Exhibit
4.4
 RIGHTS AGREEMENT 
 Agreement,
dated as of November 1, 2002, between SCOLR, Inc.,
 a
Delaware corporation (the "Company"), and OTR, Inc. (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, par value $0.001 per share, of the Company (a "Common
Share")
 outstanding
on the Close of Business on November 12, 2002 (the "Record Date")
 and has
authorized the issuance of one Right with respect to each
additional
 Common
Share that shall become outstanding between the Record Date and the
 earliest
of the Close of Business on the Distribution Date, the Redemption
Date
 and the
Close of Business on the Final Expiration Date, and certain
additional
 shares of
Common Stock that shall become outstanding after the Distribution
Date
 as
provided in Section 22 of this Agreement, each Right representing the
right
 to
purchase one one-thousandth of a Preferred Share (as hereinafter defined),
or
 such
different amount and/or kind of securities as shall be hereinafter
 provided.
 
 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
 meanings
indicated:
 
 "Acquiring
Person" shall mean any Person who or which, together
 with all
Affiliates and Associates of such Person, shall be the Beneficial
Owner
 of 15% or
more of the Common Shares of the Company then outstanding but shall
 not
include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any
 employee
benefit plan of the Company or any Subsidiary of the Company, or
(iv)
 any
entity holding Common Shares for or pursuant to the terms of any
such
 
 
 1
 employee
benefit plan. Notwithstanding the foregoing, (1) no Person shall
become
 an
"Acquiring Person" as the result of an acquisition of Common Shares by
the
 Company
which, by reducing the number of shares outstanding, increases the
 proportionate
number of shares beneficially owned by such Person to 15% (or such
 other
percentage as would otherwise result in such person becoming an
Acquiring
 Person)
or more of the Common Shares of the Company then outstanding;
provided,
 however,
that if a Person shall so become the Beneficial Owner of 15% (or
such
 other
percentage) or more of the Common Shares of the Company then
outstanding
 by reason
of an acquisition of Common Shares by the Company and shall, after
 such
share purchases by the Company, become the Beneficial Owner of an
 additional
1% of the outstanding Common Shares of the Company, then such
Person
 shall be
deemed to be an "Acquiring Person"; and (2) if the Board of
Directors
 of the
Company determines in good faith that a Person who would otherwise be
an
 "Acquiring
Person," as defined pursuant to the foregoing provisions of this
 paragraph,
has become such inadvertently, and such Person divests as promptly
as
 practicable
a sufficient number of Common Shares so that such Person would no
 longer be
an "Acquiring Person," as defined pursuant to the foregoing
provisions
 of this
paragraph, then such Person shall not be deemed to have become an
 "Acquiring
Person" for any purposes of this Agreement.
 
 "Affiliate"
and "Associate" shall have the respective meanings
 ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations
under
 the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
in
 effect on
the date of this Agreement.
 
 A
Person shall be deemed the "Beneficial Owner" of and shall be
 deemed to
"beneficially own" any securities:
 
 
 
 2
 
 (i)
which such Person or any of such Person's Affiliates or
 Associates
beneficially owns, directly or indirectly;
 
 (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), written or otherwise, or upon the exercise of
 conversion
rights, exchange rights, rights (other than the Rights), warrants
or
 options,
or otherwise; provided, however, that a Person shall not be deemed
to
 be the
Beneficial Owner of, or to beneficially own, securities tendered
pursuant
 to a
tender or exchange offer made pursuant to, and in accordance with,
the
 applicable
rules and regulations promulgated under the Exchange Act by or on
 behalf of
such Person or any of such Person's Affiliates or Associates until
 such
tendered securities are accepted for purchase or exchange; or (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 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 with which such Person or any of such Person's Affiliates or
 Associates
has any agreement, arrangement or understanding (other than
customary
 agreements
with and between
 
 3
 underwriters
and selling group members with respect to a bona fide public
 offering
of securities), written or otherwise, for the purpose of acquiring,
 holding,
voting (except to the extent contemplated by the proviso to section
(B)
 of the
immediately preceding paragraph (ii)) or disposing of any securities
of
 the
Company.
 
 Notwithstanding
anything in this definition of Beneficial
 Ownership
to the contrary, the phrase "then outstanding," when used with
 reference
to a Person's Beneficial Ownership of securities of the Company,
shall
 mean the
number of such securities then issued and outstanding together with
the
 number of
such securities not then actually issued and outstanding which such
 Person
would be deemed to own beneficially hereunder.
 
 "Business
Day" shall mean any day other than a Saturday, Sunday,
 or a day
on which banking institutions in the state of New York are
authorized
 or
obligated by law or executive order to close.
 
 "Close
of Business" on any given date shall mean 5:00 P.M.,
 eastern
time, on such date; provided, however, that if such date is not a
 Business
Day it shall mean 5:00 P.M., eastern time, on the next succeeding
 Business
Day.
 
 "Common
Shares" when used with reference to the Company shall
 mean the
shares of Common Stock, par value $.001 per share, of the Company.
 "Common
Shares" when used with reference to any Person other than the
Company
 shall
mean the capital stock (or equity interest) with the greatest voting
power
 of such
other Person or, if such other Person is a Subsidiary of another
Person,
 the
Person or Persons which ultimately control such first-mentioned
Person.
 
 "common
stock equivalents" shall have the meaning set forth in
 Section
11(a)(iii)(B)(3) hereof.
 
 
 4
 
 "Current
Value" shall have the meaning set forth in Section
 11(a)(iii)(A)(1)
hereof.
 
 
 "Distribution
Date" shall have the meaning set forth in Section
 3(a)
hereof.
 
 "equivalent
preferred shares" shall have the meaning set forth in
 Section
11(b) hereof.
 
 "Exchange
Ratio" shall have the meaning set forth in Section
 24(a)
hereof.
 
 "Final
Expiration Date" shall mean November 1, 2012.
 
 "Person"
shall mean any individual, firm, corporation,
 partnership,
limited partnership, limited liability partnership, business trust,
 limited
liability company, unincorporated association or other entity, and
shall
 include
any successor (by merger or otherwise) of such entity.
 
 "Purchase
Price" shall have the meaning set forth in Section 7(b)
 hereof.
 
 "Preferred
Shares" shall mean shares of Series A Junior
 Participating
Preferred Stock, par value $0.01 per share, of the Company having
 such
rights and preferences as are set forth in the form of Certificate
of
 Designation
set forth as Exhibit A hereto, as the same may be amended from time
 to
time.
 
 "Redemption
Date" shall have the meaning set forth in Section 23
 hereof.
 
 "Right
Certificate" shall mean a certificate evidencing a Right
 in
substantially the form of Exhibit B hereto.
 
 "Section
11(a)(ii) Trigger Date" shall have the meaning set forth
 in
Section 11(a)(iii) hereof.
 
 "Shares
Acquisition Date" shall mean the earlier of the date of
 (i) the
public announcement by the Company or an Acquiring Person that an
 Acquiring
Person has become
 
 
 5
 
 such or
(ii) the public disclosure of facts by the Company or an Acquiring
 Person
indicating that an Acquiring Person has become such.
 
 "Spread"
shall have the meaning set forth in Section
 11(a)(iii)(A)
hereof.
 
 "Subsidiary"
of any Person shall mean any Person of which a
 majority
of the voting power of the voting equity securities or equity
interest
 is owned,
directly or indirectly, by such Person.
 
 "Substitution
Period" shall have the meaning set forth in Section
 11(a)(iii)
hereof.
 
 "Summary
of Rights" shall mean the Summary of Rights to Purchase
 Preferred
Shares in substantially the form of Exhibit C hereto.
 
 Section
2. Appointment of Rights Agent.
 
 The
Company hereby appoints the Rights Agent to act as agent for
 the
Company and the holders of the Rights (who, in accordance with Section
3
 hereof,
shall prior to the Distribution Date also be the holders of the
Common
 Shares)
in accordance with the terms and conditions hereof, and the Rights
Agent
 hereby
accepts such appointment. The Company may from time to time appoint
such
 co-Rights
Agents as it may deem necessary or desirable.
 
 Section
3. Issue of Right Certificates.
 
