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Exhibit 4.1  


NEOPHARM, INC.  


and  


COMPUTERSHARE INVESTOR SERVICES LLC  


 PREFERRED STOCK RIGHTS AGREEMENT  


Dated as of June 30, 2003  






  



 
 

TABLE OF CONTENTS    
    



	 
	 	 
	 	Page

	Section 1.	 	Certain Definitions	 	1
	

Section 2.	
 	

Appointment of Rights Agent	
 	

5
	

Section 3.	
 	

Issuance of Rights Certificates	
 	

6
	

Section 4.	
 	

Form of Rights Certificates	
 	

7
	

Section 5.	
 	

Countersignature and Registration	
 	

8
	

Section 6.	
 	

Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates	
 	

8
	

Section 7.	
 	

Exercise of Rights; Exercise Price; Expiration Date of Rights	
 	

9
	

Section 8.	
 	

Cancellation and Destruction of Rights Certificates	
 	

10
	

Section 9.	
 	

Reservation and Availability of Preferred Shares	
 	

10
	

Section 10.	
 	

Record Date	
 	

11
	

Section 11.	
 	

Adjustment of Exercise Price, Number of Shares or Number of Rights	
 	

12
	

Section 12.	
 	

Certificate of Adjusted Exercise Price or Number of Shares 	
 	

17
	

Section 13.	
 	

Consolidation, Merger or Sale or Transfer of Assets or Earning Power	
 	

17
	

Section 14.	
 	

Fractional Rights and Fractional Shares	
 	

20
	

Section 15.	
 	

Rights of Action	
 	

21
	

Section 16.	
 	

Agreement of Rights Holders	
 	

21
	

Section 17.	
 	

Rights Certificate Holder Not Deemed a Stockholder	
 	

22
	

Section 18.	
 	

Concerning the Rights Agent	
 	

22
	

Section 19.	
 	

Merger or Consolidation or Change of Name of Rights Agent	
 	

22
	

Section 20.	
 	

Duties of Rights Agent	
 	

23
	

Section 21.	
 	

Change of Rights Agent	
 	

24
	

Section 22.	
 	

Issuance of New Rights Certificates	
 	

25
	

Section 23.	
 	

Redemption	
 	

25
	

Section 24.	
 	

Exchange	
 	

26
	

Section 25.	
 	

Notice of Certain Events	
 	

27
	

Section 26.	
 	

Notices	
 	

28
	

Section 27.	
 	

Supplements and Amendments	
 	

28
	

Section 28.	
 	

Successors	
 	

28
	

Section 29.	
 	

Determinations and Actions by the Board of Directors, etc	
 	

29
	

Section 30.	
 	

Benefits of this Agreement	
 	

29
	

Section 31.	
 	

Severability	
 	

29
	

Section 32.	
 	

Governing Law	
 	

29
	

Section 33.	
 	

Counterparts	
 	

29
	

Section 34.	
 	

Descriptive Headings	
 	

29
	

 	
 	

 	
 	

 





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EXHIBITS	
 	

 	
 	

 
	

Exhibit A	
 	

Form of Certificate of Designation	
 	

 
	

Exhibit B	
 	

Form of Rights Certificate	
 	

 
	

Exhibit C	
 	

Summary of Rights	
 	

 




ii







 
 

PREFERRED STOCK RIGHTS AGREEMENT    
    



        This Preferred Stock Rights Agreement is dated as of June 30, 2003, between NeoPharm, Inc., a Delaware corporation (the "Company"), and
Computershare Investor Services LLC (the "Rights Agent"). 


        On
June 30, 2003, (the "Rights Dividend Declaration Date"), the Board of Directors of the Company authorized and declared a
dividend of one Preferred Share Purchase Right (a "Right") for each Common Share (as hereinafter defined) of the Company outstanding as of the Close of
Business (as hereinafter defined) on July 28, 2003 (the "Record Date"), each Right representing the right to purchase one
one-thousandth (0.001) of a share of Series A Participating Preferred Stock (as such number may be adjusted pursuant to the provisions of this Agreement), having the rights,
preferences and privileges set forth in the form of Certificate of Designations of Rights, Preferences and Privileges of Series A Participating Preferred Stock attached hereto as  Exhibit A,
upon the terms and subject to the conditions herein set forth, and further authorized and directed the issuance of one Right (as such
number may be adjusted pursuant to the provisions of this Agreement) with respect to each Common Share that shall become outstanding between the Record Date and the earlier of the Distribution Date
and the Expiration Date (as such terms are hereinafter defined), and in certain circumstances after the Distribution Date. 


        NOW,
THEREFORE, in consideration of the promises and the mutual agreements herein set forth, the parties hereby agree as follows: 


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


                    (a)    "Acquiring Person" shall mean any Person, who or which, together with all Affiliates and Associates of
such Person, shall be the Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall not include the Company, any Subsidiary of the Company or 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; provided, however, that
John N. Kapoor, Ph.D. and his Affiliates shall not be deemed an "Acquiring Person" until such time as he together with his Affiliates shall be the Beneficial Owner of 30% or more of the Common Shares
then outstanding. Notwithstanding the foregoing, no Person shall be deemed to be an Acquiring Person as the result of an acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the Common Shares of the Company then outstanding (or with respect to John N.
Kapoor, Ph.D. and his Affiliates, increases in such number of shares to 30% or more of the Common Shares of the Company then outstanding); provided,
however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding (or with respect to John N. Kapoor, Ph.D. and
his Affiliates, shall become the Beneficial Owner of 30% or more of the Common Shares of the Company then outstanding) by reason of share purchases by the Company and shall, after such share purchases
by the Company, become the Beneficial Owner of any additional Common Shares of the Company (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common
Shares in Common Shares or pursuant to a split or subdivision of the outstanding Common Shares), then such Person shall be deemed to be an Acquiring Person unless upon becoming the Beneficial Owner of
such additional Common Shares of the Company such Person does not beneficially own 15% or more of the Common Shares of the Company then outstanding (or with respect to John N. Kapoor, Ph.D. and his
Affiliates, does not Beneficially Own 30% or more of the Common Shares of the Company then outstanding). Notwithstanding the foregoing, (i) if the Company's 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 (including, without
limitation, because (A) such Person was unaware that it beneficially owned a percentage of the Common Shares that would otherwise cause such Person to be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this paragraph (a), or (B) such Person was aware of the extent of the Common Shares it beneficially owned 





 



but
had no actual knowledge of the consequences of such beneficial ownership under this Agreement) and without any intention of changing or influencing control of the Company, and if such Person
divested or divests as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), then such Person shall not be deemed to be or to have become an "Acquiring Person" for any purposes of this Agreement including, without limitation Section 1(gg)
hereof; and (ii) if, as of the date hereof, any Person is the Beneficial Owner of 15% or more of the Common Shares outstanding (or with respect to John N. Kapoor, Ph.D. and his Affiliates, is
the Beneficial Owner of 30% or more of the Common Shares of the Company then outstanding), such Person shall not be or become an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), unless and until such time as such Person shall become the Beneficial Owner of additional Common Shares (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a split or subdivision of the outstanding Common Shares), unless, upon becoming the Beneficial Owner of such additional
Common Shares, such Person is not then the Beneficial Owner of 15% or more of the Common Shares then outstanding (or with respect to John N. Kapoor, Ph.D. and his Affiliates, is not the Beneficial
Owner of 30% or more of the Common Shares of the Company then outstanding). 


                    (b)    "Adjustment Fraction" shall have the meaning set forth in Section 11(a)(i) hereof. 


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


                    (d)    A
Person shall be deemed the "Beneficial Owner" of and shall be deemed to  "beneficially own" any securities: 


                            (i)    which
such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly, for purposes of Section 13(d) of the
Exchange Act and Rule 13d-3 thereunder (or any comparable or successor law or regulation); 


                            (ii)    which
such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona
fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed pursuant to this Section 1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange, or
(2) securities which a Person or any of such Person's Affiliates or Associates may be deemed to have the right to acquire pursuant to any merger or other acquisition agreement between the
Company and such Person (or one
or more of its Affiliates or Associates) if such agreement has been approved by the Board of Directors of the Company prior to there being an Acquiring Person; 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 under this Section 1(d)(ii)(B) if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person
in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or 


                            (iii)    which
are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such
Person's Affiliates or Associates 


2





 



has
any agreement, arrangement or understanding, whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B)) or disposing of any securities of the Company;  provided,
however, that in no case shall an officer or director of the Company be deemed (x) the Beneficial Owner of any securities beneficially
owned by another officer or director of the Company solely by reason of actions undertaken by such persons in their capacity as officers or directors of the Company or (y) the Beneficial Owner
of securities held of record by the trustee of any employee benefit plan of the Company or any Subsidiary of the Company for the benefit of any employee of the Company or any Subsidiary of the
Company, other than the officer or director, by reason of any influence that such officer or director may have over the voting of the securities held in the plan. 


