Document:

Exhibit 10.4

 

STOCK PLEDGE AGREEMENT

 

STOCK
PLEDGE AGREEMENT (“Agreement”) entered into as of the 28th
day of October 2005 by and among Triity Financing investments Corporation
(the “Secured Party”), and those persons identified on the signature page hereof
(each a “Pledgor”).

 

RECITALS

 

A.                                   Pledgors
have financial and other interests in Power 3 Medical Products, Inc., a
New York corporation (the “Company”), and have agreed to pledge certain shares
of the Company as security for: (i) the payment and performance by the
Company of its obligations under its Promissory note of even date herewith in
an aggregate face amount of $150,000 and 00/100 Dollars ($150,000.00) payable
to the Secured Party (the “Note”)and (ii) the performance by
Pledgor of its  Guaranty delivered to
Secured Party of even date herewith.  
Capitalized terms in this Agreement which are not identified herein will
have the meanings given such terms in the Note. 

 

B.                                     The
Secured Party is willing to accept the Note from the Company only upon receiving
Pledgors’ Guaranty and the pledge of certain stock as set forth in this
Agreement.

 

NOW,
THEREFORE, in consideration of the premises, the mutual covenants and
conditions contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

 

1.                                       Grant
of Security Interest.  As security
for the prompt and complete payment and performance (whether at the stated
maturity, by acceleration or otherwise) of all of the Company’s obligations
under the Note (the “Secured obligations”), Pledgors hereby pledge to the
Secured Party as collateral security the securities initially  set forth on the attached Schedule 1 of
this Agreement (the “Pledged Shares”). 
Unless otherwise set forth on Schedule 1 of this Agreement, each
Pledgor is the beneficial and record owner of the Pledged Shares set forth
opposite such Pledgor’s name on such Schedule. 
Such Pledged Shares, together with any additions, replacements,
accessions substitutes therefor, or proceeds thereof, are hereinafter referred
to collectively as the “Collateral.” 

 

2.                                       Perfection
of Security Interests.  (a) 
Upon execution of this Agreement by each Pledgor, such Pledgor shall deliver
the Pledge Shares, together with Stock Powers (with Medallion Guarantees
annexed).

 

(b)                                 The
Company and each Pledgor will, at its expense, cause to be searched the public
records with respect to the Collateral and will execute, deliver, file and
record (in such manner and form as each Secured Party may require), or permit
each Secured Party to file and record, as its attorney in fact, any financing
statements, any carbon, photographic or other reproduction of a financing
statement or this Agreement (which shall be sufficient as a financing statement
hereunder), any specific assignments or other paper that may be reasonably
necessary or desirable, or that such Secured 
Party may request, in order to create, preserve, perfect or validate any
Security Interest or to enable such Secured Party to exercise and enforce its
rights hereunder with respect to any of the Collateral.  The Company and each of the Pledgors hereby
appoints each Secured Party as the Company’s or such Pledgor’s
attorney-in-fact  to execute in the name
and behalf of the Company or such Pledgor, as the case may be, such additional
financing statements as such Secured Party may request.

 

3.                                       Assignment.  In connection with the transfer of the Note
in accordance with its terms, a Secured Party may assign or transfer the whole
or any part of its security interest granted hereunder, and may transfer as
collateral security the whole or any part of Secured Party’s security interest
in the Collateral.  Any transferee of the
Collateral shall be vested with all of the rights and powers of Secured Party
hereunder with respect to the Collateral. 

 

4.                                       Pledgors’
Warranty.  (A) Title.  Each Pledgor represents and warrants hereby
to the Secured Party as follows with respect to the Pledged Shares set forth
opposite such Pledgor’s name on Schedule 2 to this Agreement: 

 

(i)                                     that
the Collateral is free and clear of any encumbrances of every nature
whatsoever, and such Pledgor is the sole owner of the Pledged Shares; 

 

 

(ii)                                  Such
Pledgor agrees not to grant or create, any security interest, claim, lien,
pledge or other encumbrance with respect to such Collateral or attempt to sell,
transfer or otherwise dispose of the Collateral, until the Secured Obligations
have been paid in full or this Agreement terminates; and

 

(iii)                               this
Agreement constitutes a legal, valid and binding obligation of such Pledgor
enforceable in accordance with its terms (except as the enforcement thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and similar laws, now or hereafter in effect),

 

B.                                     Other:               (i) Pledgor
has made necessary inquiries of the Company and believes that the Company fully
intends to fulfill and has the capability of fulfilling the Secured Obligations
to be performed by the Company in accordance with the terms of the Notes. 

 

(ii)                                  The
Pledgors are not (and none of them is) acting, and have not (and none of them
has) agreed to act, in any plan to sell or dispose of any Shares in a manner
intended to circumvent the registration requirements of the Securities Act of
1933, as amended, or any applicable state law.

 

(iii)                               Pledgor
has been advised by counsel of the elements of a bona-fide pledge for purposes
of Rule 144(d)(3)(iv) under the Securities Act of 1933, as amended,
including the relevant SEC interpretations and affirm the pledge of shares by
each of the undersigned pursuant to this Pledge Agreement will constitute a
bona-fide pledge of such shares for purposes of such Rule.

 

(iv)                              Pledgors
hereby unconditionally personally guarantees to the Secured Party the timely
and full fulfillment of the Secured Obligations of the Company.

 

6.                                       Collection
of Dividends and Interest.  During
the term of this Agreement for so long as any amounts remain outstanding under
the Note, all dividends, distributions, interest payments, and other amounts
that may be, or may become, due on any of the Collateral, shall be paid to the
Secured Party as a payment or prepayment, as the case may be, of amounts due
under the Note.  

 

7.                                       Voting
Rights.  During the term of this
Agreement and until such time as this Agreement has terminated or Secured Party
has exercised its rights under this Agreement to foreclose its security
interest in the Collateral, Pledgors shall have the right to exercise any
voting rights evidenced by, or relating to, the Collateral.

 

8.                                       Warrants
and Options.  In the event that,
during the term of this Agreement, subscription, spin-off, warrants, dividends,
or any other rights or option shall be issued in connection with  the Collateral, such warrants, dividends,
rights and options shall be immediately delivered to Secured Party to be held
under the terms hereof in the same manner as the Collateral.

 

9.                                       Preservation
of the Value of the Collateral. 
Pledgors shall pay all taxes, charges, and assessments against the
Collateral and do all acts necessary to preserve and maintain the value
thereof. 

 

10.                                 Secured
Party as Pledgor’s Attorney-in-Fact.

 

(a)                                  Pledgor
hereby irrevocably appoints Secured Party as Pledgor’s attorney-in-fact, with
full authority in the place and stead of Pledgor and in the name of Pledgor,
Secured Party or otherwise, from time to time at Secured Party’s discretion, to
take any action and to execute any instrument that Secured Party may reasonably
deem necessary or advisable to accomplish the purposes of this Agreement,
including: (i) upon the occurrence and during the continuance of an Event
of Default, to receive, indorse, and collect all instruments made payable to
Pledgor representing any dividend, interest payment or other distribution in
respect of the Collateral or any part thereof to the extent permitted hereunder
and to give full discharge for the same and to execute and file governmental
notifications and reporting forms; (ii) to arrange for the transfer of the
Collateral on the books of any of the Company or any other Person to the name
of Secured Party or to the name of Secured Party’s nominee.

 

(b)                                 In
addition to the designation of Secured Party as Pledgor’s attorney-in-fact in
subsection (a), Pledgor hereby irrevocably appoints Secured Party as Pledgor’s
agent and attorney-in-fact to make, execute and deliver any and all documents
and writings which may be necessary or appropriate for approval of, or be
required by, any regulatory authority located in any city, county, state or
country where Pledgor or any of the Company engage in business, in order to
transfer or to more effectively transfer any of the Pledged Interests or
otherwise enforce Secured Party’s rights hereunder.

 

 

11.                                 Remedies
upon Default.

 

Upon
the occurrence and during the continuance of an Event of Default under the Note
and/or the Guaranty “Event of Default”):

 

(a)                                  Secured
Party may exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform Commercial Code
(the “Code”, irrespective of whether the Code applies to the affected items of
Collateral), and Secured Party may also without notice (except as specified
below) sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker’s board or at any of Secured Party’s
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Secured Party
may deem commercially reasonable, irrespective of the impact of any such sales
on the market price of the Collateral. To the maximum extent permitted by
applicable law, Secured Party may be the purchaser of any or all of the
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion
of the Collateral sold at any such public sale, to use and apply all or any
part of the Secured Obligations as a credit on account of the purchase price of
any Collateral payable at such sale. Each purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of
Pledgor, and Pledgor hereby waives (to the extent permitted by law) all rights
of redemption, stay, or appraisal that it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter
enacted. Pledgor agrees that, to the extent notice of sale shall be required by
law, at least ten (10) calendar days notice to Pledgor of the time and
place of any public sale or the time after which a private sale is to be made
shall constitute reasonable notification. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from tme to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the maximum extent permitted by law, Pledgor hereby waives any claims against
Secured Party arising because the price at which any Collateral may have been
sold at such a private sale was less than the price that might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Collateral to more than one offeree.

 

(b)                                 Pledgor
hereby agrees that any sale or other disposition of the Collateral conducted in
conformity with reasonable commercial practices of banks, insurance companies,
or other financial institutions in the city and state where Secured Party is
located in disposing of property similar to the Collateral shall be deemed to
be commercially reasonable.

 

(c)                                  Pledgor
hereby acknowledges that the sale by Secured Party of any Collateral pursuant
to the terms hereof in compliance with the Securities Act of 1933 as now in
effect or as hereafter amended, or any similar statute hereafter adopted with
similar purpose or effect (the “Securities Act”), as well as applicable “Blue
Sky” or other state securities laws, may require strict limitations as to the
manner in which Secured Party or any subsequent transferee of the Collateral
may dispose thereof. Pledgor acknowledges and agrees that in order to protect
Secured Party’s interest it may be necessary to sell the Collateral at a price
less than the maximum price attainable if a sale were delayed or were made in
another manner, such as a public offering under the Securities Act. Pledgor has
no objection to sale in such a manner and agrees that Secured Party shall have
no obligation to obtain the maximum possible price for the Collateral. Without
limiting the generality of the foregoing, Pledgor agrees that, upon the
occurrence and during the continuation of an Event of Default, Secured Party
may, subject to applicable law, from time to time attempt to sell all or any
part of the Collateral by a private placement, restricting the bidders and
prospective purchasers to those who will represent and agree that they are
purchasing for investment only and not for distribution. In so doing, Secured
Party may solicit offers to buy the Collateral or any part thereof for cash,
from a limited number of investors reasonably believed by Secured Party to be
institutional investors or other accredited investors who might be interested
in purchasing the Collateral. If Secured Party shall solicit such offers, then
the acceptance by Secured Party of one of the offers shall be deemed to be a
commercially reasonable method of disposition of the Collateral.

 

(d)                                 If
Secured Party shall determine to exercise its right to sell all or any portion
of the Collateral pursuant to this Section, Pledgor agrees that, upon request
of Secured Party, Pledgor will, at its own expense:

 

(i)                                     execute
and deliver, or cause the officers and directors of the Company to execute and
deliver, to any person, entity or governmental authority as Secured Party may
choose, any and all documents and writings which, in Secured Party’s reasonable
judgment, may be necessary or appropriate for approval, or be required by, any
regulatory authority located in any city, county, state or country where
Pledgor or the Company engage in business, in order to transfer or to more
effectively transfer the Pledged Interests or otherwise enforce

 

 

Secured Party’s rights
hereunder; and

 

(ii)                                  do
or cause to be done all such other acts and things as may be necessary to make
such sale of the Collateral or any part thereof valid and binding and in
compliance with applicable law; and

 

(iii)                               cause
the Company  to timely file all periodic
reports required to be filed by the Company 
under the Securities Exchange Act of 1934.

 

12.                                 (a)Term
of Agreement.  This Agreement shall
continue in full force and effect until the indefeasible payment in full of the
Note.  Upon the indefeasible payment in
full of the Note is paid in full, the security interests in the relevant
Collateral shall be deemed released, and any portion of the Collateral not
transferred to or sold by any one or more Secured Parties shall be returned to
the Pledgor (and for such purpose, delivery to Darrin Ocasio, Esq., of
Sichenzia Ross Friedman Ference LLP of New York, NY shall deemed to comply with
such return requirement).  Upon
termination of this Pledge Agreement, the relevant Collateral shall be returned
within five (5) Trading Days to Debtor or to the Pledgor, as contemplated
above.