 (a)
Until the earlier of (i) the tenth day after the Shares
 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 the Company, any Subsidiary of the Company, any employee
benefit
 plan of
the Company or of any Subsidiary of the Company or any entity
holding
 Common
Shares for or pursuant to the terms of any such plan) of, or of the
first
 public
announcement of the intention of any Person (other than any of the
 Persons
referred to in the
 
 
 6
 
 preceding
parenthetical) to commence, a tender or exchange offer the
 consummation
of which would result in any Person becoming the Beneficial Owner
 of Common
Shares aggregating 15% or more of the then outstanding Common
Shares
 (such
date being herein referred to as the "Distribution Date"), (x) the
Rights
 will be
evidenced (subject to the provisions of Section 3(b) hereof) by the
 certificates
for Common Shares registered in the names of the holders thereof
 (which
certificates shall also be deemed to be Right Certificates) and not
by
 separate
Right Certificates, and (y) the right to receive Right Certificates
 will be
transferable only in connection with the transfer of Common Shares.
As
 soon as
practicable after the Distribution Date, the 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, at the expense of
the
 Company,
send) by first-class, insured, postage-prepaid mail, to each record
 holder of
Common Shares as of the Close of Business on the Distribution Date,
at
 the
address of such holder shown on the records of the Company, a Right
 Certificate
evidencing one Right for each Common Share 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 the Summary of Rights by first-class,
 postage-prepaid
mail, to each record holder of Common Shares as of the Close of
 Business
on the Record Date, at the address of such holder shown on the
records
 of the
Company. With respect to certificates for Common Shares outstanding as
of
 the
Record Date, until the Close of Business on the Distribution Date,
the
 Rights
will be evidenced by such certificates registered in the names of
the
 holders
thereof together with a copy of the Summary of Rights attached
thereto.
 Until the
Close of Business on the Distribution Date (or the earlier of the
 Redemption
Date or the Close of Business on the Final Expiration Date), the
 surrender
for transfer of any certificate for Common Shares outstanding on
 
 7
 
 the
Record Date, with or without a copy of the Summary of Rights
attached
 thereto,
shall also constitute the transfer of the Rights associated with
the
 Common
Shares evidenced thereby.
 
 (c)
Certificates for Common Shares which become outstanding
 (including,
without limitation, reacquired Common Shares referred to in the
last
 sentence
of this paragraph (c)) after the Record Date but prior to the
earliest
 of the
Close of Business on the Distribution Date, the Redemption Date or
the
 Close of
Business on the Final Expiration Date shall have impressed on,
printed
 on,
written on or otherwise affixed to them the following legend:
 
 This
certificate also evidences and entitles the
 holder
hereof to certain Rights as set forth in a Rights
 Agreement
between SCOLR, Inc. and OTR, Inc., as Rights
 Agent,
dated as of November 1, 2002, as it may from time
 to
time be amended or supplemented pursuant to its terms
 (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 SCOLR, Inc.
 Under
certain circumstances, as set forth in the Rights
 Agreement,
such Rights will be evidenced by separate
 certificates
and will no longer be evidenced by this
 certificate.
SCOLR, Inc. 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, Rights that are or were acquired
 or
beneficially owned by Acquiring Persons (as defined in
 the
Rights Agreement) may become null and void.
 
 With
respect to such certificates containing the foregoing legend, until
the
 Close of
Business on the Distribution Date, the Rights associated with the
 Common
Shares represented by certificates shall be evidenced by such
 certificates
alone, and the surrender for transfer of any such certificate shall
 also
constitute the transfer of the Rights associated with the Common
Shares
 represented
thereby. In the event that the Company purchases or acquires any
 Common
Shares after the Record Date but prior to the Close of Business on
the
 Distribution
Date, any Rights associated with such Common Shares shall be deemed
 canceled
and retired so that the Company shall not be entitled to exercise
any
 Rights
associated with the Common Shares which are no longer
outstanding.
 
 8
  Section
4. Form of Right Certificates.
 
 The
Right Certificates (and the forms of election to purchase
 Preferred
Shares and of assignment to be printed on the reverse thereof)
shall
 be
substantially the same as Exhibit 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 on which the Rights may from time
to
 time be
listed, or to conform to usage. Subject to the other provisions of
this
 Agreement,
the Right Certificates shall entitle the holders thereof to
purchase
 such
number of one one-thousandths of a Preferred Share as shall be set
forth
 therein
at the Purchase Price, but the number of one one-thousandths of a
 Preferred
Share and the Purchase Price shall be subject to adjustment as
 provided
herein.
 
 Section
5. Countersignature and Registration.
 
 The
Right Certificates shall be executed on behalf of the Company
 by its
Chairman of the Board, its Chief Executive Officer, its President, any
of
 its Vice
Presidents, or its Treasurer, either manually or by facsimile
 signature,
shall have affixed thereto the Company's seal or a facsimile
thereof,
 and shall
be attested by the Secretary or any Assistant Secretary of the
 Company,
either manually or by facsimile signature. The Right Certificates
shall
 be
countersigned by the Rights Agent and shall not be valid for any
purpose
 unless so
countersigned, either manually or by facsimile. 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
 
 9
 
 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 Rights Agreement any such person was not such an
officer.
 
 Following
the Distribution Date, the Rights Agent will keep or
 cause to
be kept, at its principal office, books for registration of the
 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.
 
 Subject
to the provisions of Section 14 hereof, at any time after
 the Close
of Business on the Distribution Date, and prior to the earlier of
the
 Redemption
Date or the Close of Business on the Final Expiration Date, any
Right
 Certificate
or Right Certificates (other than Right Certificates representing
 Rights
that have become void pursuant to Section 11(a)(ii) hereof or that
have
 been
exchanged pursuant to Section 24 hereof) 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
Preferred Share 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
 
 10
 
 
 surrender
the Right Certificate or Right Certificates to be transferred,
split
 up,
combined or exchanged at the principal office of the Rights Agent.
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 for any tax or
governmental
 charge
that may be imposed in connection with any transfer, split up,
 combination
or exchange of Right Certificates.
 
 Upon
receipt by the Company and the Rights Agent of evidence
 reasonably
satisfactory to them of the loss, theft, destruction or mutilation
of
 a Right
Certificate, and, 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 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)
The registered holder of any Right Certificate (other than a
 holder
whose Rights have become void pursuant to Section 11(a)(ii) hereof
or
 have been
exchanged pursuant to Section 24 hereof) may exercise the Rights
 evidenced
thereby in whole or in part at any time after the Distribution Date
 upon
surrender of the Right Certificate, with the form of election to
purchase
 on the
reverse side thereof duly executed, to the Rights Agent at its
principal
 office,
together with payment of the Purchase Price for each one
one-thousandth
 of a
Preferred Share as to which the Rights are exercised, prior to the
earliest
 of (i)
the Close of Business on the Final Expiration Date, (ii) the time
at
 which the
right to exercise the Rights terminates pursuant to
 
 
 11
 
 Section
23 hereof, or (iii) the time at which the right to exercise the
Rights
 terminates
pursuant to Section 24 hereof.
 
 (b)
The purchase price for each one one-thousandth of a Preferred
 Share to
be purchased upon the exercise of a Right shall initially be
Fifteen
 Dollars
($15.00) (the "Purchase Price"), 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)
 below.
 
 (c)
Upon receipt of a Right Certificate representing exercisable
 Rights,
with the form of election to purchase and certificate duly
executed,
 accompanied
by payment of the Purchase Price for the number of one
 one-thousandths
of a Preferred Share to be purchased and an amount equal to any
 applicable
transfer tax required to be paid by the holder of such Right
 Certificate
in accordance with Section 9 hereof by cash, 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 Shares certificates for the number of one one-thousandths of
a
 Preferred
Share to be purchased and the Company hereby irrevocably authorizes
 its
transfer agent to comply with all such requests, or (B) requisition from
any
 depositary
agent for the Preferred Shares depositary receipts representing
such
 number of
one one-thousandths of a Preferred Share as are to be purchased (in
 which
case certificates for the Preferred Shares represented by such
receipts
 shall be
deposited by the transfer agent with the depositary agent) and the
 Company
hereby directs 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 Preferred Shares in accordance with
 Section
14 hereof, (iii) after receipt of such certificates or depositary
 receipts,
cause the same to be delivered to or upon the
 
 12
 
 order of
the registered holder of such Right Certificate, registered in such
 name or
names as may be designated by such holder and (iv) when
appropriate,
 after
receipt, deliver such cash to or upon the order of the registered
holder
 of such
Right Certificate.
 
