Document:

Exhibit 10.1

EXECUTION COPY

Extra Space
Storage LP

$250,000,000 3.625% Exchangeable Senior Notes due
2027

Registration Rights Agreement

March 27, 2007

Citigroup Global Markets
Inc.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

As representatives of the Initial Purchasers

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Ladies and Gentlemen:

Extra Space Storage LP, a Delaware limited partnership
(the “Operating Partnership”) proposes to issue and sell to certain
purchasers (the “Initial Purchasers”), for whom you (the “Representatives”)
are acting as representatives, its 3.625% Exchangeable Senior Notes due 2027
(the “Notes”), upon the terms set forth in the Purchase Agreement by and
among the Operating Partnership, Extra Space Storage Inc., a Maryland
corporation (the “Company”), and the Representatives, dated as of March
21, 2007 (the “Purchase Agreement”), relating to the initial placement
(the “Initial Placement”) of the Notes. 
In certain circumstances, the Notes will be exchangeable for shares of
common stock, $0.01 par value (the “Common Stock”) of the Company in
accordance with the terms of the Notes and the Indenture (as defined
below).  The Company will fully and
unconditionally guarantee the payment by the Operating Partnership of principal
and interest on the Notes.  To induce the
Initial Purchasers to enter into the Purchase Agreement and to satisfy their
obligations thereunder, the holders of the Notes will have the benefit of this
registration rights agreement by and among the Operating Partnership, the
Company and the Initial Purchasers whereby the Company agrees with you for your
benefit and the benefit of the holders from time to time of the Notes
(including the Initial Purchasers) (each a “Holder” and, collectively,
the “Holders”), as follows:

1.             Definitions. 
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement.  As used in this Agreement, the following
capitalized defined terms shall have the following meanings:

“Act” shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated
thereunder.

“Affiliate” shall have the meaning specified in Rule
405 under the Act and the terms “controlling” and “controlled” shall have
meanings correlative thereto.

“Automatic Shelf Registration Statement” shall mean a
Registration Statement filed by a Well-Known Seasoned Issuer which shall become
effective upon filing thereof pursuant to General Instruction I.D for Form S-3.

“Broker-Dealer” shall mean any broker or dealer
registered as such under the Exchange Act.

“Business Day” shall mean any day other than a
Saturday, a Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York City.

“Closing Date” shall mean the date of the first
issuance of the Notes.

“Commission” shall mean the Securities and Exchange
Commission.

“Common Stock” shall have the meaning set forth in the
preamble hereto.

“Company” shall have the meaning set forth in the
preamble hereto.

“Deferral Period” shall have the meaning indicated in
Section 3(i) hereof.

“Exchange Act” shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission
promulgated thereunder.

“Exchange Price” shall have the meaning specified in
the Indenture.

“Final Memorandum” shall
mean the final
offering
memorandum, dated March 21, 2007, relating to the Notes,
including any and all annexes thereto and any information incorporated by
reference therein as of such date.

“Holder” shall
have the meaning
set forth in the preamble hereto.

“Indenture” shall
mean the
Indenture relating to the Notes,  dated the date hereof, by and among the
Operating Partnership, the Company, as guarantor, and Wells Fargo Bank, N.A., as the same may be
amended from time to time in accordance with the terms thereof.

“Initial Placement” shall
have the meaning set forth
in the preamble hereto.

“Initial Purchasers” shall have the meaning set forth
in the preamble hereto.

“Losses” shall have the meaning set forth in Section
5(d) hereof.

“Majority Holders” shall
mean,
on any date,
Holders of a majority of the Common Stock registered under the
Shelf
Registration Statement.

“Managing Underwriters” shall
mean the
investment banker or investment bankers and manager or managers that administer
an underwritten offering, if any, conducted pursuant to Section 6
hereof.

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“NASD Rules” shall mean the Conduct Rules and the
By-Laws of the National Association of Securities Dealers, Inc.

“Note” shall have the meaning set forth in the
preamble.

“Notice and Questionnaire” shall mean a written notice
delivered to the Company substantially in the form attached as Annex A to the
Final Memorandum.

“Notice Holder” shall mean, on any date, any Holder of
Registrable Securities that has delivered a properly completed Notice and
Questionnaire to the Company on or prior to such date.

“Operating Partnership” shall have the meaning set
forth in the preamble hereto.

“Prospectus” shall
mean a prospectus
included in the Shelf Registration Statement (including, without limitation, a
prospectus that discloses information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
or Rule 430B under the Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Common Stock covered by the Shelf Registration Statement, and all
amendments and supplements thereto, including any and all
exhibits thereto and any information incorporated by reference therein.

“Purchase Agreement” shall have the meaning set forth
in the preamble hereto.

“Registrable Securities” shall mean shares of Common
Stock initially issuable in exchange for the Notes initially sold to the
Initial Purchasers pursuant to the Purchase Agreement other than those that
have (i) been registered under the Shelf Registration Statement and disposed of
in accordance therewith, (ii) become eligible to be sold without restriction as
contemplated by Rule 144(k) under the Act or any successor rule or regulation
thereto that may
be adopted by the Commission, (iii) ceased to be outstanding,
whether as a result of redemption, repurchase, cancellation, exchange or otherwise,
or (iv) been sold to the public pursuant to Rule 144 under the Act.

“Registration Default Damages” shall have the meaning
set forth in Section 7 hereof.

“Shelf Registration
Period” shall have the meaning set forth in Section 2(c) hereof.

“Shelf Registration
Statement” shall mean a “shelf” registration statement of the Company
pursuant to the provisions of Section 2 hereof which covers some or all of
the Common Stock on an appropriate form under Rule 415 under the Act, or
any similar rule that may be adopted by the Commission, amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.

“underwriter” shall
mean any
underwriter of Common Stock in connection with an offering thereof under the
Shelf Registration Statement.

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“Well-Known Seasoned
Issuer” shall have the meaning set forth in Rule 405 under the Act.

2.             Shelf
Registration.  (a) The
Company shall as
promptly as practicable (but in no event more than 120 days after
the Closing Date) file with the Commission a Shelf Registration Statement
(which shall be, if the Company is then a Well-Known Seasoned Issuer, an
Automatic Shelf Registration Statement) providing for the registration of, and
the sale on a continuous or delayed basis by the Holders of, all of the
Registrable Securities, from time to time in accordance with the methods of
distribution elected by such Holders, pursuant to Rule 415 under
the Act or any similar rule that may be adopted by the Commission.

(b)           If
the Shelf Registration Statement is not an Automatic Shelf Registration
Statement, the Company shall use its commercially reasonable efforts to cause
the Shelf Registration Statement to become or be declared effective under the
Act no later than 210 days after the Closing Date.

(c)           The Company shall use its commercially
reasonable
efforts to keep the Shelf Registration Statement continuously effective,
supplemented and amended as required by the Act, in order to permit the
Prospectus forming part thereof to be usable by Holders for a period (the “Shelf
Registration Period”)  from the date the Shelf Registration Statement is
declared effective by the Commission (or becomes effective in the
case of an Automatic Shelf Registration Statement) until the earlier of (i) the
20th trading day immediately following the maturity
date of the Notes or
(ii) the date upon which there are no Notes or Registrable
Securities outstanding.  The Company
shall be deemed not to have used its commercially reasonable efforts to keep
the Shelf Registration Statement effective during the Shelf Registration Period
if it voluntarily takes any action that would result in Holders of Registrable
Securities not
being able to offer and sell such Common Stock at any time during the
Shelf
Registration Period, unless such action is (x) required by applicable
law or otherwise undertaken by the Company in good faith and for
valid business reasons (not including avoidance of the Company’s obligations
hereunder), including the acquisition or divestiture of assets, and (y)
permitted by Section 3(i) hereof. 
None of the Company, the Operating Partnership or any of their
respective securityholders (other than Holders of Registrable Securities) shall
have the right to include any securities of the Company or the Operating
Partnership in any Shelf Registration Statement other than Registrable
Securities.

(d)           The Company shall cause the Shelf
Registration Statement and the related Prospectus and any amendment or
supplement thereto, as of the effective date of the Shelf Registration
Statement or such amendment or supplement, (i) to comply in all material
respects with the applicable requirements of the Act; and (ii) not to contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein (in the
case of the Prospectus, in the light of the circumstances under which they were made)
not misleading.

(e)           The Company shall issue a press
release through a reputable national newswire service announcing the
anticipated effective date of the Shelf Registration Statement at least 15
Business Days prior to the anticipated effective date thereof.  Each Holder of Registrable Securities agrees
to deliver a Notice and Questionnaire and such other information as the

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Company may reasonably request in writing, if any, to the Company at
least ten Business Days prior to the anticipated effective date of the Shelf
Registration Statement as announced in the press release.  From and after the effective date of the
Shelf Registration Statement, the Company shall use commercially reasonable
efforts, as promptly as is practicable after the date a Notice and Questionnaire
is delivered, and in any event within 20 Business Days after such date, (i) if
required by applicable law, to file with the Commission a post-effective
amendment to the Shelf Registration Statement or to prepare and, if permitted
or required by applicable law, to file a supplement to the related Prospectus
or an amendment or supplement to any document incorporated therein by reference
or file any other required document so that the Holder delivering such Notice
and Questionnaire is named as a selling securityholder in the Shelf
Registration Statement and the related Prospectus, and so that such Holder is
permitted to deliver such Prospectus to purchasers of the Registrable
Securities in accordance with applicable law and, if the Company shall file a
post-effective amendment to the Shelf Registration Statement, use its
commercially reasonable efforts to cause such post-effective amendment to be
declared effective under the Act as promptly as is practicable; provided, that
the Company shall not be required to file more than two post-effective
amendments in any 90-day period in accordance with this Section 2(e)(i); (ii)
provide such Holder, upon request, copies of any documents filed pursuant to
Section 2(e)(i) hereof; and (iii) notify such Holder as promptly as practicable
after the effectiveness under the Act of any post-effective amendment filed or
the filing of any supplement to the related Prospectus, pursuant to Section
2(e)(i) hereof; provided, that if such Notice and Questionnaire is
delivered during a Deferral Period, the Company shall so inform the Holder
delivering such Notice and Questionnaire and shall take the actions set forth
in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in
accordance with Section 3(i) hereof. 
Notwithstanding anything contained herein to the contrary, the Company
shall be under no obligation to name any Holder that is not a Notice Holder as
a selling securityholder in the Shelf Registration Statement or related
Prospectus; provided, however, that any Holder that becomes a
Notice Holder pursuant to the provisions of this Section 2(e) (whether or not
such Holder was a Notice Holder at the effective date of the Shelf Registration
Statement) shall be named as a selling securityholder in the Shelf Registration
Statement or related Prospectus in accordance with the requirements of this
Section 2(e).  Notwithstanding the
foregoing, if (A) the Notes are called for redemption and the then prevailing
market price of the Common Stock is above the Exchange Price or (B) the Notes
are exchanged as provided for in Section 13.01(i), 13.01(ii) or 13.01(iv) of
the Indenture, then the Company shall use commercially reasonable efforts to
file the post-effective amendment or supplement to the related Prospectus within
five Business Days of the redemption date or the end of the exchange period, as
applicable.

3.             Registration
Procedures.  The following
provisions shall apply in connection with the Shelf Registration
Statement.

