willful misconduct must be determined by
a final judgment of a court of competent jurisdiction).  Any liability of the Rights Agent under this
Agreement will be limited to the amount of annual fees paid by the Company to
the Rights Agent.

 

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

 

30

 

(e)                                  The Rights Agent shall not have any
liability for or be under any responsibility in respect of the validity of this
Rights Agreement or the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the validity or execution of any
Right Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition
contained in this Rights Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming null and void pursuant to Section 11(a)(ii) hereof)
or any change or adjustment in the terms of the Rights including any adjustment
required under the provisions of Sections 11, 13, 23 or 24 hereof or
responsible for the manner, method or amount of any such adjustment, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of a Certificate furnished pursuant to Section 12
describing any such adjustment, upon which the Rights Agent may rely); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock to be
issued pursuant to this Rights Agreement or any Right Certificate or as to
whether any shares of Common Stock will, when issued, be validly authorized and
issued, fully paid and nonassessable.

 

(f)                                    The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the carrying
out or performing by the Rights Agent of the provisions of this Rights
Agreement.

 

(g)                                 The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the Chief Executive Officer, the
President or any Vice President or the Secretary or any Assistant Secretary or
the Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and such
instructions shall be full authorization and protection to the Rights Agent and
the Rights Agent shall not be liable for or in respect of any action taken,
suffered or omitted to be taken by it in accordance with the instructions of
any such officer or for any delay in acting while waiting for those
instructions.  The Rights Agent shall be
fully authorized and protected in relying upon the most recent instructions
received by any such officer.  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 shall be taken or such omission shall be
effective.  The Rights Agent shall not be
liable for any action taken or suffered 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 shall not be less than five
Business Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented 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 shall have received written
instructions in response to such application specifying the action to be taken,
suffered or omitted.

 

(h)                                 The Rights Agent and any stockholder,
affiliate, 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 

 

31

 

interested,
or contract with or lend money to the Company or otherwise act as fully and
freely as though it were not the Rights Agent under this Rights Agreement.  Nothing herein shall preclude the Rights
Agent or any such stockholder, affiliate, director, officer or employee from
acting in any other capacity for the Company or for any other Person.

 

(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 (through its directors, officers and employees) or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company or any other Person resulting from any
such act, default, neglect or misconduct, absent gross negligence, bad faith or
willful misconduct in the selection and continued employment thereof (which
gross negligence, bad faith or willful misconduct must be determined by a
final, non-appealable judgment of a court of competent jurisdiction).

 

(j)                                     No provision of this Rights Agreement
shall 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 it believes that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.

 

(k)                                  If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
contained in the form of assignment or the form of election to purchase set
forth on the reverse thereof, as the case may be, has either not been completed
or indicates an affirmative response to clause 1 and/or 2 thereof, the
Rights Agent shall not take any further action with respect to such requested
exercise of transfer without first consulting with the Company.

 

21.                                 Change of Rights Agent. 
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Rights Agreement upon 30 days’
notice in writing, or such earlier period as shall be agreed to in writing,
mailed to the Company and to each transfer agent of the Common Stock known to
the Rights Agent by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. 
The Company may remove the Rights Agent or any successor Rights Agent
(with or without cause) upon 30 days’ notice in writing, or such earlier
period as shall be agreed to in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock by registered or certified mail, and to the holders of the Right
Certificates by first-class mail.  If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the incumbent Rights Agent or the holder of
record of any Right 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 such a court, shall be (a) a Person organized and
doing business under the laws of the United States or any State thereof, in
good standing, 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 

 

32

 

combined capital
and surplus of at least $50,000,000 or (b) an Affiliate controlled by a
Person described in clause (a) of this sentence.  After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock, and mail
a notice thereof in writing to the registered holders of the Right
Certificates.  Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation, replacement or removal of
the Rights Agent or the appointment of the successor Rights Agent, as the case
may be.

 

22.                                 Issuance of New Right Certificates. 
Notwithstanding any of the provisions of this Rights Agreement or of the
Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price per share
and the number or kind or class of shares of stock or other securities or
property purchasable under the Right Certificates made in accordance with the
provisions of this Rights Agreement.  In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration of
the Rights, the Company may, with respect to shares of Common Stock so issued
or sold pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, in each case existing prior to the
Distribution Date, issue Right Certificates representing the appropriate number
of Rights in connection with such issuance or sale; provided, however,
that (i) no such Right Certificate shall be issued if, and to the extent
that, the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Right Certificate would be issued, and (ii) no such
Right Certificate shall be issued, if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.

 

23.                                 Redemption.

 

(a)                                  The Board of Directors may, at its
option, at any time prior to the earlier of (x) the first occurrence of a
Flip-In Event or (y) the Close of Business on the Expiration Date, redeem
all but not less than all the then outstanding Rights at a redemption price of $0.001 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the “Redemption Price”).  The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock (based on the
current market price of the Common Stock at the time of redemption as
determined pursuant to Section 11(d)(i) hereof) or any other form of
consideration deemed appropriate by the Board of Directors.

 

(b)                                 Immediately upon the action of the Board
of Directors ordering the redemption of the Rights (or at such later time as
the Board of Directors may establish for the effectiveness of such redemption),
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 

 

33

 

shall
be to receive the Redemption Price.  The
Company shall promptly give public notice of any such redemption (with prompt
written notice thereof to the Rights Agent); provided, however,
that the failure to give, or any defect in, any such notice shall not affect
the legality or validity of such redemption. 
Within 10 days after such action of the Board of Directors ordering the
redemption of the Rights (or such later time as the Board of Directors may
establish for the effectiveness of such redemption), the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Stock.  Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.  Each such
notice of redemption shall state the method by which the payment of the
Redemption Price will be made.  The
failure to give notice required by this Section 23(b) or any defect
therein shall not affect the legality or validity of the action taken by the
Company.

