Document:

<PAGE>

                                                                     EXHIBIT 4.1

                                RIGHTS AGREEMENT

                                     between

                         SYNOVIS LIFE TECHNOLOGIES, INC.

                                       and

                     AMERICAN STOCK TRANSFER & TRUST COMPANY

                            dated as of June 1, 2006

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Section 1.    Certain Definitions........................................     1
Section 2.    Appointment of Rights Agent................................     9
Section 3.    Issue of Rights Certificates...............................     9
Section 4.    Form of Rights Certificates................................    11
Section 5.    Countersignature and Registration..........................    12
Section 6.    Transfer, Split Up, Combination and Exchange of Rights
              Certificates; Mutilated, Destroyed, Lost or Stolen Rights
              Certificates...............................................    12
Section 7.    Exercise of Rights; Purchase Price; Expiration Date........    13
Section 8.    Cancellation and Destruction of Rights Certificates........    15
Section 9.    Reservation and Availability of Common Shares;
              Registration...............................................    15
Section 10.   Common Shares Record Date..................................    17
Section 11.   Adjustment of Purchase Price, Number and Kind of Shares or
              Number of Rights...........................................    17
Section 12.   Certificate of Adjusted Purchase Price or Number of
              Shares.....................................................    25
Section 13.   Consolidation, Merger or Sale or Transfer of Assets or
              Earning Power..............................................    25
Section 14.   Fractional Rights and Fractional Shares....................    28
Section 15.   Rights of Action...........................................    28
Section 16.   Agreement of Rights Holders................................    29
Section 17.   Rights Certificate Holder Not Deemed a Shareholder.........    29
Section 18.   Concerning the Rights Agent................................    30
Section 19.   Merger or Consolidation or Change of Name of Rights Agent..    30
Section 20.   Duties of Rights Agent.....................................    31
Section 21.   Change of Rights Agent.....................................    33
Section 22.   Issuance of New Rights Certificates........................    34
Section 23.   Redemption and Termination.................................    34
Section 24.   Exchange...................................................    37
Section 25.   Notice of Certain Events...................................    38
Section 26.   Notices....................................................    39
Section 27.   Supplements and Amendments.................................    40
Section 28.   Successors.................................................    41
Section 29.   Determinations and Actions by the Board....................    41
Section 30.   Benefits of this Agreement.................................    42
Section 31.   Severability...............................................    42
Section 32.   Governing Law..............................................    42
Section 33.   Counterparts...............................................    42
Section 34.   Descriptive Headings.......................................    42
</TABLE>

<TABLE>
<CAPTION>
Exhibits
--------
<S>        <C>
A          Form of Rights Certificate
B          Summary of Rights Agreement
</TABLE>

                                        i
<PAGE>

                                RIGHTS AGREEMENT

     This Rights Agreement, dated as of June 1, 2006 (this Agreement"), is by
and between Synovis Life Technologies, Inc., a Minnesota corporation (the
"Company"), and American Stock Transfer & Trust Company, a New York corporation,
as Rights Agent (the "Rights Agent").

                                   WITNESSETH

     WHEREAS, in June 1996 the Board of Directors of the Company (the "Board")
approved and adopted a Rights Agreement (the "1996 Agreement") pursuant to which
common stock purchase rights were distributed to the shareholders of the
Company;

     WHEREAS, the rights issued pursuant to the 1996 Agreement will expire at
the close of business on June 11, 2006, and the 1996 Agreement will thereupon
terminate; and

     WHEREAS, on June 1, 2006 (the "Rights Dividend Declaration Date"), the
Board determined to extend the protections similar to those provided by the 1996
Agreement by authorizing and declaring a dividend distribution of one new Right
for each share of common stock, par value $0.01 per share, of the Company (the
"Common Stock") outstanding at the close of business on June 11, 2006 (the
"Record Date"), to replace the rights previously issued pursuant to the 1996
Agreement, and the Board has authorized the issuance of one Right (as such
number may hereinafter be adjusted pursuant to the provisions of Sections 11,
13, or 24 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, each Right (initially, a "Right" and collectively the
"Rights") initially representing the right to purchase one-tenth of a Common
Share of the Company upon the terms and subject to the conditions hereinafter
set forth and directed the issuance of one Right for each Common Share issued
between the Record Date and the earlier of the Distribution Date or the
Expiration Date (both as hereinafter defined).

     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, other than an Exempt
     Person, who or which, alone or together with all Affiliates and Associates
     of such Person, shall be the Beneficial Owner of 20% or more of the Common
     Shares then outstanding (other than as a result of a Permitted Offer (as
     hereinafter defined)). Notwithstanding the foregoing, no Person shall
     become an "Acquiring Person": (i) as the result of an acquisition of Common
     Shares by the Company which, by reducing the number of Common Shares
     outstanding, increases the proportionate number of Common Shares
     beneficially owned by such Person to 20% or more of the Common Shares then
     outstanding; provided, however, that if a Person shall become the
     Beneficial Owner of 20% or more of the Common Shares then outstanding by
     reason of Common Share purchases by the Company and shall thereafter become
     the Beneficial Owner of any additional Common Shares, then such Person
     shall be deemed to be an "Acquiring Person"; or (ii) who beneficially owns
     20% or more of the outstanding Common Shares

                                       1

<PAGE>

     but who acquired Beneficial Ownership of Common Shares without any plan or
     intention to seek or affect control of the Company, if such Person promptly
     enters into an irrevocable commitment promptly to divest, and thereafter
     promptly divests (without exercising or retaining any power, including
     voting, with respect to such shares), sufficient shares of Common Shares
     (or securities convertible into, exchangeable into or exercisable for
     Common Shares) so that such Person ceases to be the Beneficial Owner of 20%
     or more of the outstanding shares of Common Shares; or (iii) who
     beneficially owns Common Shares consisting solely of one or more (A) Common
     Shares beneficially owned pursuant to the grant for exercise of an option
     granted to such Person by the Company in connection with an agreement to
     merge with, or acquire, the Company entered into prior to a Section
     11(a)(ii) Trigger Date, (B) Common Shares (or securities convertible into,
     exchangeable into or exercisable for Common Shares), beneficially owned by
     such Person or its Affiliates or Associates at the time of grant of such
     option or (C) Common Shares (or securities convertible into, exchangeable
     into or exercisable for Common Shares) acquired by Affiliates or Associates
     of such Person after the time of such grant which, in the aggregate, amount
     to less than 1% of the outstanding Common Shares.

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

          (c) "Adjustment Shares" shall have the meaning set forth in Section
     11(a)(ii).

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

          (e) "Agreement" shall have the meaning set forth in the preamble
     clause at the beginning hereof.

          (f) "Beneficial Owner"

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

                    (A) which such Person or any of such Person's Affiliates or
     Associates, directly or indirectly, beneficially owns;

                    (B) which such Person or any of such Person's Affiliates or
     Associates, directly or indirectly, has the right to acquire (whether such
     right is exercisable immediately or only after the passage of time)
     pursuant to any agreement, arrangement or understanding, whether or not in
     writing (other than customary agreements with and between underwriters and
     selling group members with respect to a bona fide public offering of
     securities), 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," (1) securities tendered pursuant to a tender or exchange offer made
     by or on behalf of such Person or any of such Person's Affiliates or
     Associates until such tendered securities

                                       2

<PAGE>

     are accepted for purchase or exchange, (2) securities issuable upon
     exercise of Rights at any time prior to the occurrence of a Triggering
     Event, or (3) 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 (the "Original
     Rights") or pursuant to Section 11(i) in connection with an adjustment made
     with respect to any Original Rights;

                    (C) which such Person or any of such Person's Affiliates or
     Associates, directly or indirectly, has the right (sole or shared) 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, or
     any comparable or successor rule, whether or not the Company is subject to
     the Exchange Act), including, without limitation, 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 Section 1(f)(i)(C) as
     a result of an oral or written agreement, arrangement or understanding to
     vote such security if such agreement, arrangement or understanding (1)
     arises solely from a revocable proxy given in response to a 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 if such provisions are not applicable by law such proxy
     or solicitation is made in substantially the same manner as if such
     provisions were applicable), and (2) is not also then reportable by such
     Person on Schedule 13D under the Exchange Act (or any comparable or
     successor report) (and if the Company is not subject to the Exchange Act,
     would not be then reportable if the Company was subject to the Exchange
     Act); or

                    (D) which are beneficially owned, directly or indirectly, by
     any other Person (or any Affiliate or Associate thereof) with which such
     Person (or any of such Person's Affiliates or Associates) 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 Section 1(f)(i)(C)(1) or disposing of such securities.

               (ii) Notwithstanding anything in this definition to the contrary,
     the phrase "then outstanding," when used with reference to a Person's
     Beneficial Ownership of securities, shall mean the number of such
     securities then issued and outstanding together with the number of such
     securities not then actually issued and outstanding which such Person is
     deemed to own beneficially hereunder.

          (g) "Board" shall have the meaning set forth in the recital clause at
     the beginning of this Agreement.

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

          (i) "Close of business" on any given date shall mean 5:00 p.m.
     Minneapolis, Minnesota time, on such date; provided, however, that if such
     date is not a Business Day

                                       3

<PAGE>

     it shall mean 5:00 p.m. Minneapolis, Minnesota time on the next succeeding
     Business Day.

          (j) "Committee" shall have the meaning set forth in Section 23(c).

          (k) "Common Shares" when used with reference to the Company shall mean
     the shares of Common Stock, par value $.01 per share, of the Company.
     "Common Shares" when used with reference to any Person other than the
     Company shall mean: (i) in the case of Persons organized in corporate form,
     the shares of capital stock or units of equity security with the greatest
     voting power of such Person or, if such Person is a Subsidiary of another
     Person, of the Person or Persons which ultimately control or direct the
     management of such first-mentioned Person, and (ii) in the case of Persons
     not organized in corporate form, the units of beneficial interest which (A)
     represent the right to participate generally in the profits and losses of
     such Person (including without limitation any flow-through tax benefits
     resulting from an ownership interest in such Person) and (B) are entitled
     to exercise the greatest voting power of such Person or, in the case of a
     limited partnership, shall have the power to remove the general partner or
     partners.

          (l) "Company" shall have the meaning set forth in the preamble clause
     at the beginning of this Agreement.

          (m) "Current Market Price" shall have the meaning set forth in Section
     11(d).

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

          (o) "Distribution Date" shall have the meaning set forth in Section
     3(a).

          (p) "Equivalent Preferred Stock" shall have the meaning set forth in
     Section 11(a)(iii).

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

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

          (s) "Exempt Person(s)" shall mean the Company, any Subsidiary of the
     Company, or any employee benefit plan of the Company or of any Subsidiary
     of the Company or any Person organized, appointed or established by the
     Company for or pursuant to the terms of any such plan.

          (t) "Expiration Date" shall have the meaning set forth in Section
     7(a).

          (u) "Final Expiration Date" shall mean the close of business on June
     10, 2016.

          (v) "Offer Date" shall have the meaning set forth in Section 23(d)(i).

          (w) "Original Rights" shall have the meaning set forth in Section
     1(f)(i)(B)(3).

                                       4

<PAGE>

          (x) "Outside Directors" shall mean members of the Board who are not
     officers of the Company or any of its Subsidiaries and who are not
     Acquiring Persons or representatives, nominees, Affiliates or Associates of
     Acquiring Persons.

          (y) "Permitted Offer" shall mean a tender or exchange offer which is
     for all outstanding Common Shares at a price and on terms determined, prior
     to the purchase of shares under such tender or exchange offer, by at least
     a majority of the Outside Directors to be adequate (taking into account all
     factors that such directors deem relevant including, without limitation,
     prices that could reasonably be achieved if the Company or its assets were
     sold on an orderly basis designed to realize maximum value) and otherwise
     in the best interests of the Company and its shareholders (other than the
     Person or any Affiliate or Associate thereof on whose behalf the offer is
     being made) taking into account all factors that such directors may deem
     relevant.

          (z) "Person" shall mean any individual, firm, corporation, partnership
     or other entity.

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

          (bb) "Purchase Price" shall have the meaning set forth in Section
     4(a), and shall initially be as set forth in Section 7(b).

          (cc) "Qualified Offer" shall mean a tender offer for all outstanding
     shares of Common Stock which meets all of the following requirements:

               (i) the same per share price and consideration is offered for all
     shares of Common Stock in the Qualified Offer, provided that such per share
     price and consideration is no less than the then Current Market Price for
     shares of Common Stock;

               (ii) the consideration is at least 80 percent cash (and any
     non-cash portion is comprised of shares listed on a national exchange or
     the Nasdaq National Market, to be adjusted to reflect any decrease in the
     value of such shares prior to the consummation of the Qualified Offer) and
     is to be paid upon consummation of the Qualified Offer for all tendered or
     exchanged shares of Common Stock in the Qualified Offer;

               (iii) on or prior to the date such offer is commenced within the
     meaning of Rule 14d-2(a) of the General Rules and Regulations under the
     Exchange Act, such Person making the offer:

                    (A) has on hand cash or cash equivalents for the full amount
     necessary to consummate such offer and has irrevocably committed in writing
     to the Company to utilize such cash or cash equivalents for purposes of
     such offer if consummated and to set apart and maintain available such cash
     or cash equivalents for such purposes until the offer is consummated or
     withdrawn; or

                                       5

<PAGE>

                    (B) has all financing in the full amount necessary to
     consummate such offer and has:

                         (1) entered into, and provided to the Company certified
     copies of, definitive financing agreements (including exhibits and related
     documents) for funds for such offer which, when added to the amount of cash
     and cash equivalents available, committed in writing, set apart and
     maintained in the same manner as described in clause (A) above, are in an
     amount not less than the full amount necessary to consummate such offer,
     which agreements are with one or more responsible financial institutions or
     other entities having the necessary financial capacity and ability to
     provide such funds, and are subject only to customary terms and conditions
     (which shall in no event include conditions requiring access by such
     financial institutions to non-public information to be provided by the
     Company, conditions based on the accuracy of any information concerning the
     Company, or conditions requiring the Company to make any representations,
     warranties or covenants in connection with such financing); and

                         (2) provided to the Company copies of all written
     materials prepared by such Person for such financial institutions in
     connection with entering into such financing agreements; provided that,
     "the full amount necessary to consummate such offer" in either clause (A)
     or (B) above shall be an amount sufficient to pay for all shares of Common
     Stock outstanding on a fully diluted basis the cash portion of the
     consideration pursuant to the offer and the second-step transaction
     required by clause (v) below and all related expenses;