(a)           The Company shall:

(i)            furnish to each
of the
Representatives and to counsel for the Notice Holders (as
appointed in accordance with Section 4), not less than five Business Days prior to the filing
thereof with the Commission, a copy of the Shelf Registration
Statement and
each amendment thereto and each amendment or supplement, if any, to the
Prospectus included therein (including all documents incorporated
by reference therein after the initial filing) and shall use its

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commercially
reasonable
efforts to reflect in each such document, when so filed with the Commission,
such comments as the Representatives reasonably propose; and

(ii)           include information
regarding the Notice Holders and the methods of distribution they have elected
for their Registrable Securities provided to the Company in Notices and
Questionnaires as necessary to permit such distribution by the methods specified
therein.

(b)           The Company shall ensure that:

(i)            the Shelf Registration
Statement and any amendment thereto and any Prospectus forming part thereof and
any amendment or supplement thereto complies in all material respects with the
Act; and

(ii)           the Shelf Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.

(c)           The Company shall advise the Representatives, the
Notice Holders and any underwriter that has provided in writing to the Company
a telephone or facsimile number and address for notices, and confirm such
advice in writing (which notice pursuant to clauses (ii) through (v) hereof
shall be accompanied by an instruction to suspend the use of the Prospectus
until the Company shall have remedied the basis for such suspension):

(i)            when the Shelf Registration
Statement and any amendment thereto has been filed with the Commission and when
the Shelf Registration Statement or any post-effective amendment thereto
has become effective;

(ii)           of any request by the Commission for any
amendment or
supplement to the Shelf Registration Statement or the Prospectus or for
additional information;

(iii)          of the issuance by the Commission of
any stop order suspending the effectiveness of the Shelf Registration Statement
or the institution or threatening of any proceeding for
that purpose;

(iv)          of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Common
Stock included
therein for sale in any jurisdiction or the institution or
threatening of any proceeding for such purpose; and

(v)           of the happening of any event that
requires any change in the Shelf Registration Statement or the Prospectus so
that, as of such date, they (A) do not contain any untrue
statement of a material fact and (B) do not omit to state a material fact required to be
stated therein or necessary to make the statements

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therein (in the case of the Prospectus, in the
light of the
circumstances under which they were made) not misleading.

(d)           The
Company shall use its commercially reasonable efforts to
prevent the issuance of any order suspending the effectiveness of the Shelf
Registration Statement or the qualification of the securities
therein for sale in any jurisdiction and, if issued, to obtain as soon as
possible the withdrawal thereof.  The
Company shall undertake additional reasonable actions as required to permit
unrestricted resales of the Common Stock in accordance with the terms and
conditions of this Agreement.

(e)           Upon
request, the Company
shall furnish to each Notice Holder, without charge, at least one copy of the
Shelf Registration Statement and any post-effective amendment thereto,
including all material incorporated therein by reference, and, if a Notice
Holder so requests in writing, all exhibits thereto (including exhibits
incorporated by
reference therein).

(f)            During the Shelf
Registration Period, the Company shall promptly deliver to each Initial
Purchaser, each
Notice Holder, and any sales or placement agents or underwriters
acting on their behalf, without charge, as many copies of the Prospectus
(including the preliminary Prospectus, if any) included in the Shelf
Registration Statement and any amendment or supplement thereto as any
such person may
reasonably request.  The Company consents to
the use of the Prospectus or any amendment or supplement thereto by each of the
foregoing in connection with the offering and sale of the Common
Stock.

(g)           Prior
to any offering of Common Stock pursuant to the Shelf Registration Statement,
the Company shall arrange for the qualification of the Common Stock for sale
under the laws of such jurisdictions as any Notice Holder  shall reasonably request and
shall maintain such qualification in effect so long as required; provided
that in no event shall the Company be obligated to qualify to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to service of process in suits, other than those arising out
of the Initial Placement or any offering pursuant to the Shelf Registration
Statement, in any
jurisdiction where it is not then so subject.

(h)           Upon the occurrence of any event contemplated by subsections (c)(ii)
through (v)
above, the Company shall promptly (or within the time period
provided for by Section 3(i) hereof, if applicable) prepare a
post-effective amendment to the Shelf Registration Statement or an amendment or
supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to Initial Purchasers of the securities included therein,
the Prospectus will not include an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

(i)            Upon the occurrence or existence of
any pending corporate development, public filings with the Commission or any
other material event that, in the reasonable judgment of the Company, makes it
appropriate to suspend the availability of the Shelf Registration Statement and
the related Prospectus, the Company shall give notice (without notice of the
nature or details of such events) to the Notice Holders that the availability
of the Shelf Registration Statement is suspended and, upon actual receipt of
any such notice, each Notice

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Holder agrees not to sell any Registrable Securities pursuant to the
Shelf Registration Statement until such Notice Holder’s receipt of copies of
the supplemented or amended Prospectus provided for in Section 3(h) hereof, or
until it is advised in writing by the Company that the Prospectus may be used,
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus.  The period during which the availability of
the Shelf Registration Statement and any Prospectus is suspended (the “Deferral
Period”) shall not exceed 45 days in any 90-day period or 90 days in any
360-day period; provided, that, if the event triggering the
Deferral Period relates to a proposed or pending material business transaction,
the disclosure of which the board of directors of the Company determines in
good faith would be reasonably likely to impede the ability to consummate the
transaction or would otherwise be seriously detrimental to the Company and its
subsidiaries taken a whole, the Company may extend the Deferral Period from 45
days to 60 days in any 90-day period or from 90 days to 120 days in any 360-day
period.

(j)            The
Company shall comply with all applicable rules and regulations of the
Commission and shall make generally available to its securityholders an
earnings statement satisfying the provisions of Section 11(a) of, and Rule
158 under, the Act  as soon as practicable after the effective date of the
Shelf Registration Statement and in any event no later than 45
days after the end of a 12-month period (or 90 days, if such period is a fiscal
year) beginning with the first month of the Company’s first fiscal quarter
commencing after the effective date of the Shelf Registration Statement.

(k)           The
Company may require each Holder of Common Stock to be sold pursuant to the
Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of such Common Stock as the
Company may from time to time reasonably require for inclusion in the Shelf
Registration Statement.   The
Company
may exclude from the Shelf Registration Statement the Common Stock of any
Holder that unreasonably fails to furnish such information within ten Business
Days after receiving such request.

(l)            Subject
to Section 6 hereof, the Company shall enter into customary
agreements (including, if requested, an underwriting agreement in customary
form) and take
all other appropriate actions  in order to expedite or facilitate the registration or
the disposition of the Common Stock, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
customary indemnification provisions and procedures.

(m)          Subject to Section 6 hereof, the Company shall:

(i)            make reasonably available for
inspection by the Holders of Common Stock to be registered thereunder, any
underwriter participating in any disposition pursuant to the Shelf Registration
Statement, and any attorney, accountant or other agent retained by the Holders
or any such underwriter all relevant financial and other records and pertinent
corporate documents of the Company and its subsidiaries;

(ii)           cause the Company’s officers,
directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the

 8
 

Holders or any such underwriter, attorney, accountant
or agent in connection with the Shelf Registration Statement as is customary
for similar due diligence examinations;

(iii)          make such representations and
warranties to the Holders of Common Stock registered thereunder and the
underwriters, if any, in form, substance and scope as are customarily made by
issuers to underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase Agreement;

(iv)          obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the Managing Underwriters, if
any) addressed to each selling Holder and the underwriters, if any, covering
such matters as are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such Holders
and underwriters;

(v)           obtain “comfort” letters and updates
thereof from the independent certified public accountants of the Company (and,
if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included in
the Shelf Registration Statement), addressed to each selling Holder of Common
Stock registered thereunder and the underwriters, if any, in customary form and
covering matters of the type customarily covered in “comfort” letters in
connection with primary underwritten offerings; and

(vi)          deliver such documents and
certificates as may be reasonably requested by the
Majority Holders
or the Managing Underwriters, if any, including those to evidence compliance
with Section 3(i) hereof and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.

The actions set forth in
clauses (iii) through (vi) of this paragraph (m) shall be performed in
connection with any underwriting or similar agreement as and to the extent
required thereunder.

(n)           In the event that any Broker-Dealer
shall underwrite any Common Stock or participate as a member of an underwriting
syndicate or selling group or “assist in the distribution” (within the meaning
of the NASD Rules) thereof, whether as a Holder of such Common Stock or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such Broker-Dealer in complying
with the NASD Rules.

(o)           The Company shall use its
commercially reasonable efforts to take all other steps necessary to effect the
registration of the Common Stock covered by the Shelf Registration Statement.

 9

4.             Registration
Expenses.  The Company shall bear all
expenses incurred in connection with the performance of its obligations under
Sections 2 and 3 hereof and  shall reimburse the
Holders for the reasonable fees and disbursements of one firm or counsel (which
shall initially be  Hogan &
Hartson LLP, but which may be another nationally recognized law firm
experienced in securities matters designated by the Majority
Holders) to act as counsel for
the Holders in connection therewith; provided, however, that such expenses
shall not include, and the Company shall not have any obligation to pay, any
underwriting fees, discounts or commissions attributable to the sale of such
Registrable Securities, or any fees and expenses of any Broker-Dealer or other
financial intermediary engaged by any Holder.

5.             Indemnification
and Contribution.  (a)  The Company
and the Operating Partnership agree to indemnify and hold harmless each Holder
of Common Stock  covered by the Shelf Registration
Statement, each
Initial Purchaser, the directors, officers, employees, Affiliates and agents of
each such Holder or Initial Purchaser and each person who controls any such
Holder or Initial Purchaser within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Shelf
Registration Statement as originally filed or in any amendment thereof, or in
any preliminary Prospectus or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the
case of any preliminary Prospectus or the Prospectus, in the light of the
circumstances under which they were made) not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
Company and the Operating Partnership will not be liable in any such
case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the party claiming
indemnification specifically for inclusion therein.  This indemnity agreement shall be in addition
to any liability that the Company and the Operating Partnership may otherwise
have to the indemnified party.

The Company and the
Operating Partnership also agree to indemnify as provided
in this Section 5(a) or contribute as provided in Section 5(d) hereof
to Losses of each
underwriter,
if any, of Common
Stock  registered under the Shelf Registration Statement, its directors,
officers,
employees, Affiliates or agents and each person who controls such underwriter on
substantially the same basis as that of the indemnification of the Initial
Purchasers and the selling Holders provided in this paragraph (a)
and shall, if requested by any Holder, enter into an underwriting agreement
reflecting such agreement, as provided in Section 3(l) hereof.

(b)           Each
Holder of securities covered by the Shelf Registration Statement (including
each Initial Purchaser that is a Holder, in such capacity) severally and
not jointly agrees
to indemnify and hold harmless the Company and the Operating Partnership,
each of its
directors, each of its officers who signs the Shelf Registration
Statement and each person  who

 10
 

controls the Company or
the Operating Partnership within the meaning of either the Act or the Exchange
Act, to the same extent as the foregoing indemnity from the
Company and the Operating Partnership to each such Holder, but only with
reference to written information relating to such Holder furnished to the
Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity.  This indemnity agreement shall be
acknowledged by each Notice Holder that is not an Initial Purchaser in such
Notice Holder’s Notice and Questionnaire and shall be in addition to any
liability that any such Notice Holder may otherwise have
to the Company or the Operating Partnership.