 

(c)                                  In the case of a redemption permitted
under Section 23(a) hereof, the Company may, at its option, discharge
all of its obligations with respect to the Rights by (i) issuing a press
release announcing the manner of redemption of the Rights and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
of the Common Stock, and upon such action, all outstanding Right Certificates
shall be null and void without any further action by the Company.

 

24.                                 Exchange of Rights for Common Stock.

 

(a)                                  The Board of Directors may, at its
option, at any time after the occurrence of a Flip-In Event, exchange all or
part of the then outstanding and exercisable Rights (which (i) shall not
include Rights that have become null and void pursuant to the provisions of Section 11(a)(ii) and
(ii) shall include, without limitation, any Rights issued after the
Distribution Date in accordance with Section 22 hereof) for shares of
Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (the “Exchange Ratio”).  Notwithstanding the foregoing the Board of
Directors shall not be empowered to effect such exchange at any time after any
Acquiring Person becomes the Beneficial Owner of shares of Common Stock
aggregating 50% or more of the shares of Common Stock then outstanding.  From and after the occurrence of an event
specified in Section 13(a) hereof, any Rights that theretofore have
not been exchanged pursuant to this Section 24(a) shall thereafter be
exercisable only in accordance with Section 13 and may not be exchanged
pursuant to this Section 24(a).  The exchange 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.  Prior to
effecting an exchange pursuant to this Section 24, the Board of Directors
may direct the Company to enter into a Trust Agreement in such form and with
such terms as the Board of Directors shall then approve (the “Trust
Agreement”). If the Board of Directors so directs, the Company shall enter
into the Trust Agreement and shall issue to the trust created by such agreement
(the “Trust”) all of the shares of Common Stock issuable pursuant to the
exchange, and all stockholders entitled to receive shares pursuant to the
exchange shall be entitled to receive such shares (and any dividends or
distributions made thereon after the date on which 

 

34

 

such shares are deposited in the Trust) only from
the Trust and solely upon compliance with the relevant terms and provisions of
the Trust Agreement.

 

(b)                                 Immediately upon the action of the Board
of Directors ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the
right to exercise such Rights shall terminate and the only right thereafter of
a holder of such Rights shall be to receive that number of shares of Common
Stock equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio.  The Company shall
promptly give public notice of any such exchange (with prompt written notice of
such exchange to the Rights Agent); provided, however, that the
failure to give, or any defect in, such notice shall not affect the legality or
validity of such exchange.  The Company
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent.  Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
exchange will state the method by which the exchange of the shares of Common
Stock for Rights will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. 
Any partial exchange shall be effected pro rata based on the number of
Rights (other than Rights which have become null and void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of
Rights.

 

(c)                                  In any exchange pursuant to this Section 24,
the Company, at its option, may substitute, and, in the event that there shall
not be sufficient shares of Common Stock issued but not outstanding or
authorized but unissued to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall substitute to the
extent of such insufficiency, for each share of Common Stock that would
otherwise be issuable upon exchange of a Right, a number of shares of Preferred
Stock or Preferred Stock Equivalent or fractions thereof having an aggregate
current per share market price (determined pursuant to Section 11(d) hereof)
equal to the current per share market price of one share of Common Stock
(determined pursuant to Section 11(d) hereof) as of the date of the
Flip-In Event.

 

(d)                                 In the event that there shall not be
sufficient shares of Common Stock nor of Preferred Stock or Preferred Stock
Equivalents issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock, Preferred Stock or Preferred Stock Equivalents for
issuance upon exchange of the Rights.

 

(e)                                  The Company shall not be required to
issue fractions of shares of Common Stock or to distribute certificates which
evidence fractional shares of Common Stock. 
In lieu of such fractional shares of Common Stock, the Company shall pay
to the registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
Common Stock.  For the purposes of this
paragraph (d), the current market value of a whole share of Common Stock
shall be the Current Market Price of a share of Common Stock (as defined in Section 11(d) hereof
for the purposes of computations made other than pursuant to Section 11(a)(iii))
for the Trading Day immediately prior to the date of exchange pursuant to this Section 24.

 

35

 

25.                                 Notice of Proposed Actions.

 

(a)                                  In case the Company, after the
Distribution Date, shall propose (i) to effect any of the transactions
referred to in Section 11(a)(i) or to pay any dividend to the holders
of record of its Preferred Stock payable in stock of any class or to make any
other distribution to the holders of record of its Preferred Stock (other than
a regular periodic cash dividend), or (ii) to offer to the holders of
record of its Preferred Stock or options, warrants, or other rights to
subscribe for or to purchase shares of Preferred Stock (including any security
convertible into or exchangeable for Preferred Stock) or shares of stock of any
other class or any other securities, options, warrants, convertible or
exchangeable securities or other rights, or (iii) to effect any
reclassification of its Preferred Stock or any recapitalization or
reorganization of the Company, or (iv) to effect any consolidation or
merger with or into, 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 more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to, any other Person or Persons, or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to the Rights Agent and to each holder of
record of a Right Certificate, in accordance with Section 26 hereof,
notice of such proposed action, which shall specify the record date for the
purposes of such transaction referred to in Section 11(a)(i), or such
dividend or distribution, or the date on which such reclassification,
recapitalization, reorganization, consolidation, merger, sale or transfer of
assets, disposition, liquidation, dissolution or winding up is to take place
and the record date for determining participation therein by the holders of
record of Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i) or (ii) above
at least 10 days prior to but not including the record date for
determining holders of record of the Preferred Stock 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 record of Preferred Stock, whichever shall be the
earlier.

