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Exhibit 4.38    
  

 
 

Confidential Materials omitted and filed separately with the
  Securities and Exchange commission. Asterisks denote omissions.    

 
 

Joint Venture Agreement    
  

        This Joint Venture Agreement (hereinafter the "Joint Venture Agreement" or this "Agreement") is entered into by and between 

        Nanya
Technology Corporation, a company legally established under the laws of the Republic of China and having its head office at Hwa-Ya Technology Park 669, Fuhsing
3rd Road, Kueishan, Taoyuan, Taiwan, Republic of China (hereinafter "NTC"), and 

        Infineon
Technologies AG, a company legally established under the laws of Germany and having its head office at St.-Martin-Strasse 53, D-81669 Munich, Germany (hereinafter
"IFX") (collectively the "Parties"). 

        WHEREAS,
the Parties entered into a Memorandum of Understanding and an Addendum to Memorandum of Understanding, both dated May 2, 2002 in order to negotiate in good faith
definitive agreements dealing with a technical cooperation project and a manufacturing joint venture; and 

        WHEREAS,
concurrent with execution of this Agreement, the Parties enter into a Technical Cooperation Agreement to jointly develop the 90nm and 70nm DRAM process technology between the
Parties. 

        NOW,
THEREFORE, in consideration of the foregoing and of the mutual agreements and covenants contained herein, intending to be legally bound, the parties agree as follows: 

Article 1.    Establishment of the Joint Venture Company  

        1.1  Joint
Venture Company 

        The
Parties agree to establish a joint venture company (hereinafter the "Company") to operate a 300mm wafer fab with a capacity of at least 50K wafer starts per month (hereinafter
"Module I"). The Company will initially apply the 90nm and 70nm DRAM process technology to be jointly developed by the Parties and licensed to the Company, or such other DRAM technology agreed by the
Parties. In addition to this Agreement, certain agreements will be entered into among the Parties and the Company, either concurrently with the execution of this Agreements or upon establishment of
the Company (hereinafter referred to as the "Ancillary Agreements"), as follow: 

        a)    Know
How Transfer Agreement (as attached in Appendix A): to transfer the technology jointly developed by the Parties to the Company as pursuant to the Technical
Cooperation Agreement. 

        b)    Product
Purchase and Capacity Reservation Agreement ("PPCRA") (as attached in Appendix B): to deal with matters relating to product purchase and capacity
allocation and reservation of the Company. 

        c)    Land
Sale and Purchase Agreement (as attached in Appendix C): to sell certain land from NTC to the Company. 

        d)    Services
Agreement (as attached in draft form in Appendix D): for NTC and eventually its Affiliates to provide certain support services to the Company. 

        1.1-1    The
Parties shall act as quickly as possible to establish a company limited by shares under the laws of the Republic of China. The name of
the Company shall be  

   ("Hwa-Ya Semiconductor Inc.") in Chinese. 

 

        The
Company shall additionally have an English name. Infineon shall have the right to choose this English name for the Company, and provide an alternative name if the first name is
reasonably refused by NTC. 

        1.1-2    Address
of the Company: The registered address of the company shall be at Hwa-Ya Technology Park, Fuhsing 3rd Road,
Kueishan, Taoyuan, Taiwan, Republic of China. 

        Registered
Business of the Company: The registered business of the Company is set forth in government applications and in the Articles of Incorporation of the Company as attached in
Appendix E. 

        1.1-3    Business
Activities: Notwithstanding the registered business scope of the Company, the Parties agree to cause and allow the Company to engage
only in the business of the development, manufacture and sale of semiconductor products. 

        1.1-4    Articles
of Incorporation: The Company shall adopt Articles of Incorporation pursuant to the laws of the Republic of China in the form as
attached to this Agreement as Appendix E. The Articles of Incorporation shall be consistent with the terms of this Agreement and in case of any conflict the terms of this Agreement shall
prevail as between the Parties. Without limiting the foregoing, the Parties shall exercise all rights available to them to give effect to the terms of this Agreement and shall take all reasonable
steps to amend the Articles of Incorporation to the extent necessary to remove such inconsistency or conflict. 

        1.2-1    Procedure
of application: The Parties shall jointly undertake the procedures for investment in a Joint Venture Company pursuant to the
Statute for Investment by Foreign Nationals. IFX may at its option delegate the performance of application procedures to NTC. 

        1.2-2    Merger
control: If any transaction under this Agreement is subject to premerger control and/or premerger notification, then this Agreement
shall not become effective unless the competent antitrust
authorities shall have given the relevant permissions or clearances to the transaction under premerger control or unless any required premerger notification waiting period shall have expired. 

        1.3  Capitalization

        1.3-1    Authorized
Capital: At the formation of the Company, the authorized capital of the Company shall be NT$ 7.7 billion (equivalent of US$
220 million at a conversion rate of 35 NT$ for one US$), which shall be divided into 770 million shares of common stock, each having a par value of NT$10. 

        1.3-2    Issued
and Outstanding Capital: At the formation of the Company, the outstanding and issued share capital shall be NT$ 2.45 billion
(equivalent of US$ 70 million), out of which (i) NT$ 875 million (equivalent of US$ 25 million) shall be paid in the Company by each of the Parties as equity, and
(ii) NT$ 700 million (equivalent of US$ 20 million) shall be paid in the Company by a special purpose vehicle incorporated under the laws of the Republic of China ("SPV"), set up
jointly by the Parties, for the sole purpose of granting employee shares pursuant to the terms and conditions set forth by the Board of Directors. The equity shall be paid in cash in the fourth
calendar quarter of 2002, the exact date to be determined by the Board of Directors of the Company. 

        1.3-3    Shareholder's
Loan: Subject to Subsection 1.3-7, up to NT$ 2.625 billion (equivalent of US$ 75 million) shall be
provided to the Company by each of the Parties as shareholder loans ("Shareholder's Loan") until the third calendar quarter of 2003 in equal installments by each Party according to the financial needs
of the Company and as determined by the Board of Directors of the Company. 

2

 

        1.3-4    Capital
Increase: The Company may from time to time increase its outstanding and issued share capital. In this case, additional funds raised
with the increased capital shall first be used to pay off the Shareholder's Loan. The exact dates and conditions of capital increases and repayments of Shareholder's Loan shall be determined by the
Board of Directors of the Company. 

        1.3-5    SPV:
The SPV shall be established under the laws of the Republic of China by the Parties for the sole purpose of buying shares in the
Company, administrating and selling these shares to the employees of the Company pursuant to the terms and conditions to be set forth by the Company's Board of Directors. The SPV shall adopt Articles
of Incorporation pursuant to the laws of the Republic of China in the form as attached to this Agreement as Appendix I. The SPV shall be set up by the Parties simultaneously with the
establishment of the Company and shall be capitalized by the Parties with NT$ 700 million (equivalent of US$ 20 million) in equal installments by each Party of NT$ 350 million
(equivalent of US$ 10 million. The SPV shall then subscribe for 70 million shares of the Company at nominal value of NT$ 10 per share. Upon affirmative decision of the Parties and
subject to the
conditions as to be determined by the Board of Directors of the Company and the SPV, the SPV shall later offer the shares in the Company to the Company's employees, whereby the sales price per share
shall be NT$ 10 per share plus reasonable interest. Upon completion of this employee participation program, the SPV shall be dissolved and the proceeds from the share sale (equivalent of US$
20 million plus interest) shall be redistributed to the Parties according to their respective shareholding of 50% in the SPV. 

        1.3-6    Transfer
of Shares to employees of NTC and/or IFX: Each Party shall have the option to offer to its employees shares in the Company up to a
maximum number of 35 million shares of 10 NT$ nominal value of each share. The Parties may choose to make use of this option until December 31st, 2004 at the latest. Both
Parties shall be obliged to restrict their respective employees to a minimum shareholding period of two years after the receipt of such shares. 

        1.3-7    Funding:
The Parties agree that the Company shall require funding for the purpose of building-up the production capacity of
Module I in accordance with the Top Level Business Plan attached in Appendix F, which may be revised from time to time by the unanimous consent of the Parties. The max funding requirement for
Module I up to December 31st, 2005 shall be US$ 2.2 billion comprising (a) US$ 1.1 billion in issued and paid up capital (via the issue of shares as set out
in this Section 1.3), or Shareholder Loans and (b) as may be approved by the Board of Directors, US$ 1.1 billion by way of grants, credit facilities and/or bank loans. As a
principle, the Parties agree that the debt ratio of the Company shall be at anytime at least 50%. Each Party shall have the obligation to provide the Company with 50% of the funding outlined in
a) above. 

        1.3-8    Subscription
ratio: Each of the Parties shall subscribe to equal outstanding and issued share capital of the Company. No third party shall
subscribe to share capital of the Company unless jointly agreed upon by the Parties or otherwise provided by law. 

        1.3-9    Except
as agreed in Subsection 1.3-7, agreement between the Parties shall be necessary to determine the timing and necessity of
increases in the capital of the Company. Furthermore, for such agreed capital increases as indicated herein, each Party shall have the right and obligation to subscribe to new shares in the same
proportion as its then current ownership of shares. For the avoidance of doubt, this Agreement shall impose no obligation on any Party to provide any additional funding other than what is stipulated
herein, whether in the forms of loans, equity or otherwise. 

        1.3-10    The
Company shall provide for its own loan financing according to the decision of its Board of Directors. Both Parties shall support the
Company in obtaining the most favorable terms for its loan financing. None of the Parties shall be obliged to make any guarantees of financing unless this is separately agreed by the Parties. 

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        1.4  Limitations
on Sale, Transfer and Other Disposition, and Use of Shares as Security 

        1.4-1    Within
five (5) years after the incorporation of the Company, or until the shares of the Company are listed on Taiwan Stock Exchange
or any other stock exchanges of Taiwan, Republic of China (the "Stock Exchange"), whichever is earlier, neither Party shall, without the prior written consent of the other Party, sell, transfer or
otherwise dispose of its shares (except for, (i) transferring all but not part of its shares to an Affiliate, or (ii) transfers of shares to employees under Subsection 1.3-6,
each under the terms of this Agreement and in accordance with the provisions of the Articles of Incorporation), or pledge, hypothecate or otherwise use its shares as security, or grant options over
its legal and beneficial interest in its shares. Any action of a Party violating this provision shall be void and shall be considered a material breach of this Agreement in accordance with Subsection
7.3 (a). 

        1.4-2    To
the extent that the restrictions of Subsection 1.4.1 cease to apply and in the case that either Party desires to sell to a bona fide third
party all or any of its shares of the Company (such Party hereinafter the "Selling Party"), the other Party shall have a right of first refusal to purchase such shares (except for transferring all but
not part of its shares to an Affiliate under the terms of this Agreement and in accordance with the provisions of the Articles of Incorporation). The Selling Party shall first give a written notice to
the other Party (hereinafter the "Receiving Party") setting forth i) the number of shares proposed to be transferred (hereinafter the "Offered Shares"), ii) the proposed purchase price,
terms and payment and other material terms and conditions received from a bona fide third party and iii) an irrevocable offer to sell Offered Shares to the Receiving Party (hereinafter the
"Sale Offer") at the same price and on the same terms and conditions as set forth therein. For the avoidance of doubt, the right of first refusal stipulated in this Subsection 1.4-2 shall
apply only when i) the shares of the Company remain unlisted after five (5) years of incorporation of the Company; or ii) in the case where the shares of the Company are listed on
the Stock Exchange, the right of first refusal stipulated herein shall only apply for the Off-the-Market Sale of shares of the Company by either Party. 

        For
the purpose of this Subsection 1.4-2, Off-the-Market Sale shall mean the sale of shares of a company which lists its shares on the Stock Exchange
not through such Stock Exchange. 

        1.4-3    The
Receiving Party shall have the right to purchase the Offered Shares pursuant to the Sale Offer, in whole or in part, by delivering a
written notice to the Selling Party within 30 days from the date of the Sale Offer, irrevocably stating therein that all of the Offered Shares will be purchased by the Receiving Party. 

        1.4-4    If
the Receiving Party provides to the Selling Party the notice specified in the immediately preceding paragraph, then the Receiving Party
shall have 30 days to complete the purchase of the Offered Shares upon the terms set forth in the Sale Offer (hereinafter the "Purchase Period"), provided, however, that the Purchase Period
shall be extended until such date as all required approvals, consents or authorizations in connection with such purchase are obtained. 

        1.4-5    If
the Receiving Party shall not have completed such purchase within the Purchase Period, as extended as provided herein, then the Selling
Party shall have the right for 90 days thereafter (hereinafter the "Transfer Period") to transfer the Offered Shares not subject to any of the restrictions set forth in this Agreement;
provided, however, that such transfer is consummated on terms not more favorable to the purchasers thereof than the terms specified on the Sale Offer; and provided, further, that the Transfer Period
shall be extended until such date as all required approvals, consents or authorizations in connection with such purchase are obtained. 

        1.4-6    If
at the end of the Transfer Period, as extended as provided herein, the Selling Party has not completed the sale of the Offered Shares, the
Selling Party shall no longer be permitted to sell such Offered Shares pursuant to this Section 1.4. 

4

 

        1.4-7    In
such case that any Party transfers all or part of its shares in the Company to an Affiliate or a third party in accordance with
Section 1.4, this Agreement shall not terminate and such Selling Party shall remain liable to all obligations under this Agreement, and it is a precondition for such transfer of shares that
1) the Selling Party shall have caused such Affiliate or third party to enter into an agreement with the other Party by which such Affiliate or third party agrees to be bound by the covenants
of this Agreement and the Ancillary Agreements and to perform the obligations of the Selling Party under this Agreement and the Ancillary Agreements, and that 2) the Selling Party shall have
caused such Affiliate to agree that should it at anytime cease to be an Affiliate it will before this happens transfer all its shares in the Company to another Affiliate of the original Selling Party. 

        1.4-8    Notwithstanding
anything to the contrary of other provisions set forth in this Section 1.4, neither Party shall sell any of its shares
of the Company to any Competitors of the Company. For purposes of this Agreement, a Competitor shall mean a company which conducts the businesses of development, manufacture or sale of semiconductor
products which are in competition with the Company's products at any time. 

        1.4-9    Notwithstanding
anything to the contrary of other provisions set forth in this Article 1, each Party shall own
[**] the outstanding shares of the Company at any time; and [**]. Any action in violation of this provision shall be considered a material breach of
this Agreement according to Subsection 7.3 (a). In case the non-breaching Party decides not to terminate this Agreement for material breach according to Subsection 7.3(a), it may choose
that each Party's Output Share shall be adjusted by the following formula: The breaching Party shall be obligated to offer to the non-breaching Party, and the non-breaching
Party shall have the right of first refusal to the offer from the breaching Party, a share of the Total Capacity amounting to 2[x]% of the Total Capacity of the Company if the
breaching Party's shareholding is [x]% [**] of the shares of the Company, or if the breaching Party's shareholding [**] is
[x]% [**] of the shares of the Company. By way of example: If the breaching Party's shareholding is [**] of the outstanding
shares of the Company, it shall offer to the non-breaching Party [**] of the Total Capacity. 

        The
terms Output Share and Total Capacity used in this Subsection 1.4-9 shall have the same meaning as defined in the PPCRA and the Parties shall cause the Company to comply
with this Subsection 1.4-9. 

        1.5  Changes
in Subscription Ratio 

        In
case of a change pursuant to Section 1.4 in the subscription ratio established in Subsection 1.3-7, the Parties shall revise Article 2 of this Agreement to
provide for nomination and voting of officers and directors and other management in accordance with the shareholding ratio at that time. 

        1.6  Time
Schedule and Costs of Establishment 

        Each
of the Parties agrees to the timetable with several milestones hereto attached as Appendix G for the establishment of the Company and the operation of the plant and,
furthermore, both Parties shall cooperate to make progress according to the timetable. Except for salaries of the staff of each Party, the Company shall bear all of the costs of establishing the
Company. 

        1.7  Interim
Committee 

        The
Parties have established an interim committee to review, monitor and approve all necessary costs associated with establishing the Company. Upon the incorporation of the Company, the
Company shall reimburse any and all such costs incurred by each of the Parties. 

5

 

Article 2.    Management Structure and Operation  

        2.1  Shareholders
Meeting 

        2.1-1    Matters
to be decided by the Shareholders Meeting shall be as follows: 

        (a)  Revision
of the Articles of Incorporation; 

        (b)  Appointment
and dismissal of the directors and the supervisors, and determination of their compensation; 

        (c)  Approval
of the balance sheet and other financial statements received from the Board of Directors; 

        (d)  Determination
of dividends and of disposition of losses; 

        (e)  Merger,
consolidation, restructuring or reorganization of the Company; 

        (f)    Sale
of all or substantially all assets of the Company; 

        (g)  Appointment
and removal of the Company's auditors; 

        (h)  An
initial public offering of the company's shares; 

        (i)    Voluntary
submission by the Company to receivership, bankruptcy, or any similar status; 

        (j)    Liquidation
or dissolution of the Company; and 

        (k)  Other
matters reserved to the determination of the Shareholders Meeting by the Company Law of the Republic of China. 

        2.1-2    Matters
such as the method of announcing the Shareholders Meeting, the legally required number of attendants, and the required number of
votes for decisions shall be in accordance with the Articles
of Incorporation of the Company and the Company Law of the Republic of China subject to the following: 

        a)    Each
shareholder of the Company shall be given timely, written notice of the time, date, agenda and place of the Shareholders Meeting, in no event later than
15 days prior to the date of convocation of such meeting. All notices and agendas of Shareholders Meetings shall be accompanied by accurate and complete English language translations thereof. 

        b)    A
quorum for a Shareholders Meeting shall require the presence, in person or by proxy, of shareholders of the Company holding more than 60% of the total outstanding
shares of the Company. 

        c)    Resolutions
of the Shareholders Meetings shall be adopted by the affirmative vote of 60% of the shares represented in person or by proxy at a Shareholders Meeting at
which a quorum is present. 

        2.1-3    Each
share shall be entitled to one vote. 

        2.1-4    In
case where a shareholder cannot attend a Shareholders Meeting, such shareholder may appoint a representative by issuing a proxy in writing
in accordance with the laws of the Republic of China. 

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        2.2  Directors,
Supervisors, President and Executive Vice President 

        2.2-1    Unless
otherwise agreed by the Parties, the Chairman, directors, supervisors, President and Executive Vice President of the Company shall be
appointed and replaced by the Parties in accordance with the following method: 

        (a)  There
shall be 8 directors, of whom NTC shall appoint 4 directors and IFX shall appoint 4 directors. 

        (b)  There
shall be 2 supervisors, of whom NTC shall appoint 1 supervisor and IFX shall appoint 1 supervisor. 

        (c)  NTC
shall nominate a director of the Company, and provide an alternative nominee if the first nomination is not agreed by IFX, to be appointed as the Chairman of the
Board of the Company. 

        (d)  The
appointment of the President and the Executive Vice President shall be jointly consented by the Parties. However, neither Party shall unreasonably withhold such
consent. If the President is appointed by one Party, the other Party may appoint the Executive Vice President. 

        (e)  Each
Party shall cause the performance of such Chairman, President, Executive Vice President, directors, supervisors, and/or other managers appointed or nominated by
such Party to be in accordance with this Agreement. 

        The
Parties agree to vote in the Shareholders Meeting or meeting of Board of Directors, as the case may be, in favor of the candidates appointed by the other Party as stipulated in this
Subsection 2.2-1. 

        2.2-2    Subject
to the Company Law of the Republic of China, the term of the directors and the supervisors shall be three (3) years, and it
shall be possible to reappoint any of them to any number of terms. 

        2.2-3    If
the Company needs to comply with legal requirements for the appointment of independent directors and supervisors as will be provided in
the Company Law, Securities Exchange Law and any other laws or regulations, the Parties agree to co-operate in good faith and to work out an appropriate contractual arrangement to maintain
the Company as joint venture between the Parties as equal partners with regard to the directors, supervisors and the management of the Company. 

        2.3  The
Board of Directors 

        2.3-1    The
responsibilities of the Board of Directors shall be as follows: 

        (a)  Appointment
and removal of the Chairman of the Board, approval and removal of the President and Executive Vice President of the Company appointed by the Chairman,
approval and removal of Vice Presidents and Assistant Vice Presidents of the Company appointed by the President; 

        (b)  Approval
of the annual and quarterly budgets (including but not limited to the production plan, the business plan, the profit and loss plan, the capital investment plan,
and the financial plan); 

        (c)  Change
of issued and outstanding share capital of the Company; 

        (d)  Determination
of long term policies of the Company including substantial change in the organizational structure and business operation of the Company; 

        (e)  Determination
of employment terms including compensation packages of President, Executive Vice President, Vice Presidents and Assistant Vice Presidents of the Company; 

7

 

        (f)    Establishment
of subsidiaries, opening and closing of branch offices, acquisition of the whole or part of the assets of another company or business, establishment of new
business sites and closing of existing ones; 

        (g)  Setting
the limits of authorities of various positions and approving the chart of authorities; 

        (h)  Approval
of capital expenditure in the amount of US$2,000,000 or more in a single event or a total of US$10,000,000 or more in a quarter proposed by the President and
the Executive Vice President, as well as ratified by the Chairman, in case where the capital expenditure exceeds the quarterly budget approved by the Board of Directors in the quarterly Board meeting; 

        (i)    Approval
of any borrowing and lending with respect to banks and third parties in the amount of US$ 2,000,000 or more; 

        (j)    Preparation
and submission to the Shareholders Meeting of the financial accounts (including dividends and disposition of losses); 

        (k)  Creation
of pledge, hypothecation, encumbrance or other security on the Company's assets; 

        (l)    Issuance
of debt securities; 

        (m)  Transfer,
sale or any other disposal of major assets other than in the ordinary course of business in the amount of more than US$ 2,000,000; 

        (n)  Conclusion
or termination of agreements regarding intellectual property rights and know how; 

        (o)  Conclusion
of any agreement or other arrangement with, or for the benefit of any director of the Company; 

        (p)  Establishment
or change of any significant accounting principles; 

        (q)  Initiation
of new product lines or discontinuation of existing product lines; 

        (r)  The
commencement of any litigation as plaintiff or the settlement by the Company of any litigation against it; 

        (s)  Submission
of other matters to the Shareholders Meeting for consideration or approval as may be required by law; 

        (t)    Decision
to modify, extend or terminate any of the agreements with the Parties listed in Section 1.1. and any other agreements between the Company and any of the
Parties; 

        (u)  Repurchase
of the Company's own shares; and 

        (v)  Decision
of other important matters related to the Company and transactions other than in the ordinary course of business of the Company. 

        A
resolution adopted by a majority of all the members of the Board of Directors shall be required for the Joint Venture Company, its Chairman, its President and Executive Vice President,
or any of its directors, personnel or supervisors to engage in any matters which are within the responsibilities of the Board of Directors. 

        2.3-2    An
attendance by a simple majority of the directors in person or through representation shall be necessary to form a quorum.
Resolutions of the Board of Directors shall be in writing, and shall be adopted by a majority vote of all Directors (whether attending the Board Meeting or not), unless a higher majority of votes is
specifically provided for in the Company Law. The Chairman shall not be entitled to a second or casting vote. 

8

  

        2.3-3    In
case where any director of the Company cannot attend a meeting of the Board of Directors, that director may appoint another director as
representative in accordance with the Company law of the Republic of China. All or any of the directors may participate in a meeting of the Board of Directors by means of a video conference which
allows all persons participating in the meeting to see and hear each other. A director so participating shall be deemed to be present in person at the meeting and shall be entitled to vote or be
counted in a quorum accordingly. 

        2.3-4    Meetings
of the Board of Directors shall be called by the Chairman. Each director of the Company shall be given timely, written notice of the
time, date, agenda and place of the Directors meeting, in no event later than 14 days prior to the date of convocation of such meeting. In emergency cases the meeting of the Board of Directors
can be called by the Chairman by giving a minimum of two working days notice. 

        The
Chairman shall designate, at the time when the Chairman is appointed, one of the IFX-nominated directors as agent during the office term to convene the Board of Directors
meeting when the Chairman cannot convene such meeting himself, or does not designate any other director to do so on his behalf, for any reason. Each director of the Company shall have the right to
request the Chairman to call a Board of Directors meeting indicating the proposed agenda. If the Chairman cannot, within one week, comply with the director's request, the IFX-nominated
director designated by the Chairman as specified in this Subsection 2.3.4 may call the meeting on behalf of the Chairman. 

        2.4  Operation

        Except
as determined in the Company Law of the Republic of China or in the Articles of Incorporation of the Company, the Board of Directors and the Chairman of the Board shall delegate
the daily operation and management of the Company jointly to the President and Executive Vice President, including without limitation: 

        (a)  Appointment
of Vice Presidents and Assistant Vice Presidents of the Company; 

        (b)  Proposal
to the Board of Directors of annual and quarterly budgets and business plan of the Company; 

        (c)  Approval
of capital expenditure in the amount of up to US$ 2,000,000 in a single event, or a total of up to US$ 10,000,000 in a quarter; 

        (d)  Approval
of borrowing and lending and disposition of assets in the amount of up to US$ 2,000,000; and 

        (e)  Execution
of annual and quarterly budgets approved by the Board of Directors. 

        The
President and Executive Vice President shall manage the Company as a team. The Executive Vice President shall report to the President and will have specific responsibilities as
determined by the Board of Directors. The Executive Vice President shall represent the President in case he is unable to fulfill his duties. 

Article 3.    Construction and Operation of the Fab  

        3.1  Manufacturing
Plan 

        The
Company will initially construct a wafer fab (hereafter "Module I") with a target capacity of 50.000 300mm wafer starts per month (hereafter "wspm"). Market conditions permitting,
[**] will be located at NTC's existing site at Hwa-Ya Technology Park 669, Fuhsing 3rd Road, Kueishan, Taoyuan, Taiwan, Republic of China. 

