Document:

Exhibit

Exhibit 10.2
EXECUTION

LIMITED LIABILITY COMPANY AGREEMENT
OF
CBW 2020, LLC
A Delaware Limited Liability Company

Dated as of March 19, 2020

	
		
	 
	 

THIS LIMITED LIABILITY COMPANY AGREEMENT OF CBW 2020, LLC, a Delaware limited liability company (the “Company”), is made as of the 19th day of March, 2020 (the “Effective Date”), by and among CBW MM 2020, LLC (“CLNY”), Blackwells Capital, LLC (“BW”), and any other Person admitted to the Company after the date hereof (the “Additional Members,” and with CLNY and BW, collectively, the “Members”), and the Company.  Capitalized terms used in this Agreement are defined in Section 11; references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement; and references to a “Section” or a “Subsection” are, unless otherwise specified, to a Section or a Subsection of this Agreement.
R E C I T A L S:
		
	A.
	The Company was formed as a limited liability company on March 19, 2020, pursuant to the Act by Carol Mayers, acting as the sole organizer, by the filing of a Certificate of Formation for the Company with the Secretary of State of the State of Delaware; 

		
	B.
	As required by and in accordance with Section 3.1(a), (i) CLNY may contribute to the Company cash and/or shares of Colony Capital, Inc. class A common stock, par value $0.01 (“CLNY Stock”), in the aggregate amount of up to $13.23 million and (ii) BW may contribute to the Company up to $1.47 million in cash; and

		
	C.
	The Members desire to enter into this Agreement to constitute themselves and continue the Company as a limited liability company for the purposes and on the terms and subject to the conditions set forth herein.

W I T N E S S E T H:
For and in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, the Members hereby agree as follows:
1.ORGANIZATION.
1.1.    Formation.  The Members have formed and agree to continue the Company as a limited liability company pursuant to the Delaware Limited Liability Company Act, as amended (the “Act”), upon the terms and subject to the conditions set forth in this Agreement, as amended from time to time.  The rights and liabilities of the Members of the Company shall be as provided in the Act, except as otherwise expressly provided herein or in the Certificate of Formation.  In the event of any inconsistency between any terms and conditions contained in this Agreement and any non-mandatory provisions of the Act, the terms and conditions contained in this Agreement shall govern.
1.2.    Name.  The name of the Company shall be “CBW 2020, LLC”.
1.3.    Purpose.  The Company is a holding company formed for the limited purpose of engaging in the following activities, unless otherwise agreed by the Members:

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(a)    to acquire, own, hold, sell, Transfer, dispose of or otherwise deal with CLNY Stock (or any stock or other assets received in respect of CLNY Stock as a result of corporate action of Colony Capital, Inc. applicable to all holders of CLNY stock or any successor securities) in accordance with the terms of this Agreement (the “Purpose”); and
(b)    to engage in any lawful act or activity that a limited liability company organized under the laws of the State of Delaware is permitted to engage in, to the extent incidental, necessary, convenient or advisable for the accomplishment of the Purpose.
1.4.    Documents.  The Managing Member, or anyone designated by the Managing Member, is hereby authorized to execute any necessary amendments and/or restatements of the Certificate of Formation in accordance with this Agreement and the Act and cause the same to be filed in the office of the Secretary of State of the State of Delaware.  The Company shall promptly execute and duly file with the proper offices in each state or jurisdiction in which the Company may conduct the activities hereinafter authorized, one or more certificates as required by the laws of each such state in order that the Company may lawfully conduct the business, purposes and activities herein authorized in each such state and take any other action or measures necessary in such state or states for the Company to conduct such activities.  The Company shall promptly deliver copies of any such filing or document to BW.
1.5.    Principal Office.  The principal place of business and office of the Company shall be at 515 Flower Street, 44th Floor, Los Angeles, California 90071 or at such other place or places as may be designated by the Managing Member.  The Managing Member shall be responsible for maintaining at the Company’s principal place of business those books and records required by the Delaware Act to be maintained there.
1.6.    Registered Office.  The name of the Company’s registered agent for service of process shall be the Corporation Service Company and the address of the Company’s registered agent and the address of the Company’s registered office in the State of Delaware shall be 251 Little Falls Drive, Wilmington, Delaware 19808.  The registered agent and the registered office of the Company may be changed from time to time by the Managing Member.
1.7.    Partnership Tax Classification.  Neither the Company nor any Member shall elect to treat the Company as a corporation under Treasury Regulation Section 301.7701-3(c) (or any corresponding applicable provisions of state or local law) or take any other action that is inconsistent with the foregoing, unless such election or action is approved by both the Managing Member and BW.
1.8.    Certificates.  Ownership of equity interests in the Company may, but need not, be evidenced by certificates similar to customary stock certificates.  As of the date hereof, the equity interests are uncertificated, but the Managing Member, with the prior written consent of BW, may determine to certificate all or any equity interests at any time by resolution thereof; provided that no such decision to certificate the equity interests may adversely and disproportionately affect a Member.  In such event, the Managing Member shall prescribe the forms of certificates to be issued by the Company including the forms of legends to be affixed thereto.  Any such certificate shall be delivered by the Company to the applicable Member.  Certificates evidencing equity interests will 

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provide that they are governed by Article 8 of the Uniform Commercial Code.  Certificates need not bear a seal of the Company but shall be signed by the Managing Member or any other Person authorized by the Managing Member to sign such certificates who shall certify the equity interests represented by such certificate.  Books and records reflecting the record ownership of the equity interests shall be kept by the Managing Member.  The Managing Member may determine the conditions upon which a new certificate may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed and may, in its discretion, require the owner of such certificate or its legal representative to give bond, with sufficient surety, to indemnify the Company against any and all losses or claims that may arise by reason of the issuance of a new certificate in the place of the one so lost, stolen or destroyed.  Each certificate shall bear a legend on the reverse side thereof substantially in the following form in addition to any other legend required by law or by agreement with the Company:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD, UNLESS IT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE (AND, IN SUCH CASE, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY MAY BE REQUESTED BY THE COMPANY TO THE EFFECT THAT SUCH OFFER OR SALE IS NOT REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT).  
THIS SECURITY MAY BE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET FORTH IN THE LIMITED LIABILITY COMPANY AGREEMENT OF THE COMPANY, DATED AS OF MARCH 19, 2020 (AS FURTHER AMENDED OR RESTATED FROM TIME TO TIME), A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
2.    MEMBERS.
2.1.    Members.  
(a)    Each Person listed on Schedule A hereto is hereby admitted as a Member as of the Effective Date.  Schedule A shall be amended from time to time to reflect the admission of any Member or the removal, expulsion, retirement or death of any Member or the receipt by the Company of notice of any change of the name of a Member.  Schedule A shall serve as the Company’s equity interest ledger and will list all record holders and the Percentage Interest held thereby.  The Company will update Schedule A as equity interests are created, issued, forfeited or Transferred from time to time, and the Company will furnish each Member with an updated Schedule A as soon as reasonably practicable upon written request by such Member or upon any changes to Schedule 

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A.  Any modification to Schedule A for the foregoing reasons shall not require consent or approval from any of the Members.
(b)    Additional Members.  In addition to the Persons listed on Schedule A, the following Persons shall be deemed to be Members and shall be admitted as Members without any further action by the Company, the Managing Member or any Member: (i) any Person to whom a Percentage Interest is Transferred by a Member so long as such Transfer is made in compliance with this Agreement and (ii) any Person to whom the Company issues an equity interest after the Effective Date in compliance with this Agreement.
(c)    Cessation of Members.  Any Person admitted or deemed admitted as a Member pursuant to Section 2.1(a) or Section 2.1(b) shall cease to have the rights of a Member under this Agreement at such time that such Person is no longer a record owner of any equity interest (except as provided under Section 8, which rights shall not cease), but such Person shall remain bound by all of the provisions of this Agreement except those, if any, that expressly terminate upon cessation of being a Member. 
(d)    Voting Rights.  The equity interests of the Company shall be non-voting.
2.2.    Limitation on Liability of Members.  Except as otherwise contemplated herein, no Member, any Affiliate of such Member, or any officer, director, manager, member, stockholder, partner or employee of such Member, such Affiliate of such Member (collectively, “Related Persons”) shall be liable, responsible or accountable, whether directly or indirectly, in contract or tort or otherwise, to the Company or to any other Member for any Damages asserted against, suffered or incurred by the Company or such other Member arising out of, relating to or in connection with any act or failure to act by such Related Person pursuant to this Agreement or otherwise with respect to the business and affairs of the Company except Damages resulting from acts or omissions of such Related Person which (x) were taken or omitted in bad faith or in breach of its fiduciary duties pursuant to the terms of this Agreement or (y) constituted intentional misconduct, fraud or gross negligence; provided, that the Member affiliated with such Related Person, and not the Related Person, shall be responsible for any such Damages.  No Related Person shall be liable to the Company or any other Member for any action taken or omitted to be taken by any other Member.  Any Related Person may consult with counsel, accountants and other professional advisors in respect of the affairs of the Company and each Related Person shall be deemed not to have acted in bad faith or to have engaged in intentional misconduct with respect to any action or failure to act and shall be fully protected and justified in so acting or failing to act, if such action or failure to act is in accordance with the advice or opinion of such counsel, accountants or other professional advisors, except for actions or failures to act by such Related Person which constitute a knowing violation of law.  Except as otherwise expressly provided in the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member.  Except as otherwise expressly provided in the Act or in this Agreement, the liability of each Member hereunder shall be limited to the amount of Capital Contributions, if any, required to be made by such Member to the Company in accordance 

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with the provisions of this Agreement, but only when and to the extent the same shall become due pursuant to the provisions of this Agreement.
3.    CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS.
3.1.    Capital Contributions. 
(a)    The committed Capital Contribution of each Member as of the Effective Date is set forth on Schedule A hereto.  BW’s Capital Contributions pursuant to this Section 3.1(a) shall be in cash in United States Dollars and CLNY’s Capital Contributions pursuant to this Section 3.1(a) shall be in (x) cash in United States Dollars, (y) shares of CLNY Stock, or (z) a mix of cash in United States Dollars and shares of CLNY Stock, determined in CLNY’s sole discretion; provided, that CLNY shall contribute not less than four million shares of CLNY Stock as part of its Capital Contribution.  Each Party’s cash Capital Contribution shall be funded to the Company not more two (2) Business Days following such Party’s receipt of written notice from the Managing Member that the Company’s bank account has been opened and CLNY's contribution of shares of CLNY Stock shall transferred to the Company not more three (3) Business Days following CLNY’s receipt of written notice from the Managing Member that the Company’s brokerage account has been opened.  The Managing Member shall use its commercially reasonable efforts to open the Company’s bank account and brokerage account as promptly as possible following the date hereof.  The Managing Member shall provide the written notices referenced above to Member’s no later than one (1) Business Day following the opening of the Company’s bank account and brokerage account.  Following any Capital Contribution of cash pursuant to this Section 3.1(a), as soon as reasonably practicable and as permitted by applicable law or regulation, the Managing Member shall use such Capital Contribution to purchase CLNY Stock on the open market.  Any Capital Contribution in the form of CLNY Stock shall be valued at $1.47 per share (the “Contribution Value”).
(b)    From time to time after the date hereof, the Managing Member may issue a capital call notice (each, a “Payment Notice”) at such time, in such amount, and on such other terms, in each case, as are determined by the Managing Member to be necessary to fund any organizational or operating expenses of the Company, including but not limited to legal, administrative and accounting costs; provided, that all such required Capital Contributions shall be made pro rata (based on each Member’s Percentage Interest).  All Capital Contributions pursuant to this Section 3.1(b) shall be in cash in United States Dollars.  
(c)    All Capital Contributions must be made by each Member to the Company in accordance with the payment instructions included in the applicable Payment Notice and must be received by the Company no later than the close of business on the third (3rd) Business Day following the date of such Member’s receipt of any such Payment Notice.   
(d)    Except as contemplated by this Section 3.1 and Section 9.1, no Capital Contributions shall be required by any Member.
3.2.    Capital Accounts.

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(a)    There shall be established and maintained throughout the full term of the Company in accordance with Treasury Regulation Section 1.704-l(b)(2)(iv) for each Member, a capital account (a “Capital Account”).  The initial balance of the Capital Account of each Member shall be the amount or value, as set forth opposite such Member’s name in Schedule A hereto under the column entitled “Capital Contributions”.  The Capital Account of each Member shall be increased by (i) any additional Capital Contributions made by such Member and (ii) such Member’s allocable share of the Company’s Net Income for each fiscal year.  The Capital Account of each Member shall be decreased by (i) the dollar amount of any distributions made to such Member, (ii) the Fair Market Value of any property distributed to such Member (net of any liabilities to which such property is subject); provided that in the case of CLNY Stock, Fair Market Value shall be deemed to be the Distribution Value, and (iii) such Member’s allocable share of the Company’s Net Loss for each fiscal year.
(b)    In addition to the adjustments specified by Section 3.2(a), each Member’s Capital Account shall also be adjusted for any other increases or decreases required to be made to Capital Accounts in accordance with Section 704 of the Code and with the Treasury Regulations promulgated thereunder.
3.3.    Tax Allocations.
(a)    Net Income and Net Losses for any taxable period of the Company shall be allocated among the Members’ respective Capital Accounts in a manner as to cause the Capital Accounts of the Members (as adjusted through the end of the taxable period) to equal, as nearly as possible, the amount such Members would receive in a hypothetical liquidation of the Company pursuant to Section 9.1(d)(iii).  For U.S. federal (and applicable state and local) income tax purposes, each item of Company income, gain, loss or deduction shall be allocated among the Members in the same manner and in the same proportion that the corresponding book items have been allocated among the Members’ respective Capital Accounts.  This provision is intended to comply with Treasury Regulation section 1.704-1(b) and shall be interpreted and applied in a manner consistent therewith (and in furtherance of the foregoing, this Agreement shall be deemed to include a qualified income offset and minimum gain chargeback as provided therein).  The Managing Member shall be authorized to make appropriate amendments to the allocations of items pursuant to this Agreement (i) in order to comply with Section 704 of the Code or the Treasury Regulations thereunder or (ii) to allocate profits and losses (and items thereof) to those Members who bear the economic burden or benefit associated therewith, in each case, if advised by independent tax advisors that such action is required.
(b)    In accordance with Section 704(c) of the Code and the Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed (or deemed contributed for federal income tax purposes) to the capital of the Company, solely for tax purposes shall be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its fair market value at the time of contribution.  If the book value of any asset of the Company is revalued pursuant to the Treasury Regulations promulgated under Section 704(c) of the Code, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation 

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between the adjusted basis of such asset for federal income tax purposes and its carrying value (as so revalued) in the same manner as under Section 704(c) of the Code and the Treasury Regulations thereunder.
3.4.    Treatment of Capital Contributions.  No Member shall be entitled to interest on its Capital Contributions nor shall any Member be entitled to demand the return of all or any part of such Capital Contributions to the capital of the Company.
3.5.    Not Liable for Return of Capital.  No Member or any of its Related Persons shall be personally liable for the return of the Capital Contributions of any other Member or any portion thereof, and such return shall be made solely from available Company Assets, if any, from which the Capital Contribution was made and shall be subtracted from the account or accounts from which the Capital Contribution was made.
3.6.    Capital Contribution Default.  If any Member shall fail to timely make a Capital Contribution required pursuant to Section 3.1(b) (a “Default”), the Managing Member shall send a notice to such Member, and such Member shall have five (5) Business Days from the receipt of such notice to cure such Default.  If such Default is not cured within such five (5) Business Day period, the other Member shall, in addition to all other remedies at law or equity, have the right, but not the obligation, to fund the amount of such Default, which funding shall be treated as a loan from such other Member to the Company and shall be payable in priority to distributions to the defaulting Member and shall bear interest at a rate equal to the Prime Rate plus twelve percent (12%) from the date of the relevant Default paid until repaid.
3.7.    Benefits of Agreement.  Except as set forth in Section 8.1, nothing in this Agreement, and, without limiting the generality of the foregoing, in this Section 3, expressed or implied, is intended or shall be construed to give to any creditor of the Company or to any creditor of any Member or any other Person or entity whatsoever, other than the Company, any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenant, condition or provisions herein contained, and such provisions are and shall be held to be for the sole and exclusive benefit of the Members and the Company.
4.    DISTRIBUTIONS.
4.1.    Distributions.  
(a)    On at least a quarterly basis, or more frequently as determined in the sole discretion of the Managing Member, the Managing Member shall cause the Company to distribute all Available Cash, in the following order of priority:
(i)    First, 90% to CLNY and 10% to BW until the later of (A) CLNY and BW shall have each received aggregate distributions equal to an amount that would provide it with an IRR equal to 10%, and (B) solely if there has been an Early Termination, CLNY shall have received aggregate distributions equal to 125% of CLNY’s aggregate Capital Contributions;

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(ii)    Thereafter, 66.7% to CLNY and 33.3% to BW until CLNY and BW shall have each received aggregate distributions equal to an amount that would provide it with an IRR equal to 15%;
(iii)    Thereafter, 33.3% to CLNY and 66.7% to BW until CLNY and BW shall have each received aggregate distributions equal to an amount that would provide it with an IRR equal to 20%; and
(iv)    Thereafter, 10% to CLNY and 90% to BW.
(b)    Managing Member shall have the option, in its sole discretion, to distribute to BW either (i) cash, (ii) CLNY Stock, or (iii) a mix of cash and CLNY Stock.  In the event that the Managing Member elects to distribute CLNY Stock to BW, such CLNY Stock shall be deemed to have a value equal to the arithmetic average of the TWAP of CLNY Stock for the five (5) trading days immediately prior to the date of distribution to BW.  In the event the Managing Member elects to distribute CLNY Stock to BW and BW is unable to sell such CLNY Stock and achieve liquidity within a reasonable period of time, BW and CLNY and its Affiliates shall discuss in good faith alternatives for BW to achieve such liquidity. 
(c)    In the event that CLNY Stock is distributed to BW, Colony Capital, Inc. shall (and CLNY shall cause Colony Capital, Inc. to) prepare and, as soon as practicable but in no event later than the date which is ten (10) Business Days after the date of the distribution, file with the SEC a registration statement covering the resale of all of the shares of CLNY Stock distributed to BW (the “Registration Statement”) and use its reasonable best efforts to have the Registration Statement declared effective by the SEC as soon as practicable after the date the shares are distributed to BW.  Colony Capital, Inc. shall (and CLNY shall cause Colony Capital, Inc. to) use its reasonable best efforts to cause such Registration Statement to remain effective until the earlier of (i) the date that shares of CLNY Stock registered thereunder are sold by BW and (ii) the date that the shares of CLNY Stock registered thereunder can be freely sold by BW pursuant to Rule 144 without restriction or limitation.
4.2.    Withholding.  The Company is hereby authorized to withhold from any distribution to any Member and to pay over to any federal, state, local or foreign government any amounts required to be so withheld pursuant to federal, state, local or foreign law.  All amounts required to be withheld pursuant to federal, state, local or foreign tax laws shall be treated as amounts actually distributed to the affected Members for all purposes under this Agreement.  In the event that the Company determines in good faith that any amounts are required to be withheld pursuant to federal, state, local or foreign tax laws, the Company shall promptly notify the Members in writing of its intention to withhold.  Within fifteen (15) days of receiving such notice from the Company, a Member may notify the Company in writing of its election to contest the basis for such withholding and the rationale for such contest (including an opinion of counsel that such withholding should not be required).  If the Company agrees that such determination is reasonable, subject to receipt from such Member (or, if the Company believes that such Member is not credit-worthy, another credit-worthy party reasonably acceptable to the Company) of an agreement in a form reasonably acceptable to the Company to indemnify, defend and hold harmless the Company, the responsible withholding agent and the other Members, as appropriate, against all taxes, interest, penalties, 

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claims, liabilities and expenses of whatever nature payable to a taxing authority as a result of such obligation to withhold and to pay over any such withholding to the applicable taxing authority, the Company shall not withhold any amounts from the distribution to such Member.
5.    MANAGEMENT.
5.1.    The Managing Member.  The Managing Member shall have the exclusive right and power to manage and operate the Company and to do all things necessary to carry on the business of the Company in accordance with this Agreement and the Act.  The Managing Member shall devote so much of its time to the business of the Company as in its judgment the conduct of the Company’s business shall reasonably require and shall not be obligated to do or perform any act or thing in connection with the business of the Company not expressly set forth herein.  The Managing Member may engage in business ventures of any nature and description independently or with others and neither the Company nor any of its Members shall have any rights in and to such independent ventures or the income or profits derived therefrom.
5.2.    Authority of the Managing Member.  
(a)    Subject to the provisions of this Agreement and the Act, the Managing Member is specifically authorized and empowered, on behalf of the Company without any further consent of any other Member, to do any act or execute any document or enter into any contract or any agreement of any nature necessary or desirable, in the opinion of the Managing Member, in pursuance of the Purpose, including, without limitation, the following: 
(i)    entering into, making and performing contracts, agreements and other undertakings binding upon the Company that may be necessary, appropriate or advisable in furtherance of the Purpose and making all decisions and waivers thereunder;
(ii)    opening and maintaining bank and investment accounts and arrangements, drawing checks and other orders for the payment of money, and designating individuals with authority to sign or give instructions with respect to those accounts and arrangements;
(iii)    purchasing CLNY Stock pursuant to the terms of this Agreement;
(iv)    maintaining the assets of the Company in good order;
(v)    collecting sums due the Company;
(vi)    to the extent that funds of the Company are available therefor, paying debts and obligations of the Company;
(vii)    selecting, removing and changing the authority and responsibility of lawyers, accountants, and other advisers and consultants;
(viii)    obtaining insurance for the Company;

