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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
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Date of Report (Date of earliest event reported): June 5, 1998
Hyseq, Inc.
(Exact Name of Registrant as Specified in Charter)
Nevada 0-22873 36-3855489
(State or Other Jurisdiction Commission (IRS Employer
of Incorporation) File Number) Identification No.)
670 Almanor Avenue, Sunnyvale, CA 94086
(Address of principal executive offices, including
zip code)
(408) 524-8100
(Registrant's telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
This report relates to certain announcements made by the Registrant in
the Press Release, dated June 5, 1998, filed as an exhibit hereto and
incorporated herein by reference.
The Board of Directors of Hyseq, Inc. (the "Company") declared a
dividend distribution of one right (a "Right") for each outstanding share of
common stock, par value $.001 per share, of the Company (the "Common Stock") to
stockholders of record at the close of business on June 15, 1998 (the "Record
Date"). The Rights were issued pursuant to a Rights Agreement dated June 5, 1998
(the "Rights Agreement").
Each Right entitles the registered holder to purchase from the Company
one one-thousandth of a share of Series B Junior Participating Preferred Stock,
par value $.001 per share, of the Company (the "Preferred Shares") at a price of
$175.00 per one one-thousandth of a Preferred Share (the "Purchase Price"),
subject to adjustment.
Until the earlier to occur of (i) 10 business days following a public
announcement that an "Acquiring Person" (as defined below) has acquired
beneficial ownership of 15% (27.5% in the case of an Approved Stockholder (as
defined below)) or more of the outstanding Common Stock 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 a person or entity becoming the beneficial
owner of 15% (27.5% in the case of an Approved Stockholder) or more of such
outstanding Common Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Stock outstanding as of the Record Date, by such Common Share
certificate. The term "Acquiring Person" is defined as any person or group of
affiliated or associated persons (other than the Company and its subsidiaries
and employee benefit plans of the Company and its subsidiaries) who has acquired
beneficial ownership of 15% (27.5% in the case of an Approved Stockholder) or
more of the outstanding Common Shares. The term "Approved Stockholder" means any
stockholder who is approved by a majority of the directors who are not employees
of the Company or representatives of an Acquiring Person or an Approved
Stockholder ("Outside Directors") and who, to the extent deemed desirable and in
a form approved by a majority of the Outside Directors, enters into a standstill
agreement with the Company, such person being an Approved Stockholder so long as
such person owns less than 27.5% 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
issuances 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
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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 Rights are not exercisable until the Distribution Date. The Rights
will expire on June 5, 2008, unless earlier redeemed or exchanged by the Company
as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights is 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 or
convertible securities at less than the current market price of the Preferred
Shares, and (iii) upon the distribution to holders of the Preferred Shares of
evidences of indebtedness, cash, securities or assets (excluding regular
periodic cash dividends at a rate not in excess of 125% of the rate of the last
regular periodic cash dividend theretofore paid or, in case regular periodic
cash dividends have not theretofore been paid, at a rate not in excess of 50% of
the average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Preferred Shares (which dividends will be subject to the adjustment described in
clause (i) above)) or of subscription rights or warrants (other than those
referred to above).
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 current market value of the Preferred
Shares.
In the event that there is an Acquiring Person, and the Company is
involved in a merger or other business combination transaction wherein the
Company is not the surviving entity, or 50% or more of the Company's
consolidated assets or earning power are sold, 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), 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 other
party to the transaction which, at the time of such transaction, 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 an Acquiring
Person, 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.
The Company may, at its option, at any time prior to the close of
business on the tenth (10th) day following the day a person becomes an Acquiring
Person, redeem all but not less than all of the then-outstanding Rights at a
redemption price of $.001 per Right, appropriately adjusted
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to reflect any stock split, stock dividend, recapitalization, or similar
transaction occurring after the date hereof ("Redemption Price"). 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.
At any time after a person becomes an Acquiring Person and prior to the
acquisition by such Acquiring Person of 50% or more of the outstanding Common
Shares, the Board of Directors may cause the Company to acquire the Rights
(other than Rights owned by an Acquiring Person, which have become void), in
whole or in part, in exchange for one share of Common Stock per Right (subject
to adjustment).
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.
While the Rights are redeemable, the Company may supplement or amend
any provision of the Rights Agreement in any respect without the approval of any
holders of Rights or Common Shares. When the Rights are no longer redeemable,
the Company may supplement or amend the Rights Agreement without the approval of
any holders of Right Certificates; provided, that no such supplement or
amendment shall adversely affect the interests of the holders of Rights as such
(other than an Acquiring Person or an affiliate or associate of an Acquiring
Person) and no such supplement or amendment may cause the Rights again to become
redeemable. Any supplement or amendment to this Rights Agreement shall require
the affirmative vote of a majority of the Outside Directors, and any extension
of the Final Expiration Date shall require the affirmative vote of
three-quarters of the Outside Directors.
A copy of the Rights Agreement (which includes as Exhibit A the
Certificate of Designations for the Preferred Shares, as Exhibit B the form of
Rights Certificates, and as Exhibit C the Summary of Rights to Purchase Common
Stock) and the form of press release announcing the events described herein are
attached as exhibits hereto. A copy of the Rights Agreement and the Summary of
Rights will be available free of charge from the Company to stockholders
submitting written requests therefor to 670 Almanor Avenue, Sunnyvale, CA 94086,
Attention: Secretary. This summary description of the Rights does not purport to
be complete and is qualified in its entirety by reference to the Rights
Agreement and the exhibits thereto, which are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
<TABLE>
<CAPTION>
Exhibits At Page
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<S> <C> <C>
1. Rights Agreement, dated as of June 5, 1998, 7
between Hyseq, Inc. and
</TABLE>
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<TABLE>
<S> <C> <C>
U.S. Stock Transfer Corporation, which
includes as Exhibit A the Certificate of
Designations for the Preferred Stock, as
Exhibit B the Form of Rights Certificate and
as Exhibit C, the Summary of Rights to
Purchase Preferred Shares
2. Hyseq, Inc. Press Release, dated June 5, 1998 58
</TABLE>
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SIGNATURE
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.
Hyseq, Inc.
By: /s/ Christopher R. Wolf
______________________________
Christopher R. Wolf
Executive Vice President and
Chief Financial Officer
Dated: July 31, 1998
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EXHIBIT 1
================================================================================
Hyseq, Inc.
and
U.S. STOCK TRANSFER CORPORATION
as Rights Agent
Rights Agreement
Dated as of June 5, 1998
================================================================================
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RIGHTS AGREEMENT
Agreement, dated as of June 5, 1998, between Hyseq, Inc., a Nevada
corporation (the "COMPANY"), and U.S. Stock Transfer Corporation, a California
corporation, as Rights Agent (the "RIGHTS AGENT").
RECITALS
WHEREAS, on June 5, 1998, the Board of Directors of the Company adopted
this Rights Agreement, to be effective as of June 5, 1998, and has authorized
and declared a dividend of one right (a "RIGHT") for each Common Share (as
defined in Section 1.7) of the Company outstanding at the close of business on
June 15, 1998 (the "RECORD DATE"), such dividend to be paid on June 25, 1998,
and has authorized the issuance of one Right (subject to adjustment as provided
herein) with respect to each Common Share that shall become outstanding between
the Record Date and the earliest of the Distribution Date, the Redemption Date,
and the Final Expiration Date (as such terms are defined in Sections 3.1 and
7.1), each Right initially representing the right to purchase one one-thousandth
of a share of Series B Junior Participating Preferred Stock (the "PREFERRED
SHARES") of the Company having the rights, powers, and preferences set forth in
the form of Certificate of Designations attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Rights Agreement, the
following terms have the meanings indicated:
1.1. (a) Subject to Section 1.1(b), "ACQUIRING PERSON" shall
mean any Person who or which, together with all Affiliates and Associates of
such Person, shall be the Beneficial Owner of 15% or more of the Common Shares
of the Company then outstanding, but shall not include the Company Group or any
member or members thereof. Notwithstanding the foregoing, no Person shall become
an Acquiring Person as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding; provided, however, that if
a Person shall become the Beneficial Owner of 15% or more of the Common Shares
of the Company then outstanding solely by reason of share purchases by the
Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an Acquiring Person. Notwithstanding the foregoing,
if the Board of Directors of the Company determines in good faith that a Person
who would otherwise be an Acquiring Person, as defined pursuant to the foregoing
provisions of this Section 1.1, has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an Acquiring Person, as defined pursuant to the
foregoing provisions of this Section 1.1, then such Person shall
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not be deemed to be an Acquiring Person at any time for any purposes of this
Agreement.
(b) Notwithstanding anything in this Rights Agreement to the
contrary, the term Acquiring Person shall not include any Person that is an
Approved Stockholder (so long as such Person remains an Approved Stockholder),
and no Approved Stockholder shall become an Acquiring Person as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to more than 27.5% of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of more than 27.5% of the Common Shares of the Company then outstanding
solely by reason of share purchases by the Company and shall, after such share
purchases by the Company, become the Beneficial Owner of any additional Common
Shares of the Company, then such Person shall be deemed to be an "Acquiring
Person."
1.2. "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the Securities Regulations.
1.3. (a) "APPROVED STOCKHOLDER" shall mean any Person who or
which enters into a Standstill Agreement to the extent deemed desirable and in a
form approved by a majority of the Outside Directors and with respect to whom or
which the Outside Directors determine that beneficial ownership of the Common
Shares by such Person is in the best interests of the Company and is not
reasonably likely to cause a material adverse impact on the business or
prospects of the Company; provided, however, that such Person shall cease to be
an Approved Stockholder if (i) such Person, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of more than 27.5% of
the Common Shares of the Company then outstanding or (ii) such Person is not in
compliance with the terms of any Standstill Agreement applicable to such Person.