 

(b)                                 In case any of the transactions referred
to in Section 11(a)(ii)(A) or (C) or Section 13 of this
Rights Agreement are proposed, then, in any such case, the Company shall as
soon as practicable thereafter give to the Rights Agent and to each holder of
Rights, in accordance with Section 26 hereof, notice of the proposal of
such transaction at least 10 days prior to consummating such transaction,
which notice shall specify the proposed event and the consequences of the event
to holders of Rights under Section 11(a)(ii)(A) or (C) or Section 13
hereof, as the case may be, and, upon consummation of such transaction or any
transaction contemplated by Section 11(a)(ii)(B), shall similarly give
notice thereof to each holder of Rights.

 

(c)                                  The failure to give notice required by
this Section 25 or any defect therein shall not affect the legality or
validity of the action taken by the Company or the vote upon any such action.

 

26.                                 Notices.  Notices or
demands authorized by this Rights Agreement to be given or made by the Rights
Agent or by the holder of record of any Right Certificate or Right to or on
behalf of the Company shall be sufficiently given or made if in writing and
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:

 

36

 

Facet Biotech Corporation

1500 Seaport Boulevard

Redwood City,
California  94063

Attention: Secretary

 

Subject to the provisions of Section 21 hereof,
any notice or demand authorized by this Rights Agreement to be given or made by
the Company or by the holder of record of any Right Certificate or Right to or
on the Rights Agent shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Company) as follows:

 

Mellon Investor Services
LLC

525 Market Street, Suite 3500

San Francisco, CA 94105

Attention:  Relationship Manager

 

with a copy to:

 

Mellon Investor Services
LLC

Newport Office Center VII

480 Washington Boulevard

Jersey City, New Jersey 07310

Attention:  General Counsel

 

Notices or demands authorized by this Rights Agreement
to be given or made by the Company or the Rights Agent to the holder of record
of any Right Certificate or Right shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed to such holder at the address
of such holder as it appears upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the Transfer Agent.

 

27.                                 Supplements and Amendments. 
Except as otherwise provided herein, for so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion supplement or
amend any provision of this Rights Agreement in any respect without the
approval of any holders of the Rights, any such supplement or amendment to be
evidenced by a writing signed by the Company and the Rights Agent.  At any time when the Rights are no longer
redeemable, except as provided in this Section 27, the Company may
supplement or amend this Rights Agreement without the approval of any holders
of Right Certificates in order to (i) cure any ambiguity, (ii) correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen
any time period hereunder, or (iv) change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable, any
such supplement or amendment to be evidenced by a writing signed by the Company
and the Rights Agent; provided that no such supplement or amendment
shall adversely affect the interests of the holders of Rights as such (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person),
and no such amendment may cause the Rights again to become redeemable or cause
the Rights Agreement again to become amendable other than in accordance with
this sentence.  Notwithstanding anything
contained in this Rights Agreement to the contrary, no supplement or amendment
shall be made 

 

37

 

which decreases
the Redemption Price.  Upon the delivery
of a certificate from an appropriate officer of the Company that states that
the proposed supplement or amendment complies with this Section 27, the
Rights Agent shall execute such supplement or amendment.  Prior to the Distribution Date, the interests
of the holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock.  Notwithstanding anything contained in this
Agreement to the contrary, the Rights Agent may, but shall not be obligated to,
enter into any supplement or amendment that affects the Rights Agent’s own
rights, duties, obligations or immunities under this Agreement.

 

28.                                 Successors.  All of the
covenants and provisions of this Rights Agreement by or for the benefit of the
Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.

 

29.                                 Benefits of this Rights Agreement. 
Nothing in this Rights Agreement shall be construed to give to any
Person other than the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Stock)
any legal or equitable right, remedy or claim under this Rights Agreement; this
Rights Agreement shall be for the sole and exclusive benefit of the Company,
the Rights Agent and the holders of record of the Right Certificates (and,
prior to the Distribution Date, the Common Stock).

 

30.                                 Determinations and Actions by the Board
of Directors.  The Board of Directors shall have the
exclusive power and authority to administer this Rights Agreement and to
exercise the rights and powers specifically granted to the Board of Directors
or to the Company, or as may be necessary or advisable in the administration of
this Rights Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Rights Agreement and (ii) make all determinations
deemed necessary or advisable for the administration of this Rights Agreement
(including, without limitation, a determination to redeem or not redeem the
Rights or to amend or not amend this Rights Agreement).  All such actions, calculations,
interpretations and determinations which are done or made by the Board of Directors
in good faith, including but not limited to those made under Sections 1 and 11
hereunder, shall be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights, as such, and all other Persons.  The Rights Agent is entitled always to assume
the Company’s Board of Directors acted in good faith and shall be fully
protected and incur no liability in reliance thereon.

 

31.                                 Governing Law. 
This Rights Agreement and each Right Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of Delaware and for
all purposes shall be governed by and construed in accordance with the laws of
such state applicable to contracts to be made solely by residents of such state
and performed entirely within such state; provided, however, that all provisions
regarding the rights, duties, obligations and liabilities of the Rights Agent
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
State.