        3.1-1    Land
Sale and Purchase Agreement: NTC agrees to sell the land to the Company (as per the Land Sale and Purchase Agreement attached as
Appendix C) for the construction and 

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operation site and to provide all information and assistance necessary for the Company to obtain all permits and approvals necessary for the construction and operation of the wafer fab. 

        3.1-2    Services
Agreement: NTC and eventually its Affiliates will supply certain services to the Company, including without limitation warehouse
control service, security service, management information system and other management and support services. An offer for terms and conditions for the provision of
such services is set forth in the draft Services Agreement attached as Appendix D which is subject to approval of the Board of Directors of the Company. 

        3.2  Production
Capacity of Module I 

        The
timetable for the ramping-up of Module I's capacity is set forth in the Top Level Business Plan attached as Appendix F, which specifies 50.000 wspm capacity in the
first stage. Subject to further adjustment by both Parties in good faith, the first silicon will be made available for sale during the first quarter of 2004. 

        3.3  Technology
Transfer 

        Each
of NTC and IFX shall transfer to the Company the 90nm and 70nm DRAM process technology jointly developed in a technical cooperation project specified in a separate Technical
Cooperation Agreement. If IFX and NTC are the only shareholders of the Company (including employee shares described in Subsection 1.3-6), [**] will be payable by
the Company to NTC and IFX for the technology transfer specified in this Section 3.3. 

        Both
Parties shall provide the Company sufficient start-up training and other transfer support. 

        The
terms and conditions of the technology transfer and training are set forth in the Know How Transfer Agreement as attached in Appendix A. 

        3.4  Plant
Design, Plant Construction, Plant Equipment Purchasing, and Plant Construction Management 

        3.4-1    After
establishment of the Company a Building and Infrastructure Office Team (the "BIO") will be formed comprised of engineers dispatched
from both Parties and—where available—staff employed by the Company. The joint team shall be established under a project guide to be mutually agreed between the Parties. 

        The
BIO will be led in parity by one engineering team leader of each Party and will report to the President of the Company or to the person assigned by the President. 

        The
BIO will be in place until the completion and handing-over of the building and infrastructure to production. 

        The
BIO shall manage the design, detail engineering, progress on construction and the budget for the building and infrastructure works including change management. 

        The
IFX team members shall provide technical and financial expertise especially with regard to the 300mm wafer fab. Furthermore the IFX team members shall ensure continuous experience
exchange between IFX and the Company. 

        The
NTC members shall provide detailed design and engineering, procurement and supervision of the construction works. Furthermore NTC shall provide detailed information on the proposed
site, applicable national and local laws and statutory regulations including environmental protection and other applicable matters, as well as security and safety for the proposed site including
relevant areas related to the construction works. 

        Actual
costs of the BIO engineers, such as salaries, travel and living expenses shall be borne by the Company. 

10

 

        The
Hook Up Office (HUO) shall be established in due time acting in the sense of the aforementioned. Detailed regulations shall be mutually agreed. 

        3.5  Frontend
Fab Cluster 

        Both
Parties agree to make the Company a member of the Frontend Fab Cluster. The Company will therefore adopt all cluster-wide process improvements and will operate in
accordance with the regulations of the Frontend Fab Cluster as described in the Know-How Transfer Agreement 

Article 4.    Product Purchase and Capacity Reservation  

        NTC and IFX shall assign the Total Capacity of the Company into the following corridors: 

        Commodity
DRAM Corridor, which constitutes a minimum of 80% of the Total Capacity of the Company and is assigned to the production of Commodity DRAM Products using the process technology
developed by the Parties under the Technical Cooperation Agreement. 

        Specialty
DRAM Corridor, which constitutes up to 20% of the Total Capacity of the Company. 

        Terms
and conditions of matters relating to product purchase and capacity reservation are set forth in the Product Purchase and Capacity Reservation Agreement as attached in
Appendix B and capitalized terms used in this Article 4 shall have the same meaning as defined in the PPCRA. 

Article 5.    Employment and Materials  

        5.1  Employment

        5.1-1    Employment:
The Company shall employ by itself all necessary staff except for a number of employees (the "JV Employees") to be dispatched
from each of the Parties, subject to approval by the Board of the Company. Both Parties shall cooperate in order to obtain the employment of a sufficient number of staff of the Company who are high in
quality and loyal to the Company at the Taiwanese market-based compensation level. Additional costs associated with the transfer and employment of the JV Employees shall be borne by each of the
Parties from which such JV Employees are transferred; provided, however, that the Company shall reimburse each of the Parties for costs and expenses incurred as a result of loss of experienced staff
for an amount of up to 6 months of salary for each of the JV Employees. 

        5.1-2    Position
of the dispatched staff: Each of the Parties shall dispatch and/or transfer a certain number of staff to join the Company as JV
Employees. Each Party shall follow the provisions of Labor Standard Law and other applicable labor laws and regulations of the Republic of China with respect to the retirement and other benefits of JV
Employees dispatched or transferred to the Company. 

        5.2  Purchasing
of Materials 

        5.2-1    Masks
required for the manufacturing of the Commodity DRAM Products will initially be supplied by IFX's affiliated mask shop Advanced Mask
Technology Center GmbH & Co. KG, Dresden, Germany ("AMTC") under ordinary business terms. Once a qualified second source of masks is available, the Company may purchase from such alternative
source, however, AMTC should be given a right of first refusal as long as it can offer at least the same terms and conditions (commercially and technically) as any of the alternative mask sources for
such masks. 

11

 

        5.2-2    Purchasing
of machinery, equipment, tools, major and minor raw materials, consumables and the like (the "Procurement Items") shall be handled
as follows: 

        a)    The
technical selection of the Procurement Items shall be in accordance with the rules and regulations of the Frontend Fab Cluster and the Frontend Fab Cluster shall
determine the vendors for such Procurement Items. 

        b)    In
order to ensure the most favorable purchasing conditions, the JV shall purchase the Procurement Items from vendors determined by IFX and NTC under the commercial frame
conditions established between such vendors and IFX or NTC. 

        c)    NTC
shall provide procurement services (operational execution) to the Company on the same terms and conditions as it provides like services to other customers. 

        5.3  Supply
of Utilities, Waste Water Disposal and other Waste Disposal 

        NTC
shall provide to the Company adequate amounts of utilities at adequate quality on the customary terms and conditions. NTC shall cooperate with the Company for the disposal of waste
water and other wastes. NTC shall bill to the Company each month the actual costs of waste disposal determined by the amount disposed of in the previous month on the customary terms and conditions. 

        Terms
and conditions of matters relating to supply of utilities, waste water and other disposals as specified in this Section 5.3 are set forth in the Services Agreement as
attached in Appendix D. 

        5.4  Information
System 

        The
Parties agree that the Company shall establish it's own information systems organization that is responsible for procuring and/or providing all of the information systems and
technology required for the operation of the Company (the "Company's IT Organization"). The Company's IT Organization shall establish and operate the Company's IT infrastructure, including information
systems and all supporting services. The term "establish and operate" as used in the previous sentence shall mean that the Company's IT Organization shall execute these responsibilities either
directly or by entering into commercial contracts with third parties to procure equipment, technology and services as required. The Company's information systems and technology, and the Company's IT
Organization shall be determined and shall be operated in accordance with the provisions of the IT Strategy Appendix which is attached hereto as Appendix H. 

Article 6.    Accounting and Dividend Policy  

        6.1  Accounting 

        6.1-1    The
accounting year of the Company shall be from January 1 to December 31. 

        6.1-2    Within
10 days after the end of each month and 20 days after the end of each quarter, the Company shall submit to each Party
its unaudited balance sheet and profit and loss statement of such month or such quarter, as the case may be. 

        6.1-3    Each
Party shall have the right to audit or have audited, and/or require copies of the accounts of the Company. The accounts of the Company
shall be kept in accordance with the laws of the Republic of China. Monthly financial accounts according to ROC GAAP and quarterly financial accounts according to US GAAP shall be made available to
both Parties. 

        6.1-4    Unless
otherwise determined by the Board of Directors, the Parties agree to appoint KPMG as its certified public accountants. 

        6.1-5    In
order to cooperate with the public reporting of financial statements of the Parties, the Company shall tender to NTC and IFX such
accounting records including without limitation the financial statements as are necessary for the consolidated accounting of the Company with 

12

 

either or both Parties. Expenses relating to the preparation of such accounting records for the Party so requesting shall be borne by such Party. 

        6.2  Dividend
Policy 

        In
each year that the Company has realized a profit after accounting for any tax liability and covering of accumulated losses, 10% of the remaining profit shall be retained as legal
reserves. After providing for any voluntary reserves as decided by the Shareholders Meeting, 1% of the then remaining profits shall be set aside for the directors and supervisors of the Company, and
1% to 8% of the then remaining profits shall be set aside for employee as bonuses; provided, however, at least 50% of such employee bonus shall be distributed in the form of stock dividends. The
remainder of the profit, if any, may be announced and paid as dividends to the shareholders in cash or stock, such as shall be determined from year to year by the Board of Directors and approved by
the Shareholders Meeting. Any other remaining profit shall be kept by the Company as retained earnings. 

Article 7.    Term and Termination  

        7.1  Subject
to obtaining relevant anti-trust approvals as stated in Subsection 1.2-2, if applicable, this Agreement shall become effective upon
signing (hereafter the "Effective Date"), and continue in force unless terminated. 

        7.2  Other
than set forth in the Sections 7.3 and 7.4 of this Agreement, this Agreement may be terminated by written consent of both Parties. 

        7.3  In
case of the occurrence of any of the following circumstances this Agreement may be terminated with immediate effect by either Party by serving written notice (the
"Termination Notice") to the other Party: 

        (a)  Material
breach of this Agreement by a Party (where only the non-breaching Party shall have the right to unilaterally terminate this Agreement as specified
in this Section 7.3 and the breaching Party was granted a 60 days cure period before the Termination Notice is served and did not cure the material breach within this 60 day
period); 

        (b)  In
the case that the non-terminating Party has applied for liquidation or reorganization under applicable bankruptcy law, or has applied for or is the
subject of a third party action for bankruptcy, or
is unable to honor its debts, or in the case of a Force Majeure which continues uninterrupted for a period in excess of 12 months. 

        (c)  The
Technical Cooperation Agreement, or its subsequent amendments, is terminated for cause, unless such termination is due to the breach of the Technical Cooperation
Agreement by a Party requesting termination of this Agreement. 

        (d)  The
Know How Transfer Agreement, as attached in Appendix B, or its subsequent amendments, is terminated for cause, unless such termination is due to the breach of
the Know How Transfer Agreement by a Party requesting termination of this Agreement. 

        (e)  The
Product Purchase and Capacity Reservation Agreement, as attached in Appendix C, or its subsequent amendments, is terminated for cause, unless such termination
is due to the breach of the Product Purchase and Capacity Reservation Agreement by a Party requesting termination of this Agreement. 

        (f)    In
the case that either Party has disposed of, [**] its shares of the Company in violation of Subsection 1.4-9 (where only the
non-violating Party shall have the right to unilaterally terminate this Agreement). 

        7.4  This
Agreement shall be automatically terminated with immediate effect upon the date of the transfer and sale of all of the shares in the Company by one of the Parties. 

13

 

        7.5  In
case any of the circumstances stipulated in Section 7.3 occurs, the Party serving Termination Notice may elect either of the following options: 

        (i)    Within
45 days after the day the Termination Notice was served, to serve a sale notice (the "Sale Notice") on the other Party offering to sell all of its shares
at 120% of the Market Value or Net Asset Value, which ever is higher (the "Put Option Price"). The Party who receives the Sale Notice must, by itself or through a third party nominee, accept the offer
and must purchase all of the requesting Party's shares at the Put Option Price within 45 days after the above notice is served. 

        (ii)  Within
45 days after the day the Notice was served, to serve a purchase notice (the "Purchase Notice") on the other Party offering to purchase all of its shares
at 80% of either the Market Value or Net Asset Value, whichever is lower (the "Call Option Price"). The Party who receives the Purchase
Notice must, by itself or through a third party nominee, accept the offer and must sell all of its shares to the requesting Party at the Call Option Price within 45 days after the above notice
is served. 

        For
the purpose of this Section 7.5, Market Value shall mean i) if the Company is a company listed in Taiwan Stock Exchange or any other stock exchange of Taiwan, Republic
of China ("Listed Company") and the Sale Notice is served, the average traded price per share of the common stock of the Company for the thirty (30) trading days immediately prior to the date
of service of the Sale Notice, multiplied by the total number of shares the non-offering Party holds as of such date; ii) if the Company is a Listed Company and the Purchase Notice
is served, the average traded price per share of the common stock of the Company for the thirty (30) trading days immediately after the date of notice of termination of this Agreement by the
terminating Party, multiplied by the total number of shares the non-offering Party holds as of such date; and iii) if the Company is not a Listed Company, the value per share
appraised by an internationally recognized independent appraiser appointed by the President of the Company out of a list of three to be prepared by the auditors of the Company, multiplied by the total
number of shares the non-offering Party holds as of the date of the Sale Notice or the Purchase Notice, as the case may be. 

        For
the purpose of this Section 7.5, Net Asset value shall mean the book value of the Company as determined by its latest available audited financial statements, as adjusted for
capital increase or decrease of the Company or other major corporate activities which may affect the content of such financial statements, such adjustments to be made and certified by the Company's
auditors within 30 days after the Sale Notice or Purchase Notice was served. 

        7.6  In
case of occurrence of the termination event set forth in the Subsection 7.3(a), the non-breaching Party shall, in addition to the rights as set forth in
the Section 7.5, be entitled to demand the breaching Party to compensate its damages incurred by such termination event. 

        7.7  Sections
8.1, 8.3, 8.4.2 and 8.4.3 shall survive termination of this Agreement. No termination shall relieve any Party from liability for any breach of this Agreement. 

Article 8.    General Conditions  

        8.1  Confidentiality
and Non-use 

        During
a period beginning at the Effective Date and ending ten (10) years after the later of the termination of this Agreement or the termination of the Know How Transfer
Agreement set forth in Appendix A, it shall be prohibited for either Party to disclose to any third party (except Affiliates)
information which has been disclosed by the other, whether such disclosure is direct or indirect, by any means such as a writing, factory tour, or other means used to communicate information, provided
that such information shall be documented or described in a tangible form and shall be marked "Confidential" (hereinafter "Confidential Information"). Any such Confidential Information shall be 

14

 

used only for the purposes of carrying out this Agreement. Any other use of Confidential Information is prohibited. Each of the Parties will cause its own and employees of the Company to adhere to
the obligations of this Article 8 through provisions in their respective employment agreements or otherwise. Confidential Information specifically includes the terms of this Agreement and its
conditions provided however that the Parties may in connection with an actual or proposed merger or acquisition, and in connection with the enforcement of its rights under this Agreement and the
Ancillary Agreements disclose the terms and conditions of these agreements in confidence to its legal counsel, accountants and other advisors. 

        Confidential
Information does not include information: 

        (1)  Which
was obtained legally by the receiving Party prior to its receipt from the disclosing Party. 

        (2)  Which
was or has become public not through any act of the receiving Party. 

        (3)  Which
has been received from a third party with no obligation of confidentiality 

        (4)  Which
has been independently developed by the receiving Party or its Affiliates. 

        This
obligation of confidentiality shall not apply in such case that information is requested by a government agency of competent jurisdiction but in any case that Confidential
Information is disclosed under this paragraph the Party disclosing Confidential Information to such government agency shall give the other Party (the "Information Owning Party") notice prior to such
disclosure which notice shall be reasonably sufficient to allow the Information Owning Party to seek appropriate action to prevent such disclosure. 

        8.2  Force
Majeure 

        8.2-1    An
Event of Force Majeure 

        In
the event that either Party is delayed in performing or is prevented from performing in whole or in part its obligations hereunder due to Force Majeure then the Party so affected
shall have no liability to the other Party in respect of any resultant delay in performance or non-performance, partially or in whole, of its obligations under this Agreement (and the
other Party shall to a similar extent not be liable for non performance or delay in performance of its obligations). 

        For
the purpose of this Agreement, a Force Majeure shall exist only if and during a period when an event is beyond the control of the Party claiming Force Majeure. Such event of Force
Majeure shall include but not be limited to: 

	•
	labor
disputes affecting the region,

	•
	fire,
explosion directly affecting the facilities concerned, or

	•
	war
or other hostilities, flood, earthquake, severe weather conditions of an extraordinary nature directly affecting the facilities concerned. 

        8.2-2    Invocation
and Duration of Force Majeure 

        A
Party wishing to invoke Force Majeure shall promptly notify the other Party in writing giving details thereof, and of the anticipated effect on this Agreement and of the estimated
duration of Force Majeure. Such Party shall use its best endeavors to resume full performance of its obligations under this Agreement without avoidable delay. 

15

 

        8.3  Applicable
Law 

        This
Agreement shall be construed in accordance with and governed by the laws of the Republic of China and shall be interpreted thereunder. 

        8.4  Dispute
Resolution 

        8.4-1    Deadlock 

        8.4-1.1    In
case that a deadlock exists at either the Board of Directors meeting or the Shareholders' Meeting (a "Deadlock"), such Deadlock may be
submitted by either Party (containing a notice that summarizes the issues in dispute) to the President of NTC and the General Manager of the memory products group of IFX for resolution. The respective
officers of NTC and IFX shall meet at least once in person in Hong Kong (or any other location agreed between the Parties) and will then use their best effort to resolve the Deadlock in the 30
calendar day period after such Deadlock is submitted. 

        8.4-1.2    If
the officers of the Parties as specified in Subsection 8.4-1.1 are unable to resolve the Deadlock after expiration of the
above period, the Parties shall submit to a special joint committee for consultation (the "Consultation Committee"). The Consultation Committee shall be composed of four members, two of whom shall be
appointed by each of the Parties from the Board of Directors of the respective Parties. The representatives of the Consultation Committee from each Party shall meet at least once in person in Paris
(or any other location agreed between the Parties) and will then use their best effort to resolve the Deadlock in the 30 calendar day period after such Deadlock is submitted to the Consultation
Committee in accordance herewith. 

        8.4-1.3    If
the Consultation Committee as specified in Subsection 8.4-1.2 are unable to resolve the Deadlock after the expiration of the
above period, the Parties shall submit the matter to settlement proceedings under the ADR Rules of the International Chamber of Commerce The attempt to resolve the Deadlock by ADR shall not exceed
30 days. 

        8.4-1.4    If
the Parties fail to resolve any Deadlock after exhausting all reasonable avenues available to them to achieve a mutually acceptable
outcome, any Party ("First Party") may within 30 days after the result of the mediation, serve a sale notice on the other Party ("Second Party") offering Second Party the whole of the First
Party's shareholding for sale at the price stipulated therein (the "Sale Price"). The sale notice will provide that the offer will lapse 45 days after the notice is served on the Second Party. 

        The
Second Party may, or may nominate a third party to, accept the offer to purchase the shareholding at the Sale Price at any time before the offer lapses. 

        If
the offer is not accepted before it lapses, the Second Party will be deemed to have served a sale notice on the First Party offering to sell all its shareholding at the same Sale
Price (proportionate to its shareholding). The First Party will be bound to accept the offer within 7days, unless it introduces a third party which accepts the offer in that period. 

        Any
sale under this clause shall be effective within 30 days of the date of acceptance. 

        8.4-2    Dispute

        In
case of any dispute between the Parties to this Agreement which dispute is not due to Deadlock under Subsection 8.4-1, or in case of any alleged breach of this Agreement,
the Parties shall cooperate to reach an amiable resolution of such dispute. In such case that they are unable to reach such an amicable resolution, the Parties shall submit such dispute to
arbitration. Arbitration under this Subsection requested by either Party shall be held in Hong Kong. 

16

  

        8.4-3    Arbitration

        In
case of any arbitration the Parties shall choose three arbitrators in accordance with the rules of the International Chamber of Commerce. Of the three arbitrators one each shall be
chosen by each of the Parties, and the two arbitrators so chosen shall choose the third. Such arbitration shall be conducted in the English language. The decision of the arbitration proceedings shall
be final and binding upon the Parties and judgment on any arbitration decision may be entered in any court of competent jurisdiction for enforcement. The Parties are aware that the Republic of China
is not a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards and therefore wish to state that each of NTC and IFX hereby unconditionally and irrevocably
consent to the compulsory execution of any arbitration award rendered against them by any court having jurisdiction over them. 

        8.5  Language

        This
Agreement shall be prepared in the English language, and the English language version shall be official. No translation into German, Chinese or any other language shall be taken
into consideration in the interpretation of this Agreement. 

        8.6  Notice

        All
notices required under this Agreement, and all communications made by agreement of the Parties, shall be made in writing, and shall be delivered either personally, by facsimile, or
by mail. The date of actual receipt by the receiving party shall be deemed the date of notice under this Agreement. The addresses of each Party for purposes of notice under this Agreement shall be as
follows: 

	NTC:	 	Nanya Technologies Corporation

Hwa-Ya Technology Park 669

Fuhsing 3rd Road

Kueishan, Taoyuan

Taiwan, Republic of China
	

 	
 	

Attention:	
 	

Legal Department
	

IFX:	
 	

Infineon Technologies AG

P.O. Box 80 09 49

81609 Munich

Germany
	

 	
 	

Attention:	
 	

Legal Department
	

 	
 	

Copy to:	
 	

General Manager Memory Products Division

        8.7  Transfer

        No
right or obligation under this Agreement shall be transferable or assigned to any third party without the express agreement in writing of the other Party. 

        8.8  Modification
of the Agreement 

        No
modification of this Agreement shall be valid without a writing setting forth such modification signed by both Parties. 

        8.9  Miscellaneous

        8.9-1    If
any provision contained in this Agreement is or becomes ineffective or is held to be invalid by a competent authority or court having
final jurisdiction thereover, or the competent anti-trust authorities find a provision to be invalid or request modifications, all other provisions of 

17

 

this Agreement shall remain in full force and effect and there shall be substituted for the said invalid provision a valid provision having an economic effect as similar as possible to the original
provision. 

        8.9-2    This
Agreement and any documents attached hereto constitute the entire agreement between the Parties with respect to the transactions
contemplated hereby and, except as otherwise expressly set forth herein, supersedes all prior discussions, understandings, agreements and negotiations between the Parties with respect to such subject
matter. 

        8.9-3    Appendix A
through I, which are attached hereto, shall constitute an integral part hereof. The Appendices have the following titles: 

Appendix A
Know How Transfer Agreement

Appendix B Product Purchase and Capacity Reservation Agreement

Appendix C Land Sale and Purchase Agreement

Appendix D Services Agreement

Appendix E Articles of Incorporation of the Company

Appendix F Top Level Business Plan

Appendix G Milestone Timetable

Appendix H IT Strategy Appendix

Appendix I Articles of Incorporation of the SPV 

        8.10 Interpretation

        8.10-1    For
the purpose of this Agreement, "Affiliate" shall mean, with respect to any Party, any legal person that directly or indirectly through
one or more intermediaries controls, or is controlled by or is under common control with such Party. For the purpose of this definition, "control" (including the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Party shall mean the possession, directly or indirectly, of more than 50% of the outstanding shares or voting rights, or of the power to
direct or cause the direction of the management or policies of such person, whether through the ownership of voting securities, by contract, agency or otherwise. 

        8.10-2    For
the purpose of this Agreement, "Frontend Fab Cluster" shall mean a group of companies which align their frontend fabs to a synchronized
technical, quality and reporting guideline in order to realize economies of scale and common quality standards. On the Effective Date the Frontend Fab Cluster members are Infineon Technologies
Richmond Limited Partnership, USA, Infineon Technologies Dresden GmbH & Co. OHG, Germany, Infineon Technologies SC300 GmbH & Co. KG, Germany, ProMOS Technologies Inc, Hsinchu, Taiwan,
and Winbond Electronics Corporation, Hsinchu, Taiwan, and shall further include the Company, as well as any other IFX subsidiary or third party
cooperation partner of IFX that IFX may add to the Frontend Fab Cluster. The Parties acknowledge that certain members of the Frontend Fab Cluster may cease to be members throughout the term of this
Agreement. 

18

 

        In
witness to the above, duly authorized representatives of both Parties, on the date set out first above, do execute two copies of this Agreement. Each copy so executed shall be deemed
an original of this Agreement, and each Party shall retain one original. 

	Nanya Technology Corporation	 	 	 	Infineon Technologies AG
	

    	
 	

 
	

By: /s/ Jih Lien

Name: Dr. Jih Lien

Title: President

Date: 13 November 2002	
 	

 	
 	

By: /s/ Harald Eggers

Name: Dr. Harald Eggers

Title: CEO, Memory Products Group of Infineon

Date: 13 November 2002
	

 	
 	

 	
 	

By: /s/ Michael Majerus

Name: Dr. Michael Majerus

Title: CFO, Memory Products Group of Infineon

Date: 13 November 2002

19

Appendix A to Joint Venture Agreement  

Know How Transfer Agreement  

        by and between 

Hwa-Ya
Semiconductor Inc., having its registered offices at Hwa-Ya Technology Park,

Fuhsing 3rd Road, Kueishan, Taoyuan, Taiwan, R.O.C., Taiwan, R.O.C.

—hereinafter referred to as "JV"—

on the first part 

and

Nanya
Technology Corporation, having its registered offices at Hwa-Ya Technology Park

669, Fuhsing 3rd Road, Kueishan, Taoyuan, Taiwan, R.O.C.

