Exhibit 4.2


THERAVANCE, INC.


and


The Bank of New
York,


as Rights Agent


AMENDED AND RESTATED RIGHTS AGREEMENT


Dated as of June 22, 2007















TABLE OF
CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  Appointment of Rights Agent

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  Issue of Right Certificates

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  Form of Right Certificates

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  Countersignature and Registration

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

  	
  Transfer, Split Up, Combination and Exchange of
  Right

  	
   

  	
   

  
	
   

  	
   

  	
  Certificates; Mutilated, Destroyed, Lost or Stolen
  Right

  	
   

  	
   

  
	
   

  	
   

  	
  Certificates

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
   

  	
  Exercise of Rights, Purchase Price; Expiration Date
  of Rights

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  Cancellation and Destruction of Right Certificates

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.

  	
   

  	
  Availability of Shares of Preferred Stock

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  Preferred Stock Record Date

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
   

  	
  Adjustment of Purchase Price, Number of Shares and
  Number

  	
   

  	
   

  
	
   

  	
   

  	
  of Rights

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  Certificate of Adjusted Purchase Price or Number of
  Shares

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
   

  	
  Consolidation, Merger or Sale or Transfer of Assets
  or

  	
   

  	
   

  
	
   

  	
   

  	
  Earning Power

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 14.

  	
   

  	
  Fractional Rights and Fractional Shares

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 15.

  	
   

  	
  Rights of Action

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 16.

  	
   

  	
  Agreement of Right Holders

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 17.

  	
   

  	
  Right Certificate Holder Not Deemed a Stockholder

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 18.

  	
   

  	
  Concerning the Rights Agent

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 19.

  	
   

  	
  Merger or Consolidation or Change of Name of Rights
  Agent

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 20.

  	
   

  	
  Duties of Rights Agent

  	
   

  	
  26

  



 











 


	
  Section 21.

  	
   

  	
  Change of Rights Agent

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 22.

  	
   

  	
  Issuance of New Right Certificates

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 23.

  	
   

  	
  Redemption

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 24.

  	
   

  	
  Exchange

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 25.

  	
   

  	
  Notice of Certain Events

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 26.

  	
   

  	
  Notices

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 27.

  	
   

  	
  Supplements and Amendments

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 28.

  	
   

  	
  Successors; Assignment

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 29.

  	
   

  	
  Benefits of this Agreement

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 30.

  	
   

  	
  Determinations and Actions by the Board of Directors

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 31.

  	
   

  	
  Severability

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 32.

  	
   

  	
  Governing Law

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 33.

  	
   

  	
  Counterparts

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 34.

  	
   

  	
  Descriptive Headings

  	
   

  	
  34

  



 
















AMENDED AND RESTATED
RIGHTS AGREEMENT


This Amended and
Restated Rights Agreement, dated as of June 22, 2007 (“Agreement”), is between
Theravance, Inc., a Delaware corporation (the “Company”), and The Bank of New
York, a New York trust company, as Rights Agent (the “Rights Agent”).


The Board of
Directors of the Company has authorized and declared a dividend of one
preferred share purchase right (a “Right”) for each share of Common Stock (as
hereinafter defined) of the Company outstanding as of the Close of Business (as
defined below) on October 8, 2004 (the “Record Date”), each Right
representing the right to purchase one one-thousandth (subject to adjustment)
of a share of Preferred Stock (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right (subject to adjustment as provided herein)
with respect to each share of Common Stock that shall become outstanding
between the Record Date and the earlier of the Distribution Date and the
Expiration Date (as such terms are hereinafter defined); provided,
however, that Rights may be issued with respect to shares of Common Stock that
shall become outstanding after the Distribution Date and prior to the
Expiration Date in accordance with Section 22.


Accordingly, in
consideration of the premises and the mutual agreements herein set forth, the
parties hereby agree as follows:


Section 1.  Certain Definitions.  For purposes of this Agreement, the following
terms have the meaning indicated:


(a)           “Acquiring Person” shall mean any
Person (as such term is hereinaf­ter defined) who or which shall be the
Beneficial Owner (as such term is hereinafter defined) of 15% or more of the
shares of Common Stock then outstanding, but shall not include an Exempt Person
(as such term is hereinafter defined); provided, however, that
(i) if the Board of Directors of the Company determines in good faith that a
Person who would otherwise be an “Acquiring Person” became the Beneficial Owner
of a number of shares of Common Stock such that the Person would otherwise
qualify as an “Acquiring Person” inadvertently (including, without limitation,
because (A) such Person was unaware that it beneficially owned a percentage of
Common Stock that would otherwise cause such Person to be an “Acquiring Person”
or (B) such Person was aware of the extent of its Beneficial Ownership of
Common Stock but had no actual knowledge of the consequences of such Beneficial
Ownership under this Agreement) and without any intention of changing or
influencing control of the Company, then such Person shall not be deemed to be
or to have become an “Acquiring Person” for any purposes of this Agreement
unless and until such Person shall have failed to divest itself, as soon as
practicable (as determined, in good faith, by the Board of Directors of the
Company), of Beneficial Ownership of a sufficient number of shares of Common
Stock so that such Person would no longer otherwise qualify as an “Acquiring
Person”; (ii) if, as of the date hereof or prior to the first public
announcement of the adoption of this Agreement, any Person is or becomes the
Beneficial Owner of 15% or more of the shares of Common Stock outstanding, such
Person shall not be deemed to be or to become an “Acquiring Person” unless 



 1
 









and until such
time as such Person shall, after the first public announcement of the adoption
of this Agreement, become the Beneficial Owner of additional shares of Common
Stock (other than pursuant to a dividend or distribution paid or made by the
Company on the outstanding Common Stock or pursuant to a split or subdivision
of the outstanding Common Stock), unless, upon becoming the Beneficial Owner of
such additional shares of Common Stock, such Person is not then the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding; (iii) no
Person shall become an “Acquiring Person” as the result of an acquisition of
shares of Common Stock by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares of Common Stock
beneficially owned by such Person to 15% or more of the shares of Common Stock
then outstanding, provided, however, that if a Person shall
become the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding by reason of such share acquisitions by the Company and shall
thereafter become the Beneficial Owner of any additional shares of Common Stock
(other than pursuant to a dividend or distribution paid or made by the Company
on the outstanding Common Stock or pursuant to a split or subdivision of the
outstanding Common Stock), then such Person shall be deemed to be an “Acquiring
Person” unless upon becoming the Beneficial Owner of such additional shares of
Common Stock such Person does not beneficially own 15% or more of the shares of
Common Stock then outstanding; and (iv) GlaxoSmithKline plc, Glaxo Group
Limited and SmithKlineBeecham Corporation (collectively “GSK”) shall not be
deemed an “Acquiring Person” under this Agreement for so long as GSK is in compliance
with the terms of that certain Governance Agreement dated May 11, 2004 by and
among the Company and GSK.  For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Common Stock of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as in effect
on the date hereof.


(b)           “Affiliate” and “Associate” shall
have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
hereof.


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


(i)            which such Person or any of such
Person’s Affiliates or Associates is deemed to beneficially own, directly or
indirectly, within the meaning of Rule l3d-3 of the General Rules and
Regulations under the Exchange Act as in effect on the date hereof;


(ii)           which such Person or any of such
Person’s Affiliates or Associates has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (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, warrants or options, or otherwise; provided, however,
that a Person 



 2
 









shall not be
deemed the Beneficial Owner of, or to beneficially own, (x) 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, (y) securities which such Person has a right to
acquire upon the exercise of Rights at any time prior to the time that any
Person becomes an Acquiring Person or (z) securities issuable upon the exercise
of Rights from and after the time that any Person becomes an Acquiring Person
if such Rights were acquired by such Person or any of such Person’s Affiliates
or Associates prior to the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof (“Original Rights”) or pursuant to Section 11(i) or Section
11(n) with respect to an adjustment to Original Rights; or (B) the right
to vote pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security by reason of such agreement, arrangement or
understanding 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 promulgated under
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 and with respect to 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) for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of such
securities of the Company;


provided,
however, that no Person who is an officer, director or employee of an
Exempt Person shall be deemed, solely by reason of such Person’s status or
authority as such, to be the “Beneficial Owner” of, to have “Beneficial
Ownership” of or to “beneficially own” any securities that are “beneficially
owned” (as defined in this Section l(c)), including, without limitation, in a
fiduciary capacity, by an Exempt Person or by any other such officer, director
or employee of an Exempt Person.


(d)           “Business Day” shall mean any day other
than a Saturday, a Sunday or a day on which banking institutions in the State
of New York or the city in which the principal office of the Rights Agent is
located are authorized or obligated by law or executive order to close.