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(ix)    determining distributions of the Company in cash and other property solely as provided in Section 4; and
(x)    doing and performing any and all other acts as may be necessary or appropriate to the conduct of the Company’s business.
(b)    The decisions made by the Managing Member may be implemented through any Member, any officer of the Company or any other Person selected by the Members.  The Company shall not have any “managers” within the meaning of Section 18-101(9) of the Act.
(c)    The Managing Member hereby ratifies the adoption of the regulations attached to this Agreement as Schedule B authorizing certain officers to act on behalf of the Company, all as more particularly described in Schedule B.  The officers shall have full authority to manage the day-to-day operations of the Company.  No officer of the Company shall be entitled to any compensation for his or her service as an officer of the Company.
(d)    CLNY (the “Managing Member”) is hereby appointed as the “managing member” of the Company.
5.3.    Authority.
(a)    The Managing Member has authority to bind the Company, by execution of documents or otherwise, to any obligation not inconsistent with the provisions of this Agreement.  The Managing Member may contract or otherwise deal with any Person for the transaction of the business of the Company, which Person may, under supervision of the Managing Member, perform any acts or services for the Company as the Managing Member may approve and the Managing Member shall use reasonable care in the selection and retention of such Persons.  
(b)    Each Member may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties.
5.4.    Partnership Representative.  The Managing Member is hereby designated as the “partnership representative” within the meaning of Section 6223 of the Code (and, as applicable, in any similar capacity under state or local tax law) (the “Partnership Representative”) and to represent the Company in any tax audit, examination or investigation of the Company by any taxing authority or any other tax-related administrative or judicial proceeding with respect to the Company (any such proceeding, a “Tax Proceeding”).  The Partnership Representative shall be authorized to take any actions necessary with respect to any Tax Proceeding and to make any decisions and elections relating thereto in its sole discretion; provided, that (i) BW shall be entitled to fully participate in any Tax Proceeding reasonably expected to materially disproportionately affect BW and (ii) the Company shall not settle or otherwise resolve any such Tax Proceeding that materially disproportionately affects BW without BW’s consent (not to be unreasonably withheld, conditioned or delayed).  Each Member shall reasonably cooperate with the Partnership Representative to give effect to the requirements of and elections made by the Partnership Representative and provide such 

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information as the Partnership Representative may reasonably request, including any information necessary to reduce the amount of any resulting tax imposed on the Company.  If, for any reason, the Company is liable for a tax, interest, addition to tax or penalty, each person who was a Member during the taxable year of the Company that was audited shall be responsible for its share of such liability based on the amount each such Member should have borne had the Company’s tax return for such taxable year reflected the audit adjustment, and the expense for the Company’s payment of such tax, interest, addition to tax and penalty shall be specially allocated to such Member(s) in such proportions.  The provisions of this Section 5.4 and the obligations of each Member thereunder shall survive a Member’s ceasing to be a Member of the Company and will remain binding for the period of time necessary to resolve any Tax Proceedings.  The Partnership Representative shall be authorized to appoint a designated individual who shall have the same rights, obligations, and limitations of the Partnership Representative.
5.5.    Tax Matters.  By executing this Agreement, each of the Members hereby consents to any election made by the Managing Member for the Company to be treated as a partnership for federal, state and local income tax purposes.  The Managing Member shall have the sole and exclusive authority to make any elections on behalf of the Company required or permitted to be made for tax purposes (including an election pursuant to Section 754 of the Code) and make any other tax-related decisions with respect to the Company, in each case, as determined by the Managing Member; provided that any such tax decision that materially disproportionately affects BW shall be subject to the consent of BW (such consent not to be unreasonably withheld, conditioned or delayed).  Each Member shall furnish to the Company all pertinent information in its possession that is necessary to enable the Company to make any such tax election or other actions and for the Company’s tax returns to be prepared and filed.
5.6.    Other Activities of the Members and Related Persons.  
(a)    Each Member expressly agrees that the other Members and all Related Persons may engage independently, with each other or with others, for their own accounts and for the accounts of others, in other business ventures and activities of every nature and description, whether such ventures are competitive with the business of the Company or otherwise.  Neither the Company nor any Member shall have any rights or obligations by virtue of this Agreement in and to such independent ventures and activities or the income or profits derived by any other Member or Related Person therefrom.
(b)    Subject to Section 5.9(h), the Company may, from time to time, engage third parties to render services to the Company on such terms and for such compensation as the Managing Member may reasonably determine, including, without limitation, attorneys, investment consultants, brokers or finders, independent auditors and printers.  Such third parties may be Affiliates of any Member.  Persons retained or engaged by the Company may also be engaged or retained by and act on behalf of one or more Members or any of their respective Affiliates.  The Managing Member shall keep BW reasonably informed of the engagement of any such service provider.
5.7.    Compensation and Reimbursement of Members.  The Managing Member shall not be compensated for its services as the Managing Member of the Company.  The Company shall 

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reimburse the Managing Member on a current basis for its out-of-pocket expenditures made on behalf of the Company upon submission to the Company of reasonably detailed evidence of such expenditures.  All reimbursements for out-of-pocket expenditures shall be reasonable in amount and in the advancement of the Purpose.  Any out-of-pocket expenditure made by the Managing Member and eligible for reimbursement pursuant to this Section 5.7 shall not be treated as a Capital Contribution and any reimbursement of such expenditure shall not be treated as a Company distribution to the Members.
5.8.    Members to Have No Managerial Authority.  Except as expressly set forth in this Agreement or otherwise delegated to a Member by the Managing Member or as required by applicable law, the Members will have no power to participate in the management of the Company except as expressly authorized by this Agreement and except as expressly required by the Act.  Unless expressly and duly authorized in writing to do so by the Managing Member, no Member (other than the Managing Member) will have any power or authority to bind or act on behalf of the Company in any way to pledge its credit or to render it liable for any purpose.
5.9.    Approval Rights.  Notwithstanding any other provision of this Agreement, the Managing Member shall not, without the prior written consent of BW, cause the Company to take any of the following actions:
(a)    commence or consent to any bankruptcy proceeding;
(b)    create, authorize or issue any additional equity interests or admit any additional Members except as expressly provided for herein;
(c)    purchase, redeem or otherwise acquire any equity interests in the Company;
(d)    prior to the dissolution of the Company in accordance with Article 9, sell, assign or exchange (whether by sale or exchange of assets, sale or exchange of equity interests, merger or other business combination) any Company Assets or equity interests of the Company, other than purchases of CLNY Stock as provided for herein;
(e)    acquire any Company Asset other than CLNY Stock (or any other stock or assets received in respect of CLNY Stock as a result of corporate action of Colony Capital, Inc. applicable to all holders of CLNY stock or any successor securities) as provided for herein;
(f)    change the Purpose or engage in any activities other than the Purpose; 
(g)    take any action which would cause the Company to become an entity other than a Delaware limited liability company that is treated as a “pass-through” entity for federal income tax purposes;
(h)    incurring any debt or other liability or entry of any agreement between the Company (on one hand) and a Member or any of its Related Persons (on the other hand), other than expenses incurred in the ordinary course of business on arm’s length terms; or
(i)    consent or otherwise commit or agree to any of the foregoing.

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6.    BOOKS, RECORDS, ACCOUNTING AND REPORTS.
6.1.    Books and Records.  The Company shall maintain, or cause to be maintained, in a manner customary and consistent with good accounting principles, practices and procedures, a comprehensive system of office records, books and accounts (which records, books and accounts shall be and remain the property of the Company) in which shall be entered fully and accurately each and every financial transaction with respect to the ownership and operation of the property of the Company.  Such books and records of account shall be prepared and maintained at the principal place of business of the Company or such other place or places as may from time to time be determined by the Members.  Each Member or its duly authorized representative shall have the right to inspect, examine and copy such books and records of account at the Company’s office during reasonable business hours.  A reasonable charge for copying books and records may be charged by the Company.
6.2.    Bank Accounts.  Funds of the Company shall be deposited in a Company account in the bank or banks as selected by the Managing Member.  Withdrawals from bank accounts shall only be made by the Managing Member, officers of the Company, or such other parties as may be approved by the Managing Member.
7.    TRANSFER OF INTERESTS.
7.1.    Restrictions on Transfers.
(a)    No Member may sell, transfer, assign, hypothecate, pledge or otherwise dispose of or encumber (each, a “Transfer”) all or any part of such Member’s interest (including any rights or obligations under this Agreement, or any Percentage Interest) in the Company and no interest, claim or charge therein or thereto shall be Transferred, in each case, without the prior written consent of each other Member; provided that, subject to compliance with Section 7.1(b), any Member (a “Transferor”) shall be entitled to Transfer its equity interests (including any rights or obligations under this Agreement, or any Percentage Interest) in the Company to an Affiliate of such Member, so long as such Transferee signs a joinder agreement that contains the representations and warranties set forth in Section 10.  Any direct or indirect Transfer of any securities in BW shall be deemed a Transfer of BW’s Percentage Interest for purposes of this Section 7 unless Mr. Jason Aintabi retains, directly or indirectly, full beneficial and economic ownership of, and maintains sole control of, BW’s Percentage Interest.  Each Member and each permitted Transferee thereof hereby agrees that it will not effect any Transfer of all or any part of such Member’s interest (including any rights or obligations under this Agreement, or any Percentage Interest) in the Company (whether voluntarily, involuntarily or by operation of law) in any manner contrary to the terms of this Agreement.
(b)    The Company shall not participate in the establishment of a secondary market for equity interests or the substantial equivalent thereof as defined in Treasury Regulation Section 1. 7704-1 (c) or the inclusion of any equity interests on such a market or on an established securities market as defined in Treasury Regulation Section 1. 7704-1 (b), nor shall the Company recognize any Transfer made on any of the foregoing markets or otherwise cause the Company to be a “publicly traded partnership” within the meaning of Section 7704 of the Code.  In no event shall any Transfer 

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cause any Member to cease to be in compliance with all applicable anti-money laundering and anti-terrorist laws, regulations, rules, executive orders and government guidance, including the reporting, record keeping and compliance requirements of The International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001, Title III of the USA PATRIOT Act, and other authorizing statutes, executive orders and regulations administered by the Office of Foreign Assets Control, Department of the Treasury and any attempt to effect any such Transfer shall be void and of no effect and shall not bind the Company.
(c)    Any Transfer or purported Transfer made in violation of this Agreement shall be null and void and of no effect.  In the case of an attempted Transfer of all or any portion of any Percentage Interest of the Company or any economic benefit or other interest therein that is not in compliance with Section 7, the Members engaging or attempting to engage in such Transfer shall indemnify and hold harmless the other Members and their respective officers, directors, affiliates, members, partners and employees from all cost, liability and damage that any of such indemnified persons may incur (including, without limitation, incremental tax liability and attorneys, fees and expenses) as a result of such Transfer or attempted Transfer and the enforcement of this indemnity.
(d)    Upon any Transfer permitted by this Section 7.1, the Transferee of such Member shall thereafter be deemed to succeed to all of the rights and obligations of such Member, and shall be substituted for such Member as applicable for all purposes hereunder.
7.2.    Allocations Between Transferor and Transferee.  In the case of any Transfer, the Transferee will succeed to the Capital Account of the Transferor with respect to the Transferred Percentage Interest.  The Net Income and Net Loss allocable in respect of the Transferred Percentage Interest will be determined, in the discretion of the Managing Member, based on a closing of the books method based on the effective date of the Transfer or, with BW’s consent (not be unreasonably withheld, conditioned or delayed), any other method permitted by the Code.
7.3.    Effect of Retirement, Withdrawal, Bankruptcy, Dissolution, Death, Etc. of a Member.  The retirement, withdrawal, bankruptcy, dissolution, death, incapacity or adjudication of incompetency of a Member shall not dissolve the Company unless the remaining Members agree to dissolve the Company.
8.    INDEMNIFICATION OF MEMBERS.
8.1.    Member Exculpation and Indemnification.
(a)    None of the Managing Member, the Members or their respective Related Persons or any Related Person of the Company shall have any liability, responsibility or accountability in damages or otherwise to the Managing Member, any Member or the Company for, and the Company agrees to indemnify, pay, protect and hold harmless the Managing Member, the Members and their respective Related Persons and the Related Persons of the Company (collectively, the “Indemnified Parties”) from and against, any and all Damages which may be imposed on, incurred by, or asserted against the Indemnified Parties in any way relating to or arising out of, or alleged to relate to or arise out of, any action or inaction on the part of the Company, on the part of the Indemnified Parties when acting on behalf of the Company or on the part of any 

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brokers or agents when acting on behalf of the Company; provided, that a Member shall be liable, responsible and accountable for and shall indemnify and hold the Company harmless against, and the Company shall not be liable to a Member for, any portion of such Damages in connection therewith resulting from acts or omissions of such Member or Related Person which (x) were taken or omitted in bad faith or in breach of its fiduciary duties pursuant to the terms of this Agreement or (y) constituted intentional misconduct, fraud or gross negligence; provided, however, that such Member’s obligation to indemnify the Company hereunder as provided above shall be satisfied solely from (i) such Member’s interest in the Company, (ii) all distributions due such Member from the Company from the date of assertion of such claim for indemnification and (iii) any fidelity bond or insurance maintained by such Member in respect of the foregoing; and provided further, that nothing in this provision shall create personal liability on the part of any Member’s Related Persons.  In any action, suit or proceeding against the Company or any Indemnified Party relating to or arising, or alleged to relate to or arise, out of any such action or non-action, the Indemnified Parties shall have the right to jointly employ, at the expense of the Company, counsel of the Indemnified Parties’ choice, which counsel shall be reasonably satisfactory to the Company, in such action, suit or proceeding, provided that if retention of joint counsel by the Indemnified Parties would create a conflict of interest, each group of Indemnified Parties which would not cause such a conflict shall have the right to employ, at the expense of the Company, separate counsel of the Indemnified Party’s choice, which counsel shall be reasonably satisfactory to the Company, in such action, suit or proceeding.  The satisfaction of the obligations of the Company under this Section 8.1(a) shall be from and limited to the assets of the Company and no Member shall have any personal liability on account thereof.  Accordingly, with the intent that this Agreement and the contractual obligations set forth herein serve as the sole basis of establishing the governance obligations of the Members, the Managing Member, the Members and the Company agree that to the fullest extent permitted by the Act, fiduciary duties of Members are hereby eliminated, and implied covenants (other than the implied contractual covenant of good faith and fair dealing and the duty of loyalty) and other standards of conduct that are not expressly provided in this Agreement shall not apply and are hereby waived.  
(b)    The provision of advances from the Company funds to an Indemnified Party for legal expenses and other costs incurred as a result of any legal action or proceeding is permissible if (i) such suit, action or proceeding relates to or arises out of, or is alleged to relate to or arise out of, any action or inaction on the part of the Indemnified Party in the performance of its duties or provision of its services on behalf of the Company; and (ii) the Indemnified Party undertakes to repay any funds advanced pursuant to this Section 8.1(b) in cases in which such Indemnified Party would not be entitled to indemnification under Section 8.1(a).  If advances are permissible under this Section 8.1(b), the Indemnified Party shall furnish the Company with an undertaking as set forth in clause (ii) of this paragraph and shall thereafter have the right to bill the Company for, or otherwise request the Company to pay, at any time and from time to time after such Indemnified Party shall become obligated to make payment therefor, any and all reasonable amounts for which such Indemnified Party is entitled to indemnification under Section 8.1(a).  The Company shall pay any and all such bills and honor any and all such requests for payment within 60 days after such bill or request is received by the Members and the Company’s rights to repayment of such amounts shall be secured by the Indemnified Party’s interest in the Company.  In the event that a final determination is made that the Company is not so obligated in respect of any amount paid by it to 

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a particular Indemnified Party, such Indemnified Party will refund such amount within 60 days of such final determination, and in the event that a final determination is made that the Company is so obligated in respect to any amount not paid by the Company to a particular Indemnified Party, the Company will pay such amount to such Indemnified Party within 60 days of such final determination, in either case together with interest at the Prime Rate plus 2% from the date paid until repaid or the date it was obligated to be paid until the date actually paid.
8.2.    Nonexclusivity of Rights.  The right to indemnification and the advancement and payment of expenses conferred in this Section 8 shall not be exclusive of any other right that a Member, the Managing Member, officer or other Person indemnified pursuant to this Section 8 may have or hereafter acquire by approval of the Managing Member.  If the Managing Member, a Member, officer or other Person indemnified pursuant to this Section 8 is indemnified by a Third-Party Indemnitor for a loss covered by Section 8.1 or receives from a Third-Party Indemnitor expense reimbursement or advancement of an expense covered by Section 8.1, such Third-Party Indemnitor shall have a right of contribution and/or be subrogated to the rights of the Managing Member, officer or other Person under this Section 8 to recover such amount from the Company on the terms of this Section 8.  The Company hereby agrees that it irrevocably waives, relinquishes and releases any Third-Party Indemnitors from any and all claims against the Third-Party Indemnitors for contribution, subrogation or any other recovery of any kind in respect of any expense reimbursement or advancement of an expense covered by Section 8.1.  The Company shall not be subrogated to any rights the Managing Member, officer or other Person may have against a Third-Party Indemnitor.  The Managing Member, officer or other Person is not required to assert any claim for indemnification protection or expense reimbursement or advance against any Third-Party Indemnitor prior to asserting a claim against, or receiving an indemnification or expense reimbursement payment from, the Company.  The Company and each of the Members acknowledges that any Third-Party Indemnitors are express third-party beneficiaries of the terms of this Section 8.2. To the extent that any Indemnified Party or Third-Party Indemnitor incurs any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, proceedings, costs, expenses and disbursements of any kind or nature whatsoever to which it is entitled to indemnification under Section 8.1(a) that in any way relates to, arises out of or, or is alleged to relate to or arise out of, any matter or circumstance to which the Company is entitled to indemnification pursuant to any agreement to which it is party, then such Indemnified Party or Third-Party Indemnitor shall, to the extent that the Company has not made any payment to such Indemnified Party (or Third-Party Indemnitor) in the amount of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, proceedings, costs, expenses and disbursement incurred by such Indemnified Party, shall have a right of contribution and/or be subrogated to the rights of the Company under such agreement to recover such amount from such Person that is obligated to provide indemnification to the Company pursuant to the terms thereof.
9.    DURATION AND TERMINATION OF THE COMPANY.
9.1.    Dissolution and Termination of the Company.
(a)    The Company shall be dissolved and its business wound up upon the occurrence of any of the following events:

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(i)    any event which would make unlawful under the laws of Delaware or the United States of America the continuing existence of the Company;
(ii)    the written approval by each of the Members; 
(iii)    the entry of a decree of judicial dissolution pursuant to Section 18-802 of the Act; 
(iv)    prior to the third anniversary of the date hereof, upon a written notice by BW (an “Early Termination Notice”);
(v)    on or after the third anniversary of the date hereof, upon a written notice by either BW or CLNY; or
(vi)    pursuant to Section 3.6.
(b)    In the event of the dissolution of the Company, there shall be an orderly liquidation of the Company Assets, unless the Members determine that an immediate sale of all or part of the Company Assets would cause undue loss to the Members, in which event (i) the liquidation may be deferred for a reasonable time except as to those assets necessary to satisfy the Company debts, or (ii) all or part of the Company Assets may be distributed in kind, subject to the provisions of and in the same manner as cash under the applicable provisions of this Section 9.1.  If Company Assets are distributed in kind, the Capital Accounts of the Members shall be adjusted to reflect the gain or loss that would have been recognized by the Company if those assets had been sold for an amount equal to their Fair Market Value at the time of distribution; provided that the Fair Market Value of any CLNY Stock shall be deemed to be the arithmetic average of the TWAP of CLNY Stock for the five (5) trading days immediately prior to such distribution (the “Distribution Value”).  The Managing Member shall inform BW of the method and the process for the liquidation and distribution of Company Assets in order to maximize the distributions to the Members.
(c)    Upon any dissolution of the Company, the Accountants shall prepare a statement setting forth the assets and liabilities of the Company as of the date of dissolution, and such statement shall be furnished to all Members.
(d)    In the event of liquidation of the Company Assets, and subject to the first sentence of Section 9.1(b) above, the Company Assets shall be liquidated as promptly as possible, and the Managing Member shall supervise such liquidation (and keep BW informed of the same), which shall be conducted in an orderly and business-like manner so as not to involve undue sacrifice, as the Managing Member shall determine in good faith.  The proceeds thereof shall be applied and distributed in the following order of priority:
(i)    for the payment of the debts and liabilities of the Company (including any approved debts and liabilities owed to the Members and their Related Persons) and the expenses of liquidation;

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(ii)    to the setting up of any reserves which the Managing Member reasonably may deem necessary for any contingent or unforeseen liabilities or obligations of the Company; provided that the Managing Member shall promptly inform BW of the establishment of any such reserve.  Said reserves may be paid over by the Managing Member to an attorney-at-law, as escrowee, to be held by the Managing Member for the purpose of disbursing such reserves in payment of any of the aforementioned contingencies and, at the expiration of such period as the Managing Member shall deem advisable, to distribute the balance of such reserves to the Members; and
(iii)    thereafter, to the Members pursuant to the waterfall set forth in Section 4.1.
(e)    No dissolution of the Company shall release or relieve the Members of their obligations under this Agreement.
9.2.    Provisions Cumulative.  All provisions of this Agreement relating to the dissolution, liquidation and termination of the Company shall be cumulative to the extent not inconsistent with other provisions herein; that is, the exercise or use of one of the provisions hereof shall not preclude the exercise or use of any other provision of this Agreement to the extent not inconsistent therewith.
10.    REPRESENTATIONS AND WARRANTIES
10.1.    Representations and Warranties of the Members.  As of the date hereof, each Member represents and warrants to the Company and the other Members that such Member: 
(a)    if the Member is a corporation, partnership, limited liability company, trust, employee benefit plan, individual retirement account, or other entity, such Person is duly organized in the jurisdiction or its organization and is authorized to execute and deliver this Agreement;
(b)    has sufficient financial strength to hold its Percentage Interest as an investment and bear the economic risks of that investment (including possible complete loss of such investment);
(c)    by reason of its business or financial experience, or by reason of the business or financial experience of its financial advisor who is unaffiliated with and who is not compensated, directly or indirectly, by the Company or any Affiliate of the Company, is capable of evaluating the risks and merits of an investment in the Company and of protecting its own interests in connection with this investment; 
(d)    has been represented by, or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Agreement in its entirety and have had it fully explained to them by such party’s respective counsel, that each is fully aware of the contents hereof and its meaning, intent and legal 