 (d)
In case the registered holder of any Right Certificate shall
 exercise
less than all the Rights evidenced thereby, a new Right Certificate
 evidencing
Rights equivalent to the Rights remaining unexercised shall be
issued
 by the
Rights Agent 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 upon the occurrence of any
purported
 exercise
as set forth in this Section 7 unless such registered holder shall
have
 (i)
completed and signed the certificate following the form of election
to
 purchase
set forth on the reverse side of the Right Certificate surrendered
for
 such
exercise and (ii) provided such additional evidence of the identity of
the
 Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates
 thereof
as the Company shall reasonably request.
 
 Section
8. Cancellation and Destruction of Right Certificates.
 
 All
Right Certificates surrendered for the purpose of exercise,
 transfer,
split up, combination or exchange shall, if surrendered to the
Company
 or to any
of its agents, be delivered to the Rights Agent for cancellation or
in
 canceled
form, or, if surrendered to the Rights Agent, shall be canceled by
it,
 and no
Right Certificates shall be issued in lieu thereof except as
expressly
 permitted
by any of the provisions of this Rights Agreement. The Company
shall
 deliver
to the Rights Agent for cancellation and retirement, and the Rights
 Agent
shall so cancel and retire, any other Right Certificate purchased
or
 acquired
by the Company otherwise
 
 13
 
 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. Status and Availability of Preferred Shares.
 
 (a)
The Company covenants and agrees that it will take all such
 action as
may be necessary to ensure that all Preferred Shares delivered upon
 exercise
of Rights shall, at the time of delivery of the certificates for
such
 Preferred
Shares (subject to payment of the Purchase Price), be duly and
validly
 authorized
and issued and fully paid and non-assessable shares.
 
 (b)
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 Preferred Shares 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
Shares in a name other than that of, the registered holder of the
 Right
Certificate evidencing Rights surrendered for exercise, or to issue or
to
 deliver
any certificates or depositary receipts for Preferred Shares upon
the
 exercise
of any Rights until any such tax shall have been paid (any such tax
 being
payable by the holder of such Right Certificate at the time of
surrender)
 or until
it has been established to the Company's reasonable satisfaction
that
 no such
tax is due.
 
 (c)
The Company covenants and agrees that it will cause to be
 reserved
and kept available, out of its authorized and unissued Preferred
Shares
 or any
Preferred Shares held in its treasury, the number of Preferred
Shares
 that will
be sufficient to permit the exercise in full of all outstanding
Rights
 in
accordance with Section 7 hereof.
 
 14
 
 Section
10. Preferred Shares Record Date.
 
 Each
person in whose name any certificate for Preferred Shares is
 issued
upon the exercise of Rights shall for all purposes be deemed to
have
 become
the holder of record of the Preferred Shares 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. Prior to the exercise of the
 Rights
evidenced thereby, the holder of a Right Certificate shall not be
 entitled
to any rights of a holder of Preferred Shares for which the Rights
 shall be
exercisable, including, without limitation, the right to vote, to
 receive
dividends or other distributions or to exercise any preemptive
rights,
 and shall
not be entitled to receive any notice of any proceedings of the
 Company,
except as provided herein.
 
 Section
11. Adjustment of Purchase Price, Number of Shares or
 Number
of Rights.
 
 (a)
(i) In the event the Company shall at any time after the date
 of this
Agreement (A) declare a dividend on the Preferred Shares payable in
 Preferred
Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
 the
outstanding Preferred Shares into a smaller number of Preferred Shares
or
 (D) issue
any shares of its capital stock in a reclassification of the
Preferred
 Shares
(including any such reclassification in connection with a
consolidation
 or merger
in which the Company is the continuing or surviving corporation),
 except as
otherwise provided in this Section 11(a), the Purchase Price in
effect
 at the
time of the record date for such dividend or of the effective date
of
 such
subdivision, combination or reclassification, and the number and kind
of
 shares of
capital stock issuable on such date, shall be proportionately
adjusted
 so that
the holder of any Right exercised after such time shall be entitled
to
 receive
the aggregate number and kind of shares of capital stock which, if
such
 Right had
been
  15
 
 exercised
immediately prior to such date, he would have owned upon such
exercise
 and been
entitled to receive by virtue of such dividend, subdivision,
 combination
or reclassification; provided, however, that in no event shall the
 consideration
to be paid upon the exercise of one Right be less than the
 aggregate
par value of the shares of capital stock of the Company issuable
upon
 exercise
of one Right.
 
 (ii)    Subject
to the following paragraph of this
 subparagraph
(ii) and to Section 24 of this Agreement, in the event any Person
 shall
become an Acquiring Person, each holder of a Right shall thereafter have
a
 right to
receive, upon exercise thereof at a price equal to the then current
 Purchase
Price multiplied by the number of one one-thousandths of a
Preferred
 Share for
which a Right is then exercisable, in accordance with the terms of
 this
Agreement and in lieu of Preferred Shares, such number of Common Shares
of
 the
Company as shall equal the result obtained by (x) multiplying the
then
 current
Purchase Price by the number of one one-thousandths of a Preferred
Share
 for which
a Right is then exercisable and dividing that product by (y) 50% of
 the then
current per share market price of the Company's Common Shares
 (determined
pursuant to Section 11(d) hereof) on the date such Person became an
 Acquiring
Person. In the event that any Person shall become an Acquiring
Person
 and the
Rights shall then be outstanding, the Company shall not take any
action
 that
would eliminate or diminish the benefits intended to be afforded by
the
 Rights.
 
 From
and after the occurrence of such an event, any Rights that
 are or
were acquired or beneficially owned by such Acquiring Person (or
any
 Associate
or Affiliate of such Acquiring Person) on or after the earlier of
(x)
 the date
of such event and (y) the Distribution Date shall be void and any
 holder of
such Rights shall thereafter have no right to exercise such Rights
 under any
provision of this Agreement. No Right Certificate shall be issued
 pursuant
to
 
 
 16
 
 Section 3
that represents Rights beneficially owned by an Acquiring
 Person
whose Rights would be void pursuant to the preceding sentence or
any
 Associate
or Affiliate thereof; no Right Certificate shall be issued at any
time
 upon the
transfer of any Rights to an Acquiring Person whose Rights would be
 void
pursuant to the preceding sentence or any Associate or Affiliate thereof
or
 to any
nominee of such Acquiring Person, Associate or Affiliate; and any
Right
 Certificate
delivered to the Rights Agent for transfer to an Acquiring Person
 whose
Rights would be void pursuant to the preceding sentence or any
Associate
 or
Affiliate thereof shall be canceled.
 
 (iii)
In the event that the number of Common Shares
 which are
authorized by the Company's certificate of incorporation and not
 outstanding
or subscribed for, or reserved or otherwise committed for issuance
 for
purposes other than upon exercise of the Rights, are not sufficient
to
 permit
the holder of each Right to purchase the number of Common Shares to
which
 he would
be entitled upon the exercise in full of the Rights in accordance
with
 the
foregoing subparagraph (ii) of paragraph (a) of this Section 11, or
should
 the Board
of Directors so elect, the Company shall: (A) determine the excess
of
 (1) the
value of the Common Shares issuable upon the exercise of a Right
 (calculated
as provided in the last sentence of this subparagraph (iii))
 pursuant
to Section 11(a)(ii) hereof (the "Current Value") over (2) the
Purchase
 Price
(such excess, the "Spread"), and (B) with respect to each Right,
make
 adequate
provision to substitute for such Common Shares, upon payment of the
 applicable
Purchase Price, any one or more of the following having an
aggregate
 value
determined by the Board of Directors to be equal to the Current Value:
(1)
 cash, (2)
a reduction in the Purchase Price, (3) Common Shares or other
equity
 securities
of the Company (including, without limitation, shares, or units of
 shares,
of preferred stock which the Board of Directors of the Company has
 
