Document:

Exhibit
4.1

 

RIGHT CERTIFICATE

 

	
  Certificate No. R-     

  	
   

  	
        
  Rights

  

 

NOT EXERCISABLE
AFTER FEBRUARY 21, 2015 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT
$0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT.

 

RIGHT CERTIFICATE

SENOMYX, INC.

 

This certifies that                    
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of February 14,
2005 (the “Rights
Agreement”), between SENOMYX,
INC., a Delaware corporation (the “Company”), and MELLON INVESTOR SERVICES LLC (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., New Jersey Time, on
February 21, 2015 at the office of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one one-hundredth
of a fully paid non-assessable share of Series A Junior Participating
Preferred Stock, par value $0.001 per share (the “Preferred Shares”), of the Company, at a
purchase price of $100.00 per one one-hundredth of a Preferred Share (the “Purchase Price”),
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed.  The
number of Rights evidenced by this Right Certificate (and the number of one
one-hundredths of a Preferred Share which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of February 21, 2005, based on the Preferred Shares as
constituted at such date.

 

From and after the time any Person becomes an
Acquiring Person, (as such terms are defined in the Rights Agreement), if the
Rights evidenced by this Right Certificate are beneficially owned by
(i) an Acquiring Person or an Affiliate or Associate of any such Acquiring
Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate who becomes a
transferee after the Acquiring Person becomes such, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of any such
Acquiring Person, Associate or Affiliate who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such, such Rights shall become
null and void without any further action and no holder hereof shall have any
right with respect to such Rights from and after the time any Person becomes an
Acquiring Person.

 

As provided in the Rights Agreement, the Purchase
Price and the number of one one-hundredths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain
events.

 

1

 

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

 

This Right Certificate, with or without other Right
Certificates, upon surrender at the office of the Rights Agent designated for
such purpose, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Preferred Shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase.  If this Right
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Right Certificate or Right Certificates for the
number of whole Rights not exercised.

 

Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate (i) may be redeemed by the Company at a
redemption price of $0.001 per Right or (ii) may be exchanged in whole or in
part for shares of the Company’s Common Stock, par value $0.001 per share, or,
upon circumstances set forth in the Rights Agreement, cash, property or other
securities of the Company, including fractions of a share of Preferred Stock.

 

No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-hundredth of a Preferred Share, which may, at
the election of the Company, be evidenced by depositary receipts) but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.

 

No holder of this Right Certificate shall be entitled
to vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except
as provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.

 

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

 

[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK]

 

2

 

WITNESS the facsimile signature
of the proper officers of the Company and its corporate seal.  Dated as of February     ,
2005.

 

 

	
  ATTEST:

  	
  SENOMYX,
  INC. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Harry J. Leonhardt, Esq.

  	
  Kent Snyder

  
	
  Vice President, General Counsel and

  	
  President and Chief Executive Officer

  
	
  Corporate Secretary

  	
   

  
				

 

 

	
  COUNTERSIGNED:

  
	
   

  
	
   

  
	
  MELLON INVESTOR SERVICES LLC

  
	
  as Rights Agent

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
					

 

 

[Signature Page to Right Certificate]

 

 

Form of Reverse Side of Right Certificate

 

FORM OF ASSIGNMENT

 

(To
be executed by the registered holder if such

holder desires to transfer the Right Certificate.)

 

FOR VALUE RECEIVED                                       
hereby sells, assigns and transfers unto

 

	
   

  
	
  (Please print name and address of transferee)

  

 

                                                                     
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint                         
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  

 

 

SIGNATURE
GUARANTEED:

 

Signatures must be guaranteed by an “eligible
guarantor institution” as defined in Rule 17Ad-15 promulgated under the
Securities Exchange Act of 1934, as amended.

 

The undersigned hereby certifies that (1) the
Rights evidenced by this Right Certificate are not being sold, assigned or
transferred by or on behalf of a Person who is or was an Acquiring Person, an
Interested Stockholder or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement); and (2) after due inquiry and to the
best of the knowledge of the  undersigned,
the undersigned did not acquire the Rights evidenced by this Right Certificate
from any Person who is or was an Acquiring Person, an Interested Stockholder,
or an Affiliate or Associate thereof.

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

 

FORM OF ELECTION TO PURCHASE

 

(To
be executed if holder desires to exercise

Rights represented by the Right Certificate.)

 

To Mellon Investor Services LLC:

 

The undersigned hereby irrevocably elects to exercise                                         
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:

 

Please insert social security

	
  or other identifying number:

  	
   

  	
   

  

 

 

 

	
   

  
	
  (Please print name and address)

  
	
   

  
	
   

  

 

If such number of Rights
shall not be all the Rights evidenced by this Right Certificate, a new Right
Certificate for the balance remaining of such Rights shall be registered in the
name of and delivered to:

 

Please insert social security

	
  or other identifying number:

  	
   

  	
   

  

 

 

	
   

  
	
  (Please print name and address)

  
	
   

  
	
   

  

 

 

	
  Dated: 

  	
   

  	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
				

 

 

SIGNATURE
GUARANTEED:

 

Signatures must be guaranteed by an “eligible
guarantor institution” as defined in Rule 17Ad-15 promulgated under the
Securities Exchange Act of 1934, as amended.

 

The undersigned hereby certifies that (1) the Rights
evidenced by this Right Certificate are not beneficially owned by nor are they
being exercised on behalf of an Acquiring Person, an Interested Stockholder or
an Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement); and (2) after due inquiry and to the best of the knowledge of
the undersigned, the undersigned did not acquire the Rights evidenced by this
Right Certificate from any Person who is or was an Acquiring Person, an
Interested Stockholder, or an Affiliate or Associate thereof.

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

NOTICE

 

The signature in the Form of Assignment or Form of
Election to Purchase, as the case may be, must conform to the name as written
upon the face of this Right Certificate in every particular, without alteration
or enlargement or any change whatsoever.

 

In the event the certification set forth above in the
Form of Assignment or the Form of Election to Purchase, as the case may be, is
not completed, the Company and the Rights Agent will deem the beneficial owner
of the Rights evidenced by this Right Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.Exhibit 4.2

 

 

SENOMYX, INC.

 

 

and

 

MELLON INVESTOR SERVICES LLC

as Rights Agent

 

 

RIGHTS AGREEMENT

 

 

Dated as of February 14, 2005

 

 

RIGHTS AGREEMENT

 

THIS
RIGHTS AGREEMENT (“Agreement”), dated as of February 14, 2005,
between SENOMYX, INC., a Delaware corporation
(the “Company”),
and MELLON INVESTOR SERVICES LLC (“Rights Agent”).

 

The
Board of Directors of the Company (the “Board”) has authorized and declared a
dividend of one preferred share purchase right (a “Right”) for each
Common Share (as such term is hereinafter defined) outstanding at the close of
business on February 21, 2005 (the “Record Date”), each Right representing the
right to purchase one one-hundredth of a Preferred Share (as such term is
hereinafter defined), upon the terms and subject to the conditions herein set
forth, and has further authorized and directed the issuance of one Right with
respect to each Common Share that shall become outstanding between the Record
Date and the earliest to occur of the Distribution Date, the Redemption Date
and the Final Expiration Date (as such terms are hereinafter defined); provided, however, that Rights may be issued with respect to
Common Shares that shall become outstanding after the Distribution Date and
prior to the earlier of the Redemption Date and the Final Expiration Date in
accordance with the provisions of Section 22 hereof.

 

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

 

SECTION
1.         CERTAIN DEFINITIONS.  For purposes of this Agreement, the following
terms have the meanings indicated:

 

(a)           “Acquiring
Person” shall mean any Person (as
such term is hereinafter defined) who or which, together with all Affiliates
and Associates (as such terms are hereinafter defined) of such Person, shall be
the Beneficial Owner (as such term is hereinafter defined) of 15% or more of
the Common Shares then outstanding. 
Notwithstanding the foregoing, (A) the term “Acquiring Person”
shall not include (i) the Company, (ii) any Subsidiary (as such term is
hereinafter defined) of the Company, (iii) any employee benefit or compensation
plan of the Company or any Subsidiary of the Company, (iv) any entity holding
Common Shares for or pursuant to the terms of any such employee benefit or compensation
plan of the Company or any Subsidiary of the Company or (v) any Person,
together with all Affiliates and Associates of such Person, who is the
Beneficial Owner of 15% or more of the Common Shares outstanding as of the
Announcement Event until such time after the Announcement Event that such
Person, together with all Affiliates and Associates of such Person, shall
become the Beneficial Owner of any additional Common Shares (other than by
means of a dividend made by the Company on the Common Shares outstanding or
pursuant to a split, subdivision or other reclassification of the Common Shares
undertaken by the Company) and shall then Beneficially Own more than 15% of the
Common Shares outstanding, and (B) no Person shall become an “Acquiring
Person” either (x) as the result of an acquisition of
Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares Beneficially Owned by
such Person to 15% or more of the Common Shares then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 15% or more of the Common 

 

1

 

Shares then outstanding
by reason of share purchases by the Company and shall, following written notice
from, or public disclosure by the Company of such share purchases by the
Company, become the Beneficial Owner of any additional Common Shares without
the prior consent of the Company and shall then Beneficially Own more than 15%
of the Common Shares then outstanding, then such Person shall be deemed to be
an “Acquiring
Person,” (y) solely as the result of the acquisition of
Common Shares directly from the Company; provided,
however, that if a Person shall become the Beneficial Owner of 15%
or more of the Common Shares then outstanding solely by reason of share
purchases directly from the Company and shall, after that date, become
Beneficial Owner of any additional Common Shares without the prior written
consent of the Company and shall then Beneficially Own more than 15% of the
Common Shares then outstanding, then such Person shall be deemed to be an “Acquiring
Person” or (z) if the Board determines in good faith
that a Person who would otherwise be an “Acquiring Person,”
as defined pursuant to the foregoing provisions of this paragraph (a), has
become such inadvertently, and such Person divests, as promptly as practicable
(as determined in good faith by the Board), following receipt of written notice
from the Company of such event, of Beneficial Ownership of (I) a sufficient
number of Common Shares so that such Person would no longer be an “Acquiring
Person,” as defined pursuant to the foregoing
provisions of this paragraph (a), or (II), if such Person is subject to clause
(v) of this paragraph (a), then a sufficient number of Common Shares so that
such Person, together with all Affiliates and Associates of such Person,  would be the Beneficial Owner of the number
of Common Shares Beneficially Owned by such Person as of the Announcement
Event, then such Person shall not be deemed to be an “Acquiring Person”
for any purposes of this Agreement; provided, however,
that if such Person shall again become the Beneficial Owner of 15% or more of
the Common Shares then outstanding, such Person shall be deemed an “Acquiring
Person,” subject to the exceptions set forth in this
Section 1(a).