                    (e)    "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in
New York are authorized or obligated by law or executive order to close. 



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


                    (g)    "Common Stock Equivalents" shall have the meaning set forth in Section 11(a)(iii) hereof.  "Common Shares" when used with reference to the
Company shall mean the shares of Common Stock of the Company, par value at $0.001 per share. Common
Shares when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person. 


                    (h)    "Company" shall mean NeoPharm, Inc. , a Delaware corporation, subject to the terms of
Section 13(a)(iii)(C) hereof. 



                    (i)    "Current Per Share Market Price" of any security (a "Security" for purposes of this definition), for all
computations other than those made pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily closing prices per share of such Security for the thirty
(30) consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price of
any Security on any date shall be deemed to be the average of the daily closing prices per share of such Security for the ten (10) consecutive Trading Days 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 (i) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares or (ii) any subdivision,
combination or reclassification of such Security, and prior to the expiration of the applicable thirty (30) Trading Day or ten (10) Trading Day period, 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, if the Security is not listed or admitted to
trading on any national securities exchange, the last sale price or, if such last sale price is not reported, the average of the high bid and low asked prices in the
over-the-counter market, as reported by Nasdaq or such other system then in use, or, if on any such date the Security is not quoted 


3





 



by
any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company.
If on any such date no market maker is making a market in the Security, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company shall be used.
If the Preferred Shares are not publicly traded, the Current Per Share Market Price of the Preferred Shares shall be conclusively deemed to be (x) the Current Per Share Market Price of the
Common Shares as determined pursuant to this Section 1(j), as appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof,
multiplied by (y) 1,000. If the Security is not 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 and shall be conclusive for all purposes. 


                    (j)    "Current Value" shall have the meaning set forth in Section 11(a)(iii) hereof. 



                    (k)    "Distribution Date" shall mean the earlier of (i) the Close of Business on the tenth (10th)
Business day (or such later date as may be determined by action of the Company's Board of Directors) after the Shares Acquisition Date (or, if the tenth (10th) business day after the Shares
Acquisition Date occurs before the Record Date, the Close of Business on the Record Date) or (ii) the Close of Business on the
tenth (10th) Business Day (or such later date as may be determined by action of the Company's Board of Directors) after the date that a tender or exchange offer 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 Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if,
assuming the successful consummation thereof, such Person would be an Acquiring Person. 


                    (l)    "Equivalent Shares" shall mean Preferred Shares and any other class or series of capital stock of the
Company which is entitled to the same rights, privileges and preferences as the Preferred Shares. 



                    (m)    "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 


                    (n)    "Exchange Ratio" shall have the meaning set forth in Section 24(a) hereof. 


                    (o)    "Exercise Price" shall have the meaning set forth in Section 4(a) hereof. 



                    (p)    "Expiration Date" shall mean the earliest to occur of: (i) the Close of Business on the Final
Expiration Date, (ii) the Redemption Date, or (iii) the time at which the Board of Directors orders the exchange of the Rights as provided in Section 24 hereof. 


                    (q)    "Final Expiration Date" shall mean July 28, 2013. 



                    (r)    "Nasdaq" shall mean The Nasdaq Stock Market, Inc. 


                    (s)    "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by
merger or otherwise) of such entity. 


                    (t)    "Post-Event Transferee" shall have the meaning set forth in Section 7(e) hereof. 


                    (u)    "Preferred Shares" shall mean shares of Series A Participating Preferred Stock, par value $0. 001
per share, of the Company. 


                    (v)    "Pre-Event Transferee" shall have the meaning set forth in Section 7(e) hereof. 



                    (w)    "Principal Party" shall have the meaning set forth in Section 13(b) hereof. 


                    (x)    "Record Date" shall have the meaning set forth in the recitals at the beginning of this Agreement. 


4





 



                    (y)    "Redemption Date" shall have the meaning set forth in Section 23(a) hereof. 


                    (z)    "Redemption Price" shall have the meaning set forth in Section 23(a) hereof. 


                    (aa)    "Rights Agent" shall mean (i) Computershare Investor Services LLC, (ii) its successor or
replacement as provided in Sections 19 and 21 hereof or (iii) any additional Person appointed pursuant to Section 2 hereof. 


                    (bb)    "Rights Certificate" shall mean a certificate substantially in the form attached hereto as
Exhibit B. 


                    (cc)    "Rights Dividend Declaration Date" shall have the meaning set forth in the recitals at the beginning of
this Agreement. 


                    (dd)    "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof. 


                    (ee)    "Section 13 Event" shall mean any event described in clause (i), (ii) or
(iii) of Section 13(a) hereof. 



                    (ff)    "Securities Act" shall mean the Securities Act of 1933, as amended. 


                    (gg)    "Shares Acquisition Date" shall mean the first date of public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such;  provided that, if such Person is determined not to have become an Acquiring Person pursuant to Section 1(a) hereof, then no Shares Acquisition
Date shall be deemed to have occurred by virtue of such event. "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof. 


                    (hh)    "Subsidiary" of any Person shall mean any corporation or other entity of which an amount of voting
securities sufficient to elect a majority of the directors or Persons having similar authority of such corporation or other entity is beneficially owned, directly or indirectly, by such Person, or any
corporation or other entity otherwise controlled by such Person. 



                    (ii)    "Substitution Period" shall have the meaning set forth in Section 11(a)(iii) hereof. 


                    (jj)    "Summary of Rights" shall mean a summary of this Agreement substantially in the form attached hereto as
Exhibit C. 



                    (kk)    "Total Exercise Price" shall have the meaning set forth in Section 4(a) hereof. 


                    (ll)    "Trading Day" shall mean a day on which the principal national securities exchange on which a referenced
security is listed or admitted to trading is open for the transaction of business or, if a referenced security is not listed or admitted to trading on any national securities exchange, a Business Day. 



                    (mm)    A  "Triggering Event" shall be
deemed to have occurred upon any Person becoming an Acquiring Person. 


        Section
2.    Appointment of Rights Agent.    The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable, upon
ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any
co-Rights Agent. 


5





 



        Section
3.    Issuance of Rights Certificates.    



                    (a)    Until
the Distribution Date, (i) the Rights will be evidenced (subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates for
Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Rights Certificates) and not by separate Rights Certificates and (ii) the right to
receive Rights Certificates will be transferable only in connection with the transfer of Common Shares. Until the earlier of the Distribution Date or the Expiration Date, the surrender for transfer of
certificates for Common Shares shall also constitute the surrender for transfer of the Rights associated with the Common Shares represented thereby. As soon as practicable after the Distribution Date,
the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, 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 Rights Certificate evidencing
one Right for each Common Share so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per Common Share has been made pursuant to Section 11
hereof, then at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that
Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights (in accordance with Section 14(a) hereof). As of the Distribution
Date, the Rights will be evidenced solely by such Rights Certificates and may be transferred by the transfer of the Rights Certificates as permitted hereby, separately and apart from any transfer of
Common Shares, and the holders of such Rights Certificates as listed in the records of the Company or any transfer agent or registrar for the Rights shall be the record holders thereof. 


                    (b)    On
the Record Date or as soon as practicable thereafter, the Company will send a copy of the Summary of Rights by first-class, postage-prepaid mail, to
each record holder of Common Shares as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company's transfer agent and registrar. 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 together
with the Summary of Rights. 


                    (c)    Unless
the Board of Directors by resolution adopted at or before the time of the issuance of any Common Shares after the Record Date but prior to the
earlier of the Distribution Date or the Expiration Date (or, in certain circumstances provided in Section 22 hereof, after the Distribution Date) specifies to the contrary, Rights shall be
issued in respect of all Common Shares that are so issued, and Certificates representing such Common Shares shall also be deemed to be certificates for Rights, and shall bear the following legend: 



THIS
CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN NEOPHARM, INC. AND COMPUTERSHARE INVESTOR SERVICES LLC, AS THE RIGHTS
AGENT, DATED AS OF JUNE 30, 2003 (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF
NEOPHARM, INC. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE
COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE 



6





 

THEREOF
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID. 




With
respect to such certificates containing the foregoing legend, until the earlier of the Distribution Date or the 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. 


                    (d)    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. 



        Section
4.    Form of Rights Certificates.    


