SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 28, 1998 (May 20, 1998)
HUMAN GENOME SCIENCES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of
Incorporation)
0-022962
(Commission File Number)
22-3178468
(IRS Employer Identification No.)
9410 Key West Avenue, Rockville, Maryland 20850-3338
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code: (301) 309-8504
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 5. Other Events.
On May 20, 1998, Human Genome Sciences, Inc. (the "Company") adopted a
Shareholder Rights Plan which provided for the issuance of preferred share
purchase rights.
In order to implement the new Shareholder Rights Plan, the Board of
Directors of the Company has authorized a distribution of one preferred share
purchase right (a "Right") for each outstanding share of common stock, par value
$.01 (the "Common Shares"), of the Company. The dividend is payable on June 26,
1998 to stockholders of record on May 27, 1998 (the "Record Date"). The terms of
the Rights are set forth in a Rights Agreement (the "Rights Agreement") between
the Company and American Stock Transfer & Trust Company, as Rights Agent (the
"Rights Agent"), dated as of May 20, 1998, as amended from time to time.
Each Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Junior Participating Preferred Stock, par value
$.01, of the Company (the "Preferred Shares") at a price of $250.00 per one
one-thousandth of a Preferred Share (the "Purchase Price"), subject to
adjustment.
Until the earlier to occur of (i) 10 days following a public announcement
that an "Acquiring Person" acquired, or obtained the right to acquire,
beneficial ownership of 15% (20% in the case of the Bass Investors (as defined
below)) or more of the outstanding Common Shares or (ii) 10 business days (or
such later date as may be determined by the Board of Directors prior to such
time as any person becomes an Acquiring Person) following the commencement or
announcement of an intention to make a tender offer or exchange offer the
consummation of which would result in the "Acquiring Person" becoming the
beneficial owner of 15% (20% in the case of the Bass Investors) or more of such
outstanding Common Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate. Acquiring Person is defined as any person or group of
affiliated or associated persons, other than employee benefit plans of the
Company and its subsidiaries, who has acquired beneficial ownership of 15% (20%
in the case of the Bass Investors) or more of the outstanding Common Shares. The
Rights Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with the Common Shares. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Common Share
certificates issued after the Record Date upon transfer or new issuance of the
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Shares
outstanding as of the Record Date, even without such notation or a summary
description of the Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights. The Bass Investors consist of Sid R. Bass and certain stockholders
affiliated with him.
-2-
<PAGE>
The Rights are not exercisable until the Distribution Date. The Rights will
expire on May 20, 2008, unless earlier redeemed by the Company as described
below.
The Purchase Price payable, and the number of Common Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Common
Shares, (ii) upon the grant to holders of the Common Shares of certain rights or
warrants to subscribe for Common Shares or convertible securities at less than
the current market price of the Common Shares or (iii) upon the distribution to
holders of the Common Shares of evidences of indebtedness or assets (excluding
regular periodic cash dividends out of earnings or retained earnings or
dividends payable in Preferred Shares) or of subscription rights or warrants
(other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares (other than fractions that
are integral multiples of one one-thousandth of a Preferred Share) will be
issued and in lieu thereof, a payment in cash will be made based on the market
price of the Common Shares on the last trading date prior to the date of
exercise.
In the event that the Company were acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power were sold, proper provision will be made so that each holder of a Right
shall thereafter have the right to receive, upon the exercise thereof at the
then current exercise price of the Right, that number of shares of common stock
of the acquiring company which at the time of such transaction would have a
market value of two times the exercise price of the Right. In the event that the
Company were the surviving corporation in a merger and the Common Shares were
not changed or exchanged, or in the event that any person becomes the beneficial
owner of 15% (20% in the case of the Bass Investors) or more of the Company's
Common Shares and hence an Acquiring Person (a "Flip-In Event"), proper
provision will be made so that each holder of a Right, other than Rights that
are or were beneficially owned by the Acquiring Person (which will thereafter be
void), will thereafter have the right to receive upon exercise that number of
Common Shares having a market value of two times the exercise price of the Right
(or Preferred Shares if so elected by the Board of Directors).
At any time prior to the close of business on the date a person becomes an
Acquiring Person, the Company, by a vote of the Board of Directors, may redeem
the Rights in whole, but not in part, at a price of $.001 per Right (the
"Redemption Price"). The right of redemption also may be reinstated under
certain circumstances described in the Rights Agreement, including if a term,
provision, covenant or restriction of the Rights Agreement is held by a court or
other authority to be invalid, void or unenforceable. Immediately upon the
action of the Board of Directors ordering redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
-3-
<PAGE>
At any time after any person becomes an Acquiring Person, the Board of
Directors of the Company may, at its option, exchange all or part of the then
outstanding and exercisable Rights (excluding Rights of an Acquiring Person that
have become void) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof. Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any Acquiring Person, together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares then outstanding. In lieu of Common Shares, the Board of Directors
may elect to substitute Preferred Shares for any such exchange.
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 Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than an amendment to those provisions relating to certain economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board of Directors of the Company prior to the Distribution Date,
including, without limitation, any amendment deemed to be necessary or
appropriate in light of any judicial or other legal developments, whether or not
binding precedent in respect of the Rights Agreement. After the Distribution
Date, the provisions of the Rights Agreement may be amended by the Board in
order to cure any ambiguity, to make changes which do not adversely affect the
interest of holders of Rights (excluding the interests of any Acquiring Person),
or to shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable and no amendment may be
made after the Distribution Date which shortens the final expiration date of the
Rights Agreement. Without limiting any of the foregoing, at any time prior to a
Person (other than certain employee benefit plans of the Company) becoming an
Acquiring Person, the Board may amend the Rights Agreement to lower the
threshold for exercisability of the Rights (and the determination of the
existence of an Acquiring Person) from 15% (20% in the case of the Bass
Investors) to any percentage greater than the greater of (i) the largest
percentage of outstanding Common Shares then known to the Company to be
beneficially owned by any Person or group of affiliated or associated persons
(subject to certain exceptions as set forth in the Rights Agreement) and (ii)
10%.
-4-
<PAGE>
A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an Exhibit hereto and is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
as amended from time to time, which is hereby incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) and (b) Financial Statements and Pro Forma Information. None.
(c) Exhibits. The following exhibits are filed with this report, and the
foregoing description is modified by
reference to such exhibits:
4. Rights Agreement between the Company and American Stock
Transfer & Trust Company, as Rights Agent, dated as of May
20, 1998 which includes as Exhibit A the Form of Right
Certificate. Pursuant to the Rights Agreement, Right
Certificates will not be mailed until as soon as practicable
after the earlier of the tenth day following announcement
that a person or group has acquired beneficial ownership of
15% (20% in the case of the Bass Investors) or more of the
Common Shares or the tenth business day after a person
commences or announces its intention to commence an offer
the consummation of which would result in a person
beneficially owning 15% (20% in the case of the Bass
Investors) or more of the Common Shares.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HUMAN GENOME SCIENCES, INC.
By: /s/ Steven C. Mayer
------------------------
Date: May 28, 1998
-6-
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- --------
4. Rights Agreement between the Company and American Stock 9
Transfer & Trust Company, dated as of May 20, 1998
which includes as Exhibit A the Form of Right
Certificate. Pursuant to the Rights Agreement, Right
Certificates will not be mailed until as soon as
practicable after the earlier of the tenth business day
following announcement that a person or group has
acquired beneficial ownership of 15% (20% in the case
of the Bass Investors) or more of the Common Shares or
the tenth business day after a person commences or
announces its intention to commence an offer the
consummation of which would result in a person
beneficially owning 15% (20% in the case of the Bass
Investors) or more of the Common Shares.
