exhibit_4-1.htm


     

    
      

      

    

    

      
        EXHIBIT 4.1


         

        


      

      SOLUTIA
INC.

      and

      AMERICAN
STOCK TRANSFER & TRUST COMPANY, LLC

      as
Rights Agent

       

      382
RIGHTS AGREEMENT

       

      Dated
as of July 27, 2009

      
        


         

        


      


      
        
          
            
              	 
      	 
      	 
      


            

             

            


             

            K&E
15230038.6

          

           


        

        
           


          
            

          

        

        
           


        

      


      TABLE
OF CONTENTS

       

      Page

       

       

       

      
        
          
            	
                    Section
      1.

                  	
                    Certain
      Definitions

                  	
                    1

                  


          

           

        

        
          
            	
                    Section
      2.

                  	
                    Appointment
      of Rights Agent

                  	
                    6

                  


          

           

        

        
          
            	
                    Section
      3.

                  	
                    Issuance
      of Rights Certificates

                  	
                    6

                  


          

          
             

            
              	
                      Section
      4.

                    	
                      Form
      of Rights Certificates

                    	
                      9

                    


            

            
               

              
                	
                        Section
      5.

                      	
                        Countersignature
      and Registration

                      	
                        10

                      


              

              
                 

                
                  	
                          Section
      6.

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

                        	
                          10

                        


                

                
                   

                  
                    	
                            Section
      7.

                          	
                            Exercise
      of Rights; Purchase Price; Expiration Date of Rights

                          	
                            11

                          


                  

                  
                     

                    
                      	
                              Section
      8.

                            	
                              Cancellation
      and Destruction of Rights Certificates

                            	
                              13

                            


                    

                    
                       

                      
                        	
                                Section
      9.

                              	
                                Reservation
      and Availability of Capital Stock

                              	
                                13

                              


                      

                      
                         

                        
                          	
                                  Section
      10.

                                	
                                  Preferred
      Stock Record Date

                                	
                                  14

                                


                        

                        
                           

                          
                            	
                                    Section
      11.

                                  	
                                    Adjustment
      of Purchase Price, Number and Kind of Shares or Number of
      Rights

                                  	
                                    15

                                  


                          

                          
                             

                            
                              	
                                      Section
      12.

                                    	
                                      Certificate
      of Adjusted Purchase Price or Number of Shares

                                    	
                                      22

                                    


                            

                             

                          

                        

                      

                    

                  

                

              

            

          

        

        
          	
                  Section
      13.

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

                	
                  22

                


        

         

      

      
        	
                Section
      14.

              	
                Fractional
      Rights and Fractional Shares

              	
                24

              


      

       

      
        	
                Section
      15.

              	
                Rights
      of Action

              	
                25

              


      

       

      
        	
                Section
      16.

              	
                Agreement
      of Rights Holders

              	
                26

              


      

       

      
        	
                Section
      17.

              	
                Rights
      Certificate Holder Not Deemed a Stockholder

              	
                26

              


      

       

      
        	
                Section
      18.

              	
                Concerning
      the Rights Agent

              	
                27

              


      

       

      
        
          	
                  Section
      19.

                	
                  Merger
      or Consolidation or Change of Name of Rights Agent

                	
                  27

                


        

         

      

      
        	
                Section
      20.

              	
                Duties
      of Rights Agent

              	
                28

              


      

       

      
        	
                Section
      21.

              	
                Change
      of Rights Agent

              	
                30

              


      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
      22.

              	
                Issuance
      of New Rights Certificates

              	
                30

              


      

       

      
        	
                Section
      23.

              	
                Redemption
      and Termination

              	
                31

              


      

       

      
        	
                Section
      24.

              	
                Exchange

              	
                31

              


      

       

      
        	
                Section
      25.

              	
                Notice
      of Certain Events

              	
                32

              


      

       

      
        	
                Section
      26.

              	
                Notices

              	
                33

              


      

       

      
        	
                Section
      27.

              	
                Supplements
      and Amendments

              	
                34

              


      

       

      
        	
                Section
      28.

              	
                Successors

              	
                34

              


      

       

      
        	
                Section
      29.

              	
                Determinations
      and Actions by the Board, etc

              	
                34

              


      

       

      
        	
                Section
      30.

              	
                Benefits
      of this Agreement

              	
                35

              


      

       

      
        	
                Section
      31.

              	
                Severability

              	
                35

              


      

       

      
        	
                Section
      32.

              	
                Governing
      Law

              	
                35

              


      

       

      
        	
                Section
      33.

              	
                Counterparts

              	
                35

              


      

       

      
        	
                Section
      34.

              	
                Descriptive
      Headings

              	
                36

              


      

      



      
        
          
            
              	 
      	
                       

                    	 
      


            

             

            K&E
15230038.6

          

          ii 


        

        
           


          
            

          

        

        
           


        

      


      EXHIBITS

       

      
        	
                Exhibit
      A

              	
                --

              	
                Form
      of Certificate of Designation, Preferences and Rights of Series A
      Participating Preferred Stock

              
	
                Exhibit
      B

              	
                --

              	
                Form
      of Rights Certificate

              
	
                Exhibit
      C

              	
                --

              	
                Form
      of Summary of Rights

              


      

      


       


      
        
          
            
              	 
      	
                       

                    	 
      


            

             

            K&E
15230038.6

          

           


        

        
          iii 


          
            

          

        

        
           


        

      


      382 RIGHTS
AGREEMENT

       

      382
RIGHTS AGREEMENT, dated as of July 27, 2009 (this “Agreement”), between
Solutia Inc., a Delaware corporation (the “Company”), and
American Stock Transfer & Trust Company, LLC, a New York limited liability
trust company (the “Rights
Agent”).

       

      W I T N E S S E T
H:

       

      WHEREAS,
(a) the Company and certain of its Subsidiaries (as hereinafter defined) have
generated certain Tax Benefits (as hereinafter defined) for United States
federal income tax purposes; (b) the Company desires to avoid an “ownership
change” within the meaning of Section 382 of the Code (as hereinafter defined),
and thereby preserve the Company’s current ability to utilize such Tax Benefits,
and (c) in furtherance of such objective, the Company desires to enter into this
Agreement; and

       

      WHEREAS,
on July 27, 2009 (the “Rights Dividend Declaration
Date”), the Board of Directors of the Company (the “Board”) authorized
and declared a dividend distribution of one Right (as hereinafter defined) for
each share of Common Stock (as hereinafter defined) of the Company outstanding
at the close of business on July 28, 2009 (the “Record Date”), and
has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock issued between the Record Date (whether originally issued or
delivered from the Company’s treasury) and the Distribution Date (as hereinafter
defined), each Right initially representing the right to purchase 1/10,000th of
a share of Series A Participating Preferred Stock, par value $0.01 per share, of
the Company (the “Preferred Stock”)
having the rights, powers and preferences set forth in the form of Certificate
of Designation, Preferences and Rights attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth (the “Rights”).

       

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

       

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

       

      (a) “Acquiring Person”
shall mean any Person who or which, together with all Affiliates and Associates
of such Person, is or becomes the Beneficial Owner of 4.99% or more of the
shares of Common Stock then outstanding, regardless of whether or not such
Person continues to be the Beneficial Owner of 4.99% or more of the shares of
Common Stock then outstanding; provided, however, that an
“Acquiring Person” shall not include (i) an Exempt Person or (ii) Existing
Holder.  Notwithstanding the foregoing: (A) no Person shall become an
“Acquiring Person” solely as a result of (x) a reduction in the number of shares
of Common Stock outstanding due to the repurchase of shares of Common Stock by
the Company, (y) a dividend or distribution paid or made by the Company on the
outstanding shares of Common Stock or pursuant to a split or subdivision of the
outstanding shares of Common Stock, and/or (z) an Exempt Transaction; and (B) if
the Board determines in good faith that a Person who would otherwise be an
“Acquiring Person” has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an “Acquiring Person”, then such Person shall not
be deemed to be or have become an “Acquiring Person” at any time for any
purposes of this Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

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

       

      (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.

       

      (d) “Agreement” shall have
the meaning set forth in the preamble to this Agreement, as it may from time to
time be supplemented, amended, renewed, restated or extended pursuant to the
applicable provisions hereof.

       

      (e) A Person
shall be deemed the “Beneficial Owner” of,
and shall be deemed to “Beneficially Own,”
and have “Beneficial
Ownership” of, any securities:

       

      (i) which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, owns or has the right to acquire (whether such right is exercisable
immediately or only after the passage of time or upon the satisfaction of one or
more conditions (whether or not within the control of such Person), compliance
with regulatory requirements or otherwise) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, other rights, warrants or options, or
otherwise; provided, however, that a
Person shall not be deemed the “Beneficial Owner” of, or to “Beneficially Own,”
under this subparagraph (A) securities tendered pursuant to a tender or exchange
offer made by such Person or any of such Person’s Affiliates or Associates until
such tendered securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise of Rights from and
after the occurrence of a Triggering Event which Rights were acquired by such
Person or any of such Person’s Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the “Original Rights”) or
pursuant to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;

       

      (ii) which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial ownership” of
(as determined pursuant to Rule 13d-3 of the General Rules and Regulations under
the Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a
Person shall not be deemed the “Beneficial Owner” of, or to “Beneficially Own,”
any security under this subparagraph (ii) as a result of an agreement,
arrangement or understanding (whether or not in writing) to vote such security
if such agreement, arrangement or understanding (A) arises solely from a
revocable proxy given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions of the General
Rules and Regulations under the Exchange Act and (B) is not reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or successor
report);

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      (iii) which are
Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with respect to which such Person (or any of
such Person’s Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in the
proviso to subparagraph (ii) of this paragraph (f)) or disposing of any voting
securities of the Company; or

       

      (iv) which
such Person actually owns (directly or indirectly) or would be deemed to
actually or constructively own pursuant to Section 382 of the Code and the
Treasury Regulations promulgated thereunder.