(e)           “Close of Business” on any given date
shall mean 5:00 P.M., New York City time, on such date; provided, however,
that if such date is not a Business Day it shall mean 5:00 P.M., New York City
time, on the next succeeding Business Day.


(f)            “Common Stock” when used with
reference to the Company shall mean the Common Stock and Class A Common Stock,
each presently par value $0.01 per share, of the Company.  “Common Stock” when used with reference to
any Person other than the Company shall mean the common stock (or, in the case
of an unincorporated entity, the equivalent equity interest) with the greatest
voting power of such other Person or, if such other Person is a 



 3
 









Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person.


(g)           “Common Stock Equivalents” shall have
the meaning set forth in Section 11(a)(iii) hereof.


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


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


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


(k)           “Exempt Person” shall mean the
Company or any Subsidiary (as such term is hereinafter defined) of the Company,
in each case including, without limitation, in its fiduciary capacity, or any
employee benefit plan of the Company or of any Subsidiary of the Company, or
any entity or trustee holding Common Stock for or pursu­ant to the terms of any
such plan or for the purpose of funding any such plan or funding other employee
benefits for employees of the Company or of any Subsidiary of the Company.


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


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


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


(o)           “Flip-In Event” shall have the
meaning set forth in Section 11(a)(ii) hereof.


(p)           “NASDAQ” shall mean The Nasdaq Stock
Market.


(q)           “New York Stock Exchange” shall mean
the New York Stock Exchange, Inc.


(r)            “Person” shall mean any individual,
firm, corporation, partnership, limited liability company, trust or other
entity, and shall include any successor (by merger or otherwise) to such
entity.


(s)           “Preferred Stock” shall mean the
Series A Junior Participating Preferred Stock, par value $0.01 per share, of
the Company having the rights and preferences set forth in the Amended and
Restated Certificate of Incorporation attached to this Agreement as
Exhibit A.


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



 4
 









(u)                                 “Purchase
Price” shall have the meaning set forth in Section 7(b) hereof.


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


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


(x)            “Right Certificate” shall have the
meaning set forth in Section 3 hereof.


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


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


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


(bb)         “Stock Acquisition Date” shall mean the
first date of public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to Section 13(d) of
the Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such, or such earlier date as a majority of the Board of
Directors shall become aware of the existence of an Acquiring Person.


(cc)         “Subsidiary” of any Person shall mean
any corporation or other entity of which securities or other ownership
interests having ordinary voting power sufficient to elect a majority of the
board of directors or other persons performing similar functions are beneficially
owned, directly or indirectly, by such Person, and any corporation or other
entity that is otherwise controlled by such Person.


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


(ee)         “Summary of Rights” shall have the
meaning set forth in Section 3 hereof.


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


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


Section 3.  Issue of Right Certificates.


(a)           Until the Close of Business on the
earlier of (i) the tenth day after the Stock Acquisition Date or (ii) the tenth
Business Day (or such later date as may be determined by action of the Board of
Directors prior to such time as any Person becomes an Acquiring Person) after
the date of the commencement by any Person (other than an Exempt Person) of, 



 5
 









or of the first
public announcement of the intention of such Person (other than an Exempt
Person) to commence, a tender or exchange offer the consummation of which would
result in any Person (other than an Exempt Person) becoming the Beneficial
Owner of shares of Common Stock aggregating 15% or more of the Common Stock
then outstanding (the earlier of such dates being herein referred to as the “Distribution
Date”, provided, however, that if either of such dates occurs
after the date of this Agreement and on or prior to the Record Date, then the
Distribution Date shall be the Record Date), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Stock registered in the names of the holders thereof and not by separate
Right Certificates, and (y) the Rights will be transferable only in connection
with the transfer of Common Stock.  As
soon as practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign and the Company will send or cause
to be sent (and the Rights Agent will, if requested, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common Stock as of the
close of business on the Distribution Date (other than any Acquiring Person or
any Associate or Affiliate of an Acquiring Person), at the address of such
holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing
one Right (subject to adjustment as provided herein) for each share of Common
Stock so held.  As of the Distribution
Date, the Rights will be evidenced solely by such Right Certificates.


(b)           On the Record Date, or as soon as
practicable thereafter, the Company will send a copy of a Summary of Rights to
Purchase Shares of Preferred Stock, in substantially the form of Exhibit C
hereto (the “Summary of Rights”), by first-class, postage-prepaid mail, to each
record holder of Common Stock as of the Close of Business on the Record Date
(other than any Acquiring Person or any Associate or Affiliate of any Acquiring
Person), at the address of such holder shown on the records of the
Company.  With respect to certificates
for Common Stock outstanding as of the Record Date, until the Distribution
Date, the Rights will be evidenced by such certificates registered in the names
of the holders thereof together with the Summary of Rights.  Until the Distribution Date (or, if earlier,
the Expiration Date), the surrender for transfer of any certificate for Common
Stock outstanding 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 Stock represented thereby.


(c)           Rights shall be issued in respect of
all shares of Common Stock issued or disposed of (including, without limitation,
upon disposition of Common Stock out of treasury stock or issuance or
reissuance of Common Stock out of authorized but unissued shares) after the
Record Date but prior to the earlier of the Distribution Date and the
Expiration Date, or in certain circumstances provided in Section 22 hereof,
after the Distribution Date. 
Certificates issued for Common Stock (including, without limitation,
upon transfer of outstanding Common Stock, disposition of Common Stock out of
treasury stock or issuance or reissuance of Common Stock out of authorized but
unissued shares) after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date shall have impressed on, printed on,
written on or otherwise affixed to them the following legend:


This certificate
also evidences and entitles the holder hereof to certain Rights as set forth in
an Amended and Restated Rights Agreement 



 6
 









between
Theravance, Inc. (the “Company”) and The Bank of New York, as Rights Agent,
dated as of June 22, 2007 and as amended from time to time (the “Rights
Agreement”), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal executive offices of the
Company.  Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.  The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of a
written request therefor.  Under
certain circumstances, as set forth in the Rights Agreement, Rights owned by or
trans­ferred to any Person who is or becomes an Acquiring Person (as defined in
the Rights Agreement) and certain transferees thereof will become null and void
and will no longer be transferable.


With respect to
such certificates containing the foregoing legend, until the Distribution Date
the Rights associated with the Common Stock represented by such certificates
shall be evidenced by such certificates alone, and the surrender for transfer
of any such certificate, except as otherwise provided herein, shall also
constitute the transfer of the Rights associated with the Common Stock
represented thereby.  In the event that
the Company purchases or otherwise acquires any Common Stock after the Record
Date but prior to the Distribution Date, any Rights associated with such Common
Stock shall be deemed canceled and retired so that the Company shall not be
entitled to exercise any Rights associated with the Common Stock which are no
longer outstanding.


Notwithstanding
this paragraph (c), the omission of a legend shall not affect the
enforceability of any part of this Agreement or the rights of any holder of the
Rights.


Section 4.  Form of Right Certificates.  The Right Certificates (and the forms of
election to purchase shares and of assignment to be printed on the reverse
thereof) shall be substantially in the form set forth in Exhibit B hereto and
may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
interdealer quotation system on which the Rights may from time to time be
listed or quoted, or to conform to usage. 
Subject to the provisions of this Agreement, the Right Certificates
shall entitle the holders thereof to purchase such number of one
one-thousandths of a share of Preferred Stock as shall be set forth therein at
the Purchase Price, but the number of such one one-thousandths of a share of
Preferred Stock and the Purchase Price shall be subject to adjustment as
provided herein.


Section 5.  Countersignature and Registration.


(a)           The Right Certificates shall be
executed on behalf of the Company by the Company’s Chief Executive Officer
either manually or by facsimile signature, shall have 



 7
 









affixed thereto
the Company’s seal or a facsimile thereof and shall be attested by the
Secretary of the Company, either manually or by facsimile signature.  The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
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; and 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 Agreement any such Person was not such an officer.


(b)           Following the Distribution Date, the
Rights Agent will keep or cause to be kept, at an office or agency designated
for such purpose, books for registration and transfer of the Right Certificates
issued hereunder.  Such books shall show
the names and addresses of the respective holders of the Right Certificates,
the number of Rights evidenced on its face by each of the Right Certificates
and the date of each of the Right Certificates.


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


(a)           Subject to the provisions of this
Agreement, at any time after the Distribution Date and prior to the Expiration
Date, any Right Certificate or Right Certificates may be transferred, split up,
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 share of Preferred Stock as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase.  Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the office or agency of the Rights Agent designated
for such purpose.  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 of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.


(b)           Subject to the provisions of this
Agreement, at any time after the Distribution Date and prior to the Expiration
Date, upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, 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 upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for 



 8
 









delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed
or mutilated.