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effect, and that it or its authorized officer (as the case may be) is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence; 
(e)    has not seen, received, been presented with, or been solicited by any leaflet, public promotional meeting, article or any other form of advertising or general solicitation as to the Company’s sale to such Member of its Percentage Interest; 
(f)    has acquired its Percentage Interest for its own account, for investment, and not with a view to or for the resale, distribution, subdivision or fractionalization thereof; and no other Person has any direct or indirect beneficial interest in or right to such Percentage Interest;
(g)    has no contract, undertaking, understanding, agreement, or arrangement, formal or informal, with any Person to sell, Transfer, or pledge all or any portion of its Percentage Interest; and has no current plans to enter into any such contract, undertaking, understanding, agreement, or arrangement;
(h)    has been afforded full and complete access to the books, financial statements, records, contracts, documents and other information concerning the Company and its proposed activities, and has been afforded an opportunity to ask such questions of the Company’s agents, accountants and other representatives concerning the Company’s proposed business, operations, financial condition, assets, liabilities and other relevant matters as it has deemed necessary or desirable, and has been given all such information as has been requested, in order to evaluate the merits and risks of the investment contemplated herein;
(i)    it is (i) an “accredited investor” as defined in Regulation D of the Securities Act, (ii) a “qualified purchaser” under Section 3(c)(7) of the Investment Company Act of 1940, as amended, (iii) holding its Percentage Interest for its own account and not for the account of any other person and (iv) a “U.S. Person” as defined in Regulation S of the Securities Act;
(j)    (i) is in compliance in all material respects with all anti-money laundering laws, rules, regulations and orders of jurisdictions applicable to such Member (collectively, “AML Laws”), including without limitation, the USA PATRIOT Act, (ii) no proceeding by a Governmental Authority involving such Member, with respect to AML Laws, is currently pending or, to the knowledge of such Member, threatened, and (iii) is not required to be registered with the U.S. Department of the Treasury as a money services business, as such term is defined by federal law or regulation, nor is required to be registered or licensed as a money services business, money transmitter, or equivalent enterprise under the applicable law of any other jurisdiction;
(k)    (i) is not (x) a person listed in any Sanctions-related list of designated persons maintained by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”) or the U.S. Department of State, (y) a person operating, organized or resident in a country or region which is itself the subject or target of any Sanctions (“Sanctioned Country”), or (z) any Person owned or controlled by any Person or Persons specified in subclauses (x) or (y) or otherwise the target of Sanctions (“Sanctioned Persons”), (ii) is in compliance with applicable Sanctions in all material respects and is not knowingly engaged in any activity that would reasonably be expected to result in such Member being designated as a Sanctioned Person, (iii) has implemented and 

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maintains in effect and enforces policies and procedures reasonably designed to ensure compliance by such ember and its directors, officers, employees and agents with Sanctions applicable to such Persons, and (iv) is not engaged directly in any business or transactions with any Sanctioned Person or in any Sanctioned Country, or knowingly engaged in any indirect business or transactions with any Sanctioned Person or in any Sanctioned Country in any manner that would result in the violation of Sanctions;
(l)    (i) is in compliance with the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”) and any other applicable anti-corruption or anti-bribery laws, and all rules and regulations promulgated thereunder (the “Anti-Corruption Laws”), (ii) has not, and none of its representatives or anyone acting on behalf of such Member has been, (w) charged with or convicted of violating any Anti-Corruption Laws (x) received any notice, request, or citation, or been made aware of any allegation, investigation (formal or informal), inquiry, action, charge, or proceeding with regard to a potential violation of any Anti-Corruption Law, (y) established or maintained any unrecorded or improperly recorded fund of corporate monies or other properties or assets or made any false entries on any books of account or other record for any purpose or (z) directly or indirectly, knowingly offered, paid, promised, or authorized, or caused to be offered, paid, promised, or authorized, any money, offer, gift, or other thing of value, regardless of form, to any Government Official, or to any Person while knowing or having reason to know that such Person has or will offer, pay, promise, or authorize, or cause to be offered, paid, promised, or authorized, any money, offer, gift, or other thing of value to any Government Official, in furtherance of, or with the intent or purpose of, (A) corruptly influencing any act or decision of such Government Official in his or her official capacity, (B) inducing such Government Official to do or omit to do any act in violation of a lawful duty, (C) securing any improper advantage, or (D) inducing such Government Official to use his or her influence with a Governmental Authority, or instrumentality thereof, to affect or influence any act or decision of such Governmental Authority or instrumentality thereof, and (iii) has devised and implemented, and currently maintains, a system of internal controls reasonably designed to ensure compliance with all applicable Anti-Corruption Laws;
(m)    acknowledges that the issuance of Percentage Interests is being made privately by the Company in the United States pursuant to the private placement exemption from registration provided by Section 4(2) of the Securities Act;
(n)    it (i) was not formed for the purpose of investing in the Company; (ii) is not investing more than 40% of its total assets or committed capital, whichever is greater, in the Company; and (iii) allocates all items of income, gain, loss and deduction according to a single set of capital accounts, and does not permit its shareholders, members, partners, grantors, trustees or other beneficiaries or owners (or any other persons or entities having a relationship similar to the foregoing), as the case may be, to opt in or out of particular investments made by the Member; and
(o)    solely in the case of BW, Mr. Jason Aintabi, directly or indirectly, beneficially owns one hundred percent of the outstanding equity interests of BW, no such direct or indirect equity interests in BW have been pledged as collateral to lenders or any third party nor does any Person other than Mr. Aintabi derive any economic benefit or have an economic interest in the direct or indirect equity interests in BW.

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11.    DEFINITIONS.
As used herein the following terms shall have the following respective meanings:
Accountant – means a nationally recognized firm of independent certified public accountants selected by the Members.
Act – as defined in Section 1.1.
Additional Member – as defined in the Introduction to this Agreement.
Affiliate – means, with reference to any Person, any other Person of which such Person is a member, director, officer, general partner or employee or any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person.
Agreement – means this Limited Liability Company Agreement of the Company, as the same may be amended hereafter from time to time as provided herein.
Attorney-in-Fact – as defined in Section 12.1(a).
Available Cash – means all revenues of the Company (including the return received by the Company in consideration for the sale of any CLNY Stock and any dividends received by the Company in respect of CLNY Stock held by the Company) less any such amounts utilized to pay expenses and less reasonable reserves, as determined by the Managing Member in good faith taking into account the expected business needs of the Company.  In any event, Available Cash shall not include any cash Capital Contributions.
Business Day – means any day other than a Saturday, a Sunday or a holiday on which commercial banks in the State of New York are closed.
Capital Accounts – as defined in Section 3.2(a).
Capital Contributions – means, as to any Member, the amount of cash and the Contribution Value of any CLNY Stock contributed to the capital of the Company by the Members.
Certificate of Formation – means the Company’s Certificate of Formation required to be filed with the Secretary of State of the State of Delaware in order to form the Company pursuant to Section 18-201 of the Act, as such Certificate of Formation may from time to time be amended.
Close Family Member – means, with respect to any Governmental Official, any immediate relative that is a spouse, civil union partner, parent, child, sibling, grandparent, or grandchild of such Governmental Official.
Code – means the Internal Revenue Code of 1986, as amended.

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Company – as defined in the Introduction to this Agreement.
Company Assets – means all assets (including cash), whether tangible or intangible and whether real, personal or mixed, at any time owned by the Company.
Contribution Value – as defined in Section 3.1(a).
Damages – means any and all damages, losses, disbursements, suits, claims, liabilities, obligations, actions, judgments, suits, proceedings, fines, penalties, charges, amounts paid in settlement, expenses(including, without limitation, costs of investigation and reasonable attorneys’ fees and expenses), costs and other expenses of any kind or nature whatsoever arising out of or related to litigation and interest on any of the foregoing.
Distribution Value – as defined in Section 9.1(b).
Early Termination – as defined in Section 9.1(a)(iv).
Effective Date – as defined in the Introduction to this Agreement.
Exchange Act – means the Securities Exchange Act of 1934, as amended.
Fair Market Value – means, except as otherwise provided in this Agreement, as to any property on any date, the fair market value of such property on such date as determined in good faith by the Managing Member.
Governmental Authority – means any nation or government, any state or other political subdivision thereof and any other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
Government Official – means (i) any officer, director, or employee (elected, appointed, or career) of any Governmental Authority, or any person acting in an official capacity for or on behalf of any Governmental Authority, or any Close Family Member thereof; and (ii) any political party, party official, or candidate for political office, or any Close Family Member thereof.  
Indemnified Parties – as defined in Section 8.1(a).
IRR – means, with respect to any Member, the cumulative internal rate of return of such Member, as of any date, where the internal rate of return for a Member shall be the annually compounded rate of return which results in the following amount having a net present value equal to zero, calculated in accordance with Microsoft Excel’s X-IRR feature or, if such program is no longer available, a substantially similar methodology chosen by the Managing Member in good faith: (i) representing positive cash flows, the aggregate amount of distributions to such Member; provided that in no circumstances shall any expenses reimbursed to such Member be included, and (ii) representing negative cash flows, the aggregate amount of Capital Contributions made by such Member pursuant to this Agreement on a cumulative basis through such date.
Managing Member – as defined in Section 5.2(d).

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Members – as defined in the Introduction to this Agreement.
Net Income – means, with respect to any period, the net income, if any, of the Company for such period as determined for U.S. federal income tax purposes, provided that such income shall be increased by the amount of all income of the Company during such period that is exempt from U.S. federal income tax and decreased by the amount of all expenditures of the Company during such period which are not deductible in computing the Company’s income for U.S. federal income tax purposes and which do not constitute capital expenditures of the Company.
Net Loss – means, with respect to any period, the net loss, if any, of the Company for such period as determined for U.S. federal income tax purposes, provided that such loss shall be decreased by the amount of all income of the Company during such period that is exempt from U.S. federal income tax and increased by the amount of all expenditures of the Company during such period which are not deductible in computing the Company’s income for U.S. federal income tax purposes and which do not constitute capital expenditures of the Company.
Payment Notice – as defined in Section 3.1(a).
Percentage Interest – means the percentage interest of each Member of the Company, as set forth on Schedule A, as the same may be adjusted from time to time in accordance with this Agreement.
Person – means an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof.
Prime Rate – means the rate of interest identified as the prime rate in The Wall Street Journal (or, if The Wall Street Journal ceases publishing a prime rate or materially changes the criteria therefor, as reasonably determined by the Managing Member, “Prime Rate” shall mean the prime lending rate of Citibank, New York, New York).
Registration Statement – as defined in Section 4.1(c).
Related Person – as defined in Section 2.2.
Rule 144 – means Rule 144 promulgated under the Securities Act (or any successor provision promulgated by the SEC).
Sanctions – means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (i) the U.S. government, or (ii) the European Union or Her Majesty’s Treasury of the United Kingdom.
SEC – means the United States Securities and Exchange Commission.
Securities Act – means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

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Subsidiary – means, with respect to any Person, all other Persons of which such Person owns, directly or indirectly, a majority of the voting capital stock or is a general partner or otherwise has the power to control, by agreement or otherwise, the management and general business affairs of such other Person.
Tax Proceeding – as defined in Section 5.4.
Third-Party Indemnitor – means, with respect to each Indemnified Party, any Person (other than the Company or a Subsidiary thereof) that indemnifies or provides expense advancement or reimbursement to such Indemnified Party with respect to a loss that such Indemnified Party also has indemnification and/or expense reimbursement and/or advancement rights under Section 8.
Transfer – as defined in Section 7.1(a).
Transferee – means all Persons acquiring any equity interest (including any Percentage Interest) from a Member, as described in this Agreement, regardless of the method of Transfer.
Treasury Regulations – means the Income Tax Regulations promulgated under the Code.
TWAP – means, for any security as of any date, the time weighted average price for such security on the principal market on which such security trades during the period beginning at 9:30:00 a.m., New York time (or such other time as the principal market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the principal market publicly announces is the official close of trading).  If the TWAP cannot be calculated for a security on a particular date on any of the foregoing bases, the TWAP of such security on such date shall be the fair market value as determined in good faith by the Managing Member.
12.    MISCELLANEOUS.
12.1.    Reserved.
12.2.    Entire Agreement.  This Agreement and the Cooperation Agreement, dated as of March 19, 2020, by and between BW and Colony Capital, Inc. (the “Cooperation Agreement”), together with the documents expressly referred to herein, each as amended or supplemented, constitutes the entire agreement among the parties with respect to the subject matter herein or therein.  They supersede any prior agreement or understanding among the parties hereto.
12.3.    Amendments.  This Agreement may be amended only by the written consent of all of the Members.
12.4.    Choice of Law.  THIS AGREEMENT AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT LIMITATION THEREOF, THE ACT, AS NOW ADOPTED OR AS MAY BE HEREAFTER 

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AMENDED) WITHOUT REFERENCE TO ANY CONFLICT OF LAW OR CHOICE OF LAW PRINCIPLES OF SUCH STATE THAT MIGHT APPLY THE LAW OF ANOTHER JURISDICTION, AND SHALL GOVERN THE LIMITED LIABILITY COMPANY ASPECTS OF THIS AGREEMENT.
12.5.    Successors and Assigns.  Except as otherwise specifically provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, heirs, administrators, executors, successors and assigns.  
12.6.    Interpretation.  Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, definitions shall be equally applicable to both nouns and verbs and the singular and plural forms of the terms defined and pronouns stated in the masculine, the feminine or neuter gender shall include the masculine, the feminine and the neuter.
12.7.    Captions.  Captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend or otherwise affect the scope or intent of this Agreement or any provision hereof.
12.8.    Severability.  If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions of this Agreement, or the application of such provision in jurisdictions or to Persons or circumstances other than those to which it is held invalid, illegal or unenforceable shall not be affected thereby.
12.9.    Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.  It shall not be necessary for all Members to execute the same counterpart hereof.
12.10.    Additional Documents.  Subject to the provisions of this Agreement, each party hereto agrees to execute, with acknowledgment or affidavit, if required, any and all documents and writings which may be necessary or expedient in connection with the creation of the Company and the achievement of the Purpose, specifically including (a) any amendments to this Agreement and such certificates and other documents as the Members deem necessary or appropriate to form, qualify or continue the Company as a limited liability company in all jurisdictions in which the Company conducts or plans to conduct business and (b) all such agreements, certificates, tax statements, tax returns and other documents as may be required of the Company or its Members by the laws of the United States of America or any jurisdiction in which the Company conducts or plans to conduct business, or any political subdivision or agency thereof; provided that this Section 12.10 shall not be deemed to limit in any way a party’s rights under this Agreement including under Section 5.9 or Section 12.3.
12.11.    Non-Waiver.  No provision of this Agreement shall be deemed to have been waived unless such waiver is contained in a written notice given to the party claiming such waiver has occurred, provided that no such waiver shall be deemed to be a waiver of any other or further obligation or liability of the party or parties in whose favor the waiver was given.

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12.12.    Notices.  To be effective, unless otherwise specified in this Agreement, all notices and demands, consents and other communications under this Agreement must be in writing and must be given (a) by depositing the same in the United States mail, postage prepaid, certified or registered, return receipt requested, (b) by delivering the same in person and receiving a signed receipt therefor, (c) by sending the same by an internationally recognized overnight delivery service or (d) by email.  For purposes of notices, demands, consents and other communications under this Agreement, the addresses of the Members shall be as set forth on Schedule A to this Agreement and the address of the Company shall be 515 Flower Street, 30th Floor, Los Angeles, California 90071, marked for attention of Director-Legal Department, clny-legal @clny.com.  Notices, demands, consents and other communications mailed in accordance with the foregoing clause (a) shall be deemed to have been given and made three (3) Business Days following the date so mailed.  Notices, demands, consents and other communications given in accordance with the foregoing clauses (b) and (d) shall be deemed to have been given when sent.  Notices, demands, consents and other communications given in accordance with the foregoing clause (c) shall be deemed to have been given when delivered.  Any Member or its assignee may designate a different address to which notices or demands shall thereafter be directed and such designation shall be made by written notice given in the manner hereinabove required.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first set forth above.
COMPANY:

CBW 2020, LLC

By: /s/ Ronald M. Sanders    
      Name: Ronald M. Sanders
      Title: VP

MEMBERS:

CBW MM 2020, LLC

By: /s/ Ronald M. Sanders    
       Name: Ronald M. Sanders
       Title: VP

BLACKWELLS CAPITAL LLC

By: /s/ Jason Aintabi    
      Name: Jason Aintabi
      Title:  CIO

    

[Signature page to Limited Liability Company Agreement]

SCHEDULE A
As of the Effective Date
	
			
	Name and Address
	Committed Capital Contribution
	Percentage Interest

	 
	 
	 

	 
	 
	 

	CBW MM 2020, LLC 
515 Flower Street, 30th Floor 
Los Angeles, CA 90071
Attention: Director, Legal Department
Email: legal@clny.com
	$13,230,000
	90%

	 
	 
	 

	Blackwells Capital LLC
800 Third Avenue, 39th Floor
New York, New York 10022
Attention:  Susie Fiscus
Email: sfiscus@vandewater.com

	$1,470,000
	10%

	 
	 
	 

A-1

SCHEDULE B
REGULATIONS REGARDING APPOINTMENT OF OFFICERS

RECITAL

WHEREAS, the Managing Member desires to appoint officers of the Company to exercise the power and authority with respect to the business and affairs of the Company as described below;

OFFICERS

RESOLVED, that the Company may have, at the discretion of the Managing Member, a Chief Executive Officer, a President, one or more Executive Vice Presidents, one or more Vice Presidents, one or more Assistant Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers and/or such other officers as may be appointed by the Managing Member.  One person may hold two or more offices.  The officers of the Company shall serve at the discretion of the Members.  No officer shall be deemed a “manager” of the Company, as that term is defined in Section 18-101(10) of the Act, by reason of his or her appointment or by reason of his or her actions as an officer of the Company.  Any officer may resign at any time by giving written notice to the Managing Member.  Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

DUTIES

RESOLVED, that the officers of the Company shall have the powers and authority described below:

CHIEF EXECUTIVE OFFICER.  The Chief Executive Officer will be the chief executive officer of the Company and, subject to the supervision of the Managing Member, will have general management and control of the business and property of the Company in the ordinary course of its business with all powers with respect to general management and control reasonably incident to such responsibilities, including, but not limited to, the power to employ, discharge or suspend employees and agents and to suspend, with or without cause, any officer pending final action by the Members with respect to continued suspension, removal or reinstatement of such officer.

PRESIDENT.  The President will have those powers and duties assigned to him or her by the Managing Member, or delegated by the Chief Executive Officer.  The President will exercise the powers of the Chief Executive Officer during the absence or inability to act of the Chief Executive Officer.

EXECUTIVE VICE PRESIDENTS.  Each Executive Vice President, if any, will have those powers and duties assigned to him by the Managing Member, or delegated by the Chief Executive Officer or the President.  The Executive Vice Presidents, in the order designated by the Managing Member or, in the absence of such a designation, as determined by the length of time each has held the office of Executive Vice President, will exercise the powers of the Chief Executive Officer and President during the absence or inability to act of the Chief Executive Officer and President.

VICE PRESIDENTS.  Each Vice President, if any, will have those powers and duties assigned to him by the Managing Member, or delegated by the Chief Executive Officer, President or Executive Vice President.

	
		
	 
	 

B-1    

SECRETARY.  Except as otherwise provided in these Regulations, the Secretary must keep the minutes of all meetings of the Managing Member and of any committee thereof, or consents in lieu of such meetings in the Company’s minute books and must cause notice of the meetings to be given when requested by any person authorized to call a meeting.  The Secretary may sign with the Chief Executive Officer or the President, in the name of the Company, all contracts of the Company and affix the Company seal (if any) thereto.  The Secretary may sign with the Chief Executive Officer or the President all Company Stock certificates, and he is in charge of the certificate books, share transfer records, stock ledgers and any other stock books and papers as the Managing Member may direct, all of which must, at all reasonable times, be open to inspection by any Member at the Company’s office during business hours.  The Secretary will, in general, perform such other duties incident to the office of the Secretary, or as assigned by the Managing Member or delegated by the Chief Executive Officer or the President. 

ASSISTANT SECRETARIES.  Each assistant secretary, if any, of the Company will have those powers and duties assigned to him by the Managing Member or delegated by the Chief Executive Officer or the President.  The Assistant Secretaries, in the order as designated by the Managing Member or, in the absence of such a designation, as determined by the length of time they have held the office of Assistant Secretary, will exercise the powers of the Secretary during the Secretary’s absence or inability to act.

TREASURER.  The Treasurer will have the care and custody of all of the Company’s funds and must deposit them in such banks or other depositories as the Managing Member or any officer(s), or any officer and agent jointly, duly authorized by the Managing Member, direct or approve.  He must keep a full and accurate account of all monies received and paid on account of the Company and must render a statement of his accounts whenever the Managing Member so requires.  Except as otherwise provided by the Managing Member, he must perform all other necessary acts and duties in connection with the administration of the Company’s financial affairs and generally perform all the duties usually appertaining to the office of the Treasurer.  Whenever required by the Managing Member, he must give bonds for the faithful discharge of his duties in such sums and with such securities as the Managing Member may approve.  In the absence of the Treasurer, the person designated by the Chief Executive Officer or the President will perform his duties.

ASSISTANT TREASURERS.  Each assistant treasurer, if any, of the Company will have those powers and duties assigned to him by the Managing Member, or delegated by the Chief Executive Officer or the President.  The Assistant Treasurers, in the order as designated by the Managing Member or, in the absence of such a designation, as designated by the length of time they have held the office of Assistant Treasurer, will exercise the powers of the Treasurer during the Treasurer’s absence or inability to act.

COMPENSATION.  The officers of the Company shall not be compensated for their services as the officers of the Company. 

	
		
	 
	 

B-2    

APPOINTMENT OF OFFICERS

RESOLVED, that the individuals listed below be, and they hereby are, elected to the offices of the Company set forth opposite their respective names, to serve in such capacities until removal or replacement by the Managing Member or resignation:

NAME            OFFICE
Thomas J. Barrack, Jr.            Chief Executive Officer
Mark M. Hedstrom    Vice President, Treasurer
Ronald M. Sanders    Vice President, Secretary
Donna L, Hansen    Vice President
Jenny B. Neslin    Vice President, Secretary
 
Any one of the Chief Executive Officer, President, Secretary, Treasurer or any Vice President, acting alone, is authorized to sign any and all contracts and documents of any kind and to bind the Company thereto.