 

32.                                 Counterparts. 
This Rights Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.

 

38

 

33.                                 Descriptive Headings. 
Descriptive headings of the several sections of this Rights Agreement
are inserted for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.

 

34.                                 Severability. 
If any term, provision, covenant or restriction of this Rights Agreement
is held by a court of competent jurisdiction or other authority to be invalid,
illegal or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Rights Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated; provided, however, that
if such excluded provision shall effect the rights, immunities, duties or
obligations of the Rights Agent, the Rights Agent shall be entitled to resign
immediately.

 

35.                                 Force Majeure. 
Notwithstanding anything to the contrary contained herein, the Rights
Agent shall not be liable for any delays or failures in performance resulting
from acts beyond its reasonable control including, without limitation, acts of
God, terrorist acts, shortage of supply, breakdowns or malfunctions,
interruptions or malfunctions of computer facilities, or loss of data due to
power failures or mechanical difficulties with information storage or retrieval
systems, labor difficulties, war or civil unrest.

 

39

 

IN WITNESS
WHEREOF, the parties hereto have caused this Rights Agreement to be duly
executed and attested, all as of the date and year first above written.

 

 

	
  ATTEST:

  	
   

  	
  FACET BIOTECH CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Francis Sarena 

  	
   

  	
  By:

  	
  /s/ Andrew Guggenhime 

  
	
   

  	
  Name:

  	
  Francis Sarena 

  	
   

  	
   

  	
  Name:

  	
  Andrew Guggenhime 

  
	
   

  	
  Title:

  	
  Vice President, General
  Counsel and Secretary

  	
   

  	
   

  	
  Title:

  	
  Senior Vice President
  and Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

	
  ATTEST:

  	
   

  	
  MELLON INVESTOR SERVICES LLC,

  as Rights Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Joshua P. McGinn 

  	
   

  	
  By:

  	
  /s/ Asa Drew 

  
	
   

  	
  Name:

  	
  Joshua P. McGinn 

  	
   

  	
   

  	
  Name:

  	
  Asa Drew 

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

40

 

EXHIBIT
A

 

FACET
BIOTECH CORPORATION

 

CERTIFICATE
OF

DESIGNATION, PREFERENCES AND RIGHTS OF 

SERIES A PREFERRED STOCK

 

Pursuant
to Section 151 of the General Corporation Law of the State of Delaware

 

The
undersigned, the Senior Vice President and  Chief Financial Officer of Facet Biotech Corporation, organized
and existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:

 

That,
pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, the said Board of
Directors on September 7, 2009, adopted the following resolution creating
a series of 150,000 shares of Preferred Stock designated as Series A
Preferred Stock:

 

RESOLVED,
that, pursuant to the authority vested in the Board of Directors of this
Corporation in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:

 

Section 1.               Designation and Amount.  The shares of
such series shall be designated as “Series A Preferred Stock” (the “Series A
Preferred Stock”), $0.01 par value per share, and the number of shares
constituting such series shall be 150,000.

 

Section 2.               Dividends and Distributions.

 

(A)          The dividend rate on the shares of Series A
Preferred Stock shall be for each quarterly dividend (hereinafter referred to
as a “quarterly dividend period”), which quarterly dividend periods shall
commence on January 1, April 1, July 1 and October 1 each
year (each such date being referred to herein as a “Quarterly Dividend Payment
Date”) (or in the case of original issuance, from the date of original
issuance) and shall end on and include the day next preceding the first date of
the next quarterly dividend period, at a rate per quarterly dividend period
(rounded to the nearest cent) subject to the provisions for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all
cash dividends, and 1,000 times the aggregate per share amount (payable in
cash, based upon the fair market value at the time the non-cash dividend or
other distribution is declared as determined in good faith by the Board of
Directors) 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 (but not
withdrawn) on the Common Stock, par value $0.01 per share, of 

 

1

 

the Corporation
(the “Common Stock”) during the immediately preceding quarterly dividend
period, or, with respect to the first quarterly dividend period, since the
first issuance of any share or fraction of a share of Series A Preferred
Stock.  In the event this Company shall
at any time after September 21, 2009 (the “Rights Declaration Date”) (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, 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)           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
of Series A Preferred Stock, 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 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 no more than 45 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 1,000  votes on all
matters submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, 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
the Certificate of Incorporation or Bylaws, the holders of shares of Series A
Preferred Stock and the holders of shares of Common 

 

2

 

Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.

 

(C)           Except as set forth herein, in the
Certificate of Incorporation and in the Bylaws, 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.

 