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


(a)           Except as otherwise provided herein,
the Rights shall become exercisable on the Distribution Date, and thereafter
the registered holder of any Right Certificate may, subject to Section
11(a)(ii) hereof and except as otherwise provided herein, exercise the Rights
evidenced thereby in whole or in part upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly
executed, to the Rights Agent at the office or agency of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase Price
with respect to the total number of one one-thousandths of a share of Preferred
Stock (or other securities, cash or other assets, as the case may be) as to
which the Rights are exercised, at any time which is both after the
Distribution Date and prior to the time (the “Expiration Date”) that is the
earliest of (i) the Close of Business on October 8, 2014 (the “Final
Expiration Date”), (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the “Redemption Date”) or (iii) the time at which such
Rights are exchanged as provided in Section 24 hereof.


(b)           The Purchase Price shall be initially
$209.25 for each one one-thousandth of a share of Preferred Stock purchasable
upon the exercise of a Right.  The
Purchase Price and the number of one one-thousandths of a share of Preferred
Stock or other securities or property to be acquired upon exercise of a Right
shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof and shall be payable in lawful money of the United States of America
in accordance with paragraph (c) of this Section 7.


(c)           Except as otherwise provided herein,
upon receipt of a Right Certificate representing exercisable Rights, with the
form of election to purchase duly executed, accompanied by payment of the
aggregate Purchase Price for the shares of Preferred Stock to be purchased and
an amount equal to any applicable transfer tax required to be paid by the
holder of such Right Certificate in accordance with Section 9 hereof, in cash
or by certified check, 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 Stock, or make available if the Rights
Agent is the transfer agent for the Preferred Stock, certificates for the
number of shares of Preferred Stock to be purchased, and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or
(B) requisition from a depositary agent appointed by the Company depositary
receipts representing interests in such number of one one-thousandths of a
share of Preferred Stock as are to be purchased (in which case certificates for
the Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent), and the Company hereby directs any
such depositary agent to comply with such request, (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 14 hereof, (iii) promptly after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after 



 9
 









receipt, promptly
deliver such cash to or upon the order of the registered holder of such Right
Certificate.


(d)           Except as otherwise provided herein,
in case the registered holder of any Right Certificate shall exercise less than
all of the Rights evidenced thereby, a new Right Certificate evidencing Rights
equivalent to the exercisable Rights remaining unexercised shall be issued by
the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof.


(e)           Notwithstanding anything in this
Agreement to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder of Rights
upon the occurrence of any purported transfer or exercise of Rights pursuant to
Section 6 hereof or this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of assignment or form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such transfer or exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
thereof as the Company shall reasonably request.


Section 8.  Cancellation and Destruction of Right
Certificates.  All Right Certificates
surrendered for the purpose of exercise, transfer, split up, combination or
exchange shall, if surrendered to the Company or to any of its agents, be
delivered to the Rights Agent for cancellation or in canceled form, or, if
surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this 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.


Section 9.  Availability of Shares of Preferred Stock.


(a)           The Company covenants and agrees that
it will cause to be reserved and kept available out of its authorized and
unissued shares of Preferred Stock or any shares of Preferred Stock held in its
treasury, the number of shares of Preferred Stock that will be sufficient to
permit the exercise in full of all outstanding Rights.


(b)           So long as the shares of Preferred
Stock issuable upon the exercise of Rights may be listed or admitted to trading
on any national securities exchange, or quoted on NASDAQ, 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 or admitted to
trading on such exchange, or quoted on NASDAQ, upon official notice of issuance
upon such exercise.


(c)           From and after such time as the
Rights become exercisable, the Company shall use its best efforts, if then
necessary to permit the issuance of shares of Preferred Stock 



 10
 









upon the exercise of
Rights, to register and qualify such shares of Preferred Stock under the
Securities Act and any applicable state securities or “Blue Sky” laws (to the
extent exemptions therefrom are not available), cause such registration
statement and qualifications to become effective as soon as possible after such
filing and keep such registration and qualifications effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the earlier of the date as of which the Rights are no longer exercisable for
such securities and the Expiration Date. 
The Company may temporarily suspend, for a period of time not to exceed
90 days, the exercisability of the Rights in order to prepare and file a
registration statement under the Securities Act and permit it to become
effective.  Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect.  Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such jurisdiction shall have
been obtained and until a registration statement under the Securities Act shall
have been declared effective, unless an exemption therefrom is available.


(d)           The Company covenants and agrees that
it will take all such action as may be necessary to ensure that all shares of
Preferred Stock delivered upon exercise of Rights shall, at the time of
delivery of the certificates therefor (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.


(e)           The Company further covenants and
agrees that it will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any shares of Preferred Stock 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 or depositary receipts for
the Preferred Stock in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue or
deliver any certificates or depositary receipts for Preferred Stock upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by that holder of such Right Certificate at the time of
surrender) or until it has been established to the Company’s reasonable
satisfaction that no such tax is due.


Section 10.  Preferred Stock Record Date.  Each Person in whose name any certificate for
Preferred Stock is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the shares of Preferred Stock
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 Stock transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock transfer books of the Company are open.  Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate shall not be entitled to any rights
of a holder of Preferred 



 11
 









Stock for which
the Rights shall be exercisable, including, without limitation, the right to
vote or to receive dividends or other distribu­tions, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.


Section 11.  Adjustment of Purchase Price, Number and
Kind of Shares and Number of Rights. 
The Purchase Price, the number of shares of Preferred Stock or other
securities or property purchasable upon exercise of each Right and the number
of Rights outstanding are subject to adjustment from time to time as provided
in this Section 11.


(a)(i)  In the event the Company shall at any time
after the date of this Agreement (A) declare and pay a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares of Preferred Stock or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the number and kind of shares of capital stock
issuable upon exercise of a Right as of the record date for such dividend or
the effective date of such subdivision, combination or reclassification 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 Stock transfer books of the Company
were open, the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or reclassification.


(ii)           Subject to Section 24 of this
Agreement, in the event any Person becomes an Acquiring Person (the first
occurrence of such event being referred to hereinafter as the “Flip-In Event”),
then (A) the Purchase Price shall be adjusted to be the Purchase Price in
effect immediately prior to the Flip-In Event multiplied by the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such Flip-In Event, whether or not such Right was then
exercisable, and (B) each holder of a Right, except as otherwise provided in
this Section 11(a)(ii) and Section 11(a)(iii) hereof, shall thereafter have the
right to receive, upon exercise thereof at a price equal to the Purchase Price
(as so adjusted), in accordance with the terms of this Agreement and in lieu of
shares of Preferred Stock, such number of shares of Common Stock as shall equal
the result obtained by dividing the Purchase Price (as so adjusted) by 50% of
the current per share market price of the Common Stock (determined pursuant to
Section 11(d) hereof) on the date of such Flip-In Event; provided, however,
that the Purchase Price (as so adjusted) and the number of shares of Common
Stock so receivable upon exercise of a Right shall, following the Flip-In
Event, be subject to further adjustment as appropriate in accordance with
Section 11(f) hereof.  Notwithstanding
anything in this Agreement to the contrary, however, from and after the Flip-In
Event, any Rights that are beneficially owned by (x) any Acquiring Person (or
any Affiliate or Associate of any Acquiring Person), (y) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who becomes a transferee
after the Flip-In Event or (z) a transferee of any Acquiring Person (or any
such Affiliate or Associate) who became a transferee prior to or concurrently
with the Flip-In Event pursuant to either (I) a transfer from the Acquiring
Person to holders of its equity securities or to any Person with whom it has
any continuing agreement, 



 12
 









arrangement or
understanding regarding the transferred Rights or (II) a transfer which
the Board of Directors has determined is part of a plan, arrangement or
understanding which has the purpose or effect of avoiding the provisions of
this para­graph, and subsequent transferees of such Persons, shall be void
without any further action and any holder of such Rights shall thereafter have
no rights whatsoever with respect to such Rights under any provision of this
Agreement.  The Company shall use all
reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.  From and after the Flip-In
Event, no Right Certificate shall be issued pursuant to Section 3 or Section 6
hereof that represents Rights that are or have become void pursuant to the
provisions of this paragraph, and any Right Certificate delivered to the Rights
Agent that represents Rights that are or have become void pursuant to the
provisions of this paragraph shall be canceled. 
From and after the occurrence of an event specified in Section 13(a)
hereof, any Rights that theretofore have not been exer­cised pursuant to this
Section 11(a)(ii) shall thereafter be exercisable only in accordance with
Section 13 and not pursuant to this Section 11(a)(ii).