 

(b) Application
of Proceeds.  Upon the occurrence and
during the continuance of an Event of Default, any cash held by Secured Party
as Collateral and all cash Proceeds received by Secured Party in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral pursuant to the exercise by Secured Party of its remedies as a
secured creditor as provided in Section 9 shall be applied from time to
time by the Secured Part as provided in the Note.

 

13.                                 Duties
of Secured Party.

 

The
powers conferred on Secured Party hereunder are solely to protect its interests
in the Collateral and shall not impose on it any duty to exercise such powers.
Except as provided in Section 9-207 of the Code, Secured Party shall have
no duty with respect to the Collateral or any responsibility for taking any
necessary steps to preserve rights against any Persons with respect to any
Collateral.

 

14.                                 Amendments;
etc.

 

No
amendment or waiver of any provision of this Agreement nor consent to any
departure by Pledgor herefrom shall in any event be effective unless the same
shall be in writing and signed by Secured Party, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No failure on the part of Secured Party to exercise,
and no delay in exercising any right under this Agreement, any other Credit
Document, or otherwise with respect to any of the Secured Obligations, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right under this Agreement, any other Credit Document, or otherwise with
respect to any of the Secured Obligations preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided for
in this Agreement or otherwise with respect to any of the Secured Obligations
are cumulative and not exclusive of any remedies provided by law.

 

15.                                 Notices.

 

Unless
otherwise specifically provided herein, all notices shall be in writing
addressed to the respective party as set forth below: and may be personally
served, faxed, telecopied or sent by overnight courier service or United States
mail:

 

	
  If
  to Pledgors:

  
	
   

  
	
  Steven
  B. Rash

  
	
  Ira
  Goldknopf

  
	
  c/o
  Power3 Medical Products, Inc.

  
	
  3400
  Research Forest Drive

  
	
  The
  Woodlands, Texas 77381

  
	
  Fax
  No.: 281-466-1481

  

 

 

	
  with
  a copy to:

  
	
   

  
	
  Sichenzia
  Ross Friedman Ference LLP

  
	
  1065
  Avenue of the Americas

  
	
  New
  York, NY 10018

  
	
  Fax No.: 212-930-9725

  
	
  Attn:                    Darrin M. Ocasio, Esq.

  
	
   

  
	
  If
  to Secured Party:

  
	
   

  
	
  Trinity
  Financing Investments Corporation

  
	
  420
  East 55th Street

  
	
  New
  York, New York 10022

  
	
  Fax
  No.: 212 755 9309

  
	
  Attn:
  Trinity Bul

  
	
   

  
	
  with
  a copy to:

  
	
   

  
	
  Eaton &
  Van Winkle

  
	
  3
  Park Avenue

  
	
  New
  York, New York 10016

  
	
  Fax.
  No. 212 779 9928

  
	
  Attn:
  Vincent J. McGill, Esq.

  

 

Any
notice given pursuant to this section shall be deemed to have been given: (a) if
delivered in person, when delivered; (b) if delivered by fax, on the date
of transmission if transmitted on a Business Day before 4:00 p.m. at the
place of receipt or, if not, on the next succeeding Business Day; (c) if
delivered by overnight courier, two (2) days after delivery to such
courier properly addressed; or (d) if by United States mail, four (4) Business
Days after depositing in the United States mail, with postage prepaid and
properly addressed. Any party hereto may change the address or fax number at
which it is to receive notices hereunder by notice to the other party in
writing in the foregoing manner.

 

16.                                 Continuing
Security Interest.

 

This
Agreement shall create a continuing security interest in the Collateral and
shall: (a) remain in full force and effect until the indefeasible payment
in full of the Secured Obligations; (b) be binding upon Pledgor and its
successors and assigns; and (c) inure to the benefit of Secured Party and
its successors, transferees, and assigns. Upon the indefeasible payment in full
of the Secured Obligations; the security interests granted herein shall
automatically terminate and all rights to the Collateral shall revert to
Pledgor. Upon any such termination, Secured Party will, at Pledgor’s expense,
execute and deliver to Pledgor such documents as Pledgor shall reasonably
request to evidence such termination. Such documents shall be prepared by
Pledgor and shall be in form and substance reasonably satisfactory to Secured
Party.

 

17.                                 Security
Interest Absolute.

 

To the
maximum extent permitted by law, all rights of Secured Party, all security
interests hereunder, and all obligations of Pledgor hereunder, shall be
absolute and unconditional irrespective of:

 

(a)                                  any
lack of validity or enforceability of any of the Secured Obligations or any
other agreement or instrument relating thereto;

 

(b)                                 any
change in the time, manner, or place of payment of, or in any other term of,
all or any of the Secured Obligations, or any other amendment or waiver of or
any consent to any departure from any of the terms of the Note, or any other
agreement or instrument relating thereto;

 

(c)                                  any
exchange, release, or non-perfection of any other collateral, or any release or
amendment or waiver of or consent to departure from any guaranty for all or any
of the Secured Obligations; or

 

(d)                                 any
other circumstances that might otherwise constitute a defense available to, or
a discharge of, Pledgor.

 

 

18.                                 Headings.

 

Section and
subsection headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement or be given
any substantive effect.

 

19.                                 Severability.

 

In
case any provision in or obligation under this Agreement shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.

 

20.                                 Counterparts;
Telefacsimile Execution.

 

This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, or binding effect
hereof.

 

21.                                 Additional
provisions.

 

(a)                                  THE
VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT,
AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF). THE PARTIES AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK OR, AT THE SOLE OPTION OF SECURED PARTY, IN ANY OTHER
COURT IN WHICH SECURED PARTY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. THE
PLEDGOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT HE MAY HAVE
TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR SIMILAR DOCTRINE OR TO OBJECT
TO VENUE WITH RESPECT TO ANY PROCEEDING BROUGHT IN ACCORDANCE WITH THIS SECTION AND
STIPULATES THAT THE STATE AND FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF
NEW YORK SHALL HAVE IN PERSONAM JURISDICTION AND VENUE OVER HIM FOR THE PURPOSE
OF LITIGATING ANY DISPUTE, CONTROVERSY OR PROCEEDING ARISING OUT OF OR RELATED
TO THIS AGREEMENT.

 

(b)                                 PLEDGOR
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT, OR OTHER PROCESS
ISSUED IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT, OR OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO PLEDGOR  AT HIS ADDRESS PROVIDED HEREIN.

 

(c)                                  NOTHING
IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF SECURED
PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY SECURED PARTY OF ANY JUDGMENT OR ORDER OBTAINED IN
SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN
ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

 

(d)                                 PLEDGOR
SHALL REIMBURSE SECURED PARTY FOR ALL REASONABLE COSTS AND EXPENSES, INCLUDING
WITHOUT LIMITATION REASONABLE ATTORNEYS’ FEES AND COSTS, INCURRED IN CONNECTION
WITH (I) DRAFTING, NEGOTIATING, EXECUTING AND DELIVERING ANY AMENDMENT,
MODIFICATION OR WAIVER OF, OR CONSENT WITH RESPECT TO, ANY MATTER ELATING TO
THE RIGHTS OF SECURED PARTY HEREUNDER AND (II) ENFORCING ANY PROVISIONS OF THIS
AGREEMENT AND/OR REALIZING UPON ANY COLLATERAL.

 

 

The rights and remedies
herein reserved to any party shall be cumulative and in addition to any other
or further rights and remedies available at law or in equity. Any waiver by the
Pledgor or the Secured Party of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement.  The failure of the Secured Party to insist
upon strict adherence to any term of this Agreement on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.  Any waiver must be in
writing.

 

PLEDGOR HEREBY WAIVES HIS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS AGREEMENT. THE PLEDGOR REPRESENTS THAT HE HAS REVIEWED THIS WAIVER
AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

Successors and Assigns.
All of the terms and provisions of this Agreement shall be binding upon and
inure to the benefits of the parties hereto and their respective successors,
heirs and permitted assigns.

 

IN
WITNESS WHEREOF, Pledgor and Secured Party have caused this Agreement to be
duly executed and delivered by their officers thereunto duly authorized as of
the date first written above.

 

 

	
   

  	
  STEVEN B. RASH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IRA GOLDKNOPF

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TRINITY
  FINANCING INVESTMENTS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

Schedule 1

 

Pledged Interests:
2,000,000 shares of common stock of Power3 Medical Products, Inc.

 

Name of Issuer: Power3
Medical Products, Inc

 

Jurisdiction of
Organization: New York

 

Type of Interest: Share
of common stock 

 

Number of Shares/Units
(if applicable):  1,000,000

 

Certificate Number(s) (if
any) 10345      Percentage of Outstanding
Interests in Issuer: approximately 

 

Additional Collateral
as  Set forth in Section 1.

 

 

Schedule 2

 

Pledgor
Information:

 

For Pledgor That Is a
Registered Organization

 

Jurisdiction of
Organization: 

 

Type of Organization: 

 

Organizational ID Number
(if any): 

 

For Pledgor That Is An
Individual:    Steven B. Rash

 

Address of Principal
Residence:     See Notice section

 

For Pledgor That
Is Neither a Registered Organization nor an Individual: 

 

Type of Organization: 

 

 

Schedule 1

 

Pledged Interests:
2,000,000 shares of common stock of Power3 Medical Products, Inc.

 

Name of Issuer: Power3
Medical Products, Inc

 

Jurisdiction of
Organization: New York

 

Type of Interest: Share
of common stock 

 

Number of Shares/Units
(if applicable):  1,000,000

 

Certificate Number(s) (if
any) 15008      Percentage of Outstanding
Interests in Issuer: approximately 

 

Additional Collateral
as  Set forth in Section 1.

 

 

Schedule 2

 

Pledgor
Information:

 

For Pledgor That Is a
Registered Organization

Jurisdiction of
Organization: 

 

Type of Organization: 

 

Organizational ID Number
(if any): 

 

For Pledgor That Is An
Individual:    Ira Goldknopf 

 

Address of Principal
Residence:     See Notice section

 

For Pledgor That
Is Neither a Registered Organization nor an Individual: 

 

Type of Organization:Exhibit 4.1

 

 

RIGHTS AGREEMENT

 

 

between

 

MOMENTA PHARMACEUTICALS, INC.

 

and

 

AMERICAN STOCK TRANSFER & TRUST COMPANY

 

as Rights Agent

 

 

Dated as of November 7, 2005

 

 

 

Table of Contents

 

	
  Section 1.

  	
  Certain Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Appointment of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Issuance of Rights.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Form of Rights Certificates.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Countersignature and Registration.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Cancellation and Destruction of Rights
  Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.

  	
  Reservation and Availability of Capital
  Stock.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Preferred Stock Record Date

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.

  	
  Adjustment of Purchase Price, Number and
  Kind of Shares or Number of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Certificate of Adjusted Purchase Price or
  Number of Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Fractional Rights and Fractional Shares.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Rights of Action

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Agreement of Rights Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Rights Certificate Holder Not Deemed a
  Stockholder

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Concerning the Rights Agent.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 19.

  	
  Merger or Consolidation or Change of Name
  of Rights Agent.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Duties of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Change of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 22.

  	
  Issuance of New Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 23.

  	
  Redemption; Independent Director Review.

  	
   

  

 

i

 

	
  Section 24.

  	
  Exchange.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 25.

  	
  Notice of Certain Events.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 26.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 27.

  	
  Supplements and Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 29.

  	
  Actions by the Board, etc

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 30.

  	
  Benefits of this Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 31.

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 32.

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 33.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 34.

  	
  Descriptive Headings

  	
   

  

 

	
  Exhibit A

  	
  -

  	
  Form of Certificate of Designations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  -

  	
  Form of Rights Certificate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  -

  	
  Summary of Rights

  	
   

  

 

 

RIGHTS
AGREEMENT

 

RIGHTS
AGREEMENT, dated as of November 7, 2005 (the “Agreement”), between Momenta
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and
American Stock Transfer & Trust Company, as Rights Agent (the “Rights
Agent”).

