Exhibit 10.33
 
 ARADIGM CORPORATION
 and
 COMPUTERSHARE TRUST COMPANY, N.A.
as Rights Agent
 Amended and Restated Rights Agreement
 Dated as of September 5, 2008




---



##### 



Amended and Restated Rights Agreement
 This Amended and Restated Rights Agreement (Agreement Aradigm Corporation
 provided, however,
   Section 1.
    
    Certain Definitions. For purposes of this Agreement, the following terms have the
meanings indicated:
 (a)
    
    Acquiring Personshall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
then outstanding. Notwithstanding the foregoing, (A) the term Acquiring Person
shall not include (i) the Company, (ii) any Subsidiary (as such term is
hereinafter defined) of the Company, (iii) any employee benefit or compensation
plan of the Company or any Subsidiary of the Company, (iv) any entity holding
Common Shares for or pursuant to the terms of any such employee benefit or
compensation plan, (v) any Person, together with all Affiliates and Associates
of such Person, who is the Beneficial Owner of 15% or more of the Common Shares
outstanding as of the date of this Agreement until such time after the date of
this Agreement that such Person, together with all Affiliates and Associates of
such Person, shall become the Beneficial Owner of any additional Common Shares
(other than by means of a dividend made by the Company on the Common Shares
outstanding or pursuant to a split, subdivision or other reclassification of
the Common Shares undertaken by the Company) and shall then beneficially own
more than 15% of the Common Shares outstanding, and (B) no Person shall become
an
 1




---



##### 



Acquiring Person either (x) as the result of an acquisition of Common
Shares by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such
Person to 15% or more of the Common Shares then outstanding; provided,
however, that if a Person shall become the Beneficial Owner of 15% or more
of the Common Shares then outstanding by reason of share purchases by the
Company and shall, following written notice from, or public disclosure by
the Company of such share purchases by the Company, become the Beneficial
Owner of any additional Common Shares without the prior consent of the
Company and shall then Beneficially Own more than 15% of the Common Shares
then outstanding, then such Person shall be deemed to be an Acquiring
Person, (y) if the Board of Directors determines in good faith that a
Person who would otherwise be an Acquiring Person, as defined pursuant to
the foregoing provisions of this paragraph (a), has become such
inadvertently, and such Person divests, as promptly as practicable (as
determined in good faith by the Board of Directors), but in any event within
five Business Days, following receipt of written notice from the Company of
such event, of Beneficial Ownership of 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 (a), then such Person
shall not be deemed to be an Acquiring Person for any purposes of this
Agreement; provided, however, that if such Person shall again become the
Beneficial Owner of 15% or more of the Common Shares then outstanding, such
Person shall be deemed an Acquiring Person, or (z) as the result of the
acquisition of Common Shares directly from the Company or through one or
more underwriters or dealers participating in an underwritten public
offering by the Company; provided, however, that if a Person shall become
the Beneficial Owner of 15% or more of the Common Shares then outstanding by
reason of share purchases directly from the Company or through one or more
underwriters or dealers participating in an underwritten public offering by
the Company and shall, after that date, become a Beneficial Owner of any
additional Common Shares without the prior written consent of the Company
and shall then Beneficially Own more than 15% of the Common Shares then
outstanding, then such Person shall be deemed to be an Acquiring Person.(b)
    
    Affiliateand Associateshall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the Exchange Act), as in
effect on the date of this Agreement; provided, however,that the limited
partners of a limited partnership shall not be deemed to be Associates of such
limited partnership solely by virtue of their limited partnership interests.(c)
    
    A Person shall be deemed the Beneficial Ownerof and shall be
deemed to beneficially own any securities:
 2




---



##### 



(i)
    
    that such Person or any of such Persons
Affiliates or Associates is deemed to beneficially own, within the
meaning of Rule 13d-3 of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Rights Agreement;(ii)
    
    that such Person or any of such Persons
Affiliates or Associates has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or
upon the exercise of conversion rights, exchange rights, rights (other
than these Rights), warrants or options, or otherwise; provided,
however,that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, securities tendered pursuant to a tender or
exchange offer made 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)
    
    that 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
underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section
1(c)(ii)(B) hereof) 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.(d)
    
    Business Dayshall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the Commonwealth of
Massachusetts
 3




---



##### 



are authorized or obligated by law or executive order to close.(e)
    
    Close of Businesson any given date shall mean 5:00 p.m.,
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.(f)
    
    Common Sharesshall mean the shares of common stock, no par
value, of the Company; provided, however, that, Common Shares, when used in
this Agreement in connection with a specific 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.(g)
    
    Distribution Dateshall have the meaning set forth in Section
3 hereof.(h)
    
    Final Expiration Dateshall have the meaning set forth in
Section 7 hereof.(i)
    
    Interested Shareholdershall mean any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.(j)
    
    Personshall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.(k)
    
    Preferred Sharesshall mean shares of Series A Junior
Participating Preferred Stock, without par value, of the Company having the
designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions set forth in the form of Certificate of
Determination filed with the Secretary of State of the State of California on
August 31, 1998, as subsequently amended.(l)
    
    Purchase Priceshall have the meaning set forth in Section
7(b) hereof.(m)
    
    Redemption Dateshall have the meaning set forth in Section 7
hereof.(n)
    
    Shares Acquisition Dateshall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such; provided, howeverthat, if such Person is determined not to have
become an Acquiring Person pursuant to clause (y) of Subsection 1(a)(B) hereof,
then no Shares Acquisition Date shall be deemed to have occurred.(o)
    
    Subsidiaryof any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
 4




---



##### 



(p)
    
    Transactionshall mean any merger, consolidation or sale of
assets
described in Section 13(a) hereof or any acquisition of Common Shares which
would result in a Person becoming an Acquiring Person or a Principal Party
(as such term is hereinafter defined).(q)
    
    Transaction Personwith respect to a Transaction shall mean
(i) any Person who (x) is or will become an Acquiring Person or a Principal
Party (as such term is hereinafter defined) if the Transaction were to be
consummated and (y) directly or indirectly proposed or nominated a director of
the Company which director is in office at the time of consideration of the
Transaction, or (ii) an Affiliate or Associate of such a Person.
 Section 2.
    
    Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with
the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time
appoint such co-Rights Agents as it may deem necessary or
desirable, upon ten (10) days prior written notice to the
Rights Agent. The Rights Agent shall have no duty to
supervise, and in no event be liable for, the acts or omissions
of any such co-Rights Agent.Section 3.
    
    Issue of Right Certificates.
 (a)
    
    Until the earlier of the Close of Business on (i) 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 (determined in
accordance with Rule 14d-2 under the Exchange Act) 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 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) to commence, a tender or exchange offer (which
intention to commence remains in effect for five Business Days after such
announcement), the consummation of which would result in any Person becoming an
Acquiring Person (including any such date which is after the date of this
Agreement and prior to the issuance of the Rights, the earlier of such dates
being herein referred to as the Distribution Date), (x) the Rights will be
evidenced 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 Rights (and
the right to receive Right Certificates therefor) 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
 5




---



##### 



Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares as of the Close
of Business on the Distribution Date, at the address of such holder shown on
the records of the Company, a Right Certificate, in substantially the form
of Exhibit A hereto (a Right Certificate), evidencing one Right for each
Common Share so held, subject to the adjustment provisions of Section 11 of
this Rights Agreement. 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 (directly or through the Rights Agent or its transfer agent)
a copy of a Summary of Rights to Purchase Preferred Shares, in substantially
the form of Exhibit B hereto (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 Distribution Date, the Rights will be evidenced
by such certificates registered in the names of the holders thereof. Until the
Distribution Date (or the earlier of the Redemption Date and the Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares outstanding on the Record Date shall also constitute the transfer of the
Rights associated with the Common Shares represented 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 Distribution Date, the Redemption Date or the Final Expiration
Date shall have impressed on, printed on, written on or otherwise affixed to
them the following legend:
  6




---



##### 



With respect to such certificates containing the foregoing legend, until the
Distribution Date (or, if earlier, the earlier of the Redemption Date or the
Final Expiration Date), the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any such certificate shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby. In the event that the Company purchases or acquires
any Common Shares after the Record Date but prior to the Distribution Date,
any Rights associated with such Common Shares shall be deemed canceled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
Notwithstanding this Section 3(c), the omission of a legend shall not affect
the enforceability of any part of this Rights Agreement or the rights of any
holder of the Rights.
 Section 4.
    
    Form of Right Certificates.
 (a)
    
    The Right Certificates (and the form of election to purchase
Preferred Shares, the form of assignment and the form of certification to be
printed on the reverse thereof) shall be substantially the same as Exhibit A
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange or quotation system on which the Rights may from time to time be
listed, or to conform to usage. Subject to the provisions of Sections 7, 11
and 22 hereof, the Right Certificates shall entitle the holders thereof to
purchase such number of one one-hundredths of a Preferred Share as shall be set
forth therein at the Purchase Price (as defined in Section 7(b)), but the
number of such one one-hundredths of a Preferred Share and the Purchase Price
shall be subject to adjustment as provided herein.(b)
    
    Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to
the second paragraph of Section 11(a)(ii) hereof and any Right Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Right Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
  7




---



##### 



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, its
Vice Chairman of the Board, its Chief Financial Officer, or any of its Vice Presidents, 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 an Assistant Secretary of the
Company, either manually or by facsimile signature. The Right Certificates shall be
countersigned by the Rights Agent, either manually or by facsimile signature and shall not be
valid for any purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company, such Right
Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right Certificate may
be signed on behalf of the Company by any person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such person was not
such an officer.Following the Distribution Date, the Rights Agent will keep or cause to be kept, at
its office designated for such purpose, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and addresses
of the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right Certificates and the date of each of the Right
Certificates.Section 6.
    
    Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates.Subject to the provisions of Section 11(a)(ii),
Section 14 and Section 24 hereof, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the
Final Expiration Date, any Right Certificate or Right Certificates may be transferred, split
up, combined or exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-hundredths 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 surrender the Right Certificate or
Right Certificates to be transferred, split up, combined or exchanged at the office
of the Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Right Certificate until the registered holder shall
 8




---



##### 



have completed and signed the certificate contained in the form of assignment on the
reverse side of such Right Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request. Thereupon
the Rights Agent shall, subject to Section 11(a)(ii), Section 14 and Section 24
hereof, countersign and deliver to the person entitled thereto a Right Certificate
or Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of Right
Certificates.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 issue, execute and deliver a new Right Certificate of
like tenor to the Rights Agent for countersignature and delivery to the registered
holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.Notwithstanding any other provisions hereof, the Company and the Rights Agent may
amend this Rights Agreement to provide for uncertificated Rights in addition to or
in place of Rights evidenced by Rights Certificates.
 Section 7.
    