               (iv) the offering Person requests the Company to call a special
     meeting of the Company's shareholders for the purpose of voting on a
     resolution accepting such offer and authorizing the redemption of the
     Rights, and the offer contains a written agreement of such Person to pay
     (or share with any other offering Person) at least one-half of the
     Company's costs of such special meeting;

               (v) such offer remains open for at least 30 Business Days;
     provided, however, that (x) if there is any increase in the price of such
     offer, such offer must remain open for at least an additional 20 Business
     Days after the last such increase, (y) such offer must remain open for at
     least 20 Business Days after the date that any bona fide alternative offer
     is made which, in the opinion of one or more investment banking firms
     designated by the Company, provides for consideration per share in excess
     of that provided for in such offer, and (z) such offer must remain open for
     at least 20 Business Days after the date, if any, on which such Person
     reduces the per share price offered in accordance with clause (vii)(y)
     below (provided, in the case of each of clauses (x), (y) and (z) above, in
     no event will such offer have been outstanding for less than 30 Business
     Days); provided further, however, that such offer need not remain open, as
     a result of this clause (v), beyond (1) the time which any other offer
     satisfying the criteria for a Qualified Offer is then required to be kept
     open under this clause (v), or (2) the scheduled expiration date, as such
     date may be extended by public announcement on or prior to the then
     scheduled expiration date, of any other tender or exchange offer for Common
     Stock with respect to which the Board of Directors has agreed to redeem the
     Rights immediately prior to acceptance for payment of Common Stock
     thereunder (unless such

                                       6

<PAGE>

     other offer is terminated prior to its expiration without any Common Stock
     having been purchased thereunder);

               (vi) such offer is accompanied by a written opinion, in customary
     form, of a nationally recognized investment banking firm which is addressed
     to the Company and the holders of Common Stock other than such Person and
     states that the price to be paid to holders pursuant to the offer is fair
     from a financial point of view to such holders and includes any written
     presentation of such firm showing the analysis and range of values
     underlying such conclusions and such written opinion and any such
     presentation is updated and provided to the Company within two Business
     Days prior to the date such offer is consummated;

               (vii) prior to or on the date that such offer is commenced within
     the meaning of Rule 14d-2(a) of the General Rules and Regulations under the
     Exchange Act, such Person makes an irrevocable written commitment to the
     Company and, with respect to clause (x), to its stockholders, (x) to
     consummate a transaction or transactions promptly upon the completion of
     such offer (and in no event later than five Business Days thereafter),
     whereby all Common Stock not purchased in such offer will be acquired at
     the same cash price per share paid in such offer, subject only to the
     condition that the Board of Directors shall have granted any approvals
     required to enable such Person to consummate such transaction or
     transactions following consummation of such offer without obtaining the
     vote of any other stockholder, (y) that such Person will not make any
     amendment to the original offer which reduces the per share price offered
     (other than a reduction to reflect any dividend declared by the Company,
     other than a regular quarterly dividend, after the commencement of such
     offer or any material change in the capital structure of the Company
     initiated by the Company after the commencement of such offer, whether by
     way of reclassification, recapitalization, reorganization, repurchase or
     otherwise), changes the form of consideration offered, or reduces the
     number of shares being sought or which is in any other respect materially
     adverse to the Company's stockholders, and (z) that neither such Person nor
     any of its Affiliates or Associates will make any offer for or purchase any
     equity securities of the Company for a period of one year after the
     commencement of the original offer if such original offer does not result
     in the tender of at least 85% of the outstanding shares of Common Stock not
     owned by such Person (including its Affiliates and Associates), unless
     another tender offer by another party for all outstanding Common Stock is
     commenced that (a) constitutes a Qualified Offer (in which event, any new
     offer by such Person or of any Affiliates or Associates must be at a price
     no less than that provided for in such original offer) or (b) is approved
     by the Board of Directors of the Company (in which event, any new offer by
     such Person or of any of its Affiliates or Associates must be at a price no
     less than that provided for in such approved offer); and

               (viii) in addition to each of the requirements set forth above,
     such offer is not subject to any financing, funding or similar condition,
     nor any condition relating to completion of or satisfaction with any due
     diligence or similar investigation, and, subject to the foregoing,
     otherwise provides for usual and customary terms and conditions.

                                       7

<PAGE>

          (dd) "Record Date" shall have the meaning set forth in the recital
     clause at the beginning of this Agreement.

          (ee) "Redemption Date" shall have the meaning set forth in Section
     7(a).

          (ff) "Redemption Price" shall have the meaning set forth in Section
     23(b).

          (gg) "Resolution" shall have the meaning set forth in Section
     23(d)(i).

          (hh) "Rights" shall have the meaning set forth in the recital clause
     at the beginning of this Agreement.

          (ii) "Rights Agent" shall have the meaning set forth in the preamble
     clause at the beginning of this Agreement until a successor Rights Agent
     shall have become such pursuant to the applicable provisions of this
     Agreement, and thereafter "Rights Agent" shall mean such successor Rights
     Agent. If at any time there is more than one Person appointed by the
     Company as Rights Agent pursuant to the provisions of this Agreement,
     "Rights Agent" shall mean and include each such Person.

          (jj) "Rights Certificates" shall have the meaning set forth in Section
     3(a).

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

          (ll) "Section 11(a)(ii) Event" shall mean any event described in
     Section 11(a)(ii)(A), (B), or (C).

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

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

          (oo) "Special Meeting" shall have the meaning set forth in Section
     23(d)(i).

          (pp) "Spread" shall have the meaning set forth in Section 11(a)(iii).

          (qq) "Stock Acquisition Date" shall mean the date of first public
     announcement (which, for purposes of this definition, shall include,
     without limitation, a report filed pursuant to Section 13(d) of the
     Exchange Act) by the Company or an Acquiring Person that an Acquiring
     Person has become such.

          (rr) "Subsidiary" shall mean, with reference to any Person, any other
     Person of which at least a majority of the voting power of the voting
     equity securities or equity interests is beneficially owned, directly or
     indirectly, or otherwise controlled by such first mentioned Person.

                                       8

<PAGE>

          (ss) "Substitute Consideration" shall have the meaning set forth in
     Section 11(a)(iii).

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

          (uu) "Trading Day" shall have the meaning set forth in Section 11(d).

          (vv) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
     Section 13 Event.

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

     Section 3. Issue of Rights Certificates.

          (a) Until the first to occur of:

               (i) the close of business on the tenth Business Day after the
     Stock Acquisition Date (or, if the tenth Business Day after the Stock
     Acquisition Date occurs before the Record Date, the close of business on
     the Record Date), or

               (ii) the close of business on the tenth Business Day (or such
     later date as may be determined by the Board, acting by a majority of the
     Outside Directors, prior to such time as any Person has become an Acquiring
     Person) after the date that a tender or exchange offer (other than a
     Permitted Offer) by any Person (other than by 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 (or any comparable or
     successor rule), if upon consummation thereof, such Person would be the
     Beneficial Owner of 20% or more of the Common Shares then outstanding,

     (the first to occur of (i) and (ii) being herein referred to as the
     "Distribution Date"), (A) the Rights will be evidenced (subject to the
     provisions of Section 3(b)) by the certificates for the Common Shares
     registered in the names of the holders thereof (which certificates for
     Common Shares shall be deemed also to be certificates for Rights) and not
     by separate certificates and (B) the Rights will be transferable only in
     connection with the transfer of the underlying Common Shares (including a
     transfer to the Company). As soon as practicable after the Company has
     notified the Rights Agent of the occurrence of the Distribution Date, the
     Rights Agent will send by first-class, insured, postage prepaid mail, to
     each record holder of Common Shares as of the close of business on the
     Distribution Date, at the address of such holder shown on the records of
     the Company, one or more Rights certificates, in substantially the form of
     Exhibit A hereto (the "Rights Certificates"), evidencing one Right for each
     Common Share so held, subject to

                                       9

<PAGE>

     adjustment as provided herein. As of and after the Distribution Date, the
     Rights will be evidenced solely by such Rights Certificates.

          (b) As promptly as practicable following the date of this Agreement,
     the Company will file this Rights Agreement, and a summary hereof, in
     substantially the form attached hereto as Exhibit B, on a Current Report on
     Form 8-K or other filing with the Securities and Exchange Commission. With
     respect to certificates for the Common Shares outstanding as of the Record
     Date, until the Distribution Date, the Rights will be evidenced by such
     certificates for the Common Shares and the registered holders of the Common
     Shares 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 certificates representing Common Shares in respect of which Rights
     have been issued shall also constitute the transfer of the Rights
     associated with such Common Shares. Certificates issued after the Record
     Date upon the transfer of Common Shares outstanding on the Record Date
     shall bear the legend set forth in Section 3(c).

          (c) Rights shall be issued in respect of all Common Shares which are
     issued after the Record Date but prior to the earlier of the Distribution
     Date or the Expiration Date. Rights shall also be issued to the extent
     provided in Section 22 in respect of all Common Shares which are issued
     after the Distribution Date and prior to the Expiration Date. Certificates
     representing Common Shares (including, without limitation, certificates
     issued upon transfer or exchange of Common Shares) issued after the Record
     Date but prior to the earlier of the Distribution Date or the Expiration
     Date shall also be deemed to be certificates for the associated Rights, and
     shall bear the following legend:

          "This certificate also evidences and entitles the holder hereof to
          certain Rights as set forth in the Rights Agreement between Synovis
          Life Technologies, Inc. (the "Company") and American Stock Transfer &
          Trust Company (the "Rights Agent") dated as of June 1, 2006 (the
          "Rights Agreement"), and as the same may be amended from time to time,
          the terms of which (including restrictions on the transfer of such
          Rights) are hereby incorporated herein by reference and a copy of
          which is on file at the principal executive offices of the Company.
          Under certain circumstances, as set forth in the Rights Agreement,
          such Rights will be evidenced by separate certificates and will no
          longer be evidenced by this certificate. The Company will mail to the
          holder of this certificate a copy of the Rights Agreement, as in
          effect on the date of mailing, without charge after receipt of a
          written request therefor from such holder. Under certain
          circumstances, as set forth in the Rights Agreement, Rights issued to,
          or held by, any Person who is, was or becomes an Acquiring Person or
          any Affiliate or Associate thereof (as such terms are defined in the
          Rights Agreement) and any subsequent holder of such Rights, whether
          currently held by or on behalf of such Person or any subsequent
          holder, may become null and void."

     Until the earlier of the Distribution Date or the Expiration Date, the
     Rights associated with the Common Shares represented by certificates for
     Common Shares shall be

                                       10
<PAGE>

     evidenced by such certificates alone and registered holders of Common
     Shares 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 such Common Shares, whether or not containing
     the foregoing legend. In the event that the Company purchases or acquires
     and cancels any Common Shares after the Record Date but prior to the
     earlier of the Distribution Date or the Expiration Date, any Rights
     associated with such Common Shares shall be deemed cancelled and retired so
     that the Company shall not be entitled to exercise any Rights associated
     with the Common Shares that are no longer outstanding.

     Section 4. Form of Rights Certificates.

          (a) The Rights Certificates (and the forms of election to exercise,
     certification and assignment to be printed on the reverse thereof) shall
     each be substantially in the form set forth in Exhibit A hereto and may
     have such marks of identification or designation and such legends,
     summaries or endorsements printed thereon as the Company may deem
     appropriate and as are not inconsistent with the provisions of this
     Agreement, or as may be required to comply with any applicable law or with
     any rule or regulation made pursuant thereto or with any rule or regulation
     of any stock exchange, national market system or over-the-counter market 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, the Rights
     Certificates, whenever distributed, shall entitle the holders thereof to
     purchase such number of Common Shares as shall be set forth therein at the
     price per Common Share set forth therein (the "Purchase Price"), but the
     number of such shares and the Purchase Price thereof shall be subject to
     adjustment as provided herein.

          (b) Any Rights Certificate issued pursuant to Section 3(a) or Section
     22 that represents Rights beneficially owned by a Person reasonably
     believed by at least a majority of the Outside Directors to be (i) an
     Acquiring Person or any Associate or Affiliate of any such 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 (or from any
     such Associate or Affiliate) to holders of equity interests in such
     Acquiring Person (or any such Associate or Affiliate) or to any Person with
     whom such Acquiring Person (or any such Associate or Affiliate) has any
     continuing oral or written plan, agreement, arrangement or understanding
     regarding the transferred Rights or (B) a transfer which at least a
     majority of the Outside Directors has determined is part of an oral or
     written plan, arrangement or understanding that has as a primary purpose or
     effect avoidance of Section 7(e), and any Rights Certificate issued to any
     such Person pursuant Section 6 or Section 11 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,
     modified as applicable to such Person:

                                       11

<PAGE>

     "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."

     The provisions of Sections 7(e) of this Agreement shall be operative
     whether or not the foregoing legend is contained on any such Rights
     Certificate.

     Section 5. Countersignature and Registration.

          (a) The Rights Certificates shall be executed on behalf of the Company
     by its President and Chief Executive Officer or any Vice President, 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 manually
     countersigned by the Rights Agent 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 office designated by the Rights Agent 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, the date of each
     of the Rights Certificates and whether each such Rights Certificate
     contains a legend as set forth in Section 4(b).

     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), Section
     14 and Section 20(k), 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 may be transferred,
     split up, combined or exchanged for another Rights Certificate or
     Certificates, entitling the registered holder to purchase a like number of
     Common Shares (or, following a Triggering Event, other securities, cash or
     other assets, as the case may be) as the Rights Certificate or Certificates
     surrendered then entitled such

                                       12

<PAGE>

     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, with
     the form of assignment and certificate appropriately executed, at the
     office of the Rights Agent designated for such purpose. Neither the Rights
     Agent nor the Company shall be obligated to take any action whatsoever with
     respect to the transfer of any such surrendered Rights Certificate until
     the registered holder shall have duly completed and executed 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
     and Section 20(k), countersign and deliver to each Person entitled thereto
     a Rights Certificate or Certificates, as the case may be, as so requested.
     The Company may require payment of a sum sufficient to cover any transfer
     tax or charge that may be imposed in connection with any transfer, split
     up, combination or exchange of Rights Certificates.

          (b) Upon receipt by the Company and the Rights Agent of evidence
     reasonably satisfactory to them of the loss, theft, destruction or
     mutilation of a Rights Certificate, and, in case of loss, theft or
     destruction, of indemnity or security reasonably satisfactory to them, and,
     at the Company's or the Rights Agent's request, reimbursement to the
     Company and the Rights Agent of all reasonable expenses incidental thereto,
     and upon surrender to the Rights Agent and cancellation of the Rights
     Certificate if mutilated, the Company will make 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.