 

W
I  T  N  E  S  S  E  T  H

 

WHEREAS, on November
7, 2005 the Board of Directors of the Company (the “Board”) authorized and
declared a dividend distribution of one Right for each share of Common Stock
(as hereinafter defined) of the Company outstanding at the close of business on
November 18, 2005 (the “Record Date”), and authorized the issuance of one
Right (as such number may hereinafter be adjusted pursuant to the provisions of
Section 11(i) or Section 11(p) hereof) for each share of Common
Stock of the Company issued between the Record Date (whether originally issued
or delivered from the Company’s treasury) and the earlier of the Distribution
Date or the Expiration Date, each Right initially representing the right to
purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Designations attached hereto as Exhibit A,
upon the terms and subject to the conditions hereinafter set forth (the “Rights”);

 

NOW,
THEREFORE, 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 who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of 20% or more of the
shares of Common Stock then outstanding, but shall not include (i) the
Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or of any Subsidiary of the Company or (iv) any
Person organized, appointed or established by the Company for or pursuant to
the terms of any such plan. 
Notwithstanding the foregoing, (x) no Person shall become an “Acquiring
Person” as the result of an acquisition of Common Stock by the Company which,
by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 20% or more of the shares
of Common Stock of the Company then outstanding; provided, however that if a
Person shall become the Beneficial Owner of 20% or more of the shares of Common
Stock of the Company then outstanding as the result of an acquisition of Common
Stock 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 Stock of the Company and shall then
beneficially own 20% or more of the shares of Common Stock then outstanding,
then such Person shall be deemed to be an “Acquiring Person” and (y) 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 of Directors), but in any event within 15 Business Days, following
receipt of written notice from the Company of such event, of Beneficial
Ownership of a sufficient number of shares of Common Stock so that such Person
would no longer be an “Acquiring Person,” as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to
be an “Acquiring Person” for any purposes of this Agreement unless and until
such Person shall again become an “Acquiring Person.”

 

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

 

(c)                                  “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.

 

(d)                                 “Adjustment
Shares” shall have the meaning set forth in Section 11(a)(ii).

 

(e)                                  A
Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “beneficially
own,” any securities:

 

(i)                                     which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, owns or has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities or agreements with or between Persons and the Company
with respect to any other bona fide issuance of securities by the Company to
such Persons for resale within 40 days, including without limitation
pursuant to Section 4(2) of the Act or Rule 144A or Regulation S
promulgated under the Act), whether or not in writing, or upon the exercise of
conversion rights, exchange rights, other rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed
the “Beneficial Owner” of, or to “beneficially own,” (A) 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) securities issuable
upon exercise of Rights at any time prior to the occurrence of a Triggering
Event, or (C) securities issuable upon exercise of Rights from and after
the occurrence of a Triggering Event which Rights were acquired by such Person
or any of such Person’s Affiliates or Associates prior to the Distribution Date
or pursuant to Section 3(a) or Section 22 hereof (the “Original
Rights”) or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;

 

(ii)                                  which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial ownership”
of (as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act, or any comparable or successor rule),
including pursuant to any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities or agreements with or
between Persons and the Company with respect to any other bona fide issuance of
securities by

 

2

 

the Company to such Persons for resale within 40 days, including
without limitation pursuant to Section 4(2) of the Act or Rule 144A
or Regulation S promulgated under the Act), whether or not in writing; provided,
however, that a Person shall not be deemed the “Beneficial Owner” of, or
to “beneficially own,” any security under this subparagraph (ii) as a
result of an agreement, arrangement or understanding to vote such security if
such agreement, arrangement or understanding: (A) arises solely from a
revocable proxy or consent given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act,
and (B) is not then reportable by such Person on Schedule 13D under
the Exchange Act (or any comparable or successor report); or

 

(iii)                               which
are beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s
Affiliates or Associates) has any agreement, arrangement or understanding
(other than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of securities or
agreements with or between Persons and the Company with respect to any other
bona fide issuance of securities by the Company to such Persons for resale
within 40 days, including without limitation pursuant to Section 4(2) of
the Act or Rule 144A or Regulation S promulgated under the Act) whether or
not in writing, for the purpose of acquiring, holding, voting (except pursuant
to a revocable proxy or consent as described in the proviso to
subparagraph (ii) of this paragraph (e)) or disposing of any
voting securities of the Company.

 

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

 

(f)                                    “Board”
shall have the meaning set forth in the WHEREAS clause at the beginning of this
Agreement.

 

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

 

(h)                                 “Close
of business” on any given date shall mean 5:00 p.m., Boston time, on such
date; provided, however, that if such date is not a Business Day
it shall mean 5:00 p.m., Boston time, on the next succeeding Business Day.

 

(i)                                     “Common
Stock” shall mean the common stock, $.0001 par value, of the Company, except
that “Common Stock” when used with reference to any Person other than the
Company shall mean the capital stock of such Person with the greatest voting
power, or the equity securities or other equity interest having power to
control or direct the management, of such Person.

 

(j)                                     “Common
stock equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

3

 

(k)                                  “Company”
shall have the meaning set forth in the introductory paragraph hereof.

 

(l)                                     “Current
market price” shall have the meaning set forth in Section 11(d)(i) hereof.

 

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

 

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

 

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

 

(p)                                 “Exchange
Act” shall have the meaning set forth in Section 1(c) hereof.

 

(q)                                 “Exchange
Ratio” shall have the meaning set forth in Section 24(a) hereof.

 

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

 

(s)                                  “Final
Expiration Date” shall mean the close of business on November 6, 2008.

 

(t)                                    “Permitted
Offer” shall mean a tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined, prior to the
consummation of such tender offer or exchange offer, by directors constituting
at least 75% of all of the members of the Board, after receiving advice from a
nationally recognized investment banking firm selected by the Board, to be (a) at
a price that is fair to stockholders (taking into account all factors which
such members of the Board deem relevant including, without limitation, prices
which could reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise in the
best interests of the Company and its stockholders.

 

(u)                                 “Person”
shall mean any individual, firm, corporation, partnership, trust, association,
limited liability company or other entity.

 

(v)                                 “Preferred
Stock” shall mean shares of Series A Junior Participating Preferred Stock,
$.01 par value, of the Company having the rights and preferences set forth in
the form of Certificate of Designations attached to this Agreement as Exhibit A
and, to the extent that there is not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock, $.01 par value, of the Company
designated for such purpose containing terms substantially similar to the terms
of the Series A Junior Participating Preferred Stock.

 

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

 

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

 

(y)                                 “Record
Date” shall have the meaning set forth in the WHEREAS clause at the beginning
of this Agreement.

 

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

 

4

 

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

 

(bb)                          “Rights”
shall have the meaning set forth in the WHEREAS clause at the beginning of this
Agreement.

 

(cc)                            “Rights
Agent” shall have the meaning set forth in the introductory paragraph hereof.

 

(dd)                          “Rights
Certificates” shall have the meaning set forth in Section 3(a) hereof.

 

(ee)                            “Section 11(a)(ii) Event”
shall mean an acquisition of Common Stock described in the first sentence of Section 11(a)(ii) hereof.

 

(ff)                                “Section 11(a)(ii) Trigger
Date” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(gg)                          “Section 13
Event” shall mean any event described in clauses (x), (y) or (z) of Section 13(a) hereof.

 

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

 

(ii)                                  “Stock
Acquisition Date” shall mean the later of (i) the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person
has become such or (ii) the first date on which an executive officer of
the Company has actual knowledge that an Acquiring Person has become such; provided,
however that, if such Person is deemed not to be an Acquiring Person
pursuant to clause (y) of Section 1(a) hereof, no Stock Acquisition
Date shall be deemed to have occurred.

 

(jj)                                  “Subsidiary”
shall mean, with reference to any Person, any corporation or other entity of
which an amount of voting securities sufficient to elect at least a majority of
the directors (or comparable body) of such corporation or other entity is
beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.

 

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

 

(ll)                                  “Trading
Day” shall have the meaning set forth in Section 11(d)(i) hereof.

 

(mm)                      “Triggering
Event” shall mean any Section 11(a)(ii) Event or any Section 13
Event.

 

Section 2.                                            Appointment
of Rights Agent.  The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment.  The Company may from time
to time appoint such Co-Rights Agents as it may deem necessary or desirable
upon ten (10) days’ prior written notice to the Rights Agent.  The

 

5

 

Rights Agent shall have no duty to supervise, and shall in no event be
liable for, the acts or omissions of any such Co-Rights Agent.

 

Section 3.                                            Issuance
of Rights.

 

(a)                                  Until
the earlier of (i) the close of business on the tenth Business Day (or
such later date as may be determined by the Board) after the Stock Acquisition
Date (or, if the tenth Business Day after the Stock Acquisition Date occurs
before the Record Date, the close of business on the Record Date), or (ii) the
close of business on the tenth Business Day (or such later date as may be
determined by action of the Board) after the date that a tender or exchange
offer (other than a Permitted Offer) 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 Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan) is first published
or sent or given within the meaning of Rule 14d-2 of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 20% or more of the shares of Common Stock then
outstanding, (the earlier of (i) and (ii) being herein referred to as
the “Distribution Date”), (x) the Rights will be evidenced by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company).  As soon as practicable after the Distribution
Date, the Rights Agent will send by first-class, insured, postage prepaid mail,
to each record holder of the Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit B
hereto (the “Rights Certificates”), evidencing one Right for each share of
Common Stock so held, subject to adjustment as provided herein.  With respect to certificates for the Common
Stock outstanding as of the close of business on the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates for the
Common Stock and the registered holders of the Common Stock shall also be the
registered holders of the associated Rights. 
In addition, in connection with the issuance or sale of shares of Common
Stock following the Distribution Date and prior to the redemption or expiration
of the Rights, the Company (i) shall, with respect to shares of Common
Stock so issued or sold pursuant to the exercise of stock options or under any
employee benefit plan or arrangement, or upon the exercise, conversion or
exchange of securities granted or issued by the Company prior to the
Distribution Date, and (ii) may, in any other case, if deemed necessary or
appropriate by the Board, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
provided, however, that (x) no such Rights Certificate shall be issued if,
and to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and
(y) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.  In the event that an adjustment
in the number of Rights per share of Common Stock has been made pursuant to
Sections 11(i) or 11(p) hereof, at the time of distribution of the
Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole 

 

6

 

numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights.  As of and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.

 

(b)                                 As
promptly as practicable following the Record Date, the Company will send a copy
of a Summary of Rights to Purchase Preferred Stock, in substantially the form
attached hereto as Exhibit C, by first-class, postage prepaid mail,
to each record holder of the Common Stock as of the close of business on the
Record Date, at the address of such holder shown on the records of the
Company.  The failure to send a copy of
the Summary of Rights shall not affect the enforceability of any part of this
Rights Agreement or the rights of any holder of the Rights.

 

(c)                                  Rights
shall be issued (i) in respect of all shares of Common Stock that are
issued (either as an original issuance or from the Company’s treasury) after
the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date and (ii) in connection with the issuance or sale of shares
of Common Stock following the Distribution Date and prior to the redemption or
expiration of the Rights (x) with respect to shares of Common Stock so
issued or sold pursuant to the exercise of stock options or under any employee
benefit plan or arrangement, or upon the exercise, conversion or exchange of
securities, granted or issued by the Company prior to the Distribution Date and
(y) with respect to shares of Common Stock so issued or sold in any other
case, if deemed necessary or appropriate by the Board.  Certificates representing such shares of
Common Stock (including, without limitation, certificates issued upon transfer
or exchange of Common Stock) shall also be deemed to be certificates for
Rights, and shall bear the following legend:

 

This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Momenta
Pharmaceuticals, Inc. (the “Company”) and American Stock Transfer &
Trust Company (the “Rights Agent”) dated as of November 7, 2005, as the same
may be amended, restated or renewed 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 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, as in effect on the date of
mailing, without charge promptly after receipt of a written request
therefor.  Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held by, any Person who
is, was or becomes an Acquiring Person or any Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement), whether currently held by
or on behalf of such Person or by any subsequent holder, may become null and
void.

 

With respect
to such certificates containing the foregoing legend, until the earlier of (i) the
Distribution Date and (ii) the Expiration Date, the Rights associated with
the Common Stock represented by such certificates shall be evidenced by such
certificates alone and registered

 

7

 

holders of
Common Stock shall also be the registered holders of the associated
Rights.  Notwithstanding this Section 3(c),
the omission of a legend shall not affect the enforceability of any part of
this Rights Agreement or the rights of any holder of the Rights.