(c)           Promptly
after receipt by an indemnified party under this Section 5 or notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section
5, notify the
indemnifying party in writing of the commencement thereof; but the failure so
to notify the indemnifying party (i) will not relieve it from liability
under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses; and (ii) will
not, in any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above.  The
indemnifying party shall be entitled to appoint counsel (including
local counsel) of
the indemnifying party’s choice at the indemnifying party’s expense to
represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel,
other than local counsel if not appointed by the indemnifying party, retained by the
indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably
satisfactory to
the indemnified party.  Notwithstanding
the indemnifying party’s election to appoint counsel (including
local counsel) to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying
party to represent the indemnified party would present such counsel with a
conflict of interest; (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party; (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action; or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party.  An indemnifying party will not, without the
prior written consent of the indemnified party, settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is
an actual or
potential parties to such claim or action) unless such settlement, compromise
or consent includes an unconditional release of such indemnified party from
all liability arising out of such claim, action, suit or proceeding.

(d)           In
the event that the indemnity provided in paragraph (a) or (b) of this
Section 5 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party shall
have a joint and several obligation to contribute to

 11
 

the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending loss, claim, liability,
damage or action) (collectively “Losses”) to which such indemnified
party may be subject in such proportion as is appropriate to reflect the
relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Shelf Registration Statement which resulted in such Losses; provided, however,
that in no case shall any Initial Purchaser be responsible, in the aggregate,
for any amount in excess of the commission applicable to
the Notes, as set
forth in the Final Memorandum, nor shall any underwriter be
responsible for any amount in excess of the underwriting discount or commission
applicable to the securities purchased by such underwriter under the Shelf
Registration Statement which resulted in such Losses.  If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the indemnifying party and
the indemnified party shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations.  Benefits received by the Company and
the Operating Partnership shall be deemed to be equal to the total net proceeds
from the Initial Placement (before deducting expenses) as set forth in
the Final
Memorandum.  Benefits received by
the Initial Purchasers shall be deemed to be equal to the total commissions
as set forth in the Final Memorandum, and benefits received by any
other Holders shall be deemed to be equal to the value of receiving Common
Stock registered under the Act.  Benefits
received by any underwriter shall be deemed to be equal to the total
underwriting discounts and commissions, as set forth on the cover page of the
Prospectus forming a part of the Shelf Registration Statement which resulted in
such Losses.  Relative fault shall be
determined by reference to, among other things, whether any untrue
or any alleged
untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information provided by the indemnifying
party, on the one hand, or by the indemnified party, on the other hand,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission.  The parties agree that it would not be just
and equitable if contribution were determined by pro rata allocation (even
if the Holders were treated as one entity for such purpose) or any other method of
allocation which does not take account of the equitable considerations referred
to above.  Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.  For purposes of this
Section 5, each person who controls a Holder within the meaning
of either the Act or the Exchange Act and each director, officer, employee and
agent of such Holder shall have the same rights to contribution as such Holder,
and each person who controls the Company or the Operating
Partnership
within the meaning of either the Act or the Exchange Act, each officer of the
Company or the Operating Partnership who shall have signed
the Shelf Registration Statement and each director of the Company or
the Operating Partnership shall have the same rights to contribution as the
Company and the Operating Partnership, subject in each case
to the applicable terms and conditions of this paragraph (d).

(e)           The provisions of this Section 5 shall remain in full
force and effect, regardless of any investigation made by or on behalf of any
Holder or the Company or the Operating Partnership or any of the
indemnified persons referred to in this Section 5, and shall survive the
sale by a Holder of securities covered by the Shelf Registration Statement.

 12
 

6.             Underwritten Registrations.  (a)  In
no event will the method of distribution of Registrable Securities take the
form of an underwritten offering without the prior written consent of the
Company.

(b)           If any shares of Common Stock covered
by the Shelf Registration Statement are to be sold in an underwritten offering,
the Managing Underwriters shall be selected by the Company, subject to the
prior written consent of the Majority Holders, which consent shall not be
unreasonably withheld.

(c)           No
person may participate in any underwritten offering pursuant to the Shelf
Registration Statement unless such person (i) agrees to sell such person’s
shares of Common Stock on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such arrangements;
and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.

7.             Registration
Defaults. If any of the following events shall occur, then the Company
shall pay liquidated damages (the “Registration Default Damages”) to the
Holders as follows:

(a)           if the Shelf Registration Statement
(which shall be, if the Company is then a Well-Known Seasoned Issuer, an
Automatic Shelf Registration Statement) is not filed with the Commission on or
prior to the 120th day following the Closing Date, then commencing on the 121st
day after the Closing Date, Registration Default Damages shall accrue on the
aggregate outstanding principal amount of the Notes, at a rate of 0.25% per
annum for the first 90 days from and including such 121st day and 0.50% per
annum thereafter; or

(b)           if the Shelf Registration Statement
is not declared effective by the Commission (or has not become effective in the
case of an Automatic Shelf Registration Statement) on or prior to the 210th day
following the Closing Date, then commencing on the 211th day after the Closing
Date, Registration Default Damages shall accrue on the aggregate outstanding
principal amount of the Notes, at a rate of 0.25% per annum for the first 90
days from and including such 211th day and 0.50% per annum thereafter; or

(c)           if the Shelf Registration Statement
has been declared or becomes effective but ceases to be effective or usable for
the offer and sale of the Registrable Securities, other than in connection with
(A) a Deferral Period or (B) as a result of a requirement to file a
post-effective amendment or supplement to the Prospectus to make changes to the
information regarding selling securityholders or the plan of distribution
provided for therein, at any time during the Shelf Registration Period and the
Company does not cure the lapse of effectiveness or usability within ten
Business Days (or, if a Deferral Period is then in effect and subject to the 20
Business Day filing requirement and the proviso regarding the filing of
post-effective amendments in Section 2(e) with respect to any Notice and
Questionnaire received during such period, within ten Business Days following
the expiration of such Deferral Period or period permitted pursuant to Section
2(e)) then Registration Default Damages shall accrue on the aggregate
outstanding principal amount of the Notes at a rate of 0.25% per annum for the
first 90

 13
 

days from and including the day following such tenth Business Day and
0.50% per annum thereafter; or

(d)           if the Company through its omission
fails to name as a selling securityholder any Holder that had complied timely
with its obligations hereunder in a manner to entitle such Holder to be so
named in (i) the Shelf Registration Statement at the time it first became
effective or (ii) any Prospectus at the later of time of filing thereof or the
time the Shelf Registration Statement of which the Prospectus forms a part
becomes effective then Registration Default Damages shall accrue, on the
aggregate outstanding principal amount of the Notes held by such Holder, at a
rate of 0.25% per annum for the first 90 days from and including the day
following the effective date of such Shelf Registration Statement or the time
of filing of such Prospectus, as the case may be, and 0.50% per annum
thereafter; or

(e)           if the aggregate duration of Deferral
Periods in any period exceeds the number of days permitted in respect of such
period pursuant to Section 3(i) hereof, then commencing on the day the
aggregate duration of Deferral Periods in any period exceeds the number of days
permitted in respect of such period, Registration Default Damages shall accrue
on the aggregate outstanding principal amount of the Notes at a rate of 0.25%
per annum for the first 90 days from and including such date, and 0.50% per
annum thereafter;

provided, however, that (1)
upon the filing of the Shelf Registration Statement (in the case of paragraph
(a) above), (2) upon the effectiveness of the Shelf Registration Statement (in
the case of paragraph (b) above), (3) upon such time as the Shelf Registration
Statement which had ceased to remain effective or usable for resales again
becomes effective and usable for resales (in the case of paragraph (c) above),
(4) upon the time such Holder is permitted to sell its Registrable Securities
pursuant to any Shelf Registration Statement and Prospectus in accordance with
applicable law (in the case of paragraph (d) above) or (5) upon the termination
of the Deferral Period that caused the limit on the aggregate duration of
Deferral Periods in a period set forth in Section 3(i) to be exceeded (in the
case of paragraph (e) above), the Registration Default Damages shall cease to
accrue.

Any amounts of
Registration Default Damages due pursuant to this Section 7 will be payable in
cash on the next succeeding interest payment date to Holders entitled to
receive such Registration Default Damages on the relevant record dates for the
payment of interest. If any Note ceases to be outstanding during any period for
which Registration Default Damages are accruing, the Company will prorate the
Registration Default Damages payable with respect to such Note.

The Registration Default
Damages rate on the Notes shall not exceed in the aggregate 0.50% per annum and
shall not be payable under more than one clause above for any given period of
time, except that if Registration Default Damages would be payable because of
more than one Registration Default, but at a rate of 0.25% per annum under one
Registration Default and at a rate of 0.50% per annum under the other, then the
Registration Default Damages rate shall be the higher rate of 0.50% per
annum.  Other than the Company’s
obligation to pay Registration Default Damages in accordance with this Section
7, neither the Company nor the Operating Partnership will have any liability
for damages with respect to a Registration Default.

 14
 

Notwithstanding any
provision in this Agreement, in no event shall Registration Default Damages
accrue to holders of Common Stock issued upon exchange of Notes.  In lieu thereof, the Company shall increase
the Exchange Rate (as defined in the Indenture) by 3% for each $1,000 principal
amount of Notes exchanged at a time when such Registration Default has occurred
and is continuing.

In no event shall
Registration Default Damages, together with Additional Interest (as defined in
the Indenture) relating to a Reporting Event of Default (as defined in the
Indenture), accrue on the Notes at a per annum rate, in the aggregate, in
excess of 0.50% per annum, regardless of the number of events or circumstances
giving rise to the requirement to pay such Registration Default Damages and
Additional Interest.

8.             No
Inconsistent Agreements.  Neither
the Company nor
the Operating Partnership has entered into, and each agrees not to enter
into, any agreement with respect to its securities that is inconsistent with
the registration rights granted to the Holders herein.

9.             Rule 144A and Rule 144.  So long as any Registrable Securities remain
outstanding, the Company shall use its commercially reasonable efforts to file
the reports required to be filed by it under Rule 144A(d)(4) under the Act and
the Exchange Act in a timely manner and, if at anytime the Company is not
required to file such reports, it will, upon the written request of any Holder
of Registrable Securities, make publicly available other information so long as
necessary to permit sales of such Holder’s Registrable Securities pursuant to
Rules 144 and 144A of the Act. The Company covenants that it will take such
further action as any Holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Act within the limitation
of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any Holder of Registrable Securities, the Company shall deliver to such Holder
a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 9 shall be deemed to
require the Company or the Operating Partnership to register any of its
securities pursuant to the Exchange Act.

10.           Listing.  So long as any Registrable Securities are
outstanding, the Company shall use its commercially reasonable efforts to
maintain the approval of the Common Stock for listing on the New York Stock
Exchange or such other exchange or trading market as the Common Stock is then
listed.

11.           Amendments
and Waivers.  The provisions of this
Agreement may not be amended, qualified, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be given, unless
the Company has obtained the written consent of the Majority
Holders;  provided that,
with respect to any matter that directly or indirectly affects the rights of
any Initial Purchaser hereunder, the Company shall obtain the written consent
of each such Initial Purchaser against which such amendment, qualification,
supplement, waiver or consent is to be effective;  provided, further,
that no amendment, qualification, supplement, waiver or consent with
respect to Section 7 hereof shall be effective as against any Holder of
Registrable Securities unless consented to in writing by such Holder; and provided, further,
that the provisions of this Section 11 may not be amended, qualified,
modified or supplemented, and

 15
 

waivers or consents to
departures from the provisions hereof may not be given, unless the Company has
obtained the written consent of the Initial Purchasers and
each Holder.