          (a) Subject to Section 7(e), the registered holder of any Rights
     Certificate may exercise the Rights evidenced thereby (except as otherwise
     provided herein, including, without limitation, the restrictions on
     exercisability set forth in Section 9(c), Section 11(a)(iii) and Section
     23(a)) in whole or in part, at any time after the Distribution Date upon
     surrender of the Rights Certificate, with the form of election to exercise
     and the certificate on the reverse side thereof duly completed and
     executed, to the Rights Agent at the office of the Rights Agent designated
     for such purpose, together with payment of the aggregate Purchase Price for
     the total number of Common Shares (or other securities, cash or other
     assets, as the case may be) as to which such surrendered Rights are then
     exercisable, at or prior to the first to occur of: (i) the Final Expiration
     Date; (ii) if this Agreement is not ratified by holders of the greater of
     (A) a majority of the voting power of the shares of Common Stock present
     and entitled to vote on that item of business, or (B) a majority of the
     voting power of the minimum number of shares of Common Stock entitled to
     vote that would constitute a quorum for the transaction of business at the
     meeting (except where the Company's Articles of Incorporation or the
     Minnesota Business Corporation Act require a larger proportion or number),
     as such vote is

                                       13

<PAGE>

     determined at the Company's first annual meeting of shareholders following
     June 1, 2006, immediately following such annual meeting; (iii) the time at
     which such Rights expire as provided in Section 13(d); (iv) the time at
     which such Rights are redeemed as provided in Section 23 (the "Redemption
     Date"); or (v) the time at which such Rights are exchanged as provided in
     Section 24 (the first to occur of (i), (ii), (iii) (iv) and (v) being
     herein referred to as the "Expiration Date").

          (b) The Purchase Price for each one-tenth of a Common Share
     purchasable pursuant to the exercise of a Right shall initially be $5.00,
     shall be subject to adjustment from time to time as provided in Section 11
     and Section 13(a) and shall be payable in accordance with Section 7(c).

          (c) Upon receipt of a Rights Certificate representing exercisable
     Rights, with the form of election to exercise and certificate on the
     reverse side thereof duly completed and executed, accompanied by payment of
     the Purchase Price for the number of Common Shares (or other securities,
     cash or other assets, as the case may be) to be purchased and an amount
     equal to any applicable transfer tax or charge, the Rights Agent shall,
     subject to Section 14(b) and Section 20(k), thereupon promptly (i)
     requisition from any transfer agent of the Common Shares (or make
     available, if the Rights Agent is the transfer agent for such Common
     Shares) certificates for the total number of Common Shares to be purchased
     and the Company hereby irrevocably authorizes its transfer agent to comply
     with all such requests, (ii) requisition from the Company the amount of
     cash, if any, to be paid in lieu of fractional shares in accordance with
     Section 14, (iii) promptly after receipt of such certificates, 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) promptly 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)) may be made by cash, certified bank
     check or money order payable to the order of the Company. If the Company
     determines to issue other securities of the Company, pay cash and/or
     distribute other assets pursuant to Section 11(a)(iii), the Company will
     make all arrangements necessary so that such other securities, cash and/or
     other assets are available for Distribution by the Rights Agent, if and
     when appropriate.

          (d) In case the registered holder of any Rights Certificate shall
     exercise less than all Rights evidenced thereby, a new Rights Certificate
     evidencing Rights equivalent to 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.

          (e) Notwithstanding anything in this Agreement to the contrary, from
     and after the first occurrence of a Section 11(a)(ii) Event, any Rights
     that are or were beneficially owned by (i) an Acquiring Person or any
     Associate or Affiliate of any such Person, (ii) a transferee of an
     Acquiring Person or (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

                                       14

<PAGE>

     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 (or from any such Associate or
     Affiliate) to holders of equity interests in such Acquiring Person (or any
     such Associate or Affiliate) or to any Person with whom the Acquiring
     Person (or any such Associate or Affiliate) has any continuing oral or
     written plan, agreement, arrangement or understanding regarding the
     transferred Rights or (B) a transfer which at least a majority of the
     Outside Directors has determined is part of an oral or written plan,
     agreement, arrangement or understanding that has as a primary purpose or
     effect the avoidance of this Section 7(e), shall become null and void
     without any further action and any holder of such Rights shall have no
     rights whatsoever with respect to such Rights, whether under any provision
     of this Agreement or otherwise. The Company shall use all reasonable
     efforts to ensure that the provisions of this Section 7(e) and Section 4(b)
     are complied with, but shall have no liability to any holder of a Rights
     Certificate or other Person as a result of its failure to make any
     determinations with respect to an Acquiring Person or any of their
     respective 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 transfer or exercise as set forth in this Section 7 unless such
     registered holder shall have (i) duly completed and executed the
     certificate following the form of assignment or election to exercise set
     forth on the reverse side of the Rights Certificate surrendered for such
     assignment or exercise, and (ii) provided such additional evidence of the
     identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates
     or Associates thereof as the Company shall reasonably request.

     Section 8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in 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
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 in accordance with the rules and
regulations of the Securities and Exchange Commission, and in such case shall
deliver a certificate of destruction thereof to the Company.

     Section 9. Reservation and Availability of Common Shares; Registration.

          (a) The Company covenants and agrees that it will cause to be reserved
     and kept available for issuance upon the exercise of outstanding Rights as
     many of its authorized and unissued Common Shares (and, following the
     occurrence of a Triggering Event, if applicable, any Equivalent Preferred
     Stock and/or other securities), which together at all times after the
     Distribution Date as provided in this Agreement, including

                                       15

<PAGE>

     pursuant to Section 11(a)(iii), will be sufficient to permit the exercise
     in full of all outstanding Rights.

          (b) If the Common Shares (or other securities, if applicable) issuable
     and deliverable upon the exercise of the Rights are listed or admitted for
     trading on any national securities exchange or included for quotation on
     any national market system, the Company shall use its best efforts to
     cause, from and after such time as the Rights become exercisable, all
     shares and other securities reserved for such issuance to be listed or
     admitted for trading on such national securities exchange or included for
     quotation on any such national market system upon official notice of
     issuance upon such exercise.

          (c) The Company shall use its best efforts to (i) file, as soon as is
     practicable following the earliest date after the first occurrence of a
     Section 11(a)(ii) Event as of which the consideration to be delivered by
     the Company upon exercise of the Rights has been determined pursuant to
     this Agreement, including in accordance with Section 11(a)(iii), or as soon
     as is required by law following the Distribution Date, as the case may be,
     a registration statement or statements under the Act, with respect to the
     Rights and the securities purchasable upon exercise of the Rights on an
     appropriate form or forms, (ii) cause such registration statement or
     statements to become effective as soon as practicable after such filing,
     and (iii) cause such registration statement or statements 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 or (B) the Expiration Date. 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.
     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 or statements and permit it or them to become
     effective. Upon any such suspension, the Company shall issue a public
     announcement stating that the exercisability of the Rights has been
     temporarily suspended, as well as a public announcement at such time as the
     suspension is no longer in effect. Notwithstanding any provision of this
     Agreement to the contrary, the Rights shall not be exercisable in any
     jurisdiction unless the requisite qualifications in such jurisdiction, if
     any, shall have been obtained.

          (d) The Company covenants and agrees that it will take all such action
     as may be necessary to ensure that all Common Shares (or other securities,
     if applicable) delivered upon exercise of Rights shall, at the time of
     delivery of the certificates for such shares or other securities (subject
     to payment of the Purchase Price), be duly and validly authorized and
     issued and, with respect to Common Shares or other shares of capital stock,
     fully paid and non-assessable.

          (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 that
     may be payable in respect of the issuance or delivery of the Rights
     Certificates and of any certificates for Common Shares (or other
     securities, as the case may be) upon the exercise of Rights. The Company
     shall not, however, be required (i) to pay any transfer tax or charge that
     may be payable in respect of any transfer or delivery of Rights
     Certificates to a Person

                                       16

<PAGE>

     other than, or the issuance or delivery of a number of Common Shares (or
     other securities, as the case may be) in respect of a name other than that
     of, the registered holder of the Rights Certificate evidencing Rights
     surrendered for exercise or (ii) to issue or deliver any certificates for a
     number of Common Shares (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 or charge shall have been paid (any such tax or charge being
     payable by the holder of such Rights Certificate at the time of surrender)
     or until it has been established to the Company's satisfaction that no such
     tax or charge is due.

     Section 10. Common Shares Record Date. Each Person in whose name any
certificate for a number of Common Shares (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 Common Shares (or other securities, as
the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer taxes
or charges) was made; provided, however, that if the date of such surrender and
payment is a date upon which the applicable transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
shares (or other securities, as the case may be), fractional or otherwise, on,
and such certificate shall be dated, the next succeeding Business Day on which
the applicable transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Rights Certificate, as such, shall
not be entitled to any rights of a shareholder of the Company with respect to
shares (or other securities, as the case may be) for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.

     Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares or other
securities 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 outstanding Common Shares
     payable in Common Shares; (B) subdivide or split the outstanding Common
     Shares, (C) combine or consolidate the outstanding Common Shares into a
     smaller number of shares or effect a reverse stock split of the outstanding
     Common Shares, or (D) issue any shares of its capital stock in a
     reclassification of the Common Shares (including any such reclassification
     in connection with a consolidation or merger in which the Company is the
     continuing or surviving corporation), except as otherwise provided in this
     Section 11(a) and in Section 7(e), 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 capital stock issuable on such date, shall be
     proportionately adjusted so that the holder of any Right exercised after
     such time shall be entitled to receive, upon payment of the Purchase Price
     then in effect, the aggregate number and kind of shares of capital stock
     which, if such Right had been

                                       17

<PAGE>

     exercised immediately prior to such date and at a time when the Company's
     transfer books for the Common Shares were open, he 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 that would require an adjustment under both this Section
     11(a)(i) and Section 11(a)(ii), 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).

               (ii) Subject to Section 24 of this Agreement, in the event:

                    (A) any Acquiring Person or any Associate or Affiliate of
     any Acquiring Person, at any time after the date of this Agreement,
     directly or indirectly, (1) shall merge into the Company or otherwise
     combine with the Company and the Company shall be the continuing or
     surviving corporation of such merger or combination and the Common Stock of
     the Company shall remain outstanding and not changed into or exchanged for
     stock or other securities of any other Person or the Company or cash or any
     other property, (2) shall, in one or more transactions, transfer any assets
     to the Company in exchange (in whole or in part) for shares of any equity
     security of the Company or any of its Subsidiaries or for securities
     exercisable for or convertible into shares of any equity security of the
     Company or any of its Subsidiaries or otherwise obtain from the Company,
     with or without consideration, any additional shares of any equity security
     of the Company or securities exercisable for or convertible into shares of
     any equity security of the Company or any of its Subsidiaries (other than
     as part of a pro rata distribution to all holders of Common Stock), (3)
     shall sell, purchase, lease, exchange, mortgage, pledge, transfer or
     otherwise dispose (in one or more transactions), to, from or with, as the
     case may be, the Company or any of its Subsidiaries, assets on terms and
     conditions less favorable to the Company than the Company would be able to
     obtain in arms' length negotiation with an unaffiliated third Person, (4)
     shall engage in any transaction with the Company involving the sale,
     purchase, lease, exchange, mortgage, pledge, transfer or other disposition
     (in one transaction or a series of transactions), other than incidental to
     the lines of business currently engaged in as of the date hereof by the
     Company and such Acquiring Person, or Associate or Affiliate, of assets
     having an aggregate fair market value of more than $2,000,000, (5) shall
     receive any compensation from the Company or any of the Company's
     Subsidiaries other than compensation for full time employment as a regular
     employee at rates in accordance with the Company's (or its Subsidiaries')
     past practices, or (6) shall receive the benefit, directly or indirectly
     (except proportionately as a shareholder), of any loans other than in the
     ordinary course of business), advances, guarantees, pledges or other
     financial assistance or any tax credits or other tax advantage provided by
     the Company or any of its Subsidiaries, or

                    (B) Any Person (other than an Exempt 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), or

                                       18

<PAGE>

                    (C) during such time as there is an Acquiring Person, there
     shall be any reclassification of securities (including any reverse stock
     split), or recapitalization of the Company, or any merger or consolidation
     of the Company with any of its Subsidiaries or any other transaction or
     series of transactions (whether or not with or into or otherwise involving
     an Acquiring Person) which has the effect, directly or indirectly, of
     increasing by more than 1% the proportionate share of the outstanding
     shares of any class of equity securities of the Company or any of its
     Subsidiaries which is directly or indirectly owned by any Acquiring Person
     or any Associate or Affiliate of any Acquiring Person,

     then, and in each such case, promptly following the first occurrence of a
     Section 11(a)(ii) Event, proper provision shall be made so that each holder
     of a Right (except as provided below and in Section 7(e)) shall thereafter
     have the right to receive, upon exercise thereof at a price equal to the
     then current Purchase Price multiplied by ten times the number of tenths of
     a Common Share for which a Right is then exercisable, in accordance with
     the terms of this Agreement, in lieu of the number of one-tenth Common
     Shares for which such Right was exercisable immediately prior to the
     occurrence of such Section 11(a)(ii) Event, such number of whole Common
     Shares as shall equal the result obtained by (x) multiplying the then
     current Purchase Price by ten times the number of tenths of a Common Share
     for which such 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 for all purposes of this Agreement) by
     50% of the Current Market Price per Common Share (determined pursuant to
     Section 11(d) on the date of such first occurrence (such number of whole
     Common Shares, the "Adjustment Shares"); provided, however, that if the
     transaction that would otherwise give rise to the foregoing adjustment is
     also subject to the provisions of Section 13 hereof, then only the
     provisions of Section 13 shall apply and no adjustment shall be made
     pursuant to this Section 11(a)(ii). The Company shall not enter into any
     transaction of the kind listed in this Section 11(a)(ii) if at the time of
     such transaction there are any rights, warrants, instruments or securities
     outstanding or any agreements or arrangements which as a result of the
     consummation of such transaction, would substantially diminish or otherwise
     eliminate the benefits intended to be afforded by the Rights.