 17
 
 determined
to have the same value as Common Shares (such shares of preferred
 stock,
"common stock equivalents")), (4) debt securities of the Company, or
(5)
 other
assets; provided, however, if the Company shall not have made
adequate
 provision
to deliver value pursuant to clause (B) above within thirty (30)
days
 following
the first occurrence of an event triggering the rights to purchase
 Common
Shares described in Section 11(a)(ii) (the "Section 11(a)(ii)
Trigger
 Date"),
then the Company shall be obligated to deliver, upon the surrender
for
 exercise
of a Right and without requiring payment of the Purchase Price,
Common
 Shares
(to the extent available) and then, if necessary, cash, which shares
and
 cash have
an aggregate value equal to the Spread. If the Board of Directors
of
 the
Company shall determine in good faith that it is likely that
sufficient
 additional
Common Shares could be authorized for issuance upon exercise in
full
 of the
Rights, the thirty (30) day period set forth above may be extended 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 period, as it may be extended, the
 "Substitution
Period"). To the extent that the Company determines that some
 action
need be taken pursuant to the first and/or second sentences of this
 Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
 hereof
and the last paragraph of Section 11(a)(ii) 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 first sentence and
 to
determine the value thereof. In the event of any such suspension, the
Company
 shall
make a public announcement, and shall deliver to the Rights Agent a
 statement,
stating that the exercisability of the Rights has been temporarily
 suspended.
At such time as the suspension is no longer in effect,
 
 
 18
 
 the
Company shall make another public announcement, and deliver to the
Rights
 Agent a
statement, so stating. For purposes of this Section 11(a)(iii), the
 value of
the Common Shares shall be the current per share market price (as
 determined
pursuant to Section 11(d)(i) hereof) of the Common Shares on the
 Section
11(a)(ii) Trigger Date and the value of any common stock equivalent
 shall be
deemed to have the same value as the Common Shares on such date.
 
 (b)
In case the Company shall fix a record date for the
 issuance
of rights, options or warrants to all holders of Preferred Shares
 entitling
them (for a period expiring within 45 calendar days after such
record
 date) to
subscribe for or purchase Preferred Shares (or shares having the
same
 rights,
privileges and preferences as the Preferred Shares ("equivalent
 preferred
shares")) or securities convertible into Preferred Shares or
 equivalent
preferred shares at a price per Preferred Share or equivalent
 preferred
share (or having a conversion price per share, if a security
 convertible
into Preferred Shares or equivalent preferred shares) less than the
 then
current per share market price of the Preferred Shares (as defined
in
 Section
11(d)) on such record date, the Purchase Price to be in effect
after
 such
record date shall be adjusted by multiplying the Purchase Price in
effect
 immediately
prior to such record date by a fraction, the numerator of which
 shall be
the number of Preferred Shares outstanding on such record date plus
the
 number of
Preferred Shares which the aggregate offering price of the total
 number of
Preferred Shares and/or equivalent preferred shares so to be
offered
 (and/or
the aggregate initial conversion price of the convertible securities
so
 to be
offered) would purchase at such current market price and the
denominator
 of which
shall be the number of Preferred Shares outstanding on such record
date
 plus the
number of additional Preferred Shares and/or equivalent preferred
 shares to
be offered for 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
 
 
 19
  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.
 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 Shares (including any
such
 distribution
made in connection with a consolidation or merger in which the
 Company
is the continuing or surviving corporation) of evidences of
indebtedness
 or assets
(other than a regular quarterly cash dividend or a dividend payable
in
 Preferred
Shares) or subscription rights or warrants (excluding those
referred
 to in
Section 11(b) 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 Shares 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 Preferred Share and the denominator of which shall be such
 current
per share market price of the Preferred Shares;
 
 
 20
 
 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) 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 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
in the principal consolidated transaction reporting system with
 respect
to securities listed or admitted to trading on the New York
 Stock
Exchange or, if the Security is not listed or admitted to trading on
the
 New York
Stock Exchange, as reported in the principal consolidated
transaction
 reporting
 
 
 21
 
  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 the
 National
Association of Securities Dealers, Inc. Automated Quotations System
 ("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, the
 "current
per share market price" of the Preferred Shares shall be determined
in
 accordance
with the method set forth in Section 11(d)(i). If the Preferred
 Shares
are not publicly traded, the "current per share market price" of
the
 Preferred
Shares shall be conclusively deemed to be the current per share
market
 price of
the Common Shares as determined pursuant to Section 11(d)(i)
 (appropriately
adjusted to reflect any stock split, stock dividend or similar
 transaction
occurring after the date hereof), multiplied by 1000. If neither
the
 Common
Shares nor the Preferred Shares are publicly held or so listed or
traded,
 "current
per share market price" shall mean the fair value per share as
 determined
in good faith by the Board of Directors of the Company, whose
 determination
shall be described in a statement filed with the Rights Agent.
 
 22
 
 (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 ten-millionth of
a
 Preferred
Share or one ten-thousandth of any 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 three years from the
 date of
the transaction which requires such adjustment.
 
 (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
Preferred
 Shares,
the number of such other shares so receivable upon exercise of any
Right
 shall
thereafter be subject to adjustment from time to time in a manner and
on
 terms as
nearly equivalent as practicable to the provisions with respect to
the
 Preferred
Shares contained in Section 11(a) through (c), inclusive, and the
 provisions
of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
 shall
apply on like terms to any such other shares.
 
 (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
 Preferred
Share 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
 
 
 23
 
 11(b) and
(c), each Right outstanding immediately prior to the making of such
 adjustment
shall thereafter evidence the right to purchase, at the adjusted
 Purchase
Price, that number of one one-thousandths of a Preferred Share
 (calculated
to the nearest one ten-millionth of a Preferred Share) obtained by
 (i)
multiplying (x) the number of one one-thousandths of a share covered by
a
 Right
immediately prior to this adjustment by (y) the Purchase Price in
effect
 immediately
prior to such adjustment of the Purchase Price and (ii) dividing
the
 product
so obtained by the Purchase Price in effect immediately after such
 adjustment
of the Purchase Price.
 
 (i)
The Company may elect on or after the date of any adjustment
 of the
Purchase Price to adjust the number of Rights in substitution for
any
 adjustment
in the number of one one-thousandths of a Preferred Share
purchasable
 upon the
exercise of a Right. Each of the Rights outstanding after such
 adjustment
of the number of Rights shall be exercisable for the number of one
 one-thousandths
of a Preferred Share for which a Right was exercisable
 immediately
prior to such adjustment. Each Right held of record prior to such
 adjustment
of the number of Rights shall become that number of Rights
 (calculated
to the nearest one hundred-thousandth) obtained by dividing the
 Purchase
Price in effect immediately prior to adjustment of the Purchase
Price
 by the
Purchase Price in effect immediately after adjustment of the
Purchase
 Price.
The Company shall make a public announcement of its election to
adjust
 the
number of Rights, indicating the record date for the adjustment, and,
if
 known at
the time, the amount of the adjustment to be made. This record date
may
 be the
date on which the Purchase Price is adjusted or any day thereafter,
but,
 if the
Right Certificates have been distributed, shall be at least 10 days
later
 than the
date of the public announcement. If Right Certificates have been
 distributed,
upon each adjustment of the number of Rights pursuant to this
 Section
11(i), the Company shall, as promptly as practicable, cause to be
 distributed
to holders of record of Right Certificates on such
 
 
 24
 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, 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 to be so 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 Preferred Share issuable
upon
 the
exercise of the Rights, the Right Certificates theretofore and
thereafter
 issued
may continue to express the Purchase Price and the number of one
 one-thousandths
of a Preferred Share 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 one one-thousandth of the then par value
of
 the
Preferred Shares issuable upon exercise of the Rights, the Company
shall
 take any
corporate action which may, in the opinion of its counsel, be
necessary
 in order
that the Company may validly and legally issue fully paid and
 non-assessable
Preferred Shares at such adjusted Purchase Price.
 
 (l)
In any case in which this Section 11 shall require that an
 adjustment
in the Purchase Price be made effective as of a record date for a
 specified
event, the Company may elect to defer until the occurrence of such
 event the
issuing to the holder of any Right exercised after such record date
of
 the
Preferred Shares and other capital stock or securities of the
 
 25
  Company,
if any, issuable upon such exercise over and above the Preferred
Shares
 and other
capital stock or securities of the Company, if any, issuable upon
such
 exercise
on the basis of the Purchase Price in effect prior to such
adjustment;
 provided,
however, that the Company shall deliver to such holder a due bill
or
 other
appropriate instrument evidencing such holder's 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 reductions in the Purchase Price,
in
 addition
to those adjustments expressly required by this Section 11, as and
to
 the
extent that it in its sole discretion shall determine to be advisable
in
 order
that any (i) combination or subdivision of the Preferred Shares,
(ii)
 issuance
wholly for cash of any Preferred Shares at less than the current
market
 price,
(iii) issuance wholly for cash of Preferred Shares or securities which
by
 their
terms are convertible into or exchangeable for Preferred Shares,
(iv)
 dividends
on Preferred Shares payable in Preferred Shares or (v) issuance of
any
 rights,
options or warrants referred to hereinabove in Section 11(b),
hereafter
 made by
the Company to holders of its Preferred Shares shall not be taxable
to
 such
stockholders.
 
 (n)
In the event that at any time after the date of this
 Agreement
and prior to the Distribution Date, the Company shall (i) declare
or
 pay any
dividend on the Common Shares payable in Common Shares or (ii) effect
a
 subdivision,
combination or consolidation of the Common Shares (by
 reclassification
or otherwise other than by payment of dividends in Common
 Shares)
into a greater or lesser number of Common Shares, then in any such
case
 (i) the
number of one one-thousandths of a Preferred Share purchasable
after
 such
event upon proper exercise of each Right shall be determined by
multiplying
 the
number of one one-thousandths of a Preferred Share so purchasable
 immediately
prior to such event by a fraction,
 
 26
 
 the
numerator of which is the number of Common Shares outstanding
immediately
 before
such event and the denominator of which is the number of Common
Shares
 outstanding
immediately after such event, and (ii) each Common Share
outstanding
 immediately
after such event shall have issued with respect to it that number
of
 Rights
which each Common Share outstanding immediately prior to such event
had
 issued
with respect to it. The adjustments provided for in this Section
11(n)
 shall be
made successively whenever such a dividend is declared or paid or
such
 a
subdivision, combination or consolidation is effected.
 
 Section
12. Certificate of Adjustment.
 
 Whenever
an adjustment is made as provided in Sections 11 and 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
 Shares or
the Preferred Shares a copy of such certificate and (c) if such
 adjustment
occurs following a Distribution Date, mail a brief summary thereof
to
 each
holder of a Right Certificate in accordance with 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 obligated or responsible
for
 calculating
any adjustment nor shall it be deemed to have knowledge of such an
 adjustment
unless and until it shall have received such certificate.
 
 Section
13. Consolidation, Merger or Sale or Transfer of Assets
 or
Earning Power.
 
 In
the event that, at any time after a Person becomes an
 Acquiring
Person, directly or indirectly, (i) the Company shall consolidate
 with, or
merge with and into, any other Person, (ii) any Person shall
 consolidate
with the Company, or merge with and into the Company and the
Company
 shall be
the continuing or surviving corporation of such merger and, in
 connection
 
 27
 
 with such
merger, all or part of the Common Shares shall be changed into or
 exchanged
for stock or other securities of any other Person (or 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 of its
 wholly-owned
Subsidiaries, then, and in each such case, proper provision shall
 be made
so that (A) each holder of a Right (except as otherwise provided
herein)
 shall
thereafter have the right to receive, upon the exercise thereof at a
price
 equal to
the then current Purchase Price multiplied by the number of one
 one-thousandths
of a Preferred Share for which a Right is then exercisable, in
 accordance
with the terms of this Agreement and in lieu of Preferred Shares,
 such
number of Common Shares of such other Person (including the Company
as
 successor
thereto or as the surviving corporation) as shall equal the result
 obtained
by (x) multiplying the then current Purchase Price by the number of
one
 one-thousandths
of a Preferred Share for which a Right is then exercisable and
 dividing
that product by (y) 50% of the then current per share market price
of
 the
Common Shares of such other Person (determined pursuant to Section
11(d)
 hereof)
on the date of consummation of such consolidation, merger, sale or
 transfer;
(B) the issuer of such Common Shares shall thereafter be liable
for,
 and shall
assume, by virtue of such consolidation, merger, sale or transfer,
all
 the
obligations and duties of the Company pursuant to this Agreement; (C)
the
 term
"Company" shall thereafter be deemed to refer to such issuer; and (D)
such
 issuer
shall take such steps (including, but not limited to, the reservation
of
 a
sufficient number of its Common Shares in accordance with Section 9 hereof)
in
 connection
with such consummation as may be necessary to assure that the
 provisions
hereof shall thereafter be applicable, as nearly as reasonably may
 be,
in
 
 28
 
 relation
to the Common Shares thereafter deliverable upon the exercise of
 the
Rights. The Company covenants and agrees that it shall not consummate
any
 such
consolidation, merger, sale or transfer unless prior thereto the
Company
 and such
issuer shall have executed and delivered to the Rights Agent a
 supplemental
agreement so providing. The Company shall not enter into any
 transaction
of the kind referred to in this Section 13 if at the time of such
 transaction
there are any rights, warrants, instruments or securities
 outstanding
or any agreements or arrangements which, as a result of the
 consummation
of such transaction, would eliminate or substantially diminish the
 benefits
intended to be afforded by the Rights. The provisions of this
Section
 13 shall
similarly apply to successive mergers or consolidations or sales or
 other
transfers. For purposes hereof, the "earning power" of the Company and
its
 Subsidiaries
shall be determined in good faith by the Company's Board of
 Directors
on the basis of the operating earnings of each business operated by
 the
Company and its Subsidiaries during the three fiscal years preceding
the
 date of
such determination (or, in the case of any business not operated by
the
 Company
or any Subsidiary during three full fiscal years preceding such
date,
 during
the period such business was operated by the Company or any
Subsidiary).
 
 Section
14. Fractional Rights and Fractional Shares.
 
 (a)
The Company shall not be required to issue fractions of
 Rights or
to distribute Right Certificates which evidence fractional Rights.
In
 lieu of
such fractional Rights, there shall be paid to the registered holders
of
 the Right
Certificates with regard to which such fractional Rights would
 otherwise
be issuable, an amount in cash equal to the same fraction of the
 current
market value of a whole Right. For the purposes of this Section
14(a),
 the
current market value of a whole Right shall be the closing price of
the
 Rights
for the Trading Day immediately prior to the date on which such
 fractional
Rights would have been otherwise issuable. The closing price
 
 29
 
 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
Shares (other than fractions which are integral multiples of one
 one-thousandth
of a Preferred Share) upon exercise of the Rights or to
 distribute
certificates which evidence fractional Preferred Shares (other than
 fractions
which are integral multiples of one one-thousandth of a Preferred
 Share).
Fractions of Preferred Shares in integral multiples of one
 one-thousandth
of a Preferred Share may, at the election of the Company, be
 evidenced
by 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,
 
 30
 
 privileges
and preferences to which they are entitled as beneficial owners of
 the
Preferred Shares represented by such depositary receipts. In lieu
of
 fractional
Preferred Shares that are not integral multiples of one
 one-thousandth
of a Preferred Share, the Company shall pay to each registered
 holder of
Right Certificates at the time such Rights are exercised as herein
 provided
an amount in cash equal to the same fraction of the current market
 value of
one Preferred Share as the fraction of one Preferred Share that
such
 holder
would otherwise receive upon the exercise of the aggregate number
of
 rights
exercised by such holder. For the purposes of this Section 14(b),
the
 current
market value of a Preferred Share shall be the closing price of a
 Preferred
Share (as determined pursuant to the second sentence of Section
 11(d)(i)
hereof) for the Trading Day immediately prior to the date of such
 exercise.
 
 (c)
The holder of a Right by the acceptance of the Right
 expressly
waives any right to receive fractional Rights or fractional shares
 upon
exercise 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 Shares); and
any
 registered
holder of any Right Certificate (or, prior to the Distribution
Date,
 of the
Common Shares) may, without the consent of the Rights Agent or of
the
 holder of
any other Right Certificate (or, prior to the Distribution Date, of
 the
Common Shares), on his own behalf and for his own benefit, enforce, and
may
 institute
and maintain any suit, action or proceeding against the Company to
 enforce,
or otherwise act in respect of, his right to exercise the Rights
 evidenced
by such Right Certificate in the manner provided in such Right
 Certificate
 
 
 31
  and in
this Agreement. Without limiting the foregoing or any remedies
available
 to the
holders of Rights, it is specifically acknowledged that the holders
of
 Rights
would not have an adequate remedy at law for any breach of this
Agreement
 and will
be entitled to specific performance of the obligations under, and
 injunctive
relief against actual or threatened violations of the obligations
of
 any
Person subject to, this Agreement.
 
 Section
16. Agreement of Right Holders.
 
 Every
holder of a Right, by accepting the same, consents and
 agrees
with the Company and the Rights Agent and with every other holder of
a
 Right
that:
 
 (a)
prior to the Distribution Date, the Rights will be
 transferable
only in connection with the transfer of the Common Shares;
 
 (b)
after the Distribution Date, the Right Certificates are
 transferable
only on the registry books maintained by the Rights Agent if
 surrendered
at the principal office of the Rights Agent, duly endorsed or
 accompanied
by a proper instrument of transfer with a completed form of
 certification;
and
 
 (c)
the Company and the Rights Agent may deem and treat the
 person in
whose name the Right Certificate (or, prior to the Distribution
Date,
 the
associated Common Shares certificate) is registered as the absolute
owner
 thereof
and of the Rights evidenced thereby (notwithstanding any notations
of
 ownership
or writing on the Right Certificates or the associated Common
Shares
 certificate
made by anyone other than the Company or the Rights Agent) for all
 purposes
whatsoever, and neither the Company nor the Rights Agent shall be
 affected
by any notice to the contrary.
 
 32
 
 
 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
 Shares or
any other securities of the Company which may at any time be
issuable
 on the
exercise of the Rights represented thereby nor shall anything
contained
 herein or
in any Right Certificate be construed to confer upon the holder of
any
 Right
Certificate, as such, any of the rights of a stockholder of the Company
or
 any right
to vote for the election of directors or upon any matter submitted
to
 stockholders
at any meeting thereof, or to give or withhold consent to any
 corporate
action, or to receive notice of meetings or other actions affecting
 stockholders
(except as provided in Section 25 hereof), or to receive dividends
 or
subscription rights, or otherwise, until the Right or Rights evidenced
by
 such
Right Certificate shall have been exercised in accordance with the
 provisions
hereof.
 
 Section
18. Concerning the Rights Agent.
 
 The
Company agrees to pay to the Rights Agent reasonable
 compensation
for all services rendered by it hereunder and, from time to time,
 on demand
of the Rights Agent, its reasonable expenses and counsel fees and
 other
disbursements incurred in the administration and execution of this
 Agreement
and the exercise and performance of its duties hereunder. The
Company
 also
agrees to indemnify the Rights Agent for, and to hold it harmless
against,
 any loss,
liability, or expense, incurred without negligence, bad faith or
 willful
misconduct on the part of the Rights Agent, for anything done or
omitted
 by the
Rights Agent in connection with the acceptance and administration of
this
 Agreement,
including the costs and expenses of defending against any claim or
 liability
in connection therewith. The indemnification provided for hereunder
 shall
survive the expiration of the Rights and the termination of this
 Agreement.
 
 33
 
 
 The costs
and expenses of enforcing this right of indemnification shall also
be
 paid by
the Company.
 
 The
Rights Agent may conclusively rely upon and 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 Preferred
 Shares 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. 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.
 
 Section
19. Merger or Consolidation or Change of Name of Rights
 Agent.
 
 Any
corporation into which the Rights Agent or any successor
 Rights
Agent may be merged or with which it may be consolidated, or any
 corporation
resulting from any merger or consolidation to which the Rights
Agent
 or any
successor Rights Agent shall be a party, or any corporation succeeding
to
 the
corporate trust business of the Rights Agent or any successor Rights
Agent,
 shall be
the successor to the Rights Agent under this Agreement without the
 execution
or filing of any paper or any further act on the part of any of the
 parties
hereto, provided that such corporation 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
 
 
 34
 
 countersigned
but not delivered, any such successor Rights Agent may adopt the
 countersignature
of the predecessor Rights Agent and deliver such Right
 Certificates
so countersigned; and in case at that time any of the Right
 Certificates
shall not have been countersigned, any successor Rights Agent may
 countersign
such Right Certificates either in the name of the predecessor
Rights
 Agent or
in the name of the successor Rights Agent; and in all such cases
such
 Right
Certificates shall have the full force provided in the Right
Certificates
 and in
this Agreement.
 
 In
case at any time the name of the Rights Agent shall be changed
 and at
such time any of the Right Certificates shall have been countersigned
but
 not
delivered, the Rights Agent may adopt the countersignature under its
prior
 name and
deliver Right Certificates so countersigned; and in case at that
time
 any of
the Right Certificates shall not have been 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 expressly
 set forth
in this Agreement and no implied duties or obligations shall be
read
 into this
Agreement against the Rights Agent. The Rights Agent shall perform
 those
duties and obligations 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)
Before the Rights Agent acts or refrains from acting, it may
 consult
with legal counsel (who may be legal counsel for the Company), and
the
 opinion
of such counsel shall be
 
 
 35
 
 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 any one of the Chairman of the Board,
the
 Chief
Executive Officer, the President, a Vice President, the Treasurer or
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.
 
 (c)
The Rights Agent shall be liable hereunder only for its own
 negligence,
bad faith or willful misconduct.
 
 (d)
The Rights Agent shall not be liable for or by reason of any
 of the
statements of fact or recitals contained in this Agreement or in
the
 Right
Certificates (except as to its countersignature thereof) or be required
to
 verify
the same, but all such statements and recitals are and shall be deemed
to
 have been
made by the Company only.
 
 (e)
The Rights Agent shall not be under any responsibility in
 respect
of the validity of this Agreement or the execution and delivery
hereof
 (except
the due execution hereof by the Rights Agent) or in respect of the
 validity
or execution of any Right Certificate (except its countersignature
 thereof);
nor shall it be responsible for any breach by the Company of any
 covenant
or condition contained in this Agreement or in any Right
Certificate;
 nor shall
it be responsible for any adjustment required under the provisions
of
 Sections
11 or 13 hereof or
 
 36
 
 
 responsible
for the manner, method or amount of any such adjustment or the
 ascertaining
of the existence of facts that would require any such adjustment
 (except
with respect to the exercise of Rights evidenced by Right
Certificates
 after
actual notice of any such adjustment); nor shall it by any act
hereunder
 be deemed
to make any representation or warranty as to the authorization or
 reservation
of any shares of Preferred Shares to be issued pursuant to this
 Agreement
or any Right Certificate or as to whether any Preferred Shares
will,
 when so
issued, be validly authorized and issued, fully paid and
nonassessable.
 
 (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
 one of
the Chairman of the Board, the Chief Executive Officer, the President,
a
 Vice
President, the Secretary or the Treasurer of the Company, and to apply
to
 such
officers for advice or instructions in connection with its duties, and
it
 shall not
be liable for any action taken or suffered to be taken by it in
good
 faith in
accordance with instructions of any such officer. 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 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 ten Business
 Days
after the date any officer of the Company actually receives such
 
 
 37
 
 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 received, in response
to
 such
application, written instructions with respect to the proposed action
or
 omission
specifying a different 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)
No provision of this Agreement shall require the Rights Agent
 to expend
or risk its own funds or otherwise incur any financial liability in
 the
performance of any of its duties hereunder or in the exercise of its
rights
 if there
shall be reasonable grounds for believing that repayment of such
funds
 or
adequate indemnification against such risk or liability is not
reasonably
 assured
to it.
 
 (k)
The Rights Agent shall not be required to take notice or be
 deemed to
have notice of any fact, event or determination (including, without
 limitation,
any dates or events
 
 38
 
 
 defined
in this Agreement or the designation of any Person as an Acquiring
 Person,
Affiliate or Associate) under this Agreement unless and until the
Rights
 Agent
shall be specifically notified in writing by the Company of such
fact,
 event or
determination.
 
 Section
21. Change of Rights Agent.
 
 The
Rights Agent or any successor Rights Agent may resign and be
 discharged
from its duties under this Agreement upon 30 days' notice in
writing
 mailed to
the Company and to each transfer agent of the Common Shares and the
 Preferred
Shares by registered or certified mail. The Company may remove the
 Rights
Agent or any successor Rights Agent upon 30 days' notice in
writing,
 mailed to
the Rights Agent or successor Rights Agent, as the case may be, and
to
 each
transfer agent of the Common Shares and the Preferred Shares by
registered
 or
certified 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
 of any
state of the United States, in good standing, which is authorized
under
 such laws
to exercise corporate trust powers and is subject to supervision or
 examination
by federal or state authority and which has at the time of its
 appointment
as Rights Agent a combined capital and surplus of at least $10
 million.
After appointment, the successor Rights Agent shall be vested with
the
 
 
 39
 
 
 same
powers, rights, duties and responsibilities as if it had been
originally
 named as
Rights Agent without further act or deed; but the predecessor
Rights
 Agent
shall deliver and transfer to the successor Rights Agent any property
at
 the time
held by it hereunder, and execute and deliver any further
assurance,
 conveyance,
act or deed necessary for the purpose. Not later than the effective
 date of
any such appointment the Company shall file notice thereof in
writing
 with the
predecessor Rights Agent and each transfer agent of the Common
Shares
 and the
Preferred Shares. Failure to give any notice provided for in this
 Section
21, however, or any defect therein, shall not affect the legality
or
 validity
of the resignation or removal of the Rights Agent or the appointment
of
 the
successor Rights Agent, as the case may be.
 
 Section
22. Issuance of New Right Certificates.
 
 Notwithstanding
any of the provisions of this Agreement or of the
 Rights to
the contrary, the Company may, at its option, issue new Right
 Certificates
evidencing Rights in such form as may be approved by 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 earlier of the Redemption
Date
 and the
Close of Business on the Final 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 employment 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 Right Certificates
representing
 the
appropriate number of Rights in connection with such issuance or
sale.
 
 40
 
 Section
23. Redemption.
 
 (a)
The Board of Directors of the Company may, at its option, at
 any time
prior to such time as any Person becomes an Acquiring Person,
redeem
 all but
not less than all the then outstanding Rights at a redemption price
of
 $0.001
per Right, appropriately adjusted to reflect any stock split, stock
 dividend
or similar transaction occurring after the date hereof (such
redemption
 price
being hereinafter referred to as the "Redemption Price"). The
redemption
 of the
Rights by the Board of Directors may be made effective at such time,
on
 such
basis and subject to such conditions as the Board of Directors in its
sole
 discretion
may establish.
 
 (b)
Immediately upon the time of the effectiveness of the
 redemption
of the Rights pursuant to paragraph (a) of this Section 23 or such
 earlier
time as may be determined by the Board of Directors of the Company
in
 the
action ordering such redemption (although not earlier than the time of
such
 action)
(such time the "Redemption Date"), and without any further action
and
 without
any notice, the right to exercise the Rights shall 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 redemption of
the
 Rights
pursuant to paragraph (a), 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
 Shares.
Any notice which is mailed in the manner herein provided shall be
deemed
 given,
whether or not the holder receives the notice. If the payment of
the
 Redemption
Price is not included with such notice, each such notice shall
state
 the
method by which the payment of the Redemption Price will be made.
Neither
 the
Company nor any of its Affiliates or Associates
 
 
 41
 
 may
redeem, acquire or purchase for value any Rights at any time in any
manner
 other
than that specifically set forth in this Section 23 or in Section
24
 hereof,
other than in connection with the purchase of Common Shares prior to
the
 Distribution
Date.
 
 Section
24. Exchange.
 
 (a)
The Board of Directors of the Company may, at its option, at
 any time
after any Person becomes an Acquiring Person, exchange all or part
of
 the then
outstanding and exercisable Rights (which shall not include Rights
that
 have
become void pursuant to the provisions of Section 11(a)(ii) hereof)
for
 Common
Shares at an exchange ratio of one Common Share per Right (such
exchange
 ratio
being hereinafter referred to as the "Exchange Ratio").
Notwithstanding
 the
foregoing, the Board of Directors shall not be empowered to effect
such
 exchange
at any time after any Person (other than the Company, any Subsidiary
of
 the
Company, any employee benefit plan of the Company or any such Subsidiary,
or
 any
entity holding Common Shares for or pursuant to the terms of any such
plan),
 together
with all Affiliates and Associates of such Person, becomes the
 Beneficial
Owner of a majority of the Common Shares then outstanding.
 
 (b)
Immediately upon the action of the Board of Directors of the
 Company
ordering the exchange of any Rights pursuant to subsection (a) of
this
 Section
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 Common Shares equal to
the
 number of
such Rights held by such holder multiplied by the Exchange Ratio.
The
 Company
shall promptly give public notice of any such exchange; provided,
 however,
that the failure to give, or any defect in, such notice shall not
 affect
the validity of such exchange. The Company promptly shall mail a
notice
 of any
such exchange to all of the holders of such
 
 
 42
 
 
 Rights at
their last addresses as they appear upon the registry books of the
 Rights
Agent. Any notice which is mailed in the manner herein provided shall
be
 deemed
given, whether or not the holder receives the notice. Each such notice
of
 exchange
will state the method by which the exchange of the Common Shares
for
 Rights
will be effected and, in the event of any partial exchange, the number
of
 Rights
which will be exchanged. Any partial exchange shall be effected pro
rata
 based on
the number of Rights (other than Rights which have become void
pursuant
 to the
provisions of Section 11(a)(ii) hereof) held by each holder of
Rights.
 
 (c)
In any exchange pursuant to this Section 24, the Company, at
 its
option, may substitute Preferred Shares or common stock equivalents
for
 Common
Shares exchangeable for Rights, at the initial rate of one
one-thousandth
 of a
Preferred Share (or an appropriate number of common stock equivalents)
for
 each
Common Share, as appropriately adjusted to reflect adjustments in
the
 voting
rights of the Preferred Shares pursuant to the terms thereof, so that
the
 fraction
of a Preferred Share delivered in lieu of each Common Share shall
have
 the same
voting rights as one Common Share.
 
 (d)
In the event that there shall not be sufficient Common
 Shares,
Preferred Shares or common stock equivalents authorized by the
Company's
 certificate
of incorporation and not outstanding or subscribed for, or reserved
 or
otherwise committed for issuance for purposes other than upon exercise
of
 Rights,
to permit any exchange of Rights as contemplated in accordance with
this
 Section
24, the Company shall take all such action as may be necessary to
 authorize
additional Common Shares, Preferred Shares or common stock
equivalents
 for
issuance upon exchange of the Rights.
 
 (e)
The Company shall not be required to issue fractions of
 Common
Shares or to distribute certificates which evidence fractional
Common
 Shares.
In lieu of such fractional
 
 43
 
 Common
Shares, the Company shall pay to the registered holders of the
Right
 Certificates
with regard to which such fractional Common Shares would otherwise
 be
issuable an amount in cash equal to the same fraction of the current
per
 share
market value of a whole Common Share. For the purposes of this
paragraph
 (e), the
current per share market value of a whole Common Share shall be the
 closing
price of a Common Share (as determined pursuant to the second
sentence
 of
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date
of
 exchange
pursuant to this Section 24.
 
 Section
25. Notice of Certain Events.
 