 

(b)           “Affiliate”
and “Associate”
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), as in effect on the date of this Agreement; provided, however, that the limited partners of a limited
partnership shall not be deemed to be Associates of such limited partnership
solely by virtue of their limited partnership interests.

 

(c)           “Announcement
Event” shall mean the first public
announcement by the Company of the adoption of this Agreement, written notice
of which shall have been provided to the Rights Agent.

 

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

 

(i)            which such Person
or any of such Person’s Affiliates or Associates is deemed to Beneficially Own,
within the meaning of Rule 13d-3 of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Agreement;

 

(ii)           which such Person
or any of such Person’s Affiliates or Associates has (A) the right to acquire
(whether such right is exercisable immediately or only after the passage of time
or the occurrence or fulfillment of a condition) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling 

 

2

 

group members with respect
to a bona fide public offering of securities and other than customary
agreements with and between initial purchasers and selling group members with
respect to a bona fide offering of securities under Rule 144A under the
Securities Act of 1933, as amended (the “Act”) and other than agreements between the Company
and any Person pursuant to which the right or obligation to purchase securities
is conditioned upon the achievement of research or development milestones which
have not yet been achieved), or upon the exercise of conversion rights (other
than conversion rights applicable to securities held by underwriters, initial
purchasers or selling group members in connection with a bona fide public
offering of securities under Rule 144A under the Act pursuant to customary
agreements with and between them and the Company, so long as such securities
are so held), exchange rights, rights (other than the Rights), warrants or
options, or otherwise; provided, however,
that a Person shall not be deemed the “Beneficial Owner”
of, or to “Beneficially
Own,” securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person’s
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however,
that a Person shall not be deemed the “Beneficial Owner”
of, or to “Beneficially
Own,” any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or

 

(iii)         which are “Beneficially
Owned,” directly or indirectly, by any other Person
with which such Person or any of such Person’s Affiliates or Associates has any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities and other than customary agreements with and
between initial purchasers and selling group members with respect to a bona
fide offering of securities under Rule 144A under the Act) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
Section 1(c)(ii)(B) hereof) or disposing of any securities of the Company; provided, however, an agreement, arrangement or
understanding for purposes of this Section 1(c)(iii) shall not be deemed
to include actions, including any agreement, arrangement or understanding, or
statements by (1) any member of the Board (as it is comprised on the date of
this Agreement) (the “Existing Directors”),
(2) any subsequent directors of the Company who have been nominated by a
majority of the Existing Directors (the “Successor Directors”), or
by any Person of whom such Existing Director or Successor Director is an
Affiliate or Associate, or (3) any subsequent directors of the Company who
have been nominated by a majority of the Existing Directors and/or the
Successor Directors, nominating as a group; provided,
however that this exception shall not apply to a particular Person
if and to the extent that such Person, after the date of this Agreement,
acquires “Beneficial
Ownership” of more than an additional 5% of the then
outstanding Common Shares of the Company unless (A) the shares are acquired
directly from the Company or as part of an employee benefit or compensation
plan of the Company or a subsidiary of the Company or (B) the Person
establishes to the satisfaction of the directors of the Company that it is
acting on its own behalf and not in concert with any other Person and will not,
upon completion of any purchases, be the “Beneficial Owner” of
15% or more of the outstanding Common Shares.

 

3

 

Notwithstanding
anything in this definition of “Beneficial Ownership” to
the contrary, the phrase, “then outstanding,”
when used with reference to a Person’s “Beneficial Ownership” of
securities of the Company, shall mean the number of such securities then issued
and outstanding together with the number of such securities not then actually
issued and outstanding which such Person would be deemed to own beneficially
hereunder.

 

(e)           “Business Day”
shall mean any day other than a Saturday, a Sunday, or a day on which banking
institutions in the States of California and New Jersey 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., New Jersey Time,
on such date; provided, however, that if such
date is not a Business Day it shall mean 5:00 p.m., New Jersey Time, on the next succeeding Business Day.

 

(g)           “Common Shares”, when used with respect to the
Company, shall mean the shares of common stock, par value $0.001 per share, of
the Company; provided, however, that, “Common Shares,” when
used in this Agreement in connection with a specific reference to any Person
other than the Company, shall mean the capital stock (or equity interest) with
the greatest voting power of such other Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person.

 

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

 

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

 

(j)            “Interested
Stockholder” shall mean any Acquiring
Person or any Affiliate or Associate of an Acquiring Person or any other Person
in which any such Acquiring Person, Affiliate or Associate has an interest, or
any other Person acting directly or indirectly on behalf of or in concert with
any such Acquiring Person, Affiliate or Associate.

 

(k)           “Person”
shall mean any individual, group, firm, corporation or other entity, and shall
include any successor (by merger or otherwise) of such entity.

 

(l)            “Preferred
Shares” shall mean shares of Series
A Junior Participating Preferred Stock, par value $0.001 per share, of the
Company having the designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions set forth in the Form of
Certificate of Designation attached to this Agreement as Exhibit A.

 

(m)          “Purchase Price”
shall have the meaning set forth in Section 7(b) hereof.

 

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

 

(o)           “Shares
Acquisition Date” shall mean the first date
of public announcement by the Company that an Acquiring Person exists, or by an
Acquiring Person that such Person has become an Acquiring Person; provided, however, that, if such Person is
determined not to have become an Acquiring Person pursuant to clause (z) of
Subsection 1(a)(B) hereof, then no Shares Acquisition Date shall be deemed to
have occurred.

 

4

 

(p)           “Subsidiary”
of any Person shall mean any corporation or other entity of which a majority of
the voting power of the voting equity securities or equity interest is owned,
directly or indirectly, by such Person.

 

(q)           “Transaction”
shall mean any merger, consolidation or sale of assets described in
Section 13(a) hereof or any acquisition of Common Shares which would
result in a Person becoming an Acquiring Person or a Principal Party (as such
term is hereinafter defined).

 

(r)           “Transaction
Person” with respect to a
Transaction shall mean (i) any Person who (x) is or will become an Acquiring
Person or a Principal Party (as such term is hereinafter defined) if the
Transaction were to be consummated and (y) directly or indirectly proposed or
nominated a director of the Company which director is in office at the time of
consideration of the Transaction, or (ii) an Affiliate or Associate of such a
Person.

 

SECTION
2.         APPOINTMENT OF RIGHTS AGENT.  The Company hereby appoints the Rights Agent
to act as agent for the Company in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint
such co-Rights Agents as it may deem necessary or desirable.  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.

 

SECTION
3.         ISSUE OF RIGHT CERTIFICATES.

 

(a)           Until the earlier
of the Close of Business on (i) the Shares Acquisition Date or (ii) the tenth
Business Day (or such later date as may be determined by action of the Board
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement (determined in accordance with Rule 14d-2 under the Exchange
Act) by any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company or any
entity holding Common Shares for or pursuant to the terms of any such plan) of,
or of the first public announcement of the intention of any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any entity holding Common Shares
for or pursuant to the terms of any such plan) to commence, a tender or
exchange offer (which intention to commence remains in effect for five Business
Days after such announcement), the consummation of which would result in any
Person becoming an Acquiring Person (including any such date which is after the
date of this Agreement and prior to the issuance of the Rights, the earlier of
such dates being herein referred to as the “Distribution Date”),
(x) the Rights will be evidenced by the certificates for Common Shares
registered in the names of the holders thereof (which certificates shall also
be deemed to be Right Certificates) and not by separate Right Certificates, and
(y) the Rights (and the right to receive Right Certificates therefor) will be
transferable only in connection with the transfer of Common Shares.  As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and the Rights Agent will, if so
requested by written notice, and provided with a stockholder list and all other
relevant information which the Rights Agent may request, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common Shares as of the
Close of Business on the Distribution Date, at the address of such holder shown
on the records of the Company, a Right Certificate, in substantially the form 

 

5

 

of Exhibit B hereto (a “Right
Certificate”), evidencing one Right for each Common Share so
held, subject to the adjustment provisions of Section 11 of this
Agreement.  As of the Distribution Date,
the Rights will be evidenced solely by such Right Certificates, and the Rights
will be transferable only separately from the transfer of Common Shares.