       

      Notwithstanding
the foregoing, nothing in this paragraph (e) shall cause a Person engaged in
business as an underwriter of securities to be the “Beneficial Owner” of, or to
“Beneficially Own,” any securities acquired through such Person’s participation
in good faith in a firm commitment underwriting until the expiration of forty
days after the date of such acquisition, and then only if such securities
continue to be owned by such Person at such expiration of forty
days.

       

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

       

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

       

      (h) “Common Stock” shall
mean the Common Stock, par value $0.01 per share, of the Company or any other
shares of capital stock of the Company into which such stock shall be
reclassified or changed, except that “Common Stock” when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such
Person.

       

      (i) “Company” shall have
the meaning set forth in the preamble to this Agreement until a successor
corporation or entity shall have become such or until a Principal Party shall
assume, and thereafter be liable for, all obligations and duties of the Company
hereunder pursuant to the applicable provisions of this Agreement, and
thereafter, “Company” shall mean such successor or Principal Party,
respectively.

       

      (j) “Company’s Bylaws”
shall mean the Amended and Restated Bylaws of the Company, as the same may be
amended after the date hereof.

       

      (k) “Company’s Charter”
shall mean the Second Amended and Restated Certificate of Incorporation of the
Company, as the same may be amended after the date hereof.

       

      (l) “Code” shall mean the
Internal Revenue Code of 1986, as amended.

       

      (m) “Distribution Date”
shall mean the earlier of (i) the Close of Business on the 10th
Business Day (or such later date as may be determined by the Board before the
occurrence of the Distribution Date) after the Stock Acquisition Date, or (ii)
the close of business on the 10th
Business Day (or such later date as may be determined by the Board before the
occurrence of the Distribution Date) after the Tender Offer Commencement Date;
provided, however, that if
either of the Stock Acquisition Date or the Tender Offer Commencement Date
occurs after the date of this Agreement and on or prior to the Record Date, then
the Distribution Date shall be the Record Date.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      (n) “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.

       

      (o) “Exempt Person” shall
mean the Company or any Subsidiary of the Company and 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.

       

      (p) “Exempt Transaction”
shall mean any transaction that the Board determines, in its sole discretion, is
exempt from this Agreement, which determination shall be made in the sole and
absolute discretion of the Board, upon request by any Person prior to the date
upon which such Person would otherwise become an Acquiring Person, including,
without limitation, if the Board determines that (i) neither the Beneficial
Ownership of shares of Common Stock by such Person, directly or indirectly, as a
result of such transaction nor any other aspect of such transaction would
jeopardize or endanger the availability to the Company of the Tax Benefits or
(ii) such transaction is otherwise in the best interests of the
Company.

       

      (q) “Existing Holder”
shall mean any Person that, as of the date hereof, is the Beneficial Owner of
4.99% or more of the shares of Common Stock outstanding unless and until such
Existing Holder acquires Beneficial Ownership of one or more additional shares
of Common Stock (other than as a result of a dividend or distribution paid or
made by the Company on the outstanding shares of Common Stock or pursuant to a
split or subdivision of the outstanding shares of Common Stock) unless, upon
becoming the Beneficial Owner of such additional share(s), such Existing Holder
is not then the Beneficial Owner of 4.99% or more of the then outstanding shares
of Common Stock.

       

      (r) “Expiration Date”
shall mean shall mean the earliest of (i) the Final Expiration Date, (ii) the
time at which the Rights are redeemed as provided in Section
23 hereof, (iii) the time at which the Rights are exchanged as provided in
Section
24 hereof, (iv) the date on which the Board determines that this Agreement
is no longer necessary for the preservation of material valuable Tax Benefits,
and (v) the beginning of a taxable year of the Company to which the Board
determines that no Tax Benefits may be carried forward.

       

      (s) “Final Expiration
Date” shall mean the date upon which the Rights expire and shall be the
earlier of 5:00 P.M., New York City time on July 27, 2012, unless the Rights are
previously redeemed, exchanged or terminated.

       

      (t) “Person” shall mean
any individual, firm, corporation, partnership, limited liability company,
trust, association, syndicate or other entity and includes an unincorporated
group of persons who, by formal or informal agreement or arrangement (whether or
not in writing), have embarked on a common purpose or act.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      (u) “Preferred Stock”
shall have the meaning set forth in the recitals to this Agreement, and, to the
extent that there are not a sufficient number of shares of Series A
Participating Preferred Stock authorized to permit the full exercise of the
Rights, any other series of preferred stock of the Company designated for such
purpose containing terms substantially similar to the terms of the Series A
Participating Preferred Stock.

       

      (v) “Section 11(a)(ii)
Event” shall mean any event described in Section 11(a)(ii)
hereof.

       

      (w) “Stock Acquisition
Date” shall mean the first date of public announcement (which, for
purposes of this definition, shall include a report filed or amended pursuant to
Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that
an Acquiring Person has become such or that discloses information which reveals
the existence of an Acquiring Person, or such earlier date as a majority of the
Board becomes aware of the existence of an Acquiring Person.

       

      (x) “Subsidiary” shall
mean, with reference to any Person, any corporation or other entity of which an
amount of securities or other ownership interest having ordinary voting power
sufficient to elect at least a majority of the directors or other Persons having
similar functions of such corporation or other entity are at the time, directly
or indirectly, Beneficially Owned, or otherwise controlled by such
Person.

       

      (y) “Tax Benefits” shall
mean the net operating loss carryovers, capital loss carryovers, general
business credit carryovers, alternative minimum tax credit carryovers and
foreign tax credit carryovers, as well as any loss or deduction attributable to
a “net unrealized built-in loss” within the meaning of Section 382 of the Code
and the Treasury Regulations promulgated thereunder, of the Company or any of
its Subsidiaries.

       

      (z) “Tender Offer Commencement
Date” shall mean the date that a tender or exchange offer or other
transaction by any Person (other than an Exempt Person) 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, upon consummation thereof, such Person
would become an Acquiring Person.

       

      (aa) “Treasury Regulations”
shall mean final, temporary and proposed regulation of the Department of
Treasury under the Code and any successor regulation, including any amendments
thereto.

       

      (bb) “Triggering Event”
shall mean any Section 11(a)(ii) Event or any Section 13 Event.

       

      (cc) The
following terms shall have the meanings defined for such terms in the Sections
set forth below:

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      
        	
                Term

              	
                Section

              
	
                Adjustment
      Shares

              	
                11(a)(ii)

              
	
                Board

              	
                Recitals

              
	
                Common
      Stock Equivalents

              	
                11(a)(iii)

              
	
                Current
      Market Price

              	
                11(d)(i)

              
	
                Current
      Value

              	
                11(a)(iii)

              
	
                Equivalent
      Preferred Stock

              	
                11(b)

              
	
                Exchange
      Ratio

              	
                24

              
	
                Existing
      Holder

              	
                1(a)

              
	
                Grandfathered
      Holder

              	
                1(a)

              
	
                NASDAQ

              	
                11(d)(i)

              
	
                Original
      Rights

              	
                1(e)(i)

              
	
                Preferred
      Stock

              	
                Recitals

              
	
                Principal
      Party

              	
                13(b)

              
	
                Purchase
      Price

              	
                4(a)

              
	
                Record
      Date

              	
                Recitals

              
	
                Redemption
      Price

              	
                23(a)

              
	
                Rights

              	
                Recitals

              
	
                Rights
      Agent

              	
                Preamble

              
	
                Rights
      Certificate

              	
                3(a)

              
	
                Rights
      Dividend Declaration Date

              	
                Recitals

              
	
                Section
      11(a)(ii) Event

              	
                11(a)(ii)

              
	
                Section
      11(a)(ii) Trigger Date

              	
                11(a)(iii)

              
	
                Section
      13 Event

              	
                13(a)

              
	
                Spread

              	
                11(a)(iii)

              
	
                Substitution
      Period

              	
                11(a)(iii)

              
	
                Summary
      of Rights

              	
                3(b)

              
	
                Trading
      Day

              	
                11(d)(i)

              


      

      


       

      Section
2. Appointment of Rights
Agent.  The
Company hereby appoints the Rights Agent to act as rights 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 Stock) in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment.  The Company may from time to time appoint
such co-rights agents as it may deem necessary or desirable.

       

      Section
3. Issuance of Rights
Certificates.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (a) Until the
Distribution Date, (i) the Rights will be evidenced (subject to the provisions
of paragraph (b) or (c) of this Section 3) by the balances indicated in the
book-entry account system of the transfer agent for the Common Stock registered
in the names of the holders of the Common Stock (which shares of Common Stock
shall also be deemed to represent certificates for Rights) or, in the case of
certificated shares, the certificates for the Common Stock registered in the
names of the holders of the Common Stock (which certificates for Common Stock
shall also be deemed to be certificates for Rights), and not by separate
certificates, and (ii) the Rights will be transferable only in connection with
the transfer of the underlying shares of Common Stock (including a transfer to
the Company).  As soon as practicable after the Distribution Date, the
Rights Agent will send by first-class, insured, postage-prepaid mail, to each
record holder of the Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit B
hereto (the “Rights
Certificates”), evidencing one Right for each share of Common Stock so
held, subject to adjustment as provided herein.  In the event that an
adjustment in the number of Rights per share of Common Stock has been made
pursuant to Section 11(p) hereof, 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.  As of and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.  The Company shall promptly notify the Rights Agent in
writing upon the occurrence of the Distribution Date.  Until such
notice is received by the Rights Agent, the Rights Agent may presume
conclusively for all purposes that the Distribution Date has not
occurred.