                    (a)    The
Rights Certificates (and the forms of election to purchase Common Shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form of Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and 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 a national market system, on which the Rights may from time to time be listed or included, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date (or in the case of
Rights issued with respect to Common Shares issued by the Company after the Record Date, as of the date of issuance of such Common Shares) and on their face shall entitle the holders thereof to
purchase such number of
one-thousandths (0.001) of a Preferred Share as shall be set forth therein at the price set forth therein (such exercise price per one one-thousandth (0.001) of a Preferred
Share being hereinafter referred to as the "Exercise Price" and the aggregate Exercise Price of all Preferred Shares issuable upon exercise of one Right
being hereinafter referred to as the "Total Exercise Price"), but the number and type of securities purchasable upon the exercise of each Right and the
Exercise Price shall be subject to adjustment as provided herein. 


                    (b)    Any
Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a Post-Event Transferee, (iii) a Pre-Event Transferee or (iv) any subsequent
transferee receiving transferred Rights from a Post-Event Transferee or a Pre-Event Transferee, either directly or through one or more intermediate transferees, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend: 



THE
RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS
ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS
AGREEMENT. 



7







   
        Section 5.    Countersignature and Registration.    


                    (a)    The
Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its Chief Financial Officer,
its President or any Vice President, either manually or by facsimile signature, and by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal (if any) or a facsimile thereof. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights 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 Rights Certificates on behalf of the Company had not ceased to be such officer of the Company; and any Rights Certificate may be signed on behalf of the Company by any
person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer. 


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


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


                    (a)    Subject
to the provisions of Sections 7(e), 14 and 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 Expiration Date, any Rights Certificate or Rights Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of one-thousandths (0. 001) of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Rights Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Rights 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 Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse
side of such Rights 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 Sections 7(e), 14 and 24 hereof, countersign and deliver to the person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require payment from the registered holder 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 Rights Certificates. 


                    (b)    Upon
receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights
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 Rights Certificate if 


8





 



mutilated,
the Company will make and deliver a new Rights Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated. 


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


                    (a)    Subject
to Sections 7(e), 23(b) and 24(b) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after the Distribution Date and prior to the Close of Business on the Expiration Date by surrender of the Rights 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 Exercise Price for
each one-thousandth (0. 001) of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) as to which the Rights are exercised. 


                    (b)    The
Exercise Price for each one-thousandth (0. 001) of a Preferred Share issuable pursuant to the exercise of a Right shall initially be One
Hundred and Twelve U.S. dollars ($112.00), 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 Rights Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the
Exercise Price for the number of one-thousandths (0. 001) of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) to be purchased
and an amount equal to any applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 9(e) hereof, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent for the
Preferred Shares) a certificate or certificates for the number of one-thousandths (0.001) of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as
the case may be) to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the total
number of one-thousandths (0.001) of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) issuable upon exercise of the Rights
hereunder with a depository agent, requisition from the depository agent depository receipts representing such number of one-thousandths (0.001) of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be) as are to be purchased (in which case certificates for the Preferred Shares (or, following a Triggering Event, other
securities, cash or other assets as the case may be) represented by such receipts shall be deposited by the transfer agent with the depository agent) and the Company hereby directs the depository
agent to comply with 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 depository receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt thereof, deliver such cash to or upon the order of the registered
holder of such Rights Certificate. The payment of the Exercise Price (as such amount may be reduced (including to zero) pursuant to Section 11(a)(iii) hereof) and an amount equal to any
applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 9(e) hereof, may be made in cash or by certified bank check, cashier's check or
bank draft payable to the order of the Company. In the event that the Company is obligated to issue securities of the Company other than Preferred Shares, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent,
if and when appropriate. 


9





 



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


                    (e)    Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence of a Triggering Event, any Rights beneficially owned by
(i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes such (a "Post-Event Transferee"), (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives
such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Company's Board of Directors has determined is part of a
plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e) (a "Pre-Event
Transferee") or (iv) any subsequent transferee receiving transferred Rights from a Post-Event Transferee or a Pre-Event Transferee, either
directly or through one or more intermediate transferees, 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 ensure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to any holder of Rights Certificates or to any other Person as a result of its failure to make any determinations with respect to an Acquiring
Person or any of such Acquiring Person's Affiliates, Associates or transferees hereunder. 


                    (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 Section 7 unless such registered holder shall, in addition to having complied with the requirements
of subsection 7(a), have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such
exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably
request. 


        Section
8.    Cancellation and Destruction of Rights Certificates.    All Rights Certificates surrendered for the
purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights 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 Rights Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate evidencing the destruction thereof to the Company. 


        Section
9.    Reservation and Availability of Preferred Shares.    



                    (a)    The
Company covenants and agrees that it will use its best efforts to cause to be reserved and kept available out of its authorized and unissued Preferred
Shares not reserved for another purpose (and, following the occurrence of a Triggering Event, out of its authorized and unissued Common Shares and/or other securities), the number of Preferred Shares
(and, following the 


10





 



occurrence
of the Triggering Event, Common Shares and/or other securities) that will be sufficient to permit the exercise in full of all outstanding Rights. 



                    (b)    If
the Company shall hereafter list any of its Preferred Shares on a national securities exchange, then so long as the Preferred Shares (and, following
the occurrence of a Triggering Event, Common Shares and/or other securities) issuable and deliverable upon exercise of the Rights may be listed on such exchange, the Company shall use its best efforts
to cause, from and after such time as the Rights become exercisable (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such exercise. 



                    (c)    The
Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Triggering
Event in which the consideration to be delivered by the Company upon exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii) hereof, or as soon as is
required by law following the Distribution Date, as the case may be, a registration statement under the Securities Act with respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and
(B) the date of expiration of the Rights. The Company may temporarily suspend, for a period not to exceed ninety (90) days after the date set forth in clause (i) of the first
sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company
shall issue a public announcement stating, and notify the Rights Agent, that the exercisability of the Rights has been temporarily suspended, as well as a public announcement and notification to the
Rights Agent at such time as the suspension is no longer in effect. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or "blue sky" laws
of the various states in connection with the exercisability of the Rights. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction,
unless the requisite qualification in such jurisdiction shall have been obtained, or an exemption therefrom shall be available, and until a registration statement has been declared and remains
effective. 


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



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


        Section
10.    Record Date.    Each Person in whose name any certificate for a number of one-thousandths
(0.001) of a Preferred Share (or other securities of the Company) is issued upon the 


11





 



exercise
of Rights shall for all purposes be deemed to have become the holder of record of Preferred Shares (or other securities of the Company) represented thereby on, and such certificate shall be
dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Total Exercise Price with respect to which the Rights have been exercised (and any
applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the 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 transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a holder of Preferred Shares (or other securities
of the Company) 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 Exercise Price, Number of Shares or Number of Rights.    The Exercise Price, the number
and kind of shares or other property covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. 


                    (a)    (i)    Anything
in this Agreement to the contrary notwithstanding, in the event that 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
(by reverse stock split or otherwise) 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), then, in each such event, except as otherwise provided in this
Section 11 and Section 7(e) hereof: (1) the Exercise Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that the
Exercise Price thereafter shall equal the result obtained by dividing the Exercise Price in effect immediately prior to such time by a fraction (the "Adjustment
Fraction"), the numerator of which shall be the total number of Preferred Shares (or shares of capital stock issued in such reclassification of the Preferred Shares)
outstanding immediately following such time and the denominator of which shall be the total number of Preferred Shares outstanding immediately prior to such time; 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 such Right; and (2) the number of one-thousandths (0. 001) of a Preferred Share (or share of such other capital stock) issuable upon the exercise of each
Right shall equal the number of one-thousandths (0.001) of a Preferred Share (or share of such other capital stock) as was issuable upon exercise of a Right immediately prior to the
occurrence of the event described in clauses (A)-(D) of this Section 11(a)(i), multiplied by the Adjustment Fraction; provided, however, that, no such adjustment shall be made pursuant to this
Section 11(a)(i) to the extent that there shall have simultaneously occurred an event described in clause (A), (B), (C) or (D) of Section 11(n) with a
proportionate adjustment being made thereunder. Each Common Share that shall become outstanding after an adjustment has been made pursuant to this Section 11(a)(i) shall have associated
with it the number of Rights, exercisable at the Exercise Price and for the number of one-thousandths (0.001) of a Preferred Share (or shares of such other capital stock) as one Common
Share has associated with it immediately following the adjustment made pursuant to this Section 11(a)(i). 