(D)          If, at the time of any annual meeting of
stockholders for the election of directors, the equivalent of six quarterly
dividends (whether or not consecutive) payable on any share or shares of Series A
Preferred Stock are in default, the number of directors constituting the Board
of Directors of the Company shall be increased by two. In addition to voting
together with the holders of Common Stock for the election of other directors
of the Company, the holders of record of the Series A Preferred Stock,
voting separately as a class to the exclusion of the holders of Common Stock
shall be entitled at said meeting of stockholders (and at each subsequent
annual meeting of stockholders), unless all dividends in arrears on the Series A
Preferred Stock have been paid or declared and set apart for payment prior
thereto, to vote for the election of two directors of the Company, the holders
of any Series A Preferred Stock being entitled to cast a number of votes
per share of Series A Preferred Stock as is specified in paragraph (A) of
this Section 3.  Each such
additional director shall serve until the next annual meeting of stockholders
for the election of directors, or until his successor shall be elected and
shall qualify, or until his right to hold such office terminates pursuant to
the provisions of this Section 3(D). 
Until the default in payments of all dividends which permitted the
election of said directors shall cease to exist, any director who shall have
been so elected pursuant to the provisions of this Section 3(D) may
be removed at any time, without cause, only by the affirmative vote of the
holders of the shares of Series A Preferred Stock at the time entitled to
cast a majority of the votes entitled to be cast for the election of any such
director at a special meeting of such holders called for that purpose, and any
vacancy thereby created may be filled by the vote of such holders. If and when
such default shall cease to exist, the holders of the Series A Preferred
Stock shall be divested of the foregoing special voting rights, subject to
revesting in the event of each and every subsequent like default in payments of
dividends. Upon the termination of the foregoing special voting rights, the
terms of office of all persons who may have been elected directors pursuant to
said special voting rights shall forthwith terminate, and the number of
directors constituting the Board of Directors shall be reduced by two. The voting
rights granted by this Section 3(D) shall be in addition to any other
voting rights granted to the holders of the Series A Preferred Stock in
this Section 3.

 

Section 4.               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
to be created by resolution or resolutions of the Board of Directors, subject
to the conditions and restrictions on issuance set forth herein.

 

3

 

Section 5.               Liquidation, Dissolution or Winding Up.

 

(A)          In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the Series A Preferred Stock shall be entitled to
receive an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock.  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Series A Preferred Stock were entitled immediately prior to such event
pursuant to 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.

 

Section 6.               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 the shares of Series A Preferred Stock
shall at the same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 1,000  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 after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, 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 7.               No Redemption.  The shares of
Series A Preferred Stock shall not be redeemable.

 

Section 8.               Fractional Shares.  Series A
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder’s fractional shares, to exercise voting
rights, receive dividends, participate in distributions and have the benefit of
all other rights of holders of Series A Preferred Stock.  All payments made with respect to fractional
shares hereunder shall be rounded to the nearest whole cent.

 

Section 9.               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 

 

4

 

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:

 

(i)            declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
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 on 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 on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity 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)          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 9, purchase or
otherwise acquire such shares at such time and in such manner.

 

Section 10.             Ranking.  The Series A
Preferred Stock shall be junior to all other Series of the Corporation’s
preferred stock as to the payment of dividends and the distribution of assets,
unless the terms of any series shall provide otherwise.

 

Section 11.             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 without the affirmative vote of the holders of two-thirds or more of
the outstanding shares of Series A Preferred Stock voting together as a
single class.

 

5

 

IN
WITNESS WHEREOF, the undersigned has executed and subscribed this Certificate
and does affirm the foregoing as true under the penalties of perjury this 8th
day of September, 2009.

 

 

	
   

  	
   

  
	
   

  	
  Andrew Guggenhime

  
	
   

  	
  Senior Vice President
  and Chief Financial Officer

  

 

6

 

EXHIBIT
B

 

[Form of
Right Certificate]

 

	
  Certificate No. W-

  	
   

  	
             Rights

  

 

NOT EXERCISABLE AFTER
SEPTEMBER 6, 2010, OR EARLIER IF REDEEMED OR EXCHANGED.  AT THE OPTION OF THE COMPANY, THE RIGHTS MAY BE
REDEEMED AT $0.001 PER RIGHT OR EXCHANGED FOR COMMON STOCK ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT.  IN THE
EVENT THAT THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE ISSUED TO A PERSON
WHO IS AN ACQUIRING PERSON OR CERTAIN TRANSFEREE OF THE RIGHTS PREVIOUSLY OWNED
BY SUCH PERSONS, THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY SHALL
BE NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

 

RIGHT
CERTIFICATE

 

FACET
BIOTECH CORPORATION

 

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 September 7,
2009 (the “Rights Agreement”) between Facet Biotech Corporation, a Delaware
corporation (the “Company”), and Mellon Investor Services LLC, a New Jersey
limited liability company (the “Rights Agent”), to purchase from the Company at
any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 p.m. (Pacific time)
on September 6, 2010, at the office of the Rights Agent, or of its
successors as Rights Agent, designated for such purpose, one one-thousandth of
a fully paid and nonassessable share of Series A Preferred Stock of the
Company (the “Preferred Stock”) at a purchase price of $50.00 per one one-thousandth
of a share, as the same may from time to time be adjusted in accordance with
the Rights Agreement (the “Purchase Price”), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly
executed.  Capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to such terms
in the Rights Agreement.

 

 

As provided in the
Rights Agreement, the Purchase Price and the number of shares of Preferred
Stock or other securities which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events and, upon the happening of
certain events, securities other than shares of Preferred Stock, or other
property, may be acquired upon exercise of the Rights evidenced by this Right
Certificate, as provided by the Rights Agreement.

 

Upon the
occurrence of a Flip-In Event, if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person, (ii) a transferee of
any such Acquiring Person, Associate or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a Person who,
after such transfer, became an Acquiring Person, or any Affiliate or Associate
of an Acquiring Person, such Rights shall be null and void and will no longer
be transferable and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Flip-In Events.

 

This Right
Certificate is subject to all the terms, provisions and conditions of the
Rights Agreement, which terms, provisions and conditions are 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 record of the Right Certificates, which limitation of rights
include the temporary suspension of the exercisability of such Rights under the
specific circumstances set forth in the Rights Agreement.  Copies of the Rights Agreement are on file at
the principal executive office of the Company and are available upon written
request to the Company.