       

      (b) On or as
promptly as practicable after the Record Date, the Company shall send by first
class, postage prepaid mail, to each record holder of shares of Common Stock as
of the Record Date a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C (the “Summary of Rights”),
at the address of such holder shown on the records of the Company as of such
date.  The Company will make available the Summary of Rights to any
holder of Rights who may so request from time to time prior to the Expiration
Date.  With respect to the Common Stock outstanding as of the Record
Date, or issued subsequent to the Record Date, unless and until the Distribution
Date shall occur, the Rights will be evidenced by the balances indicated in the
book-entry account system of the transfer agent for the Common Stock or, in the
case of certificated shares, such certificates for the Common Stock, and the
registered holders of the Common Stock shall also be the registered holders of
the associated Rights.  Until the earlier of the Distribution Date or
the Expiration Date, the transfer of any shares of Common Stock in respect of
which Rights have been issued shall also constitute the transfer of the Rights
associated with such shares of Common Stock.

       

      (c) Rights
shall be issued in respect of all shares of Common Stock which are issued
(whether originally issued or from the Company’s treasury) after the Record Date
but prior to the earlier of the Distribution Date or the Expiration Date and
shall bear the following legends:

       

      (i) Confirmation
and account statements sent to holders of shares of Common Stock in book-entry
form (which shares of Common Stock shall also be deemed to represent
certificates for Rights) shall bear the following legend:

       

      “The
shares of Common Stock, par value $0.01 per share, of Solutia Inc. (the “Company”) entitle the
holder hereof to certain Rights as set forth in the 382 Rights Agreement between
the Company and the Rights Agent thereunder (the “Rights Agent”) dated
as of July 27, 2009, as it may be amended, restated, renewed or extended from
time to time (the “Rights Agreement”),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Rights Agent.  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 the shares
to which this statement relates.  The Rights Agent will mail to the
holder of shares to which this statement relates a copy of the Rights Agreement,
as in effect on the date of mailing, without charge, promptly after receipt of a
written request therefor.  Under certain circumstances set forth in
the Rights Agreement, Rights Beneficially Owned (as such term is defined in the
Rights Agreement) by any Person who is, was or becomes an Acquiring Person or
any Affiliate or Associate 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.”

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      With
respect to shares of Common Stock in book-entry form for which there has been
sent a confirmation or account statement containing the foregoing legend, until
the earlier of (A) the Distribution Date or (B) the Expiration Date, the Rights
associated with the Common Stock represented by such shares of Common Stock
shall be evidenced by such shares of Common Stock alone and registered holders
of Common Stock shall also be the registered holders of the associated Rights,
and the transfer of any of such shares of Common Stock shall also constitute the
transfer of the Rights associated with such shares of Common Stock.

       

      (ii) In the
case of certificated shares, certificates representing shares of Common Stock
(which certificates shall also be deemed to be certificates for Rights) shall
bear the following legend if such certificates are issued after the Record Date
but prior to the earlier of the Distribution Date or the Expiration
Date:

       

      “This
certificate also evidences and entitles the holder hereof to certain Rights as
set forth in the 382 Rights Agreement between Solutia Inc. (the “Company”) and the
Rights Agent thereunder (the “Rights Agent”) dated
as of July 27, 2009, as it may be amended, restated, renewed or extended from
time to time (the “Rights Agreement”),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Rights Agent.  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 Rights Agent will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of mailing,
without charge, promptly after receipt of a written request
therefor.  Under certain circumstances set forth in the Rights
Agreement, Rights Beneficially Owned (as such term is defined in the Rights
Agreement) by any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associate 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.”

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      With
respect to such certificates containing the foregoing legend, until the earlier
of (A) the Distribution Date or (B) the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone and registered holders of Common Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.

       

      Section
4. Form of Rights
Certificates.

       

      (a) The
Rights Certificates (and the forms of election to purchase and of assignment to
be printed on the reverse thereof) shall each be substantially in the form set
forth in Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which the Rights may from time to time be listed, 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 and on their face shall entitle the holders thereof to purchase
such number of 1/10,000th of a share of Preferred Stock as shall be set forth
therein at the price set forth therein (such exercise price per 1/10,000th of a
share, the “Purchase
Price”), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.

       

      (b) Any
Rights Certificate issued pursuant to Section 3(a), Section 11(i) 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 transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (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 such Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
regarding the transferred Rights or (B) a transfer which the Board, in its sole
discretion, has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect the avoidance of Section 7(e) hereof, 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.

       

      
        
          
          

        

        
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      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 President or any Vice President
(or more senior officer) of the Company, either manually or by facsimile
signature, and shall have affixed thereto the Company’s seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature.  The Rights
Certificates shall be countersigned by the Rights Agent, either manually or by
facsimile signature and shall not be valid for any purpose unless so
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 had not ceased
to be such officer of the Company; and any Rights Certificates 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
principal office or offices designated as the appropriate place for surrender of
Rights Certificates upon exercise or transfer, 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 Section 4(b), Section 7(e) and Section 14 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
Certificates (other than Rights Certificates representing Rights that may have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Rights Certificate or Certificates, entitling
the registered holder to purchase a like number of 1/10,000th of a share of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitles such holder (or former holder in the
case of a transfer) to purchase.  Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Certificates to be transferred, split up,
combined or exchanged at the principal office or offices 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 Section 4(b),
Section 7(e), Section 14 hereof and Section 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 holder of a Rights Certificate 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.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

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

       

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

       

      (a) Subject
to Section 7(e) hereof, at any time on or after the Distribution Date (or, if
the Distribution Date is the Record Date, 10 Business Days after the
Distribution Date), but prior to the Expiration Date, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein, including the restrictions on exercisability set
forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or
in part upon surrender of the Rights Certificate, with the form of election to
purchase and the certificate on the reverse side thereof duly executed, to the
Rights Agent at the principal office or offices of the Rights Agent designated
for such purpose, together with payment of the aggregate Purchase Price with
respect to the total number of 1/10,000th of a share of Preferred Stock (or
other securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable

       

      (b) The
Purchase Price for each 1/10,000th of a share of Preferred Stock pursuant to the
exercise of a Right initially shall be $45.00, shall be subject to adjustment
from time to time as provided in Sections 11 and 13(a) hereof and shall be
payable in accordance with paragraph (c) below.

       

      (c) Upon
receipt of a Rights Certificate representing exercisable Rights, with the form
of election to purchase and the certificate duly executed, accompanied by
payment, with respect to each Right so exercised, of the Purchase Price per
1/10,000th of a share of Preferred Stock (or other shares, securities, cash or
other assets, as the case may be) to be purchased as set forth below and an
amount equal to any applicable transfer tax, the Rights Agent shall, subject to
Sections 7(f) and 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of 1/10,000th of a share of Preferred Stock 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 shares of Preferred Stock issuable upon exercise of the Rights hereunder with
a depositary agent, requisition from the depositary agent depositary receipts
representing such number of 1/10,000th of a share of Preferred Stock as are to
be purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or, upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate.  The
payment of the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified bank check or bank
draft payable to the order of the Company.  In the event that the
Company is obligated to issue other securities (including Common Stock) of the
Company, 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.  The Company reserves the right
to require prior to the occurrence of a Triggering Event that, upon any exercise
of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock would be issued.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      (d) In case
the registered holder of any Rights Certificate shall exercise less than all the
Rights evidenced thereby, a new Rights Certificate evidencing the Rights
remaining unexercised shall be issued by the Rights Agent and 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, 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 Section 11(a)(ii) 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, or (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 (whether or not in writing)
regarding the transferred Rights or (B) a transfer which the Board has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect of the avoidance of this Section 7(e), shall become
null and void without any further action and no holder of such Rights shall have
any rights whatsoever with respect to such Rights, whether under any provision
of this Agreement or otherwise.  The Company shall use all reasonable
efforts to insure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to any holder of Rights
Certificates or any other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or any of its 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 this
Section 7 unless such registered holder shall 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 of such Beneficial Owner as
the Company shall reasonably request.

       

      
        
          
          

        

        
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      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 any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled 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 other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof.  The Rights Agent
shall deliver all cancelled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the
Company.

       

      Section
9. Reservation and Availability
of Capital Stock.

       

      (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.

       

      (b) So long
as the shares of Preferred Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) issuable and deliverable upon the
exercise of the Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange 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 Section 11(a)(ii) Event on
which the consideration to be delivered by the Company upon exercise of the
Rights has been determined in accordance with Section 11(a)(iii) hereof, a
registration statement under the 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 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 the expiration of the Rights.  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.  The Company may temporarily suspend,
for a period of time not to exceed 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 that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension has
been rescinded.  In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, the Company
may temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective.  Notwithstanding
any provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction if the requisite qualification in such
jurisdiction shall not have been obtained, the exercise thereof shall not be
permitted under applicable law, or a registration statement shall not have been
declared effective.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      (d) The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all 1/10,000th of a share of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares (subject to payment of the Purchase 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 issuance or delivery of the Rights Certificates and of any
certificates for a number of 1/10,000th of a share of Preferred Stock (or Common
Stock and/or other securities, as the case may be) 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 a
number of 1/10,000th of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in respect of a name other than that of the
registered holder of the Rights Certificates evidencing Rights surrendered for
exercise, nor shall the Company be required to issue or deliver any certificates
(or make any entries in the book-entry account system of the transfer agent) for
a number of 1/10,000th of a share of Preferred Stock (or Common Stock and/or
other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificates at
the time of surrender) or until it has been established to the Company’s
satisfaction that no such tax is due.

       

      Section
10. Preferred Stock Record
Date.  Each
person in whose name any certificate or entry in the book-entry account system
of the transfer agent for a number of 1/10,000th of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate or entry in the book-entry account system shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate or entry in
the book-entry account system shall be dated, the next succeeding Business Day
on which the Preferred Stock (or Common Stock and/or other securities, as the
case may be) 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 stockholder of the Company with respect
to shares for which the Rights shall be exercisable, including 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.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      Section
11. Adjustment of Purchase
Price, Number and Kind of Shares or Number of Rights.  The
Purchase Price, the number and kind of shares 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)           In
the event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the Preferred Stock payable in shares of Preferred Stock,
(B) subdivide or split the outstanding shares of Preferred Stock, (C) combine or
consolidate the outstanding shares of Preferred Stock into a smaller number of
shares, through a reverse stock split or otherwise, or (D) issue any shares of
its capital stock in a reclassification of the Preferred Stock (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, split, combination, consolidation or reclassification, and
the number and kind of shares of Preferred Stock or capital stock, as the case
may be, issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, split, combination, consolidation or
reclassification.  If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii)
hereof.