Upon the expiration or termination of any Standstill Agreement applicable to
such Person, such Person shall cease to be an Approved Stockholder.
(b) If, at the time of such expiration or termination, such
Person, together with all Affiliates or Associates, is the Beneficial Owner of
15% or more, but less than 27.5%, of the Common Shares of the Company then
outstanding, then, notwithstanding any other provision of this Agreement, such
Person shall not be an Acquiring Person; provided, however, that thereafter such
Person shall become an Acquiring Person if (i) such Person, or any Affiliate or
Associate of such Person, shall acquire Beneficial Ownership of one or more
additional Common Shares (other than pursuant to a stock split, stock dividend,
or similar transaction approved by a majority of the Outside Directors), and
(ii) after such acquisition, such Person is the Beneficial Owner of 15% or more
of the Common Shares then outstanding.
1.4. 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 beneficially owns, directly or indirectly (as
determined pursuant to Rule 13d-3 of the Securities Regulations);
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(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has
(A) the right to acquire (whether such right is
exercisable immediately, or only after the passage of time, compliance
with regulatory requirements, fulfillment of a condition, or otherwise)
pursuant to any agreement, arrangement, or understanding, whether or
not in writing (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, and shall not be deemed to beneficially
own, (1) securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase
or exchange or (2) securities which such Person or any of such Person's
Affiliates or Associates may acquire, does or do acquire, or may be
deemed to have the right to acquire, pursuant to any merger or other
acquisition agreement between the Company and such Person (or one or
more of such Person's Affiliates or Associates) if such agreement has
been approved by the Board of Directors of the Company prior to such
Person's becoming an Acquiring Person; or
(B) the right to vote 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, and
shall not be deemed to beneficially own, any security under this clause
(B) if the agreement, arrangement, or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate of such
other Person) with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement, or understanding (other
than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of
securities), whether or not in writing, for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in
the proviso to Section 1.4(ii)(B)), or disposing of any securities of
the Company.
1.5. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of California are authorized
or obligated by law or executive order to close.
1.6. "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,
California time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., California time, on the next succeeding
Business Day.
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1.7. "COMMON SHARES," when used with reference to the Company, shall
mean the shares of common stock, par value $.001 per share, of the Company.
"COMMON SHARES" when used with reference to any Person other than the Company,
shall mean the capital stock of such Person with the greatest voting power, or
the equity securities or other equity interest having power to control or direct
the management of such other Person (or, if such Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person, and which has issued and outstanding such capital stock,
equity securities, or equity interests).
1.8. "COMPANY GROUP" shall mean the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, and any entity holding shares of capital stock of the Company for or
pursuant to the terms of any such plan, in its capacity as an agent or trustee
for any such plan.
1.9. "OUTSIDE DIRECTOR" shall mean a member of the Board of Directors
of the Company who is not an employee of the Company, who is not an Acquiring
Person or an Approved Stockholder or an Affiliate or Associate of an Acquiring
Person or an Approved Stockholder, or a representative or nominee of an
Acquiring Person or an Approved Stockholder or of any such Affiliate or
Associate, and who either (i) was a member of the Board of Directors of the
Company prior to the time that a Person becomes an Acquiring Person or an
Approved Stockholder or (ii) subsequently becomes a director of the Company, and
whose election or nomination for election is approved or recommended by a vote
of a majority of the Board of Directors of the Company, which majority includes
a majority of the Outside Directors then on the Board of Directors.
1.10. "PERSON" shall mean any individual, partnership, joint venture,
limited liability company, firm, corporation, unallocated association, trust, or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
1.11. "SECURITIES REGULATIONS" shall mean the General Rules and
Regulations, as in effect on the date of this Rights Agreement, under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT").
1.12. "SHARES ACQUISITION DATE" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, the filing of a report pursuant to Section 13(d) of the Exchange Act
or pursuant to a comparable successor statute) by the Company or an Acquiring
Person that a Person has become an Acquiring Person, or that discloses
information which reveals the existence of an Acquiring Person.
1.13. "STANDSTILL AGREEMENT" shall mean an agreement entered into
between the Company (upon the approval of a majority of the Outside Directors)
and a Person which restricts or prohibits such Person from taking certain
actions with respect to the Company and its equity securities, including, but
not limited to, acquiring or offering to acquire Common Shares, engaging in a
tender or exchange offer or proxy contest with respect to the Common Shares,
taking actions to directly or indirectly acquire control of the Company or the
Common Shares, or other actions that the Board determines would not be in the
best interests of the Company and its
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Stockholders ("RESTRICTED ACTIONS"). The Standstill Agreement shall provide
that, in the event that any Person signing the Standstill Agreement shall sell
(in compliance with the Standstill Agreement) a sufficient number of Common
Shares so that such Person is then the Beneficial Owner of less than 15% of the
Common Shares then outstanding, then all restrictions under the Standstill
Agreement shall automatically be removed (except as the Company and such Person
shall otherwise agree in writing) and the Standstill Agreement shall be
automatically terminated.
1.14. "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, of record or beneficially, directly or indirectly,
by such Person.
1.15. A "TRIGGER EVENT" shall be deemed to have occurred upon any
Person becoming an Acquiring Person.
1.16. The following terms shall have the meanings defined for such
terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquiring Person Group 11.1.2
Adjustment Shares 11.1.2
common stock equivalent 11.1.3
Company Preamble
current per share market price 11.4.1
Current Value 11.1.3
Distribution Date 3.1
equivalent preferred stock 11.2
Exchange Act 1.11
Exchange Consideration 27.1
Final Expiration Date 7.1
NASDAQ 9
Preferred Shares Recitals
Purchase Price 4
Record Date Recitals
Redemption Date 7.1
Redemption Price 23.1
Right Recitals
Right Certificate 3.2
Rights Agent Recitals
Security 11.4.1
Spread 11.1.3
Substitution Period 11.1.3
Summary of Rights 3.3
Trading Day 11.4.1
</TABLE>
2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent
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to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3, shall, prior to the Distribution Date, also be the
holders of the Common Shares) 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. In the event the Company appoints one or more co-Rights Agents, the
respective duties of the Rights Agent and any co-Rights Agent shall be as the
Company shall determine. Contemporaneously with such appointment, if any, the
Company shall notify the Rights Agent thereof.
3. ISSUANCE OF RIGHT CERTIFICATES.
3.1. RIGHTS EVIDENCED BY SHARE CERTIFICATES. Until the earlier
of (i) the 10th business day after the Shares Acquisition Date or (ii) the 10th
business day after the date a Person (other than any member of the Company
Group) commences, or the date of the first public announcement of the intent of
any Person (other than any member of the Company Group) to commence, a tender or
exchange offer, the consummation of which would result in any Person becoming
the Beneficial Owner of Common Shares aggregating 15% or more of the
then-outstanding Common Shares of the Company (the earlier of (i) and (ii) being
herein referred to as the "DISTRIBUTION DATE"):
(x) the Rights (unless earlier expired, redeemed, or
terminated) will be evidenced (subject to the provisions of Section 3.3) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates for Common Shares shall also be deemed to be Right
Certificates) and not by separate certificates, and
(y) the Rights (and the right to receive certificates
therefor) will be transferable only in connection with the transfer of the
underlying Common Shares. The preceding sentence notwithstanding, prior to the
occurrence of a Distribution Date resulting from an event described in clause
(ii) of this Section (or such later Distribution Date as the Board of Directors
of the Company may select pursuant to this sentence), the Outside Directors may
postpone, one or more times, the Distribution Date which would occur as a result
of an event described in clause (ii) beyond the earlier of the date set forth in
such clause (ii). Nothing herein shall permit such a postponement of a
Distribution Date following the occurrence of an event described in clause (i)
of this Section.
3.2. RIGHTS EVIDENCED BY RIGHT CERTIFICATES. As soon as
practicable after the Distribution Date, the Rights Agent will send, by
first-class, 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, one or more certificates for Rights, in
substantially the form of Exhibit B hereto (a "RIGHT CERTIFICATE"), evidencing
one Right (subject to adjustment as provided herein) for each Common Share so
held. As of the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
3.3. SUMMARY OF RIGHTS. The Company will send or cause to be
sent a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form attached hereto as Exhibit C (the "SUMMARY OF RIGHTS"),
by first-class, postage-prepaid mail, to each record holder
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of Common Shares as of the close of business on the Record Date at the address
of such holder shown on the records of the Company. With respect to certificates
for Common Shares outstanding as of the close of business on the Record Date,
until the Distribution Date (or the earlier Redemption Date or Final Expiration
Date), the Rights will be evidenced by such certificates for Common Shares
registered in the names of the holders thereof together with a copy of the
Summary of Rights and the registered holders of the Common Shares shall also be
registered holders of the associated Rights. Until the Distribution Date (or the
earlier Redemption Date or Final Expiration Date), the surrender for transfer of
any certificate for Common Shares outstanding at the close of business on the
Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.
3.4. NEW CERTIFICATES AFTER RECORD DATE. Certificates for
Common Shares which become outstanding (whether upon issuance out of authorized
but unissued Common Shares, issuance out of treasury, or transfer or exchange of
outstanding Common Shares) after the Record Date but prior to the earliest of
the Distribution Date, the Redemption Date, or the Final Expiration Date, shall
be deemed also to be certificates for Rights, and shall have impressed, printed,
stamped, written, or otherwise affixed onto them the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
Hyseq, Inc. and U.S. Stock Transfer Corporation, dated as of
June 5, 1998, as the same may be 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 Hyseq, Inc. Under
certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. Hyseq, Inc.
will mail to the holder of this certificate a copy of the
Rights Agreement without charge after receipt of a written
request therefor. As described in the Rights Agreement, Rights
which are held by or have been held by Acquiring Persons or
Associates or Affiliates thereof (as defined in the Rights
Agreement) shall become null and void.