(iii)          The Company may at its option
substitute for a share of Common Stock issuable upon the exercise of Rights in
accordance with the foregoing subparagraph (ii) a number of shares of Preferred
Stock or fraction thereof such that the current per share market price of one
share of Preferred Stock multiplied by such number or fraction is equal to the
current per share market price of one share of Common Stock.  In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Board of Directors shall, with respect to such
deficiency, to the extent permitted by applicable law and any material
agreements then in effect to which the Company is a party, (A) determine the
excess (such excess, the “Spread”) of (1) the value of the shares of Common
Stock issuable upon the exercise of a Right in accordance with the foregoing
subparagraph (ii) (the “Current Value”) over (2) the Purchase Price (as
adjusted in accordance with the foregoing subparagraph (ii)), and (B) with
respect to each Right (other than Rights which have become void pursuant to the
foregoing subparagraph (ii)), make adequate provision to substitute for the
shares of Common Stock issuable in accordance with the foregoing subparagraph
(ii) upon exercise of the Right and payment of the Purchase Price (as adjusted
in accordance therewith), (1) cash, (2) a reduction in such Purchase Price, (3)
shares of Preferred Stock or other equity securities of the Company (including,
without limitation, shares or fractions of shares of preferred stock which, by
virtue of having dividend, voting and liquidation rights substantially
comparable to those of the shares of Common Stock, are deemed in good faith by
the Board of Directors to have substantially the same value as the shares of
Common Stock (such shares of Preferred Stock and shares or fractions of shares
of preferred stock are hereinafter referred to as “Common Stock Equivalents”)),
(4) debt securities of the Company, (5) other assets, or (6) any combination of
the foregoing, having a value which, when added to the value of the shares of
Common Stock issued upon exercise of such Right, shall have an aggregate value
equal to the Current Value (less the amount of any reduction in such Purchase
Price), where such aggregate value has been determined by the Board of
Directors upon the advice of a nationally recognized investment banking firm
selected in good faith by the Board of Directors; provided, however,
that if the Company shall not make adequate provision to deliver value pursuant
to 



 13
 









clause (B) above
within thirty (30) days following the Flip-In Event (the date of the Flip-In
Event being the “Section 11(a)(ii) Trigger Date”), then the Company shall be
obligated to deliver, to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a party, upon the
surrender for exercise of a Right and without requiring payment of such
Purchase Price, shares of Common Stock (to the extent available), and then, if
necessary, such number or fractions of shares of Preferred Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread.  If,
upon the occurrence of the Flip-In Event, the Board of Directors shall
determine in good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of the
Rights, then, if the Board of Directors so elects, the thirty (30) day period
set forth above may be extended to the extent necessary, but not more than
ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the
Company may seek stockholder approval for the authorization of such additional
shares (such thirty (30) day period, as it may be extended, is herein called
the “Substitution Period”).  To the
extent that the Company determines that some action need be taken pursuant to
the second and/or third sentence of this Section 11(a)(iii), the Company (x)
shall provide, subject to Section 11(a)(ii) hereof and the last sentence of
this Section 11(a)(iii) hereof, that such action shall apply uniformly to all
outstanding Rights and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution to be
made pursuant to such second sentence and to determine the value thereof.  In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii), the
value of the shares of Common Stock shall be the current per share market price
(as determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii) Trigger
Date and the per share or fractional value of any “Common Stock Equivalent”
shall be deemed to equal the current per share market price of the Common
Stock.  The Board of Directors of the
Company may, but shall not be required to, establish procedures to allocate the
right to receive shares of Common Stock upon the exercise of the Rights among
holders of Rights pursuant to this Section 11(a)(iii).


(b)           In case the Company shall fix a
record date for the issuance of rights, options or warrants to all holders of
Preferred Stock entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Stock (or shares
having the same rights, privileges and preferences as the Preferred Stock (“Equivalent
Preferred Shares”)) or securities convertible into Preferred Stock or
Equivalent Preferred Shares at a price per share of Preferred Stock or
Equivalent Preferred Shares (or having a conversion price per share, if a
security convertible into shares of Preferred Stock or Equivalent Preferred
Shares) less than the then current per share market price of the Preferred
Stock (determined pursuant to Section 11(d) hereof) on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of
Preferred Stock and Equivalent Preferred Shares outstanding on such record date
plus the number of shares of Preferred Stock and Equivalent Preferred Shares
which the aggregate offering price of the total number of shares of Preferred
Stock and/or Equivalent Preferred Shares so to be offered (and/or the aggregate
initial conversion price of 



 14
 









the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Preferred Stock and
Equivalent Preferred Shares outstanding on such record date plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible); provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of one Right. 
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.  Shares of Preferred
Stock and Equivalent Preferred Shares owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation.  Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.


(c)           In case the Company shall fix a
record date for the making of a distribution to all holders of the Preferred
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash
dividend or a dividend payable in Preferred Stock) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then current per share market
price of the Preferred Stock (determined pursuant to Section 11(d) hereof) on
such record date, less the fair market value (as determined in good faith by
the Board of Directors of the Company whose determination shall be described in
a statement filed with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription rights
or warrants applicable to one share of Preferred Stock, and the denominator of
which shall be such current per share market price (determined pursuant to
Section 11(d) hereof) of the Preferred Stock; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company to be issued upon exercise of one Right.  Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution
is not 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.


(d)(i)       Except as otherwise provided herein, for
the purpose of any computation hereunder, the “current per share market price”
of any security (a “Security” for the purpose of this Section 11(d)(i)) on any
date shall be deemed to be the average of the daily closing prices per share of
such Security for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that
in the event that the current per share market price of the Security is
determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in shares
of such Security or securities convertible into such shares, or (B) any 



 15
 









subdivision,
combination or reclassification of such Security, and prior to the expiration
of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security.  The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported by 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.  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.


(ii)           For the purpose of any computation
hereunder, if the Preferred Stock is publicly traded, the “current per share
market price” of the Preferred Stock shall be determined in accordance with the
method set forth in Section 11(d)(i).  If
the Preferred Stock is not publicly traded but the Common Stock is publicly
traded, the “current per share market price” of the Preferred Stock shall be
conclusively deemed to be the current per share market price of the Common
Stock as determined pursuant to Section 11(d)(i) multiplied by the then
applicable Adjustment Number (as defined in and determined in accordance with
the terms of the Preferred Stock).  If
neither the Common Stock nor the Preferred Stock is publicly 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, whose determination shall
be described in a statement filed with the Rights Agent.


(e)           No adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one hundred-thousandth
of a share of Preferred Stock or one-hundredth of a share of Common Stock or
other share or security as the case may be. 
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three years from the date of the transaction which requires such adjust­ment or
(ii) the Expiration Date.



 16
 









(f)            If as a result of an adjustment made
pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock of the Company
other than the Preferred Stock, thereafter the Purchase Price and the number of
such other shares so receivable upon exercise of a 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 Stock contained in
Sections 11(a), 11(b), 11(c), 11(e), 11(h), 11(i) and 11(m) hereof, as
applicable, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the Preferred Stock shall apply on like terms to any such other
shares.


(g)           All Rights originally issued by the
Company subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
one one-thousandths of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.


(h)           Unless the Company shall have
exercised its election as provided in Section 11(i), upon each adjustment of
the Purchase Price as a result of the calculations made in Sections 11(b) and
11(c), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-thousandths of a share of Preferred
Stock (calculated to the nearest one hundred-thousandth of a share of Preferred
Stock) obtained by (i) multiplying (x) the number of one one-thousandths of a
share purchasable upon the exercise of a Right immediately prior to such
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment and (ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment.


(i)   The Company
may elect on or after the date of any adjustment of the Purchase Price pursuant
to Sections 11(b) or 11(c) hereof to adjust the number of Rights, in
substitution for any adjustment in the number of one one-thousandths of a share
of Preferred Stock purchasable upon the exercise of a Right.  Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. 
Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one-hundredth)
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.  Such record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement.  If Right
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company may, as promptly as practicable,
cause to be distributed to holders of record of Right Certificates on such
record date Right Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company,



 17















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
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.


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


(k)  Before taking
any action that would cause an adjustment reducing the Purchase Price below the
then par value, if any, of the fraction of Preferred Stock or other shares of
capital stock issuable upon exercise of a Right, 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 shares of Preferred Stock or other such shares at such adjusted
Purchase Price.


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


(m) Anything in
this Section 11 to the contrary notwithstanding, the Company shall be entitled
to make such adjustments 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 Stock, issuance wholly for cash
of any shares of Preferred Stock at less than the current market price,
issuance wholly for cash of Preferred Stock or securities which by their terms
are convertible into or exchangeable for Preferred Stock, dividends on
Preferred Stock payable in shares of Preferred Stock or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.