       

      (ii) In the
event any Person shall, at any time after the Rights Dividend Declaration Date,
become an Acquiring Person, unless the event causing such Person to become an
Acquiring Person is a transaction set forth in Section 13(a) hereof, then,
promptly following the later of the occurrence of such event and the Record
Date, proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, in lieu of a number of 1/10,000th of a share
of Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of 1/10,000th of a share of Preferred Stock for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, and (y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the “Purchase Price” for
each Right and for all purposes of this Agreement) by 50% of the Current Market
Price  per share of Common Stock on the date of such first occurrence
(such number of shares, the “Adjustment
Shares”).

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      (iii) In the
event that the number of treasury shares and shares of Common Stock which are
authorized by the Company’s Charter, but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights, is not sufficient
to permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall (A) determine the
value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”), and
(B) with respect to each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon the exercise of a Right
and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the Company
(including shares, or units of shares, of preferred stock, such as the Preferred
Stock, which the Board has deemed to have essentially the same value or economic
rights as shares of Common Stock (such shares of preferred stock being referred
to as “Common Stock
Equivalents”)), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to the
Current Value (less the amount of any reduction in the Purchase Price), where
such aggregate value has been determined by the Board based upon the advice of a
nationally recognized investment banking firm selected by the Board; provided, however, that if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the later of (x) the first occurrence
of a Section 11(a)(ii) 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 Purchase
Price, shares of Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the
Spread.  For purposes of the preceding sentence, the term “Spread” shall mean
the excess of (i) the Current Value over (ii) the Purchase Price.  If
the Board determines in good faith that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon exercise in full of
the Rights, the 30 day period set forth above may be extended to the extent
necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date,
in order that the Company may seek stockholder approval for the authorization of
such additional shares (such 30 day period, as it may be extended, is herein
called the “Substitution
Period”).  To the extent that the Company determines that
action should be taken pursuant to the first and/or third sentences of this
Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights, and
(2) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such stockholder approval for such
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof.  In the event of any such suspension, the Company shall
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 each Adjustment Share shall be the Current Market Price
per share of the Common Stock on the Section 11(a)(ii) Trigger Date and the per
share or per unit value of any Common Stock Equivalent shall be deemed to equal
the Current Market Price per share of the Common Stock on such
date.

       

      
        
          
          

        

        
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      (b) In case
the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them to subscribe for or
purchase (for a period expiring within 45 days after such record date) Preferred
Stock (or shares having the same rights, privileges and preferences as the
shares of Preferred Stock (“Equivalent Preferred
Stock”)) or securities convertible into Preferred Stock or Equivalent
Preferred Stock at a price per share of Preferred Stock or per share of
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock) less
than the Current Market Price per share of Preferred Stock on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
Equivalent Preferred Stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible).  In case such subscription price may be paid by delivery
of consideration, part or all of which may be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board,
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.  Shares of Preferred Stock 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 or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.

       

      (c) In case
the Company shall fix a record date for a distribution to all holders of
Preferred Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation),
cash (other than a regular quarterly cash dividend out of the earnings or
retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or evidences of indebtedness, or of subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price per share of
Preferred Stock on such record date, less the fair market value (as determined
in good faith by the Board, 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 share of Preferred Stock, and the denominator of which
shall be such Current Market Price per share of Preferred Stock.  Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      (d) (i)           For
the purpose of any computation hereunder, other than computations made pursuant
to Section 11(a)(iii) hereof, the “Current Market Price”
per share of Common Stock on any date shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the 30 consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share
of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the 10 consecutive Trading
Days immediately following such date; provided, however, that in the
event that the Current Market Price per share of the Common Stock is determined
during a period following the announcement by the issuer of such Common Stock of
(A) a dividend or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common Stock (other
than the Rights), or (B) any subdivision, combination, consolidation, reverse
stock split or reclassification of such Common Stock, and the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination, consolidation, reverse stock split or reclassification shall not
have occurred prior to the commencement of the requisite 30 Trading Day or 10
Trading Day period, as set forth above, then, and in each such case, the Current
Market Price shall be properly adjusted to take into account ex-dividend
trading.  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 on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common Stock
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers Automated Quotation System (“NASDAQ”) or such
other system then in use, or, if on any such date the shares of Common Stock are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Common
Stock selected by the Board.  If on any such date no market maker is
making a market in the Common Stock, the fair value of such shares on such date
as determined in good faith by the Board shall be used.  The term
“Trading Day”
shall mean a day on which the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a Business
Day.  If the Common Stock is not publicly held or not so listed or
traded, Current Market Price per share shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes.

       

      
        
          
          

        

        
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      (ii) For the
purpose of any computation hereunder, the Current Market Price per share of
Preferred Stock shall be determined in the same manner as set forth above for
the Common Stock in clause (i) of this Section 11(d) (other than the last
sentence thereof).  If the Current Market Price per share of Preferred
Stock cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described in clause
(i) of this Section 11(d), the Current Market Price per share of Preferred Stock
shall be conclusively deemed to be an amount equal to 1,000 (as such number may
be appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock occurring after the date of
this Agreement) multiplied by the Current Market Price per share of the Common
Stock.  If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, Current Market Price per share of the
Preferred Stock shall mean the fair value per share as determined in good faith
by the Board, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.

       

      (e) Anything
herein to the contrary notwithstanding, no adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-thousandth of a share of Common Stock or
other share or one-millionth of a share of Preferred Stock, as the case may
be.  Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) 3 years from the date of the transaction which mandates such adjustment,
or (ii) the Expiration Date.

       

      (f) If as a
result of an adjustment made pursuant to Section 11(a)(ii) 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 Stock, thereafter the
number of such other shares so receivable upon exercise of any Right and the
Purchase 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 Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Stock shall apply on like terms to any such
other shares.

       

      (g) All
Rights originally issued by the Company subsequent to any adjustment made to the
Purchase Price hereunder shall evidence the right to purchase, at the adjusted
Purchase Price, the number of 1/10,000th of a share of Preferred Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.

       

      (h) Unless
the Company shall have exercised its election as provided in Section 11(i), upon
each adjustment of the Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each Right outstanding immediately prior to the making
of such adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of 1/10,000th of a share of Preferred Stock
(calculated to the nearest one-millionth) obtained by (i) multiplying (x) the
number of 1/10,000th of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      (i) The
Company may elect on or after the date of any adjustment of the Purchase Price
to adjust the number of Rights, in lieu of any adjustment in the number of
1/10,000th of a share of Preferred Stock purchasable upon the exercise of a
Right.  Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of 1/10,000th of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment.  Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
1/10,000th) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price.  The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made.  This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement.  If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of 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 Purchase
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.

       

      (j) Irrespective
of any adjustment or change in the Purchase Price or the number of 1/10,000th of
a share of Preferred Stock issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per 1/10,000th of a share and the number of 1/10,000th of a share
which were expressed in the initial Rights Certificates issued
hereunder.

       

      (k) Before
taking any action that would cause an adjustment reducing the Purchase Price
below the then stated value, if any, of the number of 1/10,000th of a share of
Preferred Stock issuable upon exercise of the Rights, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable such
number of 1/10,000th of a share of Preferred Stock at such adjusted Purchase
Price.

       

      (l) In any
case in which this Section 11 shall require that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event the issuance to the holder
of any Right exercised after such record date the number of 1/10,000th of a
share of Preferred Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the number of 1/10,000th of a
share of Preferred Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder’s right to receive such additional shares (fractional or
otherwise) or securities upon the occurrence of the event requiring such
adjustment.

       

      
        
          
          

        

        
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      (m) Anything
in this Section 11 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the extent that in
their good faith judgment the Board shall determine to be advisable in order
that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance
wholly for cash of any shares of Preferred Stock at less than the Current Market
Price, (iii) issuance wholly for cash of shares of Preferred Stock or securities
which by their terms are convertible into or exchangeable for shares of
Preferred Stock, (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 Stock shall not be taxable to such
stockholders.

       

      (n) The
Company covenants and agrees that it shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
other than pursuant to a pro
rata dividend and/or distribution to all of the then current holders of
Common Stock, sell or transfer (or permit any Subsidiary to sell or transfer),
in one transaction, or a series of related transactions, assets, cash flow or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale 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 or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the “Principal Party” for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.

       

      (o) The
Company covenants and agrees that, after the Distribution Date, it will not,
except as permitted by Section 23 or Section 27 hereof, take (or permit any
Subsidiary to take) any action 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.

       

      (p) Anything
in this Agreement to the contrary notwithstanding, except as provided in the
following sentence, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, through
a reverse stock split or otherwise, the number of Rights associated with each
share of Common Stock then outstanding, or issued or delivered thereafter but
prior to the Distribution Date, shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock following
any such event shall equal the result obtained by multiplying the number of
Rights associated with each share of Common Stock immediately prior to such
event by a fraction the numerator which shall be the total number of shares of
Common Stock outstanding immediately prior to the occurrence of the event and
the denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.

       

      
        
          
          

        

        
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      Section
12. Certificate of Adjusted
Purchase Price or Number of Shares.  Whenever
an adjustment is made as provided in Section 11 and Section 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent, and with each transfer agent for the Preferred Stock
and the Common Stock, a copy of such certificate and (c) if a Distribution Date
has occurred, mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a share of
Common Stock) in accordance with Section 26 hereof.  The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained.