                            (ii)    Subject
to Section 24 of this Agreement, in the event that a Triggering Event shall have occurred, then promptly following such Triggering Event
each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive for each Right, upon exercise thereof in accordance with the terms of this
Agreement and payment of the Exercise Price in effect immediately prior to the occurrence of the Triggering Event, in lieu of a number of one-thousandths 


12





 



(0.001)
of a Preferred Share, such number of Common Shares of the Company as shall equal the quotient obtained by dividing (A) the product obtained by multiplying (1) the Exercise Price
in effect immediately prior to the occurrence of the Triggering Event by (2) the number of one-thousandths (0.001) of a Preferred Share for which a Right was exercisable (or would
have been exercisable if the Distribution Date had occurred) immediately prior to the first occurrence of a Triggering Event, by (B) fifty percent (50%) of the Current Per Share Market Price
for Common Shares on the date of occurrence of the Triggering Event; provided, however, that the Exercise Price and the number of Common Shares of the
Company so receivable upon exercise of a Right shall be subject to further adjustment as appropriate in accordance with Section 11(e) hereof to reflect any events occurring in respect of the
Common Shares of the Company after the occurrence of the Triggering Event. 


                            (iii)    In
lieu of issuing Common Shares in accordance with Section 11(a)(ii) hereof, the Company may, if the Company's Board of Directors
determines that such action is necessary or appropriate and not contrary to the interest of holders of Rights and, in the event that the number of Common Shares which are authorized by the Company's
Certificate of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights, or if any
necessary regulatory approval for such issuance has not been obtained by the Company, the Company shall: (A) determine the excess of (1) the value of the Common Shares issuable upon the
exercise of a Right (the "Current Value") over (2) the Exercise Price (such excess, the "Spread")
and (B) with respect to each Right, make adequate provision to substitute for such Common Shares, upon exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price,
(3) other equity securities of the Company (including, without limitation, shares or units of shares of any series of preferred stock which the Company's Board of Directors has deemed to have
the same value as Common Shares (such shares or units of shares of preferred stock are herein called "Common Stock Equivalents")), except to the extent
that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, (4) debt securities of the Company, except to the extent that the Company has not obtained
any necessary stockholder or regulatory approval for such issuance, (5) other assets or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where
such aggregate value has been determined by the Company's Board of Directors based upon the advice of a nationally recognized investment banking firm selected by the Company's Board of Directors;  provided,
however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty
(30) days following the later of (x) the first occurrence of a Triggering Event and (y) the date on which the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall
be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Exercise Price, Common Shares (to the extent available), except to the extent that the Company
has not obtained any necessary stockholder or regulatory approval for such issuance, and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the
Company's Board of Directors shall determine in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights or that any
necessary regulatory approval for such issuance will be obtained, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares or take action to obtain such regulatory
approval (such period, as it may be extended, the "Substitution Period"). To the extent that the Company determines that some action need be taken
pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to
all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares, to take any
action to obtain any required regulatory approval and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to 


13





 



determine
the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as
a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Shares shall be the Current Per Share Market Price
of the Common Shares on the Section 11(a)(ii) Trigger Date and the value of any Common Stock Equivalent shall be deemed to have the same value as the Common Shares on such date. 


                    (b)    In
case the Company shall, at any time after the date of this Agreement, fix a record date for the issuance of rights, options or warrants to all holders
of Preferred Shares entitling such holders (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase Preferred Shares or
Equivalent Shares or securities convertible into Preferred Shares or Equivalent Shares at a price per share (or having a conversion price per share, if a security convertible into Preferred Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the Preferred Shares or Equivalent Shares on such record date, then, in each such case, the Exercise Price to be in effect after
such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares and
Equivalent Shares (if any) outstanding on such record date, plus the number of Preferred Shares or Equivalent Shares, as the case may be, which the aggregate offering price of the total number of
Preferred Shares or Equivalent Shares, as the case may be, to be offered or issued (and/or the aggregate initial conversion price of the convertible securities to be offered or issued) would purchase
at such current market price, and the denominator of which shall be the number of Preferred Shares and Equivalent Shares (if any) outstanding on such record date, plus the number of additional
Preferred Shares or Equivalent Shares, as the case may be, 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 Company's Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be binding
on the Rights Agent and the holders of the Rights. Preferred Shares and Equivalent 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 Exercise Price shall be
adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed. 


                    (c)    In
case the Company shall, at any time after the date of this Agreement, fix a record date for the making of a distribution to all holders of the
Preferred Shares or of any class or series of Equivalent 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, if any, or a dividend payable in Preferred Shares) or subscription rights, options or warrants
(excluding those referred to in Section 11(b)), then, in each such case, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Per Share Market Price of a Preferred Share or an Equivalent Share on such record date, less the
fair market value per Preferred Share or Equivalent 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) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a Preferred Share or Equivalent Share, as
the case may be, and the denominator of which shall be such Current Per Share Market Price of a Preferred Share or Equivalent Share on such record date; 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 


14





 



shares
of capital stock of the Company issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is
not so made, the Exercise Price shall be adjusted to be the Exercise Price which would have been in effect if such record date had not been fixed. 


                    (d)    Anything
herein to the contrary notwithstanding, no adjustment in the Exercise Price shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) of the Exercise Price; provided, however, that any adjustments which by reason of this Section 11(d) 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
ten-thousandth (0.0001) of a Common Share or other share or one hundred-thousandth (0.00001) of a Preferred Share, as the case may be. Notwithstanding the first sentence of this
Section 11(d), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which requires
such adjustment or (ii) the Expiration Date. 


                    (e)    If
as a result of an adjustment made pursuant to Section 11(a) or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right and, if required, the Exercise
Price thereof, 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), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and 11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply on like terms to
any such other shares. 


                    (f)    All
Rights originally issued by the Company subsequent to any adjustment made to the Exercise Price hereunder shall evidence the right to purchase, at the
adjusted Exercise Price, the number of
one-thousandths (0. 001) of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. 



                    (g)    Unless
the Company shall have exercised its election as provided in Section 11(h), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Exercise
Price, that number of Preferred Shares (calculated to the nearest one hundred-thousandth (0. 00001) of a share) obtained by (i) multiplying (x) the number of Preferred Shares covered by
a Right immediately prior to this adjustment, by (y) the Exercise Price in effect immediately prior to such adjustment of the Exercise Price, and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise Price. 


                    (h)    The
Company may elect on or after the date of any adjustment of the Exercise Price as a result of the calculations made in Section 11(b) or
(c) to adjust the number of Rights, in substitution for any adjustment in the number of Preferred Shares 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-thousandths (0.001) of a Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one hundred-thousandth (0.00001)) obtained by
dividing the Exercise Price in effect immediately prior to adjustment of the Exercise Price by the Exercise Price in effect immediately after adjustment of the Exercise 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 Exercise Price is adjusted or any day thereafter, but, if any Rights Certificates have been issued, shall be at least ten (10) days later than the 


15





 



date
of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(h), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights 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 Rights
Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall
be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company,
the adjusted Exercise Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement. 


                    (i)    Irrespective
of any adjustment or change in the Exercise Price or the number of Preferred Shares issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the Exercise Price per one one-thousandth (0. 001) of a Preferred
Share and the number of one-thousandths (0.001) of a Preferred Share which were expressed in the initial Rights Certificates issued hereunder. 


                    (j)    Before
taking any action that would cause an adjustment reducing the Exercise Price below the par or stated value, if any, of the number of
one-thousandths (0. 001) of a Preferred Share 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 as fully paid and nonassessable shares such number of one-thousandths (0.001) of a Preferred Share at such adjusted Exercise Price. 



                    (k)    In
any case in which this Section 11 shall require that an adjustment in the Exercise 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 number of one-thousandths (0. 001)
of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one-thousandths (0.001) of a Preferred Share and
other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Exercise 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 (fractional
or otherwise) upon the occurrence of the event requiring such adjustment. 


                    (l)    Anything
in this Section 11 to the contrary notwithstanding, prior to the Distribution Date, the Company shall be entitled to make such reductions
in the Exercise Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that
any (i) consolidation or subdivision of the Preferred or Common Shares, (ii) issuance wholly for cash of any Preferred or Common Shares at less than the current market price,
(iii) issuance wholly for cash of Preferred or Common Shares or securities which by their terms are convertible into or exchangeable for Preferred or Common Shares, (iv) stock dividends
or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred or Common Shares shall not be taxable to such
stockholders. 