 

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 next Business Day following such
oral notification.  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 (directly or
through the Rights Agent or its transfer agent) a copy of a Summary of Rights
to Purchase Preferred Shares, in substantially the form of Exhibit C hereto (the “Summary
of Rights”), by first-class, postage-prepaid mail, to each
record holder of Common Shares as of the Close of Business on the Record Date,
at the address of such holder shown on the records of the Company.  With respect to certificates for Common
Shares outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof.  Until the Distribution
Date (or the earlier of the Redemption Date and the Final Expiration Date), the
surrender for transfer of any certificate for Common Shares outstanding on the
Record Date shall also constitute the transfer of the Rights associated with
the Common Shares represented thereby.

 

(c)           Certificates for
Common Shares which become outstanding (including, without limitation,
reacquired Common Shares referred to in the last sentence of this paragraph
(c)) after the Record Date but prior to the earliest of the Distribution Date,
the Redemption Date or the Final Expiration Date shall have impressed on,
printed on, written on or otherwise affixed to them a legend substantially in
the following form:

 

This certificate also
evidences and entitles the holder hereof to certain rights as set forth in a
Rights Agreement between Senomyx, Inc. (the “Company”)
and Mellon Investor Services LLC as Rights Agent (the “Rights Agent”),
dated as of February 14, 2005, as amended from time to time (the “Rights
Agreement”), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal executive
offices of the Company.  Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate.  The Company will mail to
the holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. 
As described in the Rights Agreement, Rights issued to any Person who
becomes an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement) and certain related persons, whether currently held by or
on behalf of such Person or by any subsequent holder, shall become null and
void.

 

With
respect to such certificates containing a legend substantially in the foregoing
form, until the Distribution Date (or, if earlier, the earlier of the
Redemption Date or the Final 

 

6

 

Expiration Date), the Rights associated with the
Common Shares represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificate
shall also constitute the transfer of the Rights associated with the Common
Shares represented thereby.  In the event
that the Company purchases or acquires any Common Shares after the Record Date
but prior to the Distribution Date, any Rights associated with such Common
Shares shall be deemed canceled and retired so that the Company shall not be
entitled to exercise any Rights associated with the Common Shares which are no
longer outstanding.  Notwithstanding this
Section 3(c), the omission of a legend shall not affect the enforceability
of any part of this Agreement or the rights of any holder of the Rights.

 

SECTION
4.         FORM OF RIGHT CERTIFICATES.

 

(a)           The Right
Certificates (and the form of election to purchase Preferred Shares, the form
of assignment and the form of certification to be printed on the reverse
thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate (but which do not affect the rights, duties or responsibilities of
the Rights Agent) and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange or quotation system on which the Rights may from time to time be
listed, or to conform to usage.  Subject
to the provisions of Sections 7, 11 and 22 hereof, the Right Certificates shall
entitle the holders thereof to purchase such number of one one-hundredths of a
Preferred Share as shall be set forth therein at the Purchase Price (as defined
in Section 7(b)), but the number of such one one-hundredths of a Preferred
Share and the Purchase Price shall be subject to adjustment as provided herein.

 

(b)           Provided that the
Company shall have notified the Rights Agent that this Section 4(b) applies,
any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to the second
paragraph of Section 11(a)(ii) hereof and any Right Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Right Certificate referred to in this sentence,
shall contain (to the extent the Rights Agent has knowledge thereof and to the
extent feasible) a legend substantially in the following form:

 

The Rights represented by
this Right Certificate are or were Beneficially Owned by a Person who was or
became an Acquiring Person or an Affiliate or Associate of an Acquiring Person
(as such terms are defined in the Rights Agreement).  Accordingly, this Right Certificate and the
Rights represented hereby are null and void.

 

The
provisions of Section 11(a)(ii) hereof shall be operative whether or not
the foregoing legend is contained on any such Right Certificate.

 

SECTION
5.         COUNTERSIGNATURE AND
REGISTRATION.  The
Right Certificates shall be executed on behalf of the Company by its Chairman
of the Board, its Chief Executive Officer, its President, its Vice Chairman of
the Board, its Chief Financial Officer, or any of its Vice Presidents, either
manually or by facsimile signature, shall have affixed thereto the Company’s 

 

7

 

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

 

Following
the Distribution Date and receipt by the Rights Agent of (i) written notice of
the Distribution Date pursuant to Section 3(a) hereof and (ii) a stockholder
list and all relevant information requested by the Rights Agent pursuant to
Section 3(a) hereof, the Rights Agent will keep or cause to be kept, at its
office designated for such purpose, books for registration and transfer of the
Right Certificates issued hereunder. 
Such books shall show the names and addresses of the respective holders
of the Right Certificates, the number of Rights evidenced on its face by each
of the Right Certificates and the date of each of the Right Certificates.

 

SECTION
6.         TRANSFER, SPLIT UP, COMBINATION
AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT
CERTIFICATES.  Subject
to the provisions of Section 11(a)(ii), Section 14 and
Section 24 hereof, at any time after the Close of Business on the
Distribution Date, and at or prior to the Close of Business on the earlier of
the Redemption Date or the Final Expiration Date, any Right Certificate or
Right Certificates may be transferred, split up, combined or exchanged for
another Right Certificate or Right Certificates, entitling the registered
holder to purchase a like number of one one-hundredths of a Preferred Share as
the Right Certificate or Right Certificates surrendered then entitled such
holder to purchase.  Any registered
holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the office
of the Rights Agent designated for such purpose.  Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer
of any such surrendered Right Certificate until the registered holder shall
have completed and signed the certificate contained in the form of assignment
on the reverse side of such Right Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.  Thereupon the Rights
Agent shall, subject to Section 11(a)(ii), Section 14 and
Section 24 hereof, countersign and deliver to the person entitled thereto
a Right Certificate or Right Certificates, as the case may be, as so requested
by written notice.  The Company may
require payment 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 under this Section unless it is satisfied that
all such taxes and/or charges have been paid.

 

8

 

Upon
receipt by the Company and the Rights Agent of evidence reasonably satisfactory
to them of the loss, theft, destruction or mutilation of a Right Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and, at the Company’s request, reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will issue, execute and deliver a new Right Certificate
of like tenor to the Rights Agent for countersignature and delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed
or mutilated.

 

Notwithstanding
any other provisions hereof, the Company and the Rights Agent, by mutual
consent, may amend this Agreement to provide for uncertificated Rights in
addition to or in place of Rights evidenced by Rights Certificates.

 

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

 

(a)           The registered
holder of any Right Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the Purchase Price for each one one-hundredth of a Preferred
Share (or such other number of shares or other securities) as to which the
Rights are exercised, at or prior to the earliest of (i) the Close of Business
on February 21, 2015 (the “Final Expiration Date”),
(ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the “Redemption Date”), or (iii) the time
at which such Rights are exchanged as provided in Section 24 hereof.

 

(b)           The purchase price
for each one one-hundredth of a Preferred Share pursuant to the exercise of a
Right shall initially be $100.00 (the “Purchase Price”) and
shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof and shall be payable in lawful money of the United States of America
in accordance with paragraph (c) below.

 

(c)           Upon receipt of a
Right Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the Purchase Price for the
shares to be purchased and an amount equal to any applicable tax or charge
required to be paid by the holder of such Right Certificate in accordance with
Section 9 hereof by certified check, cashier’s check, bank draft or money
order payable to the order of the Company, the Rights Agent shall thereupon
promptly (i) (A) requisition from any transfer agent for the Preferred Shares
certificates for the number of Preferred Shares to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company, in its sole discretion, shall have elected to
deposit the Preferred Shares issuable upon exercise of the Rights hereunder
into a depository, requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred Share as are to
be purchased (in which case certificates for the Preferred Shares represented
by such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with
Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered 

 

9

 

to or upon the order of
the registered holder of such Right Certificate, registered in such name or
names as may be designated by such holder and (iv) when appropriate, after
receipt, deliver such cash to or upon the order of the registered holder of
such Right Certificate.  In the event
that the Company is obligated to issue securities of the Company other than
Preferred Shares (including Common Shares) of the Company pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so
that such other securities are available for distribution by the Rights Agent,
if and when necessary to comply with this Agreement.

 

In
addition, in the case of an exercise of the Rights by a holder pursuant to
Section 11(a)(ii) hereof, the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii)
hereof, and, if fewer than all the Rights represented by such Right Certificate
were so exercised, the Rights Agent shall indicate on the Right Certificate the
number of Rights represented thereby which continue to include the rights
provided by Section 11(a)(ii) hereof.

 

(d)           In case the
registered holder of any Right Certificate shall exercise fewer than all the
Rights evidenced thereby (other than a partial exercise of rights pursuant to
Section 11(a)(ii) as described in Section 7(c) hereof), a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Right Certificate
or to his duly authorized assigns, subject to the provisions of Section 14
hereof.

 

(e)           The Company
covenants and agrees that it will cause to be reserved and kept available out
of its authorized and unissued Preferred Shares or any Preferred Shares held in
its treasury, the number of Preferred Shares that will be sufficient to permit
the exercise in full of all outstanding Rights in accordance with this
Section 7.

 

(f)            Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth in this
Section 7 unless such registered holder shall have (i) duly and properly
completed and signed the certification following the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered
for such exercise, (ii) tendered the Purchase Price (and an amount equal to any
applicable tax or charge required to be paid by the holder of such Right
Certificate in accordance with Section 9) to the Company in the manner set
forth in Section 7(c), and (iii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.