               (iii) In the event that the number of Common Shares that are
     authorized by the Company's Articles of Incorporation but not outstanding
     or reserved for issuance for purposes other than upon exercise of the
     Rights are not sufficient to permit the exercise in full of all of the
     exercisable Rights in accordance with Section 11(a)(ii), the Company shall:
     (A) determine the excess of (1) the value of the Adjustment Shares issuable
     upon the exercise of a Right (the "Current Value") over (2) the Purchase
     Price (such excess, the "Spread"), and (B) with respect to each Right, make
     adequate provision to substitute for the Adjustment Shares, upon payment of
     the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
     Price, (3) Common Shares and/or other equity securities of the Company
     (including, without limitation, shares, or units of shares, of preferred
     stock of the Company with rights, privileges and other terms substantially
     the same as the Common Shares (such shares of preferred stock are referred
     to herein as

                                       19

<PAGE>

     "Equivalent Preferred Stock")), (4) debt securities of the Company, (5)
     other assets, or (6) any combination of the foregoing (whichever
     substituted, the "Substitute Consideration"), having an aggregate value
     equal to the Current Value, where such aggregate value has been determined
     by at least a majority of the Outside Directors based upon the advice of an
     investment banking firm selected by at least a majority of the Outside
     Directors; provided, however, if the Company shall not have made adequate
     provision to deliver substitute consideration pursuant to clause (B) above
     within 30 days following the later of (x) the date of the 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, Common Shares to
     the extent available and then, if necessary, cash, which shares and/or cash
     have an aggregate value equal to the Spread. If at least a majority of the
     Outside Directors shall determine in good faith that it is likely that
     sufficient additional Common Shares could be authorized for issuance upon
     exercise in full of the Rights, 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
     shareholder approval for the authorization of such additional shares (such
     period, as it may be extended, the "Substitution Period"). To the extent
     that some action need be taken pursuant to the first and/or second
     sentences of this Section 11(a)(iii), the Company (xx) shall provide,
     subject to Section 7(e), that such action shall apply uniformly to all
     outstanding Rights, and (yy) may suspend the exercisability of the Rights
     until the expiration of the Substitution Period in order to seek any
     authorization of additional shares and/or to decide the appropriate form of
     Distribution to be made pursuant to such first sentence and to determine
     the value thereof. In the event of any such suspension, the Company shall
     give notice to the Rights Agent and either advise in writing all
     shareholders of record as of that date or issue a public announcement
     stating that the exercisability of the Rights has been temporarily
     suspended, as well as a notice to the Rights Agent and either a written
     notice to all shareholders of record or a public announcement at such time
     as the suspension is no longer in effect. For purposes of this Section
     11(a)(iii), (xxx) the value of the Common Shares shall be the Current
     Market Price (as determined pursuant to Section 11(d)) per Common Share on
     the Section 11(a)(ii) Trigger Date, and (yyy) the value of any "Equivalent
     Preferred Stock" shall be deemed to have the same value as a Common Share
     on such date.

          (b) In case the Company shall fix a record date for the issuance of
     rights, options or warrants to all holders of Common Shares entitling them
     to subscribe for or purchase (for a period expiring within 45 calendar days
     after such record date) Common Shares (or securities convertible into
     Common Shares) at a price per Common Share (or having a conversion price
     per Common Share, if a security convertible into Common Shares) less than
     the Current Market Price (as determined pursuant to Section 11(d)) per
     Common Share 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 Common Shares outstanding on such record
     date, plus the number of Common Shares which the

                                       20
<PAGE>

     aggregate offering price of the total number of Common Shares so to be
     offered (and/or the aggregate initial conversion price of the convertible
     securities so to be offered) would purchase, at such Current Market Price,
     and the denominator of which shall be the number of Common Shares
     outstanding on such record date, plus the number of additional Common
     Shares 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 in a form other than cash, the value of such consideration
     shall be as determined in good faith by at least a majority of the Outside
     Directors, whose determination shall be described in a statement filed with
     the Rights Agent and shall be binding on the Rights Agent and the holders
     of the Rights. Common Shares owned by or held for the account of the
     Company shall not be deemed outstanding for the purpose of any such
     computation. Such adjustments shall be made successively whenever such a
     record date is fixed, and in the event that such rights, options or
     warrants are not so issued, the Purchase Price shall be adjusted to be the
     Purchase Price which would then be in effect if such record date had not
     been fixed.

          (c) In case the Company shall fix a record date for a distribution to
     all holders of Common Shares (including any such distribution made in
     connection with a consolidation or merger in which the Company is the
     continuing or surviving corporation) of evidences of indebtedness, cash
     (other than a regular quarterly dividend out of the earnings or retained
     earnings of the Company), assets (other than a regular quarterly dividend
     referred to above or a dividend payable in Common Shares, but including any
     dividend payable in stock other than Common Shares) or subscription rights
     or warrants (excluding those referred to in Section 11(b)), 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 (as determined pursuant to Section 11(d)) per Common Share on such
     record date, less the fair market value (as determined in good faith by at
     least a majority of the Outside Directors, 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 on, or of
     such subscription rights or warrants applicable to, one Common Share, and
     the denominator of which shall be such Current Market Price. 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.

          (d) For the purpose of any computation hereunder, other than
     computations made pursuant to Section 11(a)(iii), the "Current Market
     Price" per Common Share on any date shall be deemed to be the average of
     the daily closing prices per share of such Common Shares for the 30
     consecutive Trading Days (as such term is hereinafter defined) immediately
     prior to such date, and for purposes of computations made pursuant to
     Section 11(a)(iii), the "Current Market Price" per Common Share on any date
     shall be deemed to be the average of the daily closing prices per share of
     such Common Shares for the 10 consecutive Trading Days immediately
     following such date; provided,

                                       21

<PAGE>

     however, that in the event that such Current Market Price is determined
     during a period following the announcement by the issuer of such Common
     Shares of (A) a dividend or distribution on such Common Shares payable in
     such Common Shares or securities convertible into such Common Shares (other
     than the Rights), or (B) any subdivision, split, combination or
     reclassification of such Common Shares, and prior to the expiration of the
     requisite 30 Trading Day or 10 Trading Day period, as set forth above,
     after the ex-dividend date for such dividend or distribution, or the record
     date for such subdivision, split, combination or reclassification, 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 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 Common Shares
     are listed or admitted to trading or, if the Common Shares are not listed
     or admitted to trading on any national securities exchange, the last sale
     price or, if not reported, the average of the high bid and low asked prices
     in the over-the-counter market, as reported by the Nasdaq System or such
     other system then in use, or, if on any such date the Common Shares 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 Shares selected by the Outside Directors. If on any such date no
     market maker is making a market in the Common Shares, the "Current Market
     Price" per share shall mean the fair value per share as determined in good
     faith by at least a majority of the Outside Directors, whose determination
     shall be described in a statement filed with the Rights Agent and shall be
     conclusive for all purposes. The term "Trading Day" shall mean a day on
     which the principal national securities exchange on which the Common Shares
     are listed or admitted to trading is open for the transaction of business
     or, if the Common Shares are not listed or admitted to trading on any
     national securities exchange, a Business Day.

          (e) Anything herein to the contrary notwithstanding, except the last
     sentence of this Section 11(e), no adjustment in the Purchase Price shall
     be required unless such adjustment would require an increase or decrease of
     at least 1% in the Purchase Price; provided, however, that any adjustments
     which by reason of this Section 11(e) are not required to be made shall be
     carried forward and taken into account in any subsequent adjustment. All
     calculations under this Section 11 shall be made to the nearest cent or to
     the nearest ten-thousandths of a Common Share, as the case may be.
     Notwithstanding the first sentence of this Section 11(e), any adjustment
     which would be required by this Section 11, but for the first sentence of
     this Section 11(e), shall be made no later than the earlier of (i) three
     years from the date of the transaction or event 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), the holder of any Right thereafter exercised shall become
     entitled to receive any shares of capital stock of the Company other than
     Common Shares, 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

                                       22

<PAGE>

     on terms as nearly equivalent as practicable to the provisions with respect
     to the Common Shares 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
     with respect to the Common Shares shall apply on like terms to any such
     other shares.

          (g) All Rights originally issued by the Company subsequent to any
     adjustment made to the Purchase Price hereunder shall evidence the right to
     purchase, at the adjusted Purchase Price, the number of Common Shares
     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 Common Shares (calculated to the nearest ten-thousandth of a Common
     Share) obtained by (i) multiplying (A) the number of Common Shares covered
     by a Right immediately prior to such adjustment, by (B) the Purchase Price
     in effect immediately prior to such adjustment of the Purchase Price, and
     (ii) dividing the product so obtained by the Purchase Price in effect
     immediately after such adjustment of the Purchase Price.

          (i) The Company, acting by the decision of at least a majority of the
     Outside Directors, 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 Common Shares issuable upon the exercise of a Right. Each of
     the Rights outstanding after such adjustment in the number of Rights shall
     be exercisable for the number of Common Shares 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 ten-thousandth) obtained by dividing
     the Purchase Price in effect immediately prior to adjustment of the
     Purchase Price by the Purchase Price in effect immediately after adjustment
     of the Purchase Price. The Company shall make a public announcement of its
     election to adjust the number of Rights, indicating the record date for the
     adjustment, and, if known at the time, the amount of the adjustment to be
     made. This record date may be the date on which the Purchase Price is
     adjusted or any day thereafter, but, if the Rights Certificates have been
     issued, shall be at least 10 Business 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, 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

                                       23

<PAGE>

     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 Common Shares issuable upon the exercise of the Rights, the
     Rights Certificates theretofore and thereafter issued may continue to
     express the Purchase Price and the number of shares 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 par value of the Common Shares issuable
     upon exercise of the Rights, the Company shall take any corporate action
     which may, in the opinion of its counsel, be necessary in order that the
     Company may validly and legally issue fully paid and non-assessable Common
     Shares at such adjusted Purchase Price.

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

          (m) Anything in this Section 11 to the contrary notwithstanding, the
     Company shall be entitled to make such reductions in the Purchase Price, in
     addition to those adjustments expressly required by this Section 11, as and
     to the extent that in their sole discretion a majority of the Outside
     Directors shall determine to be advisable in order that any (i)
     consolidation or subdivision of the Common Shares, (ii) issuance wholly for
     cash of any Common Shares at less than the Current Market Price per Common
     Share, (iii) issuance wholly for cash of securities which by their terms
     are convertible into or exchangeable for Common Shares, (iv) stock
     dividends or (v) issuance of rights, options or warrants referred to in
     this Section 11, hereafter made by the Company to holders of its Common
     Shares shall not be taxable to such shareholders.

          (n) The Company covenants and agrees that it shall not, at any time
     after the Distribution Date, (i) consolidate with any Person (other than a
     Subsidiary of the Company in a transaction that complies with Section
     11(o)), (ii) merge with or into any other Person (other than a Subsidiary
     of the Company in a transaction which complies with Section 11(o)), or
     (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in
     one transaction, or a series of related transactions, assets or earning
     power aggregating more than 50% of the assets or earning power of the
     Company and its Subsidiaries (taken as a whole) to any other Person or
     Persons (other than the Company and/or any of its

                                       24

<PAGE>

     Subsidiaries in one or more transactions each of which complies with
     Section 11(o)), if (A) at the time of or immediately after such
     consolidation, merger, sale or transfer there are any rights, warrants or
     other instruments or securities outstanding or agreements in effect that
     would substantially diminish or otherwise eliminate the benefits intended
     to be afforded by the Rights or (B) prior to, simultaneously with or
     immediately after such consolidation, merger, sale or transfer, the
     shareholders of the Person who constitutes, or would constitute, the
     "Principal Party" for purposes of Section 13(a) 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, Section 24 or Section
     27, 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, unless such action is approved by a majority of the Outside
     Directors.

     Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section 13, 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 Common Shares,
a copy of such certificate, and (c) mail or make available by filing as an
exhibit to its Current Report on Form 8-K or other filing with the Securities
and Exchange Commission a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing Common Shares) in accordance with Section 26. The
Rights Agent shall be fully authorized to rely and be protected in relying on
any such certificate and on any adjustment therein contained.

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

          (a) In the event that, following the Stock Acquisition Date, directly
     or indirectly,

               (i) the Company shall consolidate with, or merge with and into,
     any other Person (other than a Subsidiary of the Company in a transaction
     that complies with Section 11(o)), and the Company shall not be the
     continuing or surviving corporation of such consolidation or merger,

               (ii) any Person (other than a Subsidiary of the Company in a
     transaction that complies with Section 11(o)) 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 Common
     Shares held by existing shareholders of the Company shall be changed into
     or exchanged for stock or other securities of any Person (including the
     Company) or cash or any other property, or

                                       25

<PAGE>

               (iii) the Company shall 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, 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 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)),

     then, and in each such case, except as contemplated by Section 13(d),
     proper provision shall be made so that: (A) each holder of a Right, except
     as otherwise provided herein, shall thereafter have the right to receive,
     upon the exercise thereof at the then current Purchase Price multiplied by
     ten times the number of tenths of a Common Share for which a Right is then
     exercisable, in accordance with the terms of this Agreement, in lieu of the
     number of one-tenth Common Shares for which such Right was exercisable
     immediately prior to the occurrence of such Section 13 Event, such number
     of whole validly authorized and issued, fully paid, non-assessable and
     freely tradable Common Shares of the Principal Party (as 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 ten times the number of
     tenths of a Common Share for which a Right was exercisable immediately
     prior to the occurrence of such Section 13 Event (or, if a Section
     11(a)(ii) Event has occurred prior to the first occurrence of a Section 13
     Event, multiplying a number equal to ten times the number of tenths of a
     Common Share for which such 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 occurrence), 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 for all purposes of this
     Agreement) by 50% of the Current Market Price per whole Common Share
     (determined pursuant to Section 11(d) of such Principal Party on the day of
     consummation of such Section 13 Event; (B) such Principal Party shall
     thereafter be liable for, and shall assume, by virtue of such Section 13
     Event, all the obligations and duties of the Company pursuant to this
     Agreement; (C) the term "Company" shall thereafter be deemed to refer to
     such Principal Party, it being specifically intended that the provisions of
     Section 11 shall apply only to such Principal Party following the first
     occurrence of a Section 13 Event; (D) such Principal Party shall take such
     steps (including, but not limited to, the reservation of a sufficient
     number of its Common Shares) in connection with the consummation of any
     such transaction as may be necessary to assure that the provisions hereof
     shall thereafter be applicable, as nearly as reasonably may be, in relation
     to its Common Shares thereafter deliverable upon the exercise of the
     Rights; and (E) the provisions of Section 11(a)(ii) shall be of no effect
     following the first occurrence of any Section 13 Event.

