Item
1.01 Entry into a Material Definitive Agreement.
On
December 13, 2019, the Board of Directors (the “Board”) of CytRx Corporation (the “Company”),
authorized and declared a dividend to stockholders of record at the close of business on December 23, 2019 (the “Record
Date”) of one preferred share purchase right (a “Right”) for each outstanding share of common stock,
$0.001 par value per share (“Common Stock”), of the Company. Each Right entitles the holder to purchase from
the Company one one-thousandth (subject to adjustment) of one share of Series B Junior Participating Preferred Stock, $0.01 par
value per share (“Preferred Stock”) of the Company at an exercise price of $5.00 per one one-thousandth of
a share of Preferred Stock (the “Purchase Price”). The complete terms of the Rights are set forth in a Rights
Agreement (the “Rights Agreement”), dated as of December 13, 2019, by and between the Company and American
Stock Transfer & Trust Company, LLC, as rights agent (the “Rights Agent”).
The
following is a summary of the principal terms of the Rights and the Rights Agreement:
The
Board declared a dividend of one Right for each outstanding share of Common Stock. Prior to the Distribution Date referred to
below, (i) the Rights will be evidenced by and trade with the certificates for the shares of Common Stock (or, with respect to
any uncertificated Common Stock registered in book-entry form, by notation in book-entry), and no separate rights certificates
will be distributed; (ii) new certificates for shares of Common Stock issued after the Record Date will contain a legend incorporating
the Rights Agreement by reference (for uncertificated shares of Common Stock registered in book-entry form, this legend will be
contained in a notation in book-entry); (iii) the surrender for transfer of any certificates for shares of Common Stock (or the
surrender for transfer of any uncertificated shares of Common Stock registered in book-entry form) will also constitute the transfer
of the Rights associated with such Common Stock; and (iv) the Rights will accompany any new shares of Common Stock that are issued
after the Record Date.
Subject
to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and become exercisable
following the earlier of (i) the tenth (10th) business day after a public announcement that either discloses that a person or
a group of related persons has acquired beneficial ownership of fifteen percent (15%) or more of the Common Stock other than as
a result of repurchases of Common Stock by the Company or certain inadvertent acquisitions (an “Acquiring Person”)
or information which reveals the existence of an Acquiring Person, or (ii) the tenth (10th) business day or such later date as
may be determined by the Board, after a person or a group of related persons announce or commence a tender or exchange offer that
would result in a person or a group of related persons becoming an Acquiring Person. For purposes of the Rights Agreement, beneficial
ownership is defined to include the ownership of derivative securities. The date on which the Rights separate from the Common
Stock and become exercisable is referred to as the “Distribution Date.”
After
the Distribution Date, the Company will mail Rights certificates to the Company’s stockholders as of the close of business
on the Distribution Date and the Rights will become transferable apart from the Common Stock. Thereafter, such Rights certificates
alone will represent the Rights.
The
Rights Agreement provides that an Acquiring Person does not include the Company, any subsidiary of the Company, any employee benefit
plan of the Company or any subsidiary of the Company, or any person holding shares of Common Stock for or pursuant to the terms
of any such employee benefit plan of the Company. In addition, certain inadvertent acquisitions will not trigger the occurrence
of the Distribution Date. The Rights Agreement also provides that any person that would otherwise be deemed an Acquiring Person
as of the date of the adoption of the Rights Agreement will be exempted but only for so long as neither it nor any of its Related
Persons (as defined in the Rights Agreement) acquire or are deemed to acquire, without the prior approval of the Board, beneficial
ownership of any additional Common Stock following the adoption of the Rights Agreement.
After
the Distribution Date, each Right will entitle the holder to purchase, for the Purchase Price, one one-thousandth of a share of
Preferred Stock having economic and other terms similar to that of one share of Common Stock. This portion of a share of Preferred
Stock is intended to give a stockholder approximately the same dividend, voting and liquidation rights as would one share of Common
Stock.
If
a person or group of related persons becomes an Acquiring Person, then each Right will entitle the holder thereof to purchase,
upon payment of the Purchase Price, in accordance with the terms of the Rights Agreement, in lieu of a number of one one-thousandths
of a share of Preferred Stock, a number of shares of Common Stock or, in certain circumstances, cash, property or other securities
of the Company having a then-current market value of twice the Purchase Price. However, the Rights are not exercisable following
the occurrence of the foregoing event until such time as the Rights are no longer redeemable by the Company, as further described
below.
Following
the occurrence of an event set forth in the preceding paragraph, all Rights that are or, under certain circumstances specified
in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.
If,
after an Acquiring Person obtains fifteen percent (15%) or more of the Common Stock, (i) the Company merges into another entity,
(ii) an acquiring entity merges into the Company and in connection with such transaction all or part of the outstanding shares
of Common Stock are converted into stock or other securities of another entity, cash, or other property or (iii) the Company sells
or transfers fifty percent (50%) or more of its assets or earning power, then each Right (except for Rights that have previously
been voided as set forth above) will entitle the holder thereof to purchase, upon payment of the Purchase Price, in accordance
with the terms of the Rights Agreement, a number of shares of common stock of the person engaging in the transaction having a
then-current market value of twice the Purchase Price.
The
Rights will be redeemable at the Board’s sole discretion for $0.001 per Right (payable in cash, Common Stock or other consideration
deemed appropriate by the Board) at any time ending on the earlier of (i) the tenth (10th) business day (or such later date as
may be determined by the Board) after the public announcement that a person has acquired beneficial ownership of fifteen percent
(15%) or more of the Common Stock and (ii) the final expiration date of the Rights Agreement. Until such time as the Rights are
no longer redeemable by the Company, the Rights are not exercisable. Immediately upon the action of the Board ordering redemption,
the Rights will terminate and the only right of the holders of the Rights will be to receive the $0.001 redemption price. The
redemption price will be adjusted if the Company undertakes a stock dividend, a stock split or similar transaction.
At
any time after the date on which a person beneficially owns fifteen percent (15%) or more of the Common Stock and prior to the
acquisition by the person of fifty percent (50%) or more of the Common Stock, the Board may exchange the Rights (other than Rights
owned by the Acquiring Person or any Related Person, which would have become void), in whole or in part, for Common Stock at an
exchange ratio (subject to adjustment) of one share of Common Stock per Right (or, if insufficient shares are available, the Company
may issue preferred stock, cash, debt or equity securities, property or a combination thereof in exchange for the Rights).
The
Rights will expire at or prior to the earlier of (i) December 13, 2029, or (ii) the redemption or exchange of the Rights as described
above.
The
terms of the Rights and the Rights Agreement may be amended by action of the Board in any respect without the consent of the holders
of the Rights on or prior to the time a person becomes an Acquiring Person. Thereafter, the terms of the Rights and the Rights
Agreement may not be supplemented or amended in any manner that would adversely affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.
The
Board may adjust the Purchase Price, the number of shares of Preferred Stock issuable and the number of outstanding Rights to
prevent dilution that may occur from a stock dividend, a stock split or a reclassification of the Preferred Stock or Common Stock.
The
distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights
exercisable or upon redemption of the Rights, stockholders may recognize taxable income.
The
foregoing summary is qualified in its entirety by reference to the complete text of the Rights Agreement, a copy of which is filed
as Exhibit 4.1 and incorporated herein by reference.