       

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

       

      (a) In the
event that, following the Stock Acquisition Date, directly or indirectly, (x)
the Company shall consolidate with, or merge with and into, any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof) shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such consolidation or merger, all or part of
the outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other property, or
(z) the Company shall, other than pursuant to pro rata dividend and/or
distribution to all of the then current holders of Common Stock, sell or
otherwise transfer (or one or more of its Subsidiaries) shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets, cash
flow or earning power aggregating more than 50% of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of which complies with Section 11(o) hereof) (each
event referred to in clauses (x)-(z), a “Section 13 Event”),
then, and in each such case, proper provision shall be made so that: (i) 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 the then current
Purchase Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, non-assessable and freely tradeable
shares of Common Stock of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of 1/10,000th of a
share of Preferred Stock for which a Right is exercisable immediately prior to
the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has
occurred prior to the first occurrence of a Section 13 Event, multiplying the
number of such 1/10,000th of a share for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event by the
Purchase Price in effect immediately prior to such first occurrence of a Section
11(a)(ii) Event), and (2) dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the “Purchase Price”
for each Right and for all purposes of this Agreement) by 50% of the Current
Market Price (determined pursuant to Section 11(d)(i) hereof) per share of the
Common Stock of such Principal Party on the date of consummation of such Section
13 Event; (ii) 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; (iii) the term “Company” shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including the reservation of a sufficient
number of shares of its Common Stock) in connection with the consummation of any
such transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      (b) “Principal Party”
shall mean:

       

      (i) in the
case of any transaction described in clause (x) or (y) of the first sentence of
Section 13(a) hereof, the Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to such merger or consolidation; and

       

      (ii) in the
case of any transaction described in clause (z) of the first sentence of Section
13(a) hereof, the Person that is the party receiving the greatest portion of the
assets, cash flow or earning power transferred pursuant to such transaction or
transactions; provided, however, that in any
such case, (1) if the Common Stock of such Person is not at such time and has
not been continuously over the preceding 12 month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, “Principal Party” shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stock of two or more of which are and have been so registered,
“Principal Party” shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value.

       

      (c) The
Company shall not consummate any such consolidation, merger, sale or transfer
unless the Principal Party shall have a sufficient number of authorized shares
of its Common Stock which 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 Principal Party shall have executed
and delivered to the Rights Agent confirming that the requirements of Section
13(a) and Section 13(b) hereof shall promptly be performed in accordance with
their terms and further providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will:

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

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

       

      (ii) take all
such other action as may be necessary to enable the Principal Party to issue the
securities purchasable upon exercise of the Rights, including the registration
or qualification of such securities under all requisite securities laws of
jurisdictions of the various states and the listing of such securities on such
exchanges and trading markets as may be necessary or appropriate;
and

       

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

       

      (d) The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.  In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section
13(a).

       

      Section
14. Fractional Rights and
Fractional Shares.

       

      (a) The
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p) hereof, or to distribute Rights
Certificates which evidence fractional Rights.  In lieu of such
fractional Rights, the Company shall pay 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 purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable.  The closing price of the
Rights for any Trading 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 on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights, selected by the Board.  If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board shall be used.

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      (b) The
Company shall not be required to issue fractions of shares of Preferred Stock
(other than fractions which are integral multiples of one ten-thousandth of a
share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one ten-thousandth of a share of
Preferred Stock).  In lieu of fractional shares of Preferred Stock
that are not integral multiples of one ten-thousandth of a share of Preferred
Stock, the Company may 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 one ten-thousandth of a share
of Preferred Stock.  For purposes of this Section 14(b), the current
market value of one ten-thousandth of a share of Preferred Stock shall be one
ten-thousandth of the closing price of a share of Preferred Stock (as determined
pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to
the date of such exercise.

       

      (c) Following
the occurrence of a Triggering Event, the Company shall not be required to issue
fractions of shares of Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock.  In
lieu of fractional shares of Common Stock, the Company may 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 1 share of Common Stock.  For purposes of this Section 14(c),
the current market value of one share of Common Stock shall be the closing price
per share of Common Stock (as determined pursuant to Section 11(d)(i) hereof) on
the Trading Day immediately prior to the date of such exercise.

       

      (d) The
holder of a Right by the acceptance of the Rights expressly waives such holder’s
right to receive any fractional Rights or any fractional shares upon exercise of
a Right, except as permitted by this Section 14.

       

      Section
15. Rights of
Action.  All
rights of action in respect of this Agreement, excepting the rights of action
given to the Rights Agent under Section 18 hereof, are vested in the respective
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the registered holders of the Common Stock); and any registered holder of
any Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), without the consent of the Rights Agent or of the holder of any other
Rights Certificate (or, prior to the Distribution Date, of the Common Stock),
may, in the holder’s own behalf and for the holder’s own benefit, enforce, and
may institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, the holder’s 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 shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this
Agreement.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      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 shares of Common Stock;

       

      (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;

       

      (c) subject
to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may
deem and treat the person in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated balance indicated in the book-entry account
system of the transfer agent for the Common Stock or, in the case of
certificated shares, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Rights Certificates or the
associated balance indicated in the book-entry account system of the transfer
agent for the Common Stock or, in the case of certificated shares, the
associated Common Stock certificate, made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be
required to be affected by any notice to the contrary; and

       

      (d) notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent shall have any liability to any holder of a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company
must use its reasonable best efforts to have any such order, decree or ruling
lifted or otherwise overturned as soon as possible.

       

      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 the holder of the number of 1/10,000th of
a share of Preferred Stock 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 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.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      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 disbursements 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 (each as determined by
a court of competent jurisdiction) 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.

       

      (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 the
balance indicated in the book-entry account system of the transfer agent for the
Common Stock or, in the case of certificated shares, certificate for Common
Stock, or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.

       

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

       

      (a) Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any Person succeeding to the corporate trust, stock transfer or other
stockholder services 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; but only if such Person 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 a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor 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.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      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 the identity
of any Acquiring Person and the determination of Current 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 the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer, any Assistant
Treasurer, 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 only for its own gross negligence, bad
faith or willful misconduct (each as determined by a court of competent
jurisdiction), provided, however, that the
Rights Agent shall under no circumstances be liable for indirect, consequential,
special or punitive damages hereunder.  Anything herein to the
contrary notwithstanding, any liability of the Rights Agent under this Agreement
will be limited in the aggregate to an amount equal to three times the amount of
fees paid by the Company to the Rights Agent.

       

      (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 or be
required to verify the same (except as to its countersignature on such Rights
Certificates), 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 adjustment required under the provisions of Section 11, Section 13 or
Section 24 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or as to whether
any shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      (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 the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
such officer.

       

      (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 Person.

       

      (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, however, 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 (other than internal costs incurred by the Rights Agent
in providing services to the Corporation in the ordinary course of its business
as Rights Agent) 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.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      Section
21. Change of Rights
Agent.  The
Rights Agent or any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon 30 days’ notice in writing mailed to the
Company, and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and, if such resignation occurs after the
Distribution Date, to the registered holders of the Rights Certificates by
first-class mail.  The Company may remove the Rights Agent or any
successor Rights Agent upon 30 days’ notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Stock and Preferred Stock, by registered or certified mail, and,
if such removal occurs after the Distribution Date, to the holders of the Rights
Certificates by first-class mail.  If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent.  If the Company shall fail to
make such appointment within a period of 30 days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent.  Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a legal business entity
organized and doing business under the laws of the United States or any State
thereof, in good standing, having an office in the State of New York, which is
authorized under such laws to exercise corporate trust, stock transfer or
stockholder services powers and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an
affiliate of a legal business entity described in clause (a) of this
sentence.  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 Common Stock and the Preferred Stock, and,
if such appointment occurs after the Distribution Date, 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 the Board to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement.  In addition, in connection with the
issuance or sale of shares of Common Stock following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to shares of Common Stock so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement, granted or awarded as
of the Distribution Date, 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, 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 if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, 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.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      Section
23. Redemption and
Termination.

       

      (a) The Board
may, at its option, at any time prior to the earlier of (i) Distribution Date,
or (ii) the Final Expiration Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $0.001 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the “Redemption
Price”).  Notwithstanding anything contained in this Agreement
to the contrary, the Rights shall not be exercisable after the first occurrence
of a Section 11(a)(ii) Event until such time as the Company’s right of
redemption hereunder has expired.  The Company may, at its option, pay
the Redemption Price in cash, shares of Common Stock (based on the Current
Market Price, as defined in Section 11(d)(i) hereof, of the Common Stock at the
time of redemption) or any other form of consideration deemed appropriate by the
Board.

       

      (b) Immediately
upon the action of the Board 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 for each Right so held.  Promptly after the action of
the Board 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 each holder’s last address
as it appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock.  Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice.  Each
such notice of redemption will state the method by which the payment of the
Redemption Price will be made.

       

      Section
24. Exchange.

       

      (a) The Board
may, at its option, at any time after the Stock Acquisition Date, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to Section 7(e) hereof or Rights that have
been exercised pursuant to Section 7 hereof) for Common Stock at an exchange
ratio of 1 share of Common Stock 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 shall not be
empowered to effect such exchange at any time after any Person (other than an
Exempt Person), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Stock of the Company
then outstanding.

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      (b) Immediately
upon the action of the Board ordering the exchange of any Rights pursuant to
subsection (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio.  The Company shall promptly give
public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange.  The Company promptly shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent.  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 Stock for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged.  Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 7(e) hereof) held by each holder of Rights.

       

      (c) In any
exchange pursuant to this Section 24, the Company, at its option, may substitute
Preferred Stock (or Equivalent Preferred Stock, as such term is defined in
paragraph (b) of Section 11 hereof) for Common Stock exchangeable for Rights, at
the initial rate of one ten-thousandth of a share of Preferred Stock (or
Equivalent Preferred Stock) for each share of Common Stock, as appropriately
adjusted to reflect stock splits, stock dividends and other similar transactions
after the date hereof.