 

(d)                                 Until
the earlier of the Distribution Date and the Expiration Date, the transfer of
any certificates representing shares of Common Stock in respect of which Rights
have been issued shall also constitute the transfer of the Rights associated
with such shares of Common Stock.  In the
event that the Company purchases or acquires any shares of Common Stock after
the Record Date but prior to the Distribution Date, any Rights associated with
such shares of Common Stock shall be deemed cancelled and retired so that the
Company shall not be entitled to exercise any Rights associated with the shares
of Common Stock which are no longer outstanding.

 

Section 4.                                            Form of
Rights Certificates.

 

(a)                                  The
Rights Certificates (and the forms of election to purchase, certification and
assignment to be printed on the reverse thereof) shall each be substantially in
the form set forth in Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate 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 over-the-counter
market 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 Rights Certificates, whenever distributed,
shall entitle the holders thereof to purchase such number of one
one-thousandths of a share of Preferred Stock as shall be set forth therein at
the price set forth therein (such exercise price per one one-thousandth of a
share, the “Purchase Price”), but the amount and type of securities purchasable
upon the exercise of each Right and the Purchase Price thereof shall be subject
to adjustment as provided herein.

 

(b)                                 Any
Rights Certificate issued pursuant to Section 3, Section 11(i) or
Section 22 hereof that represents Rights beneficially owned by persons
known to be: (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person 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
such Acquiring Person has any continuing agreement, arrangement or
understanding (whether or not in writing) regarding the transferred Rights or (B) a
transfer which the Board has determined is part of a plan, arrangement or
understanding (whether or not in writing) that has as a primary purpose or
effect avoidance of Section 7(e) hereof, and any Rights Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:

 

8

 

The Rights represented by this Rights 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
Rights Certificate and the Rights represented hereby may become null and void
in the circumstances specified in Section 7(e) of such Agreement.

 

The provisions
of Section 7(e) hereof shall be operative whether or not the
foregoing legend is contained on any such Rights Certificate.

 

Section 5.                                            Countersignature
and Registration.

 

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

 

(b)                                 Following
the Distribution Date, the Rights Agent shall keep or cause to be kept, at its
office designated as the appropriate place for surrender of Rights Certificates
upon exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder.  Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates, the Rights Certificate number and the date of each of the Rights
Certificates.

 

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

 

(a)                                  Subject
to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the close of business on the Distribution Date, and
at or prior to the close of business on the Expiration Date, any Rights
Certificate or Certificates (other than Rights Certificates representing Rights
that have become void pursuant to Section 7(e) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split
up, combined or exchanged for another Rights Certificate or Certificates,
entitling the registered holder to purchase a like number of one
one-thousandths of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case may
be) as

 

9

 

the Rights Certificate or Certificates surrendered then entitled such
holder (or former holder in the case of a transfer) to purchase.  Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged, with the form of assignment and certificate appropriately executed,
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 Rights Certificate until the registered holder shall
have completed and signed the certificate contained in the form of assignment
on the reverse side of such Rights Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former Beneficial
Owner) or Affiliates or Associates thereof as the Company shall reasonably
request.  Thereupon the Rights Agent
shall, subject to Section 4(b), Section 7(e) and Section 14
hereof, countersign and deliver to the Person entitled thereto a Rights Certificate
or Rights Certificates, as the case may be, as so requested.  The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.

 

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

 

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

 

(a)                                  Subject
to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and
Section 23 hereof) in whole or in part at any time after the Distribution
Date upon surrender of the Rights Certificate, with the form of election to
purchase and the certificate 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 aggregate Purchase Price with respect to the total
number of one one-thousandths of a share of Preferred Stock (or other shares, securities,
cash or other assets, as the case may be) as to which such surrendered Rights
are then exercisable, at or prior to the earliest of (i) the Final
Expiration Date, (ii) the time at which the Rights expire as provided in Section 13(d) hereof,
(iii) the time at which the Rights are redeemed as provided in Section 23
hereof (the “Redemption Date”) and (iv) the time at which such Rights are
exchanged as provided in Section 24 hereof (the earliest of (i), (ii), (iii) and
(iv) being herein referred to as the “Expiration Date”).

 

(b)                                 The
Purchase Price for each one one-thousandth of a share of Preferred Stock
pursuant to the exercise of a Right shall initially be $125 and shall be
subject to adjustment from

 

10

 

time to time as provided in Sections 11 and 13(a) 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 Rights Certificate representing exercisable Rights, with the form
of election to purchase and the certificate duly executed, accompanied by
payment, with respect to each Right so exercised, of the Purchase Price per one
one-thousandth of a share of Preferred Stock (or other shares, securities, cash
or other assets, as the case may be) to be purchased and an amount equal to any
applicable transfer tax, the Rights Agent shall, subject to Section 20(k)
hereof, thereupon promptly (i) (A) requisition from any transfer
agent of the shares of Preferred Stock (or make available, if the Rights Agent
is the transfer agent for such shares) certificates for the total number of one
one-thousandths of a share of Preferred Stock to be purchased and the Company
hereby authorizes its transfer agent to comply with such requests, or (B) if
the Company shall have elected to deposit the total number of shares of
Preferred Stock issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a share of Preferred Stock
as are to be purchased (in which case certificates for the shares of Preferred
Stock 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 requests, (ii) requisition from the Company the amount
of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, and (iv) after receipt thereof, deliver such cash, if any, to
or upon the order of the registered holder of such Rights Certificate.  The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) may be
made in cash or by certified bank check or money order payable to the order of
the Company.  In the event that the
Company is obligated to issue other securities (including Common Stock) of the
Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof,
the Company shall make all arrangements necessary so that such other securities,
cash and/or other property are available for distribution by the Rights Agent,
if and when appropriate.

 

(d)                                 In
case the registered holder of any Rights Certificate shall exercise less than
all the Rights evidenced thereby, a new Rights Certificate evidencing Rights
equivalent to the Rights remaining unexercised shall be issued by the Rights
Agent and delivered to, or upon the order of, the registered holder of such
Rights Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.

 

(e)                                  Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
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

 

11

 

understanding (whether or not in writing) regarding the transferred
Rights or (B) a transfer which the Board has determined is part of a plan,
arrangement or understanding (whether or not in writing) that has as a primary
purpose or effect avoidance of this Section 7(e), 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.  No Rights
Certificate shall be issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate; and any Rights Certificate delivered to the
Rights Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence shall be cancelled.  The Company shall use all reasonable efforts
to insure that the provisions of this Section 7(e) and Section 4(b) hereof
are complied with, but shall have no liability to any holder of Rights
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.

 

(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 transfer or exercise as set forth
in this Section 7 unless such registered holder shall have (i) completed
and signed the certificate following the form of assignment or election to
purchase set forth on the reverse side of the Rights Certificate surrendered
for such assignment or exercise, and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or any Affiliates or Associates thereof as the Company shall reasonably
request.

 

Section 8.                                            Cancellation
and Destruction of Rights Certificates. 
All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Company or any of its agents, be delivered to the Rights Agent for cancellation
or in cancelled form, or, if surrendered to the Rights Agent, shall be
cancelled by it, and no Rights 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 Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. 
The Rights Agent shall deliver all cancelled Rights Certificates to the
Company, or shall, at the written request of the Company, destroy such
cancelled Rights Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.

 

Section 9.                                            Reservation
and Availability of Capital Stock.

 

(a)                                  The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its
authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including Section 11(a)(iii) hereof,
will be sufficient to permit the exercise in full of all outstanding Rights.

 

12

 

(b)                                 So
long as the shares of Preferred Stock (and, following the occurrence of a Section 11(a)(ii) Event,
Common Stock and/or other securities) issuable and deliverable upon the
exercise of the Rights may be listed on any national securities exchange or
automated 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 so listed upon official notice of issuance upon such
exercise.

 

(c)                                  The
Company shall use its best efforts to (i) file, as soon as practicable
following the earliest date after the first occurrence of a Section 11(a)(ii) Event
on which the consideration to be delivered by the Company upon exercise of the
Rights has been determined in accordance with Section 11(a)(iii) hereof,
or as soon as is required by law following the Distribution Date, as the case
may be, a registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause
such registration statement to become effective as soon as practicable after
such filing, (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
earlier of (A) the date as of which the Rights are no longer exercisable
for such securities, and (B) the Expiration Date, and (iv) obtain
such other regulatory approvals as may be necessary for it to issue securities
purchasable upon the exercise of the Rights. 
The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or “blue sky” laws of the various
states in connection with the exercisability of the Rights.  The Company may temporarily suspend, for a
period of time not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective or to obtain any other required
regulatory approval in connection with the exercisability of the Rights.  Upon any such suspension, the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. 
Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction unless the requisite
registration or qualification in such jurisdiction shall have been effected or
obtained.

 

(d)                                 The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all one one-thousandths of a share of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and nonassessable.

 

(e)                                  The
Company further covenants and agrees that it will pay when due and payable any
and all federal and state transfer taxes and charges that may be payable in
respect of the issuance or delivery of the Rights Certificates and of any
certificates for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) upon the exercise
of Rights.  The Company shall not,
however, be required (i) to pay any transfer tax that may be payable in
respect of any transfer or delivery of Rights Certificates to a Person other
than, or the issuance or delivery of a number of one one-thousandths of a share
of Preferred Stock (or Common Stock and/or other securities, as the case may
be) in respect of a name other than that of, the registered holder of the
Rights Certificate evidencing Rights

 

13

 

surrendered for exercise or (ii) to issue or deliver any
certificates for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) in a name other
than that of the registered holder upon the exercise of any Rights until such
tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established
to the Company’s satisfaction that no such tax is due.

 

Section 10.                                      Preferred
Stock Record Date.  Each Person in
whose name any certificate for a number of one one-thousandths of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such fractional shares of Preferred Stock (or
Common Stock and/or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered with the forms of
election and certification duly executed and payment of the Purchase Price (and
all applicable transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record
holder of such shares (fractional or otherwise) on, and such certificate shall
be dated, the next succeeding Business Day on which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are open.  Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate, as such,
shall not be entitled to any rights of a stockholder of the Company with
respect to securities 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 and Kind of Shares or Number of Rights.  The Purchase Price, the number and kind of
shares covered by each Right and the number of Rights outstanding are subject
to adjustment from time to time as provided in this Section 11.

 

(a)                                  (i)                                     In the
event the Company shall at any time after the date of this Agreement (A) declare
a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide
the outstanding Preferred Stock, (C) combine the outstanding Preferred
Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and
the number and kind of shares of Preferred Stock or capital stock, as the case
may be, issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive,
upon payment of the Purchase Price then in effect, the aggregate number and
kind of shares of Preferred Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such date and at a time
when the Preferred Stock transfer books of the Company were open, he would have
owned

 

14

 

upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification.  If an event occurs that would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof,
the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

 

(ii)                                  Subject
to Section 24 of this Agreement, in the event that any Person, alone or
together with its Affiliates or Associates, becomes an Acquiring Person (other
than pursuant to a Permitted Offer), then, promptly following the first
occurrence of such event, proper provision shall be made so that each holder of
a Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive (subject to the last sentence of Section 23(a)),
upon exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of a number of one one-thousandths of a share
of Preferred Stock, such number of shares of Common Stock of the Company that
equals the result obtained by (x) multiplying the then current Purchase
Price by the then number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to the first occurrence of
a Section 11(a)(ii) Event, and (y) dividing that product (which,
following such first occurrence, shall thereafter be referred to as the “Purchase
Price” for each Right and for all purposes of this Agreement) by 50% of the
current market price (determined pursuant to Section 11(d) hereof)
per share of Common Stock on the date of such first occurrence (such number of
shares, the “Adjustment Shares”).