12.           Notices.  All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or air courier guaranteeing overnight
delivery:

(a)           if
to a Holder, at the most current address given by such holder to the Company in
accordance with the provisions of the Notice and Questionnaire;

(b)           if
to the Initial Purchasers or the Representatives,
initially at the address or addresses set forth in the
Purchase Agreement; and

(c)           if
to the Company or the Operating Partnership, initially at its
address set forth in the Purchase Agreement.

All such notices and
communications shall be deemed to have been duly given when received.

The Initial Purchasers, the Company or
the Operating Partnership by notice to the other parties may designate
additional or different addresses for subsequent notices or communications.

Notwithstanding the foregoing, notices given to
Holders (i) holding Notes in book-entry form may be given through the
facilities of DTC or any successor depository and (ii) may be given by e-mail
at the e-mail address provided by such Holder in accordance with the provisions
of the Notice and Questionnaire.

13.           Remedies.  Each Holder, in addition to being entitled to
exercise all rights provided to it herein or in the Purchase Agreement or
granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The
Company and the Operating Partnership agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by them of
the provisions of this Agreement and hereby agree to waive in any action for
specific performance the defense that a remedy at law would be adequate.

14.           Successors.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective successors and assigns,
including, without the need for an express assignment or any consent by the
Company or the Operating Partnership thereto, subsequent
Holders of Registrable Securities, and the indemnified persons
referred to in Section 5 hereof.  The Company and
the Operating Partnership hereby agree to extend the benefits of this Agreement to
any Holder of Registrable Securities, and any such Holder
may specifically enforce the provisions of this Agreement as if an original
party hereto.

15.           Counterparts.  This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.

 16
 

16.           Headings.  The section headings used herein are for
convenience only and shall not affect the construction hereof.

17.           Applicable
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed in the State of New York.  The parties hereto each hereby waive any
right to trial by jury in any action, proceeding or counterclaim arising out of
or relating to this Agreement.

18.           Severability.  In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.

19.           Common
Stock Held by the Company, etc. 
Whenever the consent or approval of Holders of a specified percentage of
Common Stock is required hereunder, Common Stock held by the Company or its
Affiliates (other than subsequent Holders of Common Stock if such subsequent
Holders are deemed to be Affiliates solely by reason of their holdings of such
Common Stock) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.

 17
 

If the foregoing is in accordance with your
understanding of our agreement, please sign and return to us the enclosed
duplicate hereof, whereupon this letter and your acceptance shall represent a
binding agreement by and among the Company, the Operating Partnership and the
several Initial Purchasers.

 

	
  

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  EXTRA SPACE STORAGE LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Kenneth M. Woolley

  
	
   

  	
   

  	
  Name: Kenneth M.
  Woolley

  
	
   

  	
   

  	
  Title: Trustee
  of ESS Holdings Business Trust I, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXTRA SPACE
  STORAGE INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Kent W. Christensen

  
	
   

  	
   

  	
  Name: Kent W.
  Christensen

  
	
   

  	
   

  	
  Title: Executive
  Vice President and Chief 

  
	
   

  	
   

  	
  Financial
  Officer

  

 

 

 

 

The foregoing Agreement is hereby confirmed and

accepted as of
the date first above written.

	
  Citigroup Global Markets
  Inc.

  	
   

  	
   

  
	
  Merrill Lynch, Pierce, Fenner & Smith

  	
   

  	
   

  
	
   

  	
  Incorporated

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By: Citigroup
  Global Markets Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Paul
  Ingrassia

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Paul
  Ingrassia

  	
   

  	
   

  
	
   

  	
  Title: Managing
  Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  For themselves
  and the other several Initial

  	
   

  	
   

  
	
   

  	
  Purchasers named
  in Schedule I to the

  	
   

  	
   

  
	
   

  	
  Purchase
  Agreement

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
						

 

 18Exhibit 4.1

 

VIVUS, INC.

AND

COMPUTERSHARE INVESTOR SERVICES, LLC

 

 

PREFERRED
STOCK RIGHTS AGREEMENT

Dated as
of March 27, 2007

 

TABLE OF
CONTENTS

	
  

  	
   

  	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  Appointment of Rights Agent

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  Issuance of Rights Certificates.

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  Form of Rights Certificates.

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  Countersignature and Registration.

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

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

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
   

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

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  Cancellation and Destruction of Rights Certificates

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.

  	
   

  	
  Reservation and Availability of Preferred Shares.

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  Record Date

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
   

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

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  Certificate of Adjusted Exercise Price or Number of
  Shares

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
   

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

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 14.

  	
   

  	
  Fractional Rights and Fractional Shares.

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 15.

  	
   

  	
  Rights of Action

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 16.

  	
   

  	
  Agreement of Rights Holders

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 17.

  	
   

  	
  Rights Certificate Holder Not Deemed a Stockholder

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 18.

  	
   

  	
  Concerning the Rights Agent.

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 19.

  	
   

  	
  Merger or Consolidation or Change of Name of Rights
  Agent.

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 20.

  	
   

  	
  Duties of Rights Agent

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 21.

  	
   

  	
  Change of Rights Agent

  	
   

  	
  30

  

 

 ii
 

 

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 22.

  	
   

  	
  Issuance of New Rights Certificates

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 23.

  	
   

  	
  Redemption.

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 24.

  	
   

  	
  Exchange.

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 25.

  	
   

  	
  Notice of Certain Events.

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 26.

  	
   

  	
  Notices

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 27.

  	
   

  	
  Supplements and Amendments

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 28.

  	
   

  	
  Successors

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 29.

  	
   

  	
  Determinations and Actions by the Board of
  Directors, etc

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 30.

  	
   

  	
  Benefits of this Agreement

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 31.

  	
   

  	
  Severability

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 32.

  	
   

  	
  Governing Law

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 33.

  	
   

  	
  Counterparts

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 34.

  	
   

  	
  Descriptive Headings

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 35.

  	
   

  	
  Force Majeure

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Form of Certificate of Designation

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Rights Certificate

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Summary of Rights

  	
   

  	
   

  

 

 iii

PREFERRED
STOCK RIGHTS AGREEMENT

This Preferred Stock
Rights Agreement (the “Agreement”)
is dated as of March 27, between Vivus, Inc., a Delaware corporation, (the “Company”), and Computershare Investor Services, LLC, a
Delaware limited liability company (the “Rights Agent”).

On March 26, 2007 (the  “Rights
Dividend Declaration Date”), the Board of Directors of the
Company authorized and declared a dividend of one Preferred Share Purchase
Right (a  “Right”)
for each Common Share (as hereinafter defined) of the Company outstanding as of
the Close of Business (as hereinafter defined) on April 13, 2007 (the “Record Date”), each Right
representing the right to purchase one one-thousandth (0.001) of a share of
Series A Participating Preferred Stock (as such number may be adjusted
pursuant to the provisions of this Agreement), having the rights, preferences
and privileges set forth in the form of Certificate of Designations of Rights,
Preferences and Privileges of Series A Participating Preferred Stock attached
hereto as Exhibit A, upon the terms and subject to the conditions herein
set forth, and further authorized and directed the issuance of one Right (as
such number may be adjusted pursuant to the provisions of this Agreement) with
respect to each Common Share that shall become outstanding between the Record
Date and the earlier of the Distribution Date and the Expiration Date (as such
terms are hereinafter defined), and in certain circumstances after the
Distribution Date.

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

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

(a)           “Acquiring Person”
shall mean any Person, who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of 15% or more of the
Common Shares then outstanding, but shall not include the Company, any
Subsidiary of the Company or any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity holding Common Shares for or pursuant
to the terms of any such plan.  Notwithstanding the foregoing, no Person
shall be deemed to be an Acquiring Person as the result of an acquisition of
Common Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person to 15% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 15% or more of the Common Shares of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
Common Shares of the Company (other than pursuant to a dividend or distribution
paid or made by the Company on the outstanding Common Shares in Common Shares
or pursuant to a split or subdivision of the outstanding Common Shares), then
such Person shall be deemed to be an Acquiring Person unless upon becoming the
Beneficial Owner of such additional Common Shares of the Company such Person
does not beneficially own

15% or more of the Common Shares of the Company then
outstanding.  Notwithstanding
the foregoing, (i) if the Company’s Board of Directors
determines in good faith that a Person who would otherwise be an “Acquiring
Person,” as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently (including, without limitation, because
(A) such Person was unaware that it beneficially owned a percentage of the
Common Shares that would otherwise cause such Person to be an “Acquiring
Person,” as defined pursuant to the foregoing provisions of this paragraph (a),
or (B) such Person was aware of the extent of the Common Shares it
beneficially owned but had no actual knowledge of the consequences of such
beneficial ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and if such Person divested or
divests with reasonable promptness (as determined in the discretion of the
Board of Directors) a sufficient number of Common Shares so that such Person
would no longer be an “Acquiring Person,” as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be or
to have become an “Acquiring Person” for any purposes of this Agreement
including, without limitation Section 1(gg) hereof; and (ii) if, as of the
date hereof, any Person is the Beneficial Owner of 15% or more of the Common
Shares outstanding, such Person shall not be or become an “Acquiring Person,”
as defined pursuant to the foregoing provisions of this paragraph (a), unless
and until such time as such Person shall become the Beneficial Owner of
additional Common Shares (other than pursuant to a dividend or distribution
paid or made by the Company on the outstanding Common Shares in Common Shares
or pursuant to a split or subdivision of the outstanding Common Shares),
unless, upon becoming the Beneficial Owner of such additional Common Shares,
such Person is not then the Beneficial Owner of 15% or more of the Common
Shares then outstanding. In its determination of whether a Person has divested
or shall divest with reasonable promptness in accordance with this paragraph
(a), the Board of Directors may take into account such factors as it deems
relevant, which may in the discretion of the Board of Directors, include the
potential impact of the divestiture by such Person on the Company’s stock price,
any liability of such Person which may result from such divestiture arising in
connection with Section 16 of the Exchange Act, and any undertakings by such
Person, which the Board of Directors deems reasonably necessary to ensure
compliance with this paragraph (a).

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

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

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

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

(ii)   which such Person or any of
such Person’s Affiliates or Associates has (A) the right to acquire
(whether such right is exercisable immediately or only after the passage of

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

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

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

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

(g)           “Common Stock Equivalents”
shall have the meaning set forth in Section 11(a)(iii) hereof.

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(h)           “Common Shares” when
used with reference to the Company shall mean the shares of Common Stock of the
Company, par value at $0.001 per share. 
Common Shares when used with reference to any Person other than the
Company shall mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person.

(i)            “Company” shall mean
Vivus, Inc., a Delaware corporation, subject to the terms of
Section 13(a)(iii)(C) hereof.