—hereinafter referred to as "NTC"— 

and 

Infineon
Technologies AG, having its registered offices at St. Martin Strasse 53,

81669 Munich, Germany

—hereinafter referred to as "Infineon"—

on the second part 

—JV,
NTC and Infineon are hereinafter collectively referred to as the "Parties" and severally

referred to as a "Party"— 

 

Preamble  

        WHEREAS, NTC and Infineon have formed JV as a joint venture company for the development, manufacture and sale of semiconductor products subject to a Joint Venture
Agreement ("Joint Venture Agreement"); 

        WHEREAS,
NTC has developed certain know how for 120nm DRAM process technology and Infineon has developed certain know how for 110nm DRAM process technology; 

        WHEREAS,
NTC and Infineon will jointly develop 90nm and 70nm DRAM process technology (exact dimensions of "70nm" and "90nm" are still to be defined) subject to the (110nm) License and
(90/70nm) Technical Cooperation Agreement ("Technical Cooperation Agreement"); 

        WHEREAS,
NTC, Infineon and JV will severally and jointly develop certain technology for DRAM products; 

        WHEREAS,
NTC and Infineon wish to transfer certain DRAM process and product technology to JV to enable JV to manufacture and sell DRAM-products subject to the terms of this
Agreement; 

        Now,
therefore, the Parties agree as follows: 

Article 1—Definitions  

        For the purpose of this Agreement, the terms set forth in this Article 1, when employed in capital letters, either in the singular or plural form, are
defined to mean the following: 

        1.1  "Commodity
DRAM Products" shall mean mainstream DRAM products in wafer form which: 

        a)    have
a highly standardized specification, 

        b)    are
targeted for high production volumes, 

        c)    follow
JEDEC standards, 

        d)    have
densities between 128Mbit and 2Gbit, 

        e)    include
SDRAM interface standards such as SDR, DDR and DDR II, and 

        f)    use
the Contract Process 

and
are designed by or on behalf of NTC and/or Infineon, including improved and/or modified versions thereof. Commodity DRAM Products shall exclude any embedded DRAM Products. 

        1.2  "Contract
Products" shall mean Commodity DRAM-Products and Specialty DRAM Products. 

        1.3  "Contract
Process" shall mean: 

        1.3.1  Infineon's
110nm DRAM process technology (the "Infineon 110nm Process"), as generally described in  Annex 1A hereto, and 

        1.3.2  NTC's
120nm DRAM process technology (the "NTC 120nm Process"), as generally described in Annex 1B
hereto, and 

        1.3.3  the
90nm and 70nm DRAM process technology jointly developed by NTC and Infineon, as generally described in  Annex 1C hereto (subject to changes agreed in the Technical Cooperation Agreement);

on
the condition that such process technology listed in Articles 1.3.1 to 1.3.3 is transferred to JV by NTC and/or Infineon. 

2

 

The
Contract Process shall exclude Know How relating to the backend manufacturing of semiconductor products. 

        1.4  "Effective
Date" shall mean the date upon which this Agreement enters into force as per Article 9.1 hereof. 

        1.5  "Frontend
Fab Cluster" shall mean a group of companies which align their frontend fabs to a synchronized technical, quality and reporting guideline in order to realize
economies of scale and common quality standards. On the Effective Date the Frontend Fab Cluster members are Infineon Technologies Richmond Limited Partnership, USA, Infineon Technologies Dresden
GmbH & Co. OHG, Germany, Infineon Technologies SC300 GmbH & Co. KG, Germany, ProMOS Technologies Inc, Hsinchu, Taiwan, and Winbond Electronices Corporation, Hsinchu, Taiwan, and shall
further include JV, as well as any other Infineon Subsidiary or third party cooperation partner of Infineon that Infineon may add to the Frontend Fab Cluster. The Parties acknowledge that certain
members of the Frontend Fab Cluster may cease to be members throughout the term of this Agreement. 

        1.6  "Improvements"
shall mean all technical information on improvements and/or modifications relating to the Know How, which NTC, Infineon and/or JV develop and/or acquire
during the term of this Agreement and which NTC,Infineon and/or JV are entitled to disclose in accordance with the terms of this Agreement. The term Improvements, however, shall not include any
technical information on any such improvements and/or modifications which lead to changes in the basic technical concept of the manufacture and/or testing of Contract Products or to substantial
changes and enhancements in the functionality or performance of Contract Products. 

        1.7  "Invention"
shall mean any invention or discovery relating to the Know How, conceived or first reduced to practice solely by one or more employees of JV, or jointly by
one or more employees of JV together with one or more employees of NTC and/or Infineon, during the term of this Agreement and pursuant to activities performed in JV. 

        1.8  "Information
Management System" shall mean the knowledge and document control system which is up to the standard of the industrial general practice maintained in and
implemented by JV to manage and protect its proprietary information, as well as those of any other Party which JV is obligated to keeping in confidence. 

        1.9  "Know
How" shall mean all technical information (including but not limited to technical data or specifications, drawings, engineering information, process or product
information, formulas, information on techniques or methods, software or computer programs, proprietary tools, processes of record, design information packages and quality know how), relating to
Contract Products and Contract Processes, which is available and used at NTC and/or Infineon at the time of Shipment Qualification and which NTC and/or Infineon are entitled to license without
incurring payment to third parties. 

        1.10 "Know
How Package" shall mean different subsets of the Know How and Improvements in document or other recorded form created by NTC and/or Infineon in order to
facilitate the technology transfer from NTC and/or Infineon to JV. The topics of such Know How Packages shall be set forth in Annex 2 hereto. 

        1.11 "Patents"
shall mean all patents and patent applications, including process/design patents and process/design patent applications, and utility models: 

        1.11.1  which
are issued or will be issued on patent applications entitled to an effective priority filing date prior to termination of this Agreement, and 

3

 

        1.11.2  which
but for this Agreement would have been infringed by JV by using any aspect or combination of Know How within the scope of the license to use
granted in this Agreement, or by developing, manufacturing and selling any Contract Products, and 

        1.11.3  under
which NTC and/or Infineon now have, or hereafter obtain prior to termination of this Agreement, the right to grant rights to use of the same scope
granted in Article 5 of this Agreement without such grant or the exercise of rights thereunder resulting in the payment of royalties or other consideration by NTC and/or Infineon to third
parties (except for payments between NTC and/or
Infineon and third parties for inventions made by said third parties while employed by or made on behalf of NTC and/or Infineon), unless JV reimburses NTC and/or Infineon for such payment of royalties
or other consideration. 

The
term "Patents" does not include any patent or patent application related to Non-DRAM Products. 

        1.12 "Non-DRAM
Products" shall mean all semiconductor products excluding Commodity DRAM Products and Specialty DRAM Products, such as but not limited to FeRAM or
MRAM. 

        1.13 "Reference
Site" shall mean the manufacturing site from which NTC and/or Infineon will transfer the Know How to JV. 

        1.14 "Specialty
DRAM Products" shall mean all low volume DRAM products in wafer form targeting special applications, using the Specialty DRAM Corridor and a Contract
Process, that is one of the processes being used by the JV's Commodity DRAM Corridor which show in terms of performance significant changes to Commodity DRAM Products. Specialty DRAM Products shall
include but not be limited to low power applications such as SDR, DDR and 1T SRAM, high speed applications for graphics and networking, but shall exclude embedded DRAMs. 

        1.15 "Shipment
Qualification" or "SQ" shall mean the qualification procedure as generally described in Annex 3 that is used
for releasing Contract Products for sale. 

        1.16 "Subsidiary"
shall mean any legal entity which is or becomes owned or controlled directly or indirectly by a Party hereto as to more than fifty percent (50%) of such
legal entity's issued share capital, voting rights and/or the like. 

Article 2—Supply of Know How Packages  

        2.1  NTC
and Infineon have agreed to jointly develop 90nm and 70nm DRAM process technologies at Infineon's facilities in Dresden, Germany under the Technical Cooperation
Agreement. It is the common goal of NTC and Infineon to transfer to JV such jointly developed processes to enable JV to manufacture for NTC and Infineon Commodity DRAM Products in high volume as well
as Specialty DRAM Products. 

        2.2  In
case that all Parties jointly agree in writing that the ramping-up of JV's manufacturing capacity requires the transfer of the Infineon 110nm Process,
and/or the NTC 120nm Process, Infineon or NTC shall make reasonable best efforts to transfer Know How Packages containing such process technologies to JV as soon as technically and commercially
feasible. 

        2.3  NTC
and Infineon shall provide the Know How Packages containing the 90nm DRAM process technology within 3 months after Shipment Qualification of the first
Commodity DRAM Product using such process technology at the Reference Site. The Know How Packages containing the 70 nm DRAM technology shall be provided within 3 months after Shipment
Qualification of the first Commodity DRAM Product using such process technology at the Reference Site. JV shall be responsible for the transfer of the Know How Packages to its production site and
shall bear the cost for all wafers that will be provided to JV by NTC and/or Infineon as part of the technology transfer. 

4

 

        2.4  NTC
and Infineon shall transfer a reasonable number of Know How Packages describing the Improvements they have achieved as soon as technically and commercially feasible
after they have established reliability and quality of such Improvements. JV shall continuously provide NTC and Infineon with its Improvements. 

        2.5  NTC
and Infineon shall devote sufficient resources and efforts to facilitate the technology transfer contemplated under this Agreement. 

        2.6  JV
shall implement the Know How in its manufacturing line and manufacture Contract Products according to agreed production plans as defined in the Product Purchase and
Capacity Reservation Agreement between the Parties. 

        2.7  All
the Know How Packages to be transferred shall be in English language and will be transferred by electronic means with encryption, to the extent permissible under the
applicable law, or other due safeguard for the transmission with necessary assistance from JV. 

        2.8  JV
shall set-up and maintain the Information Management System which needs to be compatible with the Reference Site. JV shall be responsible for insuring the
data security therein and for administering access rights to its employees. 

Article 3—Training Program and Technical Assistance  

        3.1    Training Program    

        3.1.1  In
order to familiarize personnel of JV with the Know How, Infineon and NTC shall provide for JV's personnel a training program based on the contents of
the Know How Packages (the "Training Program"). Except for Know How relating to NTC's 120 nm DRAM process technology, the Training Program shall take place at Infineon's facilities in Dresden,
Germany. For Know How relating to NTC's 120 nm DRAM process technology the Training Program shall take place at NTC's facility in Linkou, Taiwan. 

        3.1.2  Details
of the Training Program shall be agreed upon between the Parties in due course. 

        3.2    Technical Assistance    

        3.2.1  NTC
and Infineon shall delegate experienced employees to JV to provide on-site support to JV in the manufacture and testing of Contract
Products using the Contract Process (the "Technical Assistance"). Such Technical Assistance by experts of NTC and Infineon shall be rendered at JV's plant in Linkou, Taiwan. 

        3.2.2  Details
of the Technical Assistance shall be agreed upon between the Parties in due course. 

        3.3      General Provisions regarding the Training Program and Technical Assistance    

        3.3.1  All
Training Programs and Technical Assistance shall be provided in English language and trainers and trainees shall have sufficient working knowledge of
the English language. 

        3.3.2  Each
Party shall be responsible for and shall pay all such salaries, living allowances, insurances, travelling expenses including accommodation cost, and
other remuneration and expenses to which its employees delegated to the other Parties' facilities may be entitled. All employees delegated to other Parties shall have sufficient knowledge in the
respective technical field in which they are to be trained, or will be training employees of other Parties. 

        3.3.3  Employees
delegated to the other Parties' facilities shall observe the security rules and regulations prevailing at such facilities. The Party in charge
of the facilities shall inform the employees of the other Parties on such rules and regulations. 

5

  

        3.3.4  Reasonably
in advance of each delegation of employees to the other Parties' facilities, the Parties shall agree in writing on the dates, duration and the
number and qualification of trainers and trainees intended to be sent. Each Party shall use all reasonable efforts to comply with the interests of the other Parties regarding availability of
appropriately qualified employees and regular course of business and production. 

        3.3.5  The
Parties shall assist each other in obtaining entry visas and working permits, if required, for employees delegated to the other Parties' facilities.
Infineon's obligation to train personnel of JV shall be subject to issuance of such approvals. 

Article 4—Inventions  

        4.1  During
the term of the JV Agreement, Inventions made by employees of the Parties performing development work at the JV shall be owned as follows: 

	•
	Inventions
made solely by employees of JV shall be owned by JV and licensed to NTC and Infineon as provided in Article 5.

	•
	Inventions
made by one or more employees of JV jointly with one or more employees of NTC and/or Infineon shall be jointly owned by NTC, Infineon and JV. NTC,
Infineon and JV shall each have the right to grant licenses (including the right for any licensee to grant sublicenses) to third parties without compensation to the other Parties and/or its employees,
and necessary consent is hereby given by the other Party for the granting of such licenses as may be required by the law of any country. All expenses, other than internal expenses, incurred in
obtaining and maintaining patents issued on such jointly owned Inventions shall be equally shared by the Parties. 

        4.2  JV
shall regularly report Invention disclosures to NTC and Infineon, and the Parties shall jointly review Invention disclosures relating to Inventions made solely by
employees of the JV, or jointly by the Parties, and shall decide whether: (i) a patent application should be prepared for an Invention
disclosure, and (ii) if so, which Party should file and assume responsibility for the preparation of the patent application, or application for copyright registration, and (iii) in which
countries corresponding applications shall be filed and by whom. The non-filing Parties shall give the filing Party all reasonable assistance in the preparation or prosecution of any such
patent application filed by said filing Party, and shall cause execution of all instruments and documents as said filing Party may consider necessary or appropriate to carry out the intent of this
Article 4. 

        4.3  With
respect to any joint Inventions, where one owning Party elects not to seek or maintain patent protection in any particular country or not to share equally in the
expenses thereof, the other jointly owning Parties shall have the right to seek or maintain such patent protection in said country at their own expense and shall have full control over the prosecution
and maintenance thereof even though title to any patent issuing thereon shall be joint. 

        In
the event that the filing Party shall determine to abandon, or otherwise not to prosecute, any jointly owned patent application, or not to maintain, defend or renew any jointly owned
patent, it shall notify the non-filing Parties thereof, in writing, at the earliest practicable date. Such non-filing Parties shall have the right, at its or their expense, to
prosecute such application or to take up such maintenance or defense, and the filing Party agrees to cooperate fully with the non-filing Parties in obtaining, maintaining, defending or
renewing such jointly owned patent rights hereunder. 

Article 5—Rights Granted by the Parties  

        5.1  Pursuant
to the terms of this Agreement, and effective from the date of disclosure of the respective Know How Packages, NTC and Infineon hereby grant to JV a
non-transferable, non-exclusive right under the Know How, Improvements and Patents to manufacture and test Contracts 

6

 

Products in Taiwan and to sell such Contract Products to NTC and Infineon and/or their Subsidiaries, and to use any apparatus and/or material and any method and/or process in the manufacture of
Contract Products. For the avoidance of doubt the Parties acknowledge that JV shall have no right to (i) grant third parties any rights under the Know How, Improvements and Patents and
(ii) have Contract Products manufactured and tested at third parties. 

        5.2  In
addition to the rights granted in Article 5.1 above, Infineon and NTC hereby grant to JV the non-transferable, non-exclusive right to
use, copy, modify and/or translate the Know How Packages for the sole purpose of executing the rights granted under Article 5.1. above. 

        5.3  Rights
granted by JV to NTC and Infineon 

        JV
hereby grants to NTC and Infineon and their Subsidiaries a worldwide, non-transferable, non-exclusive and fully paid up right and license to use JV's
Improvements, JV's solely owned Inventions, and all of JV's patents, patent applications, utility models, mask works and design patents pertaining thereto ("JV Patents"), to use, manufacture, have
manufactured, develop, have developed, assemble, have assembled, test, have tested, sell or otherwise dispose of semiconductor products and to use any apparatus and/or material and any method and/or
process in the manufacture of such semiconductor products. Further, Infineon shall have the right to sublicense to third parties JV's Improvements, solely owned Inventions and JV Patents, except those
of JV's Improvements, solely owned Inventions and JV Patents relating solely to NTC's 120 nm DRAM process technology; and NTC shall have the right to sublicense (i) to third parties JV's solely
owned Inventions and JV Patents and (ii) to wholly owned subsidiaries JV's Improvements; (i) and (ii) shall not apply to those of JV's Improvements, solely owned Inventions and JV
Patents relating solely to Infineon's 110 nm DRAM process technology. 

Article 6—Frontend Fab Cluster  

        The Parties agree that JV shall become a member of the Frontend Fab Cluster. The basic rules and regulations of the Frontend Fab Cluster are attached hereto as  Annex 6. JV shall adhere to the rules and regulations set up for the Frontend Fab Cluster and shall be classified according to synchronization level A
as defined in such rules and regulations. The Parties acknowledge that the Frontend Fab Cluster is established on the basis of reciprocal treatment and contribution by all its members to their joint
interest. It is the joint understanding of the Parties, that the JV may follow a dual vendor strategy in the critical areas, which is in line with the rules and regulations of the Frontend Fab
Cluster. 

Article 7—Warranty, Warranty Exclusions, Liability  

        7.1  Subject
to Article 13 of the Product Purchase and Capacity Reservation Agreement between the Parties, neither Party represents or warrants that the possession or
use of any Know How and/or the use, development, manufacture, test, sale, lease, or other disposition of systems, processes, circuits, devices, software and any products hereunder will be free from
infringement of intellectual property rights of third parties and neither Party assumes any liability under this agreement for or indemnifies the other Parties from any third party claims for
infringement of intellectual property rights. In case that one of the Parties is subject to a claim of intellectual property rights infringement as a result of the use of the Know How or other
technology received hereunder, the other Party will give assistance, as it considers reasonable in its sole discretion in order to defend such claims. 

        7.2  Neither
NTC nor Infineon represent or warrant to JV or to one another, that the Know How will fulfill certain conditions, that the Know how will be sufficient, suitable,
or fit for JV's purposes, that
the use of the Know How by JV will be uninterrupted, error free, or result in a minimum yield and that JV will be successful in the manufacturing of Contract Products. 

7

 

        7.3  Except
as otherwise expressly provided in this Agreement, nothing in this Agreement shall be construed as: 

        7.3.1  a
warranty or representation by Infineon nor NTC to the validity and scope of any of the Patents licensed to JV, or 

        7.3.2  an
obligation on Infineon or NTC or a warranty or representation by Infineon or NTC that it will continue to own all of the Know How and Patents under
which JV is granted a right of use under this Agreement, or 

        7.3.3  a
requirement that Infineon or NTC shall file any patent application, secure any patent, or maintain any patent in force, or 

        7.3.4  an
obligation on Infineon or NTC to bring or prosecute actions or suits against third parties for infringement, or 

        7.3.5  conferring
a right to use in advertising, publicity, or otherwise any trademark, trade dress or trade name of Infineon or NTC, or 

        7.3.6  granting
by implication, estoppel or otherwise, any rights under patents or patent applications of Infineon or NTC other than the Patents licensed to JV
under this Agreement, regardless of whether such other patents or applications are dominant or subordinate thereto. 

        7.4  Infineon
and NTC make no representations, extend no warranties of any kind, either express or implied, and assumes no responsibilities whatever with respect to the use,
sale, or other disposition by JV or its vendees or other transferees of products incorporating or made by use of (i) the Know How and Patents under which JV is granted a right of use under this
Agreement or (ii) information, if any, furnished to JV under this Agreement. 

        7.5  With
the exception of a breach of the confidentiality provision in Article 8, neither Party assumes any liability, or shall be held liable by the other Parties,
for any business interruption, loss of revenue, profits or sales, loss of information or data, or for any special, incidental, punitive, indirect or consequential damages. NTC's and Infineon's
liability for direct costs, losses or damages of JV shall be limited to an aggregate amount of one million US Dollars. 

        7.6  The
Parties further agree that the rights and remedies contained in this Agreement are sole and exclusive, and that these remedies are in lieu of any and all other
rights and remedies available at law, in contract, tort, or otherwise. 

Article 8—Confidentiality  

        8.1  The
Parties undertake to keep all Confidential Information disclosed under this Agreement by a Party to the other Parties, in confidence for a period of ten years after
disclosure to the receiving Party and not to distribute, disclose, or disseminate such Confidential Information to anyone except its own or its Subsidiaries' employees, who have a reasonable need to
know such Confidential Information and who are bound to confidentiality by their employment agreements or otherwise. The receiving Party shall use the same efforts to avoid publication or
dissemination of Confidential Information received as it employs with respect to information of its own which it does not desire to be published or disseminated, but not less than reasonable care. 

        The
term Confidential Information as used herein shall include (i) all data and information relating to Contract Process and Contract Products transferred by NTC and/or Infineon
and to be held in the Information Management System of JV, (ii) all other information disclosed in written or other tangible form and marked "confidential" or the like, and (iii) all
information disclosed orally, which is confirmed in written or other tangible form within thirty (30) days after initial oral disclosure. 

8

 

        The
term Confidential Information shall not include any information which is: 

        8.1.1  already
in the possession of the receiving Party or its Subsidiaries without breach of obligation of confidence under this Agreement; 

        8.1.2  now,
or hereafter becomes, publicly available without breach of this Agreement; 

        8.1.3  rightfully
received from third parties without obligation of confidence; 

        8.1.4  independently
developed by the receiving Party or its Subsidiaries; or 

        8.1.5  approved
for release by written agreement of the disclosing Party. 

        8.2  The
receiving Party's obligations with respect to the Confidential Information as specified in Article 8.1 shall not apply to any disclosure which is in response
to a valid order of a court or a due inquiry of other governmental body of any country or group of countries or any political subdivision thereof, provided, that the receiving Party shall have
notified the disclosing Party immediately upon learning of any such order and has given the disclosing Party a reasonable opportunity and cooperated with the disclosing Party to contest or limit the
scope of such required disclosure including a protective order, or otherwise required by law. 

Article 9—Term, Termination  

        9.1  This
Agreement shall enter into force upon signature by the Parties hereto and shall terminate three years after completion of the transfer of the first Know How Package
containing the 70nm DRAM process technology, or at the same time as the JV Agreement, whichever is earlier. 

        9.2  Any
performance under this Agreement is subject to receipt of all governmental approvals necessary for the performance of this Agreement ("Government Approvals"). Either
Party shall without undue delay apply for the necessary Government Approvals and shall inform the other Parties in writing if such approval was issued by the competent authorities. 

        The
Parties anticipate that as a precondition for the performance of this Agreement the relevant export control authorities of Germany and the United States of America need to issue
export licenses for the transfer of technology to JV. The Parties shall co-operate in the application for such export licenses without undue delay after signature of this Agreement and
after receipt of any required so called "Enduser Certificates" signed by JV. 

        9.3  If
the period between Effective Date of this Agreement and receipt of all necessary Governmental Approvals exceeds twelve (12) months, this Agreement shall be
regarded as null and void, if a Party requests so after elapse of said twleve (12) months period. 

        9.4  This
Agreement may be prematurely terminated by registered letter with immediate effect by a Party having such right as herein below provided—and
notwithstanding any other rights such Party may have—upon the occurrence of one of the following events: 

        9.4.1  by
each Party in the event that one of the other Parties has failed in the performance of any material contractual obligation herein contained, provided
that such default is not remedied to the terminating Party's reasonable satisfaction within sixty (60) days after receipt of written notice by the non-terminating Party specifying
the nature of such default and requiring remedy of the same; 

        9.4.2  by
either NTC or Infineon concurrently with a termination for cause or automatic termination as specified in Article 7.3 and 7.4 of the Joint
Venture Agreement, unless such termination is due to the breach of the Joint Venture Agreement by a Party requesting termination of this Agreement; or 

9

 

        9.4.3  by
either NTC or Infineon concurrently with a termination for cause of the Technical Cooperation Agreement, unless such termination is due to the breach
of the Technical Cooperation Agreement by a Party requesting termination of this Agreement. 

Article 10—Rights and Obligations after Termination  

        10.1 JV
shall have the right to continue to exercise any and all rights and licenses granted according to Article 5, if this Agreement was terminated pursuant to
Article 9.1, or 9.4.1 if the JV was the terminating Party. 

        10.2 NTC
and/or Infineon shall have the right to continue to exercise any and all rights and licenses granted according to Article 5, if this Agreement was terminated
pursuant to Article 9.1, 9.4.2, 9.4.3, or 9.4.1 if NTC and/or Infineon are the terminating parties. 

        10.3 Articles
7, 8, 10, 11 and 12 shall survive any termination of this Agreement. 

Article 11—Arbitration  

        The Parties hereto shall use their best efforts to amicably resolve any disputes, controversies or differences which may arise between the Parties in connection
with the interpretation or performance of this Agreement. If any such disputes, controversies or differences cannot be resolved between the Parties hereto, they shall be finally settled by arbitration
in Hong Kong in accordance with the rules of the International Chamber of Commerce, Paris, ("Rules"). The arbitration shall be conducted by three arbitrators selected in accordance with the Rules.
Arbitration proceedings shall be conducted in the English language. The procedural law of the place of arbitration shall apply where the Rules are silent. The decision of the arbitration proceedings
shall be final and binding upon the Parties and judgment on any arbitration decision may be entered in any court of competent jurisdiction for enforcement. The Parties are aware that the Republic of
China is not a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards and therefore wish to state that each of NTC, Infineon and JV hereby unconditionally and
irrevocably consent to the compulsory execution of any arbitration award rendered against them by any court having jurisdiction over them. 

Article 12—Applicable Law  

        This Agreement and the performance of the Parties hereunder shall be construed in accordance with and governed by the substantive laws of Germany, without regard
to its conflict of laws principle. The application of the United Nations Convention on Contracts for the International Sale of Goods of April 11, 1980 shall be excluded. 

Article 13—Miscellaneous  

        13.1 This
Agreement cannot be modified except by written instrument signed by both Parties. This requirement of written form can only be waived in writing. 

        13.2 Neither
Party shall be liable to the others for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such
failure or delay is caused by force majeure (such as without limitation, riots, wars, freight embargo, shortage of supply, hostilities between nations, governmental laws, earthquakes, storms, fires,
sabotages, explosions or any other contingencies beyond the reasonable control of the respective party). On the occurrence of such an event, the affected Party shall immediately inform the other
Parties of such circumstances together with documents of proof and the performance of obligations hereunder shall be suspended during, but not
longer than, the period of existence of such cause and the period reasonably required to perform the obligations in such cases. 

10

 

        13.3 This
Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 

        13.4 Except
otherwise provided in this Agreement, communications between Infineon and JV shall be given in writing, by post, via e-mail or by telefax, to the
following addresses of the Parties or to such other addresses as the Party concerned may subsequently notify in writing to the other Party: 

If to NTC to:

Nanya
Technology Corporation

Legal Department

Hwa-Ya Technology Park 669, Fuhsing 3rd Road

Kueishan, Taoyuan

Taiwan, R.O.C.