-7-
<PAGE>
HUMAN GENOME SCIENCES, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Rights Agent
Rights Agreement
Dated as of May 20, 1998
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Certain Definitions....................................... 1
Section 2. Appointment of Rights Agent .............................. 6
Section 3. Issue of Right Certificates............................... 6
Section 4. Form of Right Certificates................................ 9
Section 5. Countersignature and Registration......................... 9
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or
Stolen Right Certificates.............................. 10
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights; Nullification of Rights..... 11
Section 8. Cancellation and Destruction of Rights Certificates....... 15
Section 9. Reservation and Availability of Preferred Shares.......... 15
Section 10. Preferred Shares Record Date............................. 17
Section 11. Adjustment of Purchase Price,
Number of Shares or Number of Rights................... 17
Section 12. Certificate of Adjusted Purchase
Price or Number of Shares.............................. 28
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power................................ 28
Section 14. Fractional Rights and Fractional Shares................... 34
Section 15. Rights of Action.......................................... 36
Section 16. Agreement of Right Holders................................ 36
-i-
<PAGE>
Section 17. Right Certificate Holder Not Deemed a Stockholder......... 37
Section 18. Concerning the Rights Agent............................... 37
Section 19. Merger or Consolidation or Change of
Name of Rights Agent................................... 38
Section 20. Duties of Rights Agent.................................... 39
Section 21. Change of Rights Agent.................................... 42
Section 22. Issuance of New Right Certificates........................ 43
Section 23. Redemption................................................ 44
Section 24. Notice of Certain Events.................................. 45
Section 25. Notices................................................... 46
Section 26. Supplements and Amendments................................ 47
Section 27. Exchange.................................................. 48
Section 28. Successors................................................ 50
Section 29. Determinations and Actions by the Board of Directors, etc. 50
Section 30. Benefits of this Agreement................................ 51
Section 31. Severability.............................................. 51
Section 32. Governing Law............................................. 51
Section 33. Counterparts.............................................. 51
Section 34. Descriptive Headings...................................... 52
Exhibit A -- Certificate of Designation of Series A Junior Participating
Preferred Stock
Exhibit B -- Form of Right Certificate
Exhibit C -- Summary of Rights to Purchase Preferred Shares
-ii-
<PAGE>
RIGHT AGREEMENT
This Agreement, dated as of May 20, 1998, to be immediately effective as of
the Effective Date (as hereinafter defined), between Human Genome Sciences,
Inc., a Delaware corporation (the "Company"), and American Stock Transfer &
Trust Company, a New York corporation (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has authorized and declared
a dividend of one preferred share purchase right (a "Right") for each share of
Common Stock, par value $.01 per share, of the Company ("Common Share")
outstanding at the close of business on the Effective Date (as hereinafter
defined), each Right representing the right to purchase one one-thousandth share
of Junior Participating Preferred Stock, par value $0.01 per share, of the
Company having the rights and preferences set forth in the Certificate of
Designation filed with the Secretary of State of the State of Delaware on May
26, 1998 upon the terms and subject to the conditions herein set forth, and has
further authorized the issuance of one Right with respect to each Common Share
that shall become outstanding between the Effective Date and the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date (as such
terms are defined in Sections 3 and 7 hereof).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of 15% or more of the Common Shares then
outstanding, but shall not include (i) the Company, any Subsidiary of the
Company or any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person organized, appointed or established by the Company for or
pursuant to the terms of any such plan, or (ii) any Person who has become such a
Beneficial Owner solely because (A) of a reduction in the number of Common
Shares outstanding or (B) it acquired such Beneficial Ownership in the good
faith belief that such acquisition would not (x) cause such Beneficial Ownership
to exceed 15% (20% in the case of the Bass Investors (as herein defined)) of the
Common Shares then outstanding and such Person relied in good faith in computing
the percentage of its Beneficial Ownership on publicly filed reports or
documents of the Company which are inaccurate or out-of-date or (y) otherwise
cause a Distribution Date or the adjustment provided for in Section 11(a)(ii) to
occur. Notwithstanding the foregoing, (i) the Bass Investors shall not be deemed
an Acquiring Person unless the Bass Investors, together with their Affiliates
and Associates, become the Beneficial Owner of more than 20% of the Common Stock
then outstanding and (ii) if any Person that is not an Acquiring Person due to
-1-
<PAGE>
clause (ii) of the prior sentence does not reduce its percentage of Beneficial
Ownership of Common Shares to less than 15% (20% in the case of the Bass
Investors) by the Close of Business on the fifth Business Day after notice from
the Company (the date of notice being the first day) that such Person's
Beneficial Ownership of Common Shares so exceeds 15% (20% in the case of the
Bass Investors) such Person shall, at the end of such five Business Day period,
become an Acquiring Person (and such clause (ii) shall no longer apply to such
Person). For purposes of this definition, the determination whether any Person
acted in "good faith" shall be conclusively determined by the Board of Directors
of the Company.
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date of this Agreement.
(c) "Bass Investors" shall mean each of Alexandra D. Sterling 1990 Trust A,
Annie R. Bass Grandson's Trust for Lee M. Bass, Annie R. Bass Grandson's Trust
for Sid R. Bass, Bass Sid R Management Trust, Cotham Family Partners, L.P.,
Hyatt Anne Bass Successor Trust, Lee Caroline Hallman 1992 Trust, Lee M. Bass,
Lisa D. Sterling 1990 Trust, Mary Susanna Hallman 1992 Trust, Matthew Kingston
Cotham 1996 Trust, Nancy L. Bass, P. Andrew Sterling 1990 Trust, Panther City
Investment Company, Panther City Production Company, Perry R. Bass, Perry R.
Bass, II 1993 A Trust, Peter Sterling, Philip D. Sterling 1990 Trust A, Ramona
Frates Bass 1993 A Trust, Samantha Sims Bass Successor Trust, Sid R. Bass, Sid
R. Bass Management Trust, Sophie Seeligson Bass 1993 A Trust, The Bass
Management Trust, W. Robert Cotham, Wesley Guylay Capital Management, Wesley
Richard Guylay, William P. Hallman, III 1992 Trust and William P. Hallman, Jr.;
provided, however, that the Beneficial Ownership of Common Shares by each of the
foregoing shall be aggregated together with that of any Affiliates and
Associates thereof to determine the Bass Investors' Beneficial Ownership for the
purposes of determining whether the Bass Investors are an Acquiring Person.
(d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities: (i) which such Person or any of such
Person's Affiliates or Associates is deemed to beneficially own, directly or
indirectly, within the meaning of Rule 13d-3 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement;
(ii) which such Person or any of such Person's Affiliates or Associates has (A)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing and other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise, provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made pursuant to and in accordance with the applicable rules and
regulations promulgated under the Exchange Act made by or on behalf of such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase; or (B) the right to vote, alone or in
concert with others, 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, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given in response to a
-2-
<PAGE>
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations of the Exchange Act and (2) is not
reportable by such Person on a Schedule 13D report under the Exchange Act (or
any comparable or successor report); or (iii) which are beneficially owned,
directly or indirectly, by any other Person with which such Person or any of
such Person's Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing and other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities), for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy or consent as described in clause
(B) of subparagraph (ii) of this paragraph (d)) or disposing of any securities
of the Company. Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, (A) the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder and (B) a Person engaged in
business as an underwriter of securities shall not be considered to be the
"Beneficial Owner" of or to "beneficially own" any securities acquired through
such Person's participation in good faith in a firm commitment underwriting
until the expiration of forty (40) days after the date of such acquisition. (d)
"Business Day" shall mean any day other than a Saturday, Sunday, or a day on
which banking institutions in the States of New York or Maryland 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 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 time, on the next succeeding Business
Day.
(f) "Common Shares" when used with reference to the Company shall mean
shares of Common Stock, par value $.01 per share, of the Company. "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock (or, in the case of any unincorporated entity, the equivalent
equity interest) with the greatest voting power of such Person or, if such
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(h) "Effective Date" shall mean June 20, 1998.
(i) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(j) "Person" shall mean any individual, firm, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
-3-
<PAGE>
(k) "Preferred Shares" shall mean shares of Junior Participating Preferred
Stock, $0.01 par value, of the Company.
(l) "Purchase Price" shall have the meaning set forth in Section 4 hereof.
(m) "Redemption Date" shall have the meaning set forth in Section 7 hereof.
(n) "Securities Act" shall mean the Securities Act of 1933, as amended.
(o) "Share Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such or
such earlier date as a majority of the Board of Directors shall become aware of
the existence of an Acquiring Person; provided, however, that no Share
Acquisition Date shall be deemed to have occurred on such date if, pursuant to
the definition of "Acquiring Person," a Person is deemed (whether prior to or
after the date that would otherwise be a Share Acquisition Date) not to be or
have become an Acquiring Person.