       

      (d) In the
event that there shall not be sufficient shares of Common Stock issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional shares of Common Stock for
issuance upon exchange of the Rights.

       

      (e) The
Company shall not be required to issue fractions of shares of Common Stock or,
in the case of certificated shares, to distribute certificates which evidence
fractional shares of Common Stock.  In lieu of such fractional shares
of Common Stock, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional shares of Common Stock would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole share of Common Stock.  For the
purposes of this subsection (e), the current market value of a whole share of
Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.

       

      Section
25. Notice of Certain
Events.

       

      (a) In case
the Company shall propose, at any time after the Distribution Date, (i) to pay
any dividend payable in stock of any class to the holders of Preferred Stock or
to make any other distribution to the holders of Preferred Stock (other than a
regular quarterly cash dividend out of earnings or retained earnings of the
Company), or (ii) to offer to the holders of Preferred Stock rights or warrants
to subscribe for or to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities, rights or options, or
(iii) to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock), or (iv) to effect any consolidation or merger into or with any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or, other than pursuant to a pro rata dividend and/or
distribution to all of the then current holders of Common Stock, to effect any
sale or other transfer (or to permit one or more of its Subsidiaries to effect
any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), or (v) to effect
the liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock, whichever shall be the
earlier.

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

      (b) In case
any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in
any such case, (i) the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, to the extent feasible and 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
Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.

       

      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 by the Rights Agent with
the Company) as follows:

       

      Solutia
Inc.

      575
Maryville Centre Drive

      P.O. Box
66760

      St.
Louis, Missouri 63166

      Attention:  General
Counsel

      (314)
674-8703 (facsimile)

      (314)
674-5362 (telephone)

      


      Subject
to the provisions of Section 21, 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 by the Rights Agent with the Company) as follows:

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      American
Stock Transfer & Trust Company, LLC

       

      59 Maiden
Lane

       

      New York,
New York 10038

       

      Attention:  Felix
Orihuela

       

      718-765-8719
(facsimile)

       

      718-921-8360
(telephone)

       

      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 (or, if prior to the
Distribution Date, to the holder of shares of Common Stock) 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 Distribution Date, the Company and the Rights Agent shall, if the Company
so directs, supplement or amend any provision of this Agreement without the
approval of any holders of shares of Common Stock, including, without
limitation, to change the Final Expiration Date to another date, including an
earlier date.  From and after the Distribution Date, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (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 which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or
amendment.  Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock.  Notwithstanding anything herein to the contrary,
this Agreement may not be amended (other than pursuant to clauses (i) or (ii) of
the preceding sentence) at a time when the Rights are not
redeemable.  Notwithstanding anything herein to the contrary, the
Rights Agent may, but shall not be obligated to, enter into any supplement or
amendment that affects the Rights Agent’s own rights, duties, obligations or
immunities under this Agreement.

       

      Section
28. Successors.  All
the covenants and provisions of this Agreement by or for the benefit of the
Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.

       

      Section
29. Determinations and Actions
by the Board, etc.  For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock or any other class of capital stock outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of which any Person is the Beneficial Owner,
shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act.  The Board shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board, or as may be
necessary or advisable in the administration of this Agreement, including the
right and power to (i) interpret the provisions of this Agreement, and (ii) make
all determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement).  All such actions, calculations, interpretations
and determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) which are done or made by the Board in good
faith, shall (x) be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights and all other parties, and (y) not subject the
Board, or any of the directors on the Board to any liability to the holders of
the Rights.

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

      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, registered holders of the Common Stock)
any legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock).

       

      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 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 10th
Business Day following the date of such determination by the
Board.  Without limiting the foregoing, if any provision requiring a
specific group of directors of the Company to act is held to by any court of
competent jurisdiction or other authority to be invalid, void or unenforceable,
such determination shall then be made by the Board in accordance with applicable
law and the Company’s Charter and the Company’s Bylaws.

       

      Section
32. Governing
Law.  This
Agreement, 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 made and to be 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.

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

      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.

       

      


      {Signature
page follows.}


      
        
          
            
              	 
      	 
      	 
      


            

             

            K&E
15230038.6

          

           


        

        
          36 


          
            

          

        

        
           


        

      


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

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      	 
      	
                                              SOLUTIA
      INC.

                                            
	 
      	 
      	 
      
	 	 By: 	 /s/
      Paul J. Berra, III
	 
      	 Name:	 Paul
      J. Berra, III 
	 	 Title:	 Senior
      Vice President, General
	 	 	 Counsel
      and Chief Administrative Officer
	 	 	 
	 	 	 
	 
      	
                                              AMERICAN
      STOCK TRANSFER & TRUST COMPANY, LLC

                                            
	 
      	 
      	 
      
	 
      	 By:	
                                              /s/
      Herbert J. Lemmer

                                            
	 	 Name:	Herbert
      J. Lemmer
	 	 Title:	Vice
      President


                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      


      
        
          
            
              	 
      	 
      	 
      


            

             

            K&E
15230038.6

          

           


        

        
           


          
            

          

        

        
           


        

      


      Exhibit
A

       

      FORM
OF

       

      CERTIFICATE
OF DESIGNATION, PREFERENCES AND

       

      RIGHTS OF
SERIES A PARTICIPATING PREFERRED STOCK

       

      of

       

      Solutia
Inc.

       

      Pursuant
to Section 151 of the General Corporation Law

       

      of the
State of Delaware

       

      We, the
undersigned officers of Solutia Inc., a Delaware corporation (the “Corporation”),
pursuant to the provisions of Sections 103 and 151 of the General Corporation
Law of the State of Delaware, do hereby state and certify that pursuant to the
authority vested in the Board of Directors of the Corporation (the “Board”) by the Second
Amended and Restated Certificate of
Incorporation of the Corporation, the Board on July 27, 2009, duly adopted the
following resolution creating a series of 30,000 shares of Preferred
Stock designated as Series A Participating Preferred Stock:

       

      RESOLVED,
that pursuant to the authority vested in the Board in accordance with the
provisions of its Second Amended and Restated Certificate of
Incorporation, a series of Preferred Stock of the Corporation be and hereby is
created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:

       

      Section
1 Designation and
Amount.  The
shares of such series shall be designated as “Series A Participating Preferred
Stock” and the number of shares constituting such series shall be
30,000.

       

      Section
2 Dividends and
Distributions.

       

      (A) Subject
to the prior and superior rights 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 out of funds legally available for the purpose,
quarterly dividends payable in cash on the 15th day of
March, June, September and December 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
the greater of (a) $0.10 or (b) subject to the provision for adjustment
hereinafter set forth, 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, par
value $0.01 per share, of the Corporation (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.  In
the event the Corporation shall at any time after the Rights Dividend
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock, through a reverse stock split or otherwise, into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Participating Preferred Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

       

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

      (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); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.10 per share on the
Series A Participating Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.

       

      (C) Dividends
shall begin to accrue and be cumulative 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 and be cumulative 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 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
3 Voting
Rights.  The
holders of shares of Series A Participating Preferred Stock shall have the
following voting rights:

       

      (A) Subject
to the provision for adjustment hereinafter set forth, 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.  In the event the Corporation shall at any time after the
Rights Dividend Declaration Date (i) declare any dividend on 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,
through a reverse stock split or otherwise, then in each such case the number of
votes per share to which holders of shares of Series A Participating Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

       

      
        
          
          

        

        
          A-2

          
            

          

        

        
          
          

        

      

      (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) (i) If at
any time dividends on any Series A Participating Preferred Stock shall be in
arrears in an amount equal to 6 quarterly dividends thereon, the occurrence of
such contingency shall mark the beginning of a period (herein called a “default period”)
which shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of Series A Participating Preferred Stock then outstanding
shall have been declared and paid or set apart for payment.  During
each default period, all holders of Preferred Stock (including holders of the
Series A Participating Preferred Stock) with dividends in arrears in an amount
equal to 6 quarterly dividends thereon, voting as a class, irrespective of
series, shall have the right to elect 2 directors.

       

      (ii) During
any default period, such voting right of the holders of Series A Participating
Preferred Stock may be exercised initially at a special meeting called pursuant
to subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders; provided that such
voting right shall not be exercised unless the holders of 10% in number of
shares of Preferred Stock outstanding shall be present in person or by
proxy.  The absence of a quorum of the holders of Common Stock shall
not affect the exercise by the holders of Preferred Stock of such voting
right.  At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect directors to fill such
vacancies, if any, in the Board as may then exist up to 2 directors or, if such
right is exercised at an annual meeting, to elect 2 directors.  If the
number which may be so elected at any special meeting does not amount to the
required number, the holders of the Preferred Stock shall have the right to make
such increase in the number of directors as shall be necessary to permit the
election by them of the required number.  After the holders of the
Preferred Stock shall have exercised their right to elect directors in any
default period and during the continuance of such period, the number of
directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A
Participating Preferred Stock.

       

      (iii) Unless
the holders of Preferred Stock shall, during an existing default period, have
previously exercised their right to elect directors, the Board may order, or any
stockholder or stockholders owning in the aggregate not less than 10% of the
total number of shares of Preferred Stock outstanding, irrespective of series,
may request, the calling of a special meeting of the holders of Preferred Stock,
which meeting shall thereupon be called by the President, a Vice-President or
the Secretary of the Corporation.  Notice of such meeting and of any
annual meeting at which holders of Preferred Stock are entitled to vote pursuant
to this Paragraph (C)(iii) shall be given to each holder of record of Preferred
Stock by mailing a copy of such notice to him at his last address as the same
appears on the books of the Corporation.  Such meeting shall be called
for a time not earlier than 20 days and not later than 60 days after such order
or request or in default of the calling of such meeting within 60 days after
such order or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than 10% of the
total number of shares of Preferred Stock
outstanding.  Notwithstanding the provisions of this Paragraph
(C)(iii), no such special meeting shall be called during the period within 60
days immediately preceding the date fixed for the next annual meeting of the
stockholders.