 

(iii)                               In
the event that the number of shares of Common Stock that are authorized by the
Company’s Certificate of Incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights are not sufficient
to permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall: (A) determine
the excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the “Current Value”) over (2) the Purchase Price
(such excess, the “Spread”), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred stock
which the Board has deemed to have the same value as shares of Common Stock
(such shares of preferred stock, “common stock equivalents”)), (4) debt
securities of the Company, (5) other assets, or (6) any combination
of the foregoing, having an aggregate value equal to the Current Value, where
such aggregate value has been determined by the Board based upon the advice of
a nationally recognized investment banking firm selected by the Board; provided,
however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days
following the later of (x) the first occurrence of a Section 11(a)(ii) Event
and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger
Date”), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread.  If the Board shall determine in good faith
that it is likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, the thirty

 

15

 

(30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger
Date, in order that the Company may seek shareholder approval for the
authorization of such additional shares (such period, as it may be extended,
the “Substitution Period”).  To the
extent that the Company determines that some action need be taken pursuant to
the first and/or second sentences of this Section 11(a)(iii), the Company
(x) shall provide, subject to Section 7(e) hereof, that such
action shall apply uniformly to all outstanding Rights, and (y) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof.  In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii),
the value of the Common Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock on
the Section 11(a)(ii) Trigger Date and the value of any “common stock
equivalent” shall be deemed to have the same value as the Common Stock on such
date.

 

(b)                                 In
case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them to subscribe for or
purchase (for a period expiring within forty-five (45) calendar days after such
record date) Preferred Stock (or shares having the same rights, privileges and
preferences as the shares of Preferred Stock (“equivalent preferred stock”)) or
securities convertible into Preferred Stock or equivalent preferred stock at a
price per share of Preferred Stock or per share of equivalent preferred stock
(or having a conversion price per share, if a security convertible into
Preferred Stock or equivalent preferred stock) less than the current market
price (as determined pursuant to Section 11(d) hereof) per share of
Preferred Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock 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 shares of Preferred Stock outstanding on such record date, plus the number
of additional shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). 
In case such subscription price may be paid by delivery of consideration
part or all of which may 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 statement filed with the Rights Agent and
shall be conclusive for all purposes. 
Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation.  Such adjustment shall be
made successively whenever such a record date is fixed, and in the event that
such rights, 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.

 

16

 

 

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

 

(d)                                 (i)                                     For
the purpose of any computation hereunder, other than computations made pursuant
to Section 11(a)(iii) hereof, the “current market price” per share of
Common Stock on any date shall be deemed to be the average of the daily closing
prices per share of such Common Stock for the thirty (30) consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such date, and for
purposes of computations made pursuant to Section 11(a)(iii) hereof,
the “current market price” per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such Common
Stock for the ten (10) consecutive Trading Days immediately following such
date; provided, however, that in the event that the current
market price per share of the Common Stock is determined during a period following
the announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than the
Rights), or (B) any subdivision, combination or reclassification of such
Common Stock, and prior to the expiration of the requisite thirty (30) Trading
Day or ten (10) Trading Day period, as set forth above, after the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification occurs, then, and in each such
case, the “current market price” shall be properly adjusted to take into
account ex-dividend or post record date trading.  The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and the low asked prices in the
over-the-counter market, as reported by The Nasdaq Stock Market, Inc. (“Nasdaq”)
or such other system then in use, or, if on any such date the shares of Common
Stock are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market

 

17

 

in the Common Stock selected by
the Board.  All references in this Section to
closing prices, last quoted prices or other stock prices mean prices during
regular trading hours, without giving effect to any after-hours or extended
hours trading.  If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date shall be as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. 
The term “Trading Day” shall mean a day on which Nasdaq or any national
securities exchange on which the shares of Common Stock are listed or admitted
to trading is open for the transaction of business or, if the shares of Common
Stock are not listed or admitted to trading on Nasdaq or any national
securities exchange, a Business Day.  If
the Common Stock is not publicly held or not so listed or traded, “current
market price” per share shall mean the fair value per share as determined in
good faith by the Board, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.

 

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

 

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

 

(f)                                    If
as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof,
the holder of any Right thereafter exercised shall become entitled to receive
any securities other than Preferred Stock, thereafter the number of such other
securities so receivable upon exercise of any Right and the Purchase Price
thereof shall be subject to adjustment from

 

18

 

time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other securities; provided,
however, that the Company shall not be liable for its inability to
reserve and keep available for issuance upon exercise of the Rights pursuant to
Section 11(a)(ii) a number of shares of Common Stock greater than the
number then authorized by the Company’s Certificate of Incorporation but not
outstanding or reserved for other purposes.

 

(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-thousandths of a share of
Preferred Stock 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),
upon each adjustment of the Purchase Price as a result of the calculations made
in Sections 11(b) and (c), each Right outstanding immediately prior
to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest ten-millionth) obtained
by (i) multiplying (x) the number of one one-thousandths of a 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 lieu of any adjustment in the number of one
one-thousandths of a share of Preferred Stock purchasable upon the exercise of
a Right.  Each of the Rights outstanding
after the adjustment in the number of Rights shall be exercisable for the
number of one one-thousandths of a share of Preferred Stock for which a Right
was exercisable immediately prior to such adjustment.  Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights (calculated
to the nearest one-hundred- thousandth) obtained by dividing the Purchase Price
in effect immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price.  The Company shall make a public announcement
of its election to adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the adjustment to be
made.  This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. 
If Rights Certificates have been issued, upon each adjustment of the
number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights 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
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment.  Rights Certificates so to be

 

19

 

distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record
of Rights Certificates on the record date specified in the public announcement.

 

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

 

(k)                                  Before
taking any action that would cause an adjustment reducing the Purchase Price
below the then par value, if any, of the number of one one-thousandths of a
share of Preferred Stock 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 such number
of one one-thousandths of a share of fully paid and nonassessable Preferred
Stock at such adjusted Purchase Price.

 

(l)                                     In
any case in which this Section 11 shall require that an adjustment in the
Purchase Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date the number of one
one-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder’s right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence
of the event requiring such adjustment.

 

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

 

(n)                                 The
Company covenants and agrees that it shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof),
or (iii) sell or transfer (or permit any Subsidiary to sell or transfer),
in one transaction, or a series of related transactions, assets or earning
power aggregating more than 50% of the assets

 

20

 

or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section 11(o)
hereof), if (x) at the time of or immediately after such consolidation,
merger or sale there are any charter or bylaw provisions or any rights,
warrants or other instruments or securities outstanding or agreements in effect
that would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the “Principal Party” for purposes
of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates or Associates.  The Company shall not consummate any
consolidation, merger, sale or transfer described in clause (i), (ii) or (iii) of
the prior sentence 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 11(n).

 

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

 

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

 

Section 12.                                      Certificate
of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in
Section 11 or Section 13 hereof, the Company shall promptly (a) prepare
a certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) file with the Rights Agent, and with
each transfer agent for the Preferred Stock and the Common Stock, a copy of
such certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 26
hereof.  The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any adjustment unless
and until it shall have received such certificate.

 

21

 

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

 

(a)                                  In
the event that, at any time after a Person has become an Acquiring Person,
(x) the Company shall consolidate with, or merge with and into, any other
Person (other than a Subsidiary of the Company in a transaction that complies
with Section 11(o) hereof), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, (y) any Person
(other than a Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof) shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or part of
the outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other property, or
(z) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with Section 11(o)
hereof), then, and in each such case and except as contemplated by Section 13(d) hereof,
proper provision shall be made so that: (i) each holder of a Right, except
as provided in Section 7(e) hereof, shall thereafter have the right
to receive, upon the exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid, non-assessable and freely tradeable shares of Common
Stock of the Principal Party (as such term is hereinafter defined), which shall
not be subject to any liens, encumbrances, rights of first refusal or other
adverse claims, as shall be equal to the result obtained by (1) multiplying
the then current Purchase Price by the number of one one-thousandths of a share
of Preferred Stock for which a Right is exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such one one-thousandths of a share for which a Right
was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event
by the Purchase Price in effect immediately prior to such first occurrence),
and (2) dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the “Purchase Price” for each Right and for all
purposes of this Agreement) by 50% of the current market price (determined
pursuant to Section 11(d)(i) hereof) per share of the Common Stock of
such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, 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, subject to clause (v) below, the provisions of Section 11
hereof shall apply only to such Principal Party following the first occurrence
of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of
no effect following the first occurrence of any Section 13 Event.

 

22

 

(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), the Person that is the issuer of any securities
into which shares of Common Stock of the Company are converted in such merger
or consolidation, and if no securities are so issued, the Person that is the
other party to such merger or consolidation; and

 

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

 

provided,
however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act,
and such Person is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, “Principal Party” shall refer to
such other Person; (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Stocks 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 Stock having the greatest aggregate
market value; and (3) in case such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules set forth in (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 ventures 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 shares
of its Common Stock which 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 such Principal Party shall have
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 further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of
this Section 13, the Principal Party will

 

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

 

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

 

23

 

The provisions
of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. 
In the event that a Section 13 Event shall occur at the same time
as, or at any time after, the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).

 

(d)                                 Notwithstanding
anything in this Agreement to the contrary, Section 13 shall not be
applicable to a transaction described in subparagraphs (x) and (y) of Section 13(a) if
(i) such transaction is consummated with a Person or Persons (or a wholly
owned subsidiary of any such Person or Persons) who acquired shares of Common
Stock pursuant to a Permitted Offer, (ii) the price per share of Common
Stock paid in such transaction is not less than the price per share of Common
Stock paid to all holders of shares of Common Stock whose shares were purchased
pursuant to such Permitted Offer, and (iii) the form of consideration paid
in such transaction is the same as the form of consideration paid pursuant to
such Permitted Offer.  Upon consummation
of any such transaction contemplated by this Section 13(d), all Rights
hereunder shall expire.

 

Section 14.                                      Fractional
Rights and Fractional Shares.

 

(a)                                  The
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(i) or (p) hereof, or to
distribute Rights Certificates that evidence fractional Rights.  In lieu of such fractional Rights, there shall
be paid to the registered holders of the Rights Certificates with regard to
which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Right.  For 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 of the Rights 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 principal national
securities exchange on which the Rights are listed or admitted to trading, or
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and the 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.  All
references in this Section to closing prices, last quoted prices or other
stock prices means prices during regular trading hours, without giving effect
to any after-hours or extended hours trading. 
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, which determination shall be described in a
statement filed with Rights Agent and shall be conclusive for all purposes.

 

(b)                                 The
Company shall not be required to issue fractions of shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock) upon exercise of the Rights or to distribute
certificates that evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a

 

24

 

share of Preferred Stock). 
Fractional shares of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock 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 shares of Preferred Stock
represented by such depositary receipts. 
In lieu of fractional shares of Preferred Stock (other than fractions
which are integral multiples of one one-thousandth of a share of Preferred
Stock), the Company shall pay to the registered holders of Rights Certificates
at the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of one one-thousandth of
a share of Preferred Stock.  For purposes
of this Section 14(b), the current market value of one one-thousandth of a
share of Preferred Stock shall be one one-thousandth of the closing price of a
share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof)
for the Trading Day immediately prior to the date of such exercise.

 

(c)                                  Following
the occurrence of a Triggering Event, the Company shall not be required to
issue fractions of shares of Common Stock upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Common Stock.  In lieu of fractional shares of Common Stock,
the Company shall pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market price of one (1) share of Common Stock
(as determined pursuant to Section 11(d)(i) hereof) for the Trading
Day immediately prior to the date of such exercise.

 

(d)                                 The
holder of a Right by the acceptance of such Right expressly waives his right to
receive any fractional Rights or any fractional shares upon exercise of a
Right, except as permitted by this Section 14.

 

Section 15.                                      Rights
of Action.  All rights of action in
respect of this Agreement, except the rights of action expressly given to the
Rights Agent in Section 18 hereof, are vested in the respective registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), may, in
his own behalf and for his own benefit, enforce, and may institute and maintain
any suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and 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 shall be entitled to
specific performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder of any Person
subject to this Agreement.

 

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

 

25

 

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

 

(b)                                 after
the Distribution Date, the Rights Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the office of the Rights
Agent designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and certificates duly
completed and fully executed;

 

(c)                                  subject
to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the penultimate sentence
of Section 7(e) hereof, shall be required to be affected by any
notice to the contrary; and

 

(d)                                 notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent 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, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to
prevent the issuance of any such order, decree or ruling and to have any such
order, decree or ruling lifted or otherwise overturned as soon as possible.