          (b) "Principal Party" shall mean (i) in the case of any transaction
     described in Section 13(a)(i) or (ii), the Person that is the issuer of any
     securities into which Common Shares are converted in such merger or
     consolidation, and if no securities are so issued, the Person that is the
     other party to such merger or consolidation, and (ii) in the case of any
     transaction described in Section 13(a)(iii), the Person that is the party
     receiving the greatest portion of the assets or earning power transferred
     pursuant to such transaction or

                                       26

<PAGE>

     transactions; provided, however, that in any such case, (A) if the Common
     Shares of such Person are not at such time and have 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 Shares of which are and have been so registered,
     "Principal Party" shall refer to such other Person; and (B) in case such
     Person is a Subsidiary, directly or indirectly, of more than one Person,
     the Common Shares 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 Shares having the greatest aggregate market value.

          (c)

               (i) The Company shall not consummate any such transaction
     constituting a Section 13 Event unless the Principal Party shall have a
     sufficient number of authorized Common Shares 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
     a supplemental agreement providing for the terms set forth in Section 13(a)
     and (b) and further providing that, as soon as practicable after the date
     of consummation of any transaction constituting a Section 13 Event, the
     Principal Party will (A) 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 (1) become effective as
     soon as practicable after such filing and (2) remain effective (with a
     prospectus at all times meeting the requirements of the Act) until the
     Expiration Date, and (B) will deliver to holders of the Rights historical
     financial statements for the Principal Party and each of its Affiliates
     that comply in all respects with the requirements for registration on Form
     10 under the Exchange Act.

               (ii) 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).

          (d) Notwithstanding anything in this Agreement to the contrary,
     Section 13 shall not be applicable to a transaction described in
     subparagraphs (i) and (ii) of Section 13(a) if: (i) such transaction is
     consummated with a Person or Persons who acquired Common Shares pursuant to
     a Permitted Offer (or a wholly owned Subsidiary of any such Person or
     Persons); (ii) the price per Common Share offered in such transaction is
     not less than the price per Common Share paid to all holders of Common
     Shares whose shares were purchased pursuant to such Permitted Offer, and
     (iii) the form of consideration offered in such transaction is the same as
     the form of consideration paid pursuant to such Permitted Offer. Upon
     consummation of any such transaction contemplated by this Section 13(d),
     all Rights hereunder shall expire.

                                       27

<PAGE>

     Section 14. Fractional Rights and Fractional Shares.

          (a) The Company shall not be required to issue fractions of Rights or
     to distribute Rights Certificates that evidence fractional Rights. The
     Company may, in lieu of such fractional Rights, 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 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 sale 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 Nasdaq
     System or such other system then in use or; if on any such day 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 at least a majority of the Outside Directors. If on
     any such day no such market maker is making a market in the Rights, the
     fair value of the Rights on such date shall be as determined in good faith
     by at least a majority of the Outside Directors, whose determination shall
     be described in a statement filed with the Rights Agent and shall be
     conclusive for all purposes.

          (b) The Company shall not be required to issue fractions of Common
     Shares or other capital stock upon exercise of the Rights or to distribute
     certificates that evidence fractional shares. The Company may, in lieu of
     such fractional shares, 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 per
     whole Common Share. For purposes of this Section 14(b), the current market
     value per whole Common Share or other capital stock shall be the closing
     price of one whole Common Share or other share of capital stock (as
     determined in accordance with Section 11(d)) for the Trading Day
     immediately prior to the date of such exercise.

          (c) Every holder of a Right, by the acceptance of the Right, expressly
     waives his right to receive any fractional Rights or any fractional Common
     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 are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
associated Common Share certificate). Any registered holder of any Rights
Certificate (or, prior to the Distribution Date, the associated Common Share
certificate), without the consent of the Rights Agent or of the holder of any
other Rights Certificate (or, prior to the Distribution Date, the associated
Common Share certificate), may, in his own behalf and for his own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his right to exercise
the Rights in

                                       28

<PAGE>

the manner provided 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.

     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 Common Shares;

          (b) on or after the Distribution Date, the Rights Certificates are
     transferable only on the registry books of the Rights Agent if surrendered
     at the 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 duly completed and fully executed
     and otherwise complying with any other requirements set forth in this
     Agreement;

          (c) subject to Section 6(a) and Section 7(f), 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 Common
     Share certificate) is registered as the absolute owner thereof and of the
     Rights evidenced thereby (notwithstanding any notations of ownership or
     writing on the Rights Certificate or the associated Common Share
     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), shall be required to be
     affected by any notice or knowledge to the contrary; and

          (d) Notwithstanding anything in this Agreement or the Rights to the
     contrary, the Company, the Board and the Rights Agent shall not have any
     liability to any holder of a Right or other Person as a result of the
     inability of the Company or the Rights Agent 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.

     Section 17. Rights Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of Common Shares or any other securities
of the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or

                                       29

<PAGE>

withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in Section 25), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.

     Section 18. Concerning the Rights Agent.

          (a) The Company agrees to pay to the Rights Agent reasonable
     compensation for all services rendered by it hereunder and, from time to
     time, on demand of the Rights Agent, its reasonable expenses and counsel
     fees and 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 negligence, bad faith or willful misconduct on
     the part of the Rights Agent, for anything done or omitted by the Rights
     Agent in connection with the acceptance, administration and execution of
     this Agreement and the exercise and performance of its duties hereunder,
     including without limitation the costs and expenses of defending against
     and appealing any such claim of liability.

          (b) The Rights Agent shall be protected and shall incur no liability
     for or in respect of any action taken, suffered or omitted by it in
     connection with its administration of this Agreement in reliance upon any
     Rights Certificate or certificate for Common Shares or for other securities
     of the Company, instrument of assignment or transfer, power of attorney,
     endorsement, affidavit, letter, notice, instruction, 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 or stock transfer business of the Rights Agent or any
     successor Rights Agent, shall be the successor to the Rights Agent under
     this Agreement without the execution or filing of any paper or any further
     act on the part of any of the parties hereto; provided, however, that such
     Person would be eligible for appointment as a successor Rights Agent under
     the provisions of Section 21. 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.

                                       30
<PAGE>

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

     Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates
(or, prior to the Distribution Date, the associated Common Share 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 advice of such counsel shall be full and
     complete authorization and protection to the Rights Agent as to any action
     taken, suffered or omitted by it in good faith and in accordance with such
     advice.

          (b) Whenever in the performance of its duties under this Agreement the
     Rights Agent shall deem it necessary or desirable that any fact or matter
     (including without limitation, the identity of any Acquiring Person and the
     determination of "Current 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 President and Chief Executive Officer, any Vice
     President, the Treasurer, any Assistant Treasurer, the Secretary or any
     Assistant Secretary of the Company and delivered to the Rights Agent; and
     any such certificate shall be full and complete authorization and
     protection to the Rights Agent for any action taken, suffered or omitted in
     good faith by it under the provisions of this Agreement in reliance upon
     such certificate.

          (c) The Rights Agent shall not be liable or responsible hereunder
     except for its own negligence, bad faith or willful misconduct.

          (d) The Rights Agent shall not be liable for or by reason of any of
     the statements of fact or recitals contained in this Agreement or in the
     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

                                       31

<PAGE>

     provisions of Section 11, Section 13 or Section 24 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
     receipt of a certificate delivered pursuant to Section 12 describing any
     such adjustment); nor shall it be deemed to make any representation or
     warranty as to the authorization or reservation of any Common Shares to be
     issued pursuant to this Agreement or any Rights Certificate or as to
     whether any Common Shares will, when so issued, be validly authorized and
     issued, fully paid and non-assessable.

          (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 or direction with respect to the performance of its duties
     hereunder from the President and Chief Executive Officer, any Vice
     President, the Treasurer, any Assistant Treasurer, the Secretary or any
     Assistant Secretary of the Company, and to apply to such officers for
     advice, instructions or direction 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 or direction of any such
     officer.

          (h) The Rights Agent and any shareholder, director, officer or
     employee of the Rights Agent may buy, sell or deal in any of the Rights or
     other securities of the Company or become pecuniarily interested in any
     transaction in which the Company may be interested, or contract with or
     lend money to the Company or otherwise act as fully and freely as though it
     were not Rights Agent under this Agreement. Nothing herein shall preclude
     the Rights Agent or any shareholder, director, officer or employee of 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
     liable or responsible for any act, default, neglect or misconduct of any
     such attorneys or agents or for any loss or damages 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 or in the exercise of its
     rights or powers 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.

                                       32

<PAGE>

          (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 exercise, as the case may be, has
     either not been duly completed and executed 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 until it
     has received instructions with respect thereto from the Company.

     Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company, and to each transfer
agent of the Common Shares the existence of which the Rights Agent has received
notice from the Company, by registered or certified mail, and to the registered
holders of the Rights Certificates (or, prior to the Distribution Date, the
associated Common Share 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 Shares, by registered or certified
mail, and to the registered holders of the Rights Certificates (or, prior to the
Distribution Date, the associated Common Share 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 registered holder of a Rights Certificate (or, prior to the Distribution
Date, the associated Common Share certificates) who shall, with such notice,
submit his Rights Certificate (or, prior to the Distribution Date, the
associated Common Share certificates) for inspection by the Company, then the
registered holder may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States, the State of Minnesota or the
State of New York (or of any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the State
of Minnesota or the State of New York) in good standing, having an office in the
State of Minnesota or the State of New York, which is authorized under such laws
to exercise corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $5 million. 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 such purpose. Not later than the effective date of any
such appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares, and mail
a notice thereof in writing to the registered holders of the Rights Certificates
(or, prior to the Distribution Date, the associated Common Share certificates).
Failure to give any notice provided for in this Section 21 or to appoint a
successor Rights Agent, 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.

                                       33

<PAGE>

     Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, but subject to
Section 7(e), the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be specified by at least a majority of the
Outside Directors to reflect any adjustment or change in the Purchase Price and
the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the provisions
of this Agreement. In addition, in connection with the issuance or sale of
Common Shares following the Distribution Date and prior to the Expiration Date,
the Company (a) shall, with respect to Common Shares so issued or sold pursuant
to the exercise of stock options, grants or awards outstanding as of the
Distribution Date under any benefit plan or arrangement for employees or
directors, or upon the exercise, conversion or exchange of securities issued by
the Company prior to the Distribution Date, and (b) may, in any other case, if
deemed necessary or appropriate by at least a majority of the Outside Directors,
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 could 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 issuance thereof.

     Section 23. Redemption and Termination.

          (a) The Rights may be redeemed by action of the Board of Directors
     pursuant to subparagraph (b) of this Section 23 or by shareholder action
     pursuant to subparagraph (d) of this Section 23 and shall not be redeemed
     in any other manner.

          (b) The Board of Directors of the Company may, at its option, at any
     time prior to the earlier of (x) the Close of Business on the tenth day
     following the Stock Acquisition Date (or, if the Stock Acquisition Date
     shall have occurred prior to the Record Date, the Close of Business on the
     tenth day following the Record Date), or (y) the Final Expiration Date,
     redeem all but not less than all of the then outstanding Rights at a
     redemption price of $.001 per Right, as such amount may be appropriately
     adjusted, as determined by the Board of Directors, to reflect any
     transaction of the kind described in clauses (A) through (D) of Section
     11(a)(i) occurring after the date hereof (such redemption price being
     hereinafter referred to as the "Redemption Price"). In considering whether
     to redeem the Rights, the Board of Directors of the Company may consider
     the best long-term and short-term interests of the Company, including,
     without limitation, the effects of the redemption of the Rights upon
     employees, suppliers and customers of the Company or any Subsidiary of the
     Company and communities in which offices or other establishments of the
     Company or any Subsidiary of the Company are located and all other
     pertinent factors. The redemption of the Rights by the Board of Directors
     may be effective at such time, on such basis and with such conditions as
     such Board of Directors in its sole discretion may establish. In addition
     to the right of redemption reserved in the first sentence of this
     subsection (b), the Board of Directors may redeem all, but not less than
     all, of the then outstanding Rights at the Redemption Price after the
     occurrence of a Stock Acquisition Date, but prior to the occurrence of any
     transaction of the kind

                                       34

<PAGE>

     described in Section 11(a)(ii)(A) or (C) or Section 13(a), if either (i) a
     Person who is an Acquiring Person shall have transferred or otherwise
     disposed of a number of shares of Common Stock in one transaction or series
     of transactions, not directly or indirectly involving the Company or any of
     its Subsidiaries and which did not result in the occurrence of any
     transaction of the kind described in Section 11(a)(ii)(A) or (C) or Section
     13(a), as shall result in such Person thereafter being a Beneficial Owner
     of 10% or less of the outstanding shares of Common Stock of the Company,
     and after such transfer or other disposition there are no other Acquiring
     Persons, or (ii) in connection with any transaction of the kind described
     in Section 11(a)(ii)(A) or Section 13(a) in which all holders of the Common
     Stock of the Company are treated the same and which shall not involve an
     Acquiring Person, an Affiliate or Associate of an Acquiring Person, any
     other Person in which such Acquiring Person, Affiliate or Associate has any
     interest or any other Person acting, directly or indirectly, on behalf of
     or in association with such Acquiring Person, Affiliate or Associate.
     Notwithstanding any other provision of this Agreement, the Rights shall not
     be exercisable after the first occurrence of an event specified in Section
     11(a)(ii) until such time as the Company's right of redemption hereunder
     has expired.

          (c) The Board shall establish a Shareholder Rights Agreement Committee
     (the "Committee") that shall review this Agreement in order to consider
     whether the maintenance of this Agreement continues to be in the best
     interests of the Company and its shareholders. The Committee shall conduct
     such review periodically when, as and in such manner as the Committee deems
     appropriate, after giving due regard to all relevant circumstances;
     provided, however, that the Committee shall conduct such review at least
     once every three years. Following each such review, the Committee will
     report its conclusions to the Board, including any recommendation in light
     thereof as to whether this Agreement should be modified, terminated or the
     Rights redeemed. The Committee is authorized to retain such legal counsel,
     financial advisors and other advisors as the Committee deems appropriate in
     order to assist the Committee in carrying out its foregoing
     responsibilities under this Agreement. The Committee shall consist of
     directors who are eligible to serve on the Committee in accordance with the
     Company's bylaws.