(j)            “Current Per Share Market Price”
of any security (a “Security” for purposes of this definition), for all
computations other than those made pursuant to Section 11(a)(iii) hereof,
shall mean the average of the daily closing prices per share of such Security
for the thirty (30) consecutive Trading Days immediately prior to such date,
and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the Current Per Share Market Price of any Security on any date shall be
deemed to be the average of the daily closing prices per share of such Security
for the ten (10) consecutive Trading Days immediately prior to such date; provided,
however, that in the event that the Current Per Share Market Price of
the Security is determined during a period following the announcement by the
issuer of such Security of (i) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares
or (ii) any subdivision, combination or reclassification of such Security,
and prior to the expiration of the applicable thirty (30) Trading Day or ten
(10) Trading Day period, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Per Share Market
Price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security.  The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last sale price or, if such
last sale price is not reported, the average of the high bid and low asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Company.  If on
any such date no market maker is making a market in the Security, the fair
value of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used. 
If the Preferred Shares are not publicly traded, the Current Per Share
Market Price of the Preferred Shares shall be conclusively deemed to be
(x) the Current Per Share Market Price of the Common Shares as determined
pursuant to this Section 1(i), as appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof, multiplied by (y) 1,000.  If
the Security is not publicly held or so listed or traded, Current Per Share
Market Price shall mean the fair value per share as

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determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.

(l)            “Current Value” shall
have the meaning set forth in Section 11(a)(iii) hereof.

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

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

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

(o)           “Exchange Ratio”
shall have the meaning set forth in Section 24(a) hereof.

(p)           “Exercise Price”
shall have the meaning set forth in Section 4(a) hereof.

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

(r)            “Final Expiration Date”
shall mean April 13, 2017.

(s)           “Nasdaq” shall mean
The Nasdaq Stock Market, Inc.

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

(u)           “Post-Event Transferee”
shall have the meaning set forth in Section 7(e) hereof.

(v)           “Preferred Shares”
shall mean shares of Series A Participating Preferred Stock, par value $0.001
per share, of the Company.

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(w)          “Pre-Event Transferee”
shall have the meaning set forth in Section 7(e) hereof.

(x)            “Principal Party”  shall
have the meaning set forth in Section 13(b) hereof.

(y)           “Record Date” shall
have the meaning set forth in the recitals at the beginning of this Agreement.

(z)            “Redemption Date”
shall have the meaning set forth in Section 23(a) hereof.

(aa)         “Redemption Price”
shall have the meaning set forth in Section 23(a) hereof.

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

(cc)         “Rights Certificate”  shall
mean a certificate substantially in the form attached hereto as Exhibit B.

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

(ee)         “Section 11(a)(ii) Trigger Date”
shall have the meaning set forth in Section 11(a)(iii) hereof.

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

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

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

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

(kk)         “Substitution Period”
shall have the meaning set forth in Section 11(a)(iii) hereof.

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

(mm)       “Total Exercise Price”
shall have the meaning set forth in Section 4(a) hereof.

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

(oo) A “Triggering Event”
shall be deemed to have occurred upon any Person becoming an Acquiring Person.

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

Section 3.               Issuance of Rights Certificates.

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

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Certificates and may be transferred by the transfer of
the Rights Certificates as permitted hereby, separately and apart from any
transfer of Common Shares, and the holders of such Rights Certificates as
listed in the records of the Company or any transfer agent or registrar for the
Rights shall be the record holders thereof.

(b)           On the Record Date
or as soon as practicable thereafter, the Company will send a copy of the
Summary of Rights by first-class, postage-prepaid mail, to each record holder
of Common Shares as of the Close of Business on the Record Date, at the address
of such holder shown on the records of the Company’s transfer agent and
registrar.  With respect to certificates
for Common Shares outstanding as of the Record Date, until the Distribution
Date, the Rights will be evidenced by such certificates registered in the names
of the holders thereof together with the Summary of Rights.

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

THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE
HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN
VIVUS, INC. AND COMPUTERSHARE INVESTOR SERVICES, LLC, AS THE RIGHTS AGENT,
DATED AS OF MARCH 27, 2007 (THE “RIGHTS AGREEMENT”), THE TERMS OF WHICH ARE
HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF VIVUS, INC. UNDER CERTAIN CIRCUMSTANCES, AS SET
FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE
CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE COMPANY
WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT
WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.  UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR
BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON
BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.

With respect to such
certificates containing the foregoing legend, until the earlier of the
Distribution Date or the Expiration Date, the Rights associated with the Common
Shares represented by such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any such certificate shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.

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(d)           In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.

Section 4.               Form of Rights Certificates.

(a)           The Rights
Certificates (and the forms of election to purchase Common Shares and of
assignment to be printed on the reverse thereof) shall be substantially in the
form of Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or a national market system, on which the
Rights may from time to time be listed or included, or to conform to
usage.  Subject to the provisions of
Section 11 and Section 22 hereof, the Rights Certificates, whenever
distributed, shall be dated as of the Record Date (or in the case of Rights
issued with respect to Common Shares issued by the Company after the Record
Date, as of the date of issuance of such Common Shares) and on their face shall
entitle the holders thereof to purchase such number of one-thousandths (0.001)
of a Preferred Share as shall be set forth therein at the price set forth
therein (such exercise price per one one-thousandth (0.001) of a Preferred
Share being hereinafter referred to as the  “Exercise Price”
and the aggregate Exercise Price of all Preferred Shares issuable upon exercise
of one Right being hereinafter referred to as the  “Total Exercise
Price”), but the number and type of securities purchasable upon
the exercise of each Right and the Exercise Price shall be subject to
adjustment as provided herein.

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

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

 

 9

Section 5.               Countersignature and
Registration.

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

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

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

(a)           Subject to the
provisions of Sections 7(e), 14 and 24 hereof, at any time after the Close
of Business on the Distribution Date, and at or prior to the Close of Business
on the Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of one-thousandths (0.001) of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Rights Certificates surrendered then entitled such holder
to purchase.  Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Rights Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose.  Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Rights Certificate and
shall have provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request. 
Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and
24 hereof, countersign and deliver to the person entitled thereto a

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Rights Certificate or Rights Certificates, as the case
may be, as so requested.  The Company may
require payment from the registered holder of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.

(b)           Upon receipt by the
Company and the Rights Agent of evidence reasonably satisfactory to them
of the loss, theft, destruction or mutilation of a Rights Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and, at the Company’s request, reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights Certificate
if mutilated, the Company will make and deliver a new Rights Certificate of
like tenor to the Rights Agent for delivery to the registered holder in lieu of
the Rights Certificate so lost, stolen, destroyed or mutilated.

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

(a)           Subject to
Sections 7(e), 23(b) and 24(b) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
and prior to the Close of Business on the Expiration Date by surrender of the
Rights Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the Exercise Price for
each one-thousandth (0.001) of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets as the case may be) as to which
the Rights are exercised.

(b)           The Exercise Price
for each one-thousandth (0.001) of a Preferred Share issuable pursuant to the
exercise of a Right shall initially be $26.00, shall be subject to adjustment
from time to time as provided in Sections 11 and 13 hereof and shall be
payable in lawful money of the United States of America in accordance with
paragraph (c) below.

(c)           Upon receipt of a
Rights Certificate representing exercisable Rights, with the form of election
to purchase duly executed, accompanied by payment of the Exercise Price for the
number of one-thousandths (0.001) of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be) to
be purchased and an amount equal to any applicable transfer tax required to be
paid by the holder of such Rights Certificate in accordance with
Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k)
hereof, thereupon promptly (i) (A) requisition from any transfer
agent of the Preferred Shares (or make available, if the Rights Agent is the
transfer agent for the Preferred Shares) a certificate or certificates for the
number of one-thousandths (0.001) of a Preferred Share (or, following a

 11
 

Triggering Event, other securities, cash or other
assets as the case may be) to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests or (B) if
the Company shall have elected to deposit the total number of one-thousandths
(0.001) of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) issuable upon exercise of
the Rights hereunder with a depository agent, requisition from the depository
agent depository receipts representing such number of one-thousandths (0.001)
of a Preferred Share (or, following a Triggering Event, other securities, cash
or other assets as the case may be) as are to be purchased (in which case
certificates for the Preferred Shares (or, following a Triggering Event, other
securities, cash or other assets as the case may be) represented by such
receipts shall be deposited by the transfer agent with the depository agent)
and the Company hereby directs the depository agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14 hereof, (iii) after receipt of such certificates or
depository receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder and (iv) when appropriate, after
receipt thereof, deliver such cash to or upon the order of the registered
holder of such Rights Certificate.  The
payment of the Exercise Price (as such amount may be reduced (including to
zero) pursuant to Section 11(a)(iii) hereof) and an amount equal to any
applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, may be made in cash or
by certified bank check, cashier’s check or bank draft payable to the order of
the Company.  In the event that the Company
is obligated to issue securities of the Company other than Preferred Shares,
pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate.

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

(e)           Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Triggering Event, any Rights beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such (a  “Post-Event Transferee”),
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Company’s
Board of Directors has determined is part of a plan, arrangement or under­standing
which has as a primary purpose or effect the avoidance of this
Section 7(e) (a  “Pre-Event Transferee”) or
(iv) any subsequent transferee receiving transferred Rights from a
Post-Event Transferee or a Pre-Event Transferee, either directly or through one
or more intermediate transferees, shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise.  The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or to any other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or any of such
Acquiring Person’s Affiliates, Associates or transferees hereunder.

 12
 

(f)            Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth in
Section 7 unless such registered holder shall, in addition to having
complied with the requirements of subsection 7(a), have (i) completed and
signed the certificate contained in the form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise and
(ii) provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request.

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

Section 9.               Reservation and Availability
of Preferred Shares.

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

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

(c)           The Company shall
use its best efforts to (i) file, as soon as practicable following the
earliest date after the first occurrence of a Triggering Event in which the
consideration to be delivered by the Company upon exercise of the Rights is
described in Section 11(a)(ii) or Section 11(a)(iii) hereof, or
as soon as is required by law following the Distribution Date, as the case may
be, a registration statement under the Securities Act with respect to the
securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement
to remain

 13
 

effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities and
(B) the date of expiration of the Rights. 
The Company may temporarily suspend, for a period not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare
and file such registration statement and permit it to become
effective.  Upon any such suspension, the
Company shall issue a public announcement stating, and notify the Rights Agent,
that the exercisability of the Rights has been temporarily suspended, as well
as a public announcement and notification to the Rights Agent at such time as
the suspension is no longer in effect. 
The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or “blue sky” laws of the various
states in connection with the exercisability of the Rights.  Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction, unless the requisite qualification in such jurisdiction shall
have been obtained, or an exemption therefrom shall be available, and until a
registration statement has been declared and remains effective.

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

(e)           The Company further
covenants and agrees that it will pay when due and payable any and all federal
and state transfer taxes and charges which may be payable in respect of the
original issuance or delivery of the Rights Certificates or of any Preferred
Shares (or other securities of the Company) upon the exercise of Rights.  The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a person other than, or the issuance or
delivery of certificates or depository receipts for the Preferred Shares (or
other securities of the Company) in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depository receipts for Preferred
Shares (or other securities of the Company) upon the exercise of any Rights
until any such tax shall have been paid (any such tax being payable by the
holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company’s satisfaction that no such tax is due.

Section 10.             Record Date.  Each
Person in whose name any certificate for a number of one-thousandths (0.001) of
a Preferred Share (or other securities of the Company) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the
holder of record of Preferred Shares (or other securities of the Company)
represented thereby on, and such certificate shall be dated, the date upon
which the Rights Certificate evidencing such Rights was duly surrendered and
payment of the Total Exercise Price with respect to which the Rights have been
exercised (and any applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the transfer books of the
Company are open.  Prior to the

 14
 

exercise of the Rights evidenced thereby, the holder
of a Rights Certificate shall not be entitled to any rights of a holder of
Preferred Shares (or other securities of the Company) for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.