    Exercise of Rights; Purchase Price; Expiration Date of Rights.
 (a)
    
    The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office of the Rights Agent designated
for such purpose, together with payment of the Purchase Price for each one
one-hundredth of a Preferred Share (or such other number of shares or other
securities) as to which the Rights are exercised, at or prior to the earliest
of (i) the Close of Business on September 8, 2018 (the Final Expiration
Date), (ii) the time at which the Rights are redeemed as provided in Section
23 hereof (the Redemption Date), or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.(b)
    
    The purchase price for each one one-hundredth of a Preferred
Share pursuant to the exercise of a Right shall initially be $9.00 (the
Purchase Price) and 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 duly executed, accompanied by
payment
 9




---



##### 



of the Purchase Price for the shares 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 certified check,
cashiers check, bank draft or money order payable to the order of the Company,
the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer
agent for the Preferred Shares certificates for the number of Preferred Shares
to be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Company, in its sole
discretion, shall have elected to deposit the Preferred Shares issuable upon
exercise of the Rights hereunder into a depository, requisition from the
depositary agent depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional 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 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. In the event
that the Company is obligated to issue securities of the Company other than
Preferred Shares (including Common Shares) of the Company pursuant to Section
11(a) hereof, the Company will make all arrangements necessary so that such
other securities are available for distribution by the Rights Agent, if and
when appropriate.In addition, in the case of an exercise of the Rights by a holder pursuant
to Section 11(a)(ii) hereof, the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii)
hereof, and, if fewer than all the Rights represented by such Right
Certificate were so exercised, the Rights Agent shall indicate on the Right
Certificate the number of Rights represented thereby which continue to
include the rights provided by Section 11(a)(ii) hereof.(d)
    
    In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby (other than a partial
exercise of rights pursuant to Section 11(a)(ii) as described in Section 7(c)
hereof), 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)
    
    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
 10




---



##### 



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 this Section 7.(f)
    
    Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall
have (i) completed and signed the certification following the form of election
to purchase set forth on the reverse side of the Rights Certificate surrendered
for such exercise, (ii) tendered the Purchase Price (and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 to the Company in the manner set forth
in Section 7(c), and (iii) 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 delivered or
surrendered to the Rights Agent, shall be canceled by it, and
no Right Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement.
The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by
the Company otherwise than upon the exercise thereof. The
Rights Agent shall deliver all canceled Right Certificates to
the Company, or shall, at the written request of the Company,
destroy such canceled Right Certificates, and in such case
shall deliver a certificate of destruction thereof to the
Company.Section 9.
    
    Availability of Preferred Shares.The Company covenants and
agrees that so long as the Preferred Shares (and, after the
time a person becomes an Acquiring Person, Common Shares or any
other securities) issuable upon the exercise of the Rights may
be listed on any national securities exchange or quotation
system, the Company shall use its best efforts to cause, from
and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange
or quotation system upon official notice of issuance upon such
exercise.The Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares (or Common Shares and other
securities, as the case may be) 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
nonassessable shares or other securities.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
 11




---



##### 



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.As soon as practicable after the Distribution Date, the Company shall use its best
efforts to:
 (i)
    
    prepare and file a registration statement under
the Securities Act of 1933, as amended (the Act), with respect to the
securities purchasable upon exercise of the Rights on an appropriate
form, will use its best efforts to cause such registration statement to
become effective as soon as practicable after such filing and will use
its best efforts to cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of
the Act) until the Final Expiration Date; and(ii)
    
    use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under
the blue sky laws of such jurisdictions as may be necessary or
appropriate.
 Section 10.
    
    Preferred Shares Record Date.Each person in whose name any certificate for Preferred
Shares or other securities is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares or other securities
represented thereby on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered with the forms of election and
certification duly executed and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however,that if the date of such surrender and payment is a date
upon which the Preferred Shares or other securities transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the Preferred Shares or
other securities transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right
Certificate, as such, 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.The Purchase Price, the number of
Preferred Shares covered by each Right and the
 12




---



##### 



number
of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
 (a)
 (i)
    
    In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the
Preferred Shares payable in Preferred Shares, (B) subdivide 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 exercised immediately prior to such date and at
a time when the Preferred Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however,that in no event shall the
consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. If an event occurs which would
require an adjustment under both Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to any adjustment required
pursuant to Section 11(a)(ii) hereof.(ii)
    
    Subject to Section 24 hereof and the provisions
of the next paragraph of this Section 11(a)(ii), in the event any
Person shall become an Acquiring Person, each holder of a Right shall,
for a period of 60 days after the later of such time any Person becomes
an Acquiring Person or the effective date of an appropriate
registration statement filed under the Act pursuant to Section 9
hereof (provided, howeverthat, if at any time prior to the
expiration or termination of the Rights there shall be a temporary
restraining order, a preliminary injunction, an injunction, or
temporary suspension by the Board of Directors, or similar obstacle
to exercise of the Rights (the Injunction) which prevents exercise
of the Rights, a new 60-day period shall commence on the date the
Injunction is removed), 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-hundredths of a Preferred
 13




---



##### 



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 as shall equal the result obtained by (A) multiplying
the then current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market
price of the Common Shares (determined pursuant to Section 11(d)
hereof) on the date such Person became an Acquiring Person; provided,
however,that if the transaction that would otherwise give rise to
the foregoing adjustment is also subject to the provisions of Section
13 hereof, then only the provisions of Section 13 hereof shall apply
and no adjustment shall be made pursuant to this Section 11(a)(ii).
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 which would eliminate or diminish the benefits intended to be
afforded by the Rights.Notwithstanding anything in this Agreement to the contrary, from and
after the time any Person becomes an Acquiring Person, any Rights
beneficially owned by (i) such Acquiring Person or an Associate or
Affiliate of such Acquiring Person, (ii) a transferee of such
Acquiring Person (or of any such Associate or Affiliate) who becomes
a transferee after the Acquiring Person became such, or (iii) a
transferee of such Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Persons becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors of
the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance
of this Section 11(a)(ii), shall become null and void without any
further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision
of this Agreement or otherwise. The Company shall use all reasonable
efforts to insure that the provisions of this Section 11(a)(ii) and
Section 4(b) hereof are complied with, but shall have no liability to
any holder of Right Certificates or other Person as a result of its
failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder. No
Right Certificate shall be issued 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
 14




---



##### 



(iii)
    