Fax: + 886-3-396-0993 

If to Infineon to:

Infineon
Technologies AG

Legal Department

P.O. Box 800949

81609 Munich, Germany

Fax: + 49 89 234 26993 

If to JV to:

Hwa-Ya
Semiconductor Inc.

Hwa-Ya Technology Park

Fuhsing 3rd Road, Kueishan

Taoyuan, Taiwan, R.O.C.

Fax: + 886 

        13.5 No
right or interest in this Agreement shall be assigned or transferred to any third party by a Party hereto without first obtaining written consent from the other
Parties except that NTC and Infineon may freely assign this Agreement to a Subsidiary, or to a third party, to which all or substantially all assets of their memory products divisions are transferred. 

        13.6 If
any provision contained in this Agreement is or becomes ineffective or is held to be invalid by a competent authority or court having final jurisdiction thereover,
all other provisions of this Agreement shall remain in full force and effect and there shall be substituted for the said invalid provision a valid provision having an economic effect as similar as
possible to the original provision. 

        13.7 This
Agreement and any documents attached hereto constitute the entire agreement between the Parties with respect to the transactions contemplated hereby and, except as
otherwise expressly set forth herein, supersedes all prior discussions, understandings, agreements and negotiations between the Parties with respect to such subject matter. 

        13.8 Annexes
1 through 6, which are or will be attached hereto, shall constitute an integral part hereof. The Annexes have the following titles: 

Annex
1A: Infineon 110nm Process 

Annex
1B: NTC 120nm Process 

Annex
1C: 90nm and 70nm DRAM process technology 

Annex
2: Description of Know How Packages 

Annex
3: Shipment Qualification 

Annex
4: Basic rules and regulations of the Frontend Fab Cluster. 

11

 

        IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed in duplicate by their respective duly authorized
representatives. 

	Nanya Technology Corporation	 	 	 	 
	

By:	
 	

 	
 	

 	
 	

 
	 	 	
	 	 	 	 
	

Name:	
 	

 	
 	

 	
 	

 
	 	 	
	 	 	 	 
	

Title:	
 	

 	
 	

 	
 	

 
	 	 	
	 	 	 	 
	

Date:	
 	

 	
 	

 	
 	

 
	 	 	
	 	 	 	 
	
Infineon Technologies AG	
 	

 	
 	

 
	

By:	
 	

 	
 	

And by:	
 	

 
	 	 	
	 	 	 	

	

Name:	
 	

 	
 	

Name:	
 	

 
	 	 	
	 	 	 	

	

Title:	
 	

 	
 	

Title:	
 	

 
	 	 	
	 	 	 	

	

Date:	
 	

 	
 	

Date:	
 	

 
	 	 	
	 	 	 	

	
Hwa-Ya Semiconductor Inc.	
 	

 	
 	

 
	

By:	
 	

 	
 	

And by:	
 	

 
	 	 	
	 	 	 	

	

Name:	
 	

 	
 	

Name:	
 	

 
	 	 	
	 	 	 	

	

Title:	
 	

 	
 	

Title:	
 	

 
	 	 	
	 	 	 	

	

Date:	
 	

 	
 	

Date:	
 	

 
	 	 	
	 	 	 	

12

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions. 

 
 

Annex 1A: Infineon 110nm Process    
  

	TECHNOLOGY:	 	[**]
	CELL:	 	[**]
	LITHOGRAPHY:	 	110nm [**]
	 	 	[**]
	L-REQUIREMENTS:	 	[**]
	DEVICE TYPES: (approximate Lmin)	 	[**]
	FEOL (FRONT END OF LINE):	 	[**]
	BEOL (BACK END OF LINE):	 	[**]

 
 

Annex 1B: NTC 120nm Process    
  

	TECHNOLOGY:	 	[**]
	CELL:	 	[**]
	LITHOGRAPHY:	 	[**]
	DEVICE TYPES: (approximate Lmin)	 	[**]
	FEOL (FRONT END OF LINE):	 	[**]
	BEOL (BACK END OF LINE):	 	[**]

 
 

Annex 1C: 90nm and 70nm DRAM process technology    
    
    90nm DRAM process technology    
  

	CELL:	 	[**]
	LITHOGRAPHY:	 	90 nm [**]
	 	 	[**]
	DEVICE TYPES:	 	[**]
	FEOL (FRONT END OF LINE):	 	[**]
	BEOL (BACK END OF LINE):	 	[**]
	WAFERSIZE:	 	[**]

 
 

70nm DRAM process technology    
  

	CELL:	 	[**]
	LITHOGRAPHY:	 	70 nm [**]
	 	 	[**]
	DEVICE TYPES:	 	[**]
	FEOL (FRONT END OF LINE):	 	[**]
	BEOL (BACK END OF LINE):	 	[**]
	WAFERSIZE:	 	[**]

 
 

Annex 2: Description of Know How Packages    
  

        The following Check List applies to the Know-How of the Contract Processes and Contract Products and is a guideline of the type of information that
will be delivered from Infineon and/ or NTC to JV. The information provided shall be on the basis of Reference Site performance and will be available in different portions: 

	Preliminary Know How Package	 	PART I
	

Final Know How Package	
 	

PART II
	

Additional measures: Update Packages and Workshops.	
 	

PART III

        Infineon
and/or NTC will prove the manufacturability of the Contract Process and Contract Product at the Reference Site with reasonable yield. The interface between the Reference Site
and the JV as well as synchronization and common learning procedures is described in Annex 4 (Basic rules and Regulations of the Frontend Fab Cluster). Infineon and NTC will undertake all reasonable
efforts to jointly achieve similar yields at JV as at the Reference Site. 

        The
Checklist given in this Annex is described as detailed below. Where information has been already transferred from a previous technology generation the data may not be repeated. 

	 
	 	Part I Preliminary Know How Package

	Part I.A	 	Frontend wafer fab: Equipment and Materials for Unit Process
	Part I.B	 	Frontend wafer fab: Process Integration
	Part I.C	 	Design

	

 
	
 	

Part II Final Know How Package

	Part II.A	 	Front End
	Part II.A.i.	 	Frontend Wafer Fab: Process Integration
	Part II.A.ii	 	Front End Wafer Test
	Part II.B.	 	Information regarding Final Back End (i.e. Package) Level Test Engineering
	Part II.C.	 	Design Data
	Part II.D.	 	QRA Fab

	

 
	
 	

Part III Updates

	(Delivery according Infineon Technology Development Handbook—TDHB—Milestones)
	Part III a	 	Update Packages
	Part III b	 	Workshops

 
 
 

Part I.—Preliminary Know How Package    
  

Part I.A    Wafer Fab Equipment and Materials for Unit Process  

        The Know How transfer should include (i) preliminary operation instruction and recipe for each and every process step, and (ii) the equipment
configurations, acceptance test reports, process control specifications, PM items and procedures, material (wafer, gases, chemicals, targets, CMP slurries, etc.) specifications including second
sources, if available, required by the respective process. 

        a.    [**]

        b.    [**]

        c.    [**] 

        d.    [**] 

        e.    [**] 

        f.      [**]

Part I.B    Wafer Fab Process Integration  

        a.    [**] 

        b.    [**] 

        c.    [**] 

        d.    [**]

        e.    [**]

        f.      [**]

        g.    [**]

        h.    [**] 

        i.      [**] 

        j.      [**]

        k.    [**]

Part I.C    Design  

        1.    By
process 

        a.    Design
Manual 

        b.    Process
assumptions 

        c.    Preliminary
design manual (Ground rules) 

        d.    Fill
rules for layers where applicable 

        e.    All
information, including mask tooling information(e.g. alignment mark, PCI, MCI), formulas for mask preparation (conversion of layouts to mask layers, quality of
different layers, all relevant biases) to include the Fracturing Method, Mask Sizing, OPC and PSM rules. 

        f.      ESD
structure 

        2.    By
Product 

2

 

        a.    Schematic
package (pdf) 

        b.    Kerf
description 

        c.    Layout
of kerf & Contract Product (GDS2) 

 
 

Part II.—Final Know How Package (includes Preliminary KHP)    
  

Part II.A    Front End  

Part II.A.i.    Wafer Fab Process Integration  

        a)    [**] 

        b)    [**] 

        c)    [**]

        d)    [**]

        e)    [**]

Part II.A.ii    Front End Wafer Sort Test Engineering—By product  

        a)    [**] 

        b)    [**]

        c)    [**]

        d)    [**]

        e)    [**] 

Part II.B    Information regarding Final Back End (i.e. Package) Level Test Engineering  

        a.    Qualification
Test flow 

        Release
criteria and correlation document with all hardware necessary to achieve product shipment qualification at JV 

Part II.C    Design data  

1.    Design data—Know How required by process  

        a.    Design
manual 

        b.    Design
Rules and reference run sets. 

        c.    Electrical
design rules for ESD, Latch up, electromigration, antenna ratios for flux sensitivities 

        d.    HSPICE
model parameter (electrical parameters) best, nominal and worst case data 

2.    Design data—Know How required by Product  

        a.    Product
description 

        b.    Circuit
design (pdf) and layout (GDS2) for each Contract Product, test chip and scribe line structure 

        c.    Data
sheets 

3

 

Part II.D    QRA  

(1)  RA/FA  

        a.    Reliability
management procedure including qualification, routine monitor, failure rate calculation method, sampling plan 

        b.    Failure
analysis procedure 

        c.    Trace
analysis procedure for qualitative and quantitative material analysis 

(2)  QA/QC  

        a.    Product
grading (frontend and backend) methodology 

        b.    Incoming
and outgoing quality control program 

        c.    QSB
Established 

        d.    In-process
quality control program and QC flow (product, process, equipment, material, and others as required) 

        e.    Experiences
and results of Failure Mode and Effect Analysis (FMEA) as available 

        f.      Alignment
of downgrade procedure 

 
 

Part III    
  

Part III a    Update Packages  

        Update Packages will be delivered after an Infineon milestone has been reached (InfineonTechnologies Development Handbook "TDHB") and new results are available. 

        The
topics and content of these updates are described in the Preliminary Know How Package. 

        The
Updates will be documented in Lotus Notes DBs. These DBs will be announced and replicated from the Reference Site Document Center. 

        After
the final Know How Package is delivered further Updates will be issued via the Frontend Fab Cluster Synch Procedure. 

Part III b    Workshops  

        Workshops at the Reference Site were held to release milestones and enter a new development period as described in the Infineon TDHB. Attendees from JV will be
invited. The number of attendees of the JV at the Workshops will be mutually agreed to. The workshop usually lasts 3 days. The information provided will be treated as an Update package and
carefully documented. The delivery will be tracked by the Reference Site's Document Center. 

4

 
 
 

Annex 3: Shipment Qualification    
  

        This Annex sets forth the work to be performed by the Parties to demonstrate qualification of the fabrication processes and the work to be performed by the
Parties for qualification of the Product design. 

        A
qualification team shall be established by the respective Project Managers to develop common methods and procedures for conducting the fabrication processes qualifications that satisfy
the common requirements of all Parties based on this Exhibit. 

PROCESSES QUALIFICATION:  

        Purpose: To demonstrate that the fabrication processes design rules are adequate for a Product with a high expectation that it will meet reliability and
productivity targets. 

        Method:
Use test site measurements and stresses to define reliability bounds and identify wearout mechanisms. Use of test site or product measurements to define the ability to maintain
statistical process control. 

        Tests
to be performed include: [**] 

PRODUCT QUALIFICATION:  

        Purpose: Demonstrate that Product built with the qualified fabrication processes and the chosen package(s) can meet the reliability and application
specifications. 

        Method:
Conduct Product stresses and functional tests to measure Product reliability and operating margins. Identify actions to resolve areas where criteria are not met. Review
documentation and procedures. An additional goal is to perform applications test to verify functionality to customers' applications. 

        Measurements
to be performed include: [**] 

5

	

	

 	 	Fab cluster member rules	 	Annex 4 to KHTA
	

  
 

    Fab cluster member rules    
  

The present document does not replace any manual or business process but summarizes in short way the rules fab cluster members are expected to respect. Chapter
1-4 are by and large an extract of the released Fab Cluster Manual.  

Content  

	1	 	MISSION OF THE IFX MP FE FAB CLUSTER	 	2
	

2	
 	

STRUCTURE OF THE MP FE FAB CLUSTER	
 	

2
	

3	
 	

RESPONSIBILITIES	
 	

2
	

4	
 	

AREAS OF SYNCHRONIZATION/FAB CLUSTER LEARNING	
 	

4
	
4.1	
 	

Synchronization levels between cluster production lines	
 	

4
	4.2	 	Technology platforms	 	4
	4.3	 	Fabrication equipment, material use, and productivity performance	 	4
	4.4	 	Quality and performance targets	 	4
	
5	
 	

PARTICULAR RULES WITHIN THE FAB CLUSTER	
 	

4
	
5.1	
 	

Rules to guarantee communication within the cluster	
 	

4
	5.2	 	Rules to guarantee synchronization level C	 	4
	5.3	 	Rules to guarantee synchronization level B	 	4
	5.4	 	Rules to guarantee synchronization level A	 	4
	
6	
 	

ABBREVIATIONS AND TERMINOLOGY	
 	

5

	

	Author
 Giorgio Schweeger	 	Owner
 Giorgio Schweeger	 	Document Number

    	 	Version
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 2002-07-02	 	Status

    	 	Page/Pages
 1/10
	

	Proprietary data. All rights reserved

 

	

	

	 	Fab cluster member rules	 	Annex 4 to KHTA
	

	1
	 MISSION OF THE IFX MP FE FAB CLUSTER  

The Fab Cluster is the community of wafer fabrication plants which are producing memory chips with Infineon owned technologies and for the scope to be sold as
Infineon products. This wafer fabs are globally synchronized 

	•
	to
meet the expectations of the customer to receive equal performance and quality from Infineon as a supplier,

	•
	to
meet the expectation of marketing and logistics to have largest possible production flexibility, and

	•
	to
obtain best-in-class fabrication performance in all fabrication sites. 

With
respect to technology, the Fab Cluster assures uniform quality, functionality (incl. performance) and reliability of technology platforms and of products fabricated on these platforms. This
results in only one technology qualification per site necessary for all products and only one customer qualification per customer necessary for all sites. Furthermore, the Fab Cluster strives to
achieve equal fabrication processes in all sites in order to improve common learning and to accelerate improvement roadmaps. 

With
respect to production, the Fab Cluster assures highest production flexibility with reduced transfer efforts due to the technology synchronization, as well as overall
"best-in-class" manufacturing performance and common learning in the areas of production efficiency, production and process control, equipment choice etc. 

	2
	 STRUCTURE OF THE MP FE FAB CLUSTER  

The Infineon MP FE fab cluster is [**]. The current members of the fab cluster are: 

	—
	Infineon
Dresden 200mm line

	—
	Semiconductor
300 Dresden 300mm line

	—
	Infineon
Richmond 200mm line

	—
	ProMOS
Hsinchu 200 and 300mm lines 

[**].

	3
	 RESPONSIBILITIES  

	

	Function	 	Responsibilities
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	[**]	 	[**]
	

	

	Author
 Giorgio Schweeger	 	Owner
 Giorgio Schweeger	 	Document Number

    	 	Version
 02	 	Date
 2002-07-02	 	Status

    	 	Page/Pages
 2/10
	

	Proprietary data. All rights reserved

2

 

	

	

	 	Fab cluster member rules	 	Annex 4 to KHTA
	

	4
	 AREAS OF SYNCHRONIZATION / FAB CLUSTER LEARNING  

 
	4.1
	 Synchronization levels between
cluster production lines [**]

 
	4.2
	 Technology platforms
  

A technology platform is [**]

	4.3
	 Fabrication equipment, material use, and productivity performance  
	[**]
	 

 
	4.4
	 Quality and performance targets  
	[**]
	 

 
	5
	
PARTICULAR RULES WITHIN THE FAB CLUSTER  

 
	5.1
	 Rules to guarantee communication within the cluster  
	[**]

	 

 
	5.2
	 Rules to guarantee synchronization level C  
	[**]
	 

 
	5.3
	 Rules to guarantee synchronization level B  
	[**]

	 

 
	5.4
	 Rules to guarantee synchronization level A  

[**]  

	

	Author
 Giorgio Schweeger	 	Owner
 Giorgio Schweeger	 	Document Number

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 2002-07-02	 	Status

    	 	Page/Pages
 4/10
	

	Proprietary data. All rights reserved

3

 

	

	

	 	Fab cluster member rules	 	Annex 4 to KHTA
	

	6
	 ABBREVIATIONS AND TERMINOLOGY  

	

	Abbreviation	 	Description
	

	BE	 	Backend
	

	CAR	 	Corrective action request
	

	CEB	 	Cluster equipment board
	

	CLB	 	Cluster logistics board
	

	CPB	 	Cluster production board
	

	CTR	 	Cluster technology review / quarterly meeting
	

	FCTO	 	Fab Cluster Technology Officer
	

	FE	 	Frontend / an organizational entity of MP
	

	FE LK	 	Frontend Leitungskreis / highest FE internal board
	

	IFDD	 	Dresden 200mm line
	

	IFR	 	Richmond
	

	KEC	 	Knowledge exchange / a working group of the CPB
	

	KEP	 	Key electrical parameter
	

	KIP	 	Key inline parameter
	

	MACORE	 	Material cost reduction / a working group of the CPB
	

	MP	 	Memory products / a division of Infineon
	

	OP	 	Operations / an organizational entity of MP
	

	PCI	 	Process integration
	

	PCN	 	Process change notification
	

	PI	 	Productivity improvement / an organizational entity within FE
	

	POR	 	Process of record
	

	PPC	 	Production planning and control / an organizational entity of MP
	

	PUR CB FE	 	Purchasing Core Buyer Frontend / an organizational entity within FE
	

	QSB	 	Quality Synchronization Board
	

	SMCom	 	Semiconductor Maintenance Comparison / a working group of the CPB
	

	TD	 	Technology development
	

	TPTI	 	Technology and Product Transfer within Infineon / an Infineon business process
	

	TSB	 	Technology Synchronization Board
	

	UP	 	Unit process
	

	UPMS	 	Unit process matching sheet
	

	UPSB	 	Unit Process Synchronization Board
	

	

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4

 
 

Appendix B to Joint Venture Agreement    
  

 
 

Product Purchase and Capacity Reservation Agreement    
  

        by and between 

Hwa-Ya
Semiconductor Inc., having its registered offices at Hwa-Ya Technology Park,

Fuhsing 3rd Road, Kueishan, Taoyuan, Taiwan, R.O.C., Taiwan, R.O.C. 

—hereinafter
referred to as "JV"—

on the first part 

and 

Nanya
Technology Corporation, having its registered offices at Hwa-Ya Technology Park

669, Fuhsing 3rd Road, Kueishan, Taoyuan, Taiwan, R.O.C. 

—hereinafter
referred to as "NTC"— 

and

Infineon
Technologies AG, having its registered offices at St. Martin Strasse 53,

81669 Munich, Germany

—hereinafter referred to as "Infineon"—

on the second part 

—JV,
NTC and Infineon are hereinafter collectively referred to as the "Parties" and severally

referred to as a "Party"; NTC and Infineon are hereinafter collectively referred to as the

"Buyers" and severally referred to as a "Buyer"— 

 

Preamble  

        WHERAS, NTC and Infineon have formed JV as a joint venture company for the development, manufacture and sale of semiconductor products subject to a Joint Venture
Agreement ("Joint Venture Agreement"); 

        WHEREAS,
NTC, Infineon and JV have entered into a Know How Transfer Agreement ("KHTA") under which NTC and Infineon transfer and license certain know how relating to DRAM processes and
products to JV; 

        WHEREAS,
NTC, Infineon and JV wish to allocate JV's total wafer manufacturing capacity to different process corridors with the understanding that the majority of JV's total wafer
manufacturing capacity will be used for the production of standard DRAM products to be sold exclusively to NTC and Infineon; 

        NOW,
THEREFORE, the Parties agree as follows: 

Article 1—Definitions  

        For the purpose of this Agreement, the terms set forth in this Article 1, when employed in capital letters, either in the singular or plural form, are
defined to mean the following: 

        1.1  "Commodity
DRAM Corridor" shall mean a certain portion of the Total Capacity assigned to the production of Commodity DRAM Products for the Buyers. 

        1.2  "Commodity
DRAM Products" shall mean mainstream DRAM products in wafer form, which 

        a)    have
a highly standardized specification, 

        b)    are
targeted for high production volumes, 

        c)    follow
JEDEC standards, 

        d)    have
densities between 256Mbit and 4Gbit, 

        e)    include
SDRAM interface standards such as SDR, DDR and DDR II, and 

        f)    use
the Contract Process 

and
are designed by or on behalf of NTC and/or Infineon, including improved and/or modified versions thereof. Commodity DRAM Products shall exclude any embedded DRAM products. 

        1.3  "Contract
Process" shall mean DRAM process technology transferred to JV under the KHTA. 

        1.4  "Frontend
Fab Cluster" shall mean a group of companies which align their frontend fabs to a synchronized technical, quality and reporting guideline in order to realize
economies of scale and common quality standards. On the Effective Date the Frontend Fab Cluster members are Infineon
Technologies Richmond Limited Partnership, USA, Infineon Technologies Dresden GmbH & Co. OHG, Germany, Infineon Technologies SC300 GmbH & Co. KG, Germany, ProMOS Technologies Inc,
Hsinchu, Taiwan, and Winbond Electronics Corporation, Hsinchu, Taiwan, and shall further include JV, as well as any other Infineon Subsidiary or third party cooperation partner of Infineon that
Infineon may add to the Frontend Fab Cluster. The Parties acknowledge that certain members of the Frontend Fab Cluster may cease to be members during the term of this Agreement. 

        1.5  "Products"
shall mean Commodity DRAM Products and Specialty DRAM Products JV sells to the Buyers under this Agreement. 

2

 

        1.6  "NTC
Development Area" shall mean a certain portion of JV's cleanroom space that NTC may use to set-up a development line using NTC equipment, at NTC's cost. 

        1.7  "NTC
Development Wafers" shall mean DRAM products manufactured in the NTC Development Area that JV shall sell exclusively to NTC. 

        1.8  "Output
Share" shall mean the respective share of JV's Total Capacity that is assigned to each Buyer. 

        1.9  "Specialty
DRAM Corridor" shall mean a certain portion of the Total Capacity assigned to the production of Specialty DRAM Products for the Buyers using a Contract
Process that is one of the processes being used by the JV's Commodity DRAM Corridor. 

        1.10 "Specialty
DRAM Products" shall mean all low volume DRAM products in wafer form targeting special applications, using the Specialty DRAM Corridor and a Contract
Process, that is one of the processes being used by the JV's Commodity DRAM Corridor which show in terms of performance significant changes to Commodity DRAM Products. Specialty DRAM Products shall
include but not be limited to low power applications such as SDR, DDR and 1T SRAM, high speed applications for graphics and networking, but shall exclude embedded DRAMs. 

        1.11 "Total
Capacity" shall mean the total wafer manufacturing capacity of JV measured in wafer starts per week ("wspw'). 

        1.12 "Transfer
Price" shall mean the price of the Products JV charges to the Buyers which is calculated according to Annex 1. 

        1.13 "Subsidiary"
shall mean any legal entity which is or becomes owned or controlled directly or indirectly by a Party hereto as to more than fifty percent (50%) of such
legal entity's issued share capital, voting rights and/or the like. 

Article 2—Utilization of JV's Wafer Manufacturing Capacity  

        2.1  The
Total Capacity of JV shall be allocated to following process corridors: 

        At
least [**]% of the Total Capacity shall be allocated to the Commodity DRAM Corridor, with the remaining portion of the Total Capacity allocated to the
Specialty DRAM Corridor. 

        Each
Buyer may assign a maximum of [**]% of the Total Capacity to the production of Specialty DRAM Products. Each Buyer may use its portion of the Specialty DRAM
Corridor for the manufacture of a maximum of four Specialty DRAM Products. In case that the demand of Specialty DRAM Products of such Buyer falls short of [**]% of the Total
Capacity, the remaining portion of the Total Capacity shall be filled with Commodity DRAM Products for that Buyer. 

        2.2  The
Parties agree, that a maximum of two different DRAM process technologies shall be used in the Commodity DRAM Corridor and that a maximum of
[**] Commodity DRAM Products shall be manufactured at the same time. Such [**] Commodity DRAM Products shall be exclusively determined out of the
following list of products (provided, however, that during the first twelve months after the establishment of JV, Commodity DRAM Products shall be limited to a maximum of
[**]): 

        1)    [**]
product [**]; 

        2)    [**]
product [**]; 

        3)    [**]product
[**]; 

        4)    [**]
product [**]. 

        2.3  Each
Buyer may assign a minimum of [**]% of the Total Capacity to the production of Commodity DRAM Products. Each Buyer may in its discretion use
its portion of the Commodity 

3

 

DRAM Corridor for the manufacture of Commodity DRAM Products in accordance with the decision of JV's board of directors on which products out of the list of products specified in Article 2.2
are to be manufactured in JV. 

        2.4  With
respect to the Products that fall within items 1, 2, 4 or 5 indicated above, the Buyer who provides the design will be responsible for setting up the product
testing and qualification mechanism at wafer level with the engineering support by JV. 

        2.5  In
addition, JV may manufacture any other 110nm, 90nm or 70nm Product designed by either Buyer upon written agreement between the Buyers on terms and conditions of
manufacturing of such Product in JV and how such Product may be manufactured and successfully commercialized by the other Buyer in its own facility at terms reasonable and equitable to both Buyers. In
case either Party wishes the Company to manufacture any product developed by such Party, such Party shall be responsible for setting up the Product testing and qualification mechanism at wafer level
with the engineering support by JV. 

        2.6  JV
shall sell all Products solely to the Buyers. The Output Share of each Buyer shall be [**]% of the Total Capacity. Each Buyer shall have the
right and obligation to buy a quantity of Products from JV that corresponds to its Output Share. 