(p) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interests is owned, directly or indirectly, by such Person.
(q) "Triggering Event" shall mean any action which would cause the
occurrence of any event described in Section 11(a)(ii) or Section 13(a) hereof.
Section 2. Appointmen of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable (the term "Rights Agent" being used herein to refer,
collectively, to the Rights Agent together with any such Co-Rights Agents). In
the event the Company appoints one or more Co-Rights Agents, the respective
duties of the Rights Agent and any Co-Rights Agents shall be as the Company
shall determine.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the
tenth day after the Share Acquisition Date or (ii) the tenth Business Day (or
such later date as may be determined by action of the Board of Directors prior
to such time as any Person becomes an Acquiring Person) after the date of the
commencement of, or first public announcement of the intention of any Person to
commence, a tender or exchange offer the consummation of which would result in
beneficial ownership by a Person, together with its Affiliates and Associates
(other than the Company, any Subsidiary of the Company or any employee benefit
plan of the Company or of any Subsidiary of the Company or any Person holding
Common Shares for or pursuant to the terms of any such plan) of 15% or more (20%
-4-
<PAGE>
or more in the case of the Bass Investors) of the Common Shares then outstanding
(including any such date that is after the date of this Agreement and prior to
the issuance of the Rights; the earlier of the dates in subsections (i) and (ii)
hereof being herein referred to as the "Distribution Date"), the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for Common Shares registered in the names of the holders of the
Common Shares (which certificates for the Common Shares shall also be deemed to
be Right Certificates) and not by separate Right Certificates, and the right to
receive Right Certificates will be transferable only in connection with the
transfer of Common Shares. 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 Common Shares as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Right Certificate, in substantially the form of Exhibit A hereto,
evidencing one Right for each Common Share so held. As of the Distribution Date,
the Rights will be evidenced solely by the Right Certificates.
(b) On the Effective Date or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of Common Shares as
of the Close of Business on the Effective Date, at the address of the record
holder shown on the records of the Company. With respect to certificates for
Common Shares outstanding as of the Effective Date, until the Distribution Date,
the Rights will be evidenced by the certificates for Common Shares registered in
the names of the holders thereof (together with a copy of the Summary of
Rights). Until the Distribution Date (or the earlier of the Redemption Date or
Final Expiration Date), the surrender for transfer of any certificate for Common
Shares outstanding on the Effective Date, with or without a copy of the Summary
of Rights attached thereto, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby. (c) Certificates for
Common Shares issued after the Effective Date but prior to the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between
Human Genome Sciences, Inc. and American Stock Transfer &
Trust Company, dated as of May 20, 1998, as amended from
time to time (the "Rights Agreement"), the terms of which
are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of Human
Genome Sciences, Inc. Under certain circumstances, as set
forth in the Rights Agreement, the Rights will be evidenced
by separate certificates and will no longer be evidenced by
this certificate. Human Genome Sciences, Inc. 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.
Rights owned by or transferred to any person who becomes an
Acquiring Person or their Affiliates or Associates (as such
terms are defined in the Rights Agreement) and certain
transferees thereof will become null and void and will no
longer be transferable.
-5-
<PAGE>
With respect to the certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. In the event that the Company purchases or otherwise acquires any
Common Shares after the Effective Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed canceled and retired
so that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding. Notwithstanding this
paragraph (c), the omission of a legend shall not affect the enforceability of
any part of this Agreement or the rights of any holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit A hereto and
may have such marks of identification or designation and legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or automated
quotation system on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Sections 11 and 22 hereof, the
Right Certificates, shall entitle the holders thereof to purchase the number of
Preferred Shares as shall be set forth therein at the price per one
one-thousandth of a Preferred Share set forth therein (the "Purchase Price"),
but the number of such Preferred Shares and the Purchase Price shall be subject
to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates shall
be executed on behalf of the Company by its Chairman of the Board, its President
or any Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. Each Right Certificate shall be manually
countersigned by an authorized signatory of the Rights Agent, but it shall not
be necessary for the same signatory to countersign all of the Right Certificates
issued hereunder. No Right Certificate shall be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any
Right Certificate shall cease to be an officer of the Company before
countersignature by the Rights Agent and issuance and delivery of the
certificate by the Company, such Right Certificate, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Right Certificate
had not ceased to be an officer of the Company. Any Right Certificate may be
signed on behalf of the Company by any person who, on the date of the execution
of the Right Certificate, shall be a proper officer of the Company to sign the
Right Certificate, although at the date of the execution of this Rights
Agreement that person was not an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right Certificates and the date and certificate
number of each of the Right Certificates.
-6-
<PAGE>
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Certificates (other than Right Certificates representing Rights
that have become void pursuant to Sections 7(g) and 11(a)(ii) hereof or that
have been exchanged pursuant to Section 27 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Certificates, entitling
the registered holder to purchase a like number of Preferred Shares as the Right
Certificate or Certificates surrendered then entitled such holder to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
Right Certificate or Certificates shall make a request in writing delivered to
the Rights Agent, and shall surrender the Right Certificate or Certificates to
be transferred, split up, combined or exchanged at the principal office of the
Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any surrendered Right Certificate until the registered holder shall
have completed and signed the certificate contained in the form of assignment on
the reverse side of the Right Certificate and shall have provided additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall countersign and deliver to the person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment from the holders of Right
Certificates of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates. Subject to the provisions of Section 11(a)(ii),
upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them and, at the request of the Company,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of a
Right Certificate if mutilated, the Company will execute and deliver a new Right
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.
Notwithstanding any other provision hereof, the Company and the Rights
Agent may amend this Rights Agreement to provide for uncertificated Rights in
addition to or in place of Rights evidenced by Right Certificates.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights;
Nullification of Rights. (a) Subject to Sections 7(f), 7(g) and 11(a)(ii)
hereof, the registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly executed
(with signatures duly guaranteed), to the Rights Agent at the principal office
of the Rights Agent in New York, New York, designated for such purpose, together
with payment of the Purchase Price for each Common Share as to which the Rights
are exercised, at or prior to the earliest of (i) the Close of Business on the
tenth (10th) anniversary of the Effective Date (the "Final Expiration Date"),
(ii) the time at which the Rights are redeemed as provided in Section 23 hereof
(the "Redemption Date"), or (iii) the time at which such Rights are exchanged as
provided in Section 27 hereof.
-7-
<PAGE>
(b) The Purchase Price for each one one-thousandth of a Preferred Share
pursuant to the exercise of a Right shall initially be $250.00. The Purchase
Price and the number of Preferred Shares to be acquired upon exercise of a Right
shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof. The Purchase Price shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase set forth on the reverse thereof duly executed, accompanied by payment
of the Purchase Price for the number of one one-thousandths of a Preferred Share
to be purchased and an amount equal to any applicable transfer tax required to
be paid by the holder of such Right Certificate in accordance with Section 9
hereof in cash, or by certified check or bank draft payable to the order of the
Company and, if requested by the Company or the Rights Agent after the
occurrence of any of the events described in subparagraphs (A), (B), or (C) of
Section 11(a)(ii) hereof (which request may be made before or after notice of
exercise of the Rights shall have been given), a representation and warranty, in
a form that the Company or the Rights Agent may reasonably request, by the
holder of Rights to be exercised that the holder is not an Acquiring Person or
an Affiliate or Associate of an Acquiring Person and that the Rights were not
acquired, directly or indirectly, from an Acquiring Person, the Rights Agent
shall thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares one or more certificates representing the number of one
one-thousandths of a Preferred Share to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or
(B) requisition from the depositary agent depositary receipts representing such
number of one one-thousandths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs the depositary agent to comply with such request, (ii)
when appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional interests in shares in accordance with Section 14
hereof, (iii) promptly after receipt of such certificates, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by the holder
and (iv) when appropriate, after receipt thereof, promptly deliver such cash, if
any, to or upon the order of the registered holder of the Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Right Certificate or
to his duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) In the event that the Company is obligated to issue other securities
(including Common Shares) of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
-8-
<PAGE>
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 or the transfer of any surrendered Right
Certificates under Section 6, unless and until such registered holder shall have
(i) completed and signed (A) in the case of a Section 7 exercise, a form of
election or (B) in the case of a Section 6 transfer, a form of assignment, as
set forth on the reverse side of the Right Certificate, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
(g) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of an event described in Section 11(a)(ii), any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person (or any such Associate or Affiliate) becomes such, or (iii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person (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 any such
Associate or Affiliate) has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which a
majority of the Board has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(g), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to insure that the provisions of this Section
7(g) are complied with, but shall have no liability to any holder of Right
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder. No Right Certificate shall be issued pursuant to
Section 3 that represents Rights beneficially owned by an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any Associate or
Affiliate thereof; no Right Certificate shall be issued at any time upon the
transfer of any Rights to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence or any Associate or Affiliate thereof or to
any nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
(or any Associate, Affiliate or nominee thereof) whose Rights would be void
pursuant to the preceding sentence shall be canceled.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
-9-
<PAGE>
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Shares. (a) The Company
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares or any authorized and issued
Preferred Shares held in its treasury, the number of Preferred Shares that will
be sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the Common or Preferred Shares and, following the time that
a Person becomes an Acquiring Person, other securities, as the case may be,
issuable upon the exercise of Rights may be listed on any national securities
exchange or automated quotation system, the Company shall use its best efforts
to cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange or automated quotation
system upon official notice of issuance upon such exercise.