    In lieu of issuing Common Shares in accordance
with Section 11(a)(ii) hereof, the Company may, if a majority of the
Board of Directors then in office determines that such action is
necessary or appropriate and not contrary to the interests of holders
of Rights, elect to (and, in the event that the Board of Directors has
not exercised the exchange right contained in Section 24(c) hereof and
there are not sufficient treasury shares (if applicable) and authorized
but unissued Common Shares to permit the exercise in full of the Rights
in accordance with the foregoing subparagraph (ii), the Company shall)
take all such action as may be necessary to authorize, issue or pay,
upon the exercise of the Rights, cash (including by way of a reduction
of the Purchase Price), property, Common Shares, other securities or
any combination thereof having an aggregate value equal to the value of
the Common Shares which otherwise would have been issuable pursuant to
Section 11(a)(ii) hereof, which aggregate value shall be determined by
a nationally recognized investment banking firm selected by a majority
of the Board of Directors then in office. For purposes of the
preceding sentence, the value of the Common Shares shall be determined
pursuant to Section 11(d) hereof. Any such election by the Board of
Directors must be made within 60 days following the date on which the
event described in Section 11(a)(ii) hereof shall have occurred.
Following the occurrence of the event described in Section 11(a)(ii)
hereof, a majority of the Board of Directors then in office may suspend
the exercisability of the Rights for a period of up to 60 days
following the date on which the event described in Section 11(a)(ii)
hereof shall have occurred to the extent that such directors have not
determined whether to exercise their rights of election under this
Section 11(a)(iii). In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended.
 (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
designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions 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 such term is hereinafter
 15




---



##### 



defined) on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price
of the total number of Preferred Shares and/or equivalent preferred shares
so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current
market price and the denominator of which shall be the number of Preferred
Shares outstanding on such record date plus the number of additional
Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however,that in no event
shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price may be
paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith
by the Board of Directors, 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 (as such term is hereinafter defined) on such record date,
less the fair market value (as determined in good faith by the Board of
Directors, 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; 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
 16




---



##### 



(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 or securities convertible into such shares, or (C) 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 system
with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to
trading or as reported on the Nasdaq Capital Market or Nasdaq Global
Market or, if the Security is not listed or admitted to trading on
any national securities exchange or reported on the Nasdaq Capital
Market or Nasdaq Global Market, 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 or, if on any such date no professional market maker is
making a market in the Security, the price as determined in good
faith by the Board of Directors. The term Trading Day shall mean a
day on which
 17




---



##### 



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)
hereof. 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) hereof (appropriately adjusted
to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof) multiplied by one
hundred. 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.
 (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
one-hundredth 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 the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the right
to exercise any Rights.(f)
    
    If as a result of an adjustment made pursuant to Section 11(a)
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,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Sections 11(a) through 11(c) hereof, inclusive,
and the provisions of Sections 7, 9, 10, 13 and 14 hereof 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-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of
 18




---



##### 



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) hereof, upon each adjustment of the Purchase Price as
a result of the calculations made in Section 11(b) and Section 11(c) hereof,
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-hundredths of a Preferred Share (calculated to the nearest
one one-millionth of a Preferred Share) obtained by (i) multiplying (x) the
number of one one-hundredths of a Preferred Share covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.(i)
    
    The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths 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-hundredths 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 ten-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right Certificates have been
issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment
of the number of Rights pursuant to this Section 11(i), the Company shall,
as promptly as practicable, cause to be distributed to holders of record of
Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by
the Company, new Right Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Right Certificates so to
be distributed shall be issued, executed and countersigned in the manner
provided for herein and 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
 19




---



##### 



number of one one-hundredths 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-hundredths 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-hundredth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
and nonassessable Preferred Shares at such adjusted Purchase Price.(l)
    
    In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
of the Preferred Shares and other capital stock or securities of the Company,
if any, issuable upon such exercise 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)
    
    The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action the purpose of which is to, or if
at the time such action is taken it is reasonably foreseeable that the effect
of such action is to, materially diminish or eliminate the benefits intended to
be afforded by the Rights. Any such action taken by the Company during any
period after any Person becomes an Acquiring Person but prior to the
Distribution Date shall be null and void unless such action could be taken
under this Section 11(m) from and after the Distribution Date.(n)
    
    Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the
Company to holders of its Preferred Shares shall not be taxable to such
shareholders.(o)
    
    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
 20




---



##### 



on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the
number of one one-hundredths of a Preferred Share so purchasable immediately
prior to such event by a fraction, 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 (B) 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(o) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.(p)
    
    The exercise of Rights under Section 11(a)(ii) hereof shall
only result in the loss of rights under Section 11(a)(ii) hereof to the extent
so exercised and shall not otherwise affect the rights represented by the
Rights under this Agreement, including the rights represented by Section 13
hereof.
 Section 12.
    
    Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is
made as provided in Sections 11 and 13 hereof, the Company shall 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) 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 deemed to have
knowledge of any adjustment unless and until it shall have received such certificate.
 Section 13.
    
    Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
 (a)
    
    In the event that, following the Shares Acquisition Date or, if
a Transaction is proposed, the Distribution Date, directly or indirectly
(x) the Company shall consolidate with, or merge with and into, any Interested
Shareholder, or if in such merger or consolidation all holders of Common Stock
are not treated alike, any other Person, (y) any Interested Shareholder, or if
in such merger or consolidation all holders of Common Stock are not treated
alike, any other 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 (other than, in the case of either transaction
described in (x) or (y), a merger or consolidation which would result in all of
the voting power represented by the securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into
 21