       

      
        
          
          

        

        
          A-3

          
            

          

        

        
          
          

        

      

      (iv) In any
default period, the holders of Common Stock, and other classes of stock of the
Corporation if applicable, shall continue to be entitled to elect the whole
number of directors until the holders of Preferred Stock shall have exercised
their right to elect 2 directors voting as a class, after the exercise of which
right (x) the directors so elected by the holders of Preferred Stock shall
continue in office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y) any vacancy in
the Board may (except as provided in Paragraph (C)(ii) of this Section 3) be
filled by vote of a majority of the remaining directors theretofore elected by
the holders of the class of stock which elected the director whose office shall
have become vacant.  References in this Paragraph (C) to directors
elected by the holders of a particular class of stock shall include directors
elected by such directors to fill vacancies as provided in clause (y) of the
foregoing sentence.

       

      (v) Immediately
upon the expiration of a default period, (x) the right of the holders of
Preferred Stock as a class to elect directors shall cease, (y) the term of any
directors elected by the holders of Preferred Stock as a class shall terminate,
and (z) the number of directors shall be such number as may be provided for in
the certificate of incorporation or by-laws irrespective of any increase made
pursuant to the provisions of Paragraph (C)(ii) of this Section 3 (such number
being subject, however, to change thereafter in any manner provided by law or in
the certificate of incorporation or by-laws).  Any vacancies in the
Board effected by the provisions of clauses (y) and (z) in the preceding
sentence may be filled by a majority of the remaining directors.

       

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

       

      Section
4 Certain
Restrictions.

       

      (A) Whenever
quarterly dividends or other dividends or distributions payable on the Series A
Participating Preferred Stock as provided in Section 2 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:

       

      
        
          
          

        

        
          A-4

          
            

          

        

        
          
          

        

      

      (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; or

       

      (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) to all holders of such
shares upon such terms as the Board, 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.

       

      (B) 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 4, purchase or
otherwise acquire such shares at such time and in such manner.

       

      Section
5 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 cancelled
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, subject to the conditions and
restrictions on issuance set forth herein.

       

      Section
6 Liquidation, Dissolution or
Winding Up.

       

      (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participating Preferred Stock unless, prior thereto,
the holders of shares of Series A Participating Preferred Stock shall have
received an amount equal to $1,000 per share of Series A Participating Preferred
Stock, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment (the “Series A Liquidation
Preference”).  Following the payment of the full amount of the
Series A Liquidation Preference, no additional distributions shall be made to
the holders of shares of Series A Participating Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the “Common
Adjustment”) equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii), the “Adjustment
Number”).  Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Participating Preferred Stock and Common Stock,
respectively, holders of Series A Participating Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.

       

      
        
          
          

        

        
          A-5

          
            

          

        

        
          
          

        

      

      (B) In the
event, however, that there are not sufficient assets available to permit payment
in full of the Series A Liquidation Preference and the liquidation preferences
of all other series of preferred stock, if any, which rank on a parity with the
Series A Participating Preferred Stock, then such remaining assets shall be
distributed ratably to the holders of such parity shares in proportion to their
respective liquidation preferences.  In the event, however, that there
are not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.

       

      (C) In the
event the Corporation shall at any time after the Rights Dividend Declaration
Date (i) declare any dividend on 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, through a reverse stock split or
otherwise, then in each such case the Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

       

      Section
7 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 (subject to
the provision for adjustment hereinafter set forth) 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.  In the event the Corporation shall at any
time after the Rights Dividend Declaration Date (i) declare any dividend on
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, through a reverse stock split or otherwise, then in each such
case the amount set forth in the preceding sentence with respect to the exchange
or change of shares of Series A Participating Preferred Stock shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

       

      
        
          
          

        

        
          A-6

          
            

          

        

        
          
          

        

      

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

       

      Section
9 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
10 Amendment.  At
any time when any shares of Series A Participating Preferred Stock are
outstanding, the Second Amended and Restated Certificate of
Incorporation of the Corporation nor this Certificate of Designation shall be
amended in any manner which would materially alter or change the powers,
preferences 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 or more of the outstanding shares of Series A Participating Preferred
Stock, voting separately as a class.

       

      Section
11 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.

       


      
        
          
            
              	 
      	
                       

                    	 
      


            

             

            K&E
15230038.6

          

          A-7 


        

        
           


          
            

          

        

        
           


        

      


      IN
WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm
the foregoing as true under the penalties of perjury this 27th day of July
2009.

       

      
        
          
            
              
                
                  	 	 By:	 /s/ Paul J. Berra, III	 
	 	 Name:	 Paul
      J. Berra, III	 
	 	 Title:	 Senior
      Vice President, General	 
	 	 	 Counsel
      and Chief Administrative Officer	 


                

              

            

          

        

      

      
         

      

       

      Attest:

                          

      
        
          
            
              
                
                  	
                          By:

                        	
                          /s/
      David P. McCool

                        	 
      
	
                          Name:

                        	
                          David
      P. McCool

                        	 
      
	
                          Title:

                        	
                          Vice
      President and Assistant Secretary

                        	 
      


                

              

            

          

        

      


      
        
          
            
              	 
      	
                       

                    	 
      


            

             

            K&E
15230038.6

          

          A-8 


        

        
           


          
            

          

        

        
           


        

      


      Exhibit
B

       

      [Form of
Rights Certificate]

       

      Certificate
No. R-________ Rights

       

      NOT
EXERCISABLE AFTER 5:00 P.M., NEW YORK CITY TIME ON JULY 27, 2012, UNLESS THE
RIGHTS ARE PREVIOUSLY REDEEMED, EXCHANGED OR TERMINATED.  THE RIGHTS
ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
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 AGREEMENT.]

       

       

      Rights
Certificate

       

      Solutia
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 382 Rights
Agreement, dated as of July 27, 2009 (the “Rights Agreement”),
as it may be amended, restated, renewed or extended from time to time, between
Solutia Inc., a Delaware corporation (the “Company”), and
American Stock Transfer & Trust Company, LLC, a New York limited liability
trust company (the “Rights Agent”), to
purchase from the Company at any time prior to 5:00 P.M., New York City time on
July 27, 2012, unless the Rights are previously redeemed, exchanged or
terminated, at the office or offices of the Rights Agent designated for such
purpose, or its successors as Rights Agent, one ten-thousandth of a fully paid,
non-assessable share of Series A Participating Preferred Stock (the “Preferred Stock”) of
the Company, at a purchase price of $45.00 per one ten-thousandth of a share
(the “Purchase
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 shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are the number
and Purchase Price as of July 27, 2009, based on the Preferred Stock as
constituted at such date.  The Company reserves the right to require
prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that a number of Rights be exercised so that only whole shares
of Preferred Stock will be issued.

       

      
        
          
          

        

        
          B-1

          
            

          

        

        
          
          

        

      

      Upon the
occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights
Agreement), if the Rights evidenced by this Rights Certificate are Beneficially
Owned by (i) an Acquiring Person or an Affiliate or Associate of any such
Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.

       

      As
provided in the Rights Agreement, the Purchase Price and the number and kind of
shares of Preferred Stock 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, including
Triggering Events.

       

      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
above-mentioned office of the Rights Agent and are also available upon written
request to the Rights Agent.

       

      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 number of
1/10,000th of a share of Preferred Stock 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.

       

      Subject
to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at any time prior to
the earlier of (A) the Distribution Date (as such term is defined in the Rights
Agreement), and (B) the Final Expiration Date (as such term is defined in the
Rights Agreement), at a redemption price of $0.001 per Right.

       

      No
fractional shares of Preferred Stock will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one ten-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights
Agreement.  The Company, at its election, may require that a number of
Rights be exercised so that only whole shares of Preferred Stock would be
issued.

       

      
        
          
          

        

        
          B-2

          
            

          

        

        
          
          

        

      

      No holder
of this Rights Certificate shall be entitled to vote or receive dividends or be
deemed for any purpose the holder of shares of Preferred Stock 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
consent to or withhold consent from 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.

       


      
        
          
            
              	 
      	
                       

                    	 
      


            

             

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          B-3 


        

        
           


          
            

          

        

        
           


        

      


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

       

      Dated as
of _________ __, ____.

       

      
        	
                ATTEST:

              	 
      	
                Solutia
      Inc.

              
	 
      	 
      	 
      
	
                 

                _____________________

                Secretary

              	 
      	
                By: ______________________________          

                Title:

              
	 
      	 
      	 
      
	
                Countersigned:

              	 
      	 
      
	
                [·]

              	 
      	 
      
	 
      	 
      	 
      
	
                By:        __________________________                                                      

                Authorized
      Signature

              	 
      	 
      


      

       

      [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:

       

      
        
          
          

        

        
          B-4

          
            

          

        

        
          
          

        

      

      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 Acquiring Person (as such terms are defined pursuant to
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
an Acquiring Person.

       

      
        	
                Dated:
      _______________, __

              	 
      	
                _______________________________

                Signature:

              


      

       

      (d)           Signature
Guaranteed:

       


      
        
          
            
              	 
      	
                       

                    	 
      


            

             

            K&E
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          B-5 


          
            

          

        

        
           


        

      


      NOTICE

       

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

       


      
        
          
            
              	 
      	
                       

                    	 
      


            

             

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          B-6 


        

        
           


          
            

          

        

        
           


        

      


      FORM OF ELECTION TO
PURCHASE

       

      (To be
executed if holder desires to exercise Rights

       

      represented
by the Rights Certificate.)

       

      To:
SOLUTIA INC.

       

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

       

      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 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:

     

    


    
      
        
          
            
              	 
      	
                       

                    	 
      


            

             

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    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 Acquiring Person (as such terms are defined pursuant to
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 became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.