 

This Right
Certificate, with or without other Right Certificates, upon surrender at the office
of the Rights Agent designated for such purpose, may be exchanged for another
Right Certificate or Right Certificates of like tenor and date evidencing
Rights entitling the holder of record to purchase a like aggregate number of
shares of Preferred Stock as the Rights evidenced 

 

2

 

by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase.  If this Right
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof, another Right Certificate or Right Certificates for the
number of whole Rights not exercised.

 

Subject to the
provisions of the Rights Agreement, at any time prior to the earlier of (i) the
occurrence of a Flip-In Event (as such term is defined in the Rights Agreement)
or (ii) the Expiration Date (as such term is defined in the Rights
Agreement), the Rights evidenced by this Certificate may be redeemed by the
Company at its option at a redemption price of $0.001 per Right.  Subject to the provisions of the Rights
Agreement, the Company may, at its option, at any time after a Flip-In Event,
exchange all or part of the Rights evidenced by this Certificate for shares of
the Company’s Common Stock or for Preferred Stock (or shares of a class or
series of the Company’s preferred stock having the same rights, privileges and
preferences as the Preferred Stock).

 

In the event (i) any
Person or group becomes an Acquiring Person or (ii) any of the types of
transactions, acquisitions or other events described above as self-dealing
transactions occur, and prior to the acquisition by such person or group of 50%
or more of the outstanding shares of Common Stock, the Board of Directors may
require all or any portion of the outstanding Rights (other than Rights owned
by such Acquiring Person which have become null and void) to be exchanged for
Common Stock on a pro rata basis, at an exchange ratio of one share of Common
Stock or one one-thousandth of a
share of Preferred Stock (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).

 

No fractional
shares of Preferred Stock shall be issued upon the exercise of any Right or
Rights evidenced hereby (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock, which may, at the option of
the Company, be evidenced by depositary receipts), and no fractional shares of
Common Stock will be issued upon the exchange of any Right or Rights evidenced
hereby, and in lieu thereof, as provided in the Rights 

 

3

 

Agreement,
fractions of shares of Preferred Stock or Common Stock shall receive an amount
in cash equal to the same fraction of the then Current Market Price (as such
term is defined in the Rights Agreement) of a share of Preferred Stock or
Common Stock, as the case may be.

 

No holder of this
Right Certificate, as such, shall be entitled to vote or receive dividends or
be deemed for any purpose the holder of Common Stock or of any other securities
of the Company which may at any time be issuable on the exercise hereof, nor
shall anything contained in the Rights 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 in 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 (other than certain actions specified in the
Rights Agreement) or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate shall have been
exercised or exchanged as provided in the Rights Agreement.

 

This Right
Certificate shall not be valid or obligatory for any purpose until it shall
have been countersigned by the Rights Agent.

 

4

 

WITNESS the
facsimile signature of the proper officers of the Company and its corporate
seal.  Dated as of                                                 ,
2009.

 

 

	
  ATTEST:

  	
   

  	
  FACET BIOTECH CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Secretary

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  COUNTERSIGNED:

  	
   

  	
  MELLON INVESTOR
  SERVICES LLC,

  
	
   

  	
   

  	
  as Rights Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Officer

  

 

5

 

Form of
Reverse Side of Right Certificate

 

FORM OF
ASSIGNMENT

 

(To be
executed by the registered holder if such holder

desires to transfer any or all of the Rights

represented by this Right Certificate)

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto

 

 

 

 

(Name, address and social security or other

identifying number of transferee)

 

                             (                              )
of the Rights represented by this Right Certificate, together with all right,
title and interest in and to said Rights, and hereby irrevocably constitutes
and appoints
                                                  
attorney to transfer said Rights on the books of the within-named Company with
full power of substitution.

 

	
  Dated:

  	
                                                    
  

  	
  ,

  	
                 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Signature)

  

 

 

Signature Guaranteed:

 

Signatures must be
guaranteed by a participant in the Securities Transfer Agent Medallion Program,
the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc.
Medallion Signature Program.

 

CERTIFICATE

 

The undersigned hereby certifies by checking the appropriate boxes
that:

 

(1)           the rights evidenced by this Right Certificate
[   ] are [   ] are not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person (as
such capitalized terms are defined in the Rights Agreement);

 

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

 

	
  Dated:

  	
                                                    
  

  	
  ,

  	
                 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Signature)

  

 

 

	
  Signature Guaranteed:

  	
   

  

 

Signatures must be
guaranteed by a participant in the Securities Transfer Agent Medallion Program,
the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc.
Medallion Signature Program.

 

2

 

Form of Reverse Side of Right Certificate

(continued)

 

NOTICE

 

The signatures to the foregoing Assignment and the foregoing
Certificate, if applicable, must correspond to the name as written upon the
face of this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a participant
in a Securities Transfer Association recognized signature program.

 

In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such capitalized terms are defined in the
Rights Agreement), and not issue any Right Certificate or Right Certificates in
exchange for this Right Certificate.

 

3

 

Form of
Reverse of Right Certificate

(continued)

 

FORM OF
ELECTION TO PURCHASE

 

(To be
executed by the registered holder if such holder

desires to exercise any or all of the Rights

represented by this Right Certificate)

 

To Facet Biotech Corporation:

 

The undersigned hereby irrevocably elects to exercise                               
(                    )
of the Rights represented by this Right Certificate to purchase the shares of
the Common Stock of the Company, or other securities or property issuable upon
the exercise of said number of Rights pursuant to the Rights Agreement.