          (d)

               (i) In the event the Company receives a Qualified Offer, the
     Outside Directors of the Board of Directors of the Company shall call a
     special meeting of shareholders (the "Special Meeting") for the purpose of
     voting on a resolution (i) accepting such Qualified Offer, as such
     Qualified Offer may be amended or revised by the offering Person from time
     to time to increase the price per share to be paid to holders of shares of
     Common Stock, and (ii) authorizing the redemption of all but not less than
     all the then outstanding Rights at the Redemption Price pursuant to
     subparagraph (d)(ii) of this Section 23 (the "Resolution"). The Special
     Meeting shall be held on a date selected by the Board of Directors, which
     date shall not be less than 90 or more than 120 days after the later of (A)
     the date such Qualified Offer is received by the Company (the "Offer Date")
     and (B) the date of any previously scheduled meeting of shareholders to be

                                       35

<PAGE>

     held within 60 days after the Offer Date; provided, however, that if (x)
     such other meeting shall have been called for the purpose of voting on a
     resolution with respect to another Qualified Offer and (y) the Offer Date
     is not later than 15 days after the date such other Qualified Offer was
     received by the Company, then both the Resolution and such other resolution
     shall be voted on at such meeting (in addition to any other matters or
     resolutions to be considered at such meeting) and such meeting shall be
     deemed to be the Special Meeting; provided, however, that in any 12-month
     period the Company shall not be required to hold more than one Annual
     Meeting and one Special Meeting; and provided further, that if the Company
     shall publicly announce that the Board of Directors has determined that it
     is in the best interest of shareholders to seek an alternative transaction
     so as to obtain greater value for shareholders than that provided by such
     Qualified Offer, then such vote shall be postponed to a meeting called by
     the Board of Directors which shall occur within 90 days after the date of
     such announcement. The Board of Directors shall set a date for determining
     the shareholders of record entitled to notice of and to vote at the Special
     Meeting in accordance with the Company's Articles of Incorporation, By-Laws
     and applicable law. At the offering Person's request, the Company shall
     include in any proxy soliciting material prepared by it in connection with
     the Special Meeting proxy soliciting material submitted by the offering
     Person; provided, however, that the offering Person, by written agreement
     with the Company contained in or delivered with such request, shall have
     indemnified the Company against any and all liabilities resulting from any
     statements found to be defamatory, misstatements, misleading statements or
     omissions contained in or omitted from the offering Person's proxy
     soliciting materials and have agreed to pay the Company's incremental costs
     incurred as a result of including such material in the Company's proxy
     soliciting material. Notwithstanding anything to the contrary contained
     this Agreement, if the Board of Directors determines that it is in the best
     interests of shareholders to seek an alternative transaction so as to
     obtain greater value for shareholders than that provided by any Qualified
     Offer, the Company shall be entitled to include information relating to
     such alternative transaction in the proxy soliciting material prepared by
     it in connection with the Special Meeting.

               (ii) If at the Special Meeting, the Resolution, or a resolution
     with respect to another Qualified Offer, receives the affirmative vote of
     holders of the greater of (A) a majority of the voting power of the shares
     of Common Stock present and entitled to vote on the Resolution, or (B) a
     majority of the voting power of the minimum number of shares of Common
     Stock entitled to vote on the Resolution that would constitute a quorum for
     the transaction of business at the meeting (except where the Company's
     Articles of Incorporation or the Minnesota Business Corporation Act require
     a larger proportion or number), as such vote is determined at the Special
     Meeting, not giving effect to any affirmative votes cast by the offering
     Person or any of its Affiliates, then all of the Rights shall be redeemed
     by the Company pursuant to such shareholder action at the Redemption Price,
     effective immediately prior to the consummation of the Qualified Offer
     (provided that the Qualified Offer was to be consummated prior to 60 days
     after the date of the Special Meeting).

                                       36

<PAGE>

               (iii) Nothing in this subparagraph (d) shall be construed as
     limiting or prohibiting the Company or any offering Person from proposing
     or engaging in any acquisition, disposition or other transfer of any
     securities of the Company, any merger or consolidation involving the
     Company, any sale or other transfer of assets of the Company, any
     liquidation, dissolution or winding-up of the Company, or any other
     business combination or other transaction, or any other action by the
     Company or such offering Person; provided, however, that the holders of
     Rights shall have the rights set forth in this Rights Agreement with
     respect to any such acquisition, disposition, transfer, merger,
     consolidation, sale, liquidation, dissolution, winding-up, business
     combination, transaction or action.

          (e) Immediately upon the action of the Board of Directors of the
     Company ordering the redemption of the Rights pursuant to subparagraph (b)
     of this Section 23, or upon effectiveness of the redemption of the Rights
     pursuant to subparagraph (d) of this Section 23, 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 of Directors ordering the redemption of the Rights, the
     Company shall give notice of such redemption to the Rights Agent and the
     holders of the then outstanding Rights by mailing such notice to the Rights
     Agent and to all such holders at their last addresses as they appear upon
     the registry books of the Rights Agent or, prior to the Distribution Date,
     on the registry books of the Transfer Agent for the Common 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. Neither the Company nor any of its Affiliates or
     Associates may redeem, acquire or purchase of value any Rights at any time
     in any manner other than that specifically set forth in this Section 23, or
     in connection with the purchase, acquisition or redemption of shares of
     Common Stock prior to the Distribution Date.

          (f) The Company may, at its option, pay the Redemption Price in cash,
     shares of Common Stock (based on the Current Per Share Market Price of the
     Common Stock as of the time of redemption) or any other form of
     consideration deemed appropriate by the Board.

     Section 24. Exchange.

          (a) The Board, acting by at least a majority of the Outside Directors,
     may, at its option, at any time after a Section 11(a)(ii) Event, exchange
     all or part of the then outstanding and exercisable Rights (which shall not
     include Rights that have become void pursuant to the provisions of Section
     7(e)) for Common Shares, with each Right to be exchanged for such number of
     Common Shares as shall equal the result obtained by dividing (x) a number
     equal to ten times the Purchase Price by (y) the Current Market Price per
     Common Share (determined pursuant to Section 11(d)) (such number of shares
     being hereinafter referred to as the "Exchange Ratio")). The Exchange Ratio
     shall be appropriately adjusted to reflect any stock split, stock dividend
     or similar transaction affecting the Common Shares that occurs after a
     Section 11(a)(ii) Event.

                                       37

<PAGE>

     Notwithstanding the foregoing, the Board shall not be empowered to effect
     such exchange at any time after an Acquiring Person becomes the Beneficial
     Owner of 50% or more of the Common Shares then outstanding.

          (b) Immediately upon the action of the Board ordering the exchange of
     any Rights pursuant to Section 24(a) and without any further action and
     without any notice, the right to exercise such Rights shall terminate and
     the only right thereafter of a holder of such Rights shall be to receive
     that number of Common Shares equal to the number of such Rights held by
     such holder multiplied by the Exchange Ratio. The Company shall promptly
     notify the Rights Agent and 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 provided in Section 26
     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
     Common Shares for Rights will be effected and, in the event of any partial
     exchange, the number of Rights that will be exchanged. Any partial exchange
     shall be effected pro rata based on the number of outstanding and
     exercisable Rights (other than Rights which have become void pursuant to
     the provisions of Section 7(e)) held by each holder of Rights.

          (c) In any exchange pursuant to this Section 24, the Company, at its
     option, may substitute Equivalent Preferred Stock for Common Shares
     exchangeable for Rights.

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

          (e) The Company shall not be required to issue fractions of Common
     Shares or to distribute certificates which evidence fractional Common
     Shares. In lieu of such fractional Common Shares, the Company shall pay to
     the registered holders of the Rights Certificates with regard to which such
     fractional Common Shares would otherwise be issuable an amount in cash
     equal to the same fraction of the Current Market Value of a whole Common
     Share, as determined pursuant to the second sentence of Section 11(d), 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
     (other than the Common Shares) to the holders of Common Shares or to make
     any other distribution to the holders of Common Shares (other than a
     regular quarterly cash dividend out of earnings or retained earnings of the
     Company), (ii) to offer to the holders of Common Shares rights or

                                       38

<PAGE>

     warrants to subscribe for or to purchase any additional Common Shares or
     shares of stock of any class or any other securities, rights or options,
     (iii) to effect any reclassification of the Common Shares (other than a
     reclassification involving only the subdivision of outstanding Common
     Shares), (iv) to effect any consolidation or merger into or with, or to
     effect any sale or other transfer (or to permit one or more of its
     Subsidiaries to effect any sale or other transfer), in one transaction or a
     series of related transactions, of 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 (x) the Company and/or any of its
     Subsidiaries in one or more transactions each of which complies with
     Section 11(o), or (y) a merger in which the Company is the surviving
     corporation and no vote of shareholders of the Company is required to
     consummate the merger), or (v) to effect the liquidation, dissolution or
     winding up of the Company, then, in each such case, the Company shall give
     to each registered holder of a Rights Certificate, to the extent feasible
     and in accordance with Section 26, a notice of such proposed action, which
     shall specify the record date for the purposes of such stock dividend or
     distribution of rights or warrants, or the date on which such
     reclassification, consolidation, merger, sale, transfer, liquidation,
     dissolution or winding up is to take place and the date of participation
     therein by the holders of Common Shares, if any such date is to be fixed,
     and such notice shall be so given in the case of any action covered by
     Section 25(a)(i) or (ii) at least ten Business Days prior to the record
     date for determining holders of Common Shares for purposes of such action,
     and in the case of any such other action, at least ten Business Days prior
     to the date of the taking of such proposed action or the date of
     participation therein by the holders of Common Shares, whichever shall be
     the earlier.

          (b) In case any Triggering Events shall occur, then, in any such case,
     the Company shall as soon as practicable thereafter give to each registered
     holder of a Rights Certificate, to the extent feasible and in accordance
     with Section 26, 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) or Section 13.

     Section 26. Notices.

          (a) Notices, communications or demands authorized by this Agreement to
     be given or made by the Rights Agent or by the holder of any Rights
     Certificate to or on the Company shall be sufficiently given or made if
     sent by first-class mail, postage prepaid, addressed (until another address
     is filed in writing with the Rights Agent) as follows:

               Synovis Life Technologies, Inc.
               2575 University Avenue
               Saint Paul, Minnesota 55114
               Attention: President and Chief Executive Officer

               with a copy to:

               Oppenheimer Wolff & Donnelly LLP
               Plaza VII, Suite 3400
               45 South Seventh Street

                                       39

<PAGE>

               Minneapolis, Minnesota 55402
               Attn: Michael J. Kolar

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

               American Stock Transfer & Trust Company
               59 Maiden Lane
               Plaza Level
               New York, NY 10038

          (c) Notices, communications 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, prior to the Distribution Date, the associated
     Common Share certificate) shall be sufficiently given or made if sent by
     first-class mail, postage prepaid, addressed to such holder at the address
     of such holder as shown on the registry books of the Company maintained by
     the Company, the Rights Agent or the transfer agent for the Common Shares,
     as appropriate.

     Section 27. Supplements and Amendments. Prior to the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company may (acting
by at least a majority of the Outside Directors), and the Rights Agent shall, if
the Company so directs, supplement or amend any provision of this Agreement,
including without limitation to modify or amend the definition of Acquiring
Person set forth in Section 1(a) hereof and to change the Purchase Price set
forth in Section 4(a) and Section 7(b) hereof, without the approval of any
holders of certificates representing Common Shares and without the approval of
any holders of Rights or holders of certificates representing Rights. From and
after the Distribution Date and subject to the penultimate sentence of this
Section 27, the Company may (acting by at least a majority of the Outside
Directors), 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 (a) to cure any ambiguity herein, (b) to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision herein, (c) to shorten or lengthen any time period hereunder, or (d)
to otherwise 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 any such Person); provided, however,
that this Agreement may not be supplemented or amended to lengthen (i) a time
period relating to when the rights may be redeemed at such time as the Rights
are not then redeemable, or (ii) any other time period unless such lengthening
is for the purpose of protecting, enhancing or clarifying the rights of, and/or
the benefits to, the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of any such 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. Notwithstanding

                                       40

<PAGE>

anything contained in this Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price, the Final Expiration Date or
the number of Common Shares for which a Right is exercisable. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.

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

     Section 29. Determinations and Actions by the Board.

          (a) For all purposes of this Agreement, any calculation of the number
     of Common Shares outstanding at any particular time, including for purposes
     of determining the particular percentage of such outstanding Common Shares
     of which any Person is the Beneficial Owner, shall be made in accordance
     with the last sentence of Rule 13d-3d(d)(1)(i) of the General Rules and
     Regulations under the Exchange Act, whether or not the Common Shares are
     registered under the Exchange Act.

          (b) The Board (where specifically provided for herein, acting by at
     least a majority of the Outside Directors) shall have the exclusive power
     and authority to administer this Agreement and to exercise all rights and
     powers specifically granted to the Board (where specifically provided for
     herein, acting by at least a majority of the Outside Directors) or to the
     Company (where specifically provided for herein, acting by at least a
     majority of the Outside Directors), or as may be necessary or advisable in
     the administration of this Agreement, including, without limitation, the
     right and power to (1) interpret the provisions of this Agreement, and (2)
     make all calculations and determinations deemed necessary or advisable for
     the administration of this Agreement (including a determination to redeem
     or not redeem the Rights or to amend or supplement this Agreement). All
     such actions, calculations, interpretations and determinations (including
     for purposes of clause (ii) below, all omissions with respect to the
     foregoing) which are done or made by the Board (where specifically provided
     for herein, acting by at least a majority of the Outside Directors) in good
     faith shall (i) be final, conclusive and binding on the Company, the Rights
     Agent, the holders of the Rights and all other parties, and (ii) not
     subject the Board or any director to any liability to the holders of the
     Rights or to any other person.

          (c) Without limiting the foregoing, nothing contained herein shall be
     construed to suggest or imply that the Board of Directors shall not be
     entitled to reject any Qualified Offer or any other tender offer or other
     acquisition proposal, or to recommend that holders of Common Stock reject
     any Qualified Offer or any other tender offer or other acquisition
     proposal, or to take any other action (including, without limitation, the
     commencement, prosecution, defense or settlement of any litigation and the
     submission of additional or alternative offers or other proposals) with
     respect to any Qualified Offer or any other tender offer or other
     acquisition proposal that the Board of Directors believes is necessary or
     appropriate in the exercise of such fiduciary duty.

                                       41

<PAGE>

     Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the associated Common Share certificates) 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, the
associated Common Share certificates).

     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 for any purpose or under any set
of circumstances or as applied to any Person, such invalid, void or
unenforceable term, provision, covenant or restriction shall continue in effect
to the maximum extent possible for all other purposes, under all other
circumstances and as applied to all other Persons, and 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 or the Rights
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 at least a
majority of the Outside Directors determines in its good faith judgment that
severing the invalid language from this Agreement would adversely affect the
purpose of effect of this Agreement, the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the close of
business on the tenth Business Day following the date of such determination by
such Outside Directors. Without limiting the foregoing, if any provisions
requiring that a determination be made by less than the entire Board (or at a
time or with the concurrence of a group of directors consisting of less than the
entire Board) is held by a 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 Articles of
Incorporation and 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 Minnesota 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.