    

	
		
	 
	 

B-3evfmexhibit4132520revise

                                                                                                            Exhibit 4.1                                                                                                                                                                     RIGHTS AGREEMENT          Dated as of March 24, 2020                  Between        EVOFEM BIOSCIENCES, INC.                    And   PHILADELPHIA STOCK TRANSFER, INC.               As Rights Agent                  

 

                      TABLE OF CONTENTS                                                                                                       Page                 Section 1.  Certain Definitions ..................................................................................1  Section 2.  Appointment of Rights Agent ..................................................................7  Section 3.  Issuance of Rights Certificates .................................................................8  Section 4.  Form of Rights Certificates .................................................................... 10  Section 5.  Countersignature and Registration ......................................................... 11  Section 6.  Transfer, Split Up, Combination and Exchange of Rights              Certificates; Mutilated, Destroyed, Lost or Stolen Rights              Certificates ............................................................................................ 11  Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights ............... 12  Section 8.  Cancellation and Destruction of Rights Certificates ............................... 15  Section 9.  Reservation and Availability of Capital Stock ........................................ 15  Section 10. Preferred Stock Record Date.................................................................. 17  Section 11. Adjustment of Purchase Price, Number and Kind of Shares or              Number of Rights .................................................................................. 17  Section 12. Certificate of Adjusted Purchase Price or Number of Shares .................. 25  Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or              Earning Power ....................................................................................... 26  Section 14. Fractional Rights and Fractional Shares ................................................. 30  Section 15. Rights of Action .................................................................................... 31  Section 16. Agreement of Rights Holders ................................................................ 32  Section 17. Rights Certificate Holder Not Deemed a Stockholder ............................ 32  Section 18. Concerning the Rights Agent ................................................................. 33  Section 19. Merger or Consolidation or Change of Name of Rights Agent ............... 33  Section 20. Duties of Rights Agent .......................................................................... 34  Section 21. Change of Rights Agent......................................................................... 36  Section 22. Issuance of New Rights Certificates....................................................... 37  Section 23. Redemption and Termination................................................................. 37  Section 24. Exchange ............................................................................................... 38  Section 25. Notice of Certain Events ........................................................................ 39  Section 26. Notices .................................................................................................. 41  Section 27. Supplements and Amendments .............................................................. 41                                   i                

 

                      TABLE OF CONTENTS                              (continued)                                                                    Page                 Section 28. Successors ............................................................................................. 42  Section 29. Determinations and Actions by the Board of Directors, etc .................... 42  Section 30. Benefits of this Agreement .................................................................... 42  Section 31. Severability ........................................................................................... 43  Section 32. Governing Law ...................................................................................... 43  Section 33. Counterparts .......................................................................................... 43  Section 34. Descriptive Headings ............................................................................. 43                 Exhibit A   Form of Rights Certificate  Exhibit B   Form of Summary of Rights  Exhibit C   Certificate of Designation                                                                                                ii                

 

                                 RIGHTS AGREEMENT          RIGHTS AGREEMENT, dated as of March 24, 2020 (the “Agreement”), between   Evofem Biosciences, Inc., a Delaware corporation (the “Company”), and Philadelphia Stock   Transfer, Inc., as rights agent (the “Rights Agent”).          WHEREAS, effective March 24, 2020 (the “Rights Dividend Declaration Date”), the   Board of Directors of the Company (the “Board of Directors”) (i) authorized and declared a   dividend of one right (“Right”) for each share of Common Stock, par value $0.0001 per share, of   the Company (the “Company Common Stock”) outstanding at the Close of Business on April 8,   2020 (the “Record Date”), and (ii) authorized the issuance of one Right (as such number may   hereinafter be adjusted pursuant hereto) for each share of Company Common Stock issued   between the Record Date and the earlier of the Distribution Date and the Expiration Date and, in   certain circumstances, for each share of Company Common Stock issued after the Distribution   Date but before the Expiration Date; and           WHEREAS, each Right initially represents the right to purchase, upon the terms and   subject to the conditions hereinafter set forth, one Unit of Series A Preferred Stock;          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 32% or more of the   shares of Company Common Stock then outstanding.  Notwithstanding the foregoing:                      (i)   an “Acquiring Person” shall not include:                            (A)   the Company;                            (B)   any Subsidiary of the Company;                            (C)   any employee benefit plan maintained by the Company or               any of its Subsidiaries;                            (D)   any trustee or fiduciary with respect to such employee               benefit plan acting in such capacity or a trustee or fiduciary holding shares of               Company Common Stock for the purpose of funding any such plan;                            (E)   any Person if:                                  (1)    the Board of Directors determines in good faith that                     such Person who would otherwise be an “Acquiring Person” became such                     inadvertently (including, without limitation, because (x) such Person was                     unaware that it beneficially owned a percentage of Company Common                                          1    

 

                     Stock that would otherwise cause such Person to be an “Acquiring                    Person” or (y) such Person was aware of the extent of its Beneficial                    Ownership of Company Common Stock but had no actual knowledge of                    the consequences of such Beneficial Ownership under this Agreement)                    and without any intention of changing or influencing control of the                    Company;                                (2)    such Person does not become the Beneficial Owner                    of any additional shares of Company Common Stock after such Person                    becomes aware that such Person would be an Acquiring Person (but for                    the operation of this clause (F)); and                                (3)    such Person as promptly as practicable (as                    determined in good faith by the Board of Directors) divested or divests                    itself of Beneficial Ownership of a sufficient number of shares of                    Company Common Stock so that such Person would no longer be an                    “Acquiring Person;”                or                           (F)   any Person who becomes the Beneficial Owner of 32% or              more of the then-outstanding shares of Company Common Stock as a result of the              acquisition of shares of Company Common Stock directly from the Company in              one or more transactions approved by the Board of Directors,          and                     (ii)  no Person shall be deemed an “Acquiring Person” as a result of the        acquisition of shares of Company Common Stock by the Company which, by reducing        the number of shares of Company Common Stock outstanding, increases the proportional        number of shares beneficially owned by such Person; provided, however, that if (x) a        Person would become an Acquiring Person (but for the operation of this subclause (ii)) as        a result of the acquisition of shares of Company Common Stock by the Company and        (y) after such share acquisition by the Company, such Person becomes the Beneficial        Owner of any additional shares of Company Common Stock (other than pursuant to the        grant or exercise of an option under a Company stock option plan or pursuant to a        dividend or distribution paid or made by the Company on the outstanding shares of        Company Common Stock or pursuant to a split or subdivision of the Company Common        Stock), then such Person shall be deemed an Acquiring Person unless, upon becoming the        Beneficial Owner of such additional shares, such Person is the Beneficial Owner of less        than 32% of the outstanding shares of Company Common Stock.   Each Person identified in subclauses (A), (B), (C) and (D) of this Section (1)(a)(i) is individually  an “Exempt Person” and collectively “Exempt Persons.”               (b)   “Affiliate” and “Associate” shall have the respective meanings ascribed to  such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange  Act of 1934, as amended (the “Exchange Act”), as in effect on the date hereof.                                         2   

 

               (c)   A Person shall be deemed the “Beneficial Owner” of, and shall be deemed  to have “Beneficial Ownership” of and to “beneficially own,” any securities:                     (i)   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 under Rule 13d-3 of the General Rules and Regulations under the        Exchange Act (the “Exchange Act Regulations”) as in effect on the date hereof, including        pursuant to any agreement, arrangement or understanding (whether or not in writing);        provided, however, that a Person shall not be deemed the “Beneficial Owner” of, to have        “Beneficial Ownership” of or to “beneficially own,” any securities under this        subparagraph (i) as a result of an agreement, arrangement or understanding to vote such        securities 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 Exchange Act        and the Exchange Act Regulations, and (B) is not reportable by such Person on        Schedule 13D under the Exchange Act (or any comparable or successor report);                     (ii)  which are beneficially owned, directly or indirectly, by any other        Person (or any Affiliate or Associate of such other Person) with which such Person (or        any of such Person’s Affiliates or Associates) has any agreement, arrangement or        understanding (whether or not in writing), for the purpose of acquiring, holding, voting        (except pursuant to a revocable proxy or consent as described in the proviso to        subparagraph (i) of this paragraph (c)) or disposing of such securities;                      (iii) which such Person or any of such Person’s Affiliates or        Associates, directly or indirectly, has the right to acquire (whether such right is        exercisable immediately or only after the passage of time or upon the satisfaction of        conditions) pursuant to any agreement, arrangement or understanding (whether or not in        writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or        options, or otherwise;                      (iv)  which are beneficially owned, directly or indirectly, by any other        Person (or any Affiliate or Associate of such other Person) with which such Person (or        any of such Person’s Affiliates or Associates) knowingly acts (whether or not pursuant to        an express agreement, arrangement or understanding) at any time after the first public        announcement of the adoption of this Agreement, in concert or in parallel with such other        Person, or towards a common goal with such other Person, relating to changing or        influencing the control of the Company or in connection with or as a participant in any        transaction having that purpose or effect, where (i) each Person is conscious of the other        Person’s conduct and this awareness is an element in their decision-making processes and        (ii) at least one additional factor supports a determination by the Board of Directors that        such Persons intended to act in concert or in parallel, which such additional factors may        include, without limitation, exchanging information, attending meetings, conducting        discussions, or making or soliciting invitations to act in concert or in parallel; or                     (v)   in respect of which such Person or any of such Person’s Affiliates        or Associates has a Synthetic Long Position, if and only if such Person, together with any                                         3   

 

         of such Person’s Affiliates or Associates, is otherwise the “Beneficial Owner” (within the        meaning of subparagraphs (i) through (iv) of this paragraph (c)) of 1% or more of the        shares of Company Common Stock then outstanding;   provided, however, that under this paragraph (c) a Person shall not be deemed the “Beneficial  Owner” of, to have “Beneficial Ownership” of, or to “beneficially own,” any securities                           (A)   tendered pursuant to a tender or exchange offer made in              accordance with Exchange Act Regulations by such Person or any of such              Person’s Affiliates or Associates until such tendered securities are accepted for              purchase or exchange,                           (B)   that may be issued upon exercise of Rights at any time              prior to the occurrence of a Triggering Event, or                           (C)   that may be issued 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(c) 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; and   further provided, however, that:                     (x)   nothing in this paragraph (c) shall cause a Person engaged in        business as an underwriter of securities to be the “Beneficial Owner” of, to have        “Beneficial Ownership” of, or to “beneficially own,” any securities acquired through        such Person’s participation in good faith in a firm commitment underwriting until the        expiration of forty days after the date of such acquisition,                     (y)   no decision reached, or action taken, by the Board of Directors or        any committee thereof shall cause any Person (or any Affiliate or Associate of such        Person) who is a member of the Board of Directors or such committee to be deemed, for        the purposes of this Agreement, to be a Beneficial Owner of any securities beneficially        owned by any other Person (or any Affiliate or Associate of such Person) who is a        member of the Board of Directors or any committee thereof solely by reason of such        membership of the Board of Directors or any committee thereof or participation in the        decisions or actions thereof on the part of either or both of such Persons, and                     (z)   no Person who is an officer, director or employee of an Exempt        Person shall be deemed, solely by reason of such Person’s status or authority as such, to        be the “Beneficial Owner” of, to have “Beneficial Ownership” of, or to “beneficially        own” any securities that are “beneficially owned” (as defined in this paragraph (c)),        including, without limitation, in a fiduciary capacity, by an Exempt Person or by any        other such officer, director or employee of an Exempt Person.                                          4   

 

               (d)   “Business Day” shall mean any day other than a Saturday, Sunday or a  day on which banking institutions in New York City, New York are authorized or obligated by  law or executive order to close.               (e)   “Close of Business” on any given date shall mean 5:00 P.M., New York  City, New York time, on such date; provided, however, that if such date is not a Business Day it  shall mean 5:00 P.M., New York City, New York time, on the next succeeding Business Day.               (f)   “Common Stock” of any Person other than the Company shall mean the  capital stock of such Person with the greatest voting power, or, if such Person shall have no  capital stock, the equity securities or other equity interest having power to control or direct the  management of such Person.               (g)   “Company” has the meaning given it in the first paragraph of this  Agreement, and also means a Principal Party to the extent provided in Section 13(a).               (h)   “Person” shall mean any individual, partnership, firm, limited liability  company, corporation, association, trust, unincorporated organization or other entity, as well as  any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act as in  effect on the date hereof.               (i)   “Preferred Stock” shall mean the Series A Preferred Stock, par value  $0.0001 per share, of the Company having the voting powers, designation, preferences and  relative, participating, optional or other special rights and qualifications, limitations and  restrictions described in the Certificate of Designation set forth as Exhibit C hereto and as  amended from time to time.               (j)   “Stock Acquisition Date” shall mean the first date of public announcement  (including, without limitation, the filing of any report, or any amendment to any report, pursuant  to Section 13(d) of the Exchange Act (or any comparable or successor report)) by the Company  or an Acquiring Person that an Acquiring Person has become such; provided, however, that if  such Person is determined not to have become an Acquiring Person pursuant to Section 1(a)  hereof, then no Stock Acquisition Date shall be deemed to have occurred.               (k)   “Subsidiary” shall mean, with reference to any Person, any other Person of  which an amount of voting securities or equity interests sufficient to elect at least a majority of  the directors or equivalent governing body of such other Person is beneficially owned, directly or  indirectly, by such Person, or any other Person otherwise controlled by such first-mentioned  Person.               (l)   “Synthetic Long Position” shall mean any option, warrant, convertible  security, stock appreciation right or other contractual right, whether or not presently exercisable,  which has an exercise or conversion privilege or a settlement payment or mechanism at a price  related to Common Stock or a value determined in whole or part with reference to, or derived in  whole or in part from, the market price or value of Common Stock, whether or not such right is  subject to settlement in whole or in part in Common Stock or conveys any voting rights, and  which increases in value as the value of Common Stock increases or which provides to the  holder of such right an opportunity, directly or indirectly, to profit or share in any profit derived                                         5   

 

   from any increase in the value of Common Stock, including, but not limited to, a long  convertible security, a long call option, and a short put option position, but shall not include:                (i)   rights of a pledgee to sell Common Stock under a bona fide pledge of                    Common Stock;               (ii)  rights of all holders of Common Stock to receive Common Stock pro rata,                    or obligations to dispose of Common Stock, as a result of a merger,                    exchange offer, or consolidation involving the Company;                (iii) rights or obligations to surrender Common Stock, or have Common Stock                    withheld, upon the receipt or exercise of a derivative security or the                    receipt or vesting of equity securities, in order to satisfy the exercise price                    or the tax withholding consequences of receipt, exercise or vesting;                (iv)  interests in broad-based index options, broad-based index futures, and                    broad-based publicly traded market baskets of stocks approved for trading                    by the appropriate federal governmental authority;               (v)   interests or rights to participate in employee benefit plans of the Company                    held by employees or former employees of the Company; or                (vi)  options granted to an underwriter in a registered public offering for the                    purpose of satisfying over-allotments in such offering.    provided, however, that any Person satisfying the requirements of Rule 13d-1(b)(1) of the  Exchange Act Regulations (other than a Person that so satisfies Rule 13d-1(b)(1) solely by  reason of Rule 13d-1(b)(1)(ii)(E)) shall not be deemed to beneficially own the notional amount  of any securities that underlie a Synthetic Long Position held by such Person as a hedge with  respect to a bona fide derivatives trade or position of such Person arising in the ordinary course  of such Person’s business as a derivatives dealer.   The shares of Common Stock in respect of which a Person has a Synthetic Long Position shall be  the notional or other number of shares of Common Stock specified in a filing by such Person or  any of such Person’s Affiliates or Associates with the Securities and Exchange Commission in  respect of which shares of Common Stock are the “subject security” or in the documentation  evidencing the Synthetic Long Position as being subject to be acquired upon the exercise or  settlement of the applicable right or as the basis upon which the value or settlement amount of  such right, or the opportunity of the holder of such right to profit or share in any profit, is to be  calculated in whole or in part or, if no such number of shares of Common Stock is specified in  any filing or documentation, as determined by the Board in good faith to be the number of shares  of Common Stock to which the Synthetic Long Position relates.               (m)   “Triggering Event” shall mean any Section 11(a)(ii) Event or any  Section 13 Event.               In addition, the following terms are defined in the Sections indicated below:                                         6   

 

                        Defined Term                         Section Number                      Adjustment Shares                    11(a)(ii)                      Agreement                            Preamble                      Board of Directors                   Whereas clause                      common stock equivalents             11(a)(iii)                      Certificate of Incorporation         11(a)(iii)                      Company                              Preamble                      Company Common Stock                 Whereas clause                      current market price                 11(d)                      Current Value                        11(a)(iii)                      Distribution Date                    3(a)                      Equivalent Preferred Stock           11(b)                      Exchange Act                         1(b)                      Exchange Act Regulations             1(c)                      Exchange Ratio                       24(a)                      Exempt Person                        1(a)                      Expiration Date                      7(a)                      Final Expiration Date                7(a)                      Original Rights                      1(c)                      Purchase Price                       7(b)                      Record Date                          Whereas clause                      Redemption Price                     23(a)                      Registered Common Stock              13(b)(ii)                      Registration Date                    9(c)                      Registration Statement               9(c)                      Right                                Whereas clause                      Rights Agent                         Preamble                      Rights Certificates                  3(a)                      Rights Dividend Declaration Date     Whereas clause                      Section 11(a)(ii) Event              11(a)(ii)                      Section 11(a)(iii) Trigger Date      11(a)(iii)                      Section 13 Event                     13(a)                      Securities Act                       9(c)                      Spread                               11(a)(iii)                      Substitution Period                  11(a)(iii)                      Summary of Rights                    3(b)                      Trading Day                          11(d)(i)                      Unit                                 7(b)                  Section 2.  Appointment of Rights Agent.  The Company hereby appoints the Rights  Agent to act as agent for the Company in accordance with the express 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 setting forth the respective duties of the Rights Agent and  any co-rights agent.  The Rights Agent shall have no duty to supervise, and in no event shall be  liable for, the acts or omissions of any such co-rights agent.                                           7    

 

        Section 3.  Issuance of Rights Certificates.               (a)   Until the earlier of (i) the Close of Business on the tenth Business Day  after the Stock Acquisition Date or such later date as may be determined by action of the Board  of Directors prior to the tenth Business Day 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), and (ii) the Close of Business on the tenth Business Day (or such  later date as may be determined by action of the Board of Directors) after the date that a tender  or exchange offer by any Person (other than an Exempt Person) is first published or sent or given  within the meaning of Rule 14d-4(a) of the Exchange Act Regulations or any successor rule, if  upon consummation thereof such Person would be an Acquiring Person (including, in the case of  both clause (i) and (ii), any such date which is after the date of this Agreement and prior to the  issuance of the Rights) (the earlier of (i) and (ii) above being the “Distribution Date”):                     (x)   the Rights (unless earlier expired, redeemed or terminated) will be        evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates        for shares of Company Common Stock registered in the names of the holders of shares of        Company Common Stock as of and subsequent to the Record Date or, in the case of        uncertificated shares of Company Common Stock registered in book-entry form (“Book        Entry Shares”), by notation in accounts reflecting the ownership of such shares of        Company Common Stock (which certificates for shares of Company Common Stock and        Book Entry Shares, as applicable, 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 Company Common Stock including a transfer to the        Company;   provided, however, that if a tender or exchange offer is terminated prior to the occurrence of a  Distribution Date, then no Distribution Date shall occur as a result of such tender or exchange  offer.  The Company shall promptly notify the Rights Agent in writing upon the occurrence of  the Distribution Date and, if such notification is given orally, the Company shall confirm the  same in writing within two (2) Business Days.  Until such written notice is received by the  Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution  Date has not occurred.  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 shares of Company  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 A hereto (the “Rights Certificates”), evidencing one Right for each share of  Company Common Stock so held, subject to adjustment as provided herein.         In the event that an adjustment in the number of Rights per share of Company Common  Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Rights  Certificates, the Company may make the necessary and appropriate rounding adjustments (in  accordance with Section 14(a) hereof) so that Rights Certificates representing only whole  numbers of Rights are distributed and cash is paid in lieu of any fractional Rights.  As of and  after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates.                                         8   

 

               (b)   As promptly as practicable following the Record Date, the Company will  (directly, or at the expense of the Company, upon the written request of the Company and after  providing all necessary information and documents, through the Rights Agent or the Company’s  transfer agent for the Common Stock of the Company) send a copy of a Summary of Rights to  Purchase Preferred Stock, in substantially the form attached hereto as Exhibit B (the “Summary  of Rights”), by first-class, postage prepaid mail, to each record holder of shares of Company  Common Stock as of the Close of Business on the Record Date, at the address of such holder  shown on the records of the Company or otherwise make the Summary of Rights available and  accessible to all such holders by posting it on the Company’s website and maintaining such  posting until the Expiration Date.  With respect to certificates for Company Common Stock  outstanding as of the Record Date or issued subsequent to the Record Date but prior to the earlier  of the Distribution Date and the Expiration Date, until the Distribution Date the Rights will be  evidenced by such certificates registered in the names of the holders thereof.  Until the  Distribution Date (or, if earlier, the Expiration Date), the surrender for transfer of any such  certificate for Company Common Stock outstanding as of the Record Date shall also constitute  the transfer of the Rights associated with the Company Common Stock represented thereby.               (c)   Rights shall, without any further action, be issued in respect of all shares  of Company Common Stock which are issued (including any shares of Company Common Stock  held in treasury) after the Record Date but prior to the earlier of the Distribution Date and the  Expiration Date.  In addition, Rights shall be issued with respect to all shares of Company  Common Stock described in the second sentence of Section 22 hereof, subject to the provisions  thereof.  Certificates representing such shares of Company Common Stock issued after the  Record Date 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 Evofem Biosciences, Inc. (the “Company”) and        Philadelphia Stock Transfer, Inc. (the “Rights Agent”) (or any successor Rights Agent),        as Rights Agent, dated as of March 24, 2020, as it may be supplemented or amended        from time to time (the “Rights Agreement”), the terms of which are hereby incorporated        herein by reference and a copy of which is on file at the office of the Rights Agent.         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 certificates representing shares of Company Common Stock that bear the  foregoing legend, until the earlier of the Distribution Date and the Expiration Date, the Rights  associated with the shares of Company Common Stock represented by such certificates shall be  evidenced by such certificates alone and registered holders of the shares of Company Common                                         9   

 