        2.7  In
the event either Buyer needs additional wafer fabrication capacity for processing Products, it may (i) request the other Buyer to temporarily or permanently
adjust the Buyers' Output Share, or (ii) request JV and the other Buyer to consider expansion of the Total Capacity. 

        2.8  Throughout
the term of this Agreement JV shall cooperate with the Buyers to maintain records that reflect the utilization of JV's wafer manufacturing capacity by the
Buyers. JV shall allow the Buyers to verify these records for accuracy and completeness as often as they may reasonably request. 

        2.9  JV
shall reserve 200 sqm of its cleanroom space for the NTC Development Area. NTC may use the NTC Development Area to set up at its own cost a development line. JV will
also process NTC Development Wafers for NTC if such wafers: (i) use portions of the Contract Process (ii) do not endanger the yield, performance and logistics of the Contract Process
(iii) are counted against and are
limited by the wspw agreed for NTC's Specialty DRAM Corridor; and NTC shall reimburse all costs relating to the manufacture of the NTC Development Wafers. Until the JV is ready to equip the NTC
Development Area for its own purposes, NTC may use the space assigned to it free of charge. The JV shall give 3 months prior written notice to NTC before completely equipping the rest of its
facility. NTC shall then bindingly declare, if it wishes to continue using the NTC Development Area or decommission it at its own cost. In case of such continued use by NTC the Buyers and the JV shall
agree on a reasonable monthly rent payable by NTC to JV for the continued use of the NTC Development Area. 

Article 3—Forecasts  

        3.1  In
order to plan for the efficient utilization of JV's manufacturing capacity, the Buyers agree to exchange forecasts with JV and such other information as is reasonably
requested by JV. No later than five months before the beginning of each calendar year, JV will provide the Buyers with a preliminary capacity plan in units of wspw per DRAM process technology of the
said calendar year. Within one month after receipt thereof, the Buyers shall provide JV with an annual forecast in units of wspw per DRAM process technology for every week. The Buyers shall mutually
agree on the capacity per DRAM process technology that will be shared in equal parts. JV shall use reasonable best efforts to meet the request of the Buyers. Based on the Buyers' request, JV will
(i) plan its production capacity, efficiency and related adjustments and then (ii) prepare an adjusted forecast that will become the basis for the quantity to be purchased by the Buyers
during the said calendar year. 

4

 

        3.2  The
Product mix for each Buyer's Output Share is determined by the Buyers according to the principles of this Agreement. If any Buyer wishes to modify the Product mix
and/or production capacity, the Buyer shall inform JV in writing on a monthly basis and in manner which is timely synchronized to the Frontend Fab Cluster's rolling forecast process. Such modification
shall be subject to the condition that no substantial change of the production process flow or equipment will occur due to the modification. 

        3.3  Once
per month JV will plan parameter values (chips per wafer, yields, cycle times, quality shares) together with the Buyers and synchronized with the Frontend Fab
Cluster planning process. JV shall provide the Buyers on a weekly basis with a short term wafer out/chip out forecast as well as reports of actual wafer starts, wafer out/chip out and above mentioned
parameter values for each Product. Each kind of manual forecast/report are consolidated into one file. In addition, yields, cycle times and wafer starts must be provided accurately and regularly
compatible to Buyers IT landscape. 

        3.4  The
Parties will further jointly review this forecast mechanism, taking into account practical operation. 

Article 4—Ordering  

        4.1  Four
working days prior to the beginning of each calendar month, the Buyers shall issue to JV a non-cancelable purchase order ("Purchase Order"). The
Purchase Order shall: 

	—
	specify
the Product mix;

	—
	provide
for the ordering of quantities sufficient to cover the Buyer's Output Share;

	—
	respect
the allocation of JV's manufacturing capacity to different process corridors;

	—
	specify
the applicable price and delivery date. 

        4.2  JV
shall be obliged to accept the Purchase Order if it is within the scope of the Buyer's Output Share and the capacity allocation to process corridors and shall confirm
acceptance thereof within three working days after its receipt. 

        4.3  Should
JV's output during a quarter fall below the ordered quantities of Products, the Buyers shall accept delivery of the deficient quantities and issue to JV a revised
Purchase Order to account for such shortfall. Should output during a quarter exceed the ordered quantities of Products, the Buyers shall accept delivery of the additional quantities and issue to JV a
supplementary Purchase Order to cover such excess. 

        4.4  Subject
to Article 4.1, each Buyer may reschedule or change the mix of Products it has ordered from JV by written notice prior to the scheduled delivery, provided
that JV will have (i) the materials and (ii) the capability to fulfill such revised Purchase Order within the time available and (iii) that the respective Buyer shall pay for any
additional costs incurred by JV and (iv) that the respective Buyer shall buy and take the Products already made per the original Purchase Order. 

Article 5—Delivery, Title and Risk of Loss  

        5.1  JV
shall ship the Products to the Buyers, or at the request of a Buyer to such Buyer's Subsidiary or subcontractor. In no event will JV maintain any significant
inventory for the Buyers. The Buyers shall provide JV with reasonable assistance in meeting their shipping requirements. All freight and other shipping charges, duties, sales, excise or other taxes
(other than taxes based on the net income or assets of JV) shall be paid by the Buyers. 

        5.2  Title
and risk of loss shall pass "FCA JV's production facilities' according to Incoterms 2000. 

5

 

Article 6—Price and Payment  

        6.1  JV
shall sell all Products to the Buyers and their Subsidiaries on the basis of the Transfer Price. The prices shall be "FCA JV's production facilities' according to
Incoterms 2000 and shall include the cost of packing. 

        6.2  JV
shall issue to the Buyers an invoice promptly upon shipment of Products. Payment terms shall be net [**] from the date of shipment. Interest
at the rate of one percent per month shall be paid on all overdue amounts. 

        6.3  NTC
and Infineon shall have the right to audit through internal or external auditors all financial data of JV to verify JV's computation of the Transfer Price. 

Article 7—Specifications of Products, Inspections  

        7.1  Each
Buyer shall notify JV, with a reasonable lead time, of the electrical, mechanical, quality-related, marking, and packing specifications to be met by all Products
purchased by them and JV shall deliver Products which meet such specifications. 

        7.2  The
Buyer's may perform, or may have performed on their behalf and at their expense, incoming inspection and tests of delivered Products, and shall provide notice to JV
of Products which do not meet the specifications. Failure to provide notice of rejection within [**] of receipt of shipment shall be deemed to be an acceptance by the Buyers,
but such failure to reject shall not preclude the Buyers from making a warranty claim under Article 12. 

Article 8—Scrap Products  

        Wafers being processed by JV may need to be scrapped from time to time due to product quality issues, defects, or process errors resulting in non compliance with
the specifications of the respective Product ("Scrap Product"). For the avoidance of doubt, partially finished, untested, or non-functional Products shall be considered Scrap Products. The
JV hereby undertakes to scrap Products at its cost if the reason for scrapping the Product was caused by JV. 

        Otherwise
Scrap Products shall be sold to the Buyers at terms to be agreed. 

Article 9—Process Changes  

        JV will adopt all process changes requested and approved by the Technology Synchronization Board of the Frontend Fab Cluster. JV shall not implement any process
changes unilaterally. 

        In
case of process changes requested by only one Buyer, JV will (i) prior to implementation seek approval by the Technology Synchronization Board according to the rules and
regulations of the Frontend Fab Cluster as referred to in the KHTA, and (ii) if JV implements such changes without the approval of the Technology Synchronization Board, such Buyer shall bear
all cost associated with such process change. 

Article 10—Quality Data  

        10.1 JV
agrees to provide all information relating to the quality or reliability of the Products and the quality systems used to guarantee these standards as foreseen by the
rules and regulations of the Frontend Fab Cluster as referred to in the KHTA. 

        10.2 JV
agrees to maintain reasonable documentation regarding all Products sold to the Buyers' for 10 years after shipment. All Products shall be traceable based on
wafer lot number. Full history shall include applicable wafer fab process recipes, quality control data, process deviation notes and probe data. 

6

   
        10.3 JV agrees to participate in regular quality system reviews for all Products purchased by the Buyers. The details of such reviews shall be provided to JV by the Buyers
at least one month in advance. 

        10.4 JV
agrees to provide timely failure analysis on Products that are beyond the Buyers' analysis capability or which are returned for the purposes of feedback and
correlation. 

        10.5 Each
Buyer may review JV's quality measurement and control systems upon reasonable advance notice. 

Article 11—Customer Audit  

        Upon reasonable prior notice, JV shall permit the Buyers and their Subsidiaries and customers to audit JV's facilities during business hours. Any audit must be in
compliance with security, safety and confidentiality requirements of JV. JV shall support such audits including (i) setting the date of such audit, (ii) presenting the fab quality
systems, (iii) supplying guides to support the physical audit, and (iv) taking all requested corrective action to the audit results in a timely manner. 

Article 12—Warranties  

        12.1 JV
warrants that, at the time of delivery to the Buyers, and for a period of [**] from the date of shipment of the Products to the Buyers, all
Products will (i) be clear of any liens and encumbrances, (ii) be free from any defects in material and workmanship, and (iii) will conform to all written specifications of the
Buyers applicable to such Products. 

        12.2 The
Buyers shall advise JV of any claims for such defects in writing within the period of the said warranty. If Products are not as warranted, JV shall, at the Buyers'
choice, (i) repair the defect(s), or (ii) replace the defective Products and reimburse the Buyers' for costs of handling and transporting of
the defective Products; or (iii) refund the Transfer Price of the defective Products and reimburse the Buyers for costs of handling and transporting of the defective Products. 

Article 13—Industrial and Intellectual Property Rights  

        13.1 JV
does not warrant or represent that Products manufactured with the Contract Process will be free from infringement of intellectual property rights of third parties,
unless such claim is attributable to JV's unauthorized change of the Contract Process, or any non-compliance with specifications or instructions given to JV by the Buyers for the
manufacture of Products. 

        13.2.1    As
between the Parties, it is NTC's responsibility to indemnify JV and to defend, settle or otherwise solve at its expense any dispute arising from a
claim of a third party, wherein the third party alleges that [**]. 

        13.2.2    As
between the Parties, it is Infineon's responsibility to indemnify JV and to defend, settle or otherwise solve at its expense any dispute arising from
a claim of a third party, wherein the third party alleges that [**]. 

        13.2.3    For
the avoidance of doubt, in the case where a dispute arises from a claim of a third party as described in this Article 13, and the Products
alleged to infringe the intellectual property rights of such third party are [**] pursuant to the terms of this Agreement [**], respectively. 

        13.2.4    If
JV wishes to invoke any such indemnification, JV must, within 30 days of receipt of notice of infringement, notify the indemnifying Buyer in
writing and forward a copy of said notice. In such case JV shall assign its responsibility and control to negotiate and settle such claims described in said notice to the indemnifying Buyer and JV
agrees to comply with any reasonable request to assist in the defense of said claims. 

7

 

Article 14—Limitation of Liability  

        14.1 With
the exception of a breach of the confidentiality provision in Article 15, neither Party assumes any liability, nor shall it be held liable by the other
Parties, for any business interruption, loss of revenues, profits or sales, loss of information or data, or for any special, incidental, punitive, indirect or consequential damages. Each Party's
liability for direct costs, losses or damages of the other Parties shall be limited to an aggregate amount of one million US Dollars. 

        14.2 The
Parties further agree that the rights and remedies contained in this Agreement are sole and exclusive, and that these remedies are in lieu of any and all other
rights and remedies available at law, in contract, tort, or otherwise. 

Article 15—Confidentiality  

        15.1 The
Parties undertake to keep all Confidential Information disclosed under this Agreement by a Party to the other Parties, in confidence for a period of ten years after
disclosure to the receiving Party and not to distribute, disclose, or disseminate such Confidential Information to anyone except its own or its Subsidiaries' employees, who have a reasonable need to
know such Confidential Information and who are bound to confidentiality by their employment agreements or otherwise. The receiving Party shall use the same efforts to avoid publication or
dissemination of Confidential Information received as it employs with respect to information of its own which it does not desire to be published or disseminated, but not less than reasonable care. 

        The
term Confidential Information as used herein shall include (i) all information disclosed in written or other tangible form and marked "confidential" or the like, and
(ii) all information disclosed orally, which is confirmed in written or other tangible form within thirty (30) days after initial oral disclosure. 

        The
term Confidential Information shall not include any information which is: 

        15.1.1    already
in the possession of the receiving Party or its Subsidiaries without breach of obligation of confidence under this Agreement; 

        15.1.2    now,
or hereafter becomes, publicly available without breach of this Agreement; 

        15.1.3    rightfully
received from third parties without obligation of confidence; 

        15.1.4    independently
developed by the receiving Party or its Subsidiaries; or 

        15.1.5    approved
for release by written agreement of the disclosing Party. 

        15.2 The
receiving Party's obligations with respect to the Confidential Information as specified in Article 15.1 shall not apply to any disclosure which is in
response to a valid order of a court or a due inquiry of other governmental body of any country or group of countries or any political subdivision thereof, provided, that the receiving Party shall
have notified the disclosing Party immediately upon learning of any such order and has given the disclosing Party a reasonable opportunity and cooperated with the disclosing Party to contest or limit
the scope of such required disclosure including a protective order, or otherwise required by law. 

Article 16—Term, Termination  

        16.1 This
Agreement shall enter into force upon signature by the Parties hereto and shall terminate at the same time as the Joint Venture Agreement. 

8

 

        16.2 This
Agreement may be prematurely terminated by registered letter with immediate effect by a Party having such right as herein below provided—and
notwithstanding any other rights such Party may have—upon the occurrence of one of the following events: 

        16.2.1    by
each Party in the event that one of the other Parties has failed in the performance of any material contractual obligation herein contained, provided
that such default is not remedied to the terminating Party's reasonable satisfaction within sixty (60) days after receipt of written notice by the non-terminating Party specifying
the nature of such default and requiring remedy of the same; 

        16.2.2    by
either NTC or Infineon concurrently with a termination for cause of the Joint Venture Agreement, unless such termination is due to the breach of the
Joint Venture Agreement by a Party requesting termination of this Agreement; or 

        16.2.3    by
either NTC or Infineon concurrently with a termination for cause of the License and Technical Cooperation Agreement, unless such termination is due
to the breach of the License and Technical Cooperation Agreement by a Party requesting termination of this Agreement 

Article 17—Rights and Obligations after Termination  

        Articles 5 and 6 with respect to outstanding shipments and payments and Articles 10.2, 12, 13, 14, 15, 18 and 19 shall survive any termination of this Agreement. 

Article 18—Arbitration  

        The Parties hereto shall use their best efforts to amicably resolve any disputes, controversies or differences which may arise between the Parties in connection
with the interpretation or performance of this Agreement. If any such disputes, controversies or differences cannot be resolved between the Parties hereto, they shall be finally settled by arbitration
in Hong Kong in accordance with the rules of the International Chamber of Commerce, Paris ("Rules"). The arbitration shall be conducted by three (3) arbitrators selected in accordance with the
Rules. Arbitration proceedings shall be conducted in the English language. The procedural law of the place of arbitration shall apply where the Rules are silent. The decision of the arbitration
proceedings shall be final and binding upon the Parties and judgment on any arbitration decision may be entered in any court of competent jurisdiction for enforcement. The Parties are aware that the
Republic of China is not a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards and therefore wish to state that each of NTC, Infineon and JV hereby
unconditionally and irrevocably consent to the compulsory execution of any arbitration award rendered against them by any court having jurisdiction over them. 

Article 19—Applicable Law  

        This Agreement and the performance of the Parties hereunder shall be construed in accordance with and governed by the substantive laws of the Republic of China,
without regard to its conflict of laws principle. The application of the United Nations Convention on Contracts for the International Sale of Goods of April 11, 1980 shall be excluded. 

Article 20—Miscellaneous  

        20.1 This
Agreement cannot be modified except by written instrument signed by the Parties. This requirement of written form can only be waived in writing by the Parties. 

        20.2 Neither
Party shall be liable to the others for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such
failure or delay is caused by force majeure (such as without limitation; riots, wars, freight embargo, shortage of supply, hostilities between nations, governmental laws, earthquakes, storms, fires,
sabotages, explosions or any other contingencies 

9

 

beyond the reasonable control of the respective party). On the occurrence of such an event, the affected Party shall immediately inform the other Parties of such circumstances together with documents
of proof and the performance of obligations hereunder shall be suspended during, but not longer than, the period of existence of such cause and the period reasonably required to perform the
obligations in such cases. 

        20.3 This
Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 

        20.4 Except
otherwise provided in this Agreement, communications between Infineon and JV shall be given in writing, by post, by hand delivery, or by telefax, to the
following addresses of the Parties or to such other addresses as the Party concerned may subsequently notify in writing to the other Party: 

If to NTC to:

Nanya
Technology Corporation

Legal Department

Hwa-Ya Technology Park 669, Fuhsing 3rd Road

Kueishan, Taoyuan

Taiwan, R.O.C.

Fax: + 886-3-396-0993 

If to Infineon to:

Infineon
Technologies AG

Legal Department

P.O. Box 800949

81609 Munich, Germany

Fax: - + 49 89 234 26993 

If to JV to:

Hwa-Ya
Semiconductor Inc.

Hwa-Ya Technology Park

Fuhsing 3rd Road, Kueishan

Taoyuan, Taiwan, R.O.C.

Fax: +886 

        20.5 No
right or interest in this Agreement shall be assigned or transferred to any third party by a Party hereto without first obtaining written consent from the other
Parties except that NTC and Infineon may freely assign this Agreement to a Subsidiary, or to a third party, to which all or substantially all assets of their memory products divisions are transferred. 

        20.6 If
any provision contained in this Agreement is or becomes ineffective or is held to be invalid by a competent authority or court having final jurisdiction thereover,
all other provisions of this Agreement shall remain in full force and effect and there shall be substituted for the said invalid provision a valid provision having an economic effect as similar as
possible to the original provision. 

        20.7 This
Agreement and any documents attached hereto constitute the entire agreement between the Parties with respect to the transactions contemplated hereby and, except as
otherwise expressly set forth herein, supersedes all prior discussions, understandings, agreements and negotiations between the Parties with respect to such subject matter. 

        20.8 With
respect to the subject matter of this Agreement, the provisions of this Agreement shall prevail over any terms in any purchase order, order acknowledgment or other
form or agreement. 

        20.9 Annex
1 attached hereto, shall constitute an integral part hereof. 

10

 

        IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed in duplicate by their respective duly authorized
representatives. 

	Nanya Technology Corporation	 	 	 	 
	

By:	
 	

 	
 	

 	
 	

 
	 	 	
	 	 	 	 
	Name:	 	 	 	 	 	 
	 	 	
	 	 	 	 
	Title:	 	 	 	 	 	 
	 	 	
	 	 	 	 
	Date:	 	 	 	 	 	 
	 	 	
	 	 	 	 
	
Infineon Technologies AG	
 	

 	
 	

 
	

By:	
 	

 	
 	

And by:	
 	

 
	 	 	
	 	 	 	

	Name:	 	 	 	Name:	 	 
	 	 	
	 	 	 	

	Title:	 	 	 	Title:	 	 
	 	 	
	 	 	 	

	Date:	 	 	 	Date:	 	 
	 	 	
	 	 	 	

	
Hwa-Ya Semiconductor Inc.	
 	

 	
 	

 
	

By:	
 	

 	
 	

And by:	
 	

 
	 	 	
	 	 	 	

	Name:	 	 	 	Name:	 	 
	 	 	
	 	 	 	

	Title:	 	 	 	Title:	 	 
	 	 	
	 	 	 	

	Date:	 	 	 	Date:	 	 
	 	 	
	 	 	 	

11

 
 

Annex 1: Transfer Price    
  

Principle  

        The calculation of the Transfer Price to be charged by the JV to the Buyers has been agreed upon by the Parties to be performed by the following rules: 

        a)    The
Products will be sold from JV to the Buyers at Transfer Prices per wafer. These Transfer Prices will be calculated for all wafers of a certain diameter (e.g. 300mm).
All Commodity DRAM Products, [**] Specialty DRAM Products will be sold at [**]Wafer Transfer Prices. 

        b)    In
principle, the Transfer Price for the Commodity DRAM Products will be calculated as follows: 

        b1)  Transfer
Price = [**] 

        b2)  Margin =
[**] 

Transfer Price Principle for Commodity DRAM Products  

Transfer
price table 

        c)    The
Transfer Price for the Specialty DRAM Products will be calculated as follows: 

Transfer
Price = [**] 

        d)    For
all wafers that do not fulfill the QC quality criteria as jointly defined by the Buyers, regardless if they carry Commodity DRAM Products or Specialty DRAM Products,
[**] as calculated according to b) and c) above.[**] Transfer Prices for Commodity DRAM Products and Specialty DRAM Products to the JV. 

        e)    The
calculation sheet to be used for the calculation of all Transfer Prices according to a)—d) above, for a given diameter, is given under section II
(see below). 

        f)    The
purchase orders for a certain calendar month will be based on "Preliminary Transfer Prices", using forecasted values for the items A, C, E, H, I1, N and Q of the
formula. 

        g)    Not
later then 4 weeks after that calendar month, the "Final Transfer Prices" will be calculated by using the actual values of that month for the items A, C, E, H, I1, N
and Q. 

        h)    The
difference between payments based on "Preliminary Transfer Price" and payments due to "Final Transfer Price" will be refunded not later then 6 weeks after that
calendar month. 

        i)    The
Parties will take all reasonable efforts and provide all relevant data in order to allow timely calculation of the Preliminary Transfer Price and the Final Transfer
Price. 

        j)    In
the formula used for the Transfer Price, as per section II (see below), [**], (i) [**]
(ii) [**] the market price, (iii) [**] to the Buyer, (iv) [**]. 

        k)    The
procedure for evaluating the monthly Front End Manufacturing Cost per Commodity DRAM Product wafer (item N on the formula as per Section II) and the Front End
Manufacturing Cost per Specialty DRAM Product wafer (item Q on the formula as per Section II) shall be agreed upon between the Parties.[**]. 

        The
Parties agree that [**] Specialty DRAM Product wafers [**] in the Transfer Prices of the Specialty DRAM Product wafers. 

 
 

Appendix C to Joint Venture Agreement    
  

 
  LAND SALE AND PURCHASE AGREEMENT    
  

        This LAND SALE AND PURCHASE AGREEMENT ("Agreement") is entered into by and between: 

        Nanya
Technology Corporation, a company legally established under the laws of the Republic of China and having its head office at Hwa-Ya Technology Park 669, Fuhsing
3rd Road, Kueishan, Taoyuan, Taiwan, Republic of China (hereinafter the "Seller"), and 

        Hwa-Ya
Semiconductor Inc., a company legally established under the laws of the Republic of China and having its head office at Hwa-Ya Technology Park,
Fuhsing 3rd Road, Kueishan, Taoyuan, Taiwan, Republic of China (hereinafter the "Buyer") 

        WHEREAS,
the Buyer contemplates constructing and operating a 300mm wafer fab in Hwa-Ya Technology Park and requires sufficient and suitable land there for said construction
and operation; and 

        WHEREAS,
the Seller desires to sell and the Buyer desires to purchase the Land on the terms and conditions contained in this Agreement. 

        NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, intending to be legally bound, the parties do hereby agree as follows: 

        1.    Land The Buyer agrees to purchase and the Seller agrees to sell the entire piece of land and any and all rights attached
thereon but not a part thereof, totally approximately 10831 Pings, presently constituting part of the land registered as lot number 348 and 348-2, Hua Ya Section, Kueishan Country, Taoyuan
County as specified in Exhibit A (hereinafter referred to as "Land"). 

        2.    Purchase Price The purchase price for the Land shall be NT$[**] (the "Purchase Price"), payable
from the Buyer to the Seller in accordance with the payment schedule as follows: 

	•
	30%
of the Purchase Price shall be payable on the date of this Agreement;

	•
	40%
of the Purchase Price shall be payable on the Target Date as defined in Section 3.1; and

	•
	30%
of the Purchase Price shall be payable on the Completion Date as defined in Section 3.4. 

        The
Purchase Price is exclusive of any and all taxes and charges imposed by any government body for the transfer of title to the Land, which shall be borne by the Buyer and the Seller in
accordance with the applicable laws and regulations of the Republic of China. Any other cost and expense paid to third parties, incurred by each of the parties in connection with the negotiation,
preparation, execution of and implementation of this Agreement, shall be borne directly by the respective parties. 

        3.    Closing    

        3.1  Closing
shall begin on six months after the establishment of Buyer or otherwise agreed upon by the parties (the "Target Date") and be completed within one week following
the Target Date. 

        3.2    Deliveries by Seller    

        On
the Target Date, Seller shall deliver to Buyer: 

	•
	any
and all title documents to the Land;

	•
	certificate
issued by the banks, in whose favor the existing mortgages on the land were created, certifying that the mortgages have been removed, if
applicable;

	•
	land
registration documents showing that the Land is free and clear of any and all liens or encumbrances;

	•
	any
and all other documents required for the transfer of title; and

	•
	the
documents contemplated by Section 2 and Section 4. 

 

        3.3    Deliveries by Buyer    

        On
the Target Date, the Buyer shall deliver the following to the Seller: 

	•
	payment
of forty percent (40%) of the Purchase Price in accordance with Section 2 hereof; and

	•
	the
documents contemplated by Section 2 and Section 5. 

        3.4    Registration of Transfer of the Title and the Final Payment    

        Buyer
agrees to pay Seller thirty percent (30%) of the Purchase Price within seven (7) days after the registration of transfer of the title to the Land is completed (the
"Completion Date"). 

        4.    Conditions to Seller's Obligations    

        Unless
otherwise waived by the Seller, the obligations of the Seller to effect the Closing shall be subject to the satisfaction on or prior to the Target Date of the following
conditions: 

        4.1  The
representations and warranties of the Buyer set forth in Section 7 of this Agreement shall have been true in all material respects as of the date of this
Agreement and shall be true in all materials respects as of the Target Date as though made at such time. 