 

SECTION
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 canceled form, or, if delivered or surrendered to the Rights
Agent, shall be canceled by it, and no Right Certificates shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Agreement.  The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof.  The Rights Agent shall deliver all canceled
Right Certificates to the Company 

 

10

 

approximately one and
one-half years after the cancellation date, or shall, at the written request of
the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.

 

SECTION
9.         AVAILABILITY OF PREFERRED
SHARES.  The Company
covenants and agrees that so long as the Preferred Shares (and, after the time
a person becomes an Acquiring Person, Common Shares or any other securities)
issuable upon the exercise of the Rights may be listed on any national
securities exchange or quotation system, the Company shall use its best efforts
to cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange or quotation system
upon official notice of issuance upon such exercise.

 

The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares (or Common Shares and other
securities, as the case may be) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such Preferred Shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares or other securities.

 

The
Company further covenants and agrees that it will pay when due and payable any
and all taxes and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any Preferred Shares upon the exercise
of Rights.  The Company shall not, however, be required to pay any 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 or depositary
receipts for the Preferred Shares in a name other than that of, the registered
holder of the Right Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depositary receipts for Preferred
Shares upon the exercise of any Rights until any such tax or 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 reasonable satisfaction that no such tax or charge is due.

 

As
soon as practicable after the Distribution Date, the Company shall use its best
efforts to:

 

(i)            prepare and file a
registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, will use its
best efforts to cause such registration statement to become effective as soon
as practicable after such filing and will use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Final Expiration Date; and

 

(ii)           use its best
efforts to qualify or register the Rights and the securities purchasable upon
exercise of the Rights under the blue sky laws of such jurisdictions as may be
necessary or appropriate.

 

SECTION
10.       PREFERRED SHARES RECORD DATE.  Each person in whose name any certificate for
Preferred Shares or other securities is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Preferred Shares or other securities represented thereby on, and such
certificate shall be dated, the date upon which the 

 

11

 

Right Certificate
evidencing such Rights was duly surrendered with the forms of election and
certification duly executed and payment of the Purchase Price (and any
applicable taxes or charges) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Shares or other securities transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the Preferred Shares or other securities transfer books of the Company are
open.  Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate, as such, shall not
be entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.

 

SECTION
11.       ADJUSTMENT OF PURCHASE PRICE,
NUMBER OF SHARES OR NUMBER OF RIGHTS.  The Purchase Price, the number of Preferred
Shares covered by each Right and the number of Rights outstanding are subject
to adjustment from time to time as provided in this Section 11.

 

(a)

 

(i)            In the event the
Company shall at any time after the date of this Agreement (A) declare a
dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into
a smaller number of Preferred Shares or (D) issue any shares of its capital
stock in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the Preferred
Shares transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon
the exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right.  If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii) hereof,
the adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to any adjustment required pursuant to
Section 11(a)(ii) hereof.

 

(ii)           Subject to
Section 24 hereof and the provisions of the next paragraph of this
Section 11(a)(ii), in the event any Person shall become an Acquiring
Person, each holder of a Right shall, for a period of 60 days after the later
of such time any Person becomes an Acquiring Person or the effective date of an
appropriate registration statement filed under the Act pursuant to
Section 9 hereof (provided, however,
that, if at any time prior to the expiration or termination of the Rights there
shall be a temporary restraining order, a preliminary injunction, an injunction,

 

12

 

or temporary suspension
by the Board, or similar obstacle to exercise of the Rights (the “Injunction”)
which prevents exercise of the Rights, a new 60-day period shall commence on
the date the Injunction is removed), have a right to receive, upon exercise
thereof at a price equal to the then current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares as shall equal the result
obtained by (A) multiplying the then current Purchase Price by the number of
one one-hundredths of a Preferred Share for which a Right is then exercisable
and dividing that product by (B) 50% of the then current per share market price
of the Common Shares (determined pursuant to Section 11(d) hereof) on the
date such Person became an Acquiring Person; provided,
however, that if the transaction that would otherwise give rise to
the foregoing adjustment is also subject to the provisions of Section 13
hereof, then only the provisions of Section 13 hereof shall apply and no
adjustment shall be made pursuant to this Section 11(a)(ii).  In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company shall
not take any action which would eliminate or diminish the benefits intended to
be afforded by the Rights.

 

Notwithstanding
anything in this Agreement to the contrary, from and after the time any Person
becomes an Acquiring Person, any Rights Beneficially Owned by (i) such
Acquiring Person or an Associate or Affiliate of such Acquiring Person, (ii) a
transferee of such Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person became such, or (iii) a
transferee of such Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person’s
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 11(a)(ii), shall become
null and void without any further action and no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. 
The Company shall use all reasonable efforts to insure that the provisions
of this Section 11(a)(ii) and Section 4(b) hereof are complied with,
but shall have no liability to any holder of Right Certificates or other Person
as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.  No Right Certificate shall be issued at any
time upon the transfer of any Rights to an Acquiring Person whose Rights would
be void pursuant to the second preceding sentence or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and
any Right Certificate delivered to the Rights Agent for transfer to an
Acquiring Person whose Rights would be void pursuant to the second preceding
sentence shall be canceled.

 

(iii)         In lieu of issuing
Common Shares in accordance with Section 11(a)(ii) hereof, the Company
may, if a majority of the Board then in office determines that such action is
necessary or appropriate and not contrary to the interests of holders of
Rights, elect to (and, in the event that the Board has not exercised the
exchange right contained in Section 24(c) hereof and there are not
sufficient treasury shares and authorized but unissued Common Shares to permit
the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the 

 

13

 

Company shall) take all
such action as may be necessary to authorize, issue or pay, upon the exercise
of the Rights, cash (including by way of a reduction of the Purchase Price),
property, Common Shares, other securities or any combination thereof having an
aggregate value equal to the value of the Common Shares which otherwise would
have been issuable pursuant to Section 11(a)(ii) hereof, which aggregate
value shall be determined by a nationally recognized investment banking firm
selected by a majority of the Board then in office.  For purposes of the preceding sentence, the
value of the Common Shares shall be determined pursuant to Section 11(d)
hereof.  Any such election by the Board
must be made within 60 days following the date on which the event described in
Section 11(a)(ii) hereof shall have occurred.  Following the occurrence of the event
described in Section 11(a)(ii) hereof, a majority of the Board then in
office may suspend the exercisability of the Rights for a period of up to 60
days following the date on which the event described in Section 11(a)(ii)
hereof shall have occurred to the extent that such directors have not
determined whether to exercise their rights of election under this
Section 11(a)(iii).  In the event of
any such suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended.

 

(b)           In case the Company
shall fix a record date for the issuance of rights, options or warrants to all
holders of Preferred Shares entitling them (for a period expiring within 45
calendar days after such record date) to subscribe for or purchase Preferred
Shares (or shares having the same designations and the powers, preferences and
rights, and the qualifications, limitations and restrictions as the Preferred
Shares (“equivalent
preferred shares”)) or securities convertible into Preferred
Shares or equivalent preferred shares at a price per Preferred Share or
equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less
than the then current per share market price of the Preferred Shares (as such
term is hereinafter defined) on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of Preferred Shares outstanding on such
record date plus the number of Preferred Shares which the aggregate offering
price of the total number of Preferred Shares and/or equivalent preferred
shares so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current market
price and the denominator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of additional Preferred Shares
and/or equivalent preferred shares to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible); provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.  In
case such subscription price may be paid in a consideration part or all of
which shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board, whose determination shall be
described in a written statement filed with the Rights Agent.  Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation.  Such adjustment shall
be made successively whenever such a record date is fixed; and in the event
that such rights, options or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.

 

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

 

14

 

consolidation or merger
in which the Company is the continuing or surviving corporation) of evidences
of indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price
to be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the then current per share market price of the
Preferred Shares (as such term is hereinafter defined) on such record date,
less the fair market value (as determined in good faith by the Board, whose
determination shall be described in a written statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Preferred Share and the denominator of which shall be such current per share
market price of the Preferred Shares; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company to be issued upon exercise of one Right.  Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution
is not so made, the Purchase Price shall again be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.

 

(d)

 

(i)            For the purpose of
any computation hereunder, the “current per share market price” of
any security (a “Security”
for the purpose of this Section 11(d)(i)) on any date shall be deemed to
be the average of the daily closing prices per share of such Security for the
30 consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however,
that in the event that the current per share market price of the Security is
determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in shares
of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security or securities
convertible into such shares, or (C) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the current per share market price shall be appropriately
adjusted to reflect the current market price per share equivalent of such
Security.  The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Security is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or
as reported on the Nasdaq National Market or, if the Security is not listed or
admitted to trading on any national securities exchange or reported on the
Nasdaq National Market, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System (“Nasdaq”)
or such other system then in use, or, if on any such date the Security is not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Security selected by the Board or, if on any 

 

15

 

such date no professional
market maker is making a market in the Security, the price as determined in
good faith by the Board.  The term “Trading
Day” shall mean a day on which the principal
national securities exchange on which the Security is listed or admitted to
trading is open for the transaction of business or, if the Security is not
listed or admitted to trading on any national securities exchange, a Business
Day.