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


16









   
                    (n)    In the event that the Company shall at any time after the date of this Agreement (A) declare a
dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding Common Shares (by reverse stock split or otherwise) into a smaller number of Common Shares, or
(D) issue any shares of its capital stock in a reclassification of the Common Shares (including any such reclassification in connection with a consolidation or merger in which the Company is
the continuing or surviving corporation), then, in each such event, except as otherwise provided in this Section 11(a) and Section 7(e) hereof: (1) each Common Share (or shares of
capital stock issued in such reclassification of the Common Shares) outstanding immediately following such time shall have associated with it the number of Rights as were associated with one Common
Share immediately prior to the occurrence of the event described in clauses (A)-(D) above; (2) the Exercise Price in effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification shall be adjusted so that the Exercise Price thereafter shall equal the result obtained by multiplying the Exercise Price in effect
immediately prior to such time by a fraction, the numerator of which shall be the total number of Common Shares outstanding immediately prior to the event described in clauses (A)-(D) above, and the
denominator of which shall be the total number of Common Shares outstanding immediately after such event; 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 such Right; and (3) the
number of one-thousandths (0. 001) of a Preferred Share (or shares of such other capital stock) issuable upon the exercise of each Right outstanding after such event shall equal the number
of one-thousandths (0.001) of a Preferred Share (or shares of such other capital stock) as were issuable with respect to one Right immediately prior to such event. Each Common Share that
shall become outstanding after an adjustment has been made pursuant to this Section 11(n) shall have associated with it the number of Rights, exercisable at the Exercise Price and for the
number of one-thousandths (0.001) of a Preferred Share (or shares of such other capital stock) as one Common Share has associated with it immediately following the adjustment made pursuant
to this Section 11(n). If an event occurs which would require an adjustment under both this Section 11(n) and Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(n) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. 


        Section
12.    Certificate of Adjusted Exercise 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 Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of the Company to make such certification or give such notice shall not affect the validity
of such adjustment or the force or effect of the requirement for such adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment contained therein
and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such certificate. 



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


                    (a)    In
the event that, following a Triggering Event, directly or indirectly: 


                            (i)    the
Company shall consolidate with, or merge with and into, any other Person (other than a wholly-owned Subsidiary of the Company in a transaction the
principal purpose of which is to change the state of incorporation of the Company and which complies with Section 11(m) hereof); 


                            (ii)    any
Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other person (or the
Company); or 


17





 



                            (iii)    the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets
or earning power aggregating fifty percent (50%) or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or
one or more of its wholly owned Subsidiaries in one or more transactions, each of which individually (and together) complies with Section 11(m) hereof), then, concurrent with and in each such
case, 


                                    (A)
    each
holder of a Right (except as provided in Section 7(e) hereof) shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the Total Exercise Price applicable immediately prior to the occurrence of the Section 13 Event in accordance with the terms of this Agreement, such number of validly authorized and
issued, fully paid, nonassessable and freely tradeable Common Shares of the Principal Party (as hereinafter defined), free of any liens, encumbrances, rights of first refusal or other adverse claims,
as shall be equal to the result obtained by dividing such Total Exercise Price by an amount equal to fifty percent (50%) of the Current Per Share Market Price of the Common Shares of such Principal
Party on the date of consummation of such Section 13 Event, provided, however, that the Exercise Price and the number of Common Shares of such
Principal Party so receivable upon exercise of a Right shall be subject to further adjustment as appropriate in accordance with Section 11(e) hereof; 


                                    (B)
    such
Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the
Company pursuant to this Agreement; 


                                    (C)
    the
term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11
hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; 


                                    (D)
    such
Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares) in connection with
the consummation of any such transaction as may be necessary to ensure 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; and 


                                    (E)
    upon
the subsequent occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary transaction in respect of such Principal
Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right and payment of the Total Exercise Price as provided in this Section 13(a), such cash, shares,
rights, warrants and other property which such holder would have been entitled to receive had such holder, at the time of such transaction, owned the Common Shares of the Principal Party receivable
upon the exercise of such Right pursuant to this Section 13(a), and such Principal Party shall take such steps (including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property. 


                                    (F)
    For
purposes hereof, the "earning power" of the Company and its Subsidiaries shall be determined in good faith by the Company's Board of Directors on the
basis of the operating income of each business operated by the Company and its Subsidiaries during the three fiscal years preceding the date of such determination (or, in the case of any business not
operated by the Company or any Subsidiary during three full fiscal years preceding such date, during the period such business was operated by the Company or any Subsidiary). 


                    (b)    For
purposes of this Agreement, the term "Principal Party" shall mean: 


                            (i)    in
the case of any transaction described in clause (i) or (ii) of Section 13(a) hereof: (A) the Person that is the issuer of
the securities into which the Common Shares are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer the Common Shares of which have the greatest aggregate
market value of shares outstanding, or (B) if no securities are so 


18





 



issued,
(x) the Person that is the other party to the merger, if such Person survives said merger, or, if there is more than one such Person, the Person the Common Shares of which have the
greatest aggregate market value of shares outstanding or (y) if the Person that is the other party to the merger does not survive the merger, the Person that does survive the merger (including
the Company if it survives) or (z) the Person resulting from the consolidation; and 


                            (ii)    in
the case of any transaction described in clause (iii) 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, or, if more than one Person that is a party to such transaction or transactions receives the same
portion of the assets or earning power so transferred and each such portion would, were it not for the other equal portions, constitute the greatest portion of the assets or earning power so
transferred, or if the Person receiving the greatest portion of the assets or earning power cannot be determined, whichever of such Persons is the issuer of Common Shares having the greatest aggregate
market value of shares outstanding; provided that in any such case described in the foregoing clause (b)(i) or (b)(ii), if the Common
Shares of such Person are not at such time or have not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, then (1) if such
Person is a direct or indirect Subsidiary of another Person the Common Shares of which are and have been so registered, the term "Principal Party" shall refer to such other Person, or (2) if
such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Shares of which are and have been so registered, the term "Principal Party" shall refer to whichever of such
Persons is the issuer of Common Shares having the greatest aggregate market value of shares outstanding, or (3) if such Person is owned, directly or indirectly, by a joint venture formed by two
or more Persons that are not owned, directly or indirectly by the same Person, the rules set forth in clauses (1) and (2) above shall apply to each of the owners having an interest in
the venture as if the Person owned by the joint venture was a Subsidiary of both or all of such joint venturers, and the Principal Party in each such case shall bear the obligations set forth in this
Section 13 in the same ration as its interest in such Person bears to the total of such interests. 



                    (c)    The
Company shall not consummate any Section 13 Event 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 such issuer shall have
executed and delivered to the Rights Agent a supplemental agreement confirming that such Principal Party shall, upon consummation of such Section 13 Event, assume this Agreement in accordance
with Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive rights in respect of the issuance of Common Shares of such Principal Party upon exercise of outstanding Rights have
been waived, that there are no rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights and that such transaction shall not result in a default by such Principal Party under this Agreement, and further providing
that, as soon as practicable after the date of such Section 13 Event, such Principal Party will: 


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


                            (ii)    use
its best efforts to list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on a national securities
exchange or to meet the eligibility requirements for quotation on Nasdaq and list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on Nasdaq; and 


19





 



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



        In
the event that at any time after the occurrence of a Triggering Event some or all of the Rights shall not have been exercised at the time of a transaction described in this
Section 13, the Rights which have not theretofore been exercised shall thereafter be exercisable in the manner described in Section 13(a) (without taking into account any prior
adjustment required by Section 11(a)(ii)). 


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


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


                    (f)    The
provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. 


        Section
14.    Fractional Rights and Fractional Shares.    



                    (a)    The
Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights 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, as determined pursuant to the second sentence of Section 1(j) hereof. 



                    (b)    The
Company shall not be required to issue fractions of Preferred Shares (other than fractions that are integral multiples of one
one-thousandth (0. 001) of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions that are integral
multiples of one one-thousandth (0.001) of a Preferred Share). Interests in fractions of Preferred Shares in integral multiples of one one-thousandth (0.001) of a Preferred
Share 


20






 



may,
at the election of the Company, be evidenced by depository receipts, pursuant to an appropriate agreement between the Company and a depository selected by it;  provided, that such agreement shall provide
that the holders of such depository receipts shall have all the rights, privileges and preferences to which
they are entitled as beneficial owners of the Preferred Shares represented by such depository receipts. In lieu of fractional Preferred Shares that are not integral multiples of one
one-thousandth (0.001) of a Preferred Share, the Company shall pay to the registered holders of Rights 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 a Preferred Share. For purposes of this Section 14(b), the current market value of a Preferred Share shall be (x) one
thousand multiplied by (y) the closing price of a Common Share (as determined pursuant to the second sentence of Section 1(j) hereof) for the Trading Day immediately prior to the date of
such exercise. 