Section 11.             Adjustment of Exercise Price,
Number of Shares or Number of Rights.  The Exercise Price, the number
and kind of shares or other property covered by each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.

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

(ii)   Subject to Section 24
of this Agreement, in the event that a Triggering Event shall have occurred,
then promptly following such Triggering Event each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the right to
receive for each Right,

 15
 

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

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

 16
 

full of the Rights or that any necessary regulatory
approval for such issuance will be obtained, the thirty (30) day period set
forth above may be extended to the extent necessary, but not more than ninety
(90) days after the Section 11(a)(ii) Trigger Date, in order that the
Company may seek stockholder approval for the authorization of such additional
shares or take action to obtain such regulatory approval (such period, as it
may be extended, the  “Substitution Period”).  To the extent that the Company
determines that some action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly to
all outstanding Rights and (y) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to seek
any authorization of additional shares, to take any action to obtain any
required regulatory approval and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof.  In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii),
the value of the Common Shares shall be the Current Per Share Market Price of
the Common Shares on the Section 11(a)(ii) Trigger Date and the value of
any Common Stock Equivalent shall be deemed to have the same value as the
Common Shares on such date.

(b)           In case the Company
shall, at any time after the date of this Agreement, fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling such holders (for a period expiring within forty-five (45) calendar
days after such record date) to subscribe for or purchase Preferred Shares or
Equivalent Shares or securities convertible into Preferred Shares or Equivalent
Shares at a price per share (or having a conversion price per share, if a security
convertible into Preferred Shares or Equivalent Shares) less than the then
Current Per Share Market Price of the Preferred Shares or Equivalent Shares on
such record date, then, in each such case, the Exercise Price to be in effect
after such record date shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of Preferred Shares or
Equivalent Shares, as the case may be, which the aggregate offering price of
the total number of Preferred Shares or Equivalent Shares, as the case may be,
to be offered or issued (and/or the aggregate initial conversion price of the
convertible securities to be offered or issued) would purchase at such current
market price, and the denominator of which shall be the number of Preferred
Shares and Equivalent Shares (if any) outstanding on such record date, plus the
number of additional Preferred Shares or Equivalent Shares, as the case may be,
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right.  In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Company’s
Board of Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights.  Preferred Shares
and Equivalent Shares owned by or held for the account of the Company shall not
be deemed outstanding for the purpose of any such computation.  Such adjustment shall be made successively
whenever such a record date is fixed, and

 17
 

in the event that such rights, options or warrants are
not so issued, the Exercise Price shall be adjusted to be the Exercise Price
which would then be in effect if such record date had not been fixed.

(c)           In case the Company
shall, at any time after the date of this Agreement, fix a record date for the
making of a distribution to all holders of the Preferred Shares or of any class
or series of Equivalent Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness or assets
(other than a regular quarterly cash dividend, if any, or a dividend payable in
Preferred Shares) or subscription rights, options or warrants (excluding those
referred to in Section 11(b)), then, in each such case, the Exercise Price
to be in effect after such record date shall be determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Per Share Market Price of a Preferred
Share or an Equivalent Share on such record date, less the fair market value
per Preferred Share or Equivalent Share (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights
or warrants applicable to a Preferred Share or Equivalent Share, as the case
may be, and the denominator of which shall be such Current Per Share Market
Price of a Preferred Share or Equivalent Share on such record date; provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right.  Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution
is not so made, the Exercise Price shall be adjusted to be the Exercise Price
which would have been in effect if such record date had not been fixed.

(d)           Anything herein to
the contrary notwithstanding, no adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) of the Exercise Price; provided, however, that any
adjustments which by reason of this Section 11(d) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this
Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth (0.0001) of a Common Share or other share or one hundred-thousandth
(0.00001) of a Preferred Share, as the case may be.  Notwithstanding the first sentence of this
Section 11(d), any adjustment required by this Section 11 shall be
made no later than the earlier of (i) three (3) years from the date of
the transaction which requires such adjustment or (ii) the Expiration
Date.

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

 

 18

(f)            All Rights
originally issued by the Company subsequent to any adjustment made to the
Exercise Price hereunder shall evidence the right to purchase, at the adjusted
Exercise Price, the number of one-thousandths (0.001) of a Preferred Share
purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.

(g)           Unless the Company
shall have exercised its election as provided in Section 11(h), upon each
adjustment of the Exercise Price as a result of the calculations made in
Section 11(b) and (c), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Exercise Price, that number of Preferred Shares (calculated to the
nearest one hundred-thousandth (0.00001) of a share) obtained by
(i) multiplying (x) the number of Preferred Shares covered by a Right
immediately prior to this adjustment, by (y) the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and
(ii) dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment of the Exercise Price.

(h)           The Company may
elect on or after the date of any adjustment of the Exercise Price as a result
of the calculations made in Section 11(b) or (c) to adjust the number of
Rights, in substitution for any adjustment in the number of Preferred Shares
purchasable upon the exercise of a Right. 
Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one-thousandths (0.001) of a
Preferred Share for which a Right was exercisable immediately prior to such
adjustment.  Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one hundred-thousandth (0.00001)) obtained by
dividing the Exercise Price in effect immediately prior to adjustment of the
Exercise Price by the Exercise Price in effect immediately after adjustment of
the Exercise Price.  The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. 
This record date may be the date on which the Exercise Price is adjusted
or any day thereafter, but, if any Rights Certificates have been issued, shall
be at least ten (10) days later than the date of the public announcement.  If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(h),
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment.  Rights Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Exercise Price) and
shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

(i)            Irrespective of any
adjustment or change in the Exercise Price or the number of Preferred Shares
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Exercise Price per one
one-thousandth (0.001) of a

 19
 

Preferred Share and the number of one-thousandths
(0.001) of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.

(j)            Before taking any
action that would cause an adjustment reducing the Exercise Price below the par
or stated value, if any, of the number of one-thousandths (0.001) of a
Preferred Share issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue as fully paid and
nonassessable shares such number of one-thousandths (0.001) of a Preferred
Share at such adjusted Exercise Price.

(k)           In any case in which
this Section 11 shall require that an adjustment in the Exercise Price be
made effective as of a record date for a specified event, the Company may elect
to defer until the occurrence of such event the issuing to the holder of any
Right exercised after such record date of the number of one-thousandths (0.001)
of a Preferred Share and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the number of one-thousandths
(0.001) of a Preferred Share and other capital stock or securities of the Company,
if any, issuable upon such exercise on the basis of the Exercise Price in
effect prior to such adjustment; provided, however, that the
Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder’s right to receive such additional shares
(fractional or otherwise) upon the occurrence of the event requiring such
adjustment.

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

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

(n)           In the event that
the Company shall at any time after the date of this Agreement (A) declare
a dividend on the Common Shares payable in Common Shares, (B) subdivide
the outstanding Common Shares, (C) combine the outstanding Common Shares
(by reverse stock split or otherwise) into a smaller number of Common Shares,
or (D) issue any shares of its capital stock in a reclassification of the
Common Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such event, except as otherwise provided in this
Section 11(a) and Section 7(e) hereof: (1) each Common Share (or
shares of capital stock issued in such

 20
 

reclassification of the Common Shares) outstanding
immediately following such time shall have associated with it the number of
Rights as were associated with one Common Share immediately prior to the
occurrence of the event described in clauses (A)-(D) above; (2) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall
be adjusted so that the Exercise Price thereafter shall equal the result
obtained by multiplying the Exercise Price in effect immediately prior to such
time by a fraction, the numerator of which shall be the total number of Common
Shares outstanding immediately prior to the event described in clauses (A)-(D)
above, and the denominator of which shall be the total number of Common Shares
outstanding immediately after such event; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right
be less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of such Right; and (3) the number of
one-thousandths (0.001) of a Preferred Share (or shares of such other capital
stock) issuable upon the exercise of each Right outstanding after such event
shall equal the number of one-thousandths (0.001) of a Preferred Share (or
shares of such other capital stock) as were issuable with respect to one Right
immediately prior to such event.  Each
Common Share that shall become outstanding after an adjustment has been made
pursuant to this Section 11(n) shall have associated with it the number of
Rights, exercisable at the Exercise Price and for the number of one-thousandths
(0.001) of a Preferred Share (or shares of such other capital stock) as one
Common Share has associated with it immediately following the adjustment made
pursuant to this Section 11(n).  If
an event occurs which would require an adjustment under both this Section 11(n)
and Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(n) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.

Section 12              Certificate of Adjusted
Exercise Price or Number of Shares.  Whenever an adjustment is made as
provided in Sections 11 and 13 hereof, the Company shall promptly
(a) prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment, (b) file with the
Rights Agent and with each transfer agent for the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a
Rights Certificate in accordance with Section 26 hereof.  Notwithstanding the foregoing sentence, the
failure of the Company to make such certification or give such notice shall not
affect the validity of such adjustment or the force or effect of the
requirement for such adjustment.  The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment contained therein and shall not be deemed to have knowledge of
such adjustment unless and until it shall have received such certificate.

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

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

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

 21
 

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

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

then, concurrent with and in each such case,

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

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

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

(D)  such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to ensure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise
of the Rights; and

(E)   upon
the subsequent occurrence of any consolidation, merger, sale or transfer of
assets or other extraordinary transaction in respect of such Principal Party,
each holder of a Right shall thereupon be entitled to receive, upon exercise of
a Right and payment of the Total Exercise Price as provided in this
Section 13(a), such cash, shares, rights, warrants and other property
which such holder would have been entitled to receive had such holder, at the
time of such

 22
 

transaction, owned the Common Shares of the Principal
Party receivable upon the exercise of such Right pursuant to this Section 13(a),  and such Principal Party shall take such
steps (including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with
the terms hereof for such cash, shares, rights, warrants and other property.

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

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

(i)    in the case of any
transaction described in clause (i) or (ii) of Section 13(a) hereof:
(A) the Person that is the issuer of the securities into which the Common
Shares are converted in such merger or consolidation, or, if there is more than
one such issuer, the issuer the Common Shares of which have the greatest
aggregate market value of shares outstanding, or (B) if no securities are
so issued, (x) the Person that is the other party to the merger, if such
Person survives said merger, or, if there is more than one such Person, the
Person the Common Shares of which have the greatest aggregate market value of
shares outstanding or (y) if the Person that is the other party to the
merger does not survive the merger, the Person that does survive the merger (including
the Company if it survives) or (z) the Person resulting from the
consolidation; and

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

 23
 

Subsidiary of both or all of such joint ventures, and
the Principal Party in each such case shall bear the obligations set forth in
this Section 13 in the same ratio as its interest in such Person bears to
the total of such interests.

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

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

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

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

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

(d)           In case the “Principal
Party” for purposes of Section 13(b) hereof has provision in any of its
authorized securities or in its certificate of incorporation or by-laws or
other instrument governing its corporate affairs, which provision would have
the effect of (i) causing such Principal Party to issue (other than to
holders of Rights pursuant to Section 13 hereof), in connection with, or
as a consequence of, the consummation of a Section 13 Event, Common Shares
or

 24
 

Equivalent Shares of such Principal Party at less than
the then Current Per Share Market Price thereof or securities exercisable for,
or convertible into, Common Shares or Equivalent Shares of such Principal Party
at less than such then Current Per Share Market Price, or (ii) providing
for any special payment, tax or similar provision in connection with the
issuance of the Common Shares of such Principal Party pursuant to the
provisions of Section 13 hereof, then, in such event, the Company hereby
agrees with each holder of Rights that it shall not consummate any such
transaction unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing that the provision in question of such Principal Party shall have
been canceled, waived or amended, or that the authorized securities shall be
redeemed, so that the applicable provision will have no effect in connection
with or as a consequence of, the consummation of the proposed transaction.