 

(ii)           For the purpose of
any computation hereunder, the “current per share market price” of
the Preferred Shares shall be determined in accordance with the method set
forth in Section 11(d)(i) hereof. 
If the Preferred Shares are not publicly traded, the “current
per share market price” of the Preferred Shares shall be conclusively
deemed to be the current per share market price of the Common Shares as
determined pursuant to Section 11(d)(i) hereof (appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof) multiplied by one hundred. 
If neither the Common Shares nor the Preferred Shares are publicly held or
so listed or traded, “current per share market price”
shall mean the fair value per share as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent.

 

(e)           No adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.  All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-hundredth of a
Preferred Share or one ten-thousandth of any other share or security as the
case may be.  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 requires such adjustment or (ii) the date of
the expiration of the right to exercise any Rights.

 

(f)            If as a result of
an adjustment made pursuant to Section 11(a) hereof, the holder of any
Right thereafter exercised shall become entitled to receive any shares of
capital stock of the Company other than Preferred Shares, thereafter the number
of such other shares so receivable upon exercise of any Right shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Preferred Shares contained
in Sections 11(a) through 11(c) hereof, inclusive, and the provisions of
Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares shall
apply on like terms to any such other shares.

 

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

 

(h)           Unless the Company
shall have exercised its election as provided in Section 11(i) hereof,
upon each adjustment of the Purchase Price as a result of the calculations made
in Section 11(b) and Section 11(c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of one
one-hundredths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number
of one one-hundredths

 

16

 

of a Preferred Share
covered by a Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.

 

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

 

(j)            Irrespective of
any adjustment or change in the Purchase Price or the number of one
one-hundredths of a Preferred Share issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of one one-hundredths of a Preferred
Share which were expressed in the initial Right Certificates issued hereunder.

 

(k)           Before taking any
action that would cause an adjustment reducing the Purchase Price below one
one-hundredth of the then par value, if any, of the Preferred Shares issuable
upon exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Preferred Shares at such
adjusted Purchase Price.

 

(l)            In any case in
which this Section 11 shall require that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the Company
may elect (with prompt written notice thereof to the Rights Agent) to defer
until the occurrence of such event the issuing to the holder of any Right
exercised after such record date of the Preferred 

 

17

 

Shares and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder’s
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.

 

(m)          The Company
covenants and agrees that, after the Distribution Date, it will not, except as
permitted by Section 23 or Section 27 hereof, take (or permit any
Subsidiary to take) any action the purpose of which is to, or if at the time
such action is taken it is reasonably foreseeable that the effect of such
action is to, materially diminish or eliminate the benefits intended to be
afforded by the Rights.  Any such action
taken by the Company during any period after any Person becomes an Acquiring
Person but prior to the Distribution Date shall be null and void unless such
action could be taken under this Section 11(m) from and after the
Distribution Date.

 

(n)           Anything in this
Section 11 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Purchase Price, in addition to those adjustments
expressly required by this Section 11, as and to the extent that it in its
sole discretion shall determine to be advisable in order that any consolidation
or subdivision of the Preferred Shares, issuance wholly for cash of any
Preferred Shares at less than the current market price, issuance wholly for
cash of Preferred Shares or securities which by their terms are convertible
into or exchangeable for Preferred Shares, dividends on Preferred Shares
payable in Preferred Shares or issuance of rights, options or warrants referred
to hereinabove in Section 11(b), hereafter made by the Company to holders of
its Preferred Shares shall not be taxable to such stockholders.

 

(o)           In the event that
at any time after the date of this Agreement and prior to the Distribution
Date, the Company shall (i) declare or pay any dividend on the Common Shares
payable in Common Shares or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of
Common Shares, then in any such case (A) the number of one one-hundredths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-hundredths of a
Preferred Share so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (B) each Common Share outstanding
immediately after such event shall have issued with respect to it that number
of Rights which each Common Share outstanding immediately prior to such event
had issued with respect to it.  The
adjustments provided for in this Section 11(o) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.

 

(p)           The exercise of
Rights under Section 11(a)(ii) hereof shall only result in the loss of
rights under Section 11(a)(ii) hereof to the extent so exercised and shall
not otherwise affect the rights represented by the Rights under this Agreement,
including the rights represented by Section 13 hereof.

 

18

 

SECTION
12.       CERTIFICATE OF ADJUSTED PURCHASE
PRICE 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 Rights
to become null and void) occurs as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
or describing such event, and a brief, reasonably detailed statement of the
facts, computations and methodology accounting for such adjustment, (b) file
with the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with
Section 25 hereof.  The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall have no duty or liability with respect
to, and shall not be deemed to have knowledge of, any adjustment or any such
event unless and until it shall have received such certificate.

 

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

 

(a)           In the event that,
following the Shares Acquisition Date or, if a Transaction is proposed, the
Distribution Date, directly or indirectly (x) the Company shall consolidate
with, or merge with and into, any Interested Stockholder, or if in such merger
or consolidation all holders of Common Shares are not treated alike, any other
Person, (y) any Interested Stockholder, or if in such merger or consolidation
all holders of Common Shares are not treated alike, any other Person shall
consolidate with the Company, or merge with and into the Company, and the
Company shall be the continuing or surviving corporation of such merger (other
than, in the case of either transaction described in (x) or (y), a merger or
consolidation which would result in all of the voting power represented by the
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
securities of the surviving entity) all of the voting power represented by the
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation and the holders of such securities not
having changed as a result of such merger or consolidation), or (z) the Company
shall sell, mortgage or otherwise transfer (or one or more of its subsidiaries
shall sell, mortgage or otherwise transfer), in one or more transactions,
assets or earning power aggregating more than 50% of the assets or earning
power of the Company and its subsidiaries (taken as a whole) to any Interested
Stockholder or Stockholders, or if in such transaction all holders of Common
Stock are not treated alike, any other Person, (other than the Company or any
Subsidiary of the Company in one or more transactions each of which
individually and the aggregate does not violate Section 13(d) hereof)
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right, subject to Section 11(a)(ii) hereof, shall have the
right to receive, upon the exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of freely
tradeable Common Shares of the Principal Party (as such term is hereinafter
defined), free and clear of liens, rights of call or first refusal,
encumbrances or other adverse claims, as shall be equal to the result obtained
by (A) multiplying the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable
(without taking into account any adjustment previously made pursuant to
Section 11(a)(ii) hereof) and dividing that product by (B) 50% of the then
current per share market price of the Common Shares of such Principal Party
(determined pursuant to 

 

19

 

Section 11(d) hereof)
on the date of consummation of such consolidation, merger, sale or transfer;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such consolidation, merger, sale or transfer, all the obligations and
duties of the Company pursuant to this Agreement; (iii) the term “Company”
shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply
to such Principal Party; and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably may be, in
relation to its Common Shares thereafter deliverable upon the exercise of the
Rights.

 

(b)           “Principal
Party” shall mean:

 

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

 

(ii)           in the case of any
transaction described in clause (z) of the first sentence of 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;

 

provided, however,
that in any case, (1) if the Common Shares of such Person are not at such time
and have not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary or Affiliate of another Person the Common Shares of which
are and have been so registered, “Principal Party”
shall refer to such other Person; (2) if such Person is a Subsidiary, directly
or indirectly, or Affiliate of more than one Person, the Common Shares of two
or more of which are and have been so registered, “Principal Party”
shall refer to whichever of such Persons is the issuer of the Common Shares having
the greatest aggregate market value; and (3) if such Person is owned, directly
or indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules set forth in (1)
and (2) above shall apply to each of the chains of ownership having an interest
in such joint venture as if such party were a “Subsidiary” of
both or all of such joint venturers and the Principal Parties in each such
chain shall bear the obligations set forth in this Section 13 in the same
ratio as their direct or indirect interests in such Person bear to the total of
such interests.

 

(c)           The Company shall
not consummate any such consolidation, merger, sale or transfer unless the
Principal Party shall have a sufficient number of authorized Common Shares that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior thereto the
Company and each Principal Party and each other Person who may become a
Principal Party as a result of such consolidation, merger, sale or transfer
shall have (i) executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and (ii) prepared, filed and had declared and remain effective
a registration statement under the Act on the appropriate form with respect to
the Rights and the securities exercisable upon exercise of the 

 

20

 

Rights and further
providing that, as soon as practicable after the date of any consolidation,
merger, sale or transfer of assets mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense will:

 

(i)            cause the
registration statement under the Act with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form to
remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Final Expiration Date;

 

(ii)           use its best
efforts to qualify or register the Rights and the securities purchasable upon
exercise of the Rights under the blue sky laws of such jurisdictions as may be
necessary or appropriate;

 

(iii)         list the Rights and
the securities purchasable upon exercise of the Rights on each national
securities exchange on which the Common Shares were listed prior to the
consummation of such consolidation, merger, sale or transfer of assets or on
the Nasdaq National Market if the Common Shares were listed on the Nasdaq National
Market or, if the Common Shares were not listed on a national securities
exchange or the Nasdaq National Market prior to the consummation of such
consolidation, merger, sale or transfer of assets, on a national securities
exchange or the Nasdaq National Market; and

 

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

 

The provisions
of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.

 

(d)           After the
Distribution Date, the Company covenants and agrees that it shall not (i)
consolidate with, (ii) merge with or into, or (iii) sell or transfer to, in one
or more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its subsidiaries taken as a whole,
any other Person (other than a Subsidiary of the Company in a transaction which
does not violate Section 11(m) hereof), if (x) at the time of or after
such consolidation, merger or sale there are any charter or bylaw provisions or
any rights, warrants or other instruments or securities outstanding, agreements
in effect or any other action taken which would diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such 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.  The
Company shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 13(d).