                    (c)    The
Company shall not be required to issue fractions of Common Shares or to distribute certificates which evidence fractional Common Shares upon the
exercise or exchange of Rights. In lieu of such fractional Common Shares, the Company shall pay to the registered holders of Rights 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 a Common Share. For purposes of this Section 14(c), the current market value of a Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence of Section 1(j) hereof) for the Trading Day immediately prior to the date of such exercise. 


                    (d)    The
holder of a Right by the acceptance of the Right expressly waives his or her right to receive any fractional Rights or any fractional shares (other
than fractions that are integral multiples of one one-thousandth (0. 001) of a Preferred Share) upon exercise of a Right. 



        Section
15.    Rights of Action.    All rights of action in respect of this Agreement, excepting the rights of action
given to the Rights Agent pursuant to Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders
of the Common Shares); and any registered holder of any Rights 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 Rights Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his or her own behalf and for his or her 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 or her right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights
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. 


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


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


                    (b)    after
the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed; and 


                    (c)    subject
to Sections 6(a) and 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior
to the Distribution Date, the 


21





 



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 Rights 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.    Rights Certificate Holder Not Deemed a Stockholder.    No holder, as such, of any Rights Certificate
shall be entitled to vote, receive dividends or be deemed for any purpose to be 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 Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting stockholders (except as specifically provided in Section 25 hereof), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. 


        Section
18.    Concerning the Rights Agent.    



                    (a)    The
Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder.
The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense, incurred without 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. In no event will the Rights Agent be liable for special, indirect, incidental or consequential loss or damage of any kind whatsoever, even if the Rights Agent
has been advised of the possibility of such loss or damage. 


                    (b)    The
Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Rights Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document reasonably 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. 


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


                    (a)    Any
corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the 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,
however, 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 Rights 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 Rights Certificates so countersigned; and in case at that time any of the Rights Certificates 


22





 



shall
not have been countersigned, any successor Rights Agent may countersign such Rights 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 Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. 


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



                    (a)    The
Rights Agent may consult with legal counsel (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. 


                    (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 (including,
without limitation, the identity of any Acquiring Person and the determination of Current Per Share Market Price) 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, any Vice President, the Chief Financial Officer, the Secretary or any Assistant 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 Rights
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 Rights 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 Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights 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, 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 Rights Certificates after receipt by the Rights Agent of a certificate furnished pursuant to Section 12 describing such
change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable. 


23





 



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



                    (g)    The
Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the
Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Secretary or any Assistant Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer
or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in
writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after
the date specified in such application (which date shall not be less than five (5) Business Days after the date on which any officer of the Company actually receives such application, unless
any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be taken or omitted. 



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



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


                    (j)    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 Rights 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 either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise or transfer without first consulting with the Company. 



        Section
21.    Change of Rights Agent.    The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company and to each transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Preferred Shares and the Common Shares by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or 


24





 



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 thirty (30) days
after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his or her Rights Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Preferred Shares and the Common Shares, and mail a notice thereof in writing to the registered holders of the Rights 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 Rights Certificates.    Notwithstanding any of the provisions of this Agreement or of
the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or
change in the Exercise Price and the number or kind or class of shares or other securities or property purchasable under the Rights 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 redemption or expiration of the Rights, the Company (a) shall,
with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement or upon the exercise, conversion or exchange of other securities of
the Company outstanding at the date hereof or upon the exercise, conversion or exchange of securities hereinafter issued by the Company and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale;  provided, however, that
(i) no such Rights Certificate shall be issued and this sentence shall be null and void ab
initio if, and to the extent that, such issuance or this sentence would create a significant risk of or result in material adverse tax consequences to the Company or the Person
to whom such Rights Certificate would be issued or would create a significant risk of or result in such options' or employee plans' or arrangements' failing to qualify for otherwise available special
tax treatment and (ii) no such Rights 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
Company may, at its option and with the approval of the Board of Directors, at any time prior to the Close of Business on the earlier of
(i) the fifth day following the Shares Acquisition Date (or such later date as may be determined by action of the Company's Board of Directors and publicly announced by the Company) and
(ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $0. 001 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption price being herein referred to as the "Redemption Price") and the
Company may, at its option, pay the Redemption Price either in Common Shares (based on the Current Per Share Market Price thereof at the time of redemption) or cash. Such redemption of the Rights by
the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. The date on which the Board of Directors elects
to make the redemption effective shall be referred to as the "Redemption Date."


25





 



                    (b)    Immediately
upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with
the Rights Agent, 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 ten (10) days after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books
of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof,
and other than in connection with the purchase of Common Shares prior to the Distribution Date. 


        Section
24.    Exchange.    


                    (a)    Subject
to applicable laws, rules and regulations, and subject to subsection 24(c) below, the Company may, at its option, by action of the Board of
Directors, at any time after the occurrence of a Triggering Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to
the provisions of Section 7(e) 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 subsection 24(a) of this Section 24 and
without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common
Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall mail a notice of any such exchange to all of
the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which 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 7(e) hereof) held by each holder of Rights. 


                    (c)    In
the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with Section 24(a), the Company shall either take such action as may be necessary to authorize additional Common Shares for issuance upon exchange of the Rights or
alternatively, at the option of a majority of the Board of Directors, with respect to each Right (i) pay cash in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange 


26





 



therefor,
or (ii) issue debt or equity securities or a combination thereof, having a value equal to the Current Value, in lieu of issuing Common Shares in exchange for each such Right, where
the value of such securities shall be determined by a nationally recognized investment banking firm selected by majority vote of the Board of Directors, or (iii) deliver any combination of
cash, property, Common Shares and/or other securities having a value equal to the Current Value in exchange for each Right. For purposes of this Section 24(c) only, the Current Value shall mean
the product of the Current Per Share Market Price of Common Shares on the date of the occurrence of the event described above in subsection (a), multiplied by the number of Common Shares for which the
Right otherwise would be exchangeable if there were sufficient shares available. To the extent that the Company determines that some action need be taken pursuant to clauses (i), (ii) or
(iii) of this Section 24(c), the Board of Directors may temporarily suspend the exercisability of the Rights for a period of up to sixty (60) days following the date on which the
event described in Section 24(a) shall have occurred, in order to seek any authorization of additional Common Shares and/or to decide the appropriate form of distribution to be made pursuant to
the above provision and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been
temporarily suspended. 


                    (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, there shall be paid to the registered holders of the Rights 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 (as determined pursuant to the second sentence of Section 1(j) hereof). 


                    (e)    The
Company may, at its option, by majority vote of the Board of Directors, at any time before any Person has become an Acquiring Person, exchange all or
part of the then outstanding Rights for rights of substantially equivalent value, as determined reasonably and with good faith by the Board of Directors based upon the advice of one or more nationally
recognized investment banking firms. 



                    (f)    Immediately
upon the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection 24(e) of this Section 24 and
without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of rights
in exchange therefor as has been determined by the Board of Directors in accordance with subsection 24(e) above. The Company shall give public notice of any such exchange;  provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall 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 transfer agent for the Common Shares of the Company. 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
Rights will be effected. 


        Section
25.    Notice of Certain Events.    


                    (a)    In
case the Company shall propose to effect or permit to occur any Triggering Event or Section 13 Event, the Company shall give notice thereof to
each holder of Rights in accordance with Section 26 hereof at least twenty (20) days prior to occurrence of such Triggering Event or such Section 13 Event. 


                    (b)    In
case any Triggering Event or Section 13 Event shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders
of Rights under Sections 11(a)(ii) and 13 hereof. 


27





 



        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 Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows: 






NeoPharm, Inc.

150 Field Drive, Suite 195

Lake Forest, IL 60045

Attention: Chief Financial Officer 


with
a copy to:

Wilson Sonsini Goodrich & Rosati

Professional Corporation

650 Page Mill Road

Palo Alto, California 94304-1050

Attention: David J. Berger 







        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 Rights Certificate to
or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: 






Computershare
Investor Services LLC

2 La Salle Street

Chicago, Illinois 60602 







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



        Section
27.    Supplements and Amendments.    Prior to the occurrence of a Distribution Date, the Company may
supplement or amend this Agreement in any respect without the approval of any holders of Rights and the Rights Agent shall, if the Company so directs, execute such supplement or amendment. From and
after the occurrence of a Distribution Date, the Company and the Rights Agent may from time to time supplement or amend this Agreement without the approval of any holders of Rights 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, (iii) shorten or
lengthen any time period hereunder or (iv) to change or supplement the provisions hereunder in any manner that the Company may deem necessary or desirable and that shall not adversely affect
the interests of the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, this Agreement
may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable or (B) any other time period unless such lengthening is for the purpose
of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the
delivery of a certificate from an appropriate officer of the Company that 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. 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.    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. 