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

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

Section 14.             Fractional Rights and Fractional
Shares.

(a)           The Company shall
not be required to issue fractions of Rights or to distribute Rights
Certificates which evidence fractional Rights. 
In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. 
For the purposes of this Section 14(a), the current market value of
a whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable, as determined pursuant to the second sentence of Section 1(i)
hereof.

(b)           The Company shall
not be required to issue fractions of Preferred Shares (other than fractions
that are integral multiples of one one-thousandth (0.001) of a Preferred Share)
upon exercise of the Rights or to distribute certificates which evidence
fractional Preferred Shares (other than fractions that are integral multiples
of one one-thousandth (0.001) of a Preferred Share).  Interests in fractions of Preferred Shares in
integral multiples of one one-thousandth (0.001) of a Preferred Share may, at
the election of the Company, be evidenced by depository receipts, pursuant to
an appropriate agreement between the Company and a depository selected by it; provided,
that such agreement shall provide that the holders of such depository receipts
shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares

 25
 

represented by such depository receipts.  In lieu of fractional Preferred Shares that
are not integral multiples of one one-thousandth (0.001) of a Preferred Share,
the Company shall pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of a Preferred Share.  For purposes of this Section 14(b), the
current market value of a Preferred Share shall be (x) one thousand
multiplied by (y) the closing price of a Common Share (as determined
pursuant to the second sentence of Section 1(i) hereof) for the Trading Day
immediately prior to the date of such exercise.

(c)           The Company shall
not be required to issue fractions of Common Shares or to distribute
certificates which evidence fractional Common Shares upon the exercise or
exchange of Rights.  In lieu of such fractional
Common Shares, the Company shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a Common
Share.  For purposes of this
Section 14(c), the current market value of a Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 1(i) hereof) for the Trading Day immediately prior to the date
of such exercise.

(d)           The holder of a
Right by the acceptance of the Right expressly waives his or her right to
receive any fractional Rights or any fractional shares (other than fractions
that are integral multiples of one one-thousandth (0.001) of a Preferred Share)
upon exercise of a Right.

Section 15              Rights of Action.  All
rights of action in respect of this Agreement, excepting the rights of action
given to the Rights Agent pursuant to Section 18 hereof, are vested
in the respective registered holders of the Rights Certificates (and, prior to
the Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Shares), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Shares), may, in his or her own behalf and for his or her own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his or her
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement.  Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.

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

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

 

 26

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

(c)           subject to
Sections 6(a) and 7(f) hereof, the Company and the Rights Agent may deem
and treat the person in whose name the Rights Certificate (or, prior to
the Distribution Date, the associated Common Shares certificate) is registered
as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Shares certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary.

Section 17.             Rights Certificate Holder Not
Deemed a Stockholder.  No holder, as such, of any Rights Certificate
shall be entitled to vote, receive dividends or be deemed for any purpose to be
the holder of the Preferred Shares or any other securities of the Company which
may at any time be issuable on the exercise of the Rights represented thereby,
nor shall anything contained herein or in any Rights Certificate be construed
to confer upon the holder of any Rights Certificate, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as
specifically provided in Section 25 hereof), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.

Section 18.             Concerning the Rights Agent.

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

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

 27
 

necessary, verified or acknowledged, by the
proper Person or Persons, or otherwise upon the advice of counsel as set forth
in Section 20 hereof.

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

(a)           Any corporation into
which the Rights Agent or any successor Rights Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be
a party, or any corporation succeeding to the corporate trust business of the
Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto; provided,
however, that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof.  In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates either in
the name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.

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

Section 20.             Duties of Rights Agent. 
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Rights Certificates, by their acceptance thereof, shall be
bound:

(a)           The Rights Agent may
consult with legal counsel (who may be legal counsel for the Company), and the
opinion of such counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in good faith and
in accordance with such opinion.

(b)           Whenever in the
performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter (including, without limitation,
the identity of any Acquiring Person and the determination of Current Per Share
Market Price) be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer,

 28
 

the Secretary or any Assistant Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.

(c)           The Rights Agent
shall be liable hereunder to the Company and any other Person only for its own
gross negligence, bad faith or willful misconduct.

(d)           The Rights Agent
shall not be liable for or by reason of any of the statements of fact or
recitals contained in this Agreement or in the Rights Certificates (except its
countersignature thereof) or be required to verify the same, but all such
statements and recitals are and shall be deemed to have been made by the
Company only.

(e)           The Rights Agent
shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor shall it be responsible for any
change in the exercisability of the Rights or any adjustment in the terms of
the Rights (including the manner, method or amount thereof) provided for in
Sections 3, 11, 13, 23 or 24, or the ascertaining of the existence of
facts that would require any such change or adjustment (except with respect to
the exercise of Rights evidenced by Rights Certificates after receipt by the
Rights Agent of a certificate furnished pursuant to Section 12 describing
such change or adjustment); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.

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

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

 29
 

application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.

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

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

(j)            No provision of
this Agreement shall require the Rights Agent to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of
its duties hereunder or in the exercise of its rights if there shall be
reasonable grounds for believing that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.

(k)           If, with respect to
any Rights Certificate surrendered to the Rights Agent for exercise or
transfer, the certificate attached to the form of assignment or form of
election to purchase, as the case may be, has either not been completed or
indicates an affirmative response to clause 1 and/or 2 thereof, the Rights
Agent shall not take any further action with respect to such requested exercise
or transfer without first consulting with the Company.

Section 21.             Change of Rights Agent. 
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon thirty (30) days’ notice in writing
mailed to the Company and to each transfer agent of the Preferred Shares and
the Common Shares by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. 
In the event the transfer agency relationship in effect between the
Company and the Rights Agent terminates, the Rights Agent will be deemed to
resign automatically on the effective date of such termination; and any
required notice will be sent by the Company. The Company may remove the Rights
Agent or any successor Rights Agent upon thirty (30) days’ notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Preferred Shares and the Common Shares by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail.  If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by
the

 30
 

resigning or incapacitated Rights Agent or by the
holder of a Rights Certificate (who shall, with such notice, submit his or her
Rights Certificate for inspection by the Company), then the registered holder
of any Rights Certificate may apply to any court of competent jurisdiction for
the appointment of a new Rights Agent. 
After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Preferred Shares and
the Common Shares. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a Person organized and doing business under the laws of the United States or
any state, in good standing, which 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 $50 million, or (b) an
affiliate of a corporation described in clause (a) of this sentence.  After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares and
Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates. 
Failure to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.  If, at
the time such successor Rights Agent shall succeed to the agency created by
this Agreement, any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature
of the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and if at that time any of the Right Certificates shall not have
been countersigned,  any successor  Rights Agent may  countersign 
such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.

Section 22.             Issuance of New Rights
Certificates.  Notwithstanding any of the provisions of this Agreement
or of the Rights to the contrary, the Company may, at its option, issue new
Rights Certificates evidencing Rights in such form as may be approved by its
Board of Directors to reflect any adjustment or change in the Exercise Price
and the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement.  In
addition, in connection with the issuance or sale of Common Shares following
the Distribution Date and prior to the redemption or expiration of the Rights,
the Company (a) shall, with respect to Common Shares so issued or sold
pursuant to the exercise of

 31
 

stock options or under any employee plan or
arrangement or upon the exercise, conversion or exchange of other securities of
the Company outstanding at the date hereof or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company and (b) may, in
any other case, if deemed necessary or appropriate by the Board of Directors of
the Company, issue Rights Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued and this sentence
shall be null and void ab initio if, and to the extent that, such issuance
or this sentence would create a significant risk of or result in material
adverse tax consequences to the Company or the Person to whom such Rights
Certificate would be issued or would create a significant risk of or result in
such options’ or employee plans’ or arrangements’ failing to qualify for
otherwise available special tax treatment and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.

Section 23.             Redemption.

(a)           The Company may, at
its option and with the approval of the Board of Directors, at any time prior
to the Close of Business on the earlier of (i) the fifth day following the
Shares Acquisition Date (or such later date as may be determined by action of
the Company’s Board of Directors and publicly announced by the Company) and
(ii) the Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $0.001 per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such redemption price being herein referred to as the  “Redemption Price”) and the
Company may, at its option, pay the Redemption Price either in Common Shares
(based on the Current Per Share Market Price thereof at the time of redemption)
or cash.  Such redemption of the Rights
by the Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.  The date on which the Board of Directors
elects to make the redemption effective shall be referred to as the  “Redemption Date.”

(b)           Immediately upon the
action of the Board of Directors of the Company ordering the redemption of the
Rights, evidence of which shall have been filed with the Rights Agent, and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. 
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice
shall not affect the validity of such redemption.  Within ten (10) days after the action of the
Board of Directors ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares.  Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.  Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made.  Neither
the Company nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this

 32
 

Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.

Section 24.             Exchange.

(a)           Subject to
applicable laws, rules and regulations, and subject to subsection 24(c) below,
the Company may, at its option, by action of the Board of Directors, at any
time after the occurrence of a Triggering Event, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for
Common Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the  “Exchange Ratio”).  Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding
Common Shares for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50%
or more of the Common Shares then outstanding.

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

(c)           In the event that
there shall not be sufficient Common Shares issued but not outstanding or
authorized but unissued to permit any exchange of Rights as contemplated in
accordance with Section 24(a), the Company shall either take such action
as may be necessary to authorize additional Common Shares for issuance upon
exchange of the Rights or alternatively, at the option of a majority of the
Board of Directors, with respect to each Right (i) pay cash in an amount
equal to the Current Value (as hereinafter defined), in lieu of issuing Common
Shares in exchange therefor, or (ii) issue debt or equity securities or a
combination thereof, having a value equal to the Current Value, in lieu of
issuing Common Shares in exchange for each such Right, where the value of such
securities shall be determined by a nationally recognized investment banking
firm selected by majority vote of the Board of Directors, or (iii) deliver
any combination of

 33
 

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

(d)           The Company shall
not be required to issue fractions of Common Shares or to distribute
certificates which evidence fractional Common Shares.  In lieu of such fractional Common Shares,
there shall be paid to the registered holders of the Rights Certificates with
regard to which such fractional Common Shares would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a
whole Common Share (as determined pursuant to the second sentence of
Section 1(i) hereof).

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

(f)            Immediately upon
the action of the Board of Directors ordering the exchange of any Rights
pursuant to subsection 24(e) of this Section 24 and without any further
action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of rights in exchange therefor as has been determined by
the Board of Directors in accordance with subsection 24(e) above.  The Company shall give public notice of any
such exchange; provided, however, that the failure to give, or
any defect in, such notice shall not affect the validity of such exchange.  The Company shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the transfer agent for the Common Shares of
the Company.  Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
exchange will state the method by which the exchange of the Rights will be
effected.

Section 25.             Notice of Certain Events.