        4.2  The
Buyer shall have performed and complied in all material respects with the covenants contained in this Agreement required to be performed and complied with it prior
to or as of the Target Date. 

        4.3  The
Buyer shall have delivered to the Seller a certified copy of the resolutions adopted by its board of directors authorizing the execution, delivery, and performance
of this Agreement. 

        5.    Conditions to Buyer's Obligations    

        Unless
otherwise waived by the Buyer, the obligations of the Buyer to effect the Closing shall be subject to the satisfaction on or prior to the Target Date of the following conditions: 

        5.1  The
representations and warranties of Seller set forth in Section 6 of this Agreement shall have been true in all material respects as of the date of this
Agreement and shall be true in all material respects as of the Target Date as though made at such time. 

        5.2  The
Seller shall have performed and complied in all material respects with the covenants contained in this Agreement required to be performed and complied with by it
prior to or as of the Target Date. 

        5.3  The
Seller shall have delivered to the Buyer a certified copy of the resolutions adopted by its board of directors authorizing the execution, delivery, and performance
of this Agreement. 

        6.    Representations and Warranties of Seller    

        The
Seller represents and warrants to the Buyer as follows: 

        6.1    Organization of Seller; Authorization    

        The
Seller is a company duly organized, validly existing, and in good standing under the laws of the Republic of China, with full corporate power and authority to execute and deliver
this Agreement, and to perform its obligations hereunder. The execution, delivery and performance of this Agreement and the consummation of the sale and purchase of the Land have been duly authorized
by all necessary corporate action on the part of the Seller and this Agreement constitutes a valid and binding obligation of the Seller, enforceable against it in accordance with its terms. 

2

 

        6.2    No Conflict    

        Neither
the execution and delivery of this Agreement nor the consummation of the sale and purchase of the Land (a) will violate, be in conflict with, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a default) under, any agreement or commitment to which the Seller is a party, or result in the termination of, or accelerate the
performance required by, or excuse performance by any person of any of its obligations under, or cause the acceleration of the maturity of any debt or obligation pursuant, or result in the creation or
imposition of any encumbrance upon the Land under any agreement or commitment to which the Seller is a party or by which any of its property or assets is bound, or to which any of its property or
assets is subject, (b) will violate any statute or law, or any judgement, decree, order, rule, or regulation of any court or other governmental body applicable to the Seller, or (c) will
violate any permit, license, or approval of any court or other governmental body applicable to the Seller. 

        6.3    Consent and Approval    

        Except
as set forth elsewhere in this Agreement, no consent, approval, or authorization of or declaration, filing, or registration with any governmental body is required to be obtained
or made by the Seller in connection with the execution, delivery and performance of this Agreement or the consummation of the sale and purchase of the Land contemplated herein. 

        6.4    Title to Land; Encumbrances    

        Seller
has good, valid and marketable title to the Land, free and clear of all liens and encumbrances. 

        6.5    Litigation against the Sellers regarding the Land    

        There
have not been in the past and there is currently no pending or threatened legal action or other legal proceeding by any third party before any court or other governmental body
against the Seller with respect to the Land. 

        6.6    No Hazardous Materials    

        The
Land is free of any substance, material or other thing of potential harm to human health or the environment. 

        6.7    Conditions of the Land    

        There
are to the best of Seller's knowledge no soil, underground, environmental, or other material conditions which would make the construction of a wafer fab unduly problematic or
burdensome. 

        6.8    No Environmental Condition    

        No
environmental condition on the Land is in violation of any applicable law, governmental or administrative regulation. 

        6.9    No Default    

        Seller
is not in default with any of its obligations or liabilities pertaining to the Land. 

        6.10    No Claims    

        The
Land is free from third party claims, including rights of possession and rights of way. 

3

 

        7.    Representations and Warranties of Buyer    

        The
Buyer represents and warrants to the Seller as follows: 

        7.1    Organization of Buyer; Authorization    

        The
Buyer is a company duly organized, validly existing, and in good standing under the laws of the Republic of China, with full corporate power and authority to execute and deliver this
Agreement, and to perform its obligations hereunder. The execution, delivery and performance of this Agreement and the consummation of the sale and purchase of the Land have been duly authorized by
all necessary corporate action on the part of the Buyer and this Agreement constitutes a valid and binding obligation of the Buyer, enforceable against it in accordance with its terms. 

        7.2    No Conflict    

        Neither
the execution and delivery of this Agreement nor the consummation of the sale and purchase of the Land (a) will violate, be in conflict with, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a default) under any material agreement or commitment to which the Buyer is a party or result in the termination of, or
accelerate the performance required by, or excuse performance by any person of its obligations under, or cause the acceleration of the maturity of any debt or obligation pursuant to, any material
agreement or commitment to which the Buyer is a party or by which any of its property or assets is bound, or to which any of its assets or property is subject, or (b) to the knowledge of the
Buyer, will violate any statute or law, or any judgement, decree, order, rule or regulation of any court or other governmental body applicable to the Buyer. 

        7.3    Consent and Approval    

        To
the knowledge of the Buyer, no consent, approval or authorization of, or declaration, filing or registration with any governmental body is required to be obtained or made by the Buyer
as precondition for the execution, delivery and performance of this Agreement or the consummation of the sale and purchase of the Land. 

        8.    Seller's Obligations after the Target Date    

        The
Seller shall provide any and all additional documents and shall affix their registered seals on any of the documents, if any, which are necessary to effect the transfer of deed title
of the Land from the Seller to the Buyer upon the reasonable request of the Buyer. 

        9.    Termination    

        This
Agreement may be terminated by either party with immediate effect if the contemplated transaction on sale and purchase of the Land is not consummated as pursuant to
Section 3.1 unless failure to consummate such transaction is attributable to such terminating party. 

        10.    Arbitration    

        Any
and all claims, disputes, controversies or differences arising out of or in connection with this Agreement, or with a breach thereof, shall be determined by arbitration in accordance
with the then prevailing Arbitration Law of the Republic of China by three arbitrators appointed in accordance with such rules upon the request of any party. The arbitration shall be held in Taipei,
Taiwan and the decision of the arbitrators shall be final and binding upon the parties and judgment thereon may be entered in any court having jurisdiction thereon or application may be made to such
court for judicial acceptance of the award and/or order of enforcement, as the case may be. 

4

 

        11.    Miscellaneous    

        11.1    Expenses    

        Each
party shall bear its own expenses incident to the preparation, negotiation, execution, and delivery of this Agreement, the performance of its obligations hereunder and the
completion of the sale and purchase of the Land. 

        11.2    Captions    

        The
captions in this Agreement are for convenience of reference only and shall not be given any effect in the interpretation of this Agreement. 

        11.3    No Waiver    

        The
failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term of any other term of this Agreement. Any waiver must be in writing. 

        11.4    Exclusive Agreement; Amendment    

        This
Agreement supersedes all prior agreements among the parties with respect to its subject matter, is intended (with the documents referred to herein) as a complete and exclusive
statement of the terms of the agreement among the parties with respect thereto and cannot be changed or terminated orally. 

        11.5    Assignment    

        Neither
party may assign any of its rights under this Agreement without the written consent of the other. 

        11.6    Governing Law    

        This
Agreement and (unless otherwise provided) all amendments hereof and waivers and consents hereunder shall be governed by the laws of the Republic of China. 

5

 

        IN
WITNESS WHEREOF, the parties have each caused this Agreement to be executed by their duly authorized representative on the date above first written. 

	Hwa-Ya Semiconductor Inc. as Buyer	 	Nanya Technology Corporation as Seller
	

By:	
 	

 	
 	

 	
 	

By:	
 	

 	
 	

 
	 	 	
	 	 	 	

	 	 	Name:	 	 	 	 	 	Name:	 	 
	 	 	Title:	 	 	 	 	 	Title:	 	 
	 	 	Date:	 	 	 	 	 	Date:	 	 

6

 
 

EXHIBIT A
  THE LAND    

(DETAILED
SITE MAP WILL BE ATTACHED LATER) 

 
 

Appendix D to Joint Venture Agreement    
  

 
  Services Agreement    
  

        This Services Agreement (hereinafter this "Agreement") is entered into by and between: 

        Nanya
Technology Corporation, a company legally established under the laws of the Republic of China and having its head office at Hwa-Ya Technology Park 669, Fuhsing
3rd Road, Kueishan, Taoyuan, Taiwan, Republic of China (hereinafter "NTC"), and 

        Hwa-Ya
Semiconductor Inc., a company legally established under the laws of Republic of China and having its head office at Hwa-Ya Technology Park, Fuhsing
3rd Road, Kueishan, Taoyuan, Taiwan, Republic of China (hereinafter "JVC") (collectively the "Parties"). 

        WHEREAS,
NTC and Infineon Technologies AG, a company legally established under the laws of Germany and having its head office at St.-Martin-Strasse 53, D-81669 Munich,
Germany, entered into a Joint Venture Agreement (the "JVA"); and 

        WHEREAS,
JVC wishes to purchase from NTC certain Services (as defined hereinafter), and NTC is prepared to render such Services upon the conditions set forth hereinafter. 

        NOW,
THEREFORE, in consideration of the forgoing and of the mutual agreements and covenants contained herein, intending to be legally bound, the Parties agree as follows: 

        1.    Definitions    

        For
purposes of this Agreement, the following capitalized terms shall have the following meanings:"Effective Date" shall mean the last
signature date on this Agreement. 

        "GUI" shall mean government unified invoice. 

        "Services" shall have the meaning set forth in Section 2.1 hereof. 

        "VAT" shall mean value added tax. 

        2.    Services    

        Services Generally    Except as otherwise provided herein, NTC shall provide or cause to be provided by the Formosa Plastic Group the
services (the
"Services") described in Exhibit I hereto. To the extent the Services are provided by the Formosa Plastic Group, NTC shall remain jointly liable with respect to such services. For purposes of
this Agreement, reference to NTC's provision of Services shall include,where such context requires, the provisions of Services by the Formosa Plastic Group, as the case may be. The Services shall be
provided by NTC on a continuous basis for the term of this Agreement set forth in Section 3.1. JVC shall not be required to furnish specific orders for Services to be provided by NTC hereunder. 

        3.    Term and Termination    

        3.1    Term.    The term of this Agreement shall commence on the Effective Date and shall remain in effect for an
unlimited period of time unless terminated. 

        3.2    Termination.    This Agreement may be terminated by mutual agreement of the Parties or by JVC upon termination
of the JVA. JVC may terminate individual Services rendered hereunder at any time upon 90 days prior written notice to NTC. Notwithstanding the foregoing, in the event of any termination with
respect to one or more, but less than all Services, this Agreement shall continue in full force and effect with respect to any Services not terminated hereby and shall only terminate upon termination
of all individual Services hereunder. 

        4.    Compensation    

        4.1    Fees for Services.    JVC shall pay NTC the service fee (exclusive of VAT) in accordance with the guidelines
set forth on Exhibit I hereto and to be further agreed upon between the parties, for each of the Services listed therein as adjusted from time to time. Such service fee shall 

 

be based on a fixed annual amount to be calculated on the budgeted direct or indirect cost of providing such Services hereunder. For the avoidance of doubt, if any termination of a Service under
Section 3.2 occurs before the machinery, equipment or other assets (the "Machinery") acquired for purposes of providing such Service are fully depreciated or amortized, JVC shall pay NTC, in
addition to the service fee as specified in this Section 4.1, the amount equivalent to the unamortized or undepreciated portion of the value of the Machinery at the time of termination of such
Service. All services fees shall be payable in New Taiwan Dollars and shall be made in strict compliance with all applicable laws and regulations of the government of Taiwan. The Parties also intend
for the service fee payable hereunder to be easy to administer and, therefore, hereby acknowledge it may be counterproductive to try to recover every cost, fee, or expense, particularly those that are
insignificant or de minimis. The Parties shall use good faith efforts to discuss any situation in which the actual fee for a particular Service is
reasonably expected to exceed the estimated fee, if any, set forth on Exhibit I hereto; provided,  however, that the incurrence of fees in excess of
any such estimate shall not justify stopping the provision of, or payment for, Services under this
Agreement. 

        4.2    Payment Terms.    NTC shall bill JVC monthly for all fees pursuant to this Agreement. Such bills shall be
accompanied by GUI, and reasonable documentation or other reasonable explanation supporting such charges. The fees for such Services shall be due on the first day of each month and shall be payable by
JVC within [**] after receipt of an invoice therefor. Late payments beyond [**] of the date of the invoice shall be subject to an interest of six
percent (6%) per annum of the invoiced amount. 

        5.    General Obligations; Standard of Care    

        5.1    Performance of NTC.    NTC shall maintain a standard of reasonable care in rendering the Services hereunder.
Subject to Section 6.2, NTC shall maintain sufficient resources to perform its obligations to provide Services hereunder. NTC shall use reasonable efforts to provide Services to JVC in
accordance with the policies, procedures and practices in effect before the date hereof and shall exercise the same care and skill as it exercises in performing similar services for itself. 

        5.2    Performance of JVC.    JVC shall use reasonable efforts, in connection with receiving Services, to follow the
policies, procedures and practices in effect before the date hereof, including providing information and documentation sufficient for NTC to perform the Services and making available, as reasonably
requested by the NTC, sufficient resources and timely decisions, approvals and acceptances in order that NTC may accomplish its obligations to provide Services hereunder in a timely manner. 

        5.3    Changes in Provision of Services.    The Parties acknowledge the transitional nature of the Services and that
NTC may make changes from time to time in the manner of performing the Services if NTC is making similar changes in performing similar services for itself and if NTC furnishes to JVC reasonable
advance notice of not less than three months regarding such changes. 

        5.4    Responsibility for Errors; Delays.    NTC's sole responsibility to JVC: 

        (a)  for
errors or omissions in Services, shall be to furnish correct information, payment and/or adjustment in the Services, at no additional cost or expense to JVC;  provided JVC must promptly advise NTC of any
such error or omission of which it becomes aware after having used reasonable efforts to detect any such
errors or omissions in accordance with the standard of care set forth in Section 5.1; and 

        (b)  for
failure to deliver any Service because of impracticability, shall be to use reasonable efforts, subject to Section 6.1, to make the Services available and/or
to resume performing the Services as promptly as reasonably practicable. 

2

 

        5.5    Good Faith Cooperation; Consents.    The Parties will use good faith efforts to cooperate with each other in
all matters relating to the provision and receipt of Services. Such cooperation shall include exchanging information, providing electronic access to systems used in connection with Services,
performing adjustments and obtaining all third party consents, licenses, sublicenses or approvals necessary to permit each Party to perform its obligations hereunder. The costs of obtaining such third
party consents, licenses, sublicenses or approvals shall be borne by the JVC. The Parties will maintain documentation supporting the information contained in Exhibit I hereto and cooperate with
each other in making such information available as needed. 

        6.    Certain Limitations    

        6.1    Impracticability.    NTC shall not be required to provide any Service to the extent the performance of such
Service becomes "impracticable" as a result of a cause or causes outside the reasonable control of NTC including unfeasible technological requirements, or to the extent the performance of such
Services would require NTC to violate any applicable laws, rules or regulations or would result in the breach of any software license or other applicable contract. 

        6.2    Additional Resources.    Except as provided in Exhibit I for a specific Service, in providing the
Services, NTC shall not be obligated to: (i) hire any additional employees; (ii) maintain the employment of any specific employee; (iii) purchase, lease or license any additional
equipment or software; or (iv) pay any costs related to the transfer or conversion of JVC's data to JVC or any alternate supplier of Services. 

        7.    Confidentiality    

        During
the term of this Agreement, a Party may receive or have access to certain information of the other Party that is marked as "Confidential Information," including, though not
limited to, information or data related to any Party's products (including the discovery, invention, research, improvement, development, manufacture, or sale thereof), processes, or general business
operations (including sales, costs, profits, pricing methods, organization, employee or customer lists and processes), and any information obtained through access to any information assets or
information systems (including computers, networks, voice mail, etc.), which, if not otherwise described above, is of such a nature that a reasonable person would believe to be
confidential. Each Party agrees to hold confidential all Confidential Information furnished to it under this Agreement, except for information which
(a) is in the public domain or enters the public domain other than by such Party's breach of this Agreement, (b) is disclosed to such Party without restrictions of confidentiality by a
third person who is not in breach of an obligation of confidentiality in doing so, or (c) is required to be disclosed by any applicable law or regulation or by order of a judicial or
administrative authority having jurisdiction. 

        8.    Limitation of Liability    

        Neither
Party will be liable to the other for any lost profits, loss of data, loss of use, business interruption or other special, incidental, indirect, punitive or consequential
damages, however caused, under any theory of liability, arising from the performance of any Service hereunder, or relating to this Agreement. 

        9.    Force Majeure    

        Each
Party shall be excused for any failure or delay in performing any of its obligations under this Agreement, other than the obligations of JVC to make certain payments to NTC pursuant
to Section 4 hereof for Services rendered, if such failure or delay is caused by Force Majeure. "Force Majeure" means any act of God or the public enemy, any accident, explosion, fire, storm,
earthquake, flood, or any other circumstance or event beyond the reasonable control of the party relying upon such circumstance or event. 

3

 

        10.    Applicable Law    

        This
Agreement shall be construed in accordance with and governed by the laws of the Republic of China and shall be interpreted thereunder. 

        11.    Dispute Resolution    

        In
case of any dispute between the Parties arising from, relating to or in connection with this Agreement, the Parties shall submit such dispute to arbitration in accordance with the
rules of the Republic of China Arbitration Association. Such arbitration shall be conducted in Taipei, Taiwan by three arbitrators and in the English language. The results of such arbitration shall be
binding against both Parties. 

        12.    Miscellaneous    

        12.1    Entire Agreement.    This Agreement, together with Exhibit I hereto, constitutes the entire agreement
between the Parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject
matter hereof. 

        12.2    Descriptive Headings.    The descriptive headings herein are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of this Agreement. 

        12.3    Language.    This Agreement shall be prepared in the English language, and the English language version shall
be official. 

        12.4    Notices.    All notices required under this Agreement, and all communications made by agreement of the
Parties, shall be made in writing, and shall be delivered either personally, by facsimile, or by mail. The date of actual receipt by the receiving party shall be deemed the date of notice under this
Agreement. The addresses of each Party for purposes of notice under this Agreement shall be as follows: 

	NTC:	 	Hwa-Ya Technology Park 669

Fuhsing 3rd Road

Kueishan, Taoyuan

Taiwan, Republic of China

Fax:
	

 	
 	

Attention:
	

JVC:	
 	

Hwa-Ya Technology Park

Fuhsing 3rd Road

Kueishan, Taoyuan

Taiwan, Republic of China

Fax:
	

 	
 	

Attention:

        12.5    Transfer.    No right or obligation under this Agreement shall be transferable or assigned to any third party
without the express agreement in writing of the other Party. 

        12.6    Severability.    If any term or other provision of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the
transactions contemplated is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of 

4

 

being enforced, the Parties will negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible. 

        12.7    Modification of the Agreement.    No modification of this Agreement shall be valid without a writing setting
forth such modification signed by both Parties. 

        IN
WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed in duplicate originals by its duly authorized representatives. 

	Nanya Technology Corporation	 	Hwa-Ya Semiconductor Inc.
	    
	

 By:	
 	

 By:
	Name:	 	Name:
	Title:	 	Title:
	Date:	 	Date:

5

 
 

Exhibit I    
    
    SERVICES    
  

        Services to be provided (and guidelines for charging such Services) by Formosa Plastic Group ("FPG") to JVC are as follows: 

        1.    Corporate
systems 

        1.1  Services
for corporate systems: 

—
— [**] 

        1.2  Charging
guidelines for corporate systems services: 

        1)    For
ERP system and public relations consultancy services, service fee is a function of [**] terms as offered to NTC and other members of FPG. In
addition, Services for ERP system and software maintenance are charged based on [**]. Services for sharing the hardware (mainframe), on the other hand, are charged
[**]. 

        2)    For
other general administrative services, such as a) [**], b) [**], c) [**],
the service is charged [**] for the respective services. For the architectural design and construction, the service is charged [**] 

        2.    Fab
Operation System 

        Facility
supply (including building supply): Costs include [**]. The service is charged [**] 

—Materials
supply: Costs are [**]. The service is charged [**]. 

        Maintenance
tool: Costs include [**]. The service is charged [**] 

        Laboratory
tool: Costs include [**]. The service is charged [**] 

—Information
technology system and related services: Costs include [**]. The service is

    charged [**]. 

        3.    Fab
support system 

—Operating
system development: Costs include [**]. The service is charged [**]. 

        Fab
expansion: Costs include [**]. The service is charged [**] 

—Site
general affairs: Costs include [**]. The service is charged [**]. 

        Site
security: Costs include [**]. The service is charged [**] 

 
 

Appendix E to Joint Venture Agreement    
  

 
 

ARTICLES OF INCORPORATION
  OF
  HWA-YA SEMICONDUCTOR INC. (

  )    
  

	Chapter I General Provisions
	

Article 1.	
 	

This corporation shall be named Hwa-Ya Semiconductor Inc. ( 

 ) (the "Corporation") and be incorporated as a company limited by
shares in accordance with the Company Law of the Republic of China (the "ROC").
	

Article 2.	
 	

The scope of business of the Corporation shall be as follows:
	

 	
 	

To engage in all businesses that are not prohibited or restricted by the laws and regulations of the ROC with exception of those businesses that require special permits.
	

Article 3.	
 	

The Corporation may provide guarantee for third parties upon the unanimous approval of the Board of Directors. The Corporation may also act as a shareholder with limited liability of another company, and its investment may exceed the limit of forty
percent (40%) of the paid-in capital of the Corporation as provided in Article 13 of the Company Law.
	

Article 4.	
 	

The head office of the Corporation shall be located in Hwa-Ya Technology Park, [    ] Fuhsing 3rd Road, Kueishan, Taoyuan, Taiwan, ROC. The Board of Directors may decide to establish branch offices within or outside the
territory of the ROC.
	

Article 5.	
 	

Public notices required to be given by the Corporation pursuant to law shall be made in conspicuous sections of local daily newspapers circulated in the location of the head office of the Corporation.
	

Chapter II Shares
	

Article 6.	
 	

The total registered capital of the Corporation shall be seven point seven billion New Taiwan Dollars (NT$7,700,000,000), which is divided into seven hundred and seventy million (770,000,000) common shares with a par value of 10 New Taiwan dollars
(NT$10) per share.
	

Article 7.	
 	

The share certificates of the Corporation shall bear the shareholders' name and be signed and sealed by three or more directors of the Board and certified by the competent government agent.
	

Article 8.	
 	

Any application for transfer of share certificates shall be filed jointly by transferor and transferee with the Corporation. Until the transfer is duly made, the transferee shall not assert the shareholder's rights against the Corporation, and any
such application shall be made in a form approved by the Board of Directors.
	

Article 9.	
 	

In the event that a shareholder loses his share certificate(s), he shall formally notify the Corporation of such occurrence and shall make an announcement for three consecutive days in a daily newspaper published at the place where the head office of
the Corporation is located. If no concerned party protests within one month after the third day of the announcement, the Corporation shall issue new share certificate(s) to replace those lost, subject to receiving an indemnity on terms satisfactory
to the Board of Directors.
	

Article 10.	
 	

No transfer of share certificates shall be permitted within sixty days prior to a regular meeting of shareholders, thirty days prior to a special meeting of shareholders, or within five days prior to the date fixed for distributing dividends, bonuses,
 or other benefits.
	
 	
 	

 	
 	

 

 

	

Article 11.	
 	

Except otherwise provided for in the Company Law, each shareholder shall have a preemptive right to purchase newly issued shares, of whatever kind, issued by the Corporation for the purpose of increase of the authorized capital, in proportion to the
percentage interest of each shareholder in the issued and outstanding shares of the Corporation, and in such fractional shares subject to the reasonable discretion of the Board.
	

 	
 	

In the event that any of the shareholders elects not to exercise its option or preemptive right, the other shareholders shall be entitled to purchase such shares in the ratio of their participation in the Corporation.
	

Chapter III Shareholders Meeting
	

Article 12.	
 	

The Shareholders Meeting shall be as follows:
	

 	
 	

(1)	
 	

Regular Meeting—to be called by the Board of Directors within six months after the conclusion of each accounting year; and
	

 	
 	

(2)	
 	

Special Meeting—to be called by the Board of Directors whenever necessary, or with written requests from shareholders representing more than three percent (3%) of total issued shares which have been continuously held by the same shareholders for
more than one year. The Supervisor(s) may call a Shareholders' Meeting whenever necessary.
	

 	
 	

Where the Board of Directors or the Supervisor(s) are unable to call the Shareholders Meeting for any reason, including in the latter case because of the transfer of the Supervisor(s) shares, the shareholders representing more than three percent (3%)
of the total amount of issued shares may call the Shareholders Meeting after obtaining the competent authority's approval of the request.
	

 	
 	

Matters to be decided by the Shareholders Meeting shall be as follows:
	

 	
 	

(1)	
 	

Revision of the Articles of Incorporation;
	

 	
 	

(2)	
 	

Appointment and dismissal of the Directors and the Supervisors, and determination of their compensation;
	

 	
 	

(3)	
 	

Approval of the balance sheet and other financial statements submitted by the Board of Directors;
	

 	
 	

(4)	
 	

Determination of dividends and disposition of losses;
	

 	
 	

(5)	
 	

Merger, consolidation, restructuring or reorganization of the Corporation;
	

 	
 	

(6)	
 	

Sale of all or substantially all assets of the Corporation;
	

 	
 	

(7)	
 	

Appointment and removal of the Corporation's auditors;
	

 	
 	

(8)	
 	

An initial public offering of the Corporation's shares;
	

 	
 	

(9)	
 	

Voluntary submission by the Corporation to receivership, bankruptcy, or any similar status;
	

 	
 	

(10)	
 	

Liquidation or dissolution of the Corporation; and
	

 	
 	

(11)	
 	

Other matters reserved to the determination of the Shareholders Meeting by the Company Law
	

Article 13.	
 	