---



##### 



securities of the surviving entity) all of the voting power represented by the securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation and
the holders of such securities not having changed as a result of such merger or
consolidation), or (z) the Company shall sell, mortgage or otherwise transfer
(or one or more of its subsidiaries shall sell, mortgage or otherwise
transfer), in one or more transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company and its
subsidiaries (taken as a whole) to any Interested Shareholder or Shareholders,
or if in such transaction all holders of Common Stock are not treated alike,
any other Person, (other than the Company or any Subsidiary of the Company in
one or more transactions each of which individually and the aggregate does not
violate Section 13(d) hereof) then, and in each such case, proper provision
shall be made so that (i) each holder of a Right, subject to Section 11(a)(ii)
hereof, shall 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-hundredths 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 freely tradeable Common Shares of the Principal Party (as such
term is hereinafter defined), free and clear of liens, rights of call or first
refusal, encumbrances or other adverse claims, as shall be equal to the result
obtained by (A) multiplying the then current Purchase Price by the number of
one one-hundredths of a Preferred Share for which a Right is then exercisable
(without taking into account any adjustment previously made pursuant to
Section 11(a)(ii) hereof) and dividing that product by (B) 50% of the then
current per share market price of the Common Shares of such Principal Party
(determined pursuant to Section 11(d) hereof) on the date of consummation of
such consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term Company shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that
the provisions of Section 11 hereof shall apply to such Principal Party; and
(iv) such Principal Party shall take such steps (including, but not limited
to, the reservation of a sufficient number of shares 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 relation to its Common Shares
thereafter deliverable upon the exercise of the Rights.
 (b)
    
    Principal Party shall mean:
 (i)
    
    in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a) hereof, the
Person that is the issuer of any securities into which Common Shares
are converted in such merger or consolidation, and if no securities are
so issued, the Person that is the other party to the merger or
consolidation (or, if
 22




---



##### 



applicable, the Company, if it is the surviving corporation); and(ii)
    
    in the case of any transaction described in
clause (z) of Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
 provided, however,
 (c)
    
    The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized Common Shares that have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and each Principal Party and
each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have (i) executed and delivered
to the Rights Agent a supplemental agreement providing for the terms set forth
in paragraphs (a) and (b) of this Section 13 and (ii) prepared, filed and had
declared and remain effective a registration
statement under the Act on the appropriate form with respect to the Rights
and the securities exercisable upon exercise of the Rights and further
providing that, as soon as practicable after the date of any consolidation,
merger, sale or transfer of assets mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense will:
 (i)
    
    cause the registration statement under the Act
with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Final Expiration Date;(ii)
    
    use its best efforts to qualify or register the
Rights and the
 23




---



##### 



securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or
appropriate;(iii)
    
    list the Rights and the securities purchasable
upon exercise of the Rights on each national securities exchange on
which the Common Shares were listed prior to the consummation of such
consolidation, merger, sale or transfer or on the Nasdaq Capital Market
or Nasdaq Global Market if the Common Shares were listed on the Nasdaq
Capital Market or Nasdaq Global Market or, if the Common Shares were
not listed on a national securities exchange or the Nasdaq Capital
Market or Nasdaq Global Market prior to the consummation of such
consummation of such consolidation, merger, sale or transfer, on a
national securities exchange or the Nasdaq Capital Market or Nasdaq
Global Market; and(iv)
    
    deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all material respects with the requirements for
registration on Form 10 under the Exchange Act.
  (d)
    
    After the Distribution Date, the Company covenants and agrees
that it shall not (i) consolidate with, (ii) merge with or into, or (iii) sell
or transfer to, in one or more transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
subsidiaries taken as a whole, any other Person (other than a Subsidiary of the
Company in a transaction which does not violate Section 11(m) hereof), if
(x) at the time of or after such consolidation, merger or sale there are any
charter or bylaw provisions or any rights, warrants or other instruments or
securities outstanding, agreements in effect or any other action taken which
would diminish or otherwise eliminate the benefits intended to be afforded by
the Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the shareholders of the Person who constitutes,
or would constitute, the Principal Party for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates. The Company shall not consummate any
such consolidation, merger, sale or transfer unless prior thereto the Company
and such other Person shall have executed and delivered to the Rights Agent a supplemental
agreement evidencing compliance with this Section 13(d).
 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
 24




---



##### 



Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or as
reported on the Nasdaq Capital Market or Nasdaq Global Market or, if the Rights
are not listed or admitted to trading on any national securities exchange or
reported on the Nasdaq Capital Market or Nasdaq Global Market, 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.
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 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-hundredth 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-hundredth of a Preferred
Share). Fractions of Preferred Shares in integral multiples of one
one-hundredth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts; provided, however,that holders of such
depositary receipts shall have all of the designations and the powers,
preferences and rights, and the qualifications, limitations and restrictions 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-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one Preferred Share. For
the purposes of this Section 14(b), the current market value of a
Preferred Share shall be the current per share market price of the Preferred
Shares (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
 25




---



##### 



(or, if not publicly traded, in accordance with Section 11(d)(ii) hereof).(c)
    
    Following the occurrence of one of the transactions or events
specified in Section 11 hereof giving rise to the right to receive Common
Shares, capital stock equivalents (other than Preferred Shares) or other
securities upon the exercise of a Right, the Company shall not be required to
issue fractions of Common Shares or units of such Common Shares, capital stock
equivalents or other securities upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares, capital stock equivalents
or other securities. In lieu of fractional Common Shares, capital stock
equivalents or other securities, the Company shall pay to the registered
holders of Right Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one Common Share or unit of such Common Shares, capital stock
equivalents or other securities. For purposes of this Section 14(c), the
current market value shall be the current per share market price (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise and, if such capital stock equivalent is not traded,
each such capital stock equivalent shall have the value of one one-hundredth of
a Preferred Share.(d)
    
    The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise 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 Sections 18 and 20 hereof, are vested in the
respective registered holders of the Right Certificates (and,
prior to the Distribution Date, the registered holders of the
Common Shares) and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common
Shares), without the consent of the Rights Agent or of the
holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own
behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate 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. Holders
of Rights shall be entitled to recover the reasonable costs
and expenses, including attorneys fees, incurred by them in
any action to enforce the provisions of 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:
 26




---



##### 



(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 (subject to the provisions of this Rights Agreement) only on the
registry books of the Rights Agent if surrendered at the principal office of
the Rights Agent, duly endorsed or accompanied by a proper instrument of
transfer; and(c)
    
    the Company and the Rights Agent may deem and treat the person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
 Section 17.
    