(n) Anything in
this Agreement to the contrary notwithstanding, in the event that at any time
after the date of this Agreement and prior to the Distribution Date, the
Company shall (i) declare and pay any dividend on the Common Stock payable in
Common Stock or (ii) effect a subdivision, combination or consolidation of the
Common Stock (by reclassification or 



 18
 









otherwise than by payment of a dividend payable in
Common Stock) into a greater or lesser number of shares of Common Stock, then,
in each such case, the number of Rights associated with each share of Common
Stock then outstanding, or issued or delivered thereafter, shall be proportionately
adjusted so that the number of Rights thereafter associated with each share of
Common Stock following any such event shall equal the result obtained by
multiplying the number of Rights associated with each share of Common Stock
immediately prior to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total number
of shares of Common Stock outstanding immediately following the occurrence of
such event.


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


Section 12.  Certificate
of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in
Section 11 or 13 hereof, the Company shall promptly (a) prepare a certificate
setting forth such adjustment, and a brief statement of the facts accounting
for such adjustment, (b) file with the Rights Agent and with each transfer
agent for the Common Stock and the Preferred Stock a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof (if so required under Section 25 hereof).  The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of any such adjustment unless and until
it shall have received such certificate.


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


(a)  In the
event, directly or indirectly, at any time after the Flip-In Event (i) the
Company shall consolidate with or shall merge into any other Person, (ii) any
Person shall 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 Stock shall be changed into or exchanged for
stock or other securities of any other Person (or of the Company) or cash or
any other property, or (iii) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person (other than the Company or one or more wholly-owned
Subsidiaries of the Company), then upon the first occurrence of such event,
proper provision shall be made so that: (A) each holder of a Right (other than
Rights which have become void pursuant to Section 11(a)(ii) hereof) shall
thereafter have the right to receive, upon the exercise thereof at the Purchase
Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof), in
accordance with the terms of this Agreement and in lieu of shares of Preferred
Stock or Common Stock of the Company, 



 19
 









such number of validly authorized and issued, fully
paid, non-assessable and freely tradeable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
equal the result obtained by dividing the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof) by 50% of the current per
share market price of the Common Stock of such Principal Party (determined
pursuant to Section 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; provided, however, that
the Purchase Price (as theretofore adjusted in accordance with Section
11(a)(ii) hereof) and the number of shares of Common Stock of such Principal
Party so receivable upon exercise of a Right shall be subject to further
adjustment as appropriate in accordance with Section 11(f) hereof to reflect
any events occurring in respect of the Common Stock of such Principal Party
after the occurrence of such consolidation, merger, sale or transfer; (B) such
Principal Party 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 Agreement; (C) the term “Company” shall thereafter
be deemed to refer to such Principal Party; and (D) such Principal Party shall
take such steps (including, but not limited to, the reservation of a sufficient
number of its shares of Common Stock in accordance with Section 9 hereof) in
connection with such consummation of any such transaction as may be necessary
to assure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to the shares of its Common Stock thereafter
deliverable upon the exercise of the Rights; provided that, upon the subsequent
occurrence of any consolidation, merger, sale or transfer of assets or other
extraordinary transaction in respect of such Principal Party, each holder of a
Right shall thereupon be entitled to receive, upon exercise of a Right and
payment of the Purchase Price as provided in this Section 13(a), such cash,
shares, rights, warrants and other property which such holder would have been
entitled to receive had such holder, at the time of such transaction, owned the
Common Stock of the Principal Party receivable upon the exercise of a Right
pursuant to this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with
the terms hereof for such cash, shares, rights, warrants and other property.


(b)           “Principal Party” shall mean:


(i)            in the case of any transaction
described in (i) or (ii) of the first sentence of Section 13(a) hereof: (A) the
Person that is the issuer of the securities into which the shares of Common
Stock are converted in such merger or consolidation, or, if there is more than
one such issuer, the issuer the shares of Common Stock of which have the
greatest aggregate market value of shares outstanding, or (B) if no securities
are so issued, (x) the Person that is the other party to the merger, if such
Person survives said merger, or, if there is more than one such Person, the
Person the shares of Common Stock of which have the greatest aggregate market
value of shares outstanding or (y) if the Person that is the other party to the
merger does not survive the merger, the Person that does survive the merger
(including the Company if it survives) or (z) the Person resulting from the
consolidation; and


(ii)           in the case of any transaction
described in (iii) of the first sentence of Section 13(a) hereof, the Person
that is the party receiving the greatest portion of the assets 



 20
 









or earning power
transferred pursuant to such transaction or transactions, or, if each Person that
is a party to such transaction or transactions receives the same portion of the
assets or earning power so transferred or if the Person receiving the greatest
portion of the assets or earning power cannot be determined, whichever of such
Persons is the issuer of Common Stock having the greatest aggregate market
value of shares outstanding;


provided, however,
that in any such case described in the foregoing clause (b)(i) or (b)(ii), if
the Common Stock of such Person is not at such time or has not been continuously
over the preceding 12-month period registered under Section 12 of the Exchange
Act, then (1) if such Person is a direct or indirect Subsidiary of another
Person the Common Stock of which is and has been so registered, the term “Principal
Party” shall refer to such other Person, or (2) if such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common Stock of all of
which is and has been so registered, the term “Principal Party” shall refer to
whichever of such Persons is the issuer of Common Stock having the greatest
aggregate market value of shares outstanding, or (3) if such Person is owned,
directly or indirectly, by a joint venture formed by two or more Persons that
are not owned, directly or indirectly, by the same Person, the rules set forth
in clauses (1) and (2) above shall apply to each of the owners having an
interest in the venture as if the Person owned by the joint venture was a
Subsidiary of both or all of such joint venturers, and the Principal Party in
each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.


(c)           The Company shall not consummate any
consolidation, merger, sale or transfer referred to in Section 13(a) hereof
unless prior thereto the Company and the Principal Party involved therein shall
have executed and delivered to the Rights Agent an agreement confirming that
the requirements of Sections 13(a) and (b) hereof shall promptly be performed
in accordance with their terms and that such consolidation, merger, sale or
transfer of assets shall not result in a default by the Principal Party under
this Agreement as the same shall have been assumed by the Principal Party
pursuant to Sections 13(a) and (b) hereof and providing that, as soon as
practicable after executing such agreement pursuant to this Section 13, the
Principal Party will:


(i)            prepare and file a registration
statement under the Securities Act, if necessary, with respect to the Rights
and the securities purchasable upon exercise of the Rights on an appropriate
form, use its best efforts to cause such registration state­ment to become
effective as soon as practicable after such filing and use its best efforts to
cause such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the Expiration Date
and similarly comply with applicable state securities laws;


(ii)           use its best efforts, if the Common
Stock of the Principal Party shall be listed or admitted to trading on the New
York Stock Exchange or on another national securities exchange, to list or
admit to trading (or continue the listing of) the Rights and the securities
purchasable upon exercise of the Rights on the New York Stock Exchange or such
securities exchange, or, if the Common Stock of the Principal Party shall not
be listed or admitted to trading on the New York Stock Exchange or a national
securities exchange, to 



 21
 









cause the Rights
and the securities receivable upon exercise of the Rights to be authorized for
quotation on NASDAQ or on such other system then in use;


(iii)          deliver to holders of the Rights
historical financial statements for the Principal Party which comply in all
respects with the requirements for registration on Form 10 (or any successor
form) under the Exchange Act; and


(iv)          obtain waivers of any rights of first
refusal or preemptive rights in respect of the Common Stock of the Principal
Party subject to purchase upon exercise of outstanding Rights.


(d)           In case the Principal Party has a
provision in any of its authorized securities or in its certificate of
incorporation or by-laws or other instrument governing its affairs, which
provision would have the effect of (i) causing such Principal Party to issue
(other than to holders of Rights pursuant to this Section 13), in connection
with, or as a consequence of, the consummation of a transaction referred to in
this Section 13, shares of Common Stock or Common Stock Equivalents of such
Principal Party at less than the then current market price per share thereof
(determined pursuant to Section 11(d) hereof) or securities exercisable for, or
convertible into, Common Stock or Common Stock Equivalents of such Principal
Party at less than such then current market price, or (ii) providing for any
special payment, tax or similar provision in connection with the issuance of
the Common Stock of such Principal Party pursuant to the provisions of Section
13, then, in such event, the Company hereby agrees with each holder of Rights
that it shall not consummate any such transaction unless prior thereto the
Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that
the authorized securities shall be redeemed, so that the applicable provision
will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.


(e)           The Company covenants and agrees that
it shall not, at any time after the Flip-In Event, enter into any transaction
of the type described in clauses (i) through (iii) of Section 13(a) hereof if
(i) at the time of or immediately after such consolidation, merger, sale,
transfer or other transaction there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, (ii) prior to, simultaneously with or immediately
after such consolidation, merger, sale, transfer or other transaction, the
stockholders of the Person who constitutes, or would constitute, the Principal
Party for purposes of Section 13(b) hereof shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates or
Associates or (iii) the form or nature of organization of the Principal Party
would preclude or limit the exercisability of the Rights.