   Stock shall also be the registered holders of the associated Rights, and the transfer of any of such  certificates shall also constitute the transfer of the Rights associated with the shares of Company  Common Stock represented by such certificates.  With respect to any Book Entry Shares, a  legend in substantially similar form will be included in a notice to the record holder of such  shares in accordance with applicable law.  Notwithstanding the provisions of this Section 3(c),  neither the omission of a legend nor the failure to deliver the notice of such legend required  hereby shall affect the enforceability of any part of this Agreement or the rights of any holder of  Rights.               (d)   In the event that the Company purchases or acquires any shares of  Company Common Stock after the Record Date but prior to the Distribution Date, any Rights  associated with such shares of Company Common Stock shall be deemed canceled and returned  so that the Company shall not be entitled to exercise any Rights associated with the shares of  Company Common Stock that are no longer outstanding.               (e)   Notwithstanding anything to the contrary contained herein, shares of  Company Common Stock and Rights (and any securities issuable on their exercise) may be  issued and transferred as Book Entry Shares and not represented by physical certificates.  Where  shares of Company Common Stock and Rights (and any securities issuable on their exercise) are  held as Book Entry Shares or in other uncertificated form, the Company and the Rights Agent  shall cooperate in all respects to give effect to the intent of the provisions contained herein.        Section 4.  Form of Rights Certificates.                 (a)   The Rights Certificates (and the forms of election to purchase and of  assignment and the certificates to be printed on the reverse thereof) shall each be substantially in  the form set forth in Exhibit A hereto and may have such marks of identification or designation  and such legends, summaries or endorsements printed thereon as the Company may deem  appropriate (which marks, designations, legends, summaries or endorsements shall not affect the  rights, duties, liabilities, protections or responsibilities of the Rights Agent hereunder) and as are  not inconsistent with the provisions of this Agreement, or as may be required to comply with any  applicable law or any rule or regulation thereunder or with any rule or regulation of any stock  exchange or automated quotation system on which the Rights may from time to time be listed or  to conform to usage.  Subject to the provisions of Section 11 and Section 22 hereof, the Rights  Certificates, whenever distributed, shall be dated as of the Record Date (or in the case of Rights  issued with respect to Common Stock issued by the Company after the Record Date, as of the  date of issuance of such Common Stock) and on their face shall entitle the holders thereof to  purchase such number of Units of Preferred Stock as shall be set forth therein at the price set  forth therein, provided, however, that the amount and type of securities, cash or other assets that  may be acquired upon the exercise of each Right and the Purchase Price thereof shall be subject  to adjustment as provided herein.               (b)   Any Rights Certificate that represents Rights which are null and void  pursuant to Section 7(e) of this Agreement 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:                                           10   

 

         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 are null and void.    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)   Any Rights Certificates shall be executed on behalf of the Company by its  Chairman, its Chief Executive Officer, its President or one of its Vice Presidents and shall be  attested by its Secretary, Treasurer or one of its Assistant Secretaries and shall have affixed  thereto the Company’s seal (if any) or a facsimile thereof.  The signature of any of these officers  on the Rights Certificates may be manual or facsimile.  Rights Certificates bearing the manual or  facsimile signatures of the individuals who were at any time the proper officers of the Company  shall bind the Company, notwithstanding that such individuals or any of them have ceased to  hold such offices prior to the countersignature of such Rights Certificates or did not hold such  offices at the date of such Rights Certificates.  No Rights Certificate shall be entitled to any  benefit under this Agreement or be valid for any purpose unless there appears on such Rights  Certificate a countersignature duly executed by the Rights Agent by manual or facsimile  signature of an authorized signatory, and such countersignature upon any Rights Certificate shall  be conclusive evidence, and the only evidence, that such Rights Certificate has been duly  countersigned as required hereunder.  In case any authorized signatory of the Rights Agent who  has countersigned any Rights Certificate ceases to be an authorized signatory of the Rights Agent  before issuance and delivery by the Company, such Rights Certificate, nevertheless, may be  issued and delivered by the Company with the same force and effect as though the person who  countersigned such Rights Certificate had not ceased to be an authorized signatory of the Rights  Agent; and any Rights Certificate may be countersigned on behalf of the Rights Agent by any  person who, at the actual date of the countersignature of such Rights Certificate, is properly  authorized to countersign such Rights Certificate, although at the date of the execution of this  Rights Agreement any such person was not so authorized.               (b)   Following the Distribution Date, upon receipt by the Rights Agent of  notice to that effect and all other relevant information and documents referred to in Section 3(a),  the Rights Agent will keep or cause to be kept, at its office designated 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 name and address of each holder of the  Rights Certificates, the number of Rights evidenced on its face by each Rights Certificate and the  date of each Rights Certificate.          Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;                   Mutilated, Destroyed, Lost or Stolen Rights Certificates.                (a)   Subject to the provisions of Sections 4, 7(e) and 14 hereof, at any time  after the Close of Business on the Distribution Date, and at or prior to the Close of Business on  the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined                                         11   

 

   or exchanged for another Rights Certificate or Certificates, entitling the registered holder to  purchase a like number of Units of Preferred Stock (or, following a Triggering Event, other  securities, cash or other assets, as the case may be) as 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  at the office of the Rights Agent designated for such purpose, along with a signature guarantee  (if required) and such other and further documentation as the Company or the Rights Agent may  reasonably request.  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 duly executed the certificate set forth 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) of the Rights  represented by such Rights Certificate or Affiliates or Associates thereof, or of any other Person  with which such Beneficial Owner or any of such Beneficial Owner’s Affiliates or Associates  has any agreement, arrangement or understanding (whether or not in writing) for the purpose of  acquiring, holding, voting or disposing of securities of the Company, as the Company or the  Rights Agent shall reasonably request.  Thereupon, the Rights Agent shall, subject to the  provisions of Section 4, Section 7(e), Section 14 and Section 24 hereof, countersign and deliver  to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so  requested.  The Rights Agent shall not have any duty or obligation to take any action under any  section of this Rights Agreement that requires the payment of taxes and/or charges unless and  until it is satisfied that all such payments have been made, and the Rights Agent shall promptly  forward any such sum collected by it to the Company or to such Persons as the Company may  specify by written notice.  The Company or the Rights Agent may require payment of a sum  sufficient to cover any tax or charge that may be imposed in connection with any transfer, split  up, combination or exchange of Rights Certificates.               (b)   Subject to Section 7(e) hereof, at any time after the Distribution Date and  prior to the Expiration Date, 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,  along with such other and further documentation as the Company or the Rights Agent may  reasonably request and, at the Company’s request, reimbursement to the Company and the  Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights  Agent and cancellation of the Rights Certificate if mutilated, the Company shall execute and  deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and  delivery to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or  mutilated.          Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights.               (a)   Prior to the earlier of (i) the Close of Business on March 24, 2021, the first  anniversary of the date hereof (the “Final Expiration Date”), (ii) the time at which the Rights are  redeemed as provided in Section 23 hereof, and (iii) the time at which the Rights are exchanged  as provided in Section 24 hereof, at which time the Rights are deemed terminated (the earlier of                                         12   

 

   (i), (ii) and (iii) being the “Expiration Date”), the registered holder of any Rights Certificate may,  subject to the other provisions hereof, including without limitation Sections 7(e), 7(f), 9(c), 11(a)  and 23 hereof, exercise the Rights evidenced thereby, 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 properly completed and duly executed (with such  signature duly guaranteed, if required), to the Rights Agent at the office of the Rights Agent  designated for such purpose, together with payment of the aggregate Purchase Price for the  number of Units of Preferred Stock (or, following a Triggering Event, other securities, cash or  other assets, as the case may be) for which such surrendered Rights are then exercisable.  Except  for those provisions herein that expressly survive the termination of this Agreement, this  Agreement shall terminate at such time as the Rights are no longer exercisable hereunder.               (b)   The purchase price for each one one-thousandth (1/1,000) of a share (each  such one one-thousandth (1/1,000) of a share being a “Unit”) of Preferred Stock upon exercise of  Rights shall be $17.50, subject to adjustment from time to time as provided in Sections 11 and  13(a) hereof (such purchase price, as so adjusted, being the “Purchase Price”), 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 properly completed and the certificate duly executed,  accompanied by payment, with respect to each Right so exercised, of the Purchase Price for the  Units of Preferred Stock (or, following a Triggering Event, other securities, cash or other assets,  as the case may be) to be purchased thereby as set forth below and an amount equal to any  applicable transfer tax or evidence satisfactory to the Company of payment of such tax, the  Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly:                     (i)   (A) requisition from any transfer agent of the Preferred Stock (or        make available, if the Rights Agent is the transfer agent for the Preferred Stock) a        certificate or certificates for the number of Units of Preferred Stock to be purchased, and        the Company hereby irrevocably authorizes its transfer agent to comply with all such        requests, or (B) if the Company shall have elected to deposit the total number of Units of        Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent,        requisition from the depositary agent depositary receipts representing interests in such        number of Units of Preferred Stock as are to be purchased (in which case certificates for        the Units 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 request,                     (ii)  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,                      (iii) when necessary to comply with this Agreement, requisition from        the Company the amount of cash, if any, to be paid in lieu of fractional shares in        accordance with Section 14 hereof, and                                           13   

 

                     (iv)  when necessary to comply with this Agreement, after receipt        thereof, deliver such cash, if any, to or upon the order of the registered holder of such        Rights Certificate.   In the event that the Company is obligated to issue Company Common Stock or other securities  of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the  Company will make all arrangements necessary so that such Company Common Stock, other  securities, cash and/or other property are available for distribution by the Rights Agent, if and  when appropriate.  The payment of the Purchase Price (as such amount may be reduced pursuant  to Section 11(a)(iii) hereof) shall be made in cash or by certified or bank check or money order  payable to the order of the Company.               (d)   In case the registered holder of any Rights Certificate shall properly  exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing 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 Sections 6 and 14 hereof.               (e)   Notwithstanding anything in this Agreement to the contrary, from and  after the first occurrence of any 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) which becomes a transferee after the Acquiring Person becomes such, or                     (iii) a transferee of an Acquiring Person (or of any such Associate or        Affiliate) which becomes a transferee prior to or concurrently with the Acquiring Person        becoming such and which receives such Rights pursuant to either (A) a transfer (whether        or not for consideration) from the Acquiring Person (or any such Associate or Affiliate)        to holders of equity interests in such Acquiring Person (or any such Associate or        Affiliate) or to any Person with whom the Acquiring Person (or such Associate or        Affiliate) has any continuing agreement, arrangement or understanding regarding the        transferred Rights, shares of Company Common Stock or the Company or (B) a transfer        which the Board of Directors has determined to be part of a plan, arrangement or        understanding which has as a primary purpose or effect the avoidance of this        Section 7(e),   shall be null and void without any further action, and no holder of such Rights shall have any  rights whatsoever with respect to such Rights, whether under any provision of this Agreement or  otherwise.  The Company shall use all reasonable efforts to ensure 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 or any other Person as a result of the Company’s failure to make or delay in making  any determinations with respect to an Acquiring Person or its Affiliates or Associates or any  transferee or any of them hereunder.                                          14   

 

                 (f)   Notwithstanding anything in this Agreement or any Rights Certificate to   the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any   action with respect to a registered holder upon the occurrence of any purported exercise by such   registered holder unless such registered holder shall have (i) properly completed and duly   executed the certificate following the form of election to purchase set forth on the reverse side of   the Rights Certificate surrendered for such exercise, (ii) not indicated an affirmative response to   clause 1 or 2 thereof, (iii) provided such additional evidence of the identity of the Beneficial   Owner (or former Beneficial Owner) of the Rights represented by such Rights Certificate or   Affiliates or Associates thereof as the Company shall reasonably request and (iv) tendered the   Purchase Price (and an amount equal to any applicable transfer tax required to be paid by the   holder of such Rights Certificate in accordance with Section 9) to the Company in the manner set   for the in Section 7(c).         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 this Agreement.  The  Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent  shall so cancel and retire, any Rights Certificates 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, or cause to be destroyed, such  cancelled Rights Certificates, and in such case shall deliver a certificate evidencing the  destruction thereof to the Company (or, at the Company’s option, appropriate copies of the  electronic records relating to Rights Certificates so cancelled or destroyed by the Rights Agent).         Section 9.  Reservation and Availability of Capital Stock.                (a)   The Company shall, at all times prior to the occurrence of a   Section 11(a)(ii) Event, cause to be reserved and kept available, out of its authorized and   unissued shares of preferred stock or its authorized and issued shares of preferred stock held in   its treasury, and, after the occurrence of a Section 11(a)(ii) Event, to the extent reasonably   practical, cause to be reserved and kept available, out of its authorized but unissued shares of   preferred stock, Company Common Stock and/or other securities or its authorized and issued   shares held in its treasury, the number of shares of Preferred Stock (and, following the   occurrence of a Section 11(a)(ii) Event, Company Common Stock and/or other securities) that,   as provided in this Agreement, will be sufficient to permit the exercise in full of all outstanding   Rights.  Upon the occurrence of any events resulting in an increase in the aggregate number of   shares of Preferred Stock (or other equity securities of the Company) issuable upon exercise of   all outstanding Rights above the number then reserved, the Company shall make appropriate   increases in the number of shares so reserved to the extent reasonably practicable.                (b)   If the shares of Preferred Stock (and, following the occurrence of a   Section 11(a)(ii) Event, Company Common Stock and/or other securities) to be issued and   delivered 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 the                                           15    

 

   time that the Rights become exercisable, all securities reserved for such issuance to be listed on  such exchange or quotation system upon official notice of issuance upon such exercise.               (c)   The Company shall use its best efforts:                     (i)   as soon as practicable following the earliest date after the        occurrence of a Section 11(a)(ii) Event and a determination by the Company of the        consideration to be delivered by the Company upon exercise of the Rights (including in        accordance with Section 11(a)(iii) hereof) or, if so required by law, as soon as practicable        following the Distribution Date (such date being the “Registration Date”), to file a        registration statement on an appropriate form under the Securities Act of 1933, as        amended (the “Securities Act”), with respect to the securities that may be acquired upon        exercise of the Rights (the “Registration Statement”),                     (ii)  to cause the Registration Statement to become effective as soon as        practicable after such filing,                     (iii) to cause the Registration Statement to continue to be effective (and        to include a prospectus complying with the requirements of the Securities Act) until the        earlier of (A) the date as of which the Rights are no longer exercisable for the securities        covered by the Registration Statement, and (B) the Expiration Date, and                     (iv)  to take as soon as practicable following the Registration Date such        action as may be required to ensure that any acquisition of securities upon exercise of the        Rights complies with any applicable state securities or “blue sky” laws.    The Company may temporarily suspend, for a period of time not to exceed one hundred twenty  (120) days after the Registration Date, the exercisability of the Rights in order to prepare and file  such registration statement and permit it to become effective.  Upon any such suspension, the  Company shall issue a public announcement stating that the exercisability of the Rights has been  temporarily suspended, as well as a public announcement at such time as the suspension is no  longer in effect, in each case with simultaneous written notice to the Rights Agent.   Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be  exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have  been obtained, the exercise thereof shall not be permitted under applicable law or a registration  statement shall not have been declared effective.               (d)   The Company shall take all such action as may be necessary to ensure that  all shares of Preferred Stock (and, following the occurrence of a Triggering Event, any other  securities that may be delivered upon exercise of Rights) shall be, at the time of delivery of the  certificates or depositary receipts for such securities (subject to payment of the Purchase Price),  duly and validly authorized and issued and fully paid and nonassessable.               (e)   The Company shall pay any documentary, stamp or other tax or charge  imposed in connection with the issuance or delivery of the Rights Certificates or of any Preferred  Stock (or any other securities or assets, as the case may be) upon the exercise of Rights;  provided, however, the Company shall not be required to pay any such tax or charge imposed in  connection with the issuance or delivery of Units of Preferred Stock, or any certificates or                                         16   

 

     depositary receipts for such Units of Preferred Stock (or, following the occurrence of a   Triggering Event, any other securities, cash or assets, as the case may be) to any Person other   than the registered holder of the Rights Certificates evidencing the Rights surrendered for   exercise.  The Company shall not be required to issue or deliver any certificates or depositary   receipts for Units of Preferred Stock (or, following the occurrence of a Triggering Event, any   other securities, cash or assets, as the case may be) to, or in a name other than that of, the   registered holder upon the exercise of any Rights until any such tax or charge shall have been   paid (any such tax or charge being payable by the holder of such Rights Certificate at the time of   surrender) or until it has been established to the Company’s satisfaction that no such tax or   charge is due.         Section 10. Preferred Stock Record Date.  Each Person in whose name any certificate  or depositary receipt for Units of Preferred Stock (or other securities, as the case may be) is issued  upon the exercise of Rights shall for all purposes be deemed to have become the holder of record  of the Units of Preferred Stock (or other securities) represented thereby on, and such certificate  shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly  surrendered and payment of the Purchase Price (and any applicable taxes or charges) was made;  provided, however, that if the date of such surrender and payment is a date upon which the  Preferred Stock (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 securities on, and  such certificate shall be dated, the next succeeding Business Day on which the Preferred Stock (or  other securities) transfer books of the Company are open; further provided, however, that if  delivery of Units of Preferred Stock (or other securities, as the case may be) is delayed pursuant  to Section 9(c) hereof, such Persons shall be deemed to have become the record holders of such  Units of Preferred Stock (or other securities) only when such Units (or other securities) first  become deliverable.  Prior to the exercise of the Rights evidenced thereby, the holder of a Rights  Certificate 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 securities purchasable upon exercise of 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 for herein, including 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 other capital         stock, as the case may be, issuable on such date upon exercise of the Rights, shall be                                          17    

 

                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 other 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 transfer books of the Company were still open, such holder would have owned  upon such exercise and been entitled to receive by virtue of such dividend, subdivision,  combination or reclassification.  If an event occurs which would require an adjustment  under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for  in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment  required pursuant to Section 11(a)(ii) hereof.               (ii)  In the event any Person, alone or together with its Affiliates and  Associates, shall become an Acquiring Person, other than pursuant to any transaction set  forth in Section 13(a) hereof, then, immediately upon the occurrence of such event (a  “Section 11(a)(ii) Event”), each holder of a Right (except as otherwise provided herein,  including Section 7(e) hereof) shall thereafter have the right to receive, upon exercise of  such Right at the then-current Purchase Price in accordance with the terms of this  Agreement, in lieu of the number of Units of Preferred Stock for which a Right was  exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event (whether  or not such Right was then exercisable), such number of Units of Preferred Stock as shall  equal the result obtained by:                     (A)   multiplying the then-current Purchase Price by the number        of Units of Preferred Stock for which a Right was exercisable immediately prior        to the first occurrence of a Section 11(a)(ii) Event (whether or not such Right was        then exercisable) (such product thereafter being, for all purposes of this        Agreement, other than Section 13 hereof, the “Purchase Price”), and                     (B)   dividing that product by 50% of the current market price        (determined pursuant to Section 11(d) hereof) per Unit of Preferred Stock on the        date of such first occurrence   (such Units of Preferred Stock being the “Adjustment Shares”); provided, however, that  the Purchase Price and the number of Units of Preferred Stock so receivable upon  exercise of a Right shall, following the Section 11(a)(ii) Event, be subject to further  adjustment as appropriate in accordance with this Section 11. Notwithstanding the  foregoing, the Rights shall not be exercisable until the time period during which the  Rights may be redeemed pursuant to Section 23 hereof shall have expired. From and after  the occurrence of a Section 13(a) Event, any Rights that have not theretofore been  exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable only in  connection with Section 13 and not pursuant to this Section 11(a)(ii).               (iii) The Company, by the vote of the Board of Directors, may at its  option substitute for a Unit of Preferred Stock issuable upon the exercise of Rights in  accordance with the foregoing subparagraph (ii), shares of Company Common Stock or  fractions thereof having a current market price (as determined by Section 11(d) hereof)  equal to the current market price of a Unit of Preferred Stock on the date of the                                   18                

 

                Section 11(a)(ii) Event.  In the event that the number of shares of Preferred Stock (or, if  the Company shall have determined to substitute shares of Company Common Stock for  Units of Preferred Stock pursuant to the preceding sentence, Company Common Stock)   which are authorized by the Company’s Amended and Restated Certificate of  Incorporation, as currently in effect (the “Certificate of Incorporation”), but not  outstanding or reserved for issuance for purposes other than upon exercise of the Rights,  is 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, to the extent  permitted by applicable law:                     (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 being the “Spread”), and                     (B)   with respect to each Right (other than Rights which have        become void pursuant to Section 7(e)), make adequate provision to substitute, in        whole or in part, for such Adjustment Shares, upon exercise of a Right and        payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase        Price, (3) shares of Company Common Stock or other equity securities of the        Company (including, without limitation, shares, or units of shares, of preferred        stock (such other shares being “common stock equivalents”)), (4) debt securities        of the Company, (5) other assets, or (6) any combination of the foregoing, having        an aggregate value which, when added to the value of the Units of Preferred Stock        actually issued upon exercise of such Right, shall have an aggregate value equal        to the Current Value (less the amount of any reduction in such Purchase Price),        where such aggregate value has been determined by the Board of Directors, after        receiving advice from a nationally recognized investment banking firm;   provided, however, that if the Company shall not have made adequate provision to  deliver value pursuant to clause (B) above within thirty 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 (such thirty day period, as it may be  extended hereunder, being referred to herein as the “Substitution Period,” and the later of  (x) and (y) being referred to herein as the “Section 11(a)(iii) Trigger Date”), then, subject  to Section 24 hereof, the Company shall be obligated (to the extent permitted by  applicable law) to deliver, upon the surrender for exercise of a Right and without  requiring payment of the Purchase Price, Units of Preferred Stock (to the extent  available) and then, if necessary, shares (or fractions of shares, at the discretion of the  Board of Directors) of Company Common Stock and cash, or a combination thereof,  which Units of Preferred Stock, shares (or fractions of shares) of Company Common  Stock and/or cash shall have an aggregate value equal to the Spread.  If the Board of  Directors determines in good faith that it is likely that sufficient additional shares of  Preferred Stock or Company Common Stock could be authorized for issuance upon  exercise in full of the Rights, then the Substitution Period may be extended to the extent  necessary, but not more than ninety days after the Section 11(a)(iii) Trigger Date, in order  that the Company may seek stockholder approval for the authorization of such additional  shares.                                     19                

 