     Section 34. Descriptive Headings. Descriptive headings of the 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.

                                       42

<PAGE>

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

Attest:                                 SYNOVIS LIFE TECHNOLOGIES, INC.

By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

Attest:                                 AMERICAN STOCK TRANSFER & TRUST COMPANY

By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

                                       43

<PAGE>

                                                                       Exhibit A

                          [Form of Rights Certificate]

Certificate No. R-____________                                      _____ Rights

NOT EXERCISABLE AFTER JUNE 10, 2016 OR EARLIER IF REDEEMED OR EXCHANGED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$.001 PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT
REFERRED TO HEREIN. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR AN ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT. THE RIGHTS SHALL NOT BE EXERCISABLE AND SHALL BE VOID SO LONG AS HELD
BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION TO THE
ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH
JURISDICTION SHALL NOT HAVE BEEN OBTAINED OR BE OBTAINABLE. *

----------
*    The portion of the legend in brackets shall be inserted only if applicable,
     shall be modified to apply to an Acquiring Person, and shall replace the
     preceding sentence.

                                   Exhibit A-1

<PAGE>

                         SYNOVIS LIFE TECHNOLOGIES, INC.

                               RIGHTS CERTIFICATE

     This certifies that ________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of June 11, 2006 (the "Rights Agreement"), between Synovis
Life Technologies, Inc., a Minnesota corporation (the "Company"), and American
Stock Transfer & Trust Company, a New York corporation (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 p.m. (Minneapolis,
Minnesota time) on June 10, 2016, at the office of the Rights Agent designated
for such purpose, or its successors as Rights Agent, one-tenth of one fully paid
and non-assessable share of the Company's Common Stock, par value $.01 per share
(the "Common Shares"), at a purchase price (the "Purchase Price") of $5.00 per
one-tenth of a Common Share (the "Purchase Price") (equivalent to $50.00 for
each share), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate duly completed and
executed. The Purchase Price may be paid by cash, certified bank check or money
order payable to the order of the Company. The number of Rights evidenced by
this Rights Certificate (and the number of Common Shares which may be purchased
upon exercise thereof) set forth above, and the Purchase Price set forth above,
are the number and Purchase Price as of the close of business on June 26, 2006,
based on the Common Shares as constituted at such date.

     Capitalized terms used herein without definition shall have the meaning
given to them in the Rights Agreement.

     The Rights are not exercisable until the Distribution Date and will expire
at the close of business on June 10, 2016 (or, if the Rights Agreement is not
ratified by holders of a majority of the shares of Common Stock voting on the
issue at the Company's first annual meeting of shareholders after June 11, 2006,
immediately following such annual meeting) unless previously redeemed by the
Company as described below. The Rights will not become exercisable in connection
with a "Qualified Offer" as defined in the Rights Agreement.

     As soon as practicable after the Distribution Date, Right Certificates will
be mailed to holders of record of Common stock as of the close of business on
the Distribution Date and, thereafter, the separate Right Certificates alone
will represent the Rights. Except as otherwise determined by the Board of
Directors, only shares of Common stock issued prior to the Distribution Date
will be issued with Rights.

     Upon the occurrence of a Section 11(a)(ii) Event, if the Rights evidenced
by this Rights Certificate are beneficially owned by (i) an Acquiring Person or
an Affiliate or Associate of any such Person, (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 any such
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.

                                   Exhibit A-2

<PAGE>

     As provided in the Rights Agreement, the Purchase Price and the number and
kind of Common Shares or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events. In certain circumstances and as described in the Rights
Agreement, cash, property or other securities may be issued by the Company upon
the exercise hereof in lieu of Common Shares.

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

     Subject to the provisions of the Rights Agreement, this Rights Certificate,
with or without other Rights Certificates, upon surrender at the office or
offices of the Rights Agent designated for such purpose, with the Form of
Election and Certificate set forth on the reverse side duly executed, 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 Common Shares 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, subject to the approval of at least a majority
of the Outside Directors, at a redemption price of $.001 per Right at any time
prior to the earlier of the close of business on (i) the tenth Business Day
following the Stock Acquisition Date (as such time period may be extended
pursuant to the Rights Agreement) or (ii) the Final Expiration Date.

     Subject to the provisions of the Rights Agreement, the Company may, at its
option, at any time after a Section 11(a)(ii) Event, subject to the approval of
at least a majority of the Outside Directors, exchange all or part of the Rights
evidenced by this Certificate for Common Shares or shares of a series of
preferred stock of the Company with rights, privileges and other terms
substantially the same as the Common Shares.

     No fractional Common Shares will be issued upon the exercise of any Right
or Rights evidenced hereby if in lieu thereof a cash payment is made, as
provided in the Rights Agreement.

     No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Common Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or

                                   Exhibit A-3

<PAGE>

upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in 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.

     WITNESS the facsimile signature of the proper officers of the Company.

Dated:
       ------------------------------

ATTEST:                                 SYNOVIS LIFE TECHNOLOGIES, INC.

                                        By:
-------------------------------------       ------------------------------------
                                        Title:
                                               ---------------------------------

Countersigned:

AMERICAN STOCK TRANSFER & TRUST
COMPANY

By:
    ---------------------------------
    Authorized Officer

                                   Exhibit A-4

<PAGE>

                  [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:

     The signature(s) should be guaranteed by a brokerage firm or a financial
institution that is a member of an approved medallion program, such as
Securities Transfer Agents Medallion Program ("STAMP"), Stock Exchange Medallion
Program ("SEMP") or New York Stock Exchange, Inc. Medallion Signature Program
("MSP").

                                   Exhibit A-5

<PAGE>

                                   CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

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

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

Dated:
       ------------------------------   ----------------------------------------
                                        Signature

Signature Guaranteed:

                                     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.

                                   Exhibit A-6

<PAGE>

                          FORM OF ELECTION TO PURCHASE

                  (To be executed if holder desires to exercise
                 Rights represented by the Rights Certificate.)

To: SYNOVIS LIFE TECHNOLOGIES, INC.

The undersigned irrevocably hereby elects to exercise _______________ Rights
represented by this Rights Certificate to purchase the Common Shares 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:

     The signature(s) should be guaranteed by a brokerage firm or a financial
institution that is a member of an approved medallion program, such as
Securities Transfer Agents Medallion Program ("STAMP"), Stock Exchange Medallion
Program ("SEMF') or New York Stock Exchange, Inc. Medallion Signature Program
("MSP').

                                   Exhibit A-7

<PAGE>

                                   CERTIFICATE

     The undersigned hereby certifies by checking the appropriate boxes that:

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

     (2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [__] 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 any such Person.

Dated:
       ------------------------------   ----------------------------------------
                                        Signature

Signature Guaranteed:

                                     NOTICES

     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.

     In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored

                                  Exhibit A-8

<PAGE>

                                                                       Exhibit B

                         SYNOVIS LIFE TECHNOLOGIES, INC.

                           SUMMARY OF RIGHTS AGREEMENT

     On June 1, 2006, the Board of Directors of Synovis Life Technologies, Inc.
(the "Company") declared a dividend distribution of one common stock purchase
right (a "Right") for each outstanding share of the Company's Common Stock, par
value $.01 per share (the "Common Shares"), payable to shareholders of record at
the close of business on June 11, 2006 (the "Record Date"). Each Right entitles
the registered holder to purchase from the Company at any time following the
Distribution Date (as defined below) one-tenth of a Common Share, or a
combination of securities and assets of equivalent value, at a purchase price of
$5.00 per one-tenth Common Share (the "Purchase Price"), subject to adjustment.
The description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement"), dated as of June 1, 2006, between the Company and American
Stock Transfer & Trust Company, as Rights Agent. The Rights Agreement is
intended to be a new rights agreement that effectively extends protections
similar (with certain modifications) to those provided by the Company's previous
Rights Agreement dated as of June 12, 1996 (the "1996 Agreement"), upon
expiration of the 1996 Agreement at the close of business on June 11, 2006.

     Initially, the Rights will be evidenced, with respect to any of the Common
Share certificates outstanding as of the Record Date, by such Common Share
certificates, and no separate Rights Certificates will be distributed. The
Rights will separate from the Common Shares and will be distributed to the
holders thereof on the "Distribution Date," which shall be the first to occur of
the following: (i) the close of business on the tenth business day following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of twenty percent (20%) or more of the outstanding Common
Shares, other than as a result of a Permitted Offer, as defined (the "Stock
Acquisition Date"); or (ii) the close of business on the tenth business day (or
such later date as the Board of Directors, acting by a majority of the Outside
Directors, may determine) following the commencement of a tender offer or
exchange offer (other than a Permitted Offer, as defined) that would result in a
person or group beneficially owning twenty percent (20%) or more of the
outstanding Common Shares. A "Permitted Offer" means a tender or exchange offer
which is for all outstanding Common Shares at a price and on terms determined,
prior to the purchase of shares under such tender or exchange offer, by at least
a majority of the members of the Board who are Outside Directors, to be adequate
and otherwise in the best interests of the Company and its shareholders (other
than the Person or any Affiliate or Associate thereof on whose behalf the offer
is being made). "Outside Directors" are members of the Board who are not
officers of the Company or any of its Subsidiaries and who are not Acquiring
Persons or Affiliates, Associates, nominees or representatives of Acquiring
Persons.

     Until the Distribution Date, (i) the Rights will be evidenced by Common
Share certificates and will be transferred with and only with such Common Share
certificates, (ii) new Common Share certificates issued after June 11, 2006,
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificate for Common

                                   Exhibit B-1

<PAGE>

Shares outstanding will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate.

     The Rights are not exercisable until the Distribution Date and will expire
at the close of business on June 10, 2016 (or, if the Rights Agreement is not
ratified by holders of a majority of the shares of Common Stock voting on the
issue at the Company's first annual meeting of shareholders after June 1, 2006,
immediately following such annual meeting), unless earlier redeemed or exchanged
by the Company as described below (the earliest of all such dates, the
"Expiration Date").

     As soon as practical after the Distribution Date, Rights Certificates will
be mailed to holders of record of the Common Shares as of the close of business
on the Distribution Date and thereafter, the separate Rights Certificates alone
will represent the Rights. All Common Shares issued prior to the earlier of the
Distribution Date and the Expiration Date will be issued with Rights. Common
Shares issued after the Distribution Date upon the exercise of employee stock
options, issuances under other employee stock benefit plans or the conversion of
convertible securities issued prior to the Distribution Date will be issued with
Rights.

     In the event (i) that a person or group, with certain exceptions, becomes
the beneficial owner of more than twenty percent (20%) of the then outstanding
Common Shares, other than as a result of a Permitted Offer, (ii) any Acquiring
Person or Associate or Affiliate thereof merges or consolidates with or into the
Company and the Company is the surviving or continuing corporation, or engages
in one or more series of self-dealing transactions as described in Section
11(a)(ii) of the Rights Agreement; then, and in each such case, each holder of a
Right will thereafter have the right to receive, upon exercise for a purchase
price equal to ten times the Purchase Price of the Right, that number of Common
Shares (or in certain circumstances, cash, property or other securities of the
Company) having a market value equal to twenty times the Purchase Price of the
Right. The Rights, however, are not exercisable following the occurrence of any
of the events set forth above until such time as the Rights are no longer
redeemable by the Company as set forth below. Notwithstanding any of the
foregoing, following the occurrence of any of the events set forth above, all
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person (or certain related
persons and transferees) will be null and void. The events set forth in this
paragraph are referred to as "Section 11(a)(ii) Events."

     For example, at a Purchase Price of $5.00 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following a Section
11(a)(ii) Event would entitle its holder to purchase $100 worth of Common Shares
(or other consideration as noted above) for $50. If the Common Shares had a per
share value of $10 at such time, the holder of each valid Right would be
entitled to purchase ten Common Shares for $50.

     In the event that, at any time following the Stock Acquisition Date, other
than pursuant to a Permitted Offer, (i) the Company is acquired in a merger or
other business combination transaction in which the Company is not the surviving
corporation or the Common Shares are changed or exchanged or (ii) fifty percent
(50%) or more of the Company's assets or earning power is sold or transferred,
each holder of a Right (except Rights which previously have been voided as set
forth above) shall thereafter have the right to receive, upon exercise thereof
for a

                                   Exhibit B-2

<PAGE>

purchase price equal to ten times the current Purchase Price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a market value equal to twenty times the Purchase
Price of the Right. The events set forth in this paragraph are referred to as
"Section 13 Events," and the Section 11(a)(ii) Events and the Section 13 Events
are collectively referred to as the "Triggering Events."

     At any time after the occurrence of a Section 11(a)(ii) Event, at the
election of a majority of the Outside Directors, the Company may exchange the
Rights (other than Rights which have become void), in whole or in part, for
Common Shares, with each Right to be exchanged for a number of Common Shares
equal to the result obtained by dividing (x) a number equal to ten times the
Purchase Price by (y) the current market price per Common Share (subject to
adjustment). In any such exchange, the Company, at its option, may substitute a
series of preferred stock of the Company with rights, privileges and other terms
substantially the same as the Common Shares.

     The Purchase Price payable and the number of Common Shares 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, split,
combination, consolidation or reclassification of, the Common Shares, (ii) if
all holders of any security of the Company are granted rights, options or
warrants to subscribe for or purchase Common Shares or convertible securities at
less than the current market price of the Common Shares, or (iii) upon the
distribution to holders of Common Shares of evidences of indebtedness or assets
(excluding quarterly cash dividends) or of subscription rights or warrants
(other than those referred to above).

     With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least one percent (1%) of the
Purchase Price. The Company will not be required to issue fractional Common
Shares, and, in lieu of such fractional Common Shares, an adjustment in cash
will be made based on the market price of the Common Shares on the last trading
date prior to the date of exercise.

     In general, at any time prior to the first to occur of (i) ten days
following the Stock Acquisition Date, or (ii) the Final Expiration Date, the
Company, acting by a majority of the Outside Directors, may redeem the Rights in
whole, but not in part, at a price of $.001 per Right (payable in cash, stock or
other consideration deemed appropriate by the Board of Directors). Immediately
upon redemption of the Rights, the Rights will terminate and the only right of
the holders of the Rights will be to receive the $.001 redemption price.
However, in the event the Company receives a Qualified Offer (as defined below),
the rights may be redeemed by way of shareholder action taken at a special
meeting of shareholders called by the Board for the purpose of voting on a
resolution accepting the Qualified Offer and authorizing the redemption of the
Rights pursuant to the provisions of the Rights Agreement. Generally, the
special meeting must be held not less than 90 and more than 120 days after the
later of the date the Qualified Offer is received and the date of any previously
scheduled meeting of shareholders to be held within 60 days after the Offer
Date. Such an action by shareholders requires the affirmative vote of holders of
the greater of (A) a majority of the voting power of the shares of Common Stock
present and entitled to vote on the resolution, or (B) a majority of the voting
power of the minimum number of shares of Common Stock entitled to vote on the
resolution that would constitute a quorum for the transaction of business at the
meeting (except where the Company's

                                   Exhibit B-3

<PAGE>

Articles of Incorporation or the Minnesota Business Corporation Act require a
larger proportion or number), as such vote is determined at the special meeting,
not giving effect to any affirmative votes cast by the offering Person or any of
its Affiliates, and is effective immediately prior to the consummation of any
Qualified Offer to be consummated within 60 days after the special meeting.