28





 



        Section
29.    Determinations 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 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. 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 (i) to interpret the provisions of this Agreement and (ii) to 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 Company, the Rights Agent, the holders of the Rights Certificates and all other parties and (y) with respect to claims specifically
arising from the Agreement, not subject the Board to any liability to the holders of the Rights. 


        Section
30.    Benefits of this Agreement.    Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim pursuant
to 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 Rights 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; provided, however, that notwithstanding
anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of
the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set
forth in Section 23 hereof shall be reinstated and shall not expire until the Close of Business on the tenth day following the date of such determination by the Board of Directors. 


        Section
32.    Governing Law.    This Agreement and each Right and each Rights Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be
made and performed entirely within such State. 


        Section
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. 


29





 

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



	
"COMPANY"	
 	

NeoPharm, Inc.
	

 	
 	

By:	

/s/  LAWRENCE A. KENYON      

	

 	
 	

Name:	
LAWRENCE A. KENYON

	

 	
 	

Title:	
CHIEF FINANCIAL OFFICER

	

 	
 	

 	

 
	"RIGHTS AGENT"	 	Computershare Investor Services LLC
	

 	
 	

By:	

/s/  SHARON TULLOCH      

	

 	
 	

Name:	
SHARON TULLOCH

	

 	
 	

Title:	
CHIEF FINANCIAL OFFICER





30







 
 

EXHIBIT A    
    


CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF

SERIES A PARTICIPATING PREFERRED STOCK OF NEOPHARM, INC.  


        The
undersigned, Lawrence A. Kenyon, does hereby certify: 


        1.     That
he is duly elected and acting Secretary of NeoPharm, Inc., a Delaware corporation (the "Corporation"). 



        2.     That
pursuant to the authority conferred upon the Board of Directors by the Amended and Restated Certificate of Incorporation of the said Corporation, the said Board of
Directors of the Corporation on June 30, 2003 adopted the following resolutions creating a series of 600,000 shares of Preferred Stock designated as Series A Participating Preferred
Stock: 


        "RESOLVED,
that pursuant to the authority vested in the Board of Directors of the corporation by the Amended and Restated Certificate of Incorporation, the Board of Directors does hereby
provide for the issue of a series of Preferred Stock of the Corporation and does hereby fix and herein state and express the designations, powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions of such series of Preferred Stock as follows: 


        Section 1.    Designation and Amount.    The shares of such series shall be designated as  "Series A Participating Preferred Stock." The Series A Participating Preferred Stock shall have a par value of $0.001 per share, and the
number of shares constituting such series shall be 600,000. 


        Section 2.    Proportional Adjustment.    In the event that the Corporation shall at any time after the
issuance of any share or shares of Series A Participating Preferred Stock (i) declare any dividend on Common
Stock of the Corporation ("Common Stock") payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such case the Corporation shall simultaneously effect a proportional adjustment to the number of outstanding shares of
Series A Participating Preferred Stock. 


        Section 3.    Dividends and Distributions.    


                    (a)    Subject
to the prior and superior right of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of
Series A Participating Preferred Stock with respect to dividends, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive when, as and if declared by
the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of January, April, July, and October in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series A Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to 1,000 times the aggregate per share amount of all cash dividends,
and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision
of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Participating Preferred Stock. 



                    (b)    The
Corporation shall declare a dividend or distribution on the Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock). 


                    (c)    Dividends
shall begin to accrue on outstanding shares of Series A Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall 





 



begin
to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of
Series A Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Participating Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. 



        Section 4.    Voting Rights.    The holders of shares of Series A Participating Preferred Stock shall
have the following voting rights: 


                    (a)    Each
share of Series A Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the
stockholders of the Corporation. 


                    (b)    Except
as otherwise provided herein or by law, the holders of shares of Series A Participating Preferred Stock and the holders of shares of Common
Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. 


                    (c)    Except
as required by law, the holders of Series A Participating Preferred Stock shall have no special voting rights and their consent shall not be
required (except to the extent that they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 


        Section 5.    Certain Restrictions.    



                    (a)    The
Corporation shall not declare any dividend on, make any distribution on, or redeem or purchase or otherwise acquire for consideration any shares of
Common Stock after the first issuance of a share or fraction of a share of Series A Participating Preferred Stock unless concurrently therewith it shall declare a dividend on the
Series A Participating Preferred Stock as required by Section 3 hereof. 


                    (b)    Whenever
quarterly dividends or other dividends or distributions payable on the Series A Participating Preferred Stock as provided in
Section 3 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Participating Preferred Stock
outstanding shall have been paid in full, the Corporation shall not 


                            (i)    declare
or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock; 


                            (ii)    declare
or pay dividends on, or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Participating Preferred Stock, except dividends paid ratably on the Series A Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; 


                            (iii)    redeem
or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Participating Preferred Stock; 


2





 



                            (iv)    purchase
or otherwise acquire for consideration any shares of Series A Participating Preferred Stock, or any shares of stock ranking on a parity
with the Series A Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the respective series or classes. 


                    (c)    The
Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 5, purchase or otherwise acquire such shares at such time and in such manner. 


        Section 6.    Reacquired Shares.    Any shares of Series A Participating Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein and in the Amended and Restated Certificate of Incorporation, as then amended. 


        Section 7.    Liquidation, Dissolution or Winding Up.    Upon any liquidation, dissolution or winding up of the
Corporation, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive an aggregate amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock plus an amount equal to any accrued and unpaid dividends on such shares of Series A Participating Preferred Stock. 



        Section 8.    Consolidation, Merger, etc.    In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the
shares of Series A Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to 1,000 times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. 



        Section 9.    No Redemption.    The shares of Series A Participating Preferred Stock shall not be
redeemable. 


        Section 10.    Ranking.    The Series A Participating Preferred Stock shall rank junior to all other
series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. 



        Section 11.    Amendment.    The Amended and Restated Certificate of Incorporation of the Corporation shall not
be further amended in any manner which would materially alter or change the powers, preference or special rights of the Series A Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority of the outstanding shares of Series A Participating Preferred Stock, voting separately as a series. 


        Section 12.    Fractional Shares.    Series A Participating Preferred Stock may be issued in fractions
of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock. 


3





 

        RESOLVED
FURTHER, that the President, Chief Executive Officer, the Chief Financial Officer or any Vice President and the Secretary or any Assistant Secretary of this corporation be, and
they hereby are, authorized and directed to prepare and file a Certificate of Designation of Rights, Preferences and Privileges in accordance with the foregoing resolution and the provisions of
Delaware law and to take
such actions as they may deem necessary or appropriate to carry out the intent of the foregoing resolution." 


        I
further declare under penalty of perjury that the matters set forth in the foregoing Certificate of Designation are true and correct of my own knowledge. 


        Executed
at Lake Forest, Illinois, on July     , 2003. 



	

 	
 	


	 	 	Lawrence A. Kenyon

Chief Financial Officer and Secretary




4







 
 

EXHIBIT B    
    


FORM OF RIGHTS CERTIFICATE  



	

Certificate No. R-	
 	

                         Rights





NOT
EXERCISABLE AFTER THE EARLIER OF (i) JULY 28, 2013, (ii) THE DATE TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS
AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH RIGHTS AGREEMENT.]* 



RIGHTS CERTIFICATE  


NeoPharm, Inc.  


        This certifies that                        , or registered assigns,
 is the registered owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of June 30, 2003, (the "Rights Agreement"),
between NeoPharm, Inc., a Delaware corporation (the "Company"), and Computershare Investor Services LLC (the
"Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior
to 5:00 P.M., New York time, on July 28, 2013 at the office of the Rights Agent designated for such purpose, or at the office of its successor as Rights Agent, one
one-thousandth (0.001) of a fully paid and non-assessable share of Series A Participating Preferred Stock, par value $0.001 per share (the
"Preferred Shares"), of the Company, at an Exercise Price of One Hundred and Twelve U.S. dollars ($112.00) per one-thousandth (0.001) of a
Preferred Share (the "Exercise Price"), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of one-thousandths (0.001) of a Preferred Share which may be purchased upon exercise
hereof) set forth above are the number and Exercise Price as of July 28, 2003 based on the Preferred Shares as constituted at such date. As provided in the Rights Agreement, the Exercise Price
and the number and kind of Preferred Shares or other securities which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events. 