               To the extent that the Company determines that some action need be taken        pursuant to the second and/or third 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        second sentence and to determine the value thereof.  If any such suspension occurs, 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 the time such        suspension is no longer in effect.  For purposes of this Section 11(a)(iii), the value of a        Unit of Preferred Stock or share of Company Common Stock shall be the current market        price (as determined pursuant to Section 11(d) hereof) per Unit of Preferred Stock or        share of Company Common Stock, as the case may be, on the Section 11(a)(iii) Trigger        Date and the value of any common stock equivalent shall be deemed to have the same        value as a Unit of Preferred 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 calendar days after such record date) shares of Preferred  Stock (or shares having substantially the same rights, privileges and preferences as 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 l1(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:                     (i)   the Purchase Price in effect immediately prior to such record date,        by                     (ii)  a fraction, (A) the numerator of which shall be the sum of 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 (B) 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 of Directors, 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 or any Subsidiary shall not be deemed outstanding for  the purpose of any such computation.  Such adjustment shall be made successively whenever                                         20   

 

   such a record date is fixed, and in the event that such rights, options or warrants are not so  issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in  effect if such record date had not been fixed.               (c)   In case the Company shall fix a record date for a distribution to all holders  of shares of Preferred Stock (including any such distribution made in connection with a  consolidation or merger in which the Company is the continuing or surviving corporation) of  evidences of indebtedness, cash (other than a regular periodic cash dividend paid out of funds  legally available therefor), assets (other than a dividend payable in shares of Preferred Stock, but  including any dividend payable in stock other than Preferred Stock) or subscription rights,  options 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:                     (i)   the Purchase Price in effect immediately prior to such record date,        by                     (ii)  a fraction, (A) 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 of        Directors, whose determination shall be described in a statement filed with the Rights        Agent and shall be conclusive for all purposes) of the cash, assets or evidences of        indebtedness so to be distributed or of such subscription rights, options or warrants        distributable in respect of a share of Preferred Stock and (B) the denominator of which        shall be such current market price per share of Preferred Stock.   Such adjustments shall be made successively whenever such a record date is fixed, and in the  event that such distribution is not so made, the Purchase Price shall be adjusted to be the  Purchase Price which would have been in effect if such record date had not been fixed.               (d)   (i)   For the purpose of any computation hereunder, the “current market        price” per share of Company Common Stock or Common Stock on any date shall be        deemed to be the average of the daily closing prices per share of such shares for the thirty        consecutive Trading Days immediately prior to such date; provided, however, if prior to        the expiration of such requisite thirty Trading Day period the issuer announces either        (A) a dividend or distribution on such shares payable in such shares or securities        convertible into such shares (other than the Rights), or (B) any subdivision, combination        or reclassification of such shares, and the ex-dividend date for such dividend or        distribution or the record date for such subdivision, combination or reclassification, as the        case may be, shall not have occurred prior to the commencement of the requisite thirty        Trading Day period, then, and in each such case, the “current market price” shall be        properly adjusted to take into account such event.  The closing price for each day shall        be:                           (x)   the last sale price, regular way, or, in the 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                                          21   

 

               system with respect to securities listed on the principal national securities              exchange on which such shares are listed or admitted to trading, or                            (y)   if such shares are not listed or admitted to trading on any              national securities exchange, the last quoted price or, if not so quoted, the average              of the high bid and low asked prices in the over-the-counter market, or                            (z)   if on any such date such shares 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 such shares selected by the Board              of Directors.           If on any such date no market maker is making a market in such shares, or if such shares        are not publicly held or so listed or traded, “current market price” per share shall mean        the fair value per share as determined in good faith by the Board of Directors, whose        determination shall be described in a statement filed with the Rights Agent and shall be        conclusive for all purposes.  The term “Trading Day” shall mean, if such shares are listed        or admitted to trading on any national securities exchange, a day on which the principal        national securities exchange on which such shares are listed or admitted to trading is open        for the transaction of business or, if such shares are not so listed or admitted, a Business        Day.                     (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        for Company Common Stock in clause (i) of this Section 11(d) (other than the        penultimate 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 (A) 100 (as such amount may be appropriately adjusted for such        events as stock splits, stock dividends and recapitalizations with respect to Company        Common Stock occurring after the date of this Agreement) multiplied by (B) the current        market price per share of Company Common Stock.  If neither Company Common Stock        nor 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 of Directors, whose 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 a Unit of Preferred Stock shall be equal to        (A) the current market price of one share of Preferred Stock divided by (B) 100.               (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 1% in the Purchase Price; provided, however, that any adjustments which by reason of  this Section 11(e) are not required to be made shall be carried forward and taken into account in  any subsequent adjustment.  All calculations under this Section 11 shall be made to the nearest  cent or to the nearest one one-thousandth of a share of Company Common Stock or Common  Stock or other share or one one-millionth of a share of Preferred Stock, as the case may be.                                          22   

 

   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 and (ii) the Expiration Date.               (f)   If, as a result of an adjustment made pursuant to Section 11(a)(ii) or 13(a)  hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of  capital stock other than Preferred Stock, thereafter the number of such other shares so receivable  upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from  time to time in a manner and on terms as nearly equivalent as practicable to the provisions with  respect to the Preferred Stock contained in Sections 11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), (l)  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 shares.               (g)   All Rights originally issued by the Company subsequent to any adjustment  made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted  Purchase Price, the number of Units of Preferred Stock (or other securities or amount of cash or  combination thereof) that may be acquired 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 Units of Preferred Stock (calculated to the nearest one one-hundred-thousandth of a  Unit) obtained by (i) multiplying (x) the number of Units of Preferred Stock covered by a Right  immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such  adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price  in effect immediately after such adjustment of the Purchase Price.               (i)   The Company may elect, on or after the date of any adjustment of the  Purchase Price, to adjust the number of Rights, in lieu of any adjustment in the number of Units  of Preferred Stock that may be acquired 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  Units 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 one-hundred-thousandth) obtained  by dividing (x) the Purchase Price in effect immediately prior to adjustment of the Purchase  Price by the (y) 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 days  later than the date of such 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                                         23   

 

   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 to be so  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 Units 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 Unit  and the number of Units of Preferred Stock 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 par or stated value, if any, of the number of Units of Preferred Stock or  other shares of capital 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 fully paid and nonassessable number of Units of  Preferred Stock or other shares at such adjusted Purchase Price.               (l)   In any case in which this Section 11 shall require that an adjustment in the  Purchase Price be made effective as of a record date for a specified event, the Company may  elect to defer until the occurrence of such event the issuance to the holder of any Right exercised  after such record date of that number of Units of Preferred Stock and shares of other capital stock  or securities of the Company, if any, issuable upon such exercise over and above the number of  Units of Preferred Stock and shares of 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 of Directors 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 holders or shall reduce the taxes payable by such holders.               (n)   The Company shall not, at any time after the Distribution Date,  (i) consolidate with any other Person (other than a wholly owned Subsidiary of the Company in a  transaction which complies with Section 11(o) hereof), (ii) merge with or into any other Person                                         24   

 

     (other than a wholly owned 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 transactions, assets, cash flow or earning power aggregating more than   50% of the assets, cash flow 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 wholly owned   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, sale               or transfer there are any rights, warrants or other instruments or securities               outstanding or agreements in effect which 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, sale or transfer, the Person which constitutes, or would               constitute, the “Principal Party” for purposes of Section 13(a) hereof shall have               distributed or otherwise transferred to its stockholders or other persons holding an               equity interest in such Person Rights previously owned by such Person or any of               its Affiliates and Associates.                 (o)   After the Distribution Date, the Company shall 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 Rights Dividend Declaration Date and prior to the   Distribution Date (i) declare a dividend on the outstanding shares of Company Common Stock   payable in shares of Company Common Stock, (ii) subdivide the outstanding shares of Company   Common Stock or (iii) combine the outstanding shares of Company Common Stock into a   smaller number of shares, the number of Rights associated with each share of Company   Common Stock then outstanding, or issued or delivered thereafter prior to the Distribution Date   or in accordance with Section 22 hereof, shall be proportionately adjusted so that the number of   Rights thereafter associated with each share of Company Common Stock following any such   event shall equal the result obtained by multiplying:                      (x)   the number of Rights associated with each share of Company               Common Stock immediately prior to such event, by                      (y)   a fraction, (A) the numerator of which shall be the total number of               shares of Company Common Stock outstanding immediately prior to the               occurrence of the event and (B) the denominator of which shall be the total               number of shares of Company 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  (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts                                          25    

 

    accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer  agent for the Preferred Stock and the Company Common Stock, a copy of such certificate, and  (c) if a Distribution Date has occurred, 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 Company Common Stock) in accordance with Section 26 hereof.  Notwithstanding the  foregoing sentence, the failure of the Company to make such certification or give such notice  shall not affect the validity of such adjustment or the force or effect of the requirement for such  adjustment.  The Rights Agent shall be fully protected in relying on any such certificate and on  any adjustments or statements therein contained and shall not be deemed to have knowledge of  any such adjustment or event unless and until it shall have received such certificate.         Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning  Power.                (a)   In the event that, following the first occurrence of a Section 11(a)(ii)   Event, directly or indirectly, either:                      (x)   the Company shall consolidate with, or merge with and into, any         other Person (other than a wholly owned Subsidiary of the Company in a transaction         which 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 wholly owned Subsidiary of the Company         in a transaction which 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 Company Common Stock shall be         changed into or exchanged for stock or other securities of the Company or 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) to any Person or Persons (other than the         Company or any of its wholly owned Subsidiaries in one or more transactions each of         which complies with Section 11(o) hereof), in one or more transactions, assets, cash flow         or earning power aggregating 50% or more of the assets, cash flow or earning power of         the Company and its Subsidiaries (taken as a whole)    (any such event being a “Section 13 Event”), then, and in each such case, proper provision shall   be made so that:                      (i)   each holder of a Right (other than Rights which have become void         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 this Agreement         and in lieu of Units of Preferred Stock or shares of Company Common Stock, such         number of validly authorized and issued, fully paid, nonassessable and freely tradeable         shares of Common Stock of the Principal Party, which shares shall not be subject to any                                           26    

 

                liens, encumbrances, rights of call or first refusal, transfer restrictions or other adverse  claims, as shall be equal to the result obtained by:                     (A)   multiplying (x) the then-current Purchase Price by (y) the        number of Units 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        (x) the number of such Units for which a Right was exercisable hereunder        immediately prior to such first occurrence of a Section 11(a)(ii) Event by (y) the        Purchase Price in effect immediately prior to such first occurrence), and                      (B)   dividing that product (which, following the first occurrence        of a Section 13 Event, shall be the “Purchase Price” for all purposes of this        Agreement) by 50% of the current market price (determined pursuant to        Section 11(d) hereof) per share of the Common Stock of such Principal Party on        the date of consummation of such Section 13 Event;   provided, however, that the Purchase Price (as theretofore adjusted in accordance with  Section 11(a)(ii) hereof) and the number of shares of Common Stock of such Principal  Party so receivable upon exercise of a Right shall be subject to further adjustment as  appropriate in accordance with Section 11(f) hereof to reflect any events occurring in  respect of the Common Stock of such Principal Party after the occurrence of such  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 in all respects, it being specifically intended that 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 authorization and reservation of a sufficient number of shares of its  Common Stock in accordance with Section 9 hereof) in connection with the  consummation of any such transaction as may be necessary to assure that the provisions  of this Agreement 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;                (v)   such Principal Party shall take such steps as may be necessary to  assure that, upon the subsequent occurrence of any merger, consolidation, sale of all or  substantially all of the assets, recapitalization, reclassification of shares, reorganization or  other extraordinary transaction in respect of such Principal Party, each holder of a Right  shall thereupon be entitled to receive, upon exercise of a Right and payment of the  Purchase Price, such cash, shares, rights, warrants and other property which such holder                                   27                

 

         would have been entitled to receive had it, at the time of such transaction, owned the        shares of Common Stock of the Principal Party purchasable upon the exercise of a Right,        and such Principal Party shall take such steps (including, but not limited to, reservation of        shares of stock) as may be necessary to permit the subsequent exercise of the Rights in        accordance with the terms hereof for such cash, shares, rights, warrants and other        property; and                     (vi)  the provisions of Section 11(a)(ii) hereof shall be of no further        effect following the first occurrence of any Section 13 Event.               (b)   “Principal Party” shall mean:                     (i)   in the case of any transaction described in clause (x) or (y) of the        first sentence of Section 13(a) hereof, (A) the Person that is the issuer of any securities        into which shares of Company Common Stock are converted in such merger or        consolidation, or, if there is more than one such issuer, the issuer of Common Stock that        has the highest aggregate current market price (determined pursuant to Section 11(d)        hereof) and (B) if no securities are so issued, the Person that is the other party to such        merger or consolidation, or, if there is more than one such Person, the Person the        Common Stock of which has the highest aggregate current market price (determined        pursuant to Section 11(d) hereof); and                     (ii)  in the case of any transaction described in clause (z) of the first        sentence of Section 13(a) hereof, the Person that is the party receiving the largest portion        of the assets, cash flow or earning power transferred pursuant to such transaction or        transactions, or, if each Person that is a party to such transaction or transactions receives        the same portion of the assets, cash flow or earning power transferred pursuant to such        transaction or transactions or if the Person receiving the largest portion of the assets, cash        flow or earning power cannot be determined, whichever Person the Common Stock of        which has the highest aggregate current market price (determined pursuant to        Section 11(d) hereof);   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-month period registered under        Section 12 of the Exchange Act (“Registered Common Stock”) or such Person is not a        corporation, and such Person is a direct or indirect Subsidiary of another Person that has        Registered Common Stock outstanding, “Principal Party” shall refer to such other Person;                      (2)   if the Common Stock of such Person is not Registered Common        Stock or such Person is not a corporation, and such Person is a direct or indirect        Subsidiary of another Person but is not a direct or indirect Subsidiary of another Person        which has Registered Common Stock outstanding, “Principal Party” shall refer to the        ultimate parent entity of such first-mentioned Person;                      (3)   if such Person is directly or indirectly controlled by more than one        Person, and one or more of such other Persons has Registered Common Stock                                         28   

 

         outstanding, “Principal Party” shall refer to whichever of such Persons is the issuer of the        Registered Common Stock having the highest aggregate current market price (determined        pursuant to Section 11(d) hereof); and                      (4)   if such Person is directly or indirectly controlled by more than one        Person, and none of such other Persons have Registered Common Stock outstanding,        “Principal Party” shall refer to whichever ultimate parent entity is the corporation having        the greatest stockholders equity or, if no such ultimate parent entity is a corporation, shall        refer to whichever ultimate parent entity is the entity having the greatest net assets.               (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 the Principal Party, as soon as practicable after the date of such Section 13 Event,  at its own expense, shall:                     (i)   (A) file on an appropriate form a registration statement under the        Securities Act with respect to the Rights and the securities purchasable upon exercise of        the Rights, (B) use its best efforts to cause such registration statement to become        effective as soon as practicable after filing and remain effective (and to include a        prospectus complying with the requirements of the Securities Act) until the Expiration        Date, and (C) take all such action as may be required to enable the Principal Party to        issue the securities purchasable upon exercise of the Rights and to assure that any        acquisition of such securities upon the exercise of the Rights complies with any        applicable state securities or “blue sky” laws, including but not limited to the registration        or qualification of such securities under all requisite securities and “blue sky” laws of the        various states and the listing of such securities on such exchanges and trading markets as        may be necessary or appropriate; and                     (ii)  deliver to holders of the Rights historical financial statements for        the Principal Party and each of its Affiliates which comply in all respects with the        requirements for registration on Form 10 under the Exchange Act.               (d)   In case the Principal Party which is to be a party to a transaction referred  to in this Section 13 has a provision in any of its authorized securities or in its certificate or  articles of incorporation or by-laws or other instrument governing its corporate affairs, which  provision would have the effect of (i) causing such Principal Party to issue, in connection with,  or as a consequence of, the consummation of a transaction referred to in this Section 13, shares  of Common Stock or common stock equivalents of such Principal Party at less than the then  current market price per share (determined pursuant to Section 11(d) hereof) or securities  exercisable for, or convertible into, Common Stock or common stock equivalents of such  Principal Party at less than such then current market price (other than to holders of Rights  pursuant to this Section 13) or (ii) providing for any special payment, tax or similar provisions in  connection with the issuance of the Common Stock of such Principal Party pursuant to the                                         29   

 

   provisions of this Section 13; then, in such event, the Company shall not consummate any such  transaction unless prior thereto the Company and such Principal Party shall have executed and  delivered to the Rights Agent a supplemental agreement providing that the provision in question  of such Principal Party shall have been cancelled, waived or amended, or that the authorized  securities shall be redeemed, so that the applicable provision will have no effect in connection  with, or as a consequence of, the consummation of the proposed transaction.               (e)   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, any Rights which theretofore have not been exercised pursuant to Section 11(a)(ii) shall  thereafter be exercisable only in the manner and for the securities described in Section 13(a).        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(p) hereof, or to distribute Rights  Certificates which evidence fractional Rights.  In lieu of issuing such fractional Rights, there  shall be paid to the Persons to which such fractional Rights would otherwise be issuable an  amount in cash equal to such fraction of the market value of a whole Right.  For purposes of this  Section 14(a), the 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:                     (x)   the last sale price, regular way, or, in the 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 on the principal national securities exchange on which the Rights are        listed or admitted to trading, or                     (y)   if the Rights are not listed or admitted to trading on any national        securities exchange, the last quoted price or, if not so quoted, the average of the high bid        and low asked prices in the over-the-counter market, as reported by such system then in        use, or                      (z)   if on any such date the Rights are not quoted by any such        organization, the average of the closing bid and asked prices as furnished by a        professional market maker making a market in the Rights selected by the Board of        Directors.     If on any such date no such market maker is making a market in the Rights, the fair value of the  Rights on such date as determined in good faith by the Board of Directors shall be used and such  determination shall be described in a statement filed with the 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  (1/1,000) of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates  which evidence such fractional shares of Preferred Stock (other than fractions which are integral                                         30   

 

     multiples of one one-thousandth (1/1,000) of a share of Preferred Stock); provided, however, that   in lieu of fractions of shares of Preferred Stock which are integral multiples of one one-  thousandth (1/1,000) of a share of Preferred Stock, the Company may provide for the issuance of   depositary receipts pursuant to Section 7(c) hereof.  In lieu of such fractional shares of Preferred   Stock that are not integral multiples of one one-thousandth (1/1,000) of a share, the Company   may 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 then current market price of   a share of Preferred Stock on the day of exercise, determined in accordance with Section 11(d)   hereof.                 (c)   The Company shall not be required to issue fractions of shares of   Company Common Stock upon exercise of the Rights or to distribute certificates which evidence   fractional shares of Company Common Stock.  In lieu of such fractional shares of Company   Common Stock, the Company may 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 (1) share of Company Common Stock.  For purposes of this   Section 14(c), the current market value of one share of Company Common Stock shall be the   closing price per share of Company Common Stock (as determined pursuant to Section 11(d)(i)   hereof) on the Trading Day immediately prior to the date of such exercise.                (d)   The holder of a Right by the acceptance of the Rights 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.                 (e)   Whenever a payment for fractional Rights or fractional shares is to be   made by the Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights   Agent a certificate setting forth in reasonable detail the facts related to such payments and the   prices and/or formulas utilized in calculating such payments, and (ii) provide sufficient monies to   the Rights Agent in the form of fully collected funds to make such payments. The Rights Agent   shall be fully protected in relying upon such a certificate and shall have no duty with respect to,   and shall not be deemed to have knowledge of any payment for fractional Rights or fractional   shares under any Section of this Rights Agreement relating to the payment of fractional Rights or   fractional shares unless and until the Rights Agent shall have received such a certificate and   sufficient monies.         Section 15. Rights of Action.  All rights of action in respect of this Agreement, other  than rights of action vested in the Rights Agent hereunder, including Section 18 or Section 20  hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the  Distribution Date, the registered holders of certificates representing shares of Company Common  Stock); and any registered holder of a Rights Certificate (or, prior to the Distribution Date, of a  certificate representing shares of Company 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 a  certificate representing shares of Company Common Stock), may, in his own behalf and for his  own benefit, enforce, and may institute and maintain any suit, action or proceeding against the  Company or any other Person to enforce, or otherwise act in respect of, his right to exercise the  Rights evidenced by such 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                                          31    

 

    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:                (a)   prior to the Distribution Date, the Rights will be transferable only in   connection with the transfer of Company 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 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 Company 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 Company Common Stock   certificate made by any Person other than the Company or the Rights Agent) for all purposes   whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of   Section 7(e) hereof, shall 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 any 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, judgment or ruling   issued by a court of competent jurisdiction or by a governmental, regulatory or administrative   agency or commission, or any statute, rule, regulation or executive order promulgated or enacted   by any governmental authority, prohibiting or otherwise restraining performance of such   obligation; provided, however, the Company must use its best efforts to have any such order,   decree, judgment or ruling lifted or otherwise overturned as promptly as practicable.         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 shares 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, except as provided in  Section 25 hereof, to receive notice of meetings or other actions affecting stockholders, 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.  This                                          32    

 

    Section 17 shall also apply to holders, as such, of Rights prior to the issuance of Rights  Certificates.         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, including reasonable fees and disbursements of its counsel, and other   disbursements incurred in connection with the execution and administration of this Agreement   and the exercise and performance of its duties hereunder.  The Company shall indemnify the   Rights Agent for, and hold it harmless against, any loss, liability or expense (including the   reasonable documented fees and expenses of outside legal counsel) incurred without gross   negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful   misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a   court of competent jurisdiction) on the part of the Rights Agent, for any action taken or omitted   to be taken by the Rights Agent in connection with the acceptance and administration of this   Agreement, including, without limitation, the reasonable costs and expenses of defending against   a claim of liability hereunder.                (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 Preferred Stock or Company   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 reasonably believed by it to be genuine and to have been signed,   executed and, where necessary, verified or acknowledged by the proper Person or Persons, or   otherwise on the advice of counsel as set forth in Section 20 hereof.  The Rights Agent shall not   be deemed to have knowledge of any event of which it was supposed to receive notice thereof   hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to   take action in connection therewith, unless and until it has received such notice in writing.                (c)   The provisions of this Section 18 and Section 20 hereof shall survive the   termination or expiration of this Agreement, the exercise or expiration of the Rights and the   resignation, replacement or removal of the Rights Agent.         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 or stockholder services businesses 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 document 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                                          33    

 