(c) If necessary to permit the issuance of Common or Preferred Shares
pursuant to the Rights, the Company shall use its best efforts from and after
such time as the Rights become exercisable to register such Common or Preferred
Shares and, following the time that a Person becomes an Acquiring Person, other
securities, as the case may be, under the Securities Act, and any applicable
state securities laws, cause such registration statement to become effective as
soon as possible after such filing and keep such registration effective until
the earlier of the expiration date of the Rights or the date as of which the
Rights are no longer exercisable. The Company may temporarily suspend, for a
period of time not to exceed 90 days, the exercisability of the Rights in order
to prepare and file a registration statement under the Securities Act and permit
it to become effective. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such jurisdiction shall have
been obtained and until a registration statement under the Securities Act (if
required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares or Common Shares delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such Preferred Shares or Common Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Right Certificates or of
-10-
<PAGE>
any Preferred Shares or Common Shares upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax that may be payable in
respect of any transfer or delivery of Right Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts for the
Preferred Shares or Common Shares in a name other than that of, the registered
holder of the Right Certificate evidencing Rights surrendered for exercise or to
issue or deliver any certificates or depositary receipts for Preferred Shares or
Common Shares upon the exercise of any Rights until any such tax shall have been
paid (any such tax being payable by the holder of such Right Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Record Date. Each person in whose name any certificate for
Preferred Shares or Common Shares is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the Preferred
Shares or Common Shares represented thereby on, and such certificate shall be
dated, the date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Shares or Common Shares transfer
books of the Company are closed, such person shall be deemed to have become the
record holder of such shares on, and the certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares or Common Shares transfer
books of the Company are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate shall not be entitled to any rights
of a holder of Preferred Shares or Common Shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11. (a) (i) In the event the Company shall at any
time after the date of this Agreement (A) declare a dividend on the Preferred
Shares payable in Preferred Shares, (B) subdivide or split the outstanding
Preferred Shares into a greater number of Preferred Shares, (C) combine the
outstanding Preferred Shares into a smaller number of Preferred Shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
-11-
<PAGE>
Shares (including any reclassification in connection with a consolidation,
merger or statutory share exchange in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a), the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, split, combination or reclassification,
and the number and kind of Preferred Shares (or other capital stock) issuable on
such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and
kind of Preferred Shares which, if such Right had been exercised immediately
prior to such date and at a time when the Preferred Shares transfer books of the
Company were open, the holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, split, combination
or reclassification; provided, however, that in no event shall the consideration
to be paid upon the exercise of one Right be less than the aggregate par value
of the shares of capital stock of the Company issuable upon exercise of one
Right. If an event occurs which would require an adjustment under both 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 that any Person becomes an Acquiring Person, then
proper provision shall be made so that each holder of a Right, except as
provided below, shall thereafter have a right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of
this Agreement and in lieu of such number of Preferred Shares for which the
Right is then exercisable, such number of Common Shares of the Company as
shall equal the result obtained by (x) multiplying the then current
Purchase Price by the number of one one-thousandths of a Preferred Share
for which a Right is then exercisable and dividing that product by (y) 50%
of the then current per share market price of the Common Shares of the
Company (determined pursuant to Section 11(d)) on the date of an Acquiring
Person having become such; provided, however, that if the transaction that
would otherwise give rise to the foregoing adjustment is also subject to
the provisions of Section 13 hereof, then only the provisions of Section 13
hereof shall apply and no adjustment shall be made pursuant to this Section
11(a)(ii). At its discretion, the Board of Directors of the Company may
provide that holders of Rights, upon exercise thereof, shall receive, in
lieu of Common Shares, such number of one thousandths of a share of
Preferred Shares as shall equal the result obtained by (X) multiplying the
then current Purchase Price by the number of one one-thousandths of a share
of Preferred Shares for which a Right is then exercisable and dividing the
product by (Y) 50% of the then current per share market price of the
Company's Common Shares (determined pursuant to Section 11(d) hereof) on
the date an Acquiring Person becomes such. Notwithstanding the foregoing,
upon the occurrence of any of the events listed above in this subparagraph
(ii), any Rights that are or were beneficially owned on or after the
-12-
<PAGE>
earlier of the Distribution Date or the Share Acquisition Date by an
Acquiring Person (or any Associate or Affiliate of such Acquiring Person)
shall become null and void in accordance with the provisions of Section
7(g) of this Agreement and any holder of such Rights shall thereafter have
no right to exercise such Rights under any provision of this Agreement.
(iii) Any Right Certificate issued pursuant to Section 3 or Section 22
hereof that represents Rights beneficially owned by an Acquiring Person or
any Associate or Affiliate thereof and any Right Certificate issued at any
time upon the transfer of any Rights to an Acquiring Person or any
Associate or Affiliate thereof or to any nominee of such Acquiring Person,
Associate or Affiliate, and any Right Certificate issued pursuant to
Section 6 hereof or this Section 11 upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence,
shall contain the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or an Associate of an Acquiring Person
(as such terms are defined in the Rights Agreement). This
Right Certificate and the Rights represented hereby may become
null and void in the circumstances specified in Section
11(a)(ii) of the Rights Agreement.
(iv) In the event that an event specified in Section 11(a)(ii) occurs
and there shall not be sufficient treasury shares or authorized but
unissued Common Shares to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii) and the Board of Directors has not
exercised its discretion pursuant to Section 11(a)(ii) to provide for the
issuance of Preferred Shares in lieu of Common Shares, then the Company
shall use its best efforts to carry out all such action as may be necessary
to authorize additional Common Shares for issuance upon exercise of the
Rights; provided, however, if the Company is unable to cause the
authorization of additional Common Shares sufficient for issuance upon
exercise of the Rights within forty-five (45) days from the date the
adjustment was required, the Company shall: (A) determine the excess of (1)
the value of the Common Shares (the "Exercise Shares") issuable upon the
exercise of a Right (the "Current Value") over (2) the then current
Purchase Price (such excess, the "Spread"), and (B) with respect to each
Right, make adequate provision to substitute for the Exercise Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Shares or other equity securities of the Company
-13-
<PAGE>
(including, without limitation, shares, or units of shares, of preferred
stock which the Board of Directors of the Company has deemed to have the
same value as Common Shares of the Company (such shares of preferred stock
being "common share equivalents")), (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has been
determined by the Board of Directors of the Company based upon the advice
of a nationally recognized investment banking firm selected by the Board of
Directors of the Company; provided, however, if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days (which 30-day period may be extended by the Board
of Directors for up to two additional 30-day periods) following the first
occurrence of a Section 11(a)(ii) event, then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, Common Shares (to the
extent available) and then, if necessary, cash, securities and/or assets
which in the aggregate are equal to the Spread. To the extent that the
Company determines that some action need be taken pursuant to this
subparagraph (iv), the Company (x) shall provide, subject to the last
sentence of subparagraph (ii) of this Section 11(a), that such action shall
apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights for such time as may be reasonably necessary
in order to seek any authorization of additional shares and/or to decide
the appropriate form of distribution to be made pursuant hereto and to
determine the value thereof.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Shares entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Preferred Shares (or shares having the same rights, privileges and
preferences as the Preferred Shares ("equivalent preferred shares"), or
securities convertible into Preferred Shares or equivalent preferred shares at a
price per Preferred Share or equivalent preferred share (or having a conversion
price per Preferred Share, if a security convertible into Preferred Shares or
equivalent preferred shares) less than the current per share market price of the
Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of additional
Preferred Shares and/or equivalent preferred shares to be offered for
-14-
<PAGE>
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock issuable upon exercise of the
Right. In case such subscription price may be paid in a 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 of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b)), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
current per share market price of the Preferred Shares (as defined in Section
11(d)) on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
assets or evidences of indebtedness to be distributed or of the subscription
rights or warrants applicable to one Preferred Share and the denominator of
which shall be the current per share market price of the Preferred Shares;
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such distribution is not made, the Purchase Price shall again
be adjusted to be the Purchase Price that would be in effect if such record date
had not been fixed.