Section 14.  Fractional Rights and Fractional Shares.


(a)           The Company shall not be required to
issue fractions of Rights (except prior to the Distribution Date in accordance
with Section 11(n) hereof) or to distribute Right Certificates which evidence
fractional Rights.  In lieu of such
fractional Rights, there shall be 



 22
 









paid to the
registered holders of the Right Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right.  For the purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. 
The closing price for any day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted 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.


(b)           The Company shall not be required to
issue fractions of Preferred Stock (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock) or to distribute
certificates which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock) upon the exercise or exchange of Rights.  Interests in fractions of Preferred Stock in
integral multiples of one one-thousandth of a share of Preferred Stock may, at
the election of the Company, be evidenced by depositary receipts, pursuant to
an appropriate agreement between the Company and a depositary selected by it; provided,
that such agreement shall provide that the holders of such depositary receipts
shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts.  In lieu of
fractional shares of Preferred Stock that are not integral multiples of one
one-thousandth of a share of Preferred Stock, the Company shall pay to the
registered holders of Right Certificates at the time such Rights are exercised
or exchanged as herein provided an amount in cash equal to the same fraction of
the current market value of a whole share of Preferred Stock (as determined in
accordance with Section 14(a) hereof) for the Trading Day immediately prior to
the date of such exercise or exchange.


(c)           The Company shall not be required to
issue fractions of shares of Common Stock or to distribute certificates which
evidence fractional shares of Common Stock upon the exercise or exchange of
Rights.  In lieu of such fractional
shares of Common Stock, the Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional shares of Common Stock
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole share of Common Stock (as determined in
accordance with Section 14(a) hereof) for the Trading Day immediately prior to
the date of such exercise or exchange.



 23
 









(d)           The holder of a Right by the
acceptance of the Right expressly waives his right to receive any fractional
Rights or any fractional shares upon exercise or exchange of a Right (except as
provided above).


Section 15.  Rights of Action.  All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Stock), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate (or, prior to
the Distribution Date, such Common Stock) in the manner provided therein and in
this Agreement.  Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowl­edged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and will be entitled to
specific performance of the obligations under, and injunctive relief against
actual or threatened violations of, the obligations of any Person subject to
this Agreement.


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


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


(b)           after the Distribution Date, the
Right Certificates are transferable only on the registry books of the Rights
Agent if surrendered at the office or agency of the Rights Agent designated for
such purpose, duly endorsed or accompanied by a proper instrument of transfer;
and


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


Section 17.  Right Certificate Holder Not Deemed a
Stockholder.  No holder, as such, of
any Right Certificate shall be entitled to vote, receive dividends or be deemed
for any purpose the holder of the Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise or exchange of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of 



 24
 









any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockhold­ers at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in this Agreement), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by such Right Certificate
shall have been exercised or exchanged in accordance with the provisions
hereof.


Section 18.  Concerning the Rights Agent.


(a)           The Company agrees to pay to the
Rights Agent reasonable compensa­tion for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder.  The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability or expense, incurred without negli­gence or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability arising
therefrom, directly or indirectly.


(b)           The Rights Agent shall be protected
and shall incur no liability for, or in respect of any action taken, suffered
or omitted by it in connection with, its adminis­tration of this Agreement in
reliance upon any Right Certificate or certificate for the Preferred Stock or
Common Stock or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement or other paper or document believed
by it to be genuine and to be signed, executed and, where necessary, verified
or acknowledged, by the proper Person or Persons, or otherwise upon the advice
of counsel as set forth in Section 20 hereof.


(c)           Notwithstanding anything in this
Agreement to the contrary, in no event shall the Rights Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Rights Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
the action; and the Company agrees to indemnify the Rights Agent and to hold it
harmless against any loss, liability or expense incurred as a result of claims
for special, indirect or consequential loss or damages of any kind whatsoever
provided that such claims are not based on the negligence or willful misconduct
of the Rights Agent.



 25
 









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


(a)           Any corporation into which the Rights
Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent shall be a party, or any
corporation succeeding to the stock transfer or corporate trust powers of the
Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided,
that such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 hereof.  In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the 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; and in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.


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


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


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


(b)           Whenever in the performance of its
duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by a certificate signed by the Chief
Executive Officer and the Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.



 26
 









(c)           The Rights Agent shall be liable
hereunder to the Company and any other Person only for its own negligence or
willful misconduct; provided, however, that in no event shall the Rights Agent
be liable for special, indirect or consequential loss or damages of any kind
whatsoever.


(d)           The Rights Agent shall not be liable
for or by reason of any of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Company only.


(e)           The Rights Agent shall not be under
any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execu­tion hereof by the Rights
Agent) or in respect of the validity or execution of any Right Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Right Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to Section
11(a)(ii) hereof) or any adjustment in the terms of the Rights provided for in
Sections 3, 11, 13, 23 and 24, or the ascertaining of the existence of facts
that would require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after receipt of a
certificate furnished pursuant to Section 12, describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Preferred Stock or other securities to be issued pursuant to this Agreement
or any Right Certificate or as to whether any shares of Preferred Stock or
other securities will, when issued, be validly authorized and issued, fully
paid and nonassessable.


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


(g)           The Rights Agent is hereby authorized
and directed to accept instructions with respect to the performance of its
duties hereunder from any person reasonably believed by the Rights Agent to be
one of the Chief Executive Officer or the Secretary of the Company, and to
apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered by it in
good faith in accordance with instructions of any such officer or for any delay
in acting while waiting for those 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 under this Agreement and
the date on and/or after which such action shall be taken or such omission
shall be effective.  The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent
in accordance with a proposal included in any such application on or after the
date specified in such application (which date shall not be less than five
Business Days after the date any officer of the Company actually receives such
application unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have 



 27
 









received written
instructions in response to such application specifying the action to be taken
or omitted.


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


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


(j)            If, with respect to any Rights
Certificate surrendered to the Rights Agent for exercise or transfer, the
certificate contained in the form of assignment or the form of election to
purchase set forth on the reverse thereof, as the case may be, has not been
completed to certify the holder is not an Acquiring Person (or an Affiliate or
Associate thereof) or a transferee thereof, the Rights Agent shall not take any
further action with respect to such requested exercise or transfer without
first consulting with the Company.


Section 21.  Change of Rights Agent.  The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
days’ notice in writing mailed to the Company and to each transfer agent of the
Common Stock or Preferred Stock by registered or certified mail, and, following
the Distribution Date, to the holders of the Right Certificates by first-class
mail.  The Company may remove the Rights
Agent or any successor Rights Agent upon 30 days’ notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock or Preferred Stock by registered or
certified mail, and, following the Distribution Date, to the holders of the
Right Certificates by first-class mail. 
If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights
Agent.  If the Company shall fail to make
such appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit his 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
the laws of any state of the United States or the District of Columbia, in good
standing, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $50 million.  After 



 28
 









appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose.  Not
later than the effective date of any such appointment the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock or Preferred Stock, and, following the Distribution
Date, mail a notice thereof in writing to the registered holders of the Right
Certificates.  Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.


Section 22.  Issuance of New Right Certificates.  Notwithstanding any of the provisions of this
Agreement or of the Rights to the contrary, the Company may, at its option,
issue new Right Certificates evidencing Rights in such forms 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 Agreement.  In addition, in
connection with the issuance or sale of Common Stock following the Distribution
Date and prior to the Expiration Date, the Company may with respect to shares
of Common Stock so issued or sold pursuant to (i) the exercise of stock
options, (ii) under any employee plan or arrangement, (iii) upon the exercise,
conversion or exchange of securities, notes or debentures issued by the Company
or (iv) a contractual obligation of the Company, in each case existing prior to
the Distribution Date, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale.


Section 23.  Redemption.


(a)           The Board of Directors of the Company
may, at any time prior to the Flip-In Event, redeem all but not less than all
the then outstanding Rights at a redemption price of $.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring in respect of the Common Stock after the date hereof (the
redemption price being hereinafter referred to as the “Redemption Price”).  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. 
The Redemption Price shall be payable, at the option of the Company, in
cash, shares of Common Stock, or such other form of consideration as the Board
of Directors shall determine.


(b)           Immediately upon the action of the
Board of Directors ordering the redemption of the Rights pursuant to paragraph
(a) of this Section 23 (or at such later time as the Board of Directors may
establish for the effectiveness of such redemption), and without any further
action and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price.  The Company shall
promptly give public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such notice shall not affect
the validity of such redemption.  Within
10 days after such action of the Board of Directors ordering the 



 29
 









redemption of the
Rights (or such later time as the Board of Directors may establish for the
effectiveness of such redemption), the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights 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 Stock.  Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
redemption shall state the method by which the payment of the Redemption Price
will be made.