	*
	The
portion of the legend in bracket shall be inserted only if applicable and shall replace the preceding sentence. 





 

        This
Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances
set forth in the Rights
Agreement. Copies of the Rights Agreement are on file at the principal executive offices of the Company and the above-mentioned office of the Rights Agent. 


        Subject
to the provisions of the Rights Agreement, the Rights evidenced by this Rights Certificate (i) may be redeemed by the Company, at its option, at a redemption price of
$0.001 per Right or (ii) may be exchanged by the Company in whole or in part for Common Shares, substantially equivalent rights or other consideration as determined by the Company. 


        This
Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate amount of securities as the Rights evidenced by the Rights Certificate or
Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. 



        No
fractional portion of less than one one-thousandth (0.001) of a Preferred Share will be issued upon the exercise of any Right or Rights evidenced hereby but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement. 


        No
holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities
of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of
the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement. 


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


2





 

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



	

ATTEST:	
 	

NeoPharm, Inc.
	

 Secretary	
 	

By:	


	

 	
 	

Its:	


	

Countersigned:	
 	

 	

 
	

Computershare Investor Services LLC

as Rights Agent	
 	

 	

 





	

By:	


	

Its:	






3






Form of Reverse Side of Rights Certificate  


FORM OF ASSIGNMENT  


(To
be executed by the registered holder if such

holder desires to transfer the Rights Certificate) 



        FOR
VALUE RECEIVED                        hereby sells, assigns and transfers unto 




(Please
print name and address of transferee) 





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



	

Dated:                         ,
            	
 	

 
	

 	
 	

 Signature





Signature Guaranteed: 


        Signatures
must be guaranteed by an "Eligible Guarantor Institution" (with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of
the Securities Exchange Act of 1934, as amended. 





CERTIFICATE


        The
undersigned hereby certifies by checking the appropriate boxes that: 



	(1)
	this
Rights Certificate [    ] is [    ] is not being sold, assigned and transferred by or on behalf of a Person
who is or was an Acquiring Person, or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement);



	(2)
	after
due inquiry and to the best knowledge of the undersigned, it [    ] did [    ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of any such Person. 





	

Dated:                         ,
            	
 	

 
	

 	
 	

 Signature





Signature Guaranteed: 


        Signatures
must be guaranteed by an "Eligible Guarantor Institution" (with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of
the Securities Exchange Act of 1934, as amended. 





FORM OF ELECTION TO PURCHASE


(To
be executed if holder desires to

exercise the Rights Certificate) 


To:            


        The
undersigned hereby irrevocably elects to exercise                        Rights represented by this Rights Certificate to purchase
the number of one-thousandths (0.001) of a
Preferred Share issuable upon the exercise of such Rights and requests that certificates for such number of one-thousandths (0.001) of a Preferred Share issued in the name of: 


Please
insert social security

or other identifying number 




(Please
print name and address) 





If
such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance remaining of such Rights shall be registered in the name of and
delivered to: 


Please
insert social security

or other identifying number 




(Please
print name and address) 



	

Dated:                         ,
            	
 	

 
	

 	
 	

 Signature





Signature Guaranteed: 


        Signatures
must be guaranteed by an "Eligible Guarantor Institution" (with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of
the Securities Exchange Act of 1934, as amended. 





CERTIFICATE


        The
undersigned hereby certifies by checking the appropriate boxes that: 



	(1)
	the
Rights evidenced by this Rights Certificate [    ] are [    ] are not being exercised by or on behalf of a
Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement);



	(2)
	after
due inquiry and to the best knowledge of the undersigned, it [    ] did [    ] did not acquire the Rights
evidenced by this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of any such Person. 





	

Dated:                         ,
            	
 	

 
	

 	
 	

 Signature





Signature Guaranteed: 


        Signatures
must be guaranteed by an "Eligible Guarantor Institution" (with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of
the Securities Exchange Act of 1934, as amended. 





NOTICE


        The
signature in the foregoing Forms of Assignment and Election must conform to the name as written upon the face of this Rights Certificate in every particular, without alteration or
enlargement or any change whatsoever. 









 
 

EXHIBIT C    
    


STOCKHOLDER RIGHTS PLAN  


NeoPharm, Inc.  



	Summary of Rights

	

 	
 	

 
	Distribution and

Transfer of Rights;

Rights Certificate:	 	The Board of Directors has declared a dividend of one Right for each share of Common Stock of NeoPharm, Inc. (the "Company") outstanding. Prior to the
Distribution Date referred to below, the Rights will be evidenced by and trade with the certificates for the Common Stock. After the Distribution Date, the Company will mail Rights certificates to the Company's stockholders and the Rights will become
transferable apart from the Common Stock.
	
Distribution Date:	
 	

Rights will separate from the Common Stock and become exercisable following (a) the tenth business day (or such later date as may be determined by the Company's Board of Directors) after a person or group acquires beneficial ownership of 15% or
more of the Company's Common Stock or (b) the tenth business day (or such later date as may be determined by the Company's Board of Directors) after a person or group announces a tender or exchange offer, the consummation of which would result
in ownership by a person or group of 15% or more of the Company's Common Stock, in each case, subject to certain exclusions for certain current stockholders of the Company.
	
Preferred Stock

Purchasable Upon

Exercise of Rights:	
 	

After the Distribution Date, each Right will entitle the holder to purchase for $112.00 (the "Exercise Price"), a fraction of a share of the Company's Preferred Stock with economic terms similar
to that of one share of the Company's Common Stock.
	
Flip-In:	
 	

If an acquirer (subject to certain exclusions for certain current stockholders of the Company, an "Acquiring Person") obtains 15% or more of the Company's Common Stock, then each Right (other than Rights owned by an Acquiring Person or its affiliates) will entitle the holder thereof to purchase, for the Exercise Price, a number of shares of the Company's Common Stock having a
then-current market value of twice the Exercise Price.
	
Flip-Over:	
 	

If, after an Acquiring Person obtains 15% or more of the Company's Common Stock, (a) the Company merges into another entity, (b) an acquiring entity merges into the Company or (c) the Company sells more than 50% of the Company's assets or earning
power, then each Right (other than Rights owned by an Acquiring Person or its affiliates) will entitle the holder thereof to purchase, for the Exercise Price, a number of shares of Common Stock of the
person engaging in the transaction having a then current market value of twice the Exercise Price.
	 	 	 






 

	
Exchange Provision:	
 	

At any time after the date on which an Acquiring Person obtains 15% or more of the Company's Common Stock and prior to the acquisition by the Acquiring Person of 50% of the outstanding Common Stock, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by the Acquiring Person or its affiliates), in whole or in part, for shares of Common Stock of the Company at an exchange ratio of one share of Common Stock per Right (subject to adjustment).
	
Redemption of the Rights:	
 	

Rights will be redeemable at the Company's option for $0.001 per Right at any time on or prior to the fifth day (or such later date as may be determined by the Company's Board of Directors) after public announcement that a Person has acquired
beneficial ownership of 15% or more of the Company's Common Stock (the "Shares Acquisition Date").
	
Expiration of the Rights:	
 	

The Rights expire on the earliest of (a) July 28, 2013 or (b) exchange or redemption of the Rights as described above.
	
Amendment of Terms of Rights:	
 	

The terms of the Rights and the Rights Agreement may be amended in any respect without the consent of the Rights holders on or prior to the Distribution Date; thereafter, the terms of the Rights and the Rights Agreement may be amended without the
consent of the Rights holders in order to cure any ambiguities or to make changes which do not adversely affect the interests of Rights holders (other than the Acquiring Person).
	
Voting Rights:	
 	

Rights will not have any voting rights.
	
Anti-Dilution Provisions:	
 	

Rights will have the benefit of certain customary anti-dilution provisions.
	
Taxes:	
 	

The Rights distribution should not be taxable for federal income tax purposes. However, following an event which renders the Rights exercisable or upon redemption of the Rights, stockholders may recognize taxable income.





The
foregoing is a summary of certain principal terms of the Stockholder Rights Plan only and is qualified in its entirety by reference to the Preferred Stock Rights Agreement dated as of
June 30, 2003 between the Company and Computershare Investor Services LLC as Rights Agent (the "Rights Agreement"). The Rights Agreement may be
amended from time to time. A copy of the Rights Agreement was filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
July 7, 2003. A copy of the Rights Agreement is available free of charge from the Company. 


2











QuickLinks


TABLE OF CONTENTS


PREFERRED STOCK RIGHTS AGREEMENT


EXHIBIT A


EXHIBIT B


EXHIBIT C