 

SECTION
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 

 

21

 

be paid to the registered
holders of the Right Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. 
For the purposes of this Section 14(a), the current market value of
a whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable.  The closing price
for any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading or as reported on the Nasdaq National Market or,
if the Rights are not listed or admitted to trading on any national securities
exchange or reported on the Nasdaq National Market, the last quoted price or,
if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by Nasdaq or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board.  If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board shall be used.

 

(b)           The Company shall
not be required to issue fractions of Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share) upon exercise
of the Rights or to distribute certificates which evidence fractional Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share).  Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred
Share may, at the election of the Company, be evidenced by depositary receipts;
provided, however, that holders of such
depositary receipts shall have all of the designations and the powers,
preferences and rights, and the qualifications, limitations and restrictions to
which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. 
In lieu of fractional Preferred Shares that are not integral multiples
of one one-hundredth of a Preferred Share, the Company shall pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Preferred Share.  For
the purposes of this Section 14(b), the current market value of a
Preferred Share shall be the current per share market price of the Preferred
Shares (as determined pursuant to the first and second sentences of
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date
of such exercise (or, if not publicly traded, in accordance with
Section 11(d)(ii) hereof).

 

(c)           Following the
occurrence of one of the transactions or events specified in Section 11
hereof giving rise to the right to receive Common Shares, capital stock
equivalents (other than Preferred Shares) or other securities upon the exercise
of a Right, the Company shall not be required to issue fractions of Common
Shares or units of such Common Shares, capital stock equivalents or other
securities upon exercise of the Rights or to distribute certificates which
evidence fractional Common Shares, capital stock equivalents or other
securities.  In lieu of fractional Common
Shares, capital stock equivalents or other securities, the Company shall pay to
the registered holders of Right Certificates at the time such Rights are
exercised as herein 

 

22

 

provided an amount in
cash equal to the same fraction of the current market value of one Common Share
or unit of such Common Shares, capital stock equivalents or other
securities.  For purposes of this
Section 14(c), the current market value shall be the current per share
market price (as determined pursuant to Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of such exercise and, if such capital
stock equivalent is not traded, each such capital stock equivalent shall have
the value of one one-hundredth of a Preferred Share.

 

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

 

(e)           Whenever a payment
for fractional Rights or fractional Common Shares 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
payments 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 upon 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 Common Shares
under any Section of this Agreement relating to the payment of fractional
Rights or fractional Common Shares unless and until the Rights Agent shall have
received such a certificate and sufficient monies.

 

SECTION
15.       RIGHTS OF ACTION.  All
rights of action in respect of this Agreement, excepting the rights of action
given to the Rights Agent under Sections 18 and 20 hereof, are vested in the
respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of the Common Shares) and any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Shares), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution Date, of the
Common Shares), may, in his own behalf and for his own benefit, enforce, and
may institute and maintain any suit, action or proceeding against the Company
to enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. 
Without limiting the foregoing or any remedies available to the holders
of Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement and will be
entitled to specific performance of the obligations under, and injunctive
relief against actual or threatened violations of the obligations of any Person
subject to, this Agreement.  Holders of
Rights shall be entitled to recover the reasonable costs and expenses,
including attorneys fees, incurred by them in any action to enforce the
provisions of this Agreement.

 

Notwithstanding anything in this 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;

 

23

 

provided, however, that the
Company shall use all reasonable efforts to have any such injunction, order,
judgment, decree or ruling lifted or otherwise overturned as soon as possible.

 

SECTION
16.       AGREEMENT OF RIGHT HOLDERS.  Every holder of a Right, by accepting the
same, consents and agrees with the Company and the Rights Agent and with every
other holder of a Right that:

 

(a)           prior to the
Distribution Date, the Rights will be transferable only in connection with the
transfer of the Common Shares;

 

(b)           after the
Distribution Date, the Right Certificates are transferable (subject to the
provisions of this Agreement) only on the registry books of the Rights Agent if
surrendered at the principal office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer; and

 

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

 

SECTION
17.       RIGHT CERTIFICATE HOLDER NOT
DEEMED A STOCKHOLDER. 
No holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or any other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of
any Right Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or 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, or otherwise, until the Right
or Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.

 

SECTION
18.       CONCERNING THE RIGHTS AGENT.  The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from
time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the preparation, delivery,
amendment, administration and execution of this Agreement and the exercise and
performance of its duties hereunder.  The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, damage, judgment, fine, penalty, claim, demand,
settlement, cost or expense, incurred without gross negligence or bad faith on
the part of the Rights Agent (which gross negligence or bad faith must be
determined by a final non-appealable order, judgment, decree or ruling of a
court of competent jurisdiction), for anything done, suffered or omitted by the
Rights Agent in connection with the acceptance of, administration of, or
exercise and performance of its duties under this Agreement, including, without
limitation, the fees and expenses of legal counsel.  The 

 

24

 

provisions of this
Section 18 and Section 20 of this Agreement shall survive the expiration or
exercise of the Rights, the termination of this Agreement and the resignation,
replacement or removal of the Rights Agent.

 

The
Rights Agent shall be protected and shall incur no liability for, or in respect
of any action taken, suffered or omitted by it in connection with, its
acceptance and administration of this Agreement and the exercise and
performance of its duties hereunder, in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.  In no case will
the Rights Agent be liable for special, indirect, incidental or consequential
loss or damage at any kind whatsoever (including but not limited to lost
profits), even if the Rights Agent has been advised of such loss or damage.

 

SECTION
19.       MERGER OR CONSOLIDATION OR
CHANGE OF NAME OF RIGHTS AGENT.  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 or corporate trust business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on
the part of any of the parties hereto, provided that such 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
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 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
Agreement.

 

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

 

SECTION
20.       DUTIES OF RIGHTS AGENT.  The Rights Agent undertakes to perform only
the duties and obligations expressly imposed by this 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:

 

25

 

(a)           The Rights Agent
may consult with legal counsel of its choice (who may be any employee of the
Rights Agent or legal counsel for the Company), 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 to
any action taken, suffered or omitted by it in accordance with such advice or
opinion.

 

(b)           Whenever in the
performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter (including, without limitation,
the identity of an Acquiring Person and the determination of the current per
share market price of any security) 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 a
certificate signed by any one of the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President, the
Treasurer or the Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization to the Rights Agent for any
action taken, suffered or omitted by it under the provisions of this Agreement
in reliance upon such certificate.

 

(c)           The Rights Agent
shall be liable hereunder to the Company and any other Person only for its own
gross negligence or bad faith (which gross negligence or bad faith must be
determined by a final, non-appealable order, judgment, decree or ruling of a
court of competent jurisdiction). 
Anything to the contrary notwithstanding, in no event shall the Rights
Agent be liable for special, punitive, indirect, consequential or incidental
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 or damage.  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 Agreement or in the Right Certificates (except its
countersignature thereof) or be required to verify the same, but all such
statements and recitals are and shall be deemed to have been made by the
Company only.

 

(e)           The Rights Agent
shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming void
pursuant to Section 11(a)(ii) hereof) or any change or adjustment in the
terms of the Rights (including the manner, method or amount thereof) provided
for in Sections 3, 11, 13, 23 or 24 hereof, or the ascertaining of the
existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Right Certificates after
receipt of a certificate pursuant to Section 12 hereof describing such
change or adjustment, 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 Preferred Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.

 

26

 

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

 

(g)           The Rights Agent is
hereby authorized and directed to accept instructions with respect to the
performance of its duties hereunder from any one of the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Financial Officer, any
Vice President, the Secretary or the Treasurer of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and
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 by it in accordance with 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, suffered or
omitted by the Rights Agent under this Agreement and the date on and/or after
which such action shall be taken or suffered, or such omission shall be
effective.  The Rights Agent shall not be
liable for any action taken or suffered by, or any 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, director, officer or employee of the Rights Agent may buy,
sell or deal in any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as fully and
freely as though it were not Rights Agent under this Agreement.  Nothing herein shall preclude the Rights
Agent 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
or bad faith in the selection and continued employment thereof (which gross
negligence or bad faith must be determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction).

 

(j)            No provision of
this 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.

 

27

 

(k)           If, with respect to
any Right Certificate surrendered to the Rights Agent for exercise or transfer,
the certificate attached to the form of assignment or form of election to
purchase, as the case may be, has not been executed, the Rights Agent shall not
take any further action with respect to such requested exercise of transfer
without first consulting with the Company.

 

SECTION
21.       CHANGE OF RIGHTS AGENT.  The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
days’ notice in writing mailed to the Company and to each transfer agent for
the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail.  The Company may remove the Rights Agent or
any successor Rights Agent upon 30 days’ notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent for the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail.  If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. 
If the Company shall fail to make such appointment within a period of 30
days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Company), then the
registered holder of any Right 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 either (a) a Person organized and
doing business under the laws of the United States or of any other state of the
United States which is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50 million or (b) a
direct or indirect wholly owned Subsidiary of such an entity or its
wholly-owning parent.  After appointment,
the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it hereunder,
and execute and deliver any further assurance, conveyance, act or deed
necessary for the purpose.  Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent
for the Common Shares or Preferred Shares, and mail a notice thereof in writing
to the registered holders of the Right Certificates.  Failure to give any notice provided for in
this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.