With respect to certificates containing the foregoing legend, until the
Distribution Date (or the earlier Redemption Date or Final Expiration Date), the
Rights associated with the Common Shares represented by such certificates shall
be evidenced by such certificates, and the surrender for transfer of any such
certificates shall also constitute the transfer of the Rights associated with
the Common Shares represented thereby. In the event that the Company purchases
or acquires any Common Shares after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Shares shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Shares which are no longer outstanding.
4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the forms of
election to purchase Preferred Shares, certification, and assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or
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<PAGE> 9
designation, and such legends, summaries, or endorsements printed thereon as the
Company may deem appropriate (provided they are not inconsistent with the
provisions of this Rights 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 trading system on which the Rights
may from time to time be listed or quoted), or to conform to usage. Subject to
the terms and conditions hereof, the Right Certificates, whenever issued, shall
be dated as of the Record Date, and shall show the date of countersignature by
the Rights Agent, and on their face shall entitle the holders thereof to
purchase such number of one one- thousandths of a Preferred Share as shall be
set forth therein at the price per one one-thousandth of a Preferred Share set
forth therein (the "PURCHASE PRICE"); the number of such one one-thousandths of
a Preferred Share and the Purchase Price shall be subject to adjustment as
provided herein.
5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates shall be
executed on behalf of the Company by its Chairman of the Board of Directors, the
Chief Executive Officer, 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 any Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates 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 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 of the Right Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right Certificates, nevertheless, may
be countersigned by the Rights Agent, and issued and delivered by the Company
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company. Any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
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, the certificate
number of each of the Right Certificates, and the date of each of the Right
Certificates.
6. TRANSFER, SPLIT UP, COMBINATION, AND EXCHANGE OF RIGHT CERTIFICATES;
MUTILATED, DESTROYED, LOST, OR STOLEN RIGHT CERTIFICATES. Subject to the
provisions of Section 11.1.2 and Section 14, at any time after the close of
business on the Distribution Date, and at or prior to the close of business on
the earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11.1.2 or that have been
exchanged pursuant to Section 27) may be transferred, split up, or combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-thousandths of a
Preferred Share as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, or combine or exchange any
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<PAGE> 10
Right Certificate shall make such request in writing delivered to the Rights
Agent, and shall surrender, together with any required form of assignment and
certificate duly completed, the Right Certificate or Right Certificates to be
transferred, split up, or combined or exchanged at the office of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Right Certificate or Right Certificates until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Right Certificate or Right
Certificates and shall have provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request. Thereupon, the Rights Agent
shall 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, or combination or exchange of such Right Certificates.
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:
(a) in case of loss, theft, or destruction, upon receipt of
indemnity or security reasonably satisfactory to them, and, at the
Company's request, reimbursement to the Company and the Rights Agent of
all reasonable expenses incidental thereto, and
(b) in case of mutilation, upon surrender to the Rights Agent
and cancellation of the Right Certificate,
the Company will make and deliver a new Right Certificate (entitling the
registered holder to purchase a like number of one one-thousandths of a
Preferred Share as the Right Certificate that was lost, stolen, destroyed, or
mutilated) to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed, or
mutilated.
7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
7.1. EXERCISE OF RIGHTS. Subject to Section 11.1.3 and except
as otherwise provided herein, the registered holder of any Right Certificate may
exercise the Rights evidenced thereby 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 and certification on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the Purchase Price for each one
one-thousandths of a Preferred Share as to which the Rights are exercised, at or
prior to the earliest of (i) the close of business on June 5, 2008 (the "FINAL
EXPIRATION DATE"), (ii) the time at which the Rights are redeemed as provided in
Section 23 (the "REDEMPTION DATE"), (iii) the closing of any merger or other
acquisition transaction involving the Company pursuant to an agreement of the
type described in Sections 1.4(ii)(A)(2) and 13.2, at which time the Rights are
deemed terminated, or (iv) the time at which the Rights are exchanged as
provided in Section 27.
7.2. PURCHASE PRICE. The Purchase Price for each one
one-thousandth of a
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<PAGE> 11
Preferred Share pursuant to the exercise of a Right shall initially be $175.00,
shall be subject to adjustment from time to time as provided in Sections 11 and
26 and shall be payable in lawful money of the United States of America in
accordance with Section 7.3.
7.3. PAYMENT PROCEDURES. Upon receipt of a Right Certificate
representing exercisable Rights, with the form of election to purchase and
certification duly executed, accompanied by payment of the Purchase Price 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, by certified or cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly
(i) (A) requisition from any transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer
agent) certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) if the
Company shall have elected to deposit the total number of
Preferred Shares issuable upon exercise of the Rights
hereunder with a depository agent, requisition from the
depository agent depository 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 depository agent) and the Company
hereby directs the depository agent to comply with all such
requests,
(ii) when appropriate, requisition from the Company the amount
of cash to be paid in lieu of the issuance of fractional
shares in accordance with Section 14,
(iii) promptly after receipt of such certificates or
depository receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such
holder and
(iv) when appropriate, after receipt, promptly deliver such
cash in lieu of fractional shares to or upon the order of the
registered holder of such Right Certificate.
In the event that the Company is obligated to issue other
securities of the Company, pay cash, and/or distribute other
property pursuant to Section 11.1.3, 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.
7.4. PARTIAL EXERCISE. 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 such holder's duly authorized assigns,
subject to the provisions of Section 14.
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<PAGE> 12
7.5. FULL INFORMATION CONCERNING OWNERSHIP. Notwithstanding
anything in this Rights Agreement to the contrary, neither the Rights Agent nor
the Company shall be obligated to undertake any action with respect to a
registered holder of Rights upon the occurrence of any purported exercise as set
forth in this Section 7 unless the certificate contained in the form of election
to purchase set forth on the reverse side of the Right Certificate surrendered
for such exercise shall have been duly completed and signed by the registered
holder thereof and the Company shall have been provided with 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.
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
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.
9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. The Company covenants
and agrees that, from and after the Distribution Date, it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
(and, following the occurrence of a Trigger Event, out of its authorized and
unissued Common Shares or other securities or out of its shares held in its
treasury) the number of Preferred Shares (and, following the occurrence of a
Trigger Event, Common Shares and/or other securities) that will be sufficient to
permit the exercise in full of all outstanding Rights.
So long as the Preferred Shares (and, following the occurrence of a
Trigger Event, Common Shares and/or other securities) issuable upon the exercise
of Rights may be listed on any national securities exchange or traded in the
over-the-counter market and quoted on the Nasdaq Stock Market ("NASDAQ")
(including the National Market or Small Cap Market), 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 so traded in such over-the-counter market, upon official notice of issuance
upon such exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (and, following the
occurrence of a Trigger Event, Common Shares and/or other securities) delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all Federal and state transfer taxes and charges which may be
payable in respect of the issuance or
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<PAGE> 13
delivery of the Right Certificates or of any Preferred Shares (or Common Shares
and/or other securities, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Right Certificates to a person
other than, or the issuance or delivery of certificates for the Preferred Shares
(or Common Shares and/or other securities, as the case may be) 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 for Preferred
Shares (or Common Shares and/or other securities, as the case may be) in a name
other than that of the registered holder upon the exercise of any Rights until
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.
10. PREFERRED SHARES RECORD DATE. Each person in whose name any
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable 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 and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Company are open.
11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS.
The Purchase Price, the number of shares covered by each Right, and the number
of Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.
11.1. POST EXECUTION EVENTS.
11.1.1. CORPORATE DIVIDENDS, RECLASSIFICATIONS, ETC.
In the event the Company shall at any time after the date of this Rights
Agreement (A) declare a dividend on the Preferred Shares payable in Preferred
Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the
outstanding Preferred Shares into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11.1, the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination, or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. If an event occurs
which would require an adjustment under both Section 11.1.1
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<PAGE> 14
and Section 11.1.2, the adjustment provided for in this Section 11.1.1 shall be
in addition to, and shall be made prior to, the adjustment required pursuant to
Section 11.1.2.
11.1.2. ACQUIRING PERSON EVENTS; TRIGGERING EVENTS.
Subject to Sections 23 and 27 of this Agreement, in the event
(i) that any Acquiring Person or any
Associate or Affiliate of any Acquiring Person, at any time
after the date of this Rights Agreement, directly or
indirectly, shall merge into the Company or otherwise combine
with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and the
Common Shares of the Company shall remain outstanding and not
changed into or exchanged for stock or other securities of any
other Person or the Company or cash or any other property, or
(ii) that a Trigger Event occurs,
then, from and after the first occurrence of such event, each holder of a Right,
except as provided below, shall thereafter have a right to receive, upon
exercise thereof at a price per Right equal to the then-current Purchase Price
multiplied by the number of one one-thousandths of a Preferred Share for which a
Right is then exercisable (without giving effect to this Section 11.1.2), in
accordance with the terms of this Rights Agreement, such number of Common Shares
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 (without giving effect to this Section 11.1.2) and
being exercised and (y) dividing that product by 50% of the current per-share
market price of the Common Shares (determined pursuant to Section 11.4) on the
date of the occurrence of, or the date of the first public announcement of, one
of the events listed above in this Section 11.1.2 (the "ADJUSTMENT SHARES");
provided, however, that if the transaction that would otherwise give rise to the
foregoing adjustment is also subject to the provisions of Section 13, then only
the provisions of Section 13 shall apply and no adjustment shall be made
pursuant to this Section 11.1.2; provided, further, that nothing contained in
this Section 11.1.2 shall limit or otherwise diminish the power of the Outside
Directors to postpone the Distribution Date pursuant to Section 3.1; provided,
further, that the Purchase Price and the number of Adjustment Shares shall
thereafter be subject to further adjustment pursuant to Section 11.1.1 hereof.