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

 34
 

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

Section 26.             Notices.  Notices or
demands authorized by this Agreement to be given or made by the Rights
Agent or by the holder of any Rights Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as
follows:

VIVUS,
INC.,

1172 Castro Street

Mountain View, CA
94040

 

with a copy to:

Wilson Sonsini
Goodrich & Rosati

Professional
Corporation

650 Page Mill Road

Palo Alto,
California 94304-1050

Attention:  Mark Reinstra

 

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

Computershare
Investor Services, LLC

655 Montgomery Street,
Suite 830

San Francisco, CA 94111

 

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

Section 27.             Supplements and Amendments. 
Prior to the occurrence of a Distribution Date, the Company may supplement or
amend this Agreement in any respect without the approval of any holders of
Rights and the Rights Agent shall, if the Company so directs, execute such
supplement or amendment.  From and after
the occurrence of a Distribution Date, the Company and the Rights Agent may
from time to time supplement or amend this Agreement without the approval of
any holders of Rights in order to (i) cure any ambiguity,
(ii) correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, (iii) shorten
or lengthen any time period hereunder or (iv) to change or supplement the
provisions hereunder in any manner that the Company may deem necessary or desirable
and that shall not

 35
 

adversely affect the interests of the holders of
Rights (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a
time period relating to when the Rights may be redeemed at such time as the
Rights are not then redeemable or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person).  Upon the delivery of a certificate from an
appropriate officer of the Company that states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment.  Prior to the Distribution Date, the interests
of the holders of Rights shall be deemed coincident with the interests of the
holders of Common Shares.

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

Section 29.             Determinations and Actions by
the Board of Directors, etc.  For all purposes of this Agreement, any
calculation of the number of Common Shares outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding Common Shares of which any Person is the Beneficial Owner, shall be
made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act.  The Board of Directors of the Company shall have
the exclusive power and authority to administer this Agreement and to exercise
all rights and powers specifically granted to the Board, or the Company, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power (i) to interpret the
provisions of this Agreement and (ii) to make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the
Agreement).  All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are
done or made by the Board in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights
Certificates and all other parties and (y) with respect to claims
specifically arising from the Agreement, not subject the Board to any liability
to the holders of the Rights.

Section 30.             Benefits of this Agreement. 
Nothing in this Agreement shall be construed to give to any Person other than
the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim pursuant to this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, the Common Shares).

Section 31.             Severability.  If any
term, provision, covenant or restriction of this Agreement is held by a court
of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however,
that

 36
 

notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and shall not expire until the Close of Business on
the tenth day following the date of such determination by the Board of Directors.

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

Section 33.             Counterparts.  This
Agreement may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.

Section 34.             Descriptive Headings. 
Descriptive headings of the several Sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.

Section 35.             Force Majeure.  Notwithstanding anything to the
contrary contained herein, Rights Agent shall not be liable for any delays or
failures in performance resulting from acts beyond its reasonable control
including, without limitation, acts of God, terrorist acts, shortage of supply,
breakdowns or malfunctions, interruptions or malfunction of computer
facilities, or loss of data due to power failures or mechanical difficulties
with information storage or retrieval systems, labor difficulties, war, or
civil unrest.

[SIGNATURE PAGE TO
FOLLOW]

 37
 

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

	
  “COMPANY”

  	
   

  	
   

  	
  VIVUS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Timothy E. Morris

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Timothy E. Morris

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President of Finance and

  Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  “RIGHTS
  AGENT”

  	
   

  	
   

  	
  Computershare Investor Services, LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
  /s/ David L. Adamson

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  David L. Adamson

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Manager, Investor Services

  

 

 38

EXHIBIT
A

AMENDED AND RESTATED

CERTIFICATE OF
DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF

SERIES A PARTICIPATING
PREFERRED STOCK OF VIVUS, INC.

 

The undersigned, Timothy E. Morris, does hereby
certify:

1.             That
he is duly elected and acting Vice President of Finance and Chief Financial
Officer of VIVUS, Inc., a Delaware corporation (the “Corporation”).

2.             That
pursuant to the authority conferred upon the Board of Directors by the Amended
and Restated Certificate of Incorporation of the said Corporation, and by
Certificate of Designation filed in the office of the Secretary of State of the
State of Delaware on June 26, 1996, the Corporation created a series of
Preferred Stock designated as Series A Participating Preferred Stock and
provided that the number of shares constituting such series shall be 30,000.

3.             As
of the date hereof, no shares of Series A Participating Preferred Stock are
outstanding and no shares of A Participating Preferred Stock have been issued.

4.             That
pursuant to the authority conferred upon the Board of Directors of the
Corporation by its Amended and Restated Certificate of Incorporation, as
amended, and the provisions of Section 151(g) of the General Corporation Law of
the State of Delaware, the Board of Directors at a meeting duly called and held
on March 26, 2007, adopted the following resolutions amending and restating the
number of and the rights, preferences and privileges associate with the
Corporation’s Preferred Stock designated as Series A Participating
Preferred Stock:

NOW, THEREFORE, BE IT RESOLVED:  That pursuant to the authority vested in the
Board of Directors of the Corporation by the Amended and Restated Certificate
of Incorporation, the Board of Directors does hereby provide for the amendment
and restatement of the number of and the rights, preferences and privileges
associate with the Corporation’s Preferred Stock designated as Series A
Participating Preferred Stock as follows:

1.     Designation and Amount.  The shares of such series shall be designated
as “Series A Participating Preferred Stock.”
The Series A Participating Preferred Stock shall have a par value of $0.001 per
share, and the number of shares constituting such series shall be 700,000.

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

3.     Dividends and Distributions.

(a)           Subject to the prior and superior
right of the holders of any shares of any series of Preferred

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

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

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

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

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

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

(c)           Except as required by law, the
holders of Series A Participating Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent that

 2
 

they are entitled to vote with holders of Common Stock
as set forth herein) for taking any corporate action.

5.     Certain
Restrictions.

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

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

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

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

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

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

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

 3
 

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

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

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

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

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

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

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

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

 4
 

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

Executed at _______, [PLACE] on March [___], 2007.

 

	
   

  	
   

  
	
  

  	
  Name:

  	
   

  	
  Timothy E. Morris

  
	
   

  	
  Title:

  	
   

  	
  Vice President of Finance

  
	
   

  	
   

  	
   

  	
  and Chief Financial Officer

  

 

 5

EXHIBIT
B

FORM
OF RIGHTS CERTIFICATE

Certificate No. R-                                                                                                                                                        _________
Rights

NOT EXERCISABLE AFTER THE EARLIER OF (i) APRIL
13, 2017, (ii) THE DATE  TERMINATED
BY THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE RIGHTS PURSUANT
TO THE RIGHTS AGREEMENT.  THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. 
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID.

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

RIGHTS CERTIFICATE

VIVUS, INC.

This certifies that ______________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of March 27, 2007 (the “Rights Agreement”), between Vivus,
Inc., a Delaware corporation (the  “Company”), and Computershare
Investor Services, LLC (the “Rights Agent”),
to purchase from the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to 5:00 P.M., New York
time, on April 13, 2017 at the office of the Rights Agent designated for such

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

 

purpose, or at the office
of its successor as Rights Agent, one one-thousandth (0.001) of a fully paid
and non-assessable share of Series A Participating Preferred Stock, par
value $0.001 per share (the “Preferred Shares”),
of the Company, at an Exercise Price of $26.00 per one-thousandth (0.001) of a
Preferred Share (the  “Exercise Price”), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed.  The number of Rights evidenced by this Rights
Certificate (and the number of one-thousandths (0.001) of a Preferred Share
which may be purchased upon exercise hereof) set forth above are the number and
Exercise Price as of April 13, 2007 based on the Preferred Shares as
constituted at such date.  As provided in
the Rights Agreement, the Exercise Price and the number and kind of Preferred
Shares or other securities which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events.

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

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

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

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

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

 2
 

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 and its corporate seal. 
Dated as of  _______________, _____.

	
  ATTEST:

  	
   

  	
   

  	
  VIVUS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Computershare
  Investor Services, LLC

  as Rights Agent

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 3
 

Form of Reverse Side of Rights Certificate

FORM OF ASSIGNMENT

(To be executed by the
registered holder if such

holder desires to transfer the Rights Certificate)

FOR
VALUE RECEIVED _______________ hereby sells, assigns and transfers unto                                 

	
   

  
	
  (Please print name and
  address of transferee)

  
	
   

  

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

Dated: _______________,
____

	
   

  	
   

  
	
  

  	
  Signature

  

Signature Guaranteed:

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

 4
 

CERTIFICATE

The undersigned
hereby certifies by checking the appropriate boxes that:

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

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

Dated: _______________,
____

	
   

  	
   

  
	
  

  	
  Signature

  

Signature Guaranteed:

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

 

 5
 

Form of
Reverse Side of Rights Certificate — continued

FORM OF ELECTION TO
PURCHASE

(To be executed if holder
desires to

exercise the Rights Certificate)

To:___________________________

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

Please insert social security

or other identifying number

 

	
  

  
	
  (Please print name and address)

  
	
   

  

 

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

Please insert social security

or other identifying number

 

	
  

  
	
  (Please print name and address)

  
	
   

  

 

Dated:
_______________, ____

	
  

  	
   

  
	
  

  	
  Signature

  

 

Signature Guaranteed:

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

 6
 

CERTIFICATE

The undersigned hereby certifies by checking the
appropriate boxes that:

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

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

Dated:
_______________, ____

	
   

  	
   

  
	
  

  	
  Signature

  

 

Signature Guaranteed:

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

 7
 

Form of
Reverse Side of Rights Certificate — continued

NOTICE

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

 

 8

EXHIBIT C

 

STOCKHOLDER RIGHTS PLAN

 

VIVUS, INC.

 

 

Summary of Rights

 

	
  Distribution and

  Transfer of

  Rights; Rights

  Certificate:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Distribution

  Date:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Preferred Stock

  Purchasable

  Upon Exercise of

  Rights:

  	
   

  	
  After the Distribution Date, each Right will entitle
  the holder to purchase for $26.00 (the “Exercise Price”),
  one thousandth (0.001) of a share of the Company’s Preferred Stock with
  economic terms similar to that of one share of the Company’s Common Stock.

  
	
   

  	
   

  	
   

  
	
  Flip-In:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Flip-Over:

  	
   

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

  

 

 

	
  

  	
   

  	
  transaction having a then current market value of
  twice the Exercise Price.

  
	
   

  	
   

  	
   

  
	
  Exchange

  Provision:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Redemption of

  the Rights:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Expiration of the

  Rights:

  	
   

  	
  The Rights expire on the earliest of (a) April
  13, 2017 or (b) exchange or redemption of the Rights as described above.

  
	
   

  	
   

  	
   

  
	
  Amendment of

  Terms of Rights:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Voting Rights:

  	
   

  	
  Rights will not have any voting rights.

  
	
   

  	
   

  	
   

  
	
  Anti-Dilution

  Provisions:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Taxes:

  	
   

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

  

 

The foregoing is a
summary of certain principal terms of the Stockholder Rights Plan only and is
qualified in its entirety by reference to the Preferred Stock Rights Agreement
dated as of March 27, 2007 between the Company and Computershare Investor Services,
LLC, as Rights Agent (the “Rights Agreement”).  The Rights Agreement may be amended from time
to time.  A copy of the Rights Agreement
was filed with the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A dated March [__], 2007.  A copy of the Rights Agreement is available
free of charge from the Company.

 

 2

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