     

    Dated:
_______________,__

     

    _______________________________

    Signature:

     

    Signature
Guaranteed:

     

    


    
      
        
          
            
              	 
      	
                       

                    	 
      


            

             

            K&E
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          B-8 


          
            

          

        

        
           


        

      

    

    


    NOTICE

     

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

     

    


    
      
        
          
            
              	 
      	
                       

                    	 
      


            

             

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    Exhibit
C

     

    FORM
OF

     

    SUMMARY
OF RIGHTS TO PURCHASE

     

    STOCK
UNDER 382 RIGHTS AGREEMENT

     

    On July
27, 2009, the Board of Directors (the “Board”) of Solutia
Inc. (the “Company”) authorized
and declared a dividend distribution of one right (a “Right”) for each
outstanding share of Common Stock, par value $0.01 per share, of the Company
(the “Common
Stock”), to stockholders of record at the close of business on July 28,
2009 (the “Record
Date”).  Each Right entitles the registered holder to purchase
from the Company a unit consisting of one ten-thousandth of a share (a “Unit”) of Series A
Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”) at
a purchase price of $45.00 per Unit, subject to adjustment (the “Purchase
Price”).  The description and terms of the Rights are set forth
in a 382 Rights Agreement, dated as of July 27, 2009 (the “Rights Agreement”),
by and between the Company and American Stock Transfer & Trust Company, LLC,
a New York limited liability trust company, as Rights Agent.  The
Rights are intended to avoid an “ownership change” within the meaning of Section
382 of the Internal Revenue Code of 1986, as amended (the “Code”), and thereby
preserve the current ability of the Company to utilize certain net operating
loss carryovers and other tax benefits of the Company and its subsidiaries (the
“Tax
Benefits”).

     

    Initially,
the Rights will be attached to the shares of Common Stock underlying the
balances indicated in the book-entry account system of the transfer agent for
the Common Stock or, in the case of certificated shares, all Common Stock
certificates representing shares then outstanding, and no separate rights
certificates (“Rights
Certificates”) will be distributed.  Subject to certain
exceptions specified in the Rights Agreement, the Rights will separate from the
Common Stock and a distribution date (a “Distribution Date”)
will occur upon the earlier of (i) 10 business days (or such later date as the
Board shall determine) following a public announcement that a person or group of
affiliated or associated persons has become an Acquiring Person (as described
below) or (ii) 10 business days (or such later date as the Board shall
determine) following the commencement of a tender offer, exchange offer or other
transaction that, upon consummation thereof, would result in a person or group
of affiliated or associated persons becoming an Acquiring
Person.  Until the Distribution Date, (A) the Rights will be evidenced
by the balances indicated in the book-entry account system of the transfer agent
for the Common Stock registered in the names of the holders of the Common Stock
or, in the case of certificated shares, the Common Stock certificates, and will
be transferred with and only with such shares or, in the case of certificated
shares, Common Stock certificates, (B) confirmation and account statements sent
to the holders of shares of Common Stock in book-entry form or, in the case of
certificated shares, new Common Stock certificates issued after the Record Date,
will contain a notation incorporating the Rights Agreement by reference and (C)
the transfer of any shares of Common Stock or, in the case of certificated
shares, certificates for Common Stock, outstanding will also constitute the
transfer of the Rights associated with such shares of Common Stock or, in the
case of certificated shares, the Common Stock represented by such
certificates.  Pursuant to the Rights Agreement, the Company reserves
the right to require prior to the occurrence of a Triggering Event (as defined
below) that, upon any exercise of Rights, a number of Rights be exercised so
that only whole shares of Preferred Stock will be issued.

     

    
      
        
        

      

      
        C-1

        
          

        

      

      
        
        

      

    

    An
Acquiring Person is any person or group of affiliated or associated persons who
is or becomes the beneficially owner of 4.99% or more of the shares of Common
Stock outstanding other than as a result of repurchases of stock by the Company,
dividends or distributions by the Company or certain inadvertent actions by
stockholders.  Beneficial ownership is determined as provided in the
Rights Agreement and generally includes, without limitation, any ownership of
securities a Person would be deemed to actually or constructively own for
purposes of Section 382 of the Code or the Treasury Regulations promulgated
thereunder.  The Rights Agreement provides that the following shall
not be deemed an Acquiring Person for purposes of the Rights Agreement: (i) the
Company or any Subsidiary of the Company and 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; or (ii) any person that, as of July 27, 2009, is the beneficial owner of
4.99% or more of the shares of Common Stock outstanding (such person, an “Existing Holder”)
unless and until such Existing Holder acquires beneficial ownership of one or
more additional shares of Common Stock (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding shares of Common
Stock or pursuant to a split or subdivision of the outstanding shares of Common
Stock) and after such acquisition is the beneficial owner of 4.99% or more of
the then outstanding shares of Common Stock.

     

    The
Rights Agreement provides that a Person shall not become an Acquiring Person for
purpose of the Rights Agreement in a transaction that the Board determines, in
its sole discretion, is exempt from the Rights Agreement, which determination
shall be made in the sole and absolute discretion of the Board, upon request by
any Person prior to the date upon which such Person would otherwise become an
Acquiring Person, including, without limitation, if the Board determines that
(i) neither the beneficial ownership of shares of Common Stock by such Person,
directly or indirectly, as a result of such transaction nor any other aspect of
such transaction would jeopardize or endanger the availability to the Company of
the Tax Benefits or (ii) such transaction is otherwise in the best interests of
the Company.

     

    The
Rights are not exercisable until the Distribution Date and will expire on the
earliest of (i) 5:00 P.M., New York City time on July 27, 2012 (the “Final Expiration
Date”), (ii) the time at which the Rights are redeemed or exchanged as
provided in the Rights Agreement, (iii) the date on which the Board determines
that this Agreement is no longer necessary for the preservation of material
valuable Tax Benefits, and (iv) the beginning of a taxable year of the Company
to which the Board determines that no Tax Benefits may be carried
forward.

     

    As soon
as practicable after the Distribution Date, Rights Certificates will be mailed
to holders of record of the Common Stock as of the close of business on the
Distribution Date and, thereafter, the separate Rights Certificates alone will
represent the Rights.

     

    In the
event that a person or group of affiliated or associated persons becomes an
Acquiring Person, each holder of a Right will thereafter have the right to
receive, upon exercise on or after the Distribution Date, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the
Right.  Notwithstanding any of the foregoing, following the occurrence
of the event set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, Beneficially Owned by any
Acquiring Person will be null and void.

     

    
      
        
        

      

      
        C-2

        
          

        

      

      
        
        

      

    

    For
example, at an exercise price of $45.00 per Right, each Right not owned by an
Acquiring Person (or by certain related parties) following the event set forth
in the preceding paragraph would entitle its holder to purchase $90.00 worth of
Common Stock (or other consideration, as noted above) for
$45.00.  Assuming that the Common Stock had a per share value of $9.00
at such time, the holder of each valid Right would be entitled to purchase ten
shares of Common Stock for $45.00.

     

    In the
event that, at any time following the first date of public announcement that a
person has become an Acquiring Person or that discloses information which
reveals the existence of an Acquiring Person or such earlier date as a majority
of the Board becomes aware of the existence of an Acquiring Person (any such
date, the “Stock
Acquisition Date”), (i) the Company engages in a merger or other business
combination transaction in which the Company is not the surviving corporation,
(ii) the Company engages in a merger or other business combination transaction
in which the Company is the surviving corporation and the Common Stock of the
Company is changed or exchanged, or (iii) other than pursuant to a pro rata dividend and/or
distribution to all of the then current holders of Common Stock, 50% or more of
the Company’s assets, cash flow or earning power is sold or transferred, each
holder of a Right (except Rights which have previously been voided as set forth
above) shall thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a value equal to two times the Purchase
Price.  The events set forth in this paragraph and in the second
preceding paragraph are referred to as the “Triggering
Events.”

     

    At any
time after a the Stock Acquisition Date and prior to the acquisition by such
person or group of 50% or more of the outstanding Common Stock, the Board may
exchange the Rights (other than Rights owned by such person or group which have
become void), in whole or in part, for Common Stock or Preferred Stock at an
exchange ratio of one share of Common Stock, or one ten-thousandth of a share of
Preferred Stock (or of a share of a class or series of the Company’s preferred
stock having equivalent rights, preferences and privileges), per Right (subject
to adjustment).

     

    
      
        
        

      

      
        C-3

        
          

        

      

      
        
        

      

    

    The
Purchase Price payable, and the number of Units of Preferred Stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).

     

    With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments amount to at least 1% of the Purchase
Price.  No fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred Stock
on the last trading date prior to the date of exercise.

     

    At any
time until the earlier of (A) the Distribution Date or (B) the Final Expiration
Date, the Company may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right.  Immediately upon the action of the Board ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $0.001 redemption price.

     

    Until a
Right is exercised, the holder thereof, as such, will have no separate rights as
a stockholder of the Company, including the right to vote or to receive
dividends in respect of Rights.  While the distribution of the Rights
generally should not be taxable to stockholders or to the Company, stockholders
may, depending upon the circumstances, recognize taxable income in the event
that the Rights become exercisable for Common Stock (or other consideration) of
the Company or for common stock of the acquiring company or in the event of the
redemption of the Rights as set forth above.

     

    Any of
the provisions of the Rights Agreement may be amended by the Board prior to the
Distribution Date, including, without limitation, to change the Final Expiration
Date to another date, including an earlier date.  After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights, or to shorten or lengthen any time
period under the Rights Agreement.

     

    A copy of
the Rights Agreement has been or will be filed with the Securities and Exchange
Commission as an Exhibit to a Registration Statement on Form 8-A or Current
Report on Form 8-K.  A copy of the Rights Agreement is available free
of charge from the Rights Agent.  This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is incorporated herein by
reference.

     

    


     

    C-4

    
      K&E
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