     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 to perform 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:                (a)   The Rights Agent may consult with legal counsel (who may be legal   counsel for the Company), and the opinion or advice 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 or advice.                (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 omitting any action hereunder, such fact   or matter (unless other evidence in respect thereof be specified herein) may be deemed to be   conclusively proved and established by a certificate signed by any one of the Chairman of the   Board, the Chief Executive Officer, the President, 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 omitted 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 (which gross negligence, bad faith or willful   misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a   court of competent jurisdiction).  Any liability of the Rights Agent under this Agreement will be   limited to the amount of annual fees paid by the Company to the Rights Agent.                (d)   The Rights Agent shall not be liable for or by reason of any of the   statements of fact or recitals contained in this 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.                                          34    

 

               (e)   The Rights Agent shall not be liable or responsible for the validity of this  Agreement or the execution and delivery hereof (except the due execution hereof by the Rights  Agent) or for the validity or execution of any Rights Certificate (except its countersignature  thereof); nor shall it be liable or responsible for any breach by the Company of any covenant or  failure by the Company to satisfy conditions contained in this Agreement or in any Rights  Certificate; nor shall it be liable or responsible for any adjustment required under the provisions  of Section 11 or Section 13 hereof or 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 actual notice of any such  adjustment); 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 Preferred Stock or any other securities to  be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of  Preferred Stock or any other securities will, when so issued, be validly authorized and issued,  fully paid and nonassessable.               (f)   The Company shall perform, execute, acknowledge and deliver or cause to  be performed, executed, acknowledged and delivered all such further acts, instruments and  assurances as may reasonably be required by the Rights Agent for the performance by the Rights  Agent of its duties under this Agreement.               (g)   The Rights Agent is hereby authorized and directed to accept instructions  with respect to the performance of its duties hereunder from any one of the Chairman of the  Board, the Chief Executive Officer, the President, any Vice President, the Secretary, any  Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to  such officers for advice or instructions in connection with its duties, and shall not be liable for  any action taken, or omitted to be taken by it in good faith in accordance with instructions of any  such officer.                (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  have a pecuniary interest in any transaction in which the Company may be interested, or contract  with or lend money to the Company or otherwise act as fully and freely as though it were not  Rights Agent under this Agreement.  Nothing herein shall preclude the Rights Agent from acting  in any other capacity for the Company or for any other Person.               (i)   The Rights Agent may execute and exercise any of the rights or powers  hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or  agents.               (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 or in the exercise of its rights hereunder if the Rights Agent shall have 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                                         35   

 

     purchase, as the case may be, has either not been completed, not signed or indicates an   affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further   action with respect to such requested exercise or transfer without first consulting with the   Company.                  (l)   Notwithstanding anything in this Agreement to the contrary, in no event   will the Rights Agent be liable for special, indirect or consequential loss or damage of any kind   whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised   of the likelihood of such loss or damage and regardless of the form of action.         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’ prior  notice in writing mailed to the Company and, in the event that the Rights Agent or one of its  Affiliates is not also the transfer agent for the Company, to each transfer agent for the Company  Common Stock or Preferred Stock, in each case by trackable mail.  In the event the transfer  agency relationship in effect between the Company and the Rights Agent as of the date of this  Agreement terminates, then, unless such termination is the result of establishing a transfer agency  relationship with an Affiliate of the Rights Agent and, in connection therewith, this Agreement is  assigned to and assumed by such or any other Affiliate of the Rights Agent, the Rights Agent will  be deemed to have resigned automatically and be discharged from its duties under this Agreement  as of the effective date of such termination, and the Company shall be responsible for sending any  required notice.  The Company may remove the Rights Agent or any successor Rights Agent  upon thirty (30) days’ prior notice in writing, mailed to the Rights Agent or successor Rights  Agent, as the case may be, and to each transfer agent for the Company Common Stock or  Preferred Stock, by trackable mail, and, if such removal occurs after the Distribution Date, to the  holders of the Rights Certificates by first-class mail.  If the Rights Agent shall resign or be  removed or shall otherwise become incapable of acting, the Company shall appoint a successor to  the Rights Agent.  If the Company shall fail to make such appointment within a period of 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) an entity organized and doing  business under the laws of the United States or any state of the United States in good standing,  shall be authorized under applicable laws to exercise corporate trust or stock transfer or  stockholder service powers and shall be subject to supervision or examination by federal or state  authorities and which has at the time of its appointment as Rights Agent, when combined with its  Affiliates, a combined capital and surplus of at least $50,000,000 or (b) an Affiliate of a  corporation described in clause (a).  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 Company Common Stock or  Preferred Stock, and, if such appointment occurs after the Distribution Date, mail a notice thereof                                          36    

 

    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.         Section 22. Issuance of New Rights Certificates.  Notwithstanding any of the  provisions of this Agreement or 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 of  Directors to reflect any adjustment or change made in accordance with the provisions of this  Agreement in the Purchase Price or the number or kind or class of shares or other securities or  property that may be acquired under the Rights Certificates.            In addition, in connection with the issuance or sale of shares by the Company of   Company Common Stock following the Distribution Date and prior to the Expiration Date, the   Company (a) shall, with respect to shares of Company Common Stock so issued or sold pursuant   to the exercise of stock options or under any employee plan or arrangement granted or awarded   as of the Distribution Date, or upon the exercise, conversion or exchange of any other securities   hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or   appropriate by the Board of Directors, issue Rights Certificates representing the appropriate   number of Rights in connection with such issuance or sale; provided, however, that (i) 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 (ii) 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.         Section 23. Redemption and Termination.                (a)   Subject to Section 29 hereof, the Company may, at its option, by action of   the Board of Directors, at any time prior to the earlier of (i) the Close of Business on the tenth   Business Day 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) or (ii) the Final Expiration Date, redeem all but not less than all of the then-  outstanding Rights at a redemption price of $0.0001 per Right, as such amount may be   appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring   after the date hereof (such redemption price being the “Redemption Price”).  The Company may,   at its option, by action of the Board of Directors, pay the Redemption Price either in shares of   Company Common Stock (based on the current market price, as defined in Section 11(d) hereof,   of the shares of Company Common Stock at the time of redemption) or cash or any other form of   consideration deemed appropriate by the Board of Directors and the redemption of the Rights   shall be effective at such time and on the basis and with such conditions as the Board of   Directors may in its sole discretion establish.  Notwithstanding anything 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 has expired.                 (b)   Immediately upon the action of the Board of Directors ordering the   redemption of the Rights as provided in Section 23(a) above (or at such later time as the Board of   Directors may establish for the effectiveness of such redemption), and without any further action                                          37    

 

   and without any notice, the right to exercise the Rights will terminate and the only right  thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so  held.  The Company shall promptly give notice of such redemption (with prompt written notice  to the Rights Agent) to 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  Company Common Stock, provided, however, that the failure to give, or any defect in, any such  notice shall not affect the validity of such redemption.  Any notice which is mailed in the manner  herein provided shall be deemed given, whether or not the holder receives the notice.  Each such  notice of redemption will state the method by which the payment of the Redemption Price will  be made.               (c)   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 as 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 Company Common Stock, and upon such action, all outstanding Rights and Rights  Certificates shall be null and void without any further action by the Company.               (d)   Neither the Company nor any of its Affiliates or Associates may redeem,  acquire or purchase for value any Rights at any time in any manner, other than that specifically  set forth in this Section 23 or in Section 24 hereof and other than in connection with the purchase  or repurchase by any of them of Company Common Stock prior to the Distribution Date.        Section 24. Exchange.               (a)   The Company, upon resolution of the Board of Directors, may, at its  option, at any time after the first occurrence of a Section 11(a)(ii) Event, exchange all or part of  the then-outstanding and exercisable Rights (which shall not include Rights that have become  void pursuant to Section 7(e) hereof) for Units of Preferred Stock or shares of Company  Common Stock, at the election of the Board of Directors (such Units of Preferred Stock or shares  of Company Common Stock, as applicable, the “Exchange Securities”) at an exchange ratio of  one Exchange Security per Right, as appropriately adjusted to reflect any stock split, stock  dividend or similar transaction occurring after the date hereof (such exchange ratio being the  “Exchange Ratio”).  Notwithstanding the foregoing, the Board of Directors shall not be  empowered to effect such exchange at any time after any Person (other than an Exempt Person),  together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of  shares of Company Common Stock aggregating 50% or more of the shares of Company  Common Stock then outstanding.  From and after the occurrence of a Section 13(a) Event, any  Rights that theretofore have not been exchanged pursuant to this Section 24(a) shall thereafter be  exercisable only in accordance with Section 13 and may not be exchanged pursuant to this  Section 24(a).  The exchange of the Rights by the Board of Directors may be made effective at  such time, on such basis and with such conditions as the Board of Directors in its sole discretion  may establish.  Prior to effecting an exchange pursuant to this Section 24, the Board may direct  the Company to enter into a Trust Agreement in such form and with such terms as the Board  shall then approve (the “Trust Agreement”).  If the Board so directs, the Company shall enter                                         38   

 

   into the Trust Agreement and shall issue to the trust created by such agreement (the “Trust”) all  of the Exchange Securities issuable pursuant to the exchange, and all Persons entitled to receive  Exchange Securities pursuant to the exchange shall be entitled to receive such Exchange  Securities (and any dividends or distributions made thereon after the date on which such  Exchange Securities are deposited in the Trust) only from the Trust and solely upon compliance  with the relevant terms and provisions of the Trust Agreement.  Any Exchange Securities issued  at the direction of the Board in connection herewith shall be validly issued, fully paid and  nonassessable shares of Common Stock or Preferred Stock (as the case may be), and the  Company shall be deemed to have received as consideration for such issuance a benefit having a  value that is at least equal to the aggregate par value of the Exchange Securities so issued.               (b)   Immediately upon the action of the Board of Directors ordering the  exchange of any Rights pursuant to Section 24(a), 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 Exchange Securities equal to the number  of such Rights held by such holder multiplied by the Exchange Ratio.  The Company shall  promptly provide public notice of any such exchange (with prompt written notice to the Rights  Agent); provided, however, that the failure to give or any defect in such notice shall not affect  the validity of such exchange.  The Company shall promptly 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 Exchange Securities 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 the event that the number of Exchange Securities 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 any exchange of  Rights as contemplated in accordance with this Section 24, then the Company, at the election of  the Board of Directors, shall take all such action as may be necessary to authorize additional  Exchange Securities for issuance upon exchange of the Rights.                (d)   The Company shall not be required to issue fractions of Exchange  Securities or to distribute certificates which evidence fractional Exchange Securities.  In lieu of  issuing fractional Exchange Securities, the Company may pay to the registered holders of Rights  Certificates at the time such Rights are exchanged as herein provided an amount in cash equal to  the same fraction of the current market price (determined pursuant to Section 11(d) hereof) of  one Exchange Security on 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:                                          39   

 

                     (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 periodic cash dividend paid out of funds legally available therefor),                     (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,                     (iii) to effect any reclassification of its Preferred Stock (other than a        reclassification involving only the subdivision of outstanding shares of Preferred Stock),                     (iv)  to effect any consolidation or merger into or with any other Person        (other than a wholly owned 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 or more transactions,        of more than 50% of the assets, cash flow 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 wholly owned 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 the Rights Agent and 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; provided, however, no such notice shall be required pursuant to this Section 25, if any  wholly owned Subsidiary of the Company effects a consolidation or merger with or into, or  effects a sale or other transfer of assets, cash flow or earnings power to, any other wholly owned  Subsidiary of the Company.               (b)   In case any Triggering 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) or Section 13 hereof, as the case may be, and (ii) all references in the preceding  paragraph (a) to Preferred Stock shall be deemed thereafter to refer also to Company Common  Stock and/or, if appropriate, other securities of the Company.                                          40   

 

          Section 26. Notices.  All notices and other communications provided for hereunder  shall, unless otherwise stated herein, be in writing and sent by trackable mail or by overnight  delivery service, if to the Company, at its address at:          Evofem Biosciences, Inc..         12400 High Bluff Drive, Suite 600         San Diego, California  92130         Attention:  Corporate Secretary                  and with a copy (which shall not constitute notice) to                  Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.         3580 Carmel Mountain Road, Suite 300         San Diego, California  92130         Attention: Adam Lenain                  and if to the Rights Agent, at its address at:          Philadelphia Stock Transfer, Inc.         2320 Harverford Road, Suite 230         Ardmore, PA  19003         Attention: Robert J. Winterle            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 Company 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.  Prior to the Distribution Date, and subject  to the other provisions of this Section 27, 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 certificates representing Rights  or shares of Company Common Stock.  From and after the Distribution Date, the Company may,  in its sole and absolute discretion, and the Rights Agent shall, if the Company so directs,  supplement or amend this Agreement without the approval of any holders of Rights Certificates in  order:                      (i)   to cure any ambiguity,                      (ii)  to correct or supplement any provision contained herein which         may be defective or inconsistent with any other provisions herein,                      (iii) to shorten or lengthen any time period hereunder, or                      (iv)  to change or supplement the provisions hereunder in any manner         which the Company may deem necessary or desirable and which shall not adversely                                          41    

 

           affect the interests of the holders of Rights Certificates (other than an Acquiring Person         or an Affiliate or Associate of an Acquiring Person);     provided, however, that this Agreement may not be supplemented or amended to lengthen,   pursuant to clause (iii) of this sentence, (A) subject to Section 31 hereof, a time period relating to   when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any   other time period unless such lengthening is for the purpose of protecting, enhancing or   clarifying the rights of, and/or the benefits to, the holders of Rights (other than an Acquiring   Person or an Associate or Affiliate of an Acquiring Person).  Any such supplement or   amendment shall be evidenced by a writing signed by the Company and the Rights Agent.          Upon the delivery of a certificate from an appropriate officer of the Company which   states that the proposed supplement or amendment is in compliance with the terms of this   Section 27, the Rights Agent shall duly execute and deliver such supplement or amendment   requested by the Company; provided, however, that the Rights Agent may, but shall not be   obligated to, enter into any supplement or amendment that affects the Rights Agent’s own rights,   duties, or obligations under this Agreement.          Prior to the Distribution Date, the interests of the holders of Rights shall be deemed   coincident with the interests of the holders of Company 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. Determinations and Actions by the Board of Directors, etc.  For all  purposes of this Agreement, any calculation of the number of shares of Company Common Stock  outstanding at any particular time, including for purposes of determining the particular percentage  of such outstanding shares of Company Common Stock of which any Person is the Beneficial  Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange  Act Regulations as in effect on the date hereof.  Except as otherwise specifically provided herein,  the Board of Directors shall have the exclusive power and authority to administer this Agreement  and to exercise all rights and powers specifically granted to the Board of Directors or to the  Company, or as may be necessary or advisable in the administration of this Agreement, including,  without limitation, the right and power (i) to interpret the provisions of this Agreement, and (ii) to  make all determinations deemed necessary or advisable for the administration of this Agreement  (including, without limitation, a determination whether to redeem or not redeem the rights or to  amend this Agreement and whether any proposed amendment adversely affects the interest of the  holders of Rights Certificates).  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 of Directors 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 of Directors or any member thereof 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 shares of Company                                          42    

 

    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 shares of Company 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,  (i) if any such term, provision, covenant or restriction is held by such court or authority to be  invalid, void or unenforceable and the Board of Directors determines in its good faith judgment  that severing the invalid language from this Agreement would adversely affect the purpose or  effect of this Agreement and the Rights shall not then be redeemable, 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 Business Day following the date of such determination by the Board of Directors and (ii)  if any such excluded term, provision, covenant or restriction shall adversely affect the rights,  immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign  immediately.         Section 32. Governing Law.  This Agreement, each Right and each Rights Certificate  issued hereunder shall be governed by, and construed in accordance with, the laws of the State of  Delaware applicable to contracts executed in and to be performed entirely in such State, except  that the rights, duties and obligations of the Rights Agent shall be governed by and construed in  accordance with the laws of the State of New York applicable to contracts made and to be  performed entirely within such state.         Section 33. Counterparts.  This Agreement may be executed (including by facsimile) in  one or more counterparts, and by the different parties hereto in separate counterparts, each of  which when executed shall be deemed to be an original, but all of which taken together shall  constitute one and the same instrument.  A signature to this Agreement executed and/or  transmitted electronically shall have the same authority, effect, and enforceability as an original  signature.         Section 34. Descriptive Headings.  The headings contained in this Agreement are for  descriptive purposes only and shall not affect in any way the meaning or interpretation of this  Agreement.         Section 35. Force Majeure.  Notwithstanding anything to the contrary contained herein,  the Rights Agent shall not be liable for any delays or failures in performance resulting from acts  beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of  supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of  data due to power failures or mechanical difficulties with information storage or retrieval systems,  labor difficulties, war, or civil unrest.                                           43    

 

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly  executed, all as of the date first above written.        EVOFEM BIOSCIENCES, INC.                By:    /s/ Saundra Pelletier                Name: Saundra Pelletier                 Title:  Chief Executive Officer          PHILADELPHIA STOCK TRANSFER, INC.                By:   /s/ Robert J. Winterle                Name: Robert J. Winterle                Title:  President                                                                   44   

 

                                                                          EXHIBIT A                                                        TO RIGHTS AGREEMENT                         FORM OF RIGHTS CERTIFICATE  Certificate No.  ______                                           ______ Rights         NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE  RIGHTS AGREEMENT REFERRED TO BELOW).  THE RIGHTS ARE SUBJECT TO  REDEMPTION OR EXCHANGE, AT THE OPTION OF THE COMPANY, ON THE TERMS  SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES SET  FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED 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.                               RIGHTS CERTIFICATE                            EVOFEM BIOSCIENCES, INC.         This certifies that ____________________, or registered assigns, is the registered holder  of the number of Rights set forth above, each of which entitles the registered holder thereof,  subject to the terms and conditions of the Rights Agreement dated as of March 24, 2020, as  amended from time to time (the “Rights Agreement”) (terms defined therein being used herein  with the same meaning unless otherwise defined herein), between Evofem Biosciences, Inc., a  Delaware corporation (the “Company”), and Philadelphia Stock Transfer, Inc., as Rights Agent  (which term shall include any successor Rights Agent under the Rights Agreement), to purchase  from the Company at any time after the Distribution Date and prior to the Expiration Date, at the  office of the Rights Agent, one one-thousandth (1/1,000) of a fully paid and nonassessable share  of Series A Preferred Stock, par value $0.0001 per share (the “Preferred Stock”), of the  Company at the Purchase Price initially of $17.50 per one one-thousandth (1/1,000) share of  Preferred Stock (each such one one-thousandth (1/1,000) of a share being a “Unit”), upon  presentation and surrender of this Rights Certificate with the Election to Purchase properly  completed and related certificate duly executed.  The number of Rights evidenced by this Rights  Certificate (and the number and kind of shares which may be purchased upon exercise thereof)  and the Purchase Price per Unit set forth above, are the number and Purchase Price as of March  24, 2020, based on the Preferred Stock as constituted at such date.         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 or (ii) under certain circumstances described in the Rights Agreement, a  direct or indirect transferee of any such Acquiring Person, Associate or Affiliate, including a  transferee of any person who, after such transfer, becomes an Acquiring Person or an Affiliate or  Associate of an Acquiring Person, such Rights shall become null and void and no holder hereof                                         A-1   

 

   shall have any right with respect to such Rights from and after the occurrence of such  Section 11(a)(ii) Event.           In certain circumstances described in the Rights Agreement, the Rights evidenced hereby  may entitle the registered holder thereof to purchase capital stock of an entity other than the  Company or receive common stock, cash or other assets, all as provided in the Rights  Agreement.         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 a Triggering Event.         This Rights Certificate is subject to all of the terms and conditions of the Rights  Agreement, which terms 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 office or  offices of the Rights Agent designated for such purpose and are available from the Rights Agent  upon written request.         This Rights Certificate, with or without other Rights Certificates, upon surrender at the  office of the Rights Agent designated for such purpose, may be exchanged for another Rights  Certificate or Rights Certificates of like tenor and date evidencing an aggregate number of Rights  equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights  Certificates surrendered.  If this Rights Certificate shall be exercised in part, the registered 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 under certain circumstances at its option at a  redemption price of $0.0001 per Right (as such amount may be adjusted pursuant to the Rights  Agreement), at any time prior to the earlier of the Close of Business on (i) the tenth business day  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. The Rights will not be exercisable until such time as the  Company’s right of redemption has expired. In addition, subject to the provisions of the Rights  Agreement, the Rights may be exchanged, in whole or in part, for Units of Preferred Stock or  shares of the Common Stock of the Company.  Immediately upon the action of the Board of  Directors of the Company authorizing any such exchange, and without any further action or any  notice, the Rights (other than Rights which are not subject to such exchange) will terminate and  the Rights will only enable holders to receive the shares issuable upon such exchange.         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                                        A-2   

 

   (1/1,000) 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 Preferred Stock or of any other securities 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 of subscription rights, or otherwise,  until the 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.  Dated as  of ____________.                                               EVOFEM BIOSCIENCES, INC.                                                                               By:______________________________________                                            Name:                                            Title:  President                                                                                                                     By:______________________________________                                            Name:                                            Title:  Secretary     Countersigned:   PHILADELPHIA STOCK TRANSFER, INC.   as Rights Agent      By:  ______________________________        Name:        Title:                                         A-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 by checking the appropriate boxes in (1) and (2) that:         (1)   this Rights Certificate  is  is not being sold, assigned and transferred by or on  behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such  Acquiring Person (as such terms are defined in the Rights Agreement); and          (2)   after due inquiry and to the best knowledge of the undersigned, it  did  did not  acquire the Rights evidenced by this Rights Certificate from any Person who is, was or  subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.                                             Dated:  ________________                                             ________________________________                                                       Signature                                                                                                               Signature Guaranteed:                                                                                                                                              A-4   

 

                                      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.         Signatures must be guaranteed by an approved eligible financial institution acceptable to  the Rights Agent in its sole discretion or by a participant in the Securities Transfer Agents  Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange  Medallion Program.           In the event the certification set forth above is not completed, the Company will deem the  Beneficial Owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or  an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement) and, in the  case of an Assignment, will affix a legend to that effect on any Rights Certificates issued in  exchange for this Rights Certificate.                                         A-5   

 

                         FORM OF ELECTION TO PURCHASE                 (To be executed if the registered holder desires to exercise                      Rights represented by the Rights Certificate.)   To:  EVOFEM BIOSCIENCES, INC.         The undersigned hereby irrevocably elects to exercise ____________________ Rights  represented by this Rights Certificate to purchase the Units of Preferred Stock issuable upon the  exercise of the Rights (or such other securities of the Company or of any other person or other  property which may be issuable upon the exercise of the Rights) and requests that certificates for  such Units (or such other securities) be issued in the name of and delivered to:   ___________________________ (Please print name and  address) ___________________________________________________   (Please insert social security or other identifying number).         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 print name and address) ______________________________________ (Please insert  social security or other identifying number).                                             Dated:  ________________                                             ____________________________________                                                          Signature                                                                                                                     Signature Guaranteed:                                                                                                                                                                                                                                                                                                                                                                                                                                   A-6   