Unless otherwise provided by the Company Law, the Shareholders Meeting shall be presided over by the Chairman of the Board of Directors. In his absence, the Chairman of the Board of Directors may designate a director as the chairman of the meeting.
In the absence of such a designation, the Directors shall elect one among themselves.
	
 	
 	

 	
 	

 

2

 

	

Article 14.	
 	

A written notice to convene the Regular Shareholders Meeting shall be given to each Shareholder at least 30 days in advance including the agenda. For Special Shareholders Meeting, a written notice including the agenda shall be given to each
shareholder 15 days in advance. The notice shall state when, where and why the meeting is to be convened. All notices and agendas of Shareholders Meetings shall be accompanied by accurate and complete English language translations thereof. Other
matters regarding the announcement of the Shareholders Meeting shall be in accordance with the Company Law of the ROC.
	

Article 15.	
 	

A Shareholders Meeting may only be held if a quorum is met. The quorum requires the presence, in person or by proxy, of shareholders of the Corporation holding more than 60% of the total outstanding shares of the Corporation.
	

Article 16.	
 	

Shareholders of the Corporation shall be entitled to one vote for each share they hold. Resolutions at a Shareholders Meeting shall be adopted by a 60% majority vote of the shareholders present in person or by proxy, unless a majority of more than
60% is required by the Company Law.
	

Article 17.	
 	

In case a shareholder is unable to attend the Shareholders Meeting, he may make another person his proxy to attend the meeting. The proxy document for this purpose must be affixed with the shareholder's chop or signature, a specimen of which shall be
kept with the Corporation, provided, however, in the event the same proxy acts for two or more shareholders, his delegated voting power shall not exceed three percent (3%) of the total voting power of issued shares. This limitation shall not apply to
holders of proxies engaged in the trust business.
	

Article 18.	
 	

Resolutions adopted at the Shareholders Meeting shall be recorded in the minutes of the proceedings, which shall be prepared in English and in Chinese and shall be signed and sealed by the chairman of the meeting. The minutes of proceedings shall
also include the time and place of the meeting, name of the chairman, number of shareholders present at the meeting and the manner in which resolutions had been adopted, as well as other essentials of the proceedings. The minutes shall be kept
together with a list of shareholders present at the meeting and the proxies.
	

Chapter IV Directors, Supervisors and Officers
	

Article 19.	
 	

Unless otherwise decided by the shareholders, the Corporation shall have eight (8) Directors and two (2) Supervisors, to be elected at the Shareholders Meeting. The tenure of office of Directors and Supervisors shall be three years and they
shall be eligible for re-election. The remuneration of Directors and Supervisors, if any, shall be determined by the shareholders at the Shareholders Meeting.
	

Article 20.	
 	

A corporate shareholder of this Corporation shall have the right to designate a number of representatives to be elected as Directors and/or Supervisors of the Corporation and the right to designate representatives as substitutes or successors of such
Directors or Supervisors.
	

Article 21.	
 	

The Directors shall form the Board of Directors of the Corporation (the "Board of Directors"). The Chairman of the Board of Directors shall be elected from among the Directors by a majority vote of all Directors. The Chairman of the Board of
Directors shall represent the Corporation. The Chairman shall designate, at the time when the Chairman is appointed, one of the directors as agent (the "Agent") during the office term to convene the Board of Directors meeting when the Chairman cannot
convene such meeting himself, or does not designate any other director to do so on his behalf, for any reason.
	
 	
 	

 	
 	

 

3

 

	

Article 22.	
 	

The Chairman shall call a meeting of the Board of Directors, provided that the director who receives the number of ballots representing the largest number of votes shall call the initial meeting of each term of the Board of Directors.
	

 	
 	

Each Director of the Corporation shall have the right to request the Chairman to call a Directors Meeting indicating the proposed agenda. If the Chairman cannot, within one week, comply with the Director's request, or does not designate any other
director to do so on his behalf, the Agent may call the meeting.
	

 	
 	

An attendance by a simple majority of the Directors in person or through representation shall be necessary to form a quorum. Directors may attend the meeting in person or by proxy. A Director cannot represent more than one absent Director at a
meeting of the Board of Directors. A Director residing in a foreign country may appoint in writing a shareholder residing within the Republic of China as his alternate to attend the meetings of the Board of Directors regularly provided, however the
appointment shall be registered with competent government authority.
	

 	
 	

All or any of the Directors may participate in a meeting of the Board of Directors by means of a video conference which allows all persons participating in the meeting to see and hear each other. A Director so participating shall be deemed to be
present in person at the meeting and shall be entitled to vote or be counted in a quorum accordingly.
	

bp]	
 	

The written notice of a meeting of the Board shall state the date, place and reasons and agenda of the meeting, and shall be sent to each member of the Board of Directors fourteen (14) days prior to the meeting, provided that such period for
advance notice may be shortened to two (2) working days in case of emergency. The notice and agenda shall be prepared in English language.
	

Article 23.	
 	

The Chairman of the Board of Directors shall preside over meetings of the Board of Directors. In his absence, the Chairman of the Board of Directors may designate a director as the chairman of the meeting. In the absence of such a designation, the
Directors shall elect a meeting chairman from among themselves.
	

Article 24.	
 	

Except for matters reserved for the decision of the Shareholders Meeting as provided herein or by law, the operation of the Corporation shall be carried out and decided by the Board of Directors. The exclusive competence of the Board of Directors
shall include, but not be limited to:
	

 	
 	

(1)	
 	

Appointment and removal of the Chairman of the Board, approval and removal of the President and Executive Vice President of the Corporation appointed by the Chairman, approval of Vice Presidents and Assistant Vice Presidents of the Corporation
appointed by the President and Executive Vice President;
	

 	
 	

(2)	
 	

Approval of the annual and quarterly budgets (including but not limited to the production plan, the business plan, the profit and loss plan, the capital investment plan, and the financial plan);
	

 	
 	

(3)	
 	

Change of issued and outstanding share capital of the Corporation;
	

 	
 	

(4)	
 	

Determination of long term policies of the Corporation including substantial change in the organizational structure and business operation of the Corporation;
	
 	
 	

 	
 	

 

4

 

	

 	
 	

(5)	
 	

Determination of the employment terms including compensation packages of President, Executive Vice President, Vice Presidents and Assistant Vice Presidents of the Corporation;
	

 	
 	

(6)	
 	

Establishment of subsidiaries, opening and closing of branch offices, acquisition of the whole or part of the assets of another company or business, establishment of new business sites and closing of existing ones;
	

 	
 	

(7)	
 	

Setting the limits of authorities of various positions and approving the chart of authorities;
	

 	
 	

(8)	
 	

Approval of capital expenditure in the amount of NT$70,000,000 or more in a single event or a total of NT$350,000,000 or more in a quarter proposed by the President and the Executive Vice President, as well as ratified by the Chairman, in case where
the capital expenditures exceeds the quarterly budget approved by the Board of Directors in the quarterly Board meeting;
	

 	
 	

(9)	
 	

Approval of any borrowing and lending with respect to banks and third parties, and the disposition of major assets in the amount of NT$70,000,000 or more;
	

 	
 	

(10)	
 	

Preparation and submission to the Shareholders Meeting of the financial accounts (including dividends and disposition of losses);
	

 	
 	

(11)	
 	

Creation of pledge, hypothecation, encumbrances or other security on the Corporation's assets;
	

 	
 	

(12)	
 	

Issuance of debt securities
	

 	
 	

(13)	
 	

Transfer, sale or any other disposal of major assets other than in the ordinary course of business in the amount of more than NT$ 70,000,000;
	

 	
 	

(14)	
 	

Conclusion or termination of agreements regarding intellectual property rights and know how;
	

 	
 	

(15)	
 	

Conclusion of any agreement or other arrangement with, or for the benefit of any Director of the Corporation;
	

 	
 	

(16)	
 	

Establishment or change of any significant accounting principles;
	

 	
 	

(17)	
 	

Initiation of new product lines or discontinuation of existing product lines;
	

 	
 	

(18)	
 	

The commencement of any litigation as plaintiff or the settlement by the Corporation of any litigation against it;
	

 	
 	

(19)	
 	

Submission of other matters to the Shareholders Meeting for consideration or approval as may be required by law;
	

 	
 	

(20)	
 	

Decision to enter into, modify, extend or terminate any agreement between the Corporation and a shareholder holding more than 10% of the Corporations' issued share capital, or a legal person affiliated to such shareholder;
	

 	
 	

(21)	
 	

Repurchase of the Corporation's own shares; and
	

 	
 	

(22)	
 	

Decision of other important matters related to the Corporation and transactions other than in the ordinary course of business of the Corporation.
	

 	
 	

A resolution adopted by the majority of all the Directors shall be required for the Corporation, its Chairman, its President and Executive Vice President, or any of its Directors, personnel or Supervisors to engage in any matters which are within the
responsibilities of the Board of Directors.
	
 	
 	

 	
 	

 

5

 

	

 	
 	

Resolutions of the Board of Directors shall be in writing, and shall be adopted by a majority vote of all Directors (whether attending the Board meeting or not), unless a higher majority of votes is specifically provided for in the Company Law. On
all issues to be determined by the Board of Directors, each Director shall have one vote. The Chairman shall not be entitled to a second or casting vote.
	

Article 25.	
 	

The functions of the Supervisors shall be:
	

 	
 	

(1)	
 	

Investigation of the business and financial conditions of the Corporation;
	

 	
 	

(2)	
 	

Examination of the books and documents of the Corporation;
	

 	
 	

(3)	
 	

Investigation of the operations of the Corporation; and
	

 	
 	

(4)	
 	

Other functions prescribed by laws and regulations of the ROC.
	

Article 26.	
 	

Except as determined in the Company Law of the ROC, the Board of Directors and the Chairman of the Board shall delegate the daily operation and management of the Corporation jointly to the President and Executive Vice President, including without
limitation:
	

 	
 	

(a)	
 	

Appointment of Vice Presidents and Assistant Vice Presidents of the Corporation;
	

 	
 	

(b)	
 	

Proposal of annual budget and business plan of the Corporation;
	

 	
 	

(c)	
 	

Approval of capital expenditure in the amount of up to NT$ 70,000,000 in a single event, or a total of up to NT$ 350,000,000 in a quarter;
	

 	
 	

(d)	
 	

Approval of borrowing and lending and disposition of assets in the amount of up to NT$ 70,000,000; and
	

 	
 	

(e)	
 	

Execution of annual and quarterly budgets approved by the Board of Directors.
	

Chapter V Accounting
	

Article 27.	
 	

The accounting year of the Corporation shall begin on January 1 and end on December 31 of each year. Annual closing of books shall be made at the end of each accounting year. The accounts of the Corporation shall be kept in accordance with
the laws of the Republic of China.
	

Article 28.	
 	

At the end of each accounting year, the Board of Directors shall prepare the following documents, and forward them on to the Supervisors for examination thirty days prior to the regular meeting of shareholders:
	

 	
 	

(1)	
 	

Report on operations;
	

 	
 	

(2)	
 	

Financial statements; and
	

 	
 	

(3)	
 	

Proposal concerning distribution of net profits or action to deal with losses.
	

Article 29.	
 	

Out of the net profit of the Corporation for each fiscal year, after having provided for income tax, and covered the losses of the previous years, there shall be first set aside a legal reserve of 10% from the net profit after tax until the
accumulated amount of such reserve equals the total authorized capital. Thereafter, after providing for any voluntary reserves as decided by the Shareholders Meeting, 1% of the then remaining profits shall be set aside for the Directors and
Supervisors of the Corporation, and 1% to 8% of the then remaining profits shall be set aside for employees as bonuses; provided, however, at least 50% of such employees bonus shall be distributed in the form of stock dividends. The remainder of the
profits, if any, may be announced and paid as dividends to the shareholders in cash or stock, as shall be determined from year to year by the Board of Directors and approved by the Shareholders Meeting. Any other remaining profit shall be kept by the
Corporation as retained earnings.
	
 	
 	

 	
 	

 

6

 

	

Article 30.	
 	

Dividends shall be paid only to those shareholders whose names are recorded on the shareholders' register on the date fixed for distributing dividends in proportion to their holding percentages.
	

Chapter VI Supplementary Provisions
	

Article 31.	
 	

Provisions of the Company Law shall be referred to for matters not provided for in these Articles of Incorporation.
	

Article 32.	
 	

These Articles of Incorporation were agreed upon and signed on [    ].

7

 
 

Appendix F to Joint Venture Agreement: Business Plan, page 1 of 6    
    
    Scenario Manager    
  

Confidential
Materials omitted and filed separately with the

Securities and Exchange Commission. 

 
 

Annex G to JVA    
  

 
 

Key milestones for the JV Company    
  

	Milestone:
 
	 	Date:

	Start of Construction of Module I	 	[**]
	Inauguration of the Company	 	[**]
	Module I Cleanroom Ready-for-Equipment	 	[**]
	1. Silicon Out	 	[**]
	Start construction of Module II	 	[**]
	Start of Qual. Lots (110nm)	 	[**]
	Qualification of 110nm Technology / Product	 	[**]
	Start of 90 nm Lots	 	[**]
	Ramp Module I to 20,000 WSPM	 	[**]
	Qualification of 90 nm Technology / Product	 	[**]
	Ramp Module I to 40,000 WSPM	 	[**]
	Module II Cleanroom Ready-for-Equipment	 	[**]
	Full Capacity of 50,000 WSPM of Module I	 	[**]
	1. Silicon out of Module II	 	[**]
	[**]	 	[**]

 
 

Appendix H
  IT Strategy    
  

1.    Company IT Strategy Board  

        1.1    Purpose of the IT Strategy Board.    The IT Strategy Board (hereinafter the "ITSB") shall be set up for the
purpose of achieving maximum operational synergy among the Company, NTC and IFX with regard to achieving rapid deployment of the Company's IT infrastructure, ensuring efficient IT operations at the
lowest possible cost, and ensuring that the Parties each receive the intended benefits to be derived from the Company. 

        1.2    Responsibilities of the ITSB.    The ITSB shall establish the Company's initial IT policies, define the IT
Set-up Project, and monitor and review the IT Operations Phase of the Company.. Subject to the specific requirements set forth in this Appendix H, the goals of the IT Strategy Board
include, but are not limited to 

        (i)    harmonization
of the IT policies (inclusive of the IT Security policies) of the Company with those of NTC and IFX, 

        (ii)  determining
mutually beneficial IT Requirements, 

        (iii)  providing
input and final approvals regarding IT Reporting and common IT Projects, in which strategic IT solutions are to be deployed, 

        (iv)  providing
input regarding structure and staffing of the Company's IT Organization, the IT budget planning and execution, and outsourcing of critical IT Services, and 

        (v)  reviewing
and providing input regarding the Company's ongoing operational IT performance. 

        1.3    Establishment and composition of the ITSB.    The Parties shall cause the ITSB to be created as soon as
possible, but not later than four (4) calendar weeks after the Effective Date of the Joint Venture Agreement. The ITSB shall consist of three persons, each of which shall have extensive
experience (including senior management level experience) in the management and operation of IT. For as long as NTC and IFX comply with the minimum shareholding requirements set out in
Article 1.4-9 of the Joint Venture Agreement, NTC and IFX shall each appoint one member of the ITSB, and the Company shall appoint the third member of the ITSB. The Parties intend
that the Company's head of the Company's IT Organization be designated as the Company's representative on the ITSB. In the event that that person is not yet in place upon the initial establishment of
the ITSB, the Company's Board of Directors shall nominate Company's interim ITSB representative. 

        1.4  Each
member shall nominate a substitute member who shall be available to act on behalf of the primary member when the primary member may be occasionally unavailable.
Substitute members shall have the same requirements as the primary member with regard to experience level, shall attend all meetings of the ITSB along with the primary member in order to be fully
knowledgeable regarding the activities of the ITSB, and shall be empowered to act on behalf of the primary member in the event of the primary member's absence. All decisions of the ITSB require
unanimous agreement of each of the three primary members (or their respective substitute in event of absence of the primary member. The Meetings of the ITSB shall be scheduled as required and mutually
agreed. During the Set-up phase, it is anticipated that meetings will be frequent (as often as required, but no less than once each calendar quarter), and less frequent during the
Operational Phase (as often as required, but no less than 2 times a year). 

        1.5    Interfacing of the ITSB with the Parties.    The ITSB will communicate on a regular basis as required with the
IT organizations of NTC, IFX and the Company. 

        1.6    Decisions and Escalation for ITSB.    All decisions and recommendations of the ITSB must be unanimous. In the
event that the ITSB is unable to reach a unanimous decision, then any such situation will be escalated to the Company's Board of Directors. 

 

        1.7    Costs of the ITSB.    NTC, IFX and the Company will each be responsible for their own costs associated with the
participation in the ITSB. 

        1.8    Specific Requirements for the Company's IT Organization.    The parties agree that they will cause the
Company's IT Organization to adhere to the specific requirements set forth in Exhibit 1 and Exhibit 2 which are attached to this Appendix H. 

Exhibit 1: Requirements regarding the Company's IT Organization  

Exhibit 2: Requirements regarding the IT Set Up phase and the IT Solutions of the Company  

2

 

 EXHIBIT 1 (to APPENDIX H)  

Requirements regarding the Company's IT Organization  

        1.    IT Organization—overall responsibility for
IT.    The Parties agree that the IT Organization of the Company will have the overall responsibility for the establishment and operation of the entire IT of the
Company, including all infrastructure, applications, hardware, software, systems, platforms, processes, databases, applications and all solutions and IT Services necessary to support the Business
Processes of the Company and for insuring the data security therein. "Business Processes" shall include, without limitation, Finance, Accounting, Sales, Engineering, Human Resource management,
Purchasing, Warehousing, Supply Chain Management, Production, Production Control, Customer Communication Processes. 

        2.    IT Interfacing and Connectivity Services.    Effective and
accurate data communication and interfacing processes between the Company and each of the Parties are critical for the successful operation of all Parties' business. The Company and each Party shall
establish operational interfaces and connectivity services as required to support the agreed reporting and data communications. The Company and each
Party will nominate a Representative who will be responsible for effective communication, cooperation and mutual harmonizing of the related operational processes. This shall include but not be limited
to (i)Access, Account and Configuration Management, (ii) Change Management, (iii) Monitoring, (iv) Trouble Shooting, Emergency, Alert and Escalation Management. 

        3.    Procurement of or Outsourcing of IT Services.    The Parties
agree that certain IT products and services may be procured from or outsourced to a third party, or one of the Parties. It is further understood if a Party is to provide any IT services to the
Company, then for purposes of that service, the Party providing such service shall be treated in the same manner as would a third party. Any IT products or services acquired from or outsourced to a
third party (or a Party) shall be subject to an arm's length commercial contract which shall include but not be limited to: a detailed description of: purpose, general terms and conditions, Scope of
Work, deliverables and milestone dates as appropriate, security regulations, service performance metrics, Service Levels, and clearly defined prices that are favorable when compare to general market
prices for similar products or services. 

3

 

EXHIBIT 2 (to APPENDIX H)  

Requirements regarding the IT Set Up phase and the IT solutions of the Company  

        1.    IT Set-up Project    

        During
the IT Set-up Phase, in order to meet the agreed timeline of Company ramp up as specified in the Joint Venture Agreement, the IT Strategy Board will define the IT
Set-up Project. In compliance with conditions agreed within the IT Strategy Board, NTC shall provide the initial IT Set-up Project organization, the project management and the
project plan. The project plan will contain phases for assessment, definition, requisition, installation, configuration, integration, test, operation, administering and maintaining of the entire scope
of the IT required for the Company. The project plan shall include a schedule with milestones that are aligned with the overall Company ramp up and approved by the Board of Directors of the Company. 

        2.    IT Set Up Project completion    

        The
entire IT required by the Company, including without limitation operation, administration, maintenance, account and access management, configuration management, requirement
management, change management, incident & problem management, help desk, back up/restore procedures, disaster recovery and contingency policy will be available and ready to use for production
latest by the start of the IT Operations Phase. 

        3.    Temporary IT Services for the JV Set-up Project    

        NTC
shall provide the IT Services as may be required and agreed by the Company on a temporary basis for the purpose of running of the Company Set-up Project. NTC shall use
reasonable efforts to provide Services to Company in accordance with the policies and Requirements committed within the IT Strategy Board 

        4.    IT Set-up Project Documentation    

        All
services performed hereunder shall be fully documented and NTC shall maintain a standard of reasonable diligence and care regarding project documentation in rendering the Services
hereunder. All Documentation shall be prepared in English language and the English version shall be official. 

        5.    IT Objects & Services Catalogue and Service Levels    

        To
define the IT portfolio of the Company's IT Organization and to maintain the support of the Business Processes by IT in alignment with the Business Strategy of the Company, NTC shall
establish at the beginning of the IT Set-up Project and continuously maintain a data base of all IT applications and services used by the Company (the "IT Objects and Services Catalogue"). 

        In
context of the IT Objects and Services Catalogue the delivery and quality (availability, reliability, serviceability) of all critical services shall be controlled by mutually agreed
commercial contracts which will include without limitation, schedules with milestone, deliverables, appropriate service levels, pricing and other requirements as mutually agreed. 

        6.    Take Over of IT responsibility by Company's IT Organization    

        The
Parties shall cause the Company's IT Organization to take over the responsibility for and control of the entire IT of the Company according to the committed IT Objects &
Services Catalogue latest by the "Ready for Equipment" milestone is reached. 

        The
Company's IT Organization shall take over the responsibility for maintenance of IT Objects & Services Catalogue and agreements including the associated documentation and keep
it current. 

4

 

        7.    Protection of IT Objects and Components against unauthorized access, access for
Parties    

        The
Parties agree, that entire IT Infrastructure of the Company, consisting of all IT systems, hardware and software, platforms, including Databases and Applications and all IT Services
necessary for set up and running of all Business Processes of the Company, which includes without limitation Finance, Accounting, Sales, Engineering, Human Resource management, Purchasing,
Warehousing, Supply Chain Management, Production, Production Control will be connected to the Company's own Intranet Domain, which shall be separated from IT environments not controlled by the Company
(e.g., the Company shall be separated from the IT Infrastructure of both Parties and any third party) by means of Firewalls and Demilitarized Zones (DMZ) configured accordingly to the actual state of
the art and commonly used security standards which efficiently protect all of the Company's IT Components and Objects against an unauthorized access from outside of the Company Intranet. Each Party
shall have access to the information contained in the Company systems as pursuant to the internal rules regulating the accessibility of proprietary information approved by the board of directors of
the Company (to be defined within the IT Set-up Project) 

        8.    IT Solutions to be determined during the Company IT Set-up
Project    

        Both
Parties expressly agree that the full scope of the Company's IT, including all solutions, all required installations, hardware, software, systems, platforms, processes, databases,
applications and all solutions and IT Services necessary for set up and running of all Business Processes of the Company shall be subject of analysis, decisions and measures conducted jointly by all
three Parties during the IT Set-up Project. The final decisions about IT solutions for deployment at the Company must be approved by the IT Strategy Board by unanimous vote. All IT
solutions implemented for the Company shall be aligned with the rules and regulations of the Frontend Fab Cluster including TR24. The IT solutions implemented for the Company shall also be aligned
with NTC's Multi-Site support and Key Performance Indicator specifications. 

        9.    IT Interfaces to be determined during the Company IT Set-up
Project    

        The
Parties agree that the Company shall provide IT interfaces between the Company and each of the Parties. 

        Detailed
information and data attributes regarding: description, format, availability, confidentiality, authenticity, integrity, referring substantially to the required solutions or
corresponding interfaces will be defined in detail during the IT Set-up Project in cooperation with the Owners of the corresponding Business Processes 

        10.    IT Solutions for Reporting required by the Parties    

        The
Parties expressly agree that the Company shall set-up the appropriate IT Solutions to provide each Party with reports regarding the Business Processes of the Company. The
IT Solutions and corresponding interfaces will be defined in detail during the IT Set-up Project. 

        11.    IT Solution for ERP system for Company    

        As
proposed by NTC, the Parties agree that the Company shall use the ERP system developed by Formosa Technology Corporation (FTC) which includes: finance, accounting, sales, engineering
service, human resource management, purchasing, warehousing and production control. The Parties agree that the configuration, implementation and operation of this system shall be in accordance with
and shall adhere to the requirements stated in Sections 7, 8, 9 and 10 of this Exhibit 2. The ERP Database of the Company will be isolated and maintained separately from the databases of
Formosa Plastics Group (FPG). The Company will provide an ERP interface between the Company and each of the Parties, and establish a firewall of information system between the Company and each of the
Parties for purposes of security and confidentiality of the proprietary information of the Company. Each Party shall have access to the information contained in the Company's version of the ERP
system, subject to 

5

 

the rules and requirements regulating the accessibility of proprietary information as approved by the board of directors of the Company and the ITSB. The Company's use of the ERP system shall be
governed by a commercial contract to be negotiated between the Company and the provider of the ERP system. Such contract will include without limitation, schedules with milestone, deliverables,
appropriate service levels, pricing and other requirements as mutually agreed. 

        12.    Language for User Interfaces (Screens) and Reports and the corresponding user documentation in
English    

        User
Interfaces, Reporting and Documentation of IT Systems, Solutions and Applications to be used at Company shall be in English or bilingual English and Chinese language. If any IT
Systems, Solutions, Applications or Documentation are available only in Chinese language, NTC will translate it into English on request of IFX. 

6

 
 

Appendix I to Joint Venture Agreement    
  

 
 

ARTICLES OF INCORPORATION
  OF
  HWA-KENG INVESTMENT INC.    
  

	Chapter I. General provisions
	

Article 1.	
 	

The corporation shall be named Hwa-Keng Investment Inc. ( 

 ) (the "Corporation") and be incorporated as a company limited by
shares in accordance with the Company Law of the Republic of China (the "ROC").
	

Article 2.	
 	