 

Section 17.                                      Rights
Certificate Holder Not Deemed a Stockholder.  No holder, as such, of any Rights Certificate
shall be entitled to vote, receive dividends or be deemed for any purpose the
holder of the number of one one-thousandths of a share of Preferred Stock 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 Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.

 

Section 18.                                      Concerning
the Rights Agent.

 

(a)                                  The
Company agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses and counsel fees and disbursements and other
disbursements incurred in the administration and execution of this Agreement
and the exercise and performance of its duties

 

26

 

hereunder.  The Company also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises.

 

(b)                                 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
administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock 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.

 

Section 19.                                      Merger
or Consolidation or Change of Name of Rights Agent.

 

(a)                                  Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the 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, however, that such corporation 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 Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates either in
the name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.

 

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

 

Section 20.                                      Duties
of Rights Agent.  The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:

 

27

 

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

 

(b)                                 Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the determination of “current
market price”) be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the Chairman of
the Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.

 

(c)                                  The
Rights Agent shall be liable hereunder only for its own gross negligence, bad
faith or willful misconduct.

 

(d)                                 The
Rights Agent shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the Rights Certificates or
be required to verify the same (except as to its countersignature on such
Rights Certificates), 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 Rights 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 Rights Certificate; nor shall
it be responsible for any adjustment required under the provisions of Section 11,
Section 13 or Section 24 hereof or responsible for the manner, method
or amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after receipt of a certificate
describing any such adjustment, delivered pursuant to Section 12); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock
will, when so issued, be validly authorized and issued, fully paid and
nonassessable.

 

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

 

(g)                                 The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from the Chairman of the
Board, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant

 

28

 

Treasurer of the Company, and
to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.  Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent with respect to its duties or obligations under this Rights Agreement and
the date on and/or after which such action shall be taken or omitted and the
Rights Agent shall not be liable for any action taken or omitted in accordance
with a proposal included in any such application on or after the date specified
therein (which date shall not be less than five Business Days after the date
any such officer actually receives such application, unless any such officer
shall have consented in writing to an earlier date) unless, prior to taking or
omitting any such action, the Rights Agent has received written instructions in
response to such application specifying the action to be taken or omitted.

 

(h)                                 The
Rights Agent and any stockholder, director, officer or employee of the Rights
Agent may buy, sell or deal in any of the Rights or other securities of the
Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement.  Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.

 

(i)                                     The
Rights Agent may execute and exercise any of the rights or powers hereby vested
in it or perform any duty hereunder either itself or by or through its
attorneys or agents, and the Rights Agent shall not be answerable or accountable
for any act, default, neglect or misconduct of any such attorneys or agents or
for any loss to the Company resulting from any such act, default, neglect or
misconduct; provided, however, reasonable care was exercised in
the selection and continued employment thereof.

 

(j)                                     No
provision of this Agreement shall require the Rights Agent to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder or in the exercise of its rights if there shall be
reasonable grounds for believing that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.

 

(k)                                  If,
with respect to any Rights 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 completed, the
Company and the Rights Agent will deem the beneficial owner of the rights
evidenced by such Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof and such assignment or election to purchase will not be
honored.

 

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 thirty (30) days’ notice in writing mailed to the Company,
and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail.  The Company may remove
the Rights Agent or any successor Rights Agent upon thirty (30) days’ notice in
writing, mailed to the Rights Agent or successor Rights Agent, as

 

29

 

the case may be, and to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. 
In the event the transfer agency relationship in effect between the Company
and the Rights Agent terminates, the Rights Agent will be deemed to resign
automatically on the effective date of such termination, and any required
notice will be sent by the Company.  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 thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent.  Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a corporation organized and doing business under the laws of
the United States (or of any state of the United States) in good standing,
which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an affiliate
of a corporation described in clause (a) of this sentence.  After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates.  Failure to
give any notice provided for in this Section 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 Rights Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the 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 Rights
Certificates made in accordance with the provisions of this Agreement.  

 

Section 23.                                      Redemption;
Independent Director Review.

 

(a)                                  The
Board may, at its option, at any time prior to the earlier of (i) the
close of business on the tenth Business Day (or such later date as may be
determined by the Board pursuant to clause (i) of the first sentence of Section 3(a) with
respect to the Distribution Date) following the Stock Acquisition Date (or, if
the Stock Acquisition Date shall have occurred prior to the Record Date, the
close of business on the tenth Business Day following the Record Date) and (ii) the
Final Expiration Date, redeem all but not less than all the then outstanding
Rights at a redemption price of $0.001 per Right, as such amount may be appropriately
adjusted to reflect

 

30

 

any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the “Redemption
Price”).  The redemption of the Rights by
the Board may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish.  The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the “current market
price,” as defined in Section 11(d)(i) hereof, of the Common Stock at
the time of redemption) or any other form of consideration, or any combination
of any of the foregoing, deemed appropriate by the Board.  Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event until such time as the
Company’s right of redemption hereunder has expired.

 

(b)                                 Immediately
upon the action of the Board ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any further
action and without any notice, the right to exercise the Rights shall terminate
and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. 
Promptly after the action of the Board ordering the redemption of the
Rights, the Company shall give notice of such redemption to the Rights Agent
and the holders of the then outstanding Rights by mailing such notice to all
such holders at each holder’s last address as it appears upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the Transfer Agent for the Common Stock.  Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.  Each such notice of redemption
will state the method by which the payment of the Redemption Price will be
made.

 

(c)                                  In
the event of a redemption of the Rights in accordance with this Agreement, the
Company may, at its option, discharge all of its obligations with respect to
the Rights by (i) issuing a press release announcing the manner of
redemption of the Rights in accordance with this Agreement and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the Transfer Agent
of the Common Stock, and upon such action, all outstanding Rights and 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 a Section 11(a)(ii) Event,
exchange all or part of the then outstanding and exercisable Rights (which (i) shall
not include Rights that

 

31

 

have become void pursuant to the provisions of Section 7(e) hereof,
and (ii) shall include, without limitation, any Rights issued after the
Distribution Date) for shares of Common Stock at an exchange ratio of one share
of Common Stock per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (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 Stock
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 shares of Common Stock then outstanding.

 

(b)                                 Immediately
upon the action of the Board ordering the exchange of any Rights pursuant to
subSection (a) of this Section 24, evidence of which shall have
been filed with the Rights Agent, and without any further action and without
any notice, the right to exercise such Rights shall terminate and the only
right thereafter of a holder of such Rights shall be to receive that number of
shares of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio.  The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. 
The Company promptly shall mail a notice of any such exchange to all of
the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent.  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 shall state the method by which the
exchange of shares of Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be
exchanged.  Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) hereof) held
by each holder of Rights.

 

(c)                                  In
any exchange pursuant to this Section 24, the Company, at its option, may
substitute Preferred Stock (or equivalent preferred stock, as such term is
defined in Section 11(b) hereof) for shares of Common Stock
exchangeable for Rights, at the initial rate of one one-thousandth of a share
of Preferred Stock (or equivalent preferred stock) for each share of Common
Stock, as appropriately adjusted to reflect adjustments in the voting rights of
the Preferred Stock pursuant to Section 3(A) of the Certificate of
Designations attached hereto as Exhibit A, so that the fraction of
a share of Preferred Stock (or equivalent preferred stock) delivered in lieu of
each share of Common Stock shall have the same voting rights as one share of
Common Stock.

 

(d)                                 In
the event that there shall not be sufficient shares of Common Stock or
Preferred Stock issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 24,
the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock or Preferred Stock for issuance upon exchange
of the Rights.

 

(e)                                  The
Company shall not be required to issue fractions of shares of Common Stock or
to distribute certificates which evidence fractional shares of Common
Stock.  In lieu of such

 

32

 

fractional shares of Common Stock, there shall be paid to the
registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock.  For the purposes of this
subSection (e), the current market value of a whole share of Common Stock
shall be the closing price per share of Common Stock (as determined pursuant to
the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.

 

Section 25.                                      Notice
of Certain Events.

 

(a)                                  In
case the Company shall propose, at any time after the Distribution Date, (i) to
pay any dividend payable in stock of any class to the holders of Preferred
Stock or to make any other distribution to the holders of Preferred Stock
(other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its
Preferred Stock (other than a reclassification involving only the subdivision
of outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof),
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 transaction or a
series of related transactions, of more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of a Rights Certificate, to
the extent feasible and in accordance with Section 26 hereof, a notice of
such proposed action, which shall specify the record date for the purposes of
such stock dividend, 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 shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier.

 

(b)                                 In
case a Section 11(a)(ii) Event shall occur, then, in any such case, (i) the
Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
and (ii) all references in the preceding paragraph to Preferred Stock
shall be deemed thereafter to refer also to Common Stock and/or, if
appropriate, other securities; provided that the failure to give such notice
shall not affect the validity of such consent.

 

33

 

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

 

Momenta Pharmaceuticals, Inc.

675 West Kendall Street

Cambridge, MA 02142

Attention: Chief Executive Officer

 

with a copy to:

 

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02109

Attention: Steven D. Singer, Esq.

 

Subject to the
provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent 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:

 

American Stock Transfer & Trust
Company

59 Maiden Lane

New York, NY 
10038

Attention: 
Corporate Trust Department

 

Notices or
demands authorized by this Agreement to be given or made by the Company or the
Rights Agent to the holder of any Rights Certificate (or, if prior to the
Distribution Date, to the holder of certificates representing shares of Common
Stock) 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.  Except as provided
in the penultimate sentence of this Section 27, for so long as the Rights
are then redeemable, the Company may, in its sole and absolute discretion, and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement in any respect without the approval of any holders
of the Rights.  At any time when the
Rights are no longer redeemable, except as provided in the penultimate sentence
of this Section 27, the Company may, by approval of at least 75% of the
members of the Board, and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of
Rights in order (i) to cure any ambiguity or (ii) to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, provided that no such supplement
or amendment shall adversely affect the interests of the holders of Rights as
such (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person).  Upon the delivery of
a certificate from an appropriate officer of the Company which states that the
proposed supplement

 

34

 

or amendment is in compliance with the terms of this Section 27,
the Rights Agent shall execute such supplement or amendment.  Any supplement or amendment that the Rights
Agent is required to sign pursuant to this Section 27 shall be effective
upon execution by the Company (whether or not then executed by the Rights Agent
or the certificate referred to in the immediately preceding sentence has been
delivered).  Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall
be made which changes the Redemption Price. 
Prior to the Distribution Date, the interests of the holders of Rights
shall be deemed coincident with the interests of the holders of Common Stock.

 

Section 28.                                      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 29.                                      Actions
by the Board, etc.  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 to 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 deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend this
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 Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board to any liability to the
holders of the Rights.

 

Section 30.                                      Benefits
of this Agreement.  Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock) 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 Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).

 

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;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board
determines in its good faith judgment that severing the invalid, void or
unenforceable language from this Agreement would adversely affect the purpose
or effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and shall not expire until the close of business on
the tenth day following the date of such determination by the Board.

 

35

 

Section 32.                                      Governing
Law.  This Agreement, each Right and
each Rights 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 Delaware applicable to
contracts made and to be performed entirely within Delaware.

 

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]

 

36

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed and
their respective corporate seals to be hereunto affixed and attested, all as of
the day and year first above written.

 

	
  Attest:

  	
  MOMENTA
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Lisa
  Shmerling

  	
   

  	
  By:

  	
  /s/ Alan L.
  Crane

  	
   

  
	
  Name:

  	
   

  	
   Lisa Caron Shmerling

  	
   

  	
  Name:

  	
   Alan L. Crane

  
	
  Title:

  	
   

  	
   Deputy General Counsel

  	
   

  	
  Title:

  	
   President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
  AMERICAN
  STOCK TRANSFER & TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Susan
  Silber

  	
   

  	
  By:

  	
  /s/ Herbert
  J. Lemmer

  	
   

  
	
  Name:

  	
   

  	
     Susan
  Silber

  	
   

  	
  Name:

  	
   Herbert J. Lemmer

  	
   

  
	
  Title:

  	
   

  	
  Assistant Secretary

  	
   

  	
  Title:

  	
     Vice
  President

  	
   

  
																

 

37

 

EXHIBIT A

 

FORM OF

 

CERTIFICATE OF
DESIGNATIONS

 

OF

 

SERIES A
JUNIOR PARTICIPATING PREFERRED STOCK

 

OF

 

MOMENTA
PHARMACEUTICALS, INC.