 

SECTION
22.       ISSUANCE OF NEW RIGHT
CERTIFICATES. 
Notwithstanding any of the provisions of this 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 to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance
or sale of Common Shares following the Distribution Date and prior to the earlier
of the Redemption Date and the Final Expiration Date, the Company (a) shall
with respect to Common Shares so issued 

 

28

 

or sold pursuant
to the exercise of stock options or under any employee plan or arrangement in
existence prior to the Distribution Date, or upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Company and in
existence prior to the Distribution Date, and (b) may, in any other case, if
deemed necessary or appropriate by the Board, issue Right Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) the Company
shall not be obligated to issue any such Right Certificates if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company
or the Person to whom such Right Certificate would be issued, and (ii) no Right
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.

 

SECTION
23.       REDEMPTION.

 

(a)           The Rights may be
redeemed by action of the Board pursuant to Section 23(b) hereof and shall
not be redeemed in any other manner.

 

(b)

 

(i)            The Board may, at
its option, at any time prior to the earlier of (A) such time as any Person
becomes an Acquiring Person, or (B) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of
$0.001 per Right, 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”),
and the Company may, at its option, pay the Redemption Price in Common Shares
(based on the “current
per share market price,” as such term is defined in Section 11(d)
hereof, of the Common Shares at the time of redemption), cash or any other form
of consideration deemed appropriate by the Board.  The redemption of the Rights by the Board may
be made effective at such time, on such basis and subject to such conditions as
the Board in its sole discretion may establish. 
Notwithstanding anything contained in this Agreement to the contrary,
the Rights shall not be exercisable pursuant to Section 11(a)(ii) hereof
prior to the expiration or termination of the Company’s right of redemption
under this Section 23(b)(i).

 

(ii)           In addition, the
Board may, at its option, at any time after the time a Person becomes an
Acquiring Person and after the expiration of any period during which the holder
of Rights may exercise the rights under Section 11(a)(ii) hereof but prior
to any event described in clause (x), (y) or (z) of the first sentence of
Section 13 hereof, redeem all but not less than all of the then
outstanding Rights at the Redemption Price (x) in connection with any merger,
consolidation or sale or other transfer (in one transaction or in a series of
related transactions) of assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its subsidiaries (taken as a whole)
in which all holders of Common Shares are treated alike and not involving
(other than as a holder of Common Shares being treated like all other such
holders) an Interested Stockholder or a Transaction Person or (y)(A) if and for
so long as the Acquiring Person is not thereafter the Beneficial Owner of 15%
or more of the then outstanding Common Shares, and (B) at the time of
redemption no other Persons are Acquiring Persons.

 

29

 

(c)           Immediately upon
the action of the Board ordering the redemption of the Rights pursuant to
Section 23(b) hereof, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption
Price.  The Company shall promptly give
public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such notice shall not affect
the validity of such redemption.  Within
10 days after such action of the Board ordering the redemption of the Rights
pursuant to Section 23(b) hereof, the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares, provided, however, that failure
to give, or any defect in, any such notice shall not affect the validity of
such redemption.  Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.  Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made.  Neither
the Company nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof,
and other than in connection with the purchase of Common Shares prior to the
Distribution Date.

 

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

 

SECTION
24.       EXCHANGE.

 

(a)           The Board may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of
Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
exchange ratio being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board
shall not be empowered to effect such exchange at any time after any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or any such Subsidiary, or any entity holding Common Shares
for or pursuant to the terms of any such plan), together with all Affiliates
and Associates of such Person, becomes the Beneficial Owner of 50% or more of
the Common Shares then outstanding.

 

(b)           Immediately upon
the action of the Board ordering the exchange of any Rights pursuant to
Section 24(a) hereof and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of Common
Shares equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio.  The Company shall
promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice
shall not affect the validity of such exchange. 
The Company promptly shall mail a notice of any 

 

30

 

such exchange to all of
the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent; provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange.  Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice.  Each
such notice of exchange will state the method by which the exchange of the
Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section 11(a)(ii) hereof) held by each
holder of Rights.

 

(c)           In lieu of issuing
Common Shares in accordance with Section 24(a) hereof, the Company may, if
a majority of the Board then in office determines that such action is necessary
or appropriate and not contrary to the interests of the holders of Rights,
elect to (and, in the event that there are not sufficient treasury shares and
authorized but unissued Common Shares to permit any exchange of the Rights in
accordance with Section 24(a) hereof, the Company shall) take all such
action as may be necessary to authorize, issue or pay, upon the exchange of the
Rights, cash, property, Common Shares, other securities or any combination
thereof having an aggregate value equal to the value of the Common Shares which
otherwise would have been issuable pursuant to Section 24(a) hereof, which
aggregate value shall be determined by a nationally recognized investment
banking firm selected by a majority of the Board then in office.  For purposes of the preceding sentence, the
value of the Common Shares shall be determined pursuant to Section 11(d)
hereof.  Any election pursuant to this
Section 24(c) by the Board must be made by resolution within 60 days
following the date on which the event described in Section 11(a)(ii)
hereof shall have occurred.  Following
the occurrence of the event described in Section 11(a)(ii) hereof, a
majority of the Board then in office may suspend the exercisability of the
Rights for a period of up to 60 days following the date on which the event
described in Section 11(a)(ii) hereof shall have occurred to the extent
that such directors have not determined whether to exercise their rights of
exchange under this Section 24(c). 
In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended.

 

(d)           The Company shall
not be required to issue fractions of Common Shares or to distribute
certificates which evidence fractional Common Shares.  In lieu of such fractional Common Shares, the
Company shall pay to the registered holders of the Right Certificates with
regard to which such fractional Common Shares would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a
whole Common Share.  For the purposes of
this Section 24(d), the current market value of a whole Common Share shall
be the closing price of a Common Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately after
the date of the first public announcement by the Company that an exchange is to
be effected pursuant to this Section 24.

 

(e)           The Company shall
not be required to issue fractions of Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share) upon
exchange of the Rights or to distribute certificates which evidence fractional
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share). 
Fractions of Preferred Shares in integral multiples of one one-hundredth
of a Preferred Share may, at the election of the Company, be evidenced by
depositary receipts; provided, however,

 

31

 

that holders of such
depositary receipts shall have all of the designations and the powers, preferences
and rights, and the qualifications, limitations and restrictions to which they
are entitled as beneficial owners of the Preferred Shares represented by such
depositary receipts.  In lieu of
fractional Preferred Shares that are not integral multiples of one
one-hundredth of a Preferred Share, the Company shall pay to the registered
holders of Right Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one Preferred Share.  For the
purposes of this Section 24(e), the current market value of a Preferred
Share shall be one hundred (100) times the closing price of a Common Share (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for
the Trading Day immediately after the date of the first public announcement by
the Company that an exchange is to be effected pursuant to this
Section 24.

 

SECTION
25.       NOTICE OF CERTAIN EVENTS.

 

(a)           In case the Company
shall propose (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Shares or to make any other distribution to the
holders of its Preferred Shares (other than a regular quarterly cash dividend),
(ii) to offer to the holders of its Preferred Shares rights or warrants to
subscribe for or to purchase any additional Preferred Shares or shares of stock
of any class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to effect
any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole), to any
other Person, (v) to effect the liquidation, dissolution or winding up of the
Company, or (vi) to declare or pay any dividend on the Common Shares payable in
Common Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares), then, in each such case, the Company shall give to each holder
of a Right Certificate, in accordance with Section 26 hereof, a notice of
such proposed action, which shall specify the record date for the purpose of
such stock dividend, or distribution of rights or warrants, or the date on
which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Common Shares and/or the Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least 10 days prior
to the record date for determining holders of the Preferred Shares for purposes
of such action, and in the case of any such other action, at least 10 days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or the Preferred
Shares, whichever shall be the earlier.

 

(b)           In case the event
set forth in Section 11(a)(ii) hereof shall occur, then the Company shall
as soon as practicable thereafter give to each holder of a Right Certificate,
in accordance with Section 26 hereof, a notice of the occurrence of such
event, which notice shall describe the event and the consequences of the event
to holders of Rights under Section 11(a)(ii) hereof.

 

SECTION
26.       NOTICES.  Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall 

 

32

 

be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Rights Agent) as follows:

 

Senomyx, Inc.

11099 North Torrey Pines Road

La Jolla, California 92037

Attention: General Counsel

 

with a copy to:

 

Cooley Godward LLP

4401 Eastgate Mall

San Diego, California 92121

Attention: Thomas A. Coll, Esq.

 

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

 

Mellon Investor Services LLC

400 South Hope Street, 4th Floor

Los Angeles, California 90071

Attention: John Castellanos

 

with a copy to:

 

Mellon Investor Services LLC

85 Challenger Road

Ridgefield Park, New Jersey 07660-2108

Attention: General Counsel

 

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

 

SECTION
27.       SUPPLEMENTS AND AMENDMENTS.  Prior to the Distribution Date, the Company
and the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of the
Rights.  From and after the Distribution
Date, the Company and the Rights Agent shall, if the Company so directs, from
time to time supplement or amend any provision of this Agreement without the
approval of any holders of Right Certificates in order to (i) cure any
ambiguity, (ii) correct or supplement any provision contained herein which may
be defective or inconsistent with any other provisions herein, or (iii) change
any other provisions with respect to the Rights which the Company may deem
necessary or desirable; provided, however,
that no such supplement or amendment shall be made which would adversely affect
the interests of the holders of Rights (other than the interests of an 

 

33

 

Acquiring Person
or its Affiliates or Associates).  Any
supplement or amendment adopted during any period after any Person has become
an Acquiring Person but prior to the Distribution Date shall become null and
void unless such supplement or amendment could have been adopted by the Company
from and after the Distribution Date. 
Any such supplement or amendment shall be evidenced by a writing signed
by the Company and the Rights Agent. 
Upon delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment unless the Rights Agent shall have determined that such
supplement or amendment would adversely affect its own duties, rights,
obligations or immunities under this Agreement. 
Prior to the Distribution Date, the interests of the holders of Rights
shall be deemed coincident with the interests of the holders of Common Shares.