 

The undersigned hereby requests that a certificate for any such
securities and any such property be issued in the name of and delivered to:

 

 

 

 

 

 

(Name,
address and social security or other

identifying number of issuee)

 

The undersigned hereby further requests that if said number of Rights
shall not be all the Rights represented by this Right Certificate, a new Right
Certificate for the remaining balance of such Rights be issued in the name of
and delivered to:

 

 

 

 

 

 

(Name,
address and social security or other

identifying number of issuee)

 

	
  Dated:

  	
                                                    
  

  	
  ,

  	
                 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Signature)

  

 

 

Signature Guaranteed:

 

Signatures must be
guaranteed by a participant in the Securities Transfer Agent Medallion Program,
the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc.
Medallion Signature Program.

 

4

 

Form of Reverse Side of Right Certificate

(continued)

 

CERTIFICATE

 

The undersigned hereby certifies by checking the appropriate boxes
that:

 

(1)           the Rights evidenced by this Right
Certificate [   ] are [   ] are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined pursuant to
the Rights Agreement);

 

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

 

	
  Dated:

  	
                                                    
  

  	
  ,

  	
                 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Signature)

  

 

 

Signature Guaranteed:

 

Signatures must be
guaranteed by a participant in the Securities Transfer Agent Medallion Program,
the Stock Exchanges Medallion Program or the New York Stock Exchange, Inc.
Medallion Signature Program.

 

NOTICE

 

The signature to the foregoing Election to Purchase and the foregoing
Certificate, if applicable, must correspond to the name as written upon the
face of the this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a participant
in a Securities Transfer Association recognized signature program.

 

In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such capitalized terms are defined in the
Rights Agreement), and not issue any Right Certificate or Right Certificates in
exchange for this Right Certificate.

 

5

 

Exhibit C

 

UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, DATED SEPTEMBER 7, 2009 (THE “RIGHTS AGREEMENT”)
BETWEEN FACET BIOTECH CORPORATION AND MELLON INVESTOR SERVICES LLC, RIGHTS
ISSUED TO, BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES
AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) OR AN ASSOCIATE OR
AFFILIATE (AS DEFINED IN THE RIGHTS AGREEMENT) THEREOF AND CERTAIN TRANSFEREES
THEREOF WILL BE NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

 

Facet Biotech
Corporation

 

Summary
of Terms of

Rights
Agreement

 

	
  Nature
  of Right

  	
   

  	
  When
  exercisable, each Right (a “Right”) will initially entitle the holder
  to purchase at the Purchase Price (as defined below) one one-thousandth of a
  share of Series A Preferred Stock (“Preferred Stock”) of Facet
  Biotech Corporation (the “Company”).

  
	
   

  	
   

  	
   

  
	
  Means
  of Distribution

  	
   

  	
  The
  Company will distribute the Rights to each holder of outstanding shares of
  Common Stock of the Company (“Common Stock”) as a dividend of one
  Right for each share of Common Stock. The Company will also attach Rights to
  all future issuances of shares of Common Stock prior to the Distribution Date
  (as defined below).

  
	
   

  	
   

  	
   

  
	
  Exercisability

  	
   

  	
  Rights
  become exercisable on the earlier of: (i) the tenth day after the date
  of public announcement by the Company or by any person or group (an “Acquiring
  Person”) that such person or group has acquired beneficial ownership of 15% or more of the outstanding
  shares of Common Stock, or (ii) the tenth business day (unless extended
  by the Board of Directors of the Company (the “Board”) prior to the
  time a person becomes an Acquiring Person) following the commencement, or
  announcement of an intention to commence, by any person or group of a tender
  or exchange offer, which would result in any person becoming an Acquiring
  Person (the earlier of such dates is referred to as the “Distribution Date”),
  provided that an Acquiring Person does not include an Exempt Person or Grandfathered Person (as such
  terms are defined in the
  Rights Agreement) for so long as such persons continue to be Exempt Persons
  or Grandfathered Persons). Rights will trade separately from the Common Stock
  once the Rights become exercisable.

  

 

 

	
  Purchase
  Price

  	
   

  	
  $50.00
  per one one-thousandth of a share of Series A Preferred, which is the
  amount that in the judgment of the Board represents the long-term value of
  one share of Common Stock over the term of the Rights Agreement (the “Purchase
  Price”).

  
	
   

  	
   

  	
   

  
	
  Term

  	
   

  	
  The
  Rights will expire upon the earlier of (i) September 6, 2010 or
  (ii) redemption or exchange by the Company as described below.

  
	
   

  	
   

  	
   

  
	
  Redemption
  of Rights

  	
   

  	
  The
  Company may redeem Rights at a price of $0.001 per Right, subject to the
  approval of the Board, at any time until the occurrence of a Flip-In Event
  (defined below).