 

Momenta Pharmaceuticals, Inc., a
corporation organized and existing under the laws of the State of Delaware
(hereinafter called the “Corporation”), hereby certifies that the following
resolution was adopted by the Board of Directors of the Corporation at a
meeting duly called and held on October 31, 2005:

 

RESOLVED:  That pursuant to the authority granted to and
vested in the Board of Directors of the Corporation (hereinafter called the “Board”)
in accordance with the provisions of the Certificate of Incorporation, as
amended, the Board hereby creates a series of Preferred Stock, $.01 par value
per share, of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences and limitations thereof as
follows:

 

Series A
Junior Participating Preferred Stock:

 

Section 1.               Designation
and Amount.  The shares of such
series shall be designated as “Series A Junior Participating Preferred
Stock” (the “Series A Preferred Stock”) and the number of shares
constituting the Series A Preferred Stock shall be one hundred thousand
(100,000).  Such number of shares may be
increased or decreased by resolution of the Board prior to issuance; provided,
that no decrease shall reduce the number of shares of Series A Preferred
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding
securities issued by the Corporation convertible into Series A Preferred
Stock.

 

Section 2.               Dividends
and Distributions.

 

(A)          Subject
to the rights of the holders of any shares of any series of Preferred Stock (or
any similar stock) ranking prior and superior to the Series A Preferred
Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of Common Stock, par value $.0001
per share (the “Common Stock”), of the Corporation, and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board out
of

 

A-1

 

funds of the Corporation legally available
for the payment of dividends, quarterly dividends payable in cash on the last
day of each fiscal quarter of the Corporation in each year (each such date
being referred to herein as a “Quarterly Dividend Payment Date”), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject
to the provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. 
In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.  In the event the
Corporation shall at any time declare or pay any dividend on the Series A
Preferred Stock payable in shares of Series A Preferred Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Series A
Preferred Stock (by reclassification or otherwise than by payment of a dividend
in shares of Series A Preferred Stock) into a greater or lesser number of
shares of Series A Preferred Stock, then in each such case the amount to
which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the first sentence of
this Section 2(A) shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Series A
Preferred Stock that were outstanding immediately prior to such event and the
denominator of which is the number of shares of Series A Preferred Stock
outstanding immediately after such event.

 

(B)           The
Corporation shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (A) of this Section immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock) and the Corporation shall pay such
dividend or distribution on the Series A Preferred Stock before the
dividend or distribution declared on the Common Stock is paid or set apart;
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $10 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

 

(C)           Dividends
shall begin to accrue and be cumulative on outstanding shares of Series A
Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such shares is prior
to the record date for the first

 

A-2

 

Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date.  Accrued but unpaid
dividends shall not bear interest. 
Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. 
The Board may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.

 

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

 

(A)          Subject
to the provision for adjustment hereinafter set forth, each share of Series A
Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters
submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the number of votes
per share to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.  In the event the Corporation
shall at any time declare or pay any dividend on the Series A Preferred
Stock payable in shares of Series A Preferred Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Series A
Preferred Stock (by reclassification or otherwise than by payment of a dividend
in shares of Series A Preferred Stock) into a greater or lesser number of
shares of Series A Preferred Stock, then in each such case the number of
votes per share to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of Series A
Preferred Stock that were outstanding immediately prior to such event and the
denominator of which is the number of shares of Series A Preferred Stock
outstanding immediately after such event.

 

(B)           Except
as otherwise provided herein, in the Certificate of Incorporation or by law,
the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.

 

(C)           (i)            If
at any time dividends on any Series A Preferred Stock shall be in arrears
in an amount equal to six quarterly dividends thereon, the holders of the Series A
Preferred Stock, voting as a separate series from all other series of Preferred
Stock and classes of capital

 

A-3

 

stock, shall be entitled to elect two members
of the Board in addition to any Directors elected by any other series, class or
classes of securities and the authorized number of Directors will automatically
be increased by two.  Promptly
thereafter, the Board of the Corporation shall, as soon as may be practicable,
call a special meeting of holders of Series A Preferred Stock for the
purpose of electing such members of the Board. 
Such special meeting shall in any event be held within 45 days of the
occurrence of such arrearage.

 

(ii)           During any period when
the holders of Series A Preferred Stock, voting as a separate series,
shall be entitled and shall have exercised their right to elect two Directors,
then, and during such time as such right continues, (a) the then authorized
number of Directors shall be increased by two, and the holders of Series A
Preferred Stock, voting as a separate series, shall be entitled to elect the
additional Directors so provided for, and (b) each such additional
Director shall not be a member of any existing class of the Board, but shall
serve until the next annual meeting of stockholders for the election of
Directors, or until his successor shall be elected and shall qualify, or until
his right to hold such office terminates pursuant to the provisions of this Section 3(C).

 

(iii)          A Director elected
pursuant to the terms hereof may be removed with or without cause by the
holders of Series A Preferred Stock entitled to vote in an election of
such Director.

 

(iv)          If, during any interval
between annual meetings of stockholders for the election of Directors and while
the holders of Series A Preferred Stock shall be entitled to elect two
Directors, there is no such Director in office by reason of resignation, death
or removal, then, promptly thereafter, the Board shall call a special meeting
of the holders of Series A Preferred Stock for the purpose of filling such
vacancy and such vacancy shall be filled at such special meeting.  Such special meeting shall in any event be
held within 45 days of the occurrence of such vacancy.

 

(v)           At such time as the
arrearage is fully cured, and all dividends accumulated and unpaid on any
shares of Series A Preferred Stock outstanding are paid, and, in addition
thereto, at least one regular dividend has been paid subsequent to curing such
arrearage, the term of office of any Director elected pursuant to this Section 3(C),
or his successor, shall automatically terminate, and the authorized number of
Directors shall automatically decrease by two, the rights of the holders of the
shares of the Series A Preferred Stock to vote as provided in this Section 3(C) shall
cease, subject to renewal from time to time upon the same terms and conditions,
and the holders of shares of the Series A Preferred Stock shall have only
the limited voting rights elsewhere herein set forth.

 

(D)          Except
as set forth herein, or as otherwise provided by law, holders of Series A
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.

 

A-4

 

Section 4.               Certain
Restrictions.

 

(A)          Whenever
quarterly dividends or other dividends or distributions payable on the Series A
Preferred Stock as provided in Section 2 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:

 

(i)            declare or pay
dividends, or make any other distributions, on any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock;

 

(ii)           declare or pay dividends,
or make any other distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;

 

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

 

(iv)          redeem or purchase or
otherwise acquire for consideration any shares of Series A Preferred
Stock, or any shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board) to all holders of such shares upon
such terms as the Board, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.

 

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

 

Section 5.               Reacquired
Shares.  Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof.  All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by law.

 

A-5

 

Section 6.               Liquidation,
Dissolution or Winding Up.

 

(A)          Upon
any liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.

 

(B)           Neither
the consolidation, merger or other business combination of the Corporation with
or into any other corporation nor the sale, lease, exchange or conveyance of
all or any part of the property, assets or business of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 6.

 

(C)           In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under the proviso in clause (1) of
paragraph (A) of this Section 6 shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.  In the event the
Corporation shall at any time declare or pay any dividend on the Series A
Preferred Stock payable in shares of Series A Preferred Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Series A
Preferred Stock (by reclassification or otherwise than by payment of a dividend
in shares of Series A Preferred Stock) into a greater or lesser number of
shares of Series A Preferred Stock, then in each such case the aggregate
amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1) of
paragraph (A) of this Section 6 shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of Series A
Preferred Stock that were outstanding immediately prior to such event and the
denominator of which is the number of shares of Series A Preferred Stock
outstanding immediately after such event.

 

Section 7.               Consolidation,
Merger, etc.  Notwithstanding
anything to the contrary contained herein, in case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000

 

A-6

 

times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. 
In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.  In the event the Corporation shall at any
time declare or pay any dividend on the Series A Preferred Stock payable
in shares of Series A Preferred Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Series A
Preferred Stock (by reclassification or otherwise than by payment of a dividend
in shares of Series A Preferred Stock) into a greater or lesser number of
shares of Series A Preferred Stock, then in each such case the amount set
forth in the first sentence of this Section 7 with respect to the exchange
or change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of Series A
Preferred Stock that were outstanding immediately prior to such event and the
denominator of which is the number of shares of Series A Preferred Stock
outstanding immediately after such event.

 

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

 

Section 9.               Rank.  The Series A Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of assets, junior
to all series of any other class of the Preferred Stock issued either before or
after the issuance of the Series A Preferred Stock, unless the terms of
any such series shall provide otherwise.

 

Section 10.             Amendment.  At such time as any shares of Series A
Preferred Stock are outstanding, the Certificate of Incorporation, as amended,
of the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.

 

Section 11.             Fractional
Shares.  Series A Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder’s fractional shares, to exercise voting rights,
receive dividends, participate in distributions and have the benefit of all
other rights of holders of Series A Preferred Stock.

 

A-7

 

IN WITNESS
WHEREOF, this Certificate of Designations is executed on behalf of the
Corporation by its Chief Executive Officer this 8th day of November,
2005.

 

	
   

  	
  MOMENTA PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Alan L.
  Crane

  	
   

  
	
   

  	
  Title:

  	
  President
  and Chief Executive Officer

  	
   

  

 

A-8

 

EXHIBIT B

 

[Form of
Rights Certificate]

 

	
  Certificate
  No. R-

  	
   

  	
  Rights

  

 

NOT
EXERCISABLE AFTER NOVEMBER 6, 2008 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY.  THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID.  [THE RIGHTS REPRESENTED
BY THIS RIGHTS 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 RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.](1)

 

MOMENTA
PHARMACEUTICALS, INC.

 

Rights
Certificate

 

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 November 7, 2005 (the “Rights
Agreement”), between Momenta Pharmaceuticals, Inc., a Delaware corporation
(the “Company”), and American Stock Transfer & Trust Company (the “Rights
Agent”), to purchase from the Company after the Distribution Date (as such term
is defined in the Rights Agreement) and at any time prior to 5:00 p.m.  (Boston time) on November 6, 2008 the office
of the Rights Agent designated for such purpose, or its successors as Rights
Agent, one one-thousandth of a fully paid, non-assessable share of Series A
Junior Participating Preferred Stock (the “Preferred Stock”) of the Company,
$.01 par value per share, at a purchase price of $125 in cash per one
one-thousandth of a share (the “Purchase Price”), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase
and related Certificate duly executed. 
The number of Rights evidenced by this Rights Certificate (and the
number of one one-thousandth of a share of Preferred Stock 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 the close of business on November 7,
2005, based on the Preferred Stock as constituted at such date.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Rights Agreement.

 

(1)           The
portion of the legend in brackets shall be inserted only if applicable and
shall replace the preceding sentence.

 

B-1

 

Upon the occurrence of a Section 11(a)(ii) Event,
if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (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 an Acquiring Person, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a person who,
concurrently with or after such transfer, became an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, such Rights shall become null
and void and no holder hereof shall have any right with respect to such Rights
from and after the occurrence of such Section 11(a)(ii) Event.

 

As provided in the Rights
Agreement, the Purchase Price and the number and kind of shares of Preferred
Stock or other securities which may be purchased upon the exercise of the
Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the happening of certain events, including Section 11(a)(ii) Events.

 

This Rights Certificate is
subject to all of the terms, provisions and conditions of the Rights Agreement,
which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Rights Agent, the Company
and the holders of the Rights Certificates, which limitations of rights include
the temporary suspension of the exercisability of such Rights under the
specific circumstances set forth in the Rights Agreement.  Copies of the Rights Agreement are on file at
the principal offices of the Company and are available upon written request to
the Company.

 

This Rights Certificate, with
or without other Rights Certificates, upon surrender at the office of the
Rights Agent designated for such purpose, with the Form of Election and
Certificate set forth on the reverse side duly executed, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
one one-thousandths of a share of Preferred Stock as the Rights evidenced by
the Rights Certificate or Rights Certificates surrendered shall have entitled
such holder to purchase.  If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.

 

Subject to the provisions of
the Rights Agreement, the Rights evidenced by this Certificate may be redeemed
by the Company at its option at a redemption price of $.001 per Right at any
time prior to the earlier of (i) the close of business on the tenth
Business Day (or such later date as may be determined by the Board pursuant to
clause (i) of the first sentence of Section 3(a) with respect to
the Distribution Date) following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the tenth Business Day following the Record Date) and (ii) the
Final Expiration Date.