Section 24.  Exchange.


(a)           The Board of Directors of the Company
may, at its option, at any time after the Flip-In Event, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 11(a)(ii) hereof)
for Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring in respect of the Common Stock after the date hereof
(such amount per Right being hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after an
Acquiring Person shall have become the Beneficial Owner of shares of Common
Stock aggregating 50% or more of the shares of Common Stock then
outstanding.  From and after the
occurrence of an event specified in Section 13(a) hereof, any Rights that
theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be exercisable only in accordance with Section 13 and may not be
exchanged pursuant to this Section 24(a). 
The exchange of the Rights by the Board of Directors may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish.


(b)           Immediately upon the effectiveness of
the action of the Board of Directors of the Company ordering the exchange of
any Rights pursuant to paragraph (a) of this Section 24 and without any further
action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange.  The Company shall promptly
mail a notice of any such exchange to all of the holders of the Rights so
exchanged at their last addresses as they appear upon the registry books of the
Rights Agent.  Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
exchange will state the method by which the exchange of the shares of Common
Stock for Rights will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. 
Any partial exchange shall be effected pro rata based on the number of
Rights (other than Rights which have become void pursuant to the provisions of
Section 11(a)(ii) hereof) held by each holder of Rights.


(c)           The Company may at its option
substitute, and, in the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but 



 30
 









unissued to permit
an exchange of Rights for Common Stock as contemplated in accordance with this
Section 24, the Company shall substitute to the extent of such insufficiency,
for each share of Common Stock that would otherwise be issuable upon exchange
of a Right, a number of shares of Preferred Stock or fraction thereof (or
Equivalent Preferred Shares, as such term is defined in Section 11(b)) such
that the current per share market price (determined pursuant to Section 11(d)
hereof) of one share of Preferred Stock (or Equivalent Preferred Share)
multiplied by such number or fraction is equal to the current per share market
price of one share of Common Stock (determined pursuant to Section 11(d)
hereof) as of the date of such exchange.


Section 25.  Notice of Certain Events.


(a)           In case the Company shall at any time
after the earlier of the Distribu­tion Date or the Stock Acquisition Date
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Stock or to make any other distribution to the holders of its
Preferred Stock (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, (iii) to effect any reclassification
of its Preferred Stock (other than a reclassification involving only the
subdivision or combination of outstanding Preferred Stock), (iv) to effect the
liquidation, dissolution or winding up of the Company, or (v) to pay any
dividend on the Common Stock payable in Common Stock or to effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such dividend
or distribution or offering of rights or warrants, or the date on which such
liquidation, dissolution, winding up, reclassification, subdivision,
combination or consolidation is to take place and the date of participation
therein by the holders of the Common Stock and/or Preferred Stock, if any such
date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 10 days prior to the record
date for determining holders of the Preferred Stock for purposes of such
action, and in the case of any such other action, at least 10 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the Common Stock and/or Preferred Stock, whichever shall be
the earlier.


(b)           In case any event described in
Section 11(a)(ii) or Section 13 shall occur then the Company shall as soon as
practicable thereafter give to each holder of a Right Certificate (or if
occurring prior to the Distribution Date, the holders of the Common Stock) in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which notice shall describe such event and the consequences of such event to
holders of Rights under Section 11(a)(ii) and Section 13 hereof.


Section 26.  Notices.  Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any 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:



 31
 









Theravance, Inc.


901 Gateway
Boulevard


South San
Francisco, California 94080


Attention: Chief
Executive Officer


Subject to the
provisions of Section 21 hereof, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:


The Bank of New
York


101 Barclay Street


11 East


New York, New York
10286


Attention:  Stock Transfer Division


Notices or demands
authorized by this Agreement to be given or made by the Company or the Rights
Agent to the holder of any Right Certificate shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the Company.


Section 27.  Supplements and Amendments.  Except as provided in the penultimate
sentence of this Section 27, for so long as the Rights are then redeemable, the
Company may in its sole and absolute discretion, and the Rights Agent shall if
the Company so directs, supplement or amend any provision of this Agreement in
any respect without the approval of any holders of the Rights.  At any time when the Rights are no longer
redeemable, except as provided in the penultimate sentence of this Section 27,
the Company may, and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of
Rights, provided that no such supplement or amendment may (a) 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), (b) cause this
Agreement again to become amendable other than in accordance with this sentence
or (c) cause the Rights again to become redeemable.  Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price.  Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment, provided
that any supplement or amendment that does not amend Sections 18, 19, 20 or 21
hereof in a manner adverse to the Rights Agent shall become effective
immediately upon execution by the Company, whether or not also executed by the
Rights Agent.


Section 28.  Successors; Assignment.  All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.  This Agreement shall extend to and shall be
binding upon the parties hereto and their respective successors and assigns; 



 32
 









provided, however,
that this Agreement shall not be assignable by either party without prior
written consent of the other party; and provided further, that (a) the foregoing proviso shall not apply
to assignments by the Rights Agent to an affiliate or subsidiary of the Rights
Agent and (b) any reorganization, merger, consolidation, sale of assets or
other form of business combination by the Rights Agent shall not be deemed to
constitute an assignment of this Agreement.


Section 29.  Benefits of this Agreement.  Nothing in this Agreement shall be construed
to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Stock) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, the Common Stock).


Section 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 to amend or not amend this
Agreement).  All such actions,
calculations, interpretations and determinations that are done or made by the
Board of Directors of the Company in good faith shall be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights, as such,
and all other parties.


Section 31.  Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.


Section 32.  Governing Law.  This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State; provided, however, that if the
provision(s) in question is discreetly related to the Rights Agent’s
obligations hereunder (“Rights Agent Matters”), then such provisions shall be
governed by and construed in accordance with the laws of the State of New
York.  The parties agree that actions or
proceedings arising out of this Agreement and pertaining to Rights Agents
Matters shall be brought in the United States District Court for the Southern
District of New York or in a New York State Court in the County of New York and
that, in connection with any such action or proceeding, the parties shall
submit to the jurisdiction of, and venue in, such court.  All other actions or proceedings arising out
of this Agreement shall be brought in the Court of Chancery of the State of Delaware.  Each of the parties hereto also irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
arising out of this Agreement.



 33
 









Section 33.  Counterparts.  This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.


Section 34.  Descriptive Headings.  Descriptive headings of the several Sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.



 34














IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed, all
as of the day and year first above written.


	
   

  	
   

  	
  THERAVANCE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE BANK OF NEW YORK,

  
	
   

  	
   

  	
  as Rights Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							



 


Signature
Page to Amended and Restated Rights Agreement
















Exhibit A


Amended and
Restated Certificate of Incorporation



 A-1















Exhibit B


Form of Right
Certificate


Certificate No. R-          


NOT EXERCISABLE
AFTER OCTOBER 8, 2014 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01
PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AMENDED AND RESTATED
RIGHTS AGREEMENT.  UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE AMENDED AND RESTATED RIGHTS AGREEMENT,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE AMENDED AND RESTATED RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.


RIGHT CERTIFICATE


THERAVANCE, 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 Amended and Restated Rights Agreement, dated
as of June 22, 2007, as the same may be amended from time to time (the “Rights
Agreement”), between Theravance, Inc., a Delaware corporation (the “Company”),
and The Bank of New York, as Rights Agent (the “Rights Agent”), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 P.M., New York City time, on
October 8, 2014 at the office or agency of the Rights Agent designated for
such purpose, or of its successor as Rights Agent, one one-thousandth of a
fully paid non-assessable share of Series A Junior Participating Preferred
Stock, par value $0.01 per share (the “Preferred Stock”), of the Company at a
purchase price of $209.25  per one
one-thousandth of a share of Preferred Stock (the “Purchase Price”), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed.  The number of
Rights evidenced by this Rights Certificate (and the number of one
one-thousandths of a share of Preferred Stock which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of                     ,
20     , based on the Preferred Stock as constituted
at such date.  As provided in the Rights
Agreement, the Purchase Price, the number of one one-thousandths of a share of
Preferred Stock (or other securities or property) which may be



 B-1
 









purchased upon the
exercise of the Rights and the number of Rights evidenced by this Right
Certificate are 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 executive offices of the Company and the above-mentioned office
or agency of the Rights Agent.  The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.


This Right
Certificate, with or without other Right Certificates, upon surrender at the
office or agency 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 shares of Preferred Stock 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 Rights evidenced by this Certificate
(i) may be redeemed by the Company at a redemption price of $.01 per Right or
(ii) may be exchanged in whole or in part for shares of the Company’s Common
Stock, par value $0.01 per share, or shares of Preferred Stock.


No fractional
shares of Preferred Stock or Common Stock will be issued upon the exercise or
exchange 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 Stock or of any other
securities of the Company which may at any time be issuable on the exercise or
exchange 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 or exchanged as provided in the Rights Agreement.