 

                                     Certificate         The undersigned hereby certifies by checking the appropriate boxes in (1) and (2) 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 an Associate  thereof (as such terms are defined in the Rights Agreement); and          (2)   after due inquiry and to the best knowledge of the undersigned, it  did  did not  acquire the Rights evidenced by this Rights Certificate from any person who is, was or  subsequently became an Acquiring Person or an Affiliate or Associate thereof.                                             Dated:  ________________                                             ____________________________________                                                       Signature                                                                                                               Signature Guaranteed:                                                                                                                          NOTICE         The signature in the foregoing Election to Purchase and Certificate must conform to the  name as written upon the face of this Rights Certificate in every particular, without alteration or  enlargement or any change whatsoever.         Signatures must be guaranteed by an approved eligible financial institution acceptable to  the Rights Agent in its sole discretion or by a participant in the Securities Transfer Agents  Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange  Medallion Program.         In the event the certification set forth above is not completed, the Company will deem the  Beneficial Owner of the Rights evidenced by this Rights Certificate to be an Acquiring Person or  an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement) and the  election to purchase will not be honored.                                         A-7   

 

                                                                         EXHIBIT B                                                        TO RIGHTS AGREEMENT     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.             SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK                                                  On March 24, 2020, the Board of Directors of Evofem Biosciences, Inc. (the  “Company”) authorized and declared a dividend of one right (“Right”) for each outstanding  share of its Common Stock, par value $0.0001 per share (the “Company Common Stock”), to  stockholders of record at the close of business on April 8, 2020 (the “Record Date”), and  authorized the issuance of one Right for each share of Company Common Stock issued by the  Company (except as otherwise provided in the Rights Agreement, as defined below) between the  Record Date and the Distribution Date (as defined below).  Each Right entitles the registered  holder, subject to the terms of the Rights Agreement (as defined below), to purchase from the  Company one one-thousandth (1/1,000) of a share (a “Unit”) of Series A Preferred Stock, par  value $0.0001 per share (the “Preferred Stock”), at a purchase price of $17.50 per Unit, subject  to adjustment.  The purchase price is payable in cash or by certified or bank check or money  order payable to the order of the Company.  The description and terms of the Rights are set forth  in a Rights Agreement between the Company and Philadelphia Stock Transfer, Inc., as Rights  Agent, dated as of March 24, 2020, as amended from time to time (the “Rights Agreement”).         Copies of the Rights Agreement and the Certificate of Designation for the Preferred  Stock have been filed with the Securities and Exchange Commission as exhibits to a Current  Report on Form 8-K and a Registration Statement on Form 8-A, each dated March 25, 2020.   Copies of the Rights Agreement and the Certificate of Designation are available free of charge  from the Company.  This summary description of the Rights and the Preferred Stock does not  purport to be complete and is qualified in its entirety by reference to all of the provisions of the  Rights Agreement and the Certificate of Designation, including the definitions therein of certain  terms, which are incorporated herein by reference.         The Rights Agreement         Certificates; Distribution Date.  Initially, the Rights will attach to all certificates  representing shares of outstanding Company Common Stock, and no separate Rights Certificates  will be distributed.  Subject to the provisions of the Rights Agreement, the Rights will separate  from the Company Common Stock and the “Distribution Date” will occur upon the earlier of  (i) ten business days following a public announcement (the date of such announcement being the  “Stock Acquisition Date”) that a person or group of affiliated or associated persons (an                                        B-1   

 

   “Acquiring Person”) has acquired or otherwise obtained Beneficial Ownership of 32% or more  of the then-outstanding shares of Company Common Stock (or, if the tenth business day after the  Stock Acquisition Date occurs before the Record Date, the close of business on the Record  Date), and (ii) ten business days (or such later date as may be determined by action of the Board  of Directors) following the commencement of a tender offer or exchange offer that would result  in a person or group becoming an Acquiring Person.  Until the Distribution Date, (i) the Rights  will be evidenced by Company Common Stock certificates and will be transferred with and only  with such Company Common Stock certificates, (ii) new Company Common Stock certificates  issued after the Record Date (also including shares distributed from Treasury) will contain a  notation incorporating the Rights Agreement by reference and (iii) the surrender for transfer of  any certificates representing outstanding Company Common Stock will also constitute the  transfer of the Rights associated with the Company Common Stock represented by such  certificates.         An “Acquiring Person” does not include certain persons specified in the Rights  Agreement.         The Rights are not exercisable until the Distribution Date and, unless earlier redeemed or  exchanged by the Company as described below, will expire on the close of business on March  24, 2021, the first anniversary of the adoption of the Rights Agreement.  Under certain  circumstances, as provided in the Rights Agreement, the exercisability of the Rights may be  suspended.  In no event, however, will the Rights be exercisable prior to the expiration of the  period in which the Rights may be redeemed, as described below.         As soon as practicable after the Distribution Date, Rights Certificates will be mailed to  holders of record of Company Common Stock as of the close of business on the Distribution  Date (and to each initial holder of certain shares of Company Common Stock issued after the  Distribution Date) and, thereafter, the separate Rights Certificates alone will represent the  Rights.         Flip-In.  If a person becomes an Acquiring Person, then each holder of a Right will  thereafter have the right to receive, upon exercise, Units of Preferred Stock or, at the option of  the Company, shares of Company Common Stock (or, in certain circumstances, cash, property or  other securities of the Company) having a value equal to two times the exercise price of the  Right.  The exercise price is the purchase price multiplied by the number of Units of Preferred  Stock issuable upon exercise of a Right prior to the event described in this paragraph.   Notwithstanding any of the foregoing, following the occurrence of the event set forth in this  paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement)  were, beneficially owned by any Acquiring Person or any affiliate or associate thereof (or certain  transferees of any thereof) will be null and void.         Flip-Over.  If, at any time following the date that any person becomes an Acquiring  Person, (i) the Company is acquired in a merger or other business combination transaction and  the Company is not the surviving corporation, (ii) any person merges with the Company and all  or part of the Company Common Stock is converted or exchanged for securities, cash or property  of the Company or any other person or (iii) 50% or more of the Company’s assets, cash flow or  earning power is sold or transferred, each holder of a Right (except Rights which previously have                                        B-2   

 

   been voided as described above) shall thereafter have the right to receive, upon exercise,  common stock of the acquiring company having a value equal to two times the exercise price of  the Right.         Redemption.  At any time until ten business days following 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), the Board of Directors may redeem the Rights in whole,  but not in part, at a price of $0.0001 per Right (subject to adjustment in certain events) payable,  at the election of the Board of Directors, in cash, shares of Company Common Stock or other  consideration considered appropriate by the Board of Directors.  Immediately upon the action of  the Board of Directors 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.         Exchange.  The Company may, at any time after there is an Acquiring Person, until the  time specified in the Rights Agreement, exchange all or part of the then-outstanding and  exercisable Rights (other than Rights that shall have become null and void) for Units of Preferred  Stock or shares of Company Common Stock pursuant to a one-for-one exchange ratio, subject to  adjustment.         No Stockholder Rights; Taxation.  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.  While the distribution of the Rights will 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 Units of Preferred Stock (or  other consideration) or for common stock of the acquiring company or in the event of the  redemption of Rights as set forth above.         Amendment.  Any of the provisions of the Rights Agreement may be amended without  the approval of the holders of the Rights or Company Common Stock at any time prior to the  Distribution Date.  After such date, the provisions of the Rights Agreement may be amended in  order to cure any ambiguity, defect or inconsistency, to shorten or lengthen any time period  under the Rights Agreement, or to make changes which do not adversely affect the interests of  holders of Rights (excluding the interests of any Acquiring Person); provided, that no  amendment shall be made to lengthen (i) the time period governing redemption at such time as  the Rights are not redeemable or (ii) any other time period unless such lengthening is for the  purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of  Rights (other than an Acquiring Person or an Associate or Affiliate of an Acquiring Person).         Description of Preferred Stock         The Units of Preferred Stock that may be acquired upon exercise of the Rights will be  nonredeemable.         Each Unit of Preferred Stock will have a minimum preferential quarterly dividend of  $0.01 per Unit or any higher per share dividend declared on the Company Common Stock.                                         B-3   

 

         In the event of liquidation, the holder of a Unit of Preferred Stock will receive a preferred  liquidation payment equal to the greater of $0.01 per Unit and the per share amount paid in  respect of a share of the Company Common Stock.         Each Unit of Preferred Stock will have one vote, voting together with the Company  Common Stock.         In the event of any merger, consolidation or other transaction in which shares of  Company Common Stock are exchanged, each Unit of Preferred Stock will be entitled to receive  the per share amount paid in respect of each share of Company Common Stock.         The rights of holders of the Preferred Stock with respect to dividends, liquidation and  voting, and in the event of mergers and consolidations, are protected by customary anti-dilution  adjustment provisions.         The economic value of one Unit of Preferred Stock that may be acquired upon the  exercise of each Right should approximate the economic value of one share of Company  Common Stock.                                                  B-4   

 

                                                                        EXHIBIT C                                                          TO RIGHTS AGREEMENT                          CERTIFICATE OF DESIGNATION                                     OF THE                          SERIES A PREFERRED STOCK                                       OF                          EVOFEM BIOSCIENCES, INC.         Pursuant to Section 151 of the General Corporation Law of the State of Delaware          The undersigned officers of Evofem Biosciences, Inc., a Delaware corporation (the  “Corporation”), DO HEREBY CERTIFY:           That, pursuant to the authority conferred upon the Board of Directors of the Corporation  by its Amended and Restated Certificate of Incorporation as currently in effect (the “Certificate  of Incorporation”), the said Board of Directors, at a duly called meeting held on March 24, 2020,  at which a quorum was present and acted throughout, adopted the following resolution, which  resolution remains in full force and effect on the date hereof, creating a series of Preferred Stock  having a par value of $0.0001 per share, designated as Series A Preferred Stock (the “Series A  Preferred Stock”), out of the Corporation’s authorized shares of preferred stock of the par value  of $0.0001 per share (the “Preferred Stock”):         RESOLVED, that, pursuant to the authority granted to and vested in the Board of  Directors in accordance with applicable law and the provisions of the Certificate of  Incorporation, the Board of Directors hereby creates, authorizes and provides for 1,000,000  shares of the Corporation’s authorized Preferred Stock to be designated and issued as the  “Series A Preferred Stock,” having the relative rights, preferences and limitations that are set  forth as follows:         1.    Dividends and Distributions.                (A)   Subject to the prior and superior rights of the holders of any shares of any  other series of Preferred Stock or any other shares of stock of the Corporation ranking prior and  superior to the shares of Series A Preferred Stock with respect to dividends, each holder of one  one-thousandth (1/1,000) of a share (a “Unit”) of Series A Preferred Stock shall be entitled to  receive, when, as and if declared by the Board of Directors out of funds legally available for that  purpose, (i) quarterly dividends payable in cash on the last day of February, May, August and  November in each year (each such date being a “Quarterly Dividend Payment Date”),  commencing on the first Quarterly Dividend Payment Date after the first issuance of a Unit of  Series A Preferred Stock, in an amount per Unit (rounded to the nearest cent) equal to the greater  of (a) $0.01 or (b) subject to the provision for adjustment hereinafter set forth, the aggregate per  share amount of all cash dividends declared on shares of 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 a Unit of Series A Preferred Stock, and  (ii) subject to the provision for adjustment hereinafter set forth, quarterly distributions (payable                                        C-1    

 

  in kind) on each Quarterly Dividend Payment Date in an amount per Unit equal to the aggregate  per share amount 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 shares of 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 a Unit of Series A Preferred Stock.  In the event that the  Corporation shall at any time after March 24, 2020 (the “Rights Declaration Date”) (i) declare  any dividend on outstanding shares of Common Stock payable in shares of Common Stock,  (ii) subdivide outstanding shares of Common Stock or (iii) combine outstanding shares of  Common Stock into a smaller number of shares, then in each such case the amount to which the  holder of a Unit of Series A Preferred Stock was entitled immediately prior to such event under  clause (i)(b) or clause (ii) of the preceding sentence shall be adjusted by multiplying such  amount by a fraction (y) the numerator of which shall be the number of shares of Common Stock  that are outstanding immediately after such event and (z) the denominator of which shall be the  number of shares of Common Stock that were outstanding immediately prior to such event.               (B)   The Corporation shall declare a dividend or distribution on Units of Series  A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a  dividend or distribution on the shares of Common Stock (other than a dividend payable in shares  of Common Stock or a subdivision of the outstanding shares of Common Stock, by  reclassification or otherwise); provided, however, 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 $0.01 per Unit on the Series A Preferred Stock shall nevertheless be payable on such  subsequent Quarterly Dividend Payment Date.               (C)   Dividends shall begin to accrue and shall be cumulative on each  outstanding Unit of Series A Preferred Stock from the Quarterly Dividend Payment Date next  preceding the date of issuance of a Unit of Series A Preferred Stock, unless the date of issuance  of such Unit is prior to the record date for the first Quarterly Dividend Payment Date, in which  case dividends on such Unit shall begin to accrue from the date of issuance of such Unit, or  unless the date of issuance is a Quarterly Dividend Payment Date or is a date after the record  date for the determination of holders of Units 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 Units of Series A  Preferred Stock in an amount less than the aggregate amount of all such dividends at the time  accrued and payable on such Units shall be allocated pro rata on a Unit-by-Unit basis among all  Units of Series A Preferred Stock at the time outstanding.  The Board of Directors may fix a  record date for the determination of holders of Units of Series A Preferred Stock entitled to  receive payment of a dividend or distribution declared thereon, which record date shall be no  more than 30 days prior to the date fixed for the payment thereof.         2.    Voting Rights.  The holders of Units of Series A Preferred Stock shall have the  following voting rights:                                          C-2   

 

              (A)   Subject to the provision for adjustment hereinafter set forth, each Unit of  Series A Preferred Stock shall entitle the holder thereof to one vote on all matters submitted to a  vote of the stockholders of the Corporation.  In the event the Corporation shall, at any time after  the Rights Declaration Date, (i) declare any dividend on outstanding shares of Common Stock  payable in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock or  (iii) combine the outstanding shares of Common Stock into a smaller number of shares, then in  each such case the number of votes per Unit to which holders of Units of Series A Preferred  Stock were entitled immediately prior to such event shall be adjusted by multiplying such  number by a fraction (y) the numerator of which shall be the number of shares of Common Stock  outstanding immediately after such event and (z) the denominator of which shall be the number  of shares of Common Stock that were outstanding immediately prior to such event.                (B)   Except as otherwise provided herein, in the Certificate of Incorporation or  the Bylaws of the Corporation or as required by law, the holders of Units of Series A Preferred  Stock and the holders of shares of Common Stock shall vote together as one class on all matters  submitted to a vote of stockholders of the Corporation.               (C)   Except as set forth herein, or as otherwise provided by law, holders of  Units 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.         3.    Certain Restrictions.                 (A)   Whenever quarterly dividends or other dividends or distributions payable  on Units of Series A Preferred Stock as provided herein are in arrears, thereafter and until all  accrued and unpaid dividends and distributions, whether or not declared, on outstanding Units of  Series A Preferred Stock shall have been paid in full, the Corporation shall not:                     (i)         declare or pay dividends, or make any other distributions,  on or redeem or purchase or otherwise acquire for consideration any shares of junior stock;                      (ii)        declare or pay dividends, or make any other distributions,  on any shares of parity stock, except dividends paid ratably on Units of Series A Preferred Stock  and shares of all such parity stock on which dividends are payable or in arrears in proportion to  the total amounts to which the holders of such Units and all such shares are then entitled;                      (iii)       redeem or purchase or otherwise acquire for consideration  shares of any parity stock, provided, however, that the Corporation may at any time redeem,  purchase or otherwise acquire shares of any such parity stock in exchange for shares of any  junior stock; or                      (iv)        redeem or purchase or otherwise acquire for consideration  any Units of Series A Preferred Stock, or any shares of parity stock, except in accordance with a  purchase offer made in writing or by publication (as determined by the Board of Directors) to all  holders of such Units and shares of parity stock upon such terms as the Board of Directors, after  consideration of the respective annual dividend rates and other relative rights and preferences of                                        C-3   

 

  the respective series and classes, shall determine in good faith will result in fair and equitable  treatment among the respective series and 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 3, purchase or otherwise acquire such  shares at such time and in such manner.         4.    Reacquired Shares.  Any Units 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 Units shall, upon their cancellation, become  authorized but unissued shares (or fractions of shares) of Preferred Stock and may be reissued as  part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of  Directors, subject to the conditions and restrictions on issuance set forth herein.         5.    Liquidation, Dissolution or Winding Up.                 (A)   Upon any voluntary or involuntary liquidation, dissolution or winding up  of the Corporation, no distribution shall be made (i) to the holders of shares of junior stock,  unless the holders of Units of Series A Preferred Stock shall have received, subject to adjustment  as hereinafter provided in paragraph (B), the greater of either (a) $0.01 per Unit plus an amount  equal to accrued and unpaid dividends and distributions thereon, whether or not earned or  declared, to the date of such payment, or (b) the amount equal to the aggregate per share amount  to be distributed to holders of shares of Common Stock, or (ii) to the holders of shares of parity  stock, unless simultaneously therewith distributions are made ratably on Units of Series A  Preferred Stock and all other shares of such parity stock in proportion to the total amounts to  which the holders of Units of Series A Preferred Stock are entitled under clause (i)(a) of this  sentence and to which the holders of shares of such parity stock are entitled, in each case upon  such liquidation, dissolution or winding up.               (B)   In the event the Corporation shall at any time after the Rights Declaration  Date (i) declare any dividend on outstanding shares of Common Stock payable in shares of  Common Stock, (ii) subdivide outstanding shares of Common Stock, or (iii) combine  outstanding shares of Common Stock into a smaller number of shares, then in each such case the  aggregate amount to which holders of Units of Series A Preferred Stock were entitled  immediately prior to such event pursuant to clause (i)(b) of paragraph (A) of this Section 5 shall  be adjusted by multiplying such amount by a fraction (y) the numerator of which shall be the  number of shares of Common Stock that are outstanding immediately after such event and (z) the  denominator of which shall be the number of shares of Common Stock that were outstanding  immediately prior to such event.         6.    Consolidation, Merger, etc.  In case the Corporation shall enter into any  consolidation, merger, combination or other transaction in which the shares of Common Stock  are exchanged for or converted into other stock or securities, cash and/or any other property, then  in any such case Units of Series A Preferred Stock shall at the same time be similarly exchanged  for or converted into an amount per Unit (subject to the provision for adjustment hereinafter set  forth) equal to the aggregate amount of stock, securities, cash and/or any other property (payable                                        C-4   

 

  in kind), as the case may be, into which or for which each share of Common Stock is converted  or exchanged.  In the event the Corporation shall at any time after the Rights Declaration Date  (i) declare any dividend on outstanding shares of Common Stock payable in shares of Common  Stock, (ii) subdivide outstanding shares of Common Stock, or (iii) combine outstanding  Common Stock into a smaller number of shares, then in each such case the amount set forth in  the immediately preceding sentence with respect to the exchange or conversion of Units of Series  A Preferred Stock shall be adjusted by multiplying such amount by a fraction (y) the numerator  of which shall be the number of shares of Common Stock that are outstanding immediately after  such event and (z) the denominator of which shall be the number of shares of Common Stock  that were outstanding immediately prior to such event.         7.    Redemption.  The Units of Series A Preferred Stock and shares of Series A  Preferred Stock shall not be redeemable.         8.    Ranking.  The Units of Series A Preferred Stock and shares of Series A Preferred  Stock shall rank junior to all other series of the Preferred Stock and to any other class of  Preferred Stock that hereafter may be issued by the Corporation as to the payment of dividends  and the distribution of assets, unless the terms of any such series or class shall provide otherwise.         9.    Fractional Shares.  The Series A Preferred Stock may be issued in Units or other  fractions of a share, which Units or other fractions shall entitle the holder, in proportion to such  holder’s Units or other fractional shares, to exercise voting rights, receive dividends, participate  in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock.         10.   Amendment.  At any time when any Units of Series A Preferred Stock are  outstanding, neither the Certificate of Incorporation of the Corporation nor this Certificate of  Designation shall be amended in any manner which would materially alter or change the powers,  preferences or special rights of the Units of Series A Preferred Stock so as to affect them  adversely without the affirmative vote of the holders of a majority or more of the outstanding  Units of Series A Preferred Stock, voting separately as a class.          11.   Certain Definitions.  As used in this resolution with respect to the Series A  Preferred Stock, the following terms shall have the following meanings:               (A)   The term “Common Stock” shall mean the class of stock designated as the  common stock, par value $0.0001 per share, of the Corporation at the date hereof or any other  class of stock resulting from successive changes or reclassification of the common stock.               (B)   The term “junior stock” (i) as used in Section 3, shall mean the Common  Stock and any other class or series of capital stock of the Corporation over which the Series A  Preferred Stock has preference or priority as to dividends and (ii) as used in Section 5, shall  mean the Common Stock and any other class or series of capital stock of the Corporation over  which the Series A Preferred Stock has preference or priority in any liquidation, dissolution or  winding up of the Corporation.               (C)   The term “parity stock” (i) as used in Section 3, shall mean any class or  series of capital stock of the Corporation hereafter authorized or issued ranking pari passu with  the Series A Preferred Stock as to dividends and (ii) as used in Section 5, shall mean any class or                                        C-5   

 

  series of capital stock of the Corporation ranking pari passu with the Series A Preferred Stock in  any liquidation, dissolution or winding up.         IN WITNESS WHEREOF, Evofem Biosciences, Inc. has caused this Certificate of  Designation to be signed by its Chief Executive Officer and its Secretary this March 24, 2020.                                                 EVOFEM BIOSCIENCES, INC.                                                                                                                      By:______________________________________                                             Name:                                             Title:  Chief Executive Officer                                                                                                                                                                        By:______________________________________                                             Name:                                             Title:  Secretary                                                                                                                                                                              C-6

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