Notwithstanding the foregoing, upon the occurrence of either of the events
listed above in this Section 11.1.2, any Rights that are or were acquired or
beneficially owned by:
(1) an Acquiring Person or any Associate or Affiliate thereof,
(2) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes
such, or
(3) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person has any
continuing agreement,
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<PAGE> 15
arrangement, or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has determined is
part of a plan, arrangement, or understanding which has as a purpose or
effect avoidance of this Section 11.1.2 (the Persons in subsections
(1), (2), and (3) of this Section 11.1.2 shall collectively be returned
to herein as the "ACQUIRING PERSON GROUP"),
shall become void, and any holder (whether or not such holder is an Acquiring
Person or an Associate or Affiliate of an Acquiring Person) of such Rights shall
thereafter have no right to exercise such Rights under any provision of this
Rights Agreement or otherwise. The Company shall not enter into any transaction
of the type described in this Section 11.1.2 if, at the time of such
transaction, there are any rights, warrants, instruments, or securities
outstanding or any arrangements which, as a result of the consummation of such
transaction, would eliminate or substantially diminish the benefits intended to
be afforded by the Rights. Any Right Certificate issued pursuant to Section 3 or
Section 22 that represents Rights beneficially owned by any member of the
Acquiring Person Group, and any Right Certificate issued pursuant to Section 6,
7.4, or 22 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 (provided, however, that the Rights Agent shall not
be responsible for affixing such legend unless it has actual knowledge as to the
foregoing circumstances or the Company has notified the Rights Agent in writing
thereof):
THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE ARE HELD OR HAVE BEEN
HELD BY A PERSON WHO IS OR WAS AN ACQUIRING PERSON OR AN AFFILIATE OR
AN ASSOCIATE OF AN ACQUIRING PERSON OR A NOMINEE THEREOF. THIS RIGHT
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY HAVE BECOME NULL AND VOID
AS SPECIFIED IN SECTION 11.1.2 OF THE RIGHTS AGREEMENT.
The Company shall use all reasonable efforts to insure that the
provisions of this Section 11.1.2 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 any Acquiring Person or its
Affiliates, Associates, or transferees hereunder.
11.1.3. INSUFFICIENT SHARES. In the event that, upon the
occurrence of one or more of the events listed in Section 11.1.2 above, there
shall not be sufficient Common Shares authorized but unissued, or held by the
Company as treasury shares, to permit the exercise in full of the Rights in
accordance with the foregoing Section 11.1.2, the Company shall take all such
action as may be necessary to authorize additional Common Shares for issuance
upon exercise of the Rights; provided, however, that if the Company determines
that it is unable to cause the authorization of a sufficient number of
additional Common Shares, then, in the event the Rights become exercisable, the
Company, with respect to each Right and to the extent necessary and permitted by
applicable law and any agreements or instruments in effect on the date of such
determination to which it is a party, shall:
(A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "CURRENT
VALUE"), over (2) the Purchase Price (such excess, the
"Spread") and
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<PAGE> 16
(B) with respect to each Right, make adequate provision to
substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price (1) cash, (2) a reduction in the
Purchase Price, (3) Common Shares or other equity securities
of the Company (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) (each such share of preferred stock
constituting a "COMMON STOCK EQUIVALENT")), (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, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following the
first occurrence of one of the events listed in Section 11.1.2 above, 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, which in the aggregate are equal
to the Spread. If the Board of Directors of the Company shall determine in good
faith that it is unlikely that sufficient additional Common Shares could be
authorized for issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended and re-extended to the extent necessary,
but not more than ninety (90) days following the first occurrence of one of the
events listed in Section 11.1.2 above, in order that the Company may seek
Stockholder approval for the authorization of such additional shares (such
period, as may be extended, the "SUBSTITUTION PERIOD"). To the extent that the
Company determines that some action need be taken pursuant to the first and/or
second sentences of this Section 11.1.3, the Company (x) shall provide that such
action shall apply uniformly to all outstanding Rights (except as provided in
11.1.2 and as otherwise provided herein), and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to seek
any authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11.1.3, the
value of a Common Share shall be the current per share market price (as
determined pursuant to Section 11.4) on the date of the first occurrence of one
of the events listed in Section 11.1.2 above and the value of any "common stock
equivalent" shall be deemed to have the same value as the Common Shares on such
date.
11.2. DILUTIVE RIGHTS OFFERING. 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
securities having the same rights, privileges, and preferences as the Preferred
Shares ("EQUIVALENT PREFERRED STOCK")) or securities convertible into Preferred
Shares or equivalent preferred stock at a price per share of Preferred Shares or
per share of equivalent preferred stock (or having a conversion or exercise
price per share, if a security convertible into or exercisable for Preferred
Shares or equivalent preferred stock) less than the current per share
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<PAGE> 17
market price of the Preferred Shares (as defined in Section 11.4) 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 stock to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current per share 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 stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board 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 or any Subsidiary of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustments 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.
11.3. DISTRIBUTIONS. 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, cash, securities, or assets (other than a regular
periodic cash dividend at a rate not in excess of 125% of the rate of the last
regular periodic cash dividend theretofore paid, or, in case regular periodic
cash dividends have not theretofore been paid, at a rate not in excess of 50% of
the average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or a dividend payable in
Preferred Shares (which dividend, for purposes of this Agreement, shall be
subject to the provisions of Section 11.1.1(A) hereof)) or convertible
securities, or subscription rights or warrants (excluding those referred to in
Section 11.2), 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 11.4) 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 cash, assets,
securities, or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to one Preferred Share and the
denominator of which shall be such current per share market price of the
Preferred Shares. Such adjustments shall be made successively whenever such a
record date is fixed; in the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
11.4. CURRENT PER SHARE MARKET VALUE.
11.4.1. GENERAL. For the purpose of any computation
hereunder, the
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"CURRENT PER SHARE MARKET PRICE" of any security (a "SECURITY" for the purpose
of this Section 11.4.1) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Security is determined during any period following the announcement
by the issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares or (ii) any subdivision, combination, or reclassification of such
Security, and prior to the expiration of thirty (30) Trading Days after the
record 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 price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use, or, if on any such date
the 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 such market maker is making a market in the Security, the fair
value of the Security on such date as determined in good faith by the Board of
Directors of the Company shall be used. 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. If the Security is not publicly held or not so listed
or traded, "current per share market price" shall mean the fair value per share
as determined in good faith by the Board of Directors of the Company or, if at
the time of such determination there is an Acquiring Person, by a majority of
the Outside Directors then in office, or if there are no Outside Directors, by a
nationally recognized investment banking firm selected by the Board of
Directors, which shall have the duty to make such determination in a reasonable
and objective manner, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
11.4.2. PREFERRED SHARES. Notwithstanding Section 11.4.1, for
the purpose of any computation hereunder, the "current per share market price"
of the Preferred Shares shall be determined in the same manner as set forth
above in Section 11.4.1 (other than the last sentence thereof). If the current
per share market price of the Preferred Shares cannot be determined in the
manner described in Section 11.4.1, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be an amount equal to 1,000 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares occurring
after the date of this Agreement) multiplied by the
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<PAGE> 19
current per share market price of the Common Shares. If neither the Common
Shares nor the Preferred Shares is publicly held or so listed or traded,
"current per share market price" of the Preferred Shares shall mean the fair
value per share as determined in good faith by the Board of Directors of the
Company, or, if at the time of such determination there is an Acquiring Person,
by a majority of the Outside Directors then in office, or if there are no
Outside Directors, by a nationally recognized investment banking firm selected
by the Board of Directors of the Company, which shall have the duty to make such
determination in a reasonable and objective manner, which determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes. For purposes of this Agreement, the "current per share market
price" of one one- thousandth of a Preferred Share shall be equal to the
"current per share market price" of one Preferred Share divided by 1,000.
11.5. INSIGNIFICANT CHANGES. No adjustment in the Purchase
Price shall be required unless such adjustment would require an increase or
decrease of at least 1% in such price. Any adjustments which by reason of this
Section 11.5 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one-millionth of a Preferred
Share or the nearest ten-thousandth of a Common Share, as the case may be.
11.6. SHARES OTHER THAN PREFERRED SHARES. If as a result of an
adjustment made pursuant to Section 11.1, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Sections 11.1
through 11.3, inclusive, 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.
11.7. RIGHTS ISSUED PRIOR TO ADJUSTMENT. All Rights originally
issued by the Company subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted Purchase Price,
the number of one one-thousandths of a Preferred Share purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
11.8. EFFECT OF ADJUSTMENTS. Unless the Company shall have
exercised its election as provided in Section 11.9, upon each adjustment of the
Purchase Price as a result of the calculations made in Sections 11.2 and 11.3,
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.