 B-2
 









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


WITNESS the
facsimile signature of the proper officers of the Company and its corporate
seal.  Dated as of                   
20    .


	
   

  	
  THERAVANCE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Rick E
  Winningham, Chief Executive Officer

  



 


	
  ATTEST:

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Bradford J.
  Shafer, Senior Vice President,

  
	
  General Counsel and
  Secretary

  
	
   

  
	
   

  
	
  Countersigned:

  
	
   

  
	
   

  
	
  The Bank of New
  York,

  
	
  as Rights Agent

  
	
   

  
	
   

  
	
  By

  	
   

  	
   

  
				



 



 B-3
 









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)


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


Dated:                             


	
   

  	
  

  	
   

  
	
   

  	
           Signature

  



 


Signature
Guaranteed:


Signatures must be
guaranteed by a bank, trust company, broker, dealer or other eligible institution
participating in a recognized signature guarantee medallion program.


(To be completed)


The undersigned
hereby certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by, were not acquired by the undersigned from, and are not
being assigned to an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Amended and Restated Rights Agreement).


	
   

  	
  

  	
   

  
	
   

  	
           Signature

  



 



 B-4
 









Form of Reverse
Side of Right Certificate - continued


FORM OF ELECTION
TO PURCHASE


(To be executed if
holder desires to exercise

Rights represented by the Rights Certificate)


To THERAVANCE,
INC.:


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


(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 must
conform to holder specified on Right Certificate)


Signature
Guaranteed:


Signature must be
guaranteed by a bank, trust company, broker, dealer or other eligible
institution participating in a recognized signature guarantee medallion
program.



 B-5
 









Form of Reverse
Side of Right Certificate - continued


(To be completed)


The undersigned
certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by, and were not acquired by the undersigned from, an
Acquiring Person or an Affiliate or Associate thereof (as defined in the
Amended and Restated Rights Agreement).


	
   

  	
  

  	
   

  
	
   

  	
             Signature

  



 


NOTICE


The signature in
the Form of Assignment or Form of Election to Purchase, as the case may be,
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 the Form of Election
to Purchase, as the case may be, is not completed, such Assignment or Election
to Purchase will not be honored.



 B-6















Exhibit C


UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE AMENDED AND RESTATED RIGHTS AGREEMENT, RIGHTS OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN
THE AMENDED AND RESTATED RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL
NO LONGER BE TRANSFERABLE.


SUMMARY OF RIGHTS
TO PURCHASE


SHARES OF
PREFERRED STOCK OF


THERAVANCE, INC.


On May 27,
2004, the Board of Directors of Theravance, Inc. (the “Company”) declared a
dividend of one preferred share purchase right (a “Right”) for each outstanding
share of common stock, par value $0.01 per share, of the Company (the “Common
Stock”).  The dividend is payable on
October 8, 2004 (the “Record Date”) to the stockholders of record on that
date.  Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock, par value $0.01 per share, of the Company
(the “Preferred Stock”) at a price of $209.25 per one one-thousandth of a share
of Preferred Stock (the “Purchase Price”), subject to adjustment.  The description and terms of the Rights are
set forth in an Amended and Restated Rights Agreement dated as of June 22,
2007, as the same may be amended from time to time (the “Rights Agreement”),
between the Company and The Bank of New York, as Rights Agent (the “Rights
Agent”).


Until the earlier
to occur of (i) 10 days following a public announcement that a person or group
of affiliated or associated persons (with certain exceptions, an “Acquiring
Person”) has acquired beneficial ownership of 15% or more of the outstanding
shares of Common Stock or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
or group of affiliated persons becomes an Acquiring Person) following the
commencement of, 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 outstanding shares of
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
certificates outstanding as of the Record Date, by such Common Stock
certificate together with this Summary of Rights.


The Rights
Agreement provides that, until the Distribution Date (or earlier expiration of
the Rights), the Rights will be transferred with and only with the Common
Stock.  Until the Distribution Date (or
earlier expiration of the Rights), new Common Stock certificates issued after
the Record Date upon transfer or new issuances of Common Stock will contain a
notation incorporating the Rights Agreement by reference.  Until the Distribution Date (or earlier
expiration of the Rights), the surrender for transfer of any certificates for



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shares of Common
Stock outstanding as of the Record Date, even without such notation or a copy
of this Summary of Rights, will also constitute the transfer of the Rights
associated with the shares of Common Stock 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 Stock 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 October 8, 2014 (the “Final Expiration
Date”), unless the Final Expiration Date is advanced or extended or unless the
Rights are earlier redeemed or exchanged by the Company, in each case as
described below.


The Purchase Price
payable, and the number of shares of Preferred Stock 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 Stock, (ii) upon
the grant to holders of the Preferred Stock of certain rights or warrants to
subscribe for or purchase Preferred Stock at a price, or securities convertible
into Preferred Stock with a conversion price, less than the then-current market
price of the Preferred Stock or (iii) upon the distribution to holders of the
Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends or dividends payable in Preferred Stock) or of
subscription rights or warrants (other than those referred to above).


The number of
outstanding Rights is subject to adjustment in the event of a stock dividend on
the Common Stock payable in shares of Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.


Shares of
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable.  Each share of Preferred
Stock will be entitled, when, as and if declared, to a minimum preferential
quarterly dividend payment of the greater of (a) $1.00 per share, and (b) an
amount equal to 1,000 times the dividend declared per share of Common
Stock.  In the event of liquidation,
dissolution or winding up of the Company, the holders of the Preferred Stock
will be entitled to a minimum preferential payment of the greater of (a) $10.00
per share (plus any accrued but unpaid dividends), and (b) an amount equal to
1,000 times the payment made per share of Common Stock.  Each share of Preferred Stock will have 1,000
votes, voting together with the Common Stock. 
Finally, in the event of any merger, consolidation or other transaction
in which outstanding shares of Common Stock are converted or exchanged, each
share of Preferred Stock will be entitled to receive 1,000 times the amount
received per share of Common Stock. 
These rights are protected by customary antidilution provisions.


Because of the
nature of the Preferred Stock’s dividend, liquidation and voting rights, the
value of the one one-thousandth interest in a share of Preferred Stock
purchasable upon exercise of each Right should approximate the value of one
share of Common Stock.



 C-2
 









In the event that
any person or group of affiliated or associated persons becomes an Acquiring
Person, each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereupon become void), will thereafter have the
right to receive upon exercise of a Right that number of shares of Common Stock
having a market value of two times the exercise price of the Right.


In the event that,
after a person or group has become an Acquiring Person, the Company is acquired
in a merger or other business combination transaction or 50% or more of its
consolidated assets or earning power are sold, proper provisions will be made
so that each holder of a Right (other than Rights beneficially owned by an
Acquiring Person which will have become void) will thereafter have the right to
receive upon the exercise of a Right that number of shares of common stock of
the person with whom the Company has engaged in the foregoing transaction (or
its parent) that at the time of such transaction have a market value of two
times the exercise price of the Right.


At any time after
any person or group becomes an Acquiring Person and prior to the earlier of one
of the events described in the previous paragraph or the acquisition by such
Acquiring Person of 50% or more of the outstanding shares of Common Stock, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by such Acquiring Person which will have become void), in whole or in
part, for shares of Common Stock or Preferred Stock (or a series of the Company’s
preferred stock having equivalent rights, preferences and privileges), at an
exchange ratio of one share of Common Stock, or a fractional share of Preferred
Stock (or other preferred stock) equivalent in value thereto, per Right.


With certain
exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Purchase
Price.  No fractional shares of Preferred
Stock or Common Stock will be issued (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 depositary
receipts), and in lieu thereof an adjustment in cash will be made based on the
current market price of the Preferred Stock or the Common Stock.


At any time prior
to the time an Acquiring Person becomes such, the Board of Directors of the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (the “Redemption Price”) payable, at the option of the Company, in cash,
shares of Common Stock or such other form of consideration as the Board of
Directors of the Company shall determine. 
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.



 C-3
 









For so long as the
Rights are then redeemable, the Company may, except with respect to the
Redemption Price, amend the Rights Agreement in any manner.  After the Rights are no longer redeemable,
the Company may, except with respect to the Redemption Price, amend the Rights
Agreement in any manner that does not adversely affect the interests of holders
of the Rights.


Until a Right is
exercised or exchanged, 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.


A copy of the
Rights Agreement will be filed with the Securities and Exchange Commission as
an Exhibit to the Quarterly Report on Form 10-Q for the three-month period
ending June 30, 2007.  A copy of the
Amended and Restated Rights Agreement is available free of charge from the
Company.  This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, as the same may be amended from time to
time, which is hereby incorporated herein by reference.



 C-4