    Right Certificate Holder Not Deemed a Shareholder. 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 shareholder of the Company or any right to vote
for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (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 gross
negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent
in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending
against any claim of liability in the premises. The indemnity
provided herein shall survive the expiration of the Rights and
the termination of this Agreement.The Rights Agent shall be protected and shall incur no liability for, or in respect
of any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
 27




---



##### 



the Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons, or otherwise
upon the advice of counsel as set forth in Section 20 hereof. In no case will the
Rights Agent be liable for special, indirect, incidental or consequential or
consequential loss or damage at any kind whatsoever (including but not limited to
lost profits), even if the Rights Agent has been advised of such loss or damage.
 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 shareholder services or 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 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 imposed
by this Agreement upon the following terms and conditions, by all of which the Company and the
holders of Right Certificates, by their acceptance thereof, shall be bound:
 (a)
    
    The Rights Agent may consult with legal counsel of its choice
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
 28




---



##### 



(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, the Chief Financial Officer, any
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 to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct.(d)
    
    The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.(e)
    
    The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or
any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Sections 3, 11, 13, 23 or 24 hereof, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of a certificate pursuant to Section 12 hereof
describing such change or adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.(f)
    
    The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.(g)
    
    The Rights Agent is hereby authorized and directed to accept
instructions
 29




---



##### 



with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
the Chief Financial Officer, any Vice President, the Secretary or the Treasurer
of the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions. Any
application by the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent, set forth in writing any action proposed to
be taken or omitted by the Rights Agent with respect to its duties or
obligations under this Agreement and the date on and/or after which such action
shall be taken or omitted and the Rights Agent shall not be liable for any
action taken or omitted in accordance with a proposal included in any such
application on or after the date specified therein (which date shall not be
less than three business days after the date indicated in such application
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking or omitting any such action, the Rights Agent has
received written instructions in response to such application specifying the
action to be taken or omitted.(h)
    
    The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.(i)
    
    The Rights Agent may execute and exercise any of the rights or
powers
hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any
such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.(j)
    
    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)
    
    If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
executed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
 30




---



##### 



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 for the Common Shares or Preferred Shares by registered
or certified mail, and to the holders of the Right Certificates by first-class mail. In the
event the transfer agency relationship in effect between the Company and the Rights Agent
terminates, the Rights Agent will be deemed to have resigned automatically and be discharged
from its duties under this Agreement as of the effective date of such termination, and the
Company shall be responsible for sending any required notice. 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 for the
Common Shares or Preferred Shares by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or
shall otherwise become incapable of acting, the Company shall appoint a successor to the
Rights Agent. If the Company shall fail to make 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, trust company or
limited liability company organized and doing business under the laws of the United States, in
good standing, which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or state authority and
which has individually or combined with an affiliate at the time of its appointment as a
Rights Agent a combined
capital and surplus of at least $50 million dollars. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent for the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.Section 22.
    
    Issuance of New Right Certificates.Notwithstanding
any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its
option, issue new Right Certificates evidencing
Rights in such form as may be approved by 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
 31




---



##### 



purchasable
under the Right Certificates made in accordance with
the provisions of this Agreement. In addition, in
connection with the issuance or sale of Common Shares
following the Distribution Date and prior to the
earlier of the Redemption Date and the Final
Expiration Date, the Company (a) shall with respect
to Common Shares so issued or sold pursuant to the
exercise of stock options or under any employee plan
or arrangement in existence prior to the Distribution
Date, or upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Company
and in existence prior to the Distribution Date, and
(b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors, issue Right
Certificates representing the appropriate number of
Rights in connection with such issuance or sale;
provided, however,that (i) the Company shall not be
obligated to issue any such Right Certificates if,
and to the extent that, the Company shall be advised
by counsel that such issuance would create a
significant risk of material adverse tax consequences
to the Company or the Person to whom such Right
Certificate would be issued, and (ii) no Right
Certificate shall be issued if, and to the extent
that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
 Section 23.
    
    Redemption.
 (a)
    
    The Rights may be redeemed by action of the Board of Directors
pursuant to Section 23(b) hereof and shall not be redeemed in any other manner.(b)
 (i)
    
    The Board of Directors may, at its option, at
any time prior to the earlier of (A) such time as any Person becomes an
Acquiring Person or (B) the Final Expiration Date, redeem all but not
less than all of 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), and the Company may, at its option, pay the
Redemption Price in Common Shares (based on the current per-share
market price, as such term is defined in Section 11(d) hereof, of
the Common Shares at the time of redemption), cash or any other form
of consideration deemed appropriate by the Board of Directors. The
redemption of the Rights by the Board of Directors may be made
effective at such time, on such basis and subject to such conditions
as the Board of Directors in its sole discretion may establish.
Notwithstanding anything contained in this Agreement to the contrary,
the Rights shall not be exercisable pursuant to Section 11(a)(ii)
hereof prior to the expiration or termination of the Companys right
of redemption under this Section 23(b)(i).(ii)
    
    In addition, the Board of Directors may, at its
option, at any time after the time a Person becomes an Acquiring Person
and after the
 32