The scope of business of the Corporation shall be to subscribe for, purchase and otherwise acquire, hold, sell and otherwise dispose of shares.
	

Article 3.	
 	

The Corporation may also act as a shareholder with limited liability of another company, and its investment may exceed forty percent (40%) of the paid-in capital of the Corporation, notwithstanding Article 13 of the Company Law.
	

Article 4.	
 	

The head office of the Corporation shall be located in 3rd Foor, 101-17, Tun Hwa North Road, Taipei, Taiwan, ROC.
	

Article 5.	
 	

Public notices to be given by the Corporation pursuant to law shall be made in conspicuous sections of local daily newspapers circulated in the location of the head office of the Corporation.
	

Chapter II. Shares
	

Article 6.	
 	

The total capital of the Corporation is authorized at seven hundred million New Taiwan dollars (NT$700,000,000), which is divided into seventy million (70,000,000) common shares with a par value of 10 New Taiwan dollars (NT$10) per share.
	

Article 7.	
 	

Before they may be issued, the share certificates of the Corporation shall bear the shareholders' name, shall be signed and sealed by three or more directors of the Board, and certified by the competent government agent.
	

Article 8.	
 	

Any application for transfer of share certificates shall be filed jointly by transferor and transferee with the Corporation. Until the transfer is duly made, the transferee shall not assert its shareholder's rights against the Corporation, and any
such application shall be in a form approved by the Board of Directors.
	

Article 9.	
 	

In the event that a shareholder loses his share certificate(s), he shall formally notify the Corporation of such occurrence. The Corporation shall issue new share certificate(s) to replace those lost, subject to receiving an indemnity on terms
satisfactory to the Board of Directors.
	

Chapter III. Shareholders' Meetings
	

Article 10.	
 	

Shareholders' meetings shall be as follows:
	

 	
 	

(1)	
 	

Regular meeting—to be called by the Board of Directors within six months after the conclusion of each accounting year; and
	

 	
 	

(2)	
 	

Special meeting—to be called by the Board of Directors whenever necessary, or with written requests from shareholders representing more than three percent (3%) of total issued shares which have been continuously held by the same shareholders for
more than one year. The Supervisor may call a Shareholders' Meeting whenever necessary.
	
 	
 	

 	
 	

 

 

	

 	
 	

Where the Board of Directors or the Supervisor(s) are unable to call the Shareholders' Meeting for any reason including in the case of a latter because of the transfer of the Supervisor(s) shares, the shareholders representing more than three percent
(3%) of the total amount of issued shares may call the Shareholders' Meeting after obtaining the competent authority's approval for the request.
	

 	
 	

Matters to be decided by the Shareholders meeting shall be as follows:
	

 	
 	

(1)	
 	

Revision of the Articles of Incorporation;
	

 	
 	

(2)	
 	

Appointment and dismissal of the directors and the supervisors, and determination of their compensation;
	

 	
 	

(3)	
 	

Approval of the Settlement of Accounts received from the Board of Directors;
	

 	
 	

(4)	
 	

Determination of dividends and of disposition of losses;
	

 	
 	

(5)	
 	

Liquidation, merger, consolidation or reorganization of the Company;
	

 	
 	

(6)	
 	

Other matters reserved to the determination of the Shareholders meeting by the Company Law
	

Article 11.	
 	

Shareholders' meetings shall be presided over by the Chairman of the Board of Directors. In his absence, the Chairman of the Board of Directors may designate a director as the chairman of the meeting. In the absence of such a designation, the
Directors shall elect one among themselves.
	

Article 12.	
 	

A notice to convene a regular meeting of shareholders shall be given to each shareholder 20 days in advance. A notice to convene a special meeting of shareholders shall be given to each shareholder 10 days in advance. The notice shall state
when, where and why the meeting is to be convened.
	

Article 13.	
 	

Shareholders of the Corporation shall be entitled to one vote for each share they hold. Matters such as the method of announcing the Shareholders meeting, the legally required number of attendants, and the required number of votes for resolutions
shall be in accordance with the Company Law of the Republic of China.
	

Article 14.	
 	

Resolutions at a Shareholders' meeting shall, unless otherwise provided for in the Company Law, be adopted by a majority vote of shareholders present in person or by proxy, who represent a majority of the total number of issued shares.
	

Article 15.	
 	

Resolutions adopted at a meeting of the shareholders shall be recorded in the minutes of the proceedings, which shall be prepared in English and Chinese, and shall be signed and sealed by the chairman of the meeting. The minutes of proceedings shall
also include the time and place of the meeting, name of the chairman, number of shareholders present at the meeting and the manner in which resolutions had been adopted, as well as other essentials of the proceedings. The minutes shall be kept
together with a list of shareholders present at the meeting and the proxies.
	

Chapter IV. Directors, Supervisors, Officers
	

Article 16.	
 	

Unless otherwise decided by the shareholders, the Corporation shall have four (4) Directors and two (2) Supervisors, to be elected at a Shareholder meeting. The tenure of office of Directors and Supervisors will be three years and they will
be eligible for re-election. The remuneration of Directors and Supervisor, if any, shall be determined by the shareholders at a Shareholders' meeting.
	
 	
 	

 	
 	

 

2

 

	

Article 17.	
 	

A corporate shareholder of this Corporation shall have the right to designate a number of representatives to be elected as Directors and/or Supervisor(s) of the Corporation and the right to designate representatives as substitutes or successors of
such Directors or Supervisor(s).
	

Article 18.	
 	

The Directors shall form a Board of Directors. The Chairman of the Board of Directors shall be elected from among the Directors by a majority vote at a meeting attended by two-thirds or more of the Directors. The Chairman of the Board of
Directors shall represent the Corporation.
	

Article 19.	
 	

The Chairman shall call a meeting of the Board of Directors, provided that the director who receives the number of ballots representing the largest number of votes shall call the initial meeting of each term of the board of directors.
	

 	
 	

An attendance by a simple majority of the Directors in person or through representation shall be necessary to form a quorum. Directors may attend the meeting in person or by proxy. A Director cannot represent more than one absent Director for a
meeting of the board of directors. A director residing in a foreign country may appoint in writing a shareholder residing within the Republic of China as his alternate to attend the meetings of the Board of Directors regularly provided, however the
appointment shall be registered with the competent government authority.
	

 	
 	

The notice for the Board Meeting shall state the reasons and agenda of the meeting, and shall be sent to each Board of Director 14 days prior to the meeting, provided that such period for advance notice may be shortened to 2 days in case of
emergency.
	

Article 20.	
 	

The Chairman of the Board of Directors shall preside at meetings of the Board of Directors. In his absence, the Chairman of the Board of Directors may designate a director as the chairman of the meeting. In the absence of such a designation, the
Directors shall elect a meeting chairman from among themselves.
	

Article 21.	
 	

On all issues to be determined by the Board of Directors, each Director shall have one vote. Unless otherwise specifically provided for in the Company Law or herein, resolutions shall be in writing, adopted by a majority vote of all directors
(whether attending or not) at a meeting attended by a majority of the Directors.
	

Chapter V. Accounting
	

Article 22.	
 	

The accounting year of the Corporation shall begin on January 1 and end on December 31 of each year. Annual closing of books shall be made at the end of each accounting year. The accounts of the Company shall be kept in accordance with the
laws of the Republic of China.
	

Article 23.	
 	

At the end of each accounting year, the Board of Directors shall prepare the following reports, and forward them on to the Supervisor(s) for examination thirty days prior to the regular meeting of shareholders:
	

 	
 	

(1)	
 	

Report on operations;
	

 	
 	

(2)	
 	

Financial statements; and
	

 	
 	

(3)	
 	

Proposal concerning distribution of net profits or action to deal with losses.
	
 	
 	

 	
 	

 

3

 

	

Article 24.	
 	

Out of the net profit of the Corporation for each fiscal year, after having provided for income tax, and covered the losses of the previous years, there shall be first set aside a legal reserve of ten percent (10%) from the net profit after tax until
the accumulated amount of such reserve equals the total authorized capital. Thereafter, after providing for any voluntary reserves as decided by the Shareholders meeting, 0.1 per cent (0.1%) of the then remaining profits shall be set aside for
employee as bonuses. The remainder of the profit, if any, may be announced and paid as dividends to the shareholders in cash or stock, such as shall be determined from year to year by the Board of Directors and approved by the Shareholders
meeting.
	

Article 25.	
 	

Dividends will be paid only to those shareholders whose names are recorded on the shareholders' register on the date fixed for distributing dividends in proportion to their holding percentages.
	

Chapter VI. Supplementary Provisions
	

Article 26.	
 	

When it is determined by the Shareholders' meeting that the business of the Corporation is completed, the Corporation shall be dissolved and liquidated. Such determination shall be in the form of a shareholders' resolution adopted by a majority vote
of shareholders representing over three-fourths of the total number of issued shares of the Corporation.
	

Article 27.	
 	

Provisions of the Company Law shall be referred to for matters not provided for in these Articles of Incorporation.
	

Article 28.	
 	

These Articles of Incorporation were agreed upon and signed on [    ].

4

QuickLinks

Exhibit 4.38

Confidential Materials omitted and filed separately with the Securities and Exchange commission. Asterisks denote omissions.

Joint Venture Agreement

Annex 1A: Infineon 110nm Process

Annex 1B: NTC 120nm Process

Annex 1C: 90nm and 70nm DRAM process technology 90nm DRAM process technology

70nm DRAM process technology

Annex 2: Description of Know How Packages

Part I.—Preliminary Know How Package

Part II.—Final Know How Package (includes Preliminary KHP)

Part III

Annex 3: Shipment Qualification

Fab cluster member rules

Appendix B to Joint Venture Agreement

Product Purchase and Capacity Reservation Agreement

Annex 1: Transfer Price

Appendix C to Joint Venture Agreement

LAND SALE AND PURCHASE AGREEMENT

EXHIBIT A THE LAND

Appendix D to Joint Venture Agreement

Services Agreement

Exhibit I SERVICES

Appendix E to Joint Venture Agreement

ARTICLES OF INCORPORATION OF HWA-YA SEMICONDUCTOR INC. ( )

Appendix F to Joint Venture Agreement: Business Plan, page 1 of 6 Scenario Manager

Annex G to JVA

Key milestones for the JV Company

Appendix H IT Strategy

Appendix I to Joint Venture Agreement

ARTICLES OF INCORPORATION OF HWA-KENG INVESTMENT INC.================================================================================

                                 MIM CORPORATION

                                       and

                     AMERICAN STOCK TRANSFER & TRUST COMPANY

                                  Rights Agent

                 ----------------------------------------------

                              AMENDED AND RESTATED

                                RIGHTS AGREEMENT

                          Dated as of December 3, 2002

                           AMENDING AND RESTATING THE

                            ORIGINAL RIGHTS AGREEMENT

                          Dated as of November 24, 1998

================================================================================

<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                               PAGE
<S>                                                                                                              <C>
Section 1.        Certain Definitions............................................................................1

Section 2.        Appointment of Rights Agent....................................................................4

Section 3.        Issue of Rights Certificates...................................................................4

Section 4.        Form of Rights Certificates....................................................................6

Section 5.        Countersignature and Registration..............................................................7

Section 6.        Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
                  Destroyed, Lost or Stolen Rights Certificates..................................................7

Section 7.        Exercise of Rights; Purchase Price; Expiration Date of Rights..................................8

Section 8.        Cancellation and Destruction of Rights Certificates............................................9

Section 9.        Reservation and Availability of Capital Stock..................................................9

Section 10.       Record Date upon Exercise of Rights...........................................................11

Section 11.       Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights...................11

Section 12.       Certificate of Adjusted Purchase Price or Number of Shares....................................18

Section 13.       Consolidation, Merger or Sale or Transfer of Assets or Earning Power..........................18

Section 14.       Fractional Rights and Fractional Shares.......................................................21

Section 15.       Rights of Action..............................................................................22

Section 16.       Agreement of Rights Holders...................................................................22
Section 17.       Rights Certificate Holder Not Deemed a Stockholder............................................22

Section 18.       Concerning the Rights Agent...................................................................23

Section 19.       Merger or Consolidation or Change of Name of Rights Agent.....................................23

Section 20.       Duties of Rights Agent........................................................................24

Section 21.       Change of Rights Agent........................................................................26

Section 22.       Issuance of New Rights Certificates...........................................................26

Section 23.       Redemption and Termination....................................................................27

Section 24.       Notice of Certain Events......................................................................27

Section 25.       Notices.......................................................................................28

Section 26.       Supplements and Amendments....................................................................28

Section 27.       Successors....................................................................................29

Section 28.       Determinations and Actions by the Board of Directors, Etc.....................................29

Section 29.       Benefits of this Agreement....................................................................29

<PAGE>

Section 30.       Severability..................................................................................29

Section 31.       Governing Law.................................................................................29

Section 32.       Counterparts..................................................................................29

Section 33.       Captions......................................................................................30

Section 34.       Exchange......................................................................................30

EXHIBITS

EXHIBIT A.  Form of Rights Certificate..........................................................................A-1

EXHIBIT B.  Summary of Rights and Preferred Stock...............................................................B-1

EXHIBIT C.  Form of Certificate of Designations for Preferred Stock.............................................C-1
</TABLE>

<PAGE>

                                RIGHTS AGREEMENT

         AMENDED AND  RESTATED  RIGHTS  AGREEMENT,  dated as of December 3, 2002
(this "Agreement" or the "Amended and Restated Rights  Agreement"),  between MIM
Corporation, a Delaware corporation (the "Company"), and American Stock Transfer
& Trust Company,  a New York corporation  (the "Rights  Agent").  This Agreement
amends and restates the Rights Agreement,  dated as of November 24, 1998, and as
amended on December 14, 1998 and May 20, 1999,  between the Company and American
Stock  Transfer  and  Trust  Company,  as Rights  Agent  (the  "Original  Rights
Agreement").

         WHEREAS,  effective November 24, 1998 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a dividend
distribution  of one preferred  stock purchase right ("Right") for each share of
common stock,  par value $.0001 per share,  of the Company (the "Company  Common
Stock")  outstanding  at the Close of Business on December 4, 1998 (the  "Record
Date"),  and has  authorized  the  issuance  of one  Right (as such  number  may
hereinafter be adjusted  pursuant to the provisions of this  Agreement) for each
share of Company  Common Stock issued  (whether  originally  issued or delivered
from the Company's  treasury)  between the Record Date and,  except as otherwise
provided in Section 22, the Distribution Date, each Right initially representing
the right to purchase one Unit (each as hereinafter  defined) upon the terms and
subject to the conditions hereinafter set forth;

         WHEREAS,  on November  26,  2002,  the Board of  Directors  the Company
adopted a resolution  directing the Company to further amend the Original Rights
Agreement;

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
agreements  set forth herein,  and in accordance  with the Board's  November 26,
2002  resolution,  the parties  hereby  amend and restate  the  Original  Rights
Agreement as follows:

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

         "Acquiring  Person" shall mean any Person (other than the Company,  any
Subsidiary of the Company,  any employee  benefit plan maintained by the Company
or any of its  Subsidiaries  or any trustee or fiduciary  with respect to such a
plan  acting  in such  capacity)  who or  which,  alone  or  together  with  all
Affiliates and Associates of such Person, is the Beneficial Owner of 15% or more
of the shares of Company  Common  Stock then  outstanding.  Notwithstanding  the
foregoing,  (i) no Person shall become an  "Acquiring  Person" as a result of an
acquisition of Company Common Stock by the Company which, by reducing the number
of shares of the Company Common Stock  outstanding,  increases the proportionate
number of shares Beneficially Owned by such Person to 15% or more of the Company
Common Stock then outstanding;  provided, however, that if a Person shall become
the  Beneficial  Owner of 15% or more of the Company  Common  Stock by reason of
share  purchases  by the Company and shall,  after such share  purchases  by the
Company,  become the  Beneficial  Owner of any  additional  Company Common Stock
other than as a direct or indirect  result of any corporate  action taken by the
Company,  then such Person shall be deemed to be an "Acquiring Person"; and (ii)
if a  majority  of the Board  determines  in good  faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the first sentence of
this definition,  has become such inadvertently (including,  without limitation,
because (a) such Person was unaware  that it  Beneficially  Owned 15% or more of
the  Company  Common  Stock or (b) such  Person  was aware of the extent of such
Beneficial  Ownership  but such Person  acquired  Beneficial  Ownership  of such
shares of Company  Common Stock without the intention to change or influence the
control of the Company and without actual  knowledge of the consequences of such
Beneficial  Ownership under this  Agreement),  and such Person divests itself as
promptly as practicable of a sufficient number of shares of Company Common Stock
so that such  Person  would no  longer  be an  "Acquiring  Person,"  as  defined
pursuant to the first sentence of this definition, then such Person shall not be
deemed to be, or have been,  an  "Acquiring  Person"  for any  purposes  of this

<PAGE>

Agreement,  and no Stock Acquisition Date shall be deemed to have occurred.  All
questions as to whether a Person who would otherwise be an Acquiring  Person has
become such inadvertently  shall be determined in good faith by the Board, which
determination shall be conclusive for all purposes.

         "Adjustment Units" has the meaning set forth in Section 11(a)(ii).

         "Adverse Person" shall mean any Person declared to be an Adverse Person
by the  Board  upon  determination  that  the  criteria  set  forth  in  Section
11(a)(ii)(B) apply to such Person.

         "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 (the "Exchange Act Regulations"), as in effect on the date hereof.

         "Agreement" has the meaning set forth in the introduction.

         "Amended and Restated  Rights  Agreement"  has the meaning set forth in
the introduction.

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

         (i) of  which  such  Person  or  any of  such  Person's  Affiliates  or
Associates  is  considered  to be a  "beneficial  owner" under Rule 13d-3 of the
Exchange Act  Regulations  as in effect on the date hereof;  provided,  however,
that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," any securities  under this  subparagraph  (i) as a result of an agreement,
arrangement  or  understanding  to  vote  such  securities  if  such  agreement,
arrangement or  understanding  (A) arises solely from a revocable proxy given in
response to a proxy or consent  solicitation made pursuant to, and in accordance
with,  the  applicable  provisions  of the  Exchange  Act and the  Exchange  Act
Regulations,  and (B) is not reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor form);

         (ii) which are beneficially owned, directly or indirectly, by any other
Person (or any  Affiliate  or  Associate  of such other  Person) with which such
Person (or any of such Person's  Affiliates or  Associates)  has any  agreement,
arrangement  or  understanding  (whether or not in writing),  for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
the proviso to subparagraph (i) above) or disposing of such securities; or

         (iii)  which  such  Person  or  any  of  such  Person's  Affiliates  or
Associates, directly or indirectly, has the right to acquire (whether such right
is  exercisable  immediately  or only  after  the  passage  of time or upon  the
satisfaction   of  conditions)   pursuant  to  any  agreement,   arrangement  or
understanding  (whether or not in writing)  or upon the  exercise of  conversion
rights,  exchange rights, rights,  warrants or options, or otherwise;  provided,
however, that under this definition a Person shall not be deemed the "Beneficial
Owner" of, or to  "beneficially  own," (A)  securities  tendered  pursuant  to a
tender or exchange offer made in accordance with the Exchange Act Regulations by
such Person or any of such Person's Affiliates or Associates until such tendered
securities  are accepted for purchase or exchange,  (B)  securities  that may be
issued  upon  exercise  of  Rights  at any  time  prior to the  occurrence  of a
Triggering  Event,  or (C) securities that may be issued upon exercise of Rights
from and after the occurrence of a Triggering Event,  which Rights were acquired
by such Person or any of such Person's  Affiliates  or  Associates  prior to the
Distribution  Date or  pursuant  to Section  3(c) or  Section 22 (the  "Original
Rights") or pursuant to Section 11(i) in connection with an adjustment made with
respect to any Original Rights.

                                       2
<PAGE>

         Notwithstanding  the foregoing,  nothing  contained in this  definition
shall  cause a Person  ordinarily  engaged  in  business  as an  underwriter  of
securities  to be the  "Beneficial  Owner"  of,  or to  "beneficially  own," any
securities acquired in a bona fide firm commitment  underwriting  pursuant to an
underwriting  agreement between such Person and the Company,  unless such Person
shall make a filing on Schedule 13D (or any  comparable or successor  form) with
respect to such securities.

         "Board" means the Board of Directors of the Company.

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

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

         "Common  Stock" of any  Person  other than the  Company  shall mean the
capital stock of such Person with the greatest voting power,  or, if such Person
shall have no capital  stock,  the equity  securities  or other equity  interest
having power to control or direct the management of such Person.

         "Company" has the meaning set forth in the introduction.

         "Company Common Stock" has the meaning set forth in the Whereas Clause.

         "Current Market Price" has the meaning set forth in Section 11(d).

         "Current Value" has the meaning set forth in Section 11(a)(iii).

         "Distribution Date" has the meaning set forth in Section 3(a).

         "Equivalent  Company Common Stock" has the meaning set forth in Section
11(b).

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

         "Exchange Act Regulations" has the meaning set forth in Section 1.

         "Exchange Ratio" has the meaning set forth in Section 34(a).

         "Expiration  Date" shall mean the earliest of (i) the Final  Expiration
Date,  (ii) the time at which the Rights are  redeemed  (or deemed  redeemed) as
provided in Section 23 and (iii) the time at which all Rights  then  outstanding
and exercisable are exchanged (or deemed exchanged) pursuant to Section 34.

         "Final  Expiration  Date"  shall mean the Close of Business on November
24, 2012.

         "Original   Rights   Agreement"  has  the  meaning  set  forth  in  the
introduction.

         "Person" shall mean any  individual,  partnership,  firm,  corporation,
association,  trust, unincorporated organization or other entity, as well as any
syndicate or group deemed to be a person under Section  14(d)(2) of the Exchange
Act.

         "Preferred  Stock"  shall  mean  the  Series  A  Junior   Participating
Preferred  Stock,  par value $.0001 per share, of the Company having such voting
powers, designation, preferences and relative, participating,  optional or other
special rights and qualifications, limitations and restrictions as are described
in the form of Certificate of Designations attached as Exhibit C hereto.

         "Principal Party" has the meaning set forth in Section 13(b).

         "Purchase Price" has the meaning set forth in Section 7(b).

                                       3
<PAGE>

         "Record Date" has the meaning set forth in the Whereas Clause.

         "Redemption Price" has the meaning set forth in Section 23(a).

         "Registered Common Stock" has the meaning set forth in Section 13(b).

         "Registration Date" has the meaning set forth in Section 9(c).

         "Registration Statement" has the meaning set forth in Section 9(c).

         "Right" has the meaning set forth in the Whereas Clause.

         "Rights Agent" has the meaning set forth in the introduction.

         "Rights Certificate" has the meaning set forth in Section 3(a).

         "Rights  Dividend  Declaration  Date" has the meaning set forth in the
          Whereas Clause.

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

         "Section 13 Event"  shall mean any event  described in clause (x), (y)
          or (z) of Section 13(a).

         "Securities Act" means the Securities Act of 1933, as amended.

         "Spread" has the meaning specified in Section 11(a)(iii).

         "Stock   Acquisition   Date"  shall  mean  the  first  date  of  public
announcement (including,  without limitation,  the filing of any report pursuant
to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that
an Acquiring Person has become such or by the Company that an Adverse Person has
become such.

         "Subsidiary"  shall mean, with respect to any Person,  any other Person
of which an amount of voting securities or equity interests  sufficient to elect
at least a majority of the directors or equivalent  governing body of such other
Person is beneficially owned,  directly or indirectly,  by such  first-mentioned
Person, or otherwise controlled by such first-mentioned Person.

         "Substitution Period" has the meaning set forth in Section 11(a)(iii).

         "Summary of Rights" has the meaning set forth in Section 3(b).

         "Transfer Agent" has the meaning set forth in Section 7(c).

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

         "Unit" shall mean one one-thousandth of a share of Preferred Stock.

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

Section 3. Issue of Rights Certificates.

         (a)  Until  the  earliest  of (i) the  Close of  Business  on the tenth
Business Day after the Stock Acquisition Date, (ii) the Close of Business on the
tenth  Business Day 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  maintained  by the  Company or any of its  Subsidiaries  or any trustee or
fiduciary  with  respect  to such a plan  acting  in  such  capacity)  is  first

                                       4
<PAGE>

published or sent or given  within the meaning of Rule  14d-4(a) of the Exchange
Act Regulations or any successor rule, if upon consummation  thereof such Person
would be the  Beneficial  Owner of 15% or more of the shares of  Company  Common
Stock  then  outstanding  and (iii) the  occurrence  of a Section  13 Event (the
earliest of (i), (ii) and (iii) above being the  "Distribution  Date"),  (x) the
Rights will be evidenced  (subject to the  provisions  of paragraph  (b) of this
Section 3) by the  certificates for shares of Company Common Stock registered in
the names of the holders of shares of Company  Common Stock as of and subsequent
to the Record Date (which  certificates for shares of Company Common Stock shall
be deemed also to be certificates for Rights) and not by separate  certificates,
and (y) the Rights  will be  transferable  only by  transfer  of the  underlying
shares of Company Common Stock (including a transfer to the Company). As soon as
practicable  after the  Distribution  Date,  the  Rights  Agent  will  send,  by
first-class,  insured,  postage-prepaid mail, to each record holder of shares of
Company  Common Stock as of the Close of Business on the  Distribution  Date, at
the address of such  holder  shown on the  records of the  Company,  one or more
rights certificates, in substantially the form attached as Exhibit A hereto (the
"Rights  Certificates"),  evidencing  one Right for each share of Company Common
Stock so held,  subject to adjustment as provided  herein.  In the event that an
adjustment  in the number of Rights per share of Company  Common  Stock has been
made  pursuant  to  Section  11(p),  at the time of  distribution  of the Rights
Certificates,  the  Company  may make the  necessary  and  appropriate  rounding
adjustments  (in  accordance  with  Section  14(a)) so that Rights  Certificates
representing  only whole numbers of Rights are  distributed  and cash is paid in
lieu of any fractional Rights. As of and after the Distribution Date, the Rights
will be evidenced solely by such Rights