 

Subject to the provisions of
the Rights Agreement, the Company may, at its option, at any time after a Section 11(a)(ii) Event,
exchange all or part of the Rights evidenced by this Certificate for shares of
the Company’s Common Stock or for Preferred Stock (or shares of a class or
series of

 

B-2

 

the Company’s preferred stock
having the same rights, privileges and preferences as the Preferred Stock).

 

No fractional
shares of Preferred Stock will be issued upon the exercise of any Right or
Rights evidenced hereby (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock, which may, at the 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 Rights Certificate, as such, shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote 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 Rights Certificate shall
have been exercised as provided in the Rights Agreement.

 

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

 

WITNESS the
facsimile signature of the proper officers of the Company and its corporate
seal.

 

	
  Dated as of 

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
  MOMENTA
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Secretary

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  COUNTERSIGNED:

  	
   

  
	
   

  	
   

  
	
  AMERICAN
  STOCK TRANSFER & TRUST

  COMPANY

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Authorized
  Signature

  	
   

  
									

 

B-3

 

[Form of
Reverse Side of Rights Certificate]

 

FORM OF
ASSIGNMENT

 

(To be
executed by the registered holder if such

 

holder desires
to transfer the Rights Certificate.)

 

FOR VALUE
RECEIVED                                                                                     
hereby sells, assigns and transfers unto 

 

 

 

(Please print name and address of transferee)

 

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

 

	
  Dated:

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  

 

Signature
Guaranteed:

 

	
   

  	
  Certificate

  

 

The
undersigned hereby certifies that the Rights evidenced by this Rights
Certificate are not beneficially owned by, or being assigned to, an Acquiring Person
or an Affiliate or Associate thereof (as such terms are defined pursuant to the
Rights Agreement).

 

	
  Dated:

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature

  

 

Signature
Guaranteed:

 

	
   

  	
  NOTICE

  

 

The signature
to the foregoing Assignment and Certificate must correspond to the name as written
upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.

 

B-4

 

FORM OF
ELECTION TO PURCHASE

 

(To be
executed if holder desires to exercise

 

Rights
represented by the Rights Certificate.)

 

To:  American Stock Transfer & Trust
Company

 

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

 

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 Rights Certificate, a
new Rights Certificate for the balance 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:

 

Certificate

 

The
undersigned hereby certifies by checking the appropriate boxes that:

 

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

 

2.             after
due inquiry and to the best knowledge of the undersigned, the undersigned [    ]
did [    ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or became an Acquiring Person or
an Affiliate or Associate thereof.

 

	
  Dated:

  	
   

  	
   

  

 

B-5

 

Signature

 

Signature
Guaranteed:

 

NOTICE

 

The signature
to the foregoing Election to Purchase and Certificate must correspond to the
name as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.

 

B-6

 

EXHIBIT C

 

SUMMARY OF
RIGHTS TO

 

PURCHASE
PREFERRED STOCK

 

Effective November 7, 2005, the
Board of Directors of Momenta Pharmaceuticals, Inc. (the “Company”),
declared a dividend of one Right for each outstanding share of the Company’s
Common Stock to stockholders of record at the close of business on November 18,
2005 (the “Record Date”).  Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series A Junior Participating Preferred Stock, $.01 par
value per share (the “Preferred Stock”), at a Purchase Price of $125 in cash,
subject to adjustment.  The description
and terms of the Rights are set forth in a Rights Agreement dated as of November
7, 2005 (the “Rights Agreement”) between the Company and American Stock
Transfer & Trust Company, as Rights Agent.

 

Initially, the Rights are not
exercisable and will be attached to all certificates representing outstanding
shares of Common Stock, and no separate Rights Certificates will be
distributed.  The Rights will separate
from the Common Stock, and the Distribution Date will occur, upon the earlier
of (i) 10 business days following the later of (a) the first date of
a public announcement that a person or group of affiliated or associated
persons (an “Acquiring Person”) has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of Common Stock
or (b) the first date on which an executive officer of the Company has
actual knowledge that an Acquiring Person has become such (the “Stock
Acquisition Date”) or (ii) 10 business days following the commencement of
a tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of the outstanding shares of Common Stock.  The Distribution Date may be deferred in
circumstances determined by the Board of Directors.  In addition, certain inadvertent acquisitions
will not trigger the occurrence of the Distribution Date.  Until the Distribution Date (or earlier
redemption or expiration of the Rights), (i) the Rights will be evidenced
by the Common Stock certificates outstanding on the Record Date, together with
this Summary of Rights, or by new Common Stock certificates issued after the
Record Date which contain a notation incorporating the Rights Agreement by
reference, (ii) the Rights will be transferred with and only with such
Common Stock certificates, and (iii) the surrender for transfer of any
certificates for Common Stock outstanding (with or without a copy of this
Summary of Rights or such notation) will also constitute the transfer of the
Rights associated with the Common Stock represented by such certificate.

 

The Rights are not exercisable
until the Distribution Date and will expire upon the close of business on November
6, 2008 (the “Final Expiration Date”) unless earlier redeemed or exchanged as
described below.  As soon as practicable
after the Distribution Date, separate Rights Certificates will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and, thereafter, the separate Rights Certificates alone will
represent the Rights.  Except as
otherwise determined by the Board of Directors, and except for shares of Common
Stock issued upon exercise, conversion or exchange of then outstanding options,
convertible or exchangeable securities or other contingent obligations to issue
shares or

 

C-1

 

pursuant to any employee
benefit plan or arrangement, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.

 

In the event that any Person
becomes an Acquiring Person, unless the event causing the 20% threshold to be
crossed is a Permitted Offer (as defined in the Rights Agreement), then,
promptly following the first occurrence of such event, each holder of a Right
(except as provided below and in Section 7(e) of the Rights
Agreement) shall thereafter have the right to receive, upon exercise, that
number of shares of Common Stock of the Company (or, in certain circumstances,
cash, property or other securities of the Company) which equals the exercise
price of the Right divided by 50% of the current market price (as defined in
the Rights Agreement) per share of Common Stock at the date of the occurrence
of such event.  However, Rights are not
exercisable following such event until such time as the Rights are no longer
redeemable by the Company as described below. 
Notwithstanding any of the foregoing, following the occurrence of such
event, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void.  The event summarized in this
paragraph is referred to as a “Section 11(a)(ii) Event.”

 

For example, at an exercise
price of $125 per Right, each Right not owned by an Acquiring Person (or by
certain related parties) following a Section 11(a)(ii) Event would
entitle its holder to purchase for $125 such number of shares of Common Stock
(or other consideration, as noted above) as equals $125 divided by one-half of
the current market price (as defined in the Rights Agreement) of the Common
Stock.  Assuming that the Common Stock
had a market price of $25 per share at such time, the holder of each valid
Right would be entitled to purchase ten shares of Common Stock, having a market
value of 10 x $25, or $250, for $125.

 

In the event that, at any time
after any Person becomes an Acquiring Person, (i) the Company is
consolidated with, or merged with and into, another entity and the Company is
not the surviving entity of such consolidation or merger (other than a
consolidation or merger which follows a Permitted Offer) or if the Company is
the surviving entity, but shares of its outstanding Common Stock are changed or
exchanged for stock or securities (of any other person) or cash or any other
property, or (ii) more than 50% of the Company’s assets or earning power
is sold or transferred, each holder of a Right (except Rights which previously
have been voided as set forth above) shall thereafter have the right to
receive, upon exercise, that number of shares of common stock of the acquiring
company which equals the exercise price of the Right divided by 50% of the
current market price (as defined in the Rights Agreement) of such common stock
at the date of the occurrence of the event. 
The events summarized in this paragraph are referred to as “Section 13
Events.” A Section 11(a)(ii) Event and Section 13 Events are
collectively referred to as “Triggering Events.”

 

For example, at an exercise
price of $125 per Right, each valid Right following a Section 13 Event
would entitle its holder to purchase for $125 such number of shares of common
stock of the acquiring company as equals $125 divided by one-half of the
current market price (as defined in the Rights Agreement) of such common
stock.  Assuming that such common stock
had a market price of $25 per share at such time, the holder of each valid
Right would be entitled to purchase ten shares of common stock of the acquiring
company, having a market value of 10 x $25, or $250, for $125.

 

C-2

 

At any time after the
occurrence of a Section 11(a)(ii) Event, when no person owns a
majority of the Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such Acquiring Person which
have become void), in whole or in part, at an exchange ratio of one share of
Common Stock, or one one-thousandth of a share of Preferred Stock (or of a
share of a class or series of the Company’s preferred stock having equivalent
rights, preferences and privileges), per Right (subject to adjustment).

 

The Purchase Price payable, and
the number of units of Preferred Stock or other securities or property
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the
then-current market price (as defined in the Rights Agreement) of the Preferred
Stock, or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular periodic cash dividends
paid out of earnings or retained earnings) or of subscription rights or
warrants (other than those referred to above). 
The number of Rights associated with each share of Common Stock is also
subject to adjustment in the event of a stock split of the Common Stock or a
stock dividend on the Common Stock payable in Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.

 

With certain exceptions, no
adjustment in the Purchase Price will be required until cumulative adjustments
amount to at least 1% of the Purchase Price. 
No fractional shares of Preferred Stock (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock) will be
issued and, in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Stock on the last trading date prior to the date
of exercise.

 

Preferred Stock purchasable
upon exercise of the Rights will not be redeemable.  Each share of Preferred Stock will be entitled
to receive, when, as and if declared by the Board of Directors, a minimum
preferential quarterly dividend payment of $10 per share or, if greater, an
aggregate dividend of 1,000 times the dividend declared per share of Common
Stock.  In the event of liquidation, the
holders of the Preferred Stock will be entitled to a minimum preferential
liquidation payment of $1,000 per share, plus an amount equal to accrued and
unpaid dividends, and will be entitled to an aggregate payment of 1,000 times
the payment made per share of Common Stock. 
Each share of Preferred Stock will have 1,000 votes, voting together
with the Common Stock.  In the event of
any merger, consolidation or other transaction in which Common Stock is changed
or exchanged, each share of Preferred Stock will be entitled to receive 1,000
times the amount received per share of Common Stock.  These rights are protected by customary
antidilution provisions.  Because of the
nature of the Preferred Stock’s dividend, liquidation and voting rights, the value
of one one-thousandth of a share of Preferred Stock purchasable upon exercise
of each Right should approximate the value of one share of Common Stock.

 

At any time prior to the
earlier of the tenth Business Day (or such later date as may be determined by
the Board of Directors of the Company) after the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $0.001
per Right (the

 

C-3

 

“Redemption Price”), payable in
cash or stock.  Immediately upon the
redemption of the Rights or such earlier time as established by the Board in
the resolution ordering the redemption of the Rights, the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.

 

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.  Although the distribution of the Rights should
not be taxable to stockholders or to the Company, stockholders may, depending
upon the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Stock (or other consideration) of the Company or
for common stock of the acquiring company as set forth above.

 

Any provision of the Rights
Agreement, other than the redemption price, may be amended by the Board prior
to such time as the Rights are no longer redeemable.  Once the Rights are no longer redeemable, the
Board’s authority to amend the Rights is limited to correcting ambiguities or
defective or inconsistent provisions in a manner that does not adversely affect
the interest of holders of Rights.

 

The Rights are intended to
protect the stockholders of the Company in the event of an unfair or coercive
offer to acquire the Company and to provide the Board with adequate time to
evaluate unsolicited offers.  The Rights
may have anti-takeover effects.  The
Rights will cause substantial dilution to a person or group that attempts to
acquire the Company without conditioning the offer on a substantial number of
Rights being acquired.  The Rights,
however, should not affect any prospective offeror willing to make an offer at
a fair price and otherwise in the best interests of the Company and its
stockholders, as determined by the Board. 
The Rights should not interfere with any merger or other business
combination approved by the Board.

 

A copy of the Rights Agreement
has been filed with the Securities and Exchange Commission as an Exhibit to
the Company’s Current Report on Form 8-K dated November 8, 2005.  A copy of the Rights Agreement is available
free of charge from the Company.  This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.

 

C-4

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