 (a)
In case the Company shall after the Distribution Date propose
 (i) to
pay any dividend payable in stock of any class to the holders of
its
 Preferred
Shares or to make any other distribution to the holders of its
 Preferred
Shares (other than a regular quarterly cash dividend), (ii) to
offer
 to the
holders of its Preferred Shares rights or warrants to subscribe for or
to
 purchase
any additional Preferred Shares or shares of stock of any class or
any
 other
securities, rights or options, (iii) to effect any reclassification of
its
 Preferred
Shares (other than a reclassification involving only the
subdivision
 of
outstanding Preferred Shares), (iv) to effect any consolidation or
merger
 into or
with, or to effect any sale or other transfer (or to permit one or
more
 of its
Subsidiaries to effect any sale or other transfer), in one or more
 transactions,
of 50% or more of the assets or earning power of the Company and
 its
Subsidiaries (taken as a whole) to, any other Person, (v) to effect
the
 liquidation,
dissolution or winding up of the Company, or (vi) to declare or pay
 any
dividend on the Common Shares payable in Common Shares or to effect
a
 subdivision,
combination or consolidation of the Common Shares (by
 reclassification
or otherwise than by payment of dividends in Common Shares),
 then, in
each such case, the Company shall give to each holder of a Right
 Certificate,
in accordance with Section 26 hereof, a
 
 
 44
 
 
 notice of
such proposed action, which shall specify the record date for the
 purposes
of such stock dividend, or distribution of rights or warrants, or
the
 date on
which such reclassification, consolidation, merger, sale, transfer,
 liquidation,
dissolution, or winding up is to take place and the date of
 participation
therein by the holders of the Common Shares and/or Preferred
 Shares,
if any such date is to be fixed, and such notice shall be so given
in
 the case
of any action covered by clause (i) or (ii) above at least 10 days
 prior to
the record date for determining holders of the Preferred Shares for
 purposes
of such action, and in the case of any such other action, at least
10
 days
prior to the date of the taking of such proposed action or the date
of
 participation
therein by the holders of the Common Shares and/or Preferred
 Shares,
whichever shall be the earlier.
 
 (b)
In case any event set forth in Section 11(a)(ii) hereof shall
 occur,
then the Company shall as soon as practicable thereafter give to
each
 holder of
a Right Certificate, 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) 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:
 
 SCOLR,
Inc.
 8340
154th Avenue NE
 Redmond,
Washington 98052-3864
 
 
 Attention:
Secretary
 
 
 45
  Copy
to:
 
 Garvey
Schubert Barer
 1191
Second Avenue, Suite 1800
 Seattle,
Washington 98101
 
 Attention:
Alan M. Mitchel
 
 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 registered or certified mail and shall be deemed given upon
receipt
 and,
addressed (until another address is filed in writing with the Company)
as
 follows:
 
 OTR,
Inc.
 1000
SW Broadway, Suite 920
 Portland,
Oregon 97205
 
 Attention:  Robert
E. Roach
 
 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.
 
 The
Company may from time to time, and the Rights Agent shall, if
 the
Company so directs, supplement or amend this Agreement without the
approval
 of any
holders of Right Certificates in order to cure any ambiguity, to
correct
 or
supplement any provision contained herein which may be defective or
 inconsistent
with any other provisions herein, or to make any change to or
 delete
any provision hereof or to adopt any other provisions with respect to
the
 
 46
 
 Rights
which the Company may deem necessary or desirable; provided,
however,
 that from
and after such time as any Person becomes an Acquiring Person, this
 Agreement
shall not be amended or supplemented in any manner which would
 adversely
affect the interests of the holders of Rights (other than an
Acquiring
 Person
and its Affiliates and Associates). Any supplement or amendment
 authorized
by this Section 27 will be evidenced by a writing signed by the
 Company
and the Rights Agent. Notwithstanding anything in this Agreement to
the
 contrary,
no supplement or amendment that changes the rights and duties of
the
 Rights
Agent under this Agreement will be effective against the Rights
Agent
 without
the execution of such supplement or amendment by the Rights Agent.
 
 Section
28. Successors.
 
 All
the covenants and provisions of this Agreement by or for the
 benefit
of the Company or the Rights Agent shall bind and inure to the
benefit
 of their
respective successors and assigns hereunder.
 
 Section
29. Benefits of this Agreement.
 
 Nothing
in this Agreement shall be construed to give to any
 person or
entity other than the Company, the Rights Agent and the registered
 holders
of the Right Certificates (and, prior to the Distribution Date, the
 Common
Shares) any legal or equitable right, remedy or claim under this
 Agreement;
but this Agreement shall be for the sole and exclusive benefit of
the
 Company,
the Rights Agent and the registered holders of the Right
Certificates
 (and,
prior to the Distribution Date, the Common Shares).
 
 
 47
 
 Section
30. 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
31. Governing Law.
 
 This
Agreement and each Right Certificate issued hereunder shall
 be deemed
to be a contract made under the laws of the State of Delaware and
for
 all
purposes shall be governed by and construed in accordance with the laws
of
 such
State applicable to contracts to be made and performed entirely within
such
 State.
 
 Section
32. 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
33. 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.
 
 Section
34. Administration.
 
 The
Board of Directors of the Company shall have the exclusive
 power and
authority to administer and interpret the provisions of this
Agreement
 and to
exercise all rights and powers specifically granted to the Board of
 Directors
or the Company or as may be
 
 
 48
 
 necessary
or advisable in the administration of this Agreement. All such
 actions,
calculations, determinations and interpretations which are done or
made
 by the
Board of Directors in good faith shall be final, conclusive and
binding
 on the
Company, the Rights Agent, the holders of the Rights and all other
 parties
and shall not subject the Board of Directors to any liability to
the
 holders
of the Rights.
 
 
 49
  
 IN
WITNESS WHEREOF, the parties hereto have caused this Rights
 Agreement
to be duly executed and their respective corporate seals to be
 hereunder
affixed and attested, all as of the day and year first above
written.
 
 Attest:                                     SCOLR,
INC.
 
 
 /s/ STEVE
MOGER                        
By: /s/ DAVID T. HOWARD
 ------------------------------                  -------------------------------
 Name:
Steve
Moger                       Name:
David T. Howard
 Title:
Chief Financial
Officer         Title: President,
Chief
 Executive Officer
 
 
 Attest:                                     OTR,
INC.,
 as
Rights Agent
 
 
 /s/
BRITNEY
KALBERER             
By: /s/ ROBERT E. ROACH
 -----------------------------                   -------------------------------
 Name:
Britney
Kalberer                 
Name: Robert E. Roach
 Title:
Marketing
Director               Title:
Vice President
  50
 -----------------------------------------------------------------------------
 
 
 SCOLR,
INC.
 
 and
 
 OTR,
INC.
 
 Rights
Agent
 
 Rights
Agreement
 
 Dated
as of November 1, 2002
 
 
 -------------------------------------------------------------------------------
 - i -
 TABLE
OF CONTENTS
 
 Page
 ----
  Section
1.     Certain
Definitions..............................................................................................1
 Section
2.     Appointment of Rights
Agent..........................................................................6
 Section
3.     Issue of Right
Certificates.................................................................................6
 Section
4.     Form of Right
Certificates..................................................................................9
 Section
5.     Countersignature and
Registration..................................................................9
 Section
6.     Transfer, Split Up, Combination and Exchange of
Right Certificates;
 Mutilated, Destroyed, Lost or Stolen Right
Certificates............................10
 Section
7.     Exercise of Rights; Purchase Price; Expiration
Date of Rights...................11
 Section
8.     Cancellation and Destruction of Right
Certificates......................................13
 Section
9.     Status and Availability of Preferred
Shares...................................................14
 Section
10.    Preferred Shares Record
Date.........................................................................15
 Section
11.    Adjustment of Purchase Price, Number of Shares or
Number of Rights..15
 Section
12.    Certificate of
Adjustment.................................................................................27
 Section
13.    Consolidation, Merger or Sale or Transfer of Assets
or Earning Power..27
 Section
14.    Fractional Rights and Fractional
Shares........................................................29
 Section
15.    Rights of
Action................................................................................................31
 Section
16.    Agreement of Right
Holders...........................................................................32
 Section
17.    Right Certificate Holder Not Deemed a
Stockholder...................................33
 Section
18.    Concerning the Rights
Agent.........................................................................33
 Section
19.    Merger or Consolidation or Change of Name of Rights
Agent.................34
 Section
20.    Duties of Rights
Agent....................................................................................35
 Section
21.    Change of Rights
Agent..................................................................................39
 Section
22.    Issuance of New Right
Certificates................................................................40
 Section
23.    Redemption........................................................................................................41
 Section
24.    Exchange............................................................................................................42
 Section
25.    Notice of Certain
Events.................................................................................44
 Section
26.    Notices...............................................................................................................45
 Section
27.    Supplements and
Amendments.....................................................................46
 Section
28.    Successors........................................................................................................47
 Section
29.    Benefits of this
Agreement.............................................................................47
 Section
30.    Severability........................................................................................................48
 Section
31.    Governing
Law..................................................................................................48
 Section
32.    Counterparts......................................................................................................48
 Section
33.    Descriptive
Headings.......................................................................................48
 Section
34.    Administration..................................................................................................48