     A "Qualified Offer" is a tender offer for all outstanding shares of Common
Stock not already beneficially owned by such Person that meets the following
conditions:

-    the same per share price and consideration is offered for all shares, and
     the consideration offered is no less than the then current market price for
     shares of Common stock, is at least eighty percent (80%) cash (and any
     non-cash portion is comprised of shares listed on a national exchange or
     the Nasdaq National Market), and is to be paid upon consummation of the
     offer,

-    on or prior to the commencement of the offer, the offer is accompanied by
     written definitive financing commitments and/or the person making the offer
     has on hand cash or cash equivalents, for the full amount of all financing
     necessary to consummate the offer and has irrevocably committed to use such
     cash for the offer and to set apart and maintain such cash until the offer
     is consummated or withdrawn,

-    the offer requests that the Company call a special meeting of shareholders
     to accept the offer and contains a written agreement of the person making
     the offer to pay at least fifty percent (50%) of the Company's costs of the
     special meeting,

-    the offer by its terms remains open for at least 30 business days plus 20
     business days after any change in price or after any bona fide alternative
     offer for a higher consideration is made,

-    the offer is accompanied by a written opinion of a nationally recognized
     investment banking firm, stating that the price to be paid to holders
     pursuant to the offer is fair and including any written presentation of
     such firm showing the range of values underlying such conclusion,

-    on or before the date the offer is commenced, such Person makes an
     irrevocable written commitment to the Company:

     -    to acquire, within 5 Business Days upon completion of the offer, all
          shares of Common Stock then not beneficially owned by such Person at
          the same price, and for the same consideration, per share as paid in
          the offer,

     -    not to amend its offer to reduce the price,

     -    that such Person will not make another offer for the Common Stock
          within one year if at least eight-five percent (85%) of the common
          stock not owned by such Person has not been tendered, and

-    such offer is not subject to any financing, funding or similar condition,
     does not include any condition relating to completion of or satisfaction
     with any due diligence or similar investigation, and otherwise provides for
     usual and customary terms and conditions.

                                   Exhibit B-4

<PAGE>

     In the determination of the fairness of any offer, the Board retains the
authority to reject, advise the shareholders to reject, or take other action in
response to any offer necessary to the exercise of its fiduciary duties.

     Immediately upon action of the Board of Directors of the Company ordering
the redemption of the Rights or upon the effectiveness of a redemption of the
Rights pursuant to shareholder adoption of a resolution accepting a Qualified
Offer and authorizing the redemption of the Rights, the only existing right of a
holder of the Rights shall be to receive the redemption price for the Rights.

     Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or receive dividends. The creation of the Rights should not be taxable
to shareholders. Shareholders may, however, depending upon the circumstances,
recognize taxable income in the event that the rights become exercisable for
Common Shares (or other consideration) of the Company or for common stock of an
acquiring company as set forth above.

     The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by at least a
majority of the Outside Directors of the Company because the Outside Directors
may, at their option, either (i) declare the transaction to be a "permitted
offer," or (b) at any time before the close of business on the 10th business day
following the Stock Acquisition Date, redeem the then outstanding Rights at the
redemption price.

     The Rights Agreement contains a so-called "TIDE" provision, which requires
that a shareholder rights agreement committee of the Board of Directors of the
Company shall review (not less than once every three years) whether maintaining
the Rights Agreement continues to be in the best interest of the Company's
shareholders.

     Any of the provisions of the Rights Agreement, including the definition of
Acquiring Person or the Purchase Price, may be amended by at least a majority of
the Outside Directors prior to the Distribution Date. After the Distribution
Date, the provisions of the Rights Agreement may be amended by at least a
majority of the Outside Directors in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen
certain time periods under the Rights Agreement. However, no amendment to adjust
the time period governing redemption can be made at such time as the Rights are
not redeemable.

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

                                   Exhibit B-5exv10w1

 

Exhibit 10.1

CONNETICS CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT

     Connetics Corporation, a Delaware corporation (“Connetics” or the “Corporation”), hereby
grants to Cynthia Canup (the “Optionee”) an option to purchase 12,000 shares of Common Stock (the
“Option”) subject to the following terms and conditions of this Non-Qualified Stock Option
Agreement (the “Option Agreement”):

	 	 	 	 	 
	I.

	 	NOTICE OF STOCK OPTION GRANT	 	 
	 

	 	Cynthia Canup	 	 
	 

	 	3160 Porter Drive	 	 
	 

	 	Palo Alto, CA 94304	 	 
	 
	 	 	 	 
	 

	 	Date of Grant
	 	June 1, 2006
	 
	 	 	 	 
	 

	 	Vesting Commencement Date
	 	June 1, 2006
	 
	 	 	 	 
	 

	 	Exercise Price per Share
	 	$12.25
	 
	 	 	 	 
	 

	 	Total Number of Shares of Common	 	 
	 

	 	Stock Subject to the Option (the “Shares”)
	 	12,000 Shares
	 
	 	 	 	 
	 

	 	Total Exercise Price
	 	$147,000.00
	 
	 	 	 	 
	 

	 	Type of Option:
	 	Nonstatutory Stock Option
	 
	 	 	 	 
	 

	 	Term/Expiration Date:
	 	June 1, 2016

  Vesting Schedule:

     This Option may be exercised, in whole or in part, in accordance with the following schedule:

     1/8 of the Shares subject to the Option shall vest six months after the Vesting Commencement
Date, and 1/48 of the Shares subject to the Option shall vest each month thereafter, subject to the
Optionee continuing to be a Service Provider on such dates.

  Termination Period:

     This Option may be exercised for (3) three months after the Optionee ceases to be a Service
Provider for any reason other than death or Disability. In the event the Optionee ceases to be a
Service Provider as the result of death or Disability, this Option may be exercised for (12) twelve
months after the Optionee ceases to be a Service Provider. In no event shall this Option be
exercised later than the Term/Expiration Date as provided above.

 - 1 -

 

II. AGREEMENT

     1. Grant of Option. The Corporation hereby grants to the Optionee named in the Notice
of Stock Option Grant (the “Notice”) attached as Part I of this Option Agreement an option (the
“Option”) to purchase the number of Shares, as set forth in the Notice, at the exercise price per
share set forth in the Notice (the “Exercise Price”), subject to the terms and conditions of the
Notice and this Option Agreement.

          This Option is subject to and conditioned upon Optionee’s acceptance of the Option by
returning to the Corporation an executed original of this Option Agreement. This Option shall be
null and void and of no force and effect, unless the Optionee executes and returns to the
Corporation this Option Agreement.

          This Option is granted as an inducement material to the Optionee’s entering into service with
the Corporation as an Employee. The Grantee has not previously been a Service Provider of the
Company or any Parent or Subsidiary of the Company.

          This Option is not intended to be an incentive stock option under Section 422 of the Code.

     2. Exercise of Option.

          (a) Right to Exercise. This Option is exercisable during its term in accordance with
the Vesting Schedule set out in the Notice and the applicable provisions of this Option Agreement.

          (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice
or by such other procedure as specified from time to time by the Board, which shall state the
election to exercise the Option and the number of Shares in respect of which the Option is being
exercised (the “Exercised Shares”). The exercise notice shall be completed by the Optionee and
delivered to Connetics in person, by certified mail, or by such other method (including electronic
transmission) as determined from time to time by the Board. The exercise notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option
shall be deemed to be exercised upon receipt by Connetics of such fully executed exercise notice
accompanied by such aggregate Exercise Price.

          No Shares shall be issued pursuant to the exercise of this Option unless such issuance and
exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the Option is
exercised with respect to such Exercised Shares.

 - 2 -

 

     3. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

          (c) cash; or

          (d) check; or

          (e) consideration received by Connetics under a cashless exercise program implemented by
Connetics in connection with this Option Agreement; or

          (f) surrender of other Shares which (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.

     4. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the Optionee.

     5. No Obligation to Exercise Option. The grant and acceptance of this Option imposes
no obligation on the Optionee to exercise it.

     6. No Obligation to Continue Business Relationship. The Corporation and any its’
subsidiaries are not by this Option obligated to continue to maintain a business relationship with
the Optionee.

     7. Term of Option. This Option may be exercised only within the term set out in the
Notice, and may be exercised during such term only in accordance with the terms of this Option
Agreement.

     8. Tax Consequences. Some of the federal tax consequences relating to this Option, as
of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          (g) Exercising the Option. The Optionee may incur regular federal income tax
liability upon exercise of the Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price.
If the Optionee is an Employee or a former Employee, Connetics will be required to withhold from
his or her compensation or collect from Optionee and pay to the applicable taxing authorities an
amount in cash equal to a percentage of this compensation income at the time of exercise, and may
refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

 - 3 -

 

          (h) Disposition of Shares. The Optionee holds the Shares acquired upon exercise of
the Option for at least one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

     9. No Rights as Stockholder until Exercise. The Optionee shall have no rights as a
stockholder with respect to the Shares until a stock certificate has been issued to the Optionee
and is fully paid for in accordance with paragraph 3. With respect to certain changes in the
capitalization of the Corporation, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date such stock certificate is issued.

     10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

          (a) Changes in Capitalization. Subject to any required action by the stockholders of
Connetics, the number of shares of Common Stock covered by the Option as well as the Exercise Price
shall be proportionately adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by Connetics; provided, however,
that conversion of any convertible securities of Connetics shall not be deemed to have been
“effected without receipt of consideration.” Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as expressly provided
in this Option Agreement, no issuance by Connetics of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of Connetics, the Board shall notify the Optionee prior to the effective date of such
proposed transaction. The Board in its discretion may permit the Optionee to exercise the Option
prior to such transaction as to all of the Shares, including Shares as to which the Option would
not otherwise be vested and exercisable. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed action.

          (i) Merger or Asset Sale. In the event of a merger of Connetics with or into another
corporation, or the sale of substantially all of the assets of Connetics, the Option shall be
assumed or an equivalent option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have the right to
exercise the Option as to all of the Shares, including Shares as to which it would not otherwise be
vested and exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify the Optionee in
writing or electronically that the Option shall be fully vested and exercisable for a period of
time as determined by the Board, and the Option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase or receive, for each Share
subject to the Option immediately prior to the merger or sale of assets, the consideration

 - 4 -

 

(whether
stock, cash, or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen by the holders of
a majority of the outstanding shares of Common Stock); provided, however, that if such
consideration received in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Board may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each Share subject to the
Option, to be solely common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the merger or sale of
assets.

     11. Entire Agreement; Governing Law. This Option Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and supersedes in its entirety
all prior undertakings and agreements of Connetics and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing
signed by Connetics and Optionee. This agreement is governed by the internal substantive laws, but
not the choice of law rules, of California.

     12. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE OF THIS AGREEMENT IS EARNED ONLY BY CONTINUING
AS A SERVICE PROVIDER AT THE WILL OF CONNETICS (AND NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED AN OPTION OR PURCHASING SHARES UNDER THIS AGREEMENT). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT AND THE VESTING
SCHEDULE SET FORTH IN THIS AGREEMENT DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE’S RIGHT OR CONNETICS’ RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A
SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

 - 5 -

 

III. DEFINITIONS

     A. “Applicable Laws” means the requirements relating to the administration of stock
options under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable
laws of any foreign country or jurisdiction where the Optionee may be resident.

     B. “Board” means the Board of Directors of Connetics.

     C. “Code” means the Internal Revenue Code of 1986, as amended.

     D. “Common Stock” means the common stock of Connetics.

     E. “Corporation” means Connetics Corporation, a Delaware corporation.

     F. “Consultant” means any person, including an advisor, engaged by Connetics or a
Parent or Subsidiary to render services to such entity.

     G. “Director” means a member of the Board.

     H. “Disability” means total and permanent disability as defined in Section 22(e)(3) of
the Code.

     I. “Employee” means any person, including Officers and Directors, employed by
Connetics or any Parent or Subsidiary of Connetics. A Service Provider shall not cease to be an
Employee in the case of (i) any leave of absence approved by Connetics or (ii) transfers between
locations of Connetics or between Connetics, its Parent, any Subsidiary, or any successor. Neither
service as a Director nor payment of a director’s fee by Connetics shall be sufficient to
constitute “employment” by Connetics.

     J. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     K. “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:

(i) If the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were reported)
as quoted on such exchange or system on the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common Stock

 - 6 -

 

shall be the mean between the high bid and low asked prices for the Common Stock on
the date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable; or

(iii) In the absence of an established market for the Common Stock, the Fair Market
Value shall be determined in good faith by the Board.

     L. “Officer” means a person who is an officer of Connetics within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated under the Exchange Act.

     M. “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

     N. “Service Provider” means an Employee, Director or Consultant.

     O. “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing,
as defined in Section 424(f) of the Code.

 - 7 -

 

     By your signature and the signature of Connetics’ representative below, you and Connetics
agree that this Option is granted under and governed by the terms and conditions of the this Option
Agreement. Optionee has reviewed this Option Agreement in its’ entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option Agreement and fully understands all
provisions of this Option Agreement. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board upon any questions relating to this Option
Agreement. Optionee further agrees to notify Connetics upon any change in the residence address
indicated below.

	 	 	 	 	 	 	 
	OPTIONEE:

	 	 	 	CONNETICS CORPORATION	 	 
	 
	 	 	 	 	 	 
	     /s/ Cynthia Canup
 

	 	 	 	     /s/ Thomas G. Wiggans
 

	 	 
	Signature

	 	 	 	By: Thomas G. Wiggans	 	 
	 
	 	 	 	 	 	 
	     Cynthia Canup
 

	 	 	 	     Chairman of the Board & CEO 
	 	 
	Print Name

	 	 	 	Title	 	 
	 
	 	 	 	 	 	 
	 

Residence Address

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

 - 8 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00104-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00104-of-00352.parquet"}]]