  
	
   

  	
   

  	
   

  
	
  Preferred
  Stock

  	
   

  	
  The Preferred Stock
  purchasable upon exercise of the Rights will be nonredeemable and junior to
  any other series of preferred stock the Company may issue (unless otherwise
  provided in the terms of such other series). Each share of Preferred Stock
  will have a preferential cumulative quarterly dividend in an amount equal to
  1,000 times the dividend declared on each share of Common Stock. In the event
  of liquidation, the holders of Preferred Stock will receive a preferred liquidation
  payment equal to an amount per share equal to 1,000 times the aggregate
  payment to be distributed per share of Common Stock. Each share of Preferred
  Stock will have 1,000 votes, voting together with the shares of Common Stock.
  In the event of any merger, consolidation or other transaction in which
  shares of Common Stock are exchanged for or changed into other securities,
  cash and/or other property, each share of Preferred Stock will be entitled to
  receive 1,000 times the amount
  and type of consideration received per share of Common Stock. The rights of
  the Preferred Stock as to dividends, liquidation and voting, and in the event
  of mergers and consolidations, are protected by customary anti-dilution
  provisions. Fractional shares (in integral multiples of one one-thousandth)
  of Preferred Stock will be issuable; however, the Company may elect to
  distribute depositary receipts in lieu of such fractional shares. In lieu of
  fractional shares other than fractions that are multiples of one
  one-thousandth of a share, an adjustment in cash will be made based on the
  market price of the Preferred Stock on the last trading date prior to the
  date of exercise. Because of the nature of the Preferred Stock’s dividend,
  liquidation and voting rights, the value of one one-thousandth of a share of
  Preferred Stock purchasable upon exercise of each Right should approximate
  the value of one share of Common Stock.

  

 

2

 

	
  Rights
  in Event of Acquisition of Substantial Amount of Common Stock

  	
   

  	
  In
  the event that any person or group becomes an Acquiring Person (“Flip-In
  Event”), a holder of a Right thereafter has the right to purchase, upon
  payment of the then-current Purchase Price, in lieu of one one-thousandth of
  a share of Preferred Stock per outstanding Right, such number of shares of
  Common Stock having a market value at the time of the transaction equal to
  the Purchase Price divided by one-half the Current Market Price (as defined
  in the Rights Agreement) of the Common Stock. Notwithstanding the foregoing,
  Rights held by an Acquiring Person or any Associate or Affiliate thereof or
  certain transferees will be null and void and no longer be transferable.

  
	
   

  	
   

  	
   

  
	
  Rights
  in Event of  Business
  Combination

  	
   

  	
  If,
  following the occurrence of a Flip-In Event, the Company is acquired by any
  person in a merger or other business combination transaction in which the
  securities of the Company are exchanged or converted or in which the Company
  is not the surviving corporation, or 50% or more of its assets or earnings
  power are sold to any person (“Flip-Over Events”), each holder of a
  Right (other than an Acquiring Person, or Affiliates or Associates thereof)
  shall thereafter have the right to purchase, upon payment of the then-current
  Purchase Price, such number of shares of common stock of the acquiring
  company having a current market value equal to the Purchase Price divided by
  one-half the Current Market Price of such common stock.

  
	
   

  	
   

  	
   

  
	
  Exchange
  Option

  	
   

  	
  In
  the event any person or group becomes an Acquiring Person, and prior to the
  acquisition by such person or group of 50% or more of the outstanding shares
  of Common Stock, the Board may require all or any portion of the outstanding
  Rights (other than Rights owned by such Acquiring Person that have become
  void) to be exchanged for Common Stock on a pro rata basis, at an exchange
  ratio of one share of Common Stock or one
  one-thousandth of a share of Preferred Stock (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).

  
	
   

  	
   

  	
   

  
	
  Fractional
  Shares

  	
   

  	
  The
  Company will not issue any fractional shares of Common Stock upon exercise of
  the Rights and, in lieu thereof, the Company will make a payment in cash to
  the holder of such Rights equal to the same fraction of the current market
  value of a share of Common Stock.

  

 

3

 

	
  Adjustment

  	
   

  	
  The
  Purchase Price payable, and the number of shares of Preferred Stock 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 Stock, (ii) upon the grant to holders of the Preferred Stock
  of certain rights or warrants to subscribe for Preferred Stock or convertible
  securities at less than the current market price of the Preferred Stock or
  (iii) upon the distribution to holders of the Preferred Stock of evidences
  of indebtedness or assets (excluding dividends payable in Preferred Stock) or
  of subscription rights or warrants (other than those referred to above). The
  number of Rights associated with each share of Common Stock is also subject
  to adjustment in the event of a stock split of the Common Stock or a stock
  dividend on the Common Stock payable in Common Stock or subdivisions,
  consolidations or combinations of the Common Stock occurring, in any such
  case, prior to the Distribution Date.

  
	
   

  	
   

  	
   

  
	
  Rights
  as Stockholder

  	
   

  	
  The
  Rights themselves do not entitle the holder thereof to any rights as a
  stockholder, including, without limitation, voting rights or to receive
  dividends.

  
	
   

  	
   

  	
   

  
	
  Amendment
  of Rights

  	
   

  	
  Until
  the Rights become nonredeemable, the Company may amend the Rights Agreement
  in any manner. After the Rights become nonredeemable, the Company may amend
  the Rights Agreement to cure any ambiguity, to correct or supplement any
  provision, which may be defective or inconsistent with any other provisions,
  to shorten or lengthen any time period under the Rights Agreement, or to
  change or supplement any provision in any manner the Company may deem
  necessary or desirable, provided that no such amendment may adversely
  affect the interests of the holders of the Rights (other than the Acquiring
  Person or its Affiliates or Associates) or cause the Rights to again be
  redeemable or the Rights Agreement to again be freely amendable.

  

 

A copy of the Rights Agreement is
available, free of charge, from the Company, 1500 Seaport Boulevard, Redwood
City, California  94063, Attention:
Secretary.  This summary description of
the Rights Agreement does not purport to be complete and is qualified in its
entirety by reference to the Rights Agreement, as amended from time to time,
which is incorporated in this summary description by reference.

 

4

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