(d) For the purpose of any computation hereunder, the "current per share
market price" of any security (a "Security" for the purposes of this Section
11(d)(i)) on any date shall be deemed to be the average of the daily closing
prices per share of such Security for the 30 consecutive Trading Days (as such
term is hereinafter defined) immediately prior to such date; provided, however,
that in the event that the current per share market price of such Security is
determined during a period following the announcement by the issuer of the
Security of (1) a dividend or distribution on such Security payable in shares of
such Security or securities convertible into such shares, or (2) any
-15-
<PAGE>
subdivision, combination or reclassification of such Security, and prior to the
expiration of 30 consecutive Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the "current per share market
price" shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the closing bid and asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or any other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in a Security, the closing price of such Security shall be deemed to be
the fair value of such Security as determined in good faith by the Board of
Directors of the Company. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the Security is listed or
admitted to trading is open for the transaction of business or, if the Security
is not listed or admitted to trading on any national securities exchange, a
Business Day.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least l% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a Common
Share or other share or one-millionth of a Preferred Share, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction that requires such adjustment or (ii) the
date of the expiration of the right to exercise any Rights
(f) If as a result of an adjustment made pursuant to Section 11(a), the
holder of any Right thereafter exercised shall become entitled to receive any
shares of capital stock of the Company other than Preferred Shares, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares contained
in Section 11(a), 11(b), 11(c) and 11(i), and the provisions of Sections 7, 9,
10 and 13 with respect to the Preferred Shares shall apply on like terms to any
such other shares.
-16-
<PAGE>
(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 Preferred Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a Preferred Share (calculated to the nearest one-millionth of a Preferred Share)
obtained by (i) multiplying (x) the number of one one-thousandths of a Preferred
Share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of Preferred Shares purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one one-thousandths of a Preferred
Share for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest ten-thousandth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of, and shall
notify the Rights Agent 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 Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which the holders shall be
entitled as a result of the adjustment, or, at the option of the Company, shall
cause to be distributed to the holders of record in substitution and replacement
for the Right Certificates held by the holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which the holders shall be entitled after such
-17-
<PAGE>
adjustment. Right Certificates to be 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 Right Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of Preferred Shares issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-thousandth of a Preferred Share and the number of
shares which were expressed in the initial Right Certificates issued hereunder
but they shall be deemed to represent the Purchase Price and number of Preferred
Shares as adjusted from time to time hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-thousandth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at the 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
issuing to the holder of any Right exercised after such record date of the
Preferred Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to the adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring the adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make reductions in the Purchase Price, in addition
to those adjustments expressly required by this Section 11, as and to the extent
that it in its sole discretion shall determine to be advisable in order that any
(i) consolidation or subdivision of the Preferred Shares, (ii) issuance wholly
for cash of any of the Preferred Shares at less than the current market price,
(iii) issuance wholly for cash of Preferred Shares or securities which by their
terms are convertible into or exchangeable for Preferred Shares, (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 Shares
shall not be taxable to such shareholders.
-18-
<PAGE>
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth the adjustment,
and a brief statement of the facts accounting for the adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares or
the Preferred Shares a copy of the certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25
hereof.
Section 13. Consolidation Merger or Sale or Transfer of Assets or Earning
Power. (a) In the event that following the Distribution Date, directly or
indirectly, (w) the Company shall consolidate with, or merge with and into, any
other Person, (x) any Person shall consolidate with the Company, or merge with
and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Shares shall be changed into or exchanged for stock or other
securities of any other Person (or of the Company) or cash or any other
property, (y) the Company shall engage in any statutory share exchange whereby
the Company's Common Shares are converted into stock, securities, cash or any
other property of any other Person or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one or more transactions, assets or earning power aggregating 50% or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person other than the Company or any of its wholly owned
Subsidiaries, then, on the first occurrence of any such event, proper provision
shall be made so that (i) each holder of a Right, other than Rights that have
become void pursuant to Section 11(a)(ii) hereof, shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price in accordance with the terms of this Agreement, such number of
validly issued, fully paid, nonassessable and freely tradable Common Shares of
the Principal Party (as hereinafter defined), in lieu of Preferred Shares for
which a Right is then exercisable, not subject to any rights of call or first
refusal, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one one-thousandths of a Preferred Share
for which a Right is then exercisable and (2) dividing that product by 50% of
the then current per share market price of the Common Shares of the Principal
Party (determined pursuant to Section 11(d)) on the date of consummation of such
consolidation, merger, statutory share exchange, sale or transfer; provided,
however, that the Purchase Price and the number of Common Shares of such
Principal Party issuable upon exercise of each Right shall be further adjusted
as provided in Section 11(f) of this Agreement to reflect any events occurring
in respect of such Principal Party after the date of such consolidation, merger,
statutory share exchange, sale or transfer; (ii) the Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, statutory share exchange, sale or transfer, all the obligations and
duties of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to the Principal Party, it being specifically
-19-
<PAGE>
intended that the provisions of Section 11 hereof shall apply to the Principal
Party; and (iv) the Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares in
accordance with Section 9 hereof) in connection with such consummation of any
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
Common Shares thereafter deliverable upon the exercise of the Rights; provided,
however, that, upon the subsequent occurrence of any consolidation, merger,
statutory share exchange, sale or transfer of assets 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 as provided in this Section 13(a), 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.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (w), (x) or (y)
of the first sentence of Section 13(a), the Person that is the issuer
of any securities into which Common Shares of the Company are
converted in such merger, consolidation or statutory share exchange,
or, if there is more than one such issuer, the issuer the Common
Shares of which has the greatest aggregate market value of shares
outstanding, or if no securities are so issued, (A) the Person that is
the other party to the merger, consolidation or statutory share
exchange, if such Person survives said merger or statutory share
exchange, or, if there is more than one such Person, the Person the
Common Shares of which has the greatest aggregate market value of
shares outstanding or (B) if the Person that is the other party to the
merger or statutory share exchange does not survive the merger or
statutory share exchange, the Person that does survive the merger or
statutory share exchange (including the Company if it survives) or (C)
the Person resulting from the consolidation.
(ii) in the case of any transaction described in (z) of the first
sentence in this Section 13, the Person that is the party receiving
the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions, or, if each Person that
is a party to such transaction or transactions receives the same
portion of the assets or earning power so transferred or if the Person
receiving the greatest portion of the assets or earning power cannot
be determined, whichever of such Persons is the issuer of Common
Shares having the greatest aggregate market value of shares
outstanding; provided, however, that in any such case, (x) if the
Common Shares of such Person are not at such time and have not been
continuously during the preceding 12-month period registered under
Section 12 of the Exchange Act and such Person is a direct or indirect
subsidiary of another Person the Common Shares of which are and have
-20-
<PAGE>
been so registered, "Principal Party" shall refer to such other
Person; (y) in case such Person is a subsidiary, directly or
indirectly, of more than one Person, the Common Shares of all of which
are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Shares having
the greatest aggregate market value of shares outstanding, and (z) in
case such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in (x) and (y)
above shall apply to each of the owners having an interest in such
joint venture as if the Person owned by the joint venture were a
"subsidiary" of both or all of such joint venturers and the Principal
Parties in each such case shall bear the obligations set forth in this
Section 13 in the same ratio as their direct or indirect interests in
such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation, merger,
statutory share exchange, sale or transfer unless prior thereto the Company and
the Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger, statutory share exchange, sale or
transfer mentioned in paragraph (a) of this Section 13, the Principal Party
will:
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, use its best efforts to cause such
registration statement to become effective as soon as practicable
after such filing and use its best efforts to cause such registration
statement to remain effective (with a prospectus at all times meeting
the requirements of the Act) until the date of expiration of the
Rights and similarly comply with applicable state securities laws;
(ii) deliver to holders of the Rights 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;
(iii) use its best efforts, if the Common Shares of the Principal
Party shall be listed or admitted to trading on any national
securities exchange or quoted on any automated quotation system, to
list or admit to trading (or continue the listing or trading of) the
Rights and the securities purchasable upon exercise of the Rights on
such national securities exchange or have the Rights or such
securities quoted on such automated quotation system and, if the
Common Shares of the Principal Party shall not be listed or admitted
to trading on any national securities exchange or quoted on any
automated quotation system, to cause the Rights and the securities
purchasable upon exercise of the Rights to be listed or admitted to
trading on a national securities exchange or quoted in an automated
quotation system then in use; and
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Shares of the Principal Party subject
to purchase upon exercise of outstanding Rights.
-21-
<PAGE>
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or statutory share exchanges or sales or other transfers. In the
event that one of the transactions described in Section 13(a) hereof shall occur
at any time after the occurrence of a transaction described in Section 11(a)(ii)
hereof, the Rights which have not theretofore been exercised shall thereafter
become exercisable in the manner described in Section 13(a).
(d) Furthermore, in case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has provision in any of its
authorized securities or in its certificate 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 (other than to holders of
Rights pursuant to this Section 13), in connection with, or as a consequence of,
the consummation of a transaction referred to in this Section 13, Common Shares
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 Shares of such Principal Party at less than such then
current market price, or (ii) providing for any special payment, tax or similar
provisions in connection with the issuance of the Common Shares of such
Principal Party pursuant to the provisions of Section 13, then, in such event,
the Company hereby agrees with each holder of Rights that it shall not
consummate any such transaction unless prior thereto 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 canceled, 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 Company covenants and agrees not to enter into any transaction of
the kind listed in this Section 13 if (x) at the time of such transaction there
are any rights, warrants, instruments or securities outstanding or any
agreements or arrangements which, as a result of the consummation of such
transaction, 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 transaction, the stockholders of the Person who
constitute or would constitute the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates or Associates.
(f) If, for any reason, the Rights cannot be exercised for Common Shares of
the Company or such Principal Party, then a holder of Rights will have the right
to exchange such Rights, without payment of the applicable exercise price, for
cash from the Company or such Principal Party in an amount equal to the number
of Common Shares he would otherwise be entitled to purchase times 50% of the
-22-
<PAGE>
then current market price, as determined pursuant to Section 11(d) hereof, of
such Common Shares of the Company or such Principal Party. If, for any reason,
including, without limitation, if such Principal Party is an individual, private
partnership or private company, the foregoing cannot be applied to determine the
cash amount into which the Rights are exchangeable, then the Board of Directors
of the Company, based upon the advice from one or more investment banking firms,
shall determine such amount reasonably and with utmost good faith to the holders
of the Rights. Any such determination shall be binding and final.
Section 14. Fractional Rights and Fractional Shares. (a) The Company shall
not be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Right Certificates with regard to which
such fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For the purposes
of this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted sale price or, if not so
quoted, the average of the closing bid and asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights the fair
value of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) or Common Shares upon exercise of the Rights or to issue
certificates which evidence fractions of Preferred Shares (other than fractions
that are integral multiples of one one-thousandth of a Preferred Share) or
Common Shares. In lieu of fractional Common Shares, the Company shall pay to the
registered holders of Right Certificates at the time the Rights are exercised as
-23-
<PAGE>
herein provided an amount in cash equal to the same fraction of the current
market value of one Common Share. Fractions of Preferred Shares in integral
multiples of one one-thousandth of a Preferred Share may, at the election of the
Company, be evidenced by depositary receipt pursuant to an appropriate agreement
between the Company and a depositary selected by it, provided that such
agreement shall provide that the holders of such depositary receipts shall have
all the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not integral multiples
of one one-thousandth of a Preferred Share, the Company shall pay to the
registered holders of Right Certificates at the time the Rights are exercised as
herein provided an amount in cash equal to the same fraction of the current
market value of one Preferred Share. For purposes of this Section 14(b) hereof,
the current market value of a Preferred Share or Common Share shall be the
closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d) hereof) for the Trading Day immediately prior to the
date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares (except as
provided above) upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by the Right Certificate in the manner provided in
the Right Certificate and in this Agreement and subject to the limitations set
forth in the Right Certificates and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;
-24-
<PAGE>
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in whose
name the Right Certificate (or, prior to the Distribution Date, the associated
Common Shares certificate) is registered as the absolute owner thereof and of
the Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the associated Common Shares certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Common Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in this Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability relating to the Rights or this
Agreement. In no case will the Rights Agent be liable for special, indirect,
incidental or consequential loss or damage of any kind whatsoever, even if the
Rights Agent has been advised of the possibility of such loss or damage.
-25-
<PAGE>
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 Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, instruction, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons or otherwise upon the advice of its counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation or limited liability company into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation or limited liability company resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any corporation or limited liability company succeeding to the
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation or limited liability company
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been counter- signed, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
-26-
<PAGE>
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, the fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
President, any Vice President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and the certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon the certificate.
(c) The Rights Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any adjustment required under the provisions of Sections 3,
11, 13 or 24 or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Right 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 Preferred Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
-27-
<PAGE>
(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 President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions from any of such officers. At any time the Rights Agent may
apply to the Company for written instructions with respect to any matter arising
in connection with the Rights Agent's duties and obligations arising under this
Rights Agreement. Such application by the Rights Agent for written instructions
from the Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken or omitted by the Rights Agent with respect to
its duties or obligations under this Rights Agreement and the date on and/or
after which such action shall be taken and the Rights Agent shall not be liable
for any action taken or omitted in accordance with a proposal included in any
such application on or after the date specified therein (which date shall be not
less than one business day after the Company receives such application, without
the Company's consent) unless, prior to taking or omitting any such action, the
Rights Agent has received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be, has not been completed to certify the holder is not an
Acquiring Person (or an Affiliate or Associate thereof), the Rights Agent shall
not take any further action with respect to such requested exercise or transfer
without first consulting with the Company.
-28-
<PAGE>
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make the appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with the notice, submit his Right Certificate for inspection by the Company),
then the Company shall become the Rights Agent, and the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by a court, shall be a corporation or a limited liability
company, or an affiliate of such a corporation or limited liability company,
organized and doing business under the laws of the United States or of the
States of Maryland or New York (or of any other state of the United States so
long as such corporation is authorized to do business as a banking institution
in the States of Maryland or New York), in good standing, that is authorized
under those laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authorities and that has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by a majority of the Board to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the earlier of the Redemption Date and the Expiration Date, the Company
may with respect to Common Shares so issued or sold pursuant to (i) the exercise
of stock options; (ii) any employee plan or arrangement, (iii) the exercise,
-29-
<PAGE>
conversion or exchange of notes, debentures or other securities issued by the
Company or (iv) any other contractual obligation of the Company, in each case
existing prior to the Distribution Date, issue Right Certificates representing
the appropriate number of Rights in connection with such issuance or sale.
Section 23. Redemption. (a) The Board of Directors of the Company may, at
its option, at any time prior to the earlier of (i) the close of business on the
Share Acquisition Date (or, if the Share Acquisition Date shall have occurred
prior to the Effective Date, the close of business on the Effective Date), or
(ii) the Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.001 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The redemption of the Rights
may be made effective at such times and with such conditions as the Board of
Directors in its sole discretion may establish. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be
exercisable, and a Triggering Event shall not be deemed to have occurred, until
such time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights (or such later time as the Board of
Directors may establish for the effectiveness of such redemption), and without
any further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Company shall promptly give public notice of
any such redemption; provided, however, that the failure to give, or any defect
in, any such notice shall not affect the validity of such redemption. Within 10
days after the action of the Board of Directors ordering the redemption of the
Rights, the Company shall mail a notice of redemption to the holders of the then
outstanding Rights by mailing the notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares and Preferred Shares. 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. In any case, failure to give such
notice by mail, or any defect in the notice, to any particular holder of Rights
shall not affect the sufficiency of the notice to other holders of Rights.
Section 24. Notice of Certain Events. In case the Company shall propose at
any time following the Distribution Date (a) to pay any dividend payable in
stock of any class to the holders of the Preferred Shares or to make any other
distribution to the holders of the Preferred Shares (other than a regular
quarterly cash dividend) or (b) to offer to the holders of its Preferred Shares
rights or warrants to subscribe for or to purchase any additional Preferred
-30-
<PAGE>
Shares or shares of stock of any class or any other securities, rights or
options, or (c) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (d) to effect any consolidation, merger or statutory share exchange
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or (e) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Right, in accordance with Section 25
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such reclassification, consolidation, merger, statutory
share exchange, sale, transfer, liquidation, dissolution, or winding up is to
take place and the date of participation therein by the holders of the Preferred
Shares, if any such date is to be fixed, and the notice shall be so given in the
case of any action covered by clause (a) or (b) above at least 10 days prior to
the record date for determining holders of the Common Shares and/or Preferred
Shares for purposes of such action, and in the case of any such other action, at
least 10 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Shares, whichever
shall be the earlier. The failure to give notice required by this Section 24 or
any defect therein shall not affect the legality or validity of the action taken
by the Company or the vote upon any such action.
In case any of the events set forth in Section 11(a)(ii) or 13 hereof of
this Agreement shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to each holder of a Right (or if occurring prior to
the Distribution Date, the holders of Common Shares), in accordance with Section
25 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 13 hereof, as the case may be, and all references in this Section
24 to Preferred Shares shall be deemed thereafter to refer to Common Shares or
other capital stock, as the case may be.
Section 25. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, MD 20850 (301)
309-8439 (fax) Attention: Corporate Secretary
-31-
<PAGE>
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Attn: Corporate Trust Department
Fax: (718) 236-4558
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to the holder at the address of the holder as shown on the registry
books of the Company.
Section 26. Supplements and Amendments. Prior to the Distribution Date, and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement, without the approval of any holders of certificates
representing Common Shares, including, without limitation, any supplement or
amendment deemed necessary or appropriate by the Company in light of any
judicial or other legal developments, whether or not controlling precedent in
respect of this Agreement. From and after the Distribution Date and subject to
the penultimate sentence of this Section 26, the Company 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 affect the interests of the holders of
Rights Certificates (other than an Acquiring Person or an Affiliate or Associate
of any Acquiring Person); provided; however, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) 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. Without limiting the
foregoing, the Company may at any time prior to such time as any Person becomes
an Acquiring Person amend this Agreement to lower the thresholds set forth in
Section 1(a) and 3(a) hereof from 15% (or 20.0% in the case of the Bass
-32-
<PAGE>
Investors) to any percentage greater than the greater of (i) the largest
percentage of the outstanding Common Shares then known by the Company to be
beneficially owned by any Person (other than the Company, any wholly-owned
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary, any Person holding Common Shares for or pursuant to the terms of any
such plan or, except in the case of a lowering of the 20% threshhold, the Bass
Investors) and (ii) 10%.
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 26, the Rights Agent shall execute such
supplement or amendment and shall be fully protected by Section 18 in so doing.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made at any time which changes the Redemption
Price or the number of Common Shares for which a Right is exercisable and no
supplement or amendment shall be made after the Distribution Date which changes
the Final Expiration Date to a date earlier than the tenth (10th) anniversary of
the Effective Date. Prior to the Distribution Date, the interest of the holders
of Rights shall be deemed coincident with the interests of the holders of Common
Shares.
Section 27. Exchange. (a) Subject to any limitations of applicable law, the
Board of Directors of the Company may, at its option, at any time after any
person becomes an Acquiring Person, exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other than the
Company, any wholly-owned Subsidiary of the Company, any employee benefit plan
of the Company or of any Subsidiary, or any Person holding Common Shares for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of more than 50% of the
Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
27 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only rights thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
-33-
<PAGE>
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 11(a)(ii)
hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 27, the Company, at its
option, may substitute Preferred Shares or equivalent preferred shares for
Common Shares exchangeable for Rights, at the initial rate of one one-thousandth
of a Preferred Share (or an appropriate number of equivalent preferred shares)
for each Common Share, as appropriately adjusted to reflect adjustments in the
voting rights of the Preferred Shares pursuant to the terms thereof, so that the
fraction of a Preferred Share delivered in lieu of each Common Share shall have
the same voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares,
Preferred Shares or equivalent preferred shares issued but not outstanding or
authorized but unissued to permit any exchange of Rights as contemplated in
accordance with this Section 27, the Company shall take all such action as may
be necessary to authorize additional Common Shares for issuance upon exchange of
the Rights.
(e) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, the Company shall pay to the registered holder
of the Right Certificates with regard to which such fractional Common Shares
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. For the purposes of this
subsection (d), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to Section 11(d) hereof)
for the Trading Day immediately after the public announcement by the Company
that an exchange is to be effected pursuant to this Section 27.
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.
-34-
<PAGE>
Section 29. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, except as explicitly otherwise provided in this
Agreement, the Board of Directors of the Company shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts to be made and performed
entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
-35-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
HUMAN GENOME SCIENCES, INC.
Attest:
By /s/ James H. Davis By /s/ William A. Haseltine
---------------------- --------------------------------------------
Title: Assistant Secretary Name: William A. Haseltine, Ph.D.
Title: Chairman and Chief Executive Officer
AMERICAN STOCK TRANSFER &
TRUST COMPANY
Attest:
By /s/ Susan Silber By /s/ Herbert J. Lemmer
---------------------------- -------------------------------------------
Title: Assistant Secretary Name: Herbert J. Lemmer
Title: Vice President
-36-
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
HUMAN GENOME SCIENCES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, William A. Haseltine, Ph.D., Chairman of the Board and Chief Executive
Officer, and James H. Davis, Ph.D., Senior Vice President, General Counsel and
Secretary, of Human Genome Sciences, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware, in accordance with
the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation, as amended, of the said Corporation, the
said Board of Directors on May 20, 1998 adopted the following resolution
creating a series of 30,000 shares of Preferred Stock designated as Series A
Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Certificate of
Incorporation, as amended, a series of Preferred Stock of the Corporation be and
it hereby is created, and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations and
restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 30,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the first day of January, April, July and October in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
A-1
<PAGE>
the first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a)
$45.00 or (b) subject to the provision for adjustment hereinafter set forth,
1,000 times the aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock, without par value, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. In the event the Corporation shall at any
time after June 20, 1998 (the "Effective Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); 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 $45.00 per
shall on the Series A Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Junior Participating Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
A-2
<PAGE>
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than thirty (30) days prior
to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Junior Participating 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) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of Series
A Junior Participating Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall be
A-3
<PAGE>
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii)
shall be given to each holder of record of Preferred Stock by mailing a copy of
such notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than twenty
(20) days and not later than sixty (60) days after such order or request or in
default of the calling of such meeting within sixty (60) after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this paragraph (C)(iii), no such special meeting shall be called
during the period within sixty (60) days immediately preceding the date fixed
for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other classes
of stock of the Corporation if applicable, shall continue to be entitled to
elect the whole number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two (2) Directors voting as a class, after
the exercise of which right (x) the Directors so elected by the holders of
A-4
<PAGE>
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in paragraph
(C)(ii) of this Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this paragraph
(C) to Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in the certificate of incorporation or by-laws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner provided
by law or in the certificate of incorporation or by-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem
or purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, except dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
A-5
<PAGE>
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior Participating
Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of Series A
Junior Participating Preferred Stock, or any shares of stock ranking on a parity
with the Series A Junior Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $250.00 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment (the "Series A Liquidation Preference"). Following the payment
A-6
<PAGE>
of the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph
C below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the Series
A Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series A Junior Participating Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
A-7
<PAGE>
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation, as
amended, of the Corporation shall not be further amended in any manner which
would materially alter or change the powers, preferences or special rights of
the Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
Section 11. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 26th day of
May, 1998.
---------------------------------------
William A. Haseltine, Ph.D.
Chairman of the Board and
Chief Executive Officer
---------------------------------------
James H. Davis, Ph.D.
Senior Vice President, General Counsel
and Secretary
A-8
<PAGE>
Exhibit B
---------
[Form of Right Certificate]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER MAY 20, 2008 OR EARLIER IF
NOTICE OF REDEMPTION IS GIVEN. THE RIGHTS ARE
SUBJECT TO REDEMPTION AT $.001 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHTS OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE
OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS EACH IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Right Certificate
HUMAN GENOME SCIENCES, INC.
This certifies that , or registered assigns, is the registered owner of the
number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights Agreement dated as
of May 20, 1998 (the "Rights Agreement") between HUMAN GENOME SCIENCES, INC., a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, a New York corporation (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 P.M. (New York City time) on May 20, 2008 at
the principal office of the Rights Agent in New York, New York, or at the office
of its successors as Rights Agent, one fully paid, nonassessable share of the
Preferred Stock, par value $0.01 per share, of the Company (the "Preferred
Shares"), at a purchase price of $250.00 per one one-thousandth of a Preferred
Share (the "Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase set forth on the reverse side
hereof and the Certificate contained therein duly executed. The number of Rights
evidenced by this Right Certificate (and the number of Preferred Shares which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of ________, based on the
Preferred Shares as constituted at such date. Upon the occurrence of an event
described in Section 11(a)(ii) of the Rights Agreement, all Rights evidenced by
this Rights Certificate which are beneficially owned by (i) an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person, shall become null and void and no such
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such event.
As provided in the Rights Agreement, the Purchase Price and the number of
Preferred Shares or other securities which may be purchased upon the exercise of
the Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
B-1
<PAGE>
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the principal office of the Rights Agent in New York, New York.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled the holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may, but are not required to be (i) redeemed by the Company at
a redemption price of $.001 per Right or (ii) exchanged in whole or in part for
Common Shares.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractional shares which are
integral multiples of one one-thousandth of a Preferred Share, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or, to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
B-2
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of __________________, 1998.
ATTEST: HUMAN GENOME SCIENCES, INC.
_________________________________ By _______________________________
Secretary Title:
Countersigned the _____ day of
____________, 19__:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By ______________________________
Authorized Signature
B-3
<PAGE>
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder is such
holder desires to transfer the Right Certificates.)
FOR VALUE RECEIVED _______________________________________________________
hereby sells, assigns and transfers unto_______________________________________
_______________________________________________________________________________
_______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________________
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:__________________, 19__
___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.
- -------------------------------------------------------------------------------
B-4
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
CERTIFICATION FOR TRANSFER
(To be executed in connection with any
transfer of the Right Certificate.)
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right 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
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ______________________, 19__ _______________________________
Signature
- -------------------------------------------------------------------------------
B-5
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To: HUMAN GENOME SCIENCES, INC.
The undersigned hereby irrevocably elects to exercise _________________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
Dated ___________________, 19__
________________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate in
every particular, without alteration
or enlargement or any change whatsoever)
B-6
<PAGE>
[Form of Reverse Side of Right Certificate -- continued]
Signature Guaranteed
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- --------------------------------------------------------------------------------
CERTIFICATION FOR ELECTION TO PURCHASE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ______________________, 19__ __________________________________
Signature
- -------------------------------------------------------------------------------
NOTICE
The signatures in the foregoing Forms of Assignment and Election to
Purchase must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Forms of Assignment
and Election to Purchase is not completed, the Company will deem the beneficial
owner of the Rights evidenced by this Right Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
and, in the case of an Assignment, will affix a legend to that effect on any
Right Certificates issued in exchange for this Rights Certificate.
B-7
<PAGE>
EXHIBIT C
HUMAN GENOME SCIENCES, INC.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On May 20, 1998 the Board of Directors of Human Genome Sciences, Inc. (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of common stock, par value $.01 per share (the
"Preferred Shares"), of the Company. The dividend was payable on June 26, 1998
to the stockholders of record on May 27, 1998. Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a Preferred
Share at a price of $250.00 per share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent"), dated as of May
20, 1998.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") acquired, or obtained the right to acquire, beneficial ownership of 15%
or more of the outstanding Common Shares (more than 20% of the outstanding
Common Shares in the case of the Bass Investors) or (ii) 10 Business days
following the commencement or announcement of an intention to make a tender
offer or exchange offer the consummation of which would result in a Person,
together with its Affiliates and Associates, becoming the beneficial owner of
15% (more than 20% of the outstanding Common Shares in the case of a tender
offer or exchange offer commenced or announced by the Bass Investors) or more of
such outstanding Common Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or exercise of the Rights), the Rights will be transferred with and
only with the Common Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Share certificates issued after the
Record Date upon transfer or new issuance of the Common Shares will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for Common Shares outstanding as of the Record
Date, even without such notation or a copy of this Summary of Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common Shares
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
C-1
<PAGE>
The Rights are not exercisable until the Distribution Date. The Rights will
expire on the tenth (10th) anniversary of the Effective Date, unless the
expiration date is extended or the Rights are earlier redeemed or exchanged by
the Company, in each case as described below.
In the event that any person, alone or together with its affiliates and
associates, becomes an Acquiring Person, proper provision will be made so that
each holder of a Right, other than Rights that were or are beneficially owned by
the Acquiring Person (which will thereafter be null and void), will thereafter
have the right to receive upon exercise that number of Common Shares having a
market value of two times the exercise price of the Right. Further in the event
that the Company were acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power were
sold, proper provision will be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value of two times the exercise price of the Right. However, Rights are not
exercisable following the occurrence of any of the events set forth above until
such time as the Rights are no longer redeemable by the Corporation.
No fractional Preferred Shares will be issued (other than fractional)
shares which are integral multiples of one one-thousandth of a Preferred Share,
which may, at the election of the Company, be evidenced by depository receipts)
and in lieu thereof, a payment in cash will be made based on the market price of
the Preferred Shares on the last trading date prior to the date of exercise.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then-current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
At any time after any person becomes an Acquiring Person, the Board of
Directors of the Company may, at its option, exchange all or part of the then
outstanding and exercisable Rights (excluding Rights of an Acquiring Person that
have become void) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof. Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any Acquiring Person, together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of more than 50% of the
Common Shares then outstanding.
C-2
<PAGE>
At any time prior to the earlier of the Share Acquisition Date or the date
the Rights expire, the Rights are redeemable at the election of a majority of
the board of directors of the Company, in whole, but not in part, at a price of
$.001 per Right.
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 Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date, including,
without limitation, any amendment deemed to be necessary or appropriate in light
of any judicial or other legal developments, whether or not binding precedent in
respect of the Rights Agreement. After the Distribution Date, the provisions of
the Rights Agreement may be amended by the Board in order to cure any ambiguity,
to make changes which do not adversely affect the interest of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen any
time period under the Rights Agreement; provided, however, that no amendment to
lengthen the time period governing redemption shall be made at such time as the
Rights are not redeemable or any other time unless for the purpose of
protecting, enhancing or clarifying the rights of the holders of the Rights.
Without limiting any of the foregoing, the Board may amend the Rights Agreement
to lower the threshold for exercisability of the Rights (and the determination
of the existence of an Acquiring Person) from 15% (or 20%, in the case of the
Bass Investors) to any percentage greater than the greater of (i) the largest
percentage of outstanding Common Shares then known to the Company to be
beneficially owned by any Person or group or affiliated or associated persons
(other than the Company, employee benefit plans of the Company and its
subsidiaries and, except in the case of a lowering of the 20% threshhold, the
Bass Investors) and (ii) 10%.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as and Exhibit to the Company's Registration Statement on
Form 8-A dated _______ __, 1998. A copy of the Rights Agreement is available
free of charge from the Company. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, as amended, which is hereby incorporated herein by reference.
Dated: May 20, 1998
C-3