 

Notwithstanding the foregoing, the Rights Agent may, but shall not be
obligated to, enter into any supplement or amendment that affects the Rights
Agent’s own duties, rights, obligations, immunities or other interests under
this Agreement.

 

SECTION 28.       DETERMINATION AND ACTIONS BY THE BOARD,
ETC.  For all purposes
of this Agreement, any calculation of the number of Common Shares outstanding
at any particular time, including for purposes of determining the particular
percentage of such outstanding Common Shares or any other securities of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Agreement.  The Board shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company, or as may be necessary or
advisable in the administration of this Agreement, including without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations and calculations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the
Agreement).  All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board in good faith, shall (x) be final, conclusive and binding
on the Rights Agent and the holders of the Rights, and (y) not subject the
Board to any liability to the holders of the Rights.  The Rights Agent is entitled always to assume
the Board acted in good faith and shall be fully protected and incur no
liability in reliance thereon.

 

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

 

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

 

34

 

SECTION
31.       SEVERABILITY.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

 

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

 

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

 

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

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

35

 

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

 

 

	
   

  	
  SENOMYX,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Kent Snyder

  	
   

  
	
   

  	
  Kent Snyder

  
	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MELLON
  INVESTOR SERVICES LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Martha
  Mijango

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
     Martha
  Mijango

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Assistant Vice
  President

  	
   

  
						

 

[SIGNATURE PAGE TO
RIGHTS AGREEMENT]

 

 

EXHIBIT
A

 

CERTIFICATE
OF DESIGNATION

 

 

EXHIBIT
B

 

RIGHT
CERTIFICATE

 

 

EXHIBIT
C

 

SUMMARY
OF RIGHTS

 

 

SENOMYX, INC.

 

SUMMARY
OF RIGHTS TO PURCHASE

PREFERRED SHARES

 

The Board of Directors of SENOMYX,
INC. (the “Company”)
has declared a dividend of one preferred share purchase right (a “Right”) for each
outstanding share of common stock, par value $0.001 per share (the “Common Shares”), of
the Company.  The dividend is effective
as of February 21, 2005 (the “Record Date”) with respect to the stockholders of record
on that date.  The Rights will also
attach to new Common Shares issued after the Record Date.  Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $0.001 per share (the “Preferred Shares”),
of the Company at a price of $100.00 per one one-hundredth of a Preferred Share
(the “Purchase Price”),
subject to adjustment.  Each Preferred
Share is designed to be the economic equivalent of 100 Common Shares.  The description and terms of the Rights are
set forth in a Rights Agreement dated as of February 14, 2005 (the “Rights Agreement”),
between the Company and Mellon Investor Services LLC (the “Rights Agent”).

 

DETACHMENT
AND TRANSFER OF RIGHTS

 

Initially, the Rights will be evidenced by the stock
certificates representing Common Shares then outstanding, and no separate Right
Certificates will be distributed.  Until
the earlier to occur of (i) a public announcement that a person or group of
affiliated or associated persons, has become an “Acquiring Person” (as such term is
defined in the Rights Agreement) or (ii) 10 business days (or such later date
as the Board may determine) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer which would result in
the beneficial ownership by an Acquiring Person of 15% or more of the
outstanding Common Shares (the earlier of such dates being called the “Distribution Date”),
the Rights will be evidenced, with respect to any of the Common Share
certificates outstanding as of the Record Date, by such Common Share
certificate.  In general, an “Acquiring
Person” is a person, the affiliates or associates of such person, or a group,
which has acquired beneficial ownership of 15% or more of the outstanding
Common Shares; provided that certain
stockholders that beneficially own 15% or more of the outstanding Common Shares
as of the first public announcement by the Company of the adoption of the
Rights Agreement (the “Announcement
Event”) will be exempt from the Rights Agreement, unless any
such stockholder acquires beneficial ownership of any additional Common Shares
after the Announcement Event and holds 15% or more of the outstanding Common
Shares as a result of such acquisition.

 

The Rights Agreement provides that, until the
Distribution Date (or earlier redemption or expiration of the Rights), the
Rights will be transferable with and only with the Common Shares.  Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement by reference.  Until the Distribution Date (or earlier
redemption or expiration of the Rights) the surrender or transfer of any
certificates for Common Shares outstanding as of the Record Date, even without
such notation or a copy of this Summary of Rights being attached thereto, will
also constitute the transfer of the 

 

1

 

Rights associated with
the Common Shares represented by such certificate.  As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights (“Right Certificates”)
will be mailed to holders of record of the Common Shares as of the close of
business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights.

 

EXERCISABILITY OF RIGHTS

 

The Rights are not exercisable until the Distribution
Date.  The Rights will expire on February
21, 2015 (the “Final
Expiration Date”), unless the Final Expiration Date is extended
or unless the Rights are earlier redeemed or exchanged by the Company, in each
case as described below.  Until a Right
is exercised, the holder thereof, as such, will have no rights as a stockholder
of the Company, including, without limitation, the right to vote or to receive
dividends.

 

The Purchase Price payable, and the number of
Preferred Shares or other securities or property issuable or payable, upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution.  The number of outstanding
Rights and the number of one one-hundredths of a Preferred Share issuable upon
exercise of each Right are also subject to adjustment in the event of a stock
split of the Common Shares or a stock dividend on the Common Shares payable in
Common Shares, or subdivisions, consolidations or combinations of the Common
Shares occurring, in any such case, prior to the Distribution Date.  With certain exceptions, no adjustment in the
Purchase Price will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price.  No fractional Preferred Shares will be issued
(other than fractions which are integral multiples of one one-hundredth of a
Preferred Share, which may, at the election of the Company, be evidenced by
depositary receipts) and in lieu thereof, an adjustment in cash will be made
based on the market price of the Preferred Shares on the last trading day prior
to the date of exercise.

 

TERMS
OF PREFERRED SHARES

 

Preferred Shares purchasable upon exercise of the
Rights will not be redeemable.  Each
Preferred Share will be entitled to a minimum preferential quarterly dividend
payment of $l per share but will be entitled to an aggregate dividend of 100
times the dividend declared per Common Share. 
In the event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100 per share but
will be entitled to an aggregate payment of 100 times the payment made per
Common Share.  Each Preferred Share will
have 100 votes, voting together with the Common Shares.  Finally, in the event of any merger,
consolidation or other transaction in which Common Shares are exchanged, each
Preferred Share will be entitled to receive 100 times the amount received per
Common Share.  These rights are protected
by customary anti-dilution provisions. 
Because of the nature of the Preferred Shares’ dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.  The Preferred Shares would
rank junior to any other series of the Company’s preferred stock.

 

2

 

TRIGGER
OF FLIP-IN AND FLIP-OVER RIGHTS

 

In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, proper provision shall be made
so that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person or any affiliate or associate thereof (which will thereafter
be void), will thereafter have the right to receive upon exercise that number
of Common Shares having a market value of two times the exercise price of the
Right.  This right will commence on the
date of public announcement that a person has become an Acquiring Person (or
the effective date of a registration statement relating to distribution of the
rights, if later) and terminate 60 days later (subject to adjustment in the
event exercise of the rights is enjoined).

 

In the event that the Company is acquired in a merger
or other business combination transaction or 50% or more of its consolidated
assets or earning power are sold to an Acquiring Person, its affiliates or
associates or certain other persons in which such persons have an interest,
proper provision will be made so that each such holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right.

 

REDEMPTION
AND EXCHANGE OF RIGHTS

 

At any time prior to the earliest of (i) the
close of business on the day of the first public announcement that a person has
become an Acquiring Person, or (ii) the Final Expiration Date, the Board
of Directors of the Company may redeem the Rights in whole, but not in part, at
a price of $0.001 per Right (the “Redemption Price”).  In general, the redemption of the Rights may
be made effective at such time on such basis with such conditions as the Board
of Directors in its sole discretion may establish  Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.

 

At any time after any Person becomes an Acquiring
Person and prior to the acquisition by such person or group of 50% or more of
the outstanding Common Shares, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group which will
have become void), in whole or in part, at an exchange ratio of one Common
Share, or, under circumstances set forth in the Rights Agreement, cash,
property or other securities of the Company, including fractions of a Preferred
Share (or of a share of a class or series of the Company’s preferred stock
having equivalent designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions), per Right (with value equal to
such Common Shares).

 

AMENDMENT
OF RIGHTS

 

The terms of the Rights generally may be amended by
the Board of Directors of the Company without the consent of the holders of the
Rights, except that from and after such time as the Rights are distributed no
such amendment may adversely affect the interests of the holders of the Rights
(excluding the interest of any Acquiring Person).

 

3

 

ADDITIONAL
INFORMATION

 

A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Current Report on
Form 8-K dated February 15, 2005.  A copy
of the Rights Agreement is also available from the Company by writing to:  Senomyx, Inc., 11099 North Torrey Pines Road,
La Jolla, California 92037, Attention: Corporate Secretary.  This summary description of the Rights is not
intended to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by reference.

 

4

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