---



##### 



expiration of any period during which the holder of
Rights may exercise the rights under Section 11(a)(ii) hereof but prior
to any event described in clause (x), (y) or (z) of the first sentence
of Section 13 hereof, redeem all but not less than all of the then
outstanding Rights at the Redemption Price (x) in connection with any
merger, consolidation or sale or other transfer (in one transaction or
in a series of related transactions) of assets or earning power
aggregating 50% or more of the assets or earning power of the Company
and its subsidiaries (taken as a whole) in which all holders of Common
Shares are treated alike and not involving (other than as a holder of
Common Shares being treated like all other such holders) an Interested
Shareholder or a Transaction Person or (y)(A) if and for so long as the
Acquiring Person is not thereafter the Beneficial Owner of 15% or more
of the then outstanding Common Shares, and (B) at the time of
redemption no other Persons are Acquiring Persons.
 (c)
    
    Immediately upon the action of the Board of Directors ordering
the redemption of the Rights pursuant to Section 23(b) hereof, and without any
further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Company shall promptly give public notice of
any such redemption; provided, however,that the failure to give, or any defect
in, any such notice shall not affect the validity of such redemption. Within
10 days after such action of the Board of Directors ordering the redemption of
the Rights pursuant to Section 23(b) hereof, 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, provided,
however,that failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof, and other
than in connection with the purchase of Common Shares prior to the
Distribution Date.(d)
    
    The Company may, at its option, discharge all of its
obligations with respect to any redemption of the Rights by (i) issuing a press
release announcing the manner of redemption of the Rights and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares, and upon such action, all outstanding Right Certificates
shall be null and void without any further
 33




---



##### 



action by the Company.
 Section 24.
    
    Exchange.
 (a)
    
    The Board of Directors may, at its option, at any time after
any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common
Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the Exchange Ratio). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any 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 50%
or more of the Common Shares then outstanding.(b)
    
    Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to Section 24(a) hereof 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
Rights at their last addresses as they appear upon the registry books of the
Rights Agent; provided, however,that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. 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 lieu of issuing Common Shares in accordance with Section
24(a) hereof, the Company may, if a majority of the Board of Directors then in
office determines that such action is necessary or appropriate and not contrary
to the interests of the holders of Rights, elect to (and, in the event that
there are not sufficient treasury shares (if applicable) and authorized but
unissued Common Shares to permit any exchange of the Rights in accordance with
Section 24(a) hereof, the Company shall) take all such
 34




---



##### 



action as may be
necessary to authorize, issue or pay, upon the exchange of the Rights, cash
(including by way of a reduction of the Purchase Price), property, Common
Shares, other securities or any combination thereof having an aggregate value
equal to the value of the Common Shares which otherwise would have been
issuable pursuant to Section 24(a) hereof, which aggregate value shall be
determined by a nationally recognized investment banking firm selected by a
majority of the Board of Directors then in office. For purposes of the
preceding sentence, the value of the Common Shares shall be determined pursuant
to Section 11(d) hereof. Any election pursuant to this Section 24(c) by the
Board of Directors must be made by resolution within 60 days following the date
on which the event described in Section 11(a)(ii) hereof shall have occurred.
Following the occurrence on the event described in Section 11(a)(ii) hereof, a
majority of the Board of Directors then in office may suspend the
exercisability of the Rights for a period of up to 60 days following the date
on which the event described in Section 11(a)(ii) hereof shall have occurred to
the extent that such directors have not determined whether to exercise their
rights of exchange under this Section 24(c). In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended.
 (d)
    
    The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, the Company shall pay to the
registered 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 market value of a whole Common Share. For the
purposes of this Section 24(d), the current 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 after the date of the first public announcement
by the Company that an exchange is to be effected pursuant to this
Section 24.
 (e)
    
    The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exchange of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share). Fractions of Preferred Shares in integral multiples of one
one-hundredth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts; provided, however,that holders of such
depositary receipts shall have all of the rights, privileges, and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal
 35




---



##### 



to the same fraction of the current market value of one Preferred Share. For
the purposes of this Section 24(e), the current market value of a Preferred
Share shall be one hundred (100) times 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 after the date of the first public announcement by the
Company that an exchange is to be effected pursuant to this Section 24.
 Section 25.
    
    Notice of Certain Events.
 (a)
    
    In case the Company shall 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 notice of such proposed
action, which shall specify
the record date for the purpose 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 the 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 the Preferred Shares, whichever
shall be the earlier.(b)
    
    In case the 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 the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof.
 36




---



##### 



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 or overnight delivery service, postage
prepaid, addressed (until another address is filed in writing with the Rights Agent) as
follows:
 
 Subject to the provisions of Section 21 hereof, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if sent by
first-class mail or overnight delivery service, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
 
 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 or overnight delivery service, 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.Prior to the Distribution Date,
the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement
without the approval of any holders of the Rights. From and
after the Distribution Date, the Company and the Rights Agent
shall, if the Company so directs, from time to time supplement
or amend any provision of this Agreement without the approval
of any holders of Right Certificates in order to (i) cure any
ambiguity, (ii) correct or supplement any provision contained
herein which may be defective or inconsistent with any other
provisions herein, or (iii) change any other provisions with
respect to the Rights which the Company may deem necessary or
desirable; provided, however, that no such supplement or
amendment shall be made which would adversely affect the
interests of the holders of Rights (other than the interests
of an Acquiring Person or its Affiliates or Associates). Any
supplement or amendment adopted during any period after any
Person has become an Acquiring Person but prior to the
Distribution Date shall become null and void unless such
supplement or amendment could have been adopted by the Company
from and after the Distribution Date. Any such supplement or
amendment shall be evidenced by a writing signed by the
Company and the Rights Agent. Upon delivery of a certificate
from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with the
terms of this Section 27, the Rights Agent shall execute such
supplement or amendment unless the Rights Agent shall have
 37




---



##### 



determined in good faith that such supplement or amendment
would adversely affect its interest under this Agreement.
Prior to the Distribution Date, the interests of the holders
of Rights shall be deemed coincident with the interests of the
holders of Common Shares.Section 28.
    