11.9. ADJUSTMENT IN NUMBER OF RIGHTS. The Company may elect on
or after
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<PAGE> 20
the date of any adjustment of the Purchase Price, to adjust the number of Rights
in lieu of any adjustment in the number of one one-thousandths of a Preferred
Share issuable 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 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 ten (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
11.9, 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, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in substitution
and replacement for the Right Certificates held by such holders prior to the
date of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall be
issued, executed, and countersigned in the manner provided for herein (and 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.
11.10. RIGHT CERTIFICATES UNCHANGED. Irrespective of any
adjustment or change in the Purchase Price or the number of one one-thousandths
of a Preferred Share issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share and the number of one one-thousandths of a Preferred
Share which were expressed in the initial Right Certificates issued hereunder.
11.11. PAR VALUE LIMITATIONS. 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 such adjusted
Purchase Price.
11.12. DEFERRED ISSUANCE. 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 such
adjustment; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's
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<PAGE> 21
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
11.13. REDUCTION IN PURCHASE PRICE. Anything in this Section
11 to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it, in its sole
discretion, shall determine to be advisable in order that any consolidation or
subdivision of the Preferred Shares, issuance wholly for cash of any of the
Preferred Shares at less than the current market price, issuance wholly for cash
of Preferred Shares or securities which by their terms are convertible into or
exchangeable for Preferred Shares, dividends on Preferred Shares payable in
Preferred Shares or issuance of rights, options, or warrants referred to
hereinabove in this Section 11, hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such Stockholders.
11.14. COMPANY ACTION. The Company covenants and agrees that,
after the Distribution Date, it will not, except as permitted by Section 23 or
Section 26, take (or permit any Subsidiary to take) any action if, at the time
such action is taken, it is reasonably foreseeable that such action will
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.
11.15. COMMON SHARES. Notwithstanding anything contained in
this Agreement to the contrary, in the event that the Company shall, at any time
after the date hereof and prior to the Distribution Date (i) declare or pay any
dividend on the outstanding Common Shares payable in Common Shares, (ii) effect
a subdivision or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by the payment of dividends payable in Common
Shares), or (iii) combine the outstanding Common Shares into a greater or lesser
number of Common Shares, then in any such case, the number of Rights associated
with each Common Share then outstanding, or issued or delivered thereafter but
prior to the Distribution Date, shall be proportionately adjusted so that the
number of Rights thereafter associated with each Common Share following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each Common Share immediately prior to such event by a fraction,
the numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of Common Shares outstanding immediately following the
occurrence of such event. The adjustments provided for in this Section 11.15
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.
12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and 13, the Company
shall (a) promptly prepare a certificate setting forth such adjustment, and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate, and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
any such adjustment unless and until it shall have received such certificate.
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<PAGE> 22
13. CONSOLIDATION, MERGER, OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
13.1. GENERAL. In the event that, from and after the first
occurrence of a Trigger Event, directly or indirectly (A) the Company shall
consolidate with, or merge with and into, any other Person, and the Company
shall not be the continuing or surviving corporation, (B) 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 the Company or any other
Person, or cash or any other property, or (C) the Company shall sell, exchange,
mortgage, or otherwise transfer (or one or more of its Subsidiaries shall sell,
exchange, mortgage, 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 or Persons,
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right (except as provided in Section 11.1.2 and as otherwise
provided herein) shall thereafter have the right to receive, upon the exercise
thereof at a price per Right equal to the then-current Purchase Price multiplied
by the number of one one-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Trigger Event (as
subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and
11.12), in accordance with the terms of this Rights Agreement and in lieu of
Preferred Shares, such number of Common Shares of such other Person (including
the Company as successor thereto or as the surviving corporation) as shall be
equal to 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 was
exercisable immediately prior to the first occurrence of a Trigger Event (as
subsequently adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and
11.12) and (y) dividing that product by 50% of the then current per-share market
price of the Common Shares of such other Person (determined pursuant to Section
11.4) on the date of consummation of such consolidation, merger, sale, or
transfer; provided that the price per Right so payable and the number of Common
Shares of such Person so purchasable shall thereafter be adjusted in accordance
with Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12 by reason of such
subsequent events covered thereby occurring in respect of such Person; (ii) the
issuer of such Common Shares shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale, or transfer, all the obligations
and duties of the Company pursuant to this rights agreement; (iii) the term
"Company" shall thereafter be deemed to refer to such issuer; and (iv) such
issuer shall take such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares in accordance with Section 9) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise of
the Rights. The Company shall not enter into any transaction of the kind
referred to in this Section 13 if, 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 eliminate or substantially diminish the benefits intended to be afforded
by the Rights. The Company shall not consummate any such consolidation, merger,
sale, or transfer unless prior thereto the Company and such issuer shall have
executed and delivered to the Rights Agent a supplemental agreement so
providing. The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
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<PAGE> 23
13.2. APPROVED ACQUISITIONS. Notwithstanding anything
contained herein to the contrary, in the event of any merger or other
acquisition transaction involving the Company pursuant to a merger or other
acquisition agreement between the Company and any Person (or one or more of such
Person's Affiliates or Associates) which agreement has been approved by the
Board of Directors of the Company prior to any Person becoming an Acquiring
Person, this Rights Agreement and the rights of holders of Rights hereunder
shall be terminated in accordance with Section 7.1.
14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
14.1. CASH IN LIEU OF FRACTIONAL RIGHTS. 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 14.1, 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 price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board 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.
14.2. CASH IN LIEU OF FRACTIONAL SHARES. The Company shall not
be required to issue fractions of Preferred Shares (other than fractions which
are integral multiples of one one-thousandth of a Preferred Share) upon exercise
of the Rights or to distribute certificates which evidence fractional Preferred
Shares (other than fractions which are integral multiples of one one-thousandth
of a Preferred 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 depository receipts, pursuant to an appropriate agreement between
the Company and a depository selected by it; provided, that such agreement shall
provide that the holders of such depository receipts shall have all the rights,
privileges, and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depository 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 such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current per-share
market price of
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one Preferred Share. For purposes of this Section 14.2, the current per-share
market price of a Preferred Share shall be the closing price of a Preferred
Share (as determined pursuant to the second sentence of Section 11.4.2) for the
Trading Day immediately prior to the date of such exercise.
14.3. WAIVER OF RIGHT TO RECEIVE FRACTIONAL RIGHTS OR SHARES.
The holder of a Right, by the acceptance of the Rights, expressly waives its
right to receive any fractional Rights or any fractional shares upon exercise of
a Right, except as permitted by this Section 14.
15. RIGHTS OF ACTION. All rights of action in respect of this Rights
Agreement, except the rights of action given to the Rights Agent under Section
18, 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 its own behalf and for its own
benefit, enforce this Rights Agreement, and may institute and maintain any suit,
action, or proceeding against the Company to enforce this Rights Agreement, or
otherwise enforce or act in respect of its right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Rights Agreement. Without limiting the foregoing, or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Rights Agreement, and shall be entitled to specific performance
of the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person (including, without limitation, the
Company) subject to this Rights Agreement.
16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by accepting
the same, consents and agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) as of and after the Distribution Date, the Right
Certificates are transferable only on the registry books of the Rights
Agent if surrendered at the office of the Rights Agent designated for
such purpose, duly endorsed or accompanied by a proper instrument of
transfer with all required certifications completed; 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.
17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as
such, of
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<PAGE> 25
any Right Certificate shall be entitled to vote, receive dividends, or be deemed
for any purpose the holder of the Preferred Shares or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a Stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to Stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting Stockholders (except as
provided in Section 24), 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.
18. CONCERNING THE RIGHTS AGENT. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
in accordance with a fee schedule to be mutually agreed upon 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
Rights Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, 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 Rights Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
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 Rights Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares or the 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.
19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust or
stock transfer business of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Rights Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21. In case, at the
time such successor Rights Agent shall succeed to the agency created by this
Rights Agreement, any of the Right Certificates shall have been countersigned
but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; 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; in all such cases, such
Right Certificates shall have the full force provided in the Right Certificates
and in this
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<PAGE> 26
Rights 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; in case, at that time, any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; in all such cases, such Right Certificates shall have the full
force provided in the Right Certificates and in this Rights Agreement.
20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations imposed by this Rights 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:
20.1. LEGAL COUNSEL. The Rights Agent may consult with legal
counsel selected by it (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.
20.2. CERTIFICATES AS TO FACTS OR MATTERS. Whenever, in the
performance of its duties under this Rights Agreement, the Rights Agent shall
deem it necessary or desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board of Directors, the
Chief Executive Officer, the President, the Chief Financial Officer, any Vice
President, the Treasurer, the Secretary, or any Assistant Treasurer or Assistant
Secretary of the Company and delivered to the Rights Agent; such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Rights Agreement in reliance
upon such certificate.
20.3. STANDARD OF CARE. The Rights Agent shall be liable
hereunder only for its own negligence, bad faith, or willful misconduct.
20.4. RELIANCE ON RIGHTS AGREEMENT AND RIGHT CERTIFICATES. The
Rights Agent shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Rights Agreement or in the Right Certificates
(except as to 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.
20.5. NO RESPONSIBILITY AS TO CERTAIN MATTERS. The Rights
Agent shall not be under any responsibility in respect of the validity of this
Rights Agreement or the execution and delivery hereof (except the due execution
hereof by the Rights Agent), or in respect of the validity or execution of any
Right Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition contained
in this Rights Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11.1.2) or
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any adjustment required under the provisions of Sections 3, 11, 13, 23 or 27, 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 Rights
Agreement or any Right Certificate or as to whether any Preferred Shares will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
20.6. FURTHER ASSURANCE BY COMPANY. The Company agrees that it
will perform, execute, acknowledge, and deliver, or cause to be performed,
executed, acknowledged, and delivered, all such further and other acts,
instruments, and assurances as may reasonably be required by the Rights Agent
for the carrying out or performing by the Rights Agent of the provisions of this
Rights Agreement.
20.7. AUTHORIZED COMPANY OFFICERS. 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 of Directors,
the Chief Executive Officer, the President, the Chief Financial Officer, any
Vice President, the Treasurer, the Secretary, or any Assistant Treasurer or
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties under this Rights Agreement, and it
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer or for any delay in
acting while waiting for these instructions. Any application by the Rights Agent
for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by the
Rights Agent with respect to its duties or obligations under this Rights
Agreement and the date on and/or after which such action shall be taken or
omitted. The Rights Agent shall not be liable to the Company for any action
taken or omitted in accordance with a proposal included in any such application
on or after the date specified therein (which date shall not be less than three
business days after the date any such officer actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking of any such action (or the effective date
in the case of omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
20.8. FREEDOM TO TRADE IN COMPANY SECURITIES. The Rights Agent
and any Stockholder, director, officer, or employee of the Rights Agent may buy,
sell, or deal in any of the Rights or other securities of the Company, or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this Rights Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity
for the Company or for any other legal entity.
20.9. RELIANCE ON ATTORNEYS AND AGENTS. 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, omission,
default, neglect, or misconduct of any such attorneys or agents
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or for any loss to the Company resulting from any such act, omission, default,
neglect, or misconduct, provided that reasonable care was exercised in the
selection and continued employment thereof.
20.10. RIGHTS HOLDERS LIST. At any time and from time to time
after the Distribution Date, upon the request of the Company, the Rights Agent
shall promptly deliver to the Company a list, as of the most recent practicable
date (or as of such earlier date as may be specified by the Company), of the
holders of record of Rights.
21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Rights Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares and/or Preferred Shares, as applicable, by
registered or certified mail. The Company shall promptly notify the holders of
the Right Certificates by first-class mail of any such resignation. The Company
may remove the Rights Agent or any successor Rights Agent upon thirty (30) days'
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Shares and/or Preferred
Shares, as applicable, 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 resigning,
removed, or incapacitated Rights Agent shall remit to the Company, or to any
successor Rights Agent designated by the Company, all books, records, funds,
certificates, or other documents or instruments of any kind then in its
possession which were acquired by such resigning, removed, or incapacitated
Rights Agent in connection with its services as Rights Agent hereunder, and
shall thereafter be discharged from all duties and obligations hereunder.
Following notice of such removal, resignation, or incapacity, the Company shall
appoint a successor to such Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal, or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit such holder's Right
Certificate for inspection by the Company), then the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of New York or the
State of California (or any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the State
of New York or California) in good standing, having an office in the State of
New York or the State of California, which is authorized under such laws to
exercise stock transfer or corporate trust powers and is subject to supervision
or examination by Federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $10
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/or Preferred Shares, as applicable, and mail a notice thereof in writing to
the registered holders of the Right
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<PAGE> 29
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.
22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Rights Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price 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 Rights Agreement. In addition, in
connection with the issuance or sale of Common Shares following the Distribution
Date and prior to the redemption, exchange, termination, or expiration of the
Rights, the Company (a) shall, with respect to Common Shares so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement granted or awarded as of the Distribution Date, or upon exercise,
conversion, or exchange of securities hereinafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Right Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Right Certificate would be issued, (ii) no such right
certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof, and (iii) at the
time of a determination by the Board of Directors to cause the Company to issue
a Right Certificate under clause (b) above, there must be Outside Directors then
in office and any such determination shall require the approval of at least a
majority of such Outside Directors.
23. REDEMPTION.
23.1. RIGHT TO REDEEM. The Board of Directors of the Company
may, at its option, at any time prior to the close of business on the tenth
(10th) day following a Trigger Event, redeem all but not less than all of the
then-outstanding Rights at a redemption price of $.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend, recapitalization, or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "REDEMPTION PRICE"), and the Company may, at its
option, pay the Redemption Price in Common Shares (based on the "current per
share market price," as defined in Section 11.4 hereof, of the Common Shares at
the time of redemption), cash, or any other form of consideration deemed
appropriate by the Board of Directors. The redemption of the Rights by the Board
of Directors may be made effective at such time, on such basis, and subject to
such conditions as the Board of Directors in its sole discretion may establish.
Notwithstanding anything contained in this Rights Agreement to the contrary, the
Rights shall not be exercisable following a transaction or event described in
Section 11.1.2 prior to the expiration or termination of the Company's right of
redemption hereunder.
23.2. REDEMPTION PROCEDURES. Immediately upon the action of
the Board of Directors of the Company ordering the redemption of the Rights (or
at such later time as the Board of Directors may establish for the effectiveness
of such redemption), and without any
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<PAGE> 30
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 for each Right so held. The Company shall promptly
give public notice of such redemption; provided, however, that the failure to
give, or any defect in, any such notice shall not affect the validity of such
redemption. The Company shall promptly give, or cause the Rights Agent to give,
notice of such redemption to the holders of the then-outstanding Rights by
mailing such 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. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be made. Neither
the Company nor any of its Affiliates or Associates may redeem, acquire, or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 27, and other than in
connection with the purchase, acquisition, or redemption of Common Shares prior
to the Distribution Date.
24. NOTICE OF CERTAIN EVENTS. In case the Company shall propose at any
time after the Distribution Date (a) to pay any dividend payable in stock of any
class to the holders of Preferred Shares or to make any other distribution to
the holders of Preferred Shares (other than a regular periodic cash dividend at
a rate not in excess of 125% of the rate of the last regular periodic cash
dividend theretofore paid or, in case regular periodic cash dividends have not
theretofore been paid, at a rate not in excess of 50% of the average net income
per share of the Company for the four quarters ended immediately prior to the
payment of such dividends, or a stock dividend on, or a subdivision,
combination, or reclassification of the Common Shares), or (b) to offer to the
holders of Preferred Shares rights or warrants to subscribe for or to purchase
any additional Preferred Shares or shares of stock of any class or any other
securities, rights, or options, or (c) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), or (d) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person (other than pursuant to
a merger or other acquisition agreement of the type described in Section
1.3(ii)(A)(2)), or (e) to effect the liquidation, dissolution or winding up of
the Company, or (f) to declare or pay any dividend on the Common Shares payable
in Common Shares or to effect a subdivision, combination, or consolidation of
the Common Shares (by reclassification or otherwise than by payment of dividends
in Common Shares), then, in each such case, the Company shall give to the Rights
Agent and to each holder of a Right Certificate, in accordance with Section 25,
a notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights, or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Preferred Shares and/or Common
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (a) or (b) above at least ten (10) days
prior to the record date for determining holders of the Preferred Shares for
purposes of such action, and in the case of any such other action, at least ten
(10) days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Preferred Shares and/or Common
Shares,
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whichever shall be the earlier.
In case any event set forth in Section 11.1.2 of this Rights Agreement
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to the Rights Agent and to each holder of a Right
Certificate, in accordance with Section 25, a notice of the occurrence of such
event, which notice shall describe the event and the consequences of the event
to holders of Rights under Section 11.1.2, and (ii) all references in this
Section 24 to Preferred Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.
Notwithstanding anything in this Rights Agreement to the contrary,
prior to the Distribution Date, a filing by the Company with the Securities and
Exchange Commission shall constitute sufficient notice to the holders of
securities of the Company, including the Rights, for purposes of this Rights
Agreement and no other notice need be given.
25. NOTICES. Notices or demands authorized by this Rights 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:
Hyseq, Inc.
670 Almanor
Sunnyvale, CA 94086
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Rights 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:
U.S. Stock Transfer Corporation
1745 Gardena Avenue, Suite 200
Glendale, CA 91204
Attention: Stockholder Services Division
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate (or,
prior to the Distribution Date, to the holder of any certificate representing
Common Shares) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
26. SUPPLEMENTS AND AMENDMENTS. For so long as the Rights are then
redeemable and subject to the last two sentences of this Section 26, the Company
may in its sole and absolute discretion, and the Rights Agent shall, if the
Company so directs, supplement or amend any provision of this Rights Agreement
in any respect without the approval of any holders of Rights or Common Shares.
From and after the time that the Rights are no longer redeemable and subject
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<PAGE> 32
to the last two sentences of this Section 26, the Company may, and the Rights
Agent shall, if the Company so directs, from time to time supplement or amend
this Rights Agreement without the approval of any holders of Right Certificates
(i) to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(ii) to shorten or lengthen any time period hereunder or (iii) to make any other
changes or provisions in regard to matters or questions arising hereunder which
the Company may deem necessary or desirable, including but not limited to
extending the Final Expiration Date; provided, however, that no such supplement
or amendment shall adversely affect the interests of the holders of Rights as
such (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person) and no such supplement or amendment may cause the Rights again
to become redeemable or cause this Rights Agreement again to become amendable
other than in accordance with this sentence; provided further, that the right of
the Board of Directors to extend the Distribution Date shall not require any
amendment or supplement hereunder. 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. Notwithstanding anything herein to
the contrary, any supplement or amendment to this Rights Agreement shall require
the affirmative vote of a majority of the Outside Directors, and any extension
of the Final Expiration Date shall require the affirmative vote of
three-quarters of the Outside Directors. In connection with any such vote,
directors, other than Outside Directors, shall vote in the same proportion as do
the Outside Directors, to the extent permitted under applicable law.
27. EXCHANGE.
27.1. EXCHANGE OF COMMON SHARES FOR RIGHTS. The Board of
Directors of the Company may, at its option, at any time after the occurrence of
a Trigger Event, exchange Common Shares for 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 11.1.2) by exchanging one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend, or
similar transaction occurring after the date hereof (such amount per Right being
hereinafter referred to as the "EXCHANGE CONSIDERATION"). Notwithstanding the
foregoing, (i) the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than any member of the Company
Group), together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding and (ii)
the Board shall not be empowered to effect an exchange for more than that number
of Rights for which there are sufficient Common Shares authorized but unissued,
or held by the Company as treasury shares, to permit the exchange for Rights.
27.2. EXCHANGE PROCEDURES. Immediately upon the action of the
Board of Directors of the Company ordering the exchange for any Rights pursuant
to Section 27.1, and without any further action and without any notice, the
right to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive one Common Share. The Company shall
promptly give public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which
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<PAGE> 33
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 the Rights which have become void pursuant to the
provisions of Section 11.1.2) held by each holder of Rights.
28. SUCCESSORS. All the covenants and provisions of this Rights
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
29. BENEFITS OF THIS RIGHTS AGREEMENT. Nothing in this Rights Agreement
shall be construed to give to any Person or corporation other than the Company,
the Rights Agent, and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable right,
remedy, or claim under this Rights Agreement; this Rights 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).
30. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. The Board of
Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise the rights and powers specifically
granted to the Board of Directors of the Company 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, without limitation, a determination
to redeem or not redeem the Rights or amend this Agreement). All such actions,
calculations, interpretations, and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) that are done or
made by the Board of Directors of the Company in good faith, shall (x) be final,
conclusive, and binding on the Company, the Rights Agent, the holders of the
Rights, as such, and all other parties, and (y) not subject the Board of
Directors to any liability to the holders of the Rights.
31. SEVERABILITY. If any term, provision, covenant, or restriction of
this Rights Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, or unenforceable, the remainder of the terms,
provisions, covenants, and restrictions of this Rights Agreement shall remain in
full force and effect and shall in no way be affected, impaired, or invalidated.
32. GOVERNING LAW. This Rights Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Nevada 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.
33. COUNTERPARTS. This Rights Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and
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all such counterparts shall together constitute but one and the same instrument.
34. DESCRIPTIVE HEADING. Descriptive headings of the several Sections
of this Rights Agreement are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
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<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed, all as of the day and year first above written.
HYSEQ, INC.
By: /s/ Lewis S. Gruber
---------------------------------
Name: Lewis S. Gruber
Title: President
and Chief Executive Officer
[SEAL]
U.S. Stock Transfer Corporation
Name: /s/ Enrique Artaza
---------------------------------
Title: Senior Vice President
---------------------------------
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EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
HYSEQ, INC.
(Pursuant to Section 78.1955 of the
Nevada General Corporation Law)
-----------------------------
Hyseq, Inc., a corporation organized and existing under the General Corporation
Law of the State of Nevada (hereinafter called the "CORPORATION"), hereby
certifies that the following resolution was adopted by the Board of Directors of
the Corporation as required by Section 78.1955 of the General Corporation Law at
a meeting duly called and held on June 5, 1998.
RESOLVED, that pursuant to the authority granted to and vested in the Board of
Directors of this Corporation (hereinafter called the "BOARD OF DIRECTORS" or
the "BOARD") in accordance with the provisions of the Articles of Incorporation,
the Board of Directors hereby creates a series of Preferred Stock, par value
$.001 per share (the "PREFERRED STOCK"), of the Corporation and hereby states
the designation and number of shares, and fixes the relative rights,
preferences, and limitations thereof as follows:
Series B Junior Participating Preferred Stock:
1. Designation and Amount. The shares of such series shall be
designated as "Series B Junior Participating Preferred Stock" (the "SERIES B
PREFERRED STOCK") and the number of shares constituting the Series B Preferred
Stock shall be 20,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series B Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights, or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series B Preferred Stock.
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2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series B Preferred Stock with respect to dividends, the
holders of shares of Series B Preferred Stock, in preference to the
holders of Common Stock, par value $.001 per share (the "COMMON
STOCK"), of the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June, September and December
in each year (each such date being referred to herein as a "QUARTERLY
DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share
of Series B Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 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 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 B Preferred
Stock. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series B Preferred Stock were
entitled immediately prior to such event under clause (1) 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 B Preferred Stock as provided in paragraph (A) of this
Section 2 immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of per share on the Series B
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 B Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first 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
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<PAGE> 38
issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series B
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 B Preferred Stock in
an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Series B Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof.
3. Voting Rights. The holders of shares of Series B Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series B Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the
Stockholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of shares of Series B Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or any
similar stock, or by law, the holders of shares of Series B Preferred
Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
Stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series B 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.
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4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series B 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 B Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series B Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series B Preferred Stock, except
dividends paid ratably on the Series B Preferred Stock and all
such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Series B Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series B
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series B Preferred Stock, or any
shares of stock ranking on a parity with the Series B
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 of this Section 4, purchase or otherwise acquire such shares
at such time and in such manner.
5. Reacquired Shares. Any shares of Series B Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the
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Articles of Incorporation, or in any other Certificate of Designations creating
a series of Preferred Stock or any similar stock or as otherwise required by
law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred Stock unless,
prior thereto, the holders of shares of Series B Preferred Stock shall have
received $1,000 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series B Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to
be distributed per share to holders of shares of Common Stock, or (2) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
except distributions made ratably on the Series B Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series B Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) 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 are outstanding immediately prior to such
event.
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 each share of Series B
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision, combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series B
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.
8. No Redemption. The shares of Series B Preferred Stock shall not be
redeemable.
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<PAGE> 41
9. Rank. The Series B Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Stock, except to the extent that any
such other series specifically provides that it shall rank on a parity with or
junior to the Series B Preferred Stock.
10. Amendment. The Articles of Incorporation of the Corporation shall
not be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series B Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series B Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of
the Corporation by its President and attested by its Secretary this ___ day of
June, 1998.
------------------------------
Lewis S. Gruber, President
Attest:
- --------------------------------------
Secretary
SUBSCRIBED AND SWORN TO BEFORE
ME , 1998.
---------------------------
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EXHIBIT B
FORM OF RIGHT CERTIFICATE
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER JUNE 5, 2008 OR EARLIER IF NOTICE OF REDEMPTION
OR EXCHANGE IS GIVEN OR IF THE COMPANY IS MERGED OR ACQUIRED PURSUANT
TO AN AGREEMENT OF THE TYPE DESCRIBED IN SECTION 1.3(ii)(A)(2) OF THE
RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION
OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SECTION 11.1.2 OF
THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON, OR ITS AFFILIATES OR ASSOCIATES, OR ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
CERTIFICATE ARE HELD OR HAVE BEEN HELD BY A PERSON WHO IS OR WAS AN
ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON OR
A NOMINEE THEREOF. THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY HAVE BECOME NULL AND VOID AS SPECIFIED IN SECTION 11.1.2 OF THE
RIGHTS AGREEMENT.]
Right Certificate
Hyseq, 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 June 5, 1998, as the same may be amended from time to
time (the "RIGHTS AGREEMENT"), between Hyseq, Inc., a Nevada corporation (the
"COMPANY"), and U.S. Stock Transfer Corporation, a California corporation, as
Rights Agent (the "RIGHTS AGENT"), to purchase from the Company at any time
after the Distribution Date and prior to 5:00 P.M. (California time) on June 5,
2008, at the offices of the Rights Agent, or its successors as Rights Agent,
designated for such purpose, one one-thousandth of a fully paid, nonassessable
share of Series B Junior Participating Preferred Stock, par value $.001 per
share (the "PREFERRED SHARES"), of the Company, at a purchase price of $175.00
per one one-thousandth of a share, subject to adjustment (the "PURCHASE PRICE"),
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase and certification duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-thousandths of a
Preferred Share 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
June 15, 1998 based on the Preferred Shares as constituted at such date.
Capitalized terms used in this Right Certificate without definition shall have
the meanings ascribed to them in the Rights Agreement. As provided in the Rights
Agreement, the Purchase Price and the number of Preferred Shares which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are
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<PAGE> 43
subject to modification and adjustment upon the happening of certain events.
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 offices of the Company and the
Rights Agent.
This Right Certificate, with or without other Right Certificates, upon surrender
at the offices of the Rights Agent designated for such purpose, may be exchanged
for another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
one one-thousandths of a Preferred Share as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Board of Directors may,
at its option (i) redeem the Rights evidenced by this Right Certificate at a
redemption price of $.001 per Right, or (ii) exchange Common Shares for the
Rights evidenced by this Certificate, in whole or in part.
No fractional Preferred Shares will be issued upon the exercise of any Right or
Rights evidenced hereby (other than fractions of Preferred Stock which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depository receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of 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.
If any term, provision, covenant, or restriction of the Rights 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 the Rights Agreement shall remain in full force and effect and
shall in no way be affected, impaired, or invalidated.
This Right Certificate shall not be valid or binding for any purpose until it
shall have been countersigned by the Rights Agent.
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<PAGE> 44
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of _______________.
Attest: HYSEQ, INC.
By ______________________ By _________________________________
Title: Title:
Countersigned:
U.S. Stock Transfer Corporation
By_____________________________
Authorized Signature
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<PAGE> 45
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Right Certificate.)
FOR VALUE RECEIVED _________________________________________ hereby sells,
assigns and transfers unto
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address
of transferee)
this Right Certificate and the Rights evidenced thereby, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Dated:__________________
___________________________________
Signature
Signature Guaranteed:
_________________________________
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended.
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<PAGE> 46
________________________________________________________________________________
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof; and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] 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 thereof.
Dated:__________________
________________________________
Signature
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<PAGE> 47
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires
to exercise the Right Certificate.)
To: Hyseq, 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 (or such other securities of the
Company or of any other Person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying number
_________________________________________
(Please print name and address)
_________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
____________________________________________________________
(Please print name and address)
____________________________________________________________
Dated: __________________
______________________________
Signature
Signature Guaranteed:
______________________________
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended.
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<PAGE> 48
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof; and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] 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 thereof.
Dated:_______________
______________________________
Signature
________________________________________________________________________________
NOTICE
The signature in the foregoing Form of Assignment and Form of Election
to Purchase must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of
Assignment or Form of 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 hereof and, in the case of
an Assignment, will affix a legend to that effect on any Right Certificates
issued in exchange for this Right Certificate.
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<PAGE> 49
EXHIBIT C
As described in the Rights Agreement, Rights which are held by or have
been held by Acquiring Persons or Associates or Affiliates thereof (as defined
in the Rights Agreement) shall become null and void.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On June 5, 1998, the Board of Directors of Hyseq, Inc. (the "COMPANY")
declared a dividend of one Right for each share of common stock, $.001 par value
(the "COMMON SHARES"), of the Company outstanding at the close of business on
June 15, 1998 (the "RECORD DATE"). As long as the Rights are attached to the
Common Shares, the Company will issue one Right (subject to adjustment) with
each new Common Share so that all such shares will have attached Rights. When
exercisable, each Right will entitle the registered holder to purchase from the
Company one one-thousandth of a share of Series B Junior Participating Preferred
Stock (the "PREFERRED SHARES") at a price of $175.00 per one one-thousandth of a
Preferred Share, subject to adjustment (the "PURCHASE PRICE"). The description
and terms of the Rights are set forth in a Rights Agreement, dated as of June 5,
1998, as the same may be amended from time to time (the "RIGHTS AGREEMENT"),
between the Company and U.S. Stock Transfer Corporation, a California
corporation (the "RIGHTS AGENT").
Until the earlier to occur of (i) ten (10) business days following a
public announcement that a person or group of affiliated or associated persons
has acquired, or obtained the right to acquire, beneficial ownership of 15% or
more of the Common Shares (or in the case of an Approved Stockholder (as defined
below), 27.5% or more of the Common Shares) (an "ACQUIRING PERSON") or (ii) ten
business (10) days following the commencement or announcement of an intention to
make a tender offer or exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% or more of the Common
Shares (the earlier of (i) and (ii) 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 together
with a copy of this Summary of Rights. An "APPROVED STOCKHOLDER" means any
Stockholder who is approved by a majority of the directors who are not employees
of the Company or representatives of an Acquiring Person or an Approved
Stockholder ("OUTSIDE DIRECTORS") and who, at the election of the Outside
Directors, enters into a standstill agreement with the Company so long as such
person owns less than 27.5% of the outstanding Common Shares.
The Rights Agreement provides that until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with
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<PAGE> 50
the Common Shares. Until the Distribution Date (or earlier redemption or
expiration of the Rights), new Common Share certificates issued after the close
of business on 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, exchange, termination, or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares, with or without a copy of this Summary of Rights, 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 Rights are not exercisable until the Distribution Date. The Rights
will expire on June 5, 2008, subject to the Company's right to extend such date
(the "FINAL EXPIRATION DATE"), unless earlier redeemed or exchanged by the
Company or terminated.
Each Preferred Share purchasable upon exercise of the Rights will be
entitled to a minimum preferential quarterly dividend payment of $1.00 per share
but will be entitled to an aggregate dividend of 1,000 times the dividend, if
any, declared per Common Share. In the event of liquidation, the holders of the
Preferred Shares will be entitled to a minimum preferential liquidation payment
of $1,000 per share but will be entitled to an aggregate payment of 1,000 times
the payment made per Common Share (if more than $1,000 per Preferred Share).
Each Preferred Share will have 1,000 votes and will vote together with the
Common Shares. Finally, in the event of any merger, consolidation or other
transaction in which Common Shares are exchanged, each Preferred Share will be
entitled to receive 1,000 times the amount received per Common Share. These
rights are protected by customary antidilution provisions. Because of the nature
of the Preferred Share's dividend, liquidation, and voting rights, the value of
one one-thousandth of a Preferred Share purchasable upon exercise of each Right
should approximate the value of one Common Share.
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 or convertible
securities at less than the current market price of the Preferred Shares, or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness, cash, securities, or assets (excluding regular periodic cash
dividends at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Preferred Shares (which dividends will be subject to the adjustment described in
clause (i) above)) or of subscription rights or warrants (other than those
referred to above).
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<PAGE> 51
In the event that a Person becomes an Acquiring Person or if the
Company were the surviving corporation in a merger with an Acquiring Person or
any affiliate or associate of an Acquiring Person and the Common Shares were not
changed or exchanged, each holder of a Right, other than Rights that are or were
acquired or beneficially owned by the Acquiring Person or any affiliate or
associate of an Acquiring Person (which Rights 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 then current Purchase Price of the Right.
With certain exceptions, in the event that the Company were acquired in a merger
or other business combination transaction or more than 50% of its assets or
earning power were sold, proper provision shall be made so that each holder of a
Right shall thereafter have the right to receive, upon the exercise thereof at
the then current Purchase 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 then current Purchase Price of the Right.
At any time after a Person becomes an Acquiring Person and prior to the
acquisition by such Acquiring Person of 50% or more of the outstanding Common
Shares, the Board of Directors may cause the Company to acquire the Rights
(other than Rights owned by an Acquiring Person or any affiliate or associate of
an Acquiring Person which have become void), in whole or in part, in exchange
for one Common Share per Right (subject to adjustment).
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 shares will be issued 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 Rights may be redeemed in whole, but not in part, at a price of
$.001 per Right (the "REDEMPTION PRICE") by the Board of Directors at any time
within 10 days of the time that an Acquiring Person has become such. The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a Stockholder of the Company beyond those as an existing Stockholder,
including, without limitation, the right to vote or to receive dividends.
Subject to the last sentence of this paragraph, any of the provisions
of the Rights Agreement may be amended by the Board of Directors of the Company
for so long as the Rights are then redeemable, and after the Rights are no
longer redeemable, the Company may amend or supplement the Rights Agreement in
any manner that does not adversely affect the interests of the holders of the
Rights. Notwithstanding anything herein to the
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<PAGE> 52
contrary, any supplement or amendment to the Rights Agreement shall require the
affirmative vote of a majority of the Outside Directors, and any extension of
the Final Expiration Date shall require the affirmative vote of three-quarters
of the Outside Directors.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Current Report on Form 8-K. A copy of the
Rights Agreement is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.
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<PAGE> 1
EXHIBIT 2
SUNNYVALE, Calif., June 5/PRNewswire/ -- Hyseq, Inc. HYSQ today announced that
it has adopted a shareholder rights plan designed to protect the long-term
interest of the Company and its stockholders in the event of an unsolicited
takeover attempt. The plan encourages potential acquirers of Hyseq to negotiate
with the Board of Directors, thereby enhancing the Board's ability to achieve
the best possible value for all Hyseq stockholders. The plan was not adopted in
response to any present effort to acquire Hyseq or its securities.
Under the plan, each holder of Hyseq common stock as of the close of business on
June 15, 1998 will receive a distribution of one right for each share of common
stock held. Each right entitles the holder to purchase from Hyseq one
one-thousandth of a share of Class B Junior Participating Preferred Stock of
Hyseq at a price of $175 per one one-thousandth of a preferred share, subject to
adjustment. The rights will become exercisable and will detach from the common
stock a specified period of time following the acquisition by any person of
beneficial ownership of 15% or more of Hyseq common stock or in the event any
person has commenced a tender or exchange offer which, if consummated, would
result in any person becoming the beneficial owner of 15% or more of Hyseq's
common stock.
If a person becomes an Acquiring Person (as defined below), each right will
entitle its holder to purchase, at the right's then-current exercise price, a
number of Hyseq's common shares having a market value at that time of twice the
then-current exercise price. Rights held by the Acquiring Person will become
void and will not be exercisable to purchase shares at the bargain purchase
price. An Acquiring Person is defined as a person who acquires 15% or more of
the outstanding common stock of Hyseq; except that, in certain limited
circumstances and with the approval of the Board, a person may acquire up to
27.5% of Hyseq's common stock without becoming an Acquiring Person. If Hyseq is
acquired in a merger or other business combination which has not been approved
by the Board, each right will entitle its holder to purchase, at the right's
then-current exercise price, a number of shares of the surviving company having
a market value at that time of twice the right's exercise price.
Hyseq may redeem the rights at a price of $0.001 per right at any time until 10
days after the date a person has become an Acquiring Person. The rights will
expire on June 5, 2008, unless earlier exchanged or redeemed.
Hyseq, Inc., based in Sunnyvale, California, applies the proprietary DNA array
technology of its integrated HyX(SM) genomics platform to produce gene-based
therapeutic product candidates, the only universal DNA sequencing chip, and
diagnostic tests. Hyseq believes that its fast-growing, proprietary HyGenomics
(TM) database of partial human gene sequences is the world's largest.
Information about Hyseq is available on the World Wide Web at
http://www.hyseq.com.
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<PAGE> 2
Any statements released by Hyseq, Inc. that are forward-looking are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Editors and investors are cautioned that forward-looking
statements involve risks and uncertainties, which may affect the company's
business prospects and performance. These include economic, competitive,
governmental, technological, and other factors discussed in the company's
filings with the Securities and Exchange Commission on forms 10-K and 8-K.
59