    Determination and Actions by the Board of Directors, etc.For
all purposes of this Agreement, any calculation of the number
of Common Shares outstanding at any particular time, including
for purposes of determining the particular percentage of such
outstanding Common Shares or any other securities of which any
Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General
Rules and Regulations under the Exchange Act as in effect on
the date of this Agreement. The Board of Directors of the
Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and
powers specifically granted to the Board, or the Company, or
as may be necessary or advisable in the administration of this
Agreement, including without limitation, the right and power
to (i) interpret the provisions of this Agreement, and
(ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend
the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board in good faith, shall
(x) be final, conclusive and binding on the Rights Agent and
the holders of the Rights, and (y) not subject the Board to
any liability to the holders of the Rights.Section 29.
    
    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 30.
    
    Benefits of this Agreement.Nothing in this Agreement shall be construed to
give to any person or corporation other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders
of the Right Certificates (and, prior to the Distribution Date, the Common
Shares).Section 31.
    
    Severability.If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.Section 32.
    
    Governing Law.This Agreement and each Right Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of
California 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.
 38




---



##### 



Section 33.
    
    Counterparts.This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.Section 34.
    
    Descriptive Headings.Descriptive headings of the several Sections of this
Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.Section 35.
    
    Force Majeure.Notwithstanding anything to the contrary contained herein, the
Rights Agent shall not be liable for any delays or failures in performance
resulting from acts beyond its reasonable control, including, without
limitation, acts of God, terrorist acts, shortage of supply, breakdowns or
malfunctions, interruptions or malfunction of computer facilities, or loss of
data due to power failures or mechanical difficulties with information storage
or retrieval systems, labor difficulties, war, or civil unrest.
 39




---



##### 



In Witness Whereof
 Attest:
    
    
    
    Aradigm CorporationBy:
    
    /s/ D. Jeffery Grimes
    
    
    
    By:
    
    /s/ Igor GondaD. Jeffery Grimes
    
    
    
    
    
    Igor Gonda, Ph.D.Vice President of Legal Affairs,
    
    
    
    
    
    President and Chief Executive OfficerGeneral Counsel and Secretary
 Attest:
    
    
    
    Computershare Trust Company, N.A.By:
    
    /s/ James Walsh
    
    
    
    By:
    
    /s/ Katherine AndersonTitle:
    
    Relationship Manager
    
    
    
    Title:
    
    Managing Director
 40




---



##### 



TABLE OF CONTENTS
 PageSection 1. Certain Definitions
    
    
    1Section 2. Appointment of Rights Agent
    
    
    5Section 3. Issue of Right Certificates
    
    
    5Section 4. Form of Right Certificates
    
    
    7Section 5. Countersignature and Registration
    
    
    8Section 6.
Transfer, Split Up, Combination and Exchange of RighCertificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates
    
    
    8Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights
    
    
    9Section 8. Cancellation and Destruction of Right Certificates
    
    
    11Section 9. Availability of Preferred Shares
    
    
    11Section 10. Preferred Shares Record Date
    
    
    12Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights
    
    
    12Section 12. Certificate of Adjusted Purchase Price or Number of Shares
    
    
    21Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power
    
    
    21Section 14. Fractional Rights and Fractional Shares
    
    
    24Section 15. Rights of Action
    
    
    26Section 16. Agreement of Right Holders
    
    
    26Section 17. Right Certificate Holder Not Deemed a Shareholder
    
    
    27Section 18. Concerning the Rights Agent
    
    
    27Section 19. Merger or Consolidation or Change of Name of Rights Agent
    
    
    28Section 20. Duties of Rights Agent
    
    
    28Section 21. Change of Rights Agent
    
    
    31Section 22. Issuance of New Right Certificates
    
    
    31Section 23. Redemption
    
    
    32Section 24. Exchange
    
    
    34Section 25. Notice of Certain Events
    
    
    36Section 26. Notices
    
    
    37Section 27. Supplements and Amendments
    
    
    37Section 28. Determination and Actions by the Board of Directors, etc.
    
    
    38Section 29. Successors
    
    
    38Section 30. Benefits of this Agreement
    
    
    38




---



##### 



PageSection 31. Severability
    
    
    38Section 32. Governing Law
    
    
    38Section 33. Counterparts
    
    
    39Section 34. Descriptive Headings
    
    
    39Section 35. Force Majeure
    
    
    39Section 36.Exhibit A   Form of Right CertificateExhibit B   Summary of Rights to Purchase Preferred Shares




---



##### 



(Exhibit A to Amended and Restated Rights agreement)
 Form of Right Certificate
 Certificate No. R-
    
    Rights
  Right Certificate
 ARADIGM CORPORATION




---



##### 



Witness




---



##### 



Attest:
    
    ARADIGM COPORATION[Signing Company Secretarys Name]
    
    [Signing Company Officers Name][Title]
    
    [Title]Countersigned:COMPUTERSHARE TRUST COMPANY, N.A.,as Rights AgentBy:[Authorized Signature]




---



##### 



FORM OF ASSIGNMENT
 
 
 (Please print name and address of transferee)




---



##### 








---



##### 



FORM OF ELECTION TO PURCHASE
 
 
 
 
 (Please print name and address)
  
 (Please print name and address)Dated:




---



##### 



NOTICE




---



##### 



(Exhibit B to Amended and Restated Rights agreement)
 ARADIGM CORPORATION
 Summary of Rights to Purchase  Preferred Shares
  Detachment and Transfer of Rights




---



##### 



Exercisability of Rights
   Terms of Preferred Shares




---



##### 



Trigger of Flip-In and Flip-Over Rights
   Redemption and Exchange of Rights
   Amendment of Rights




---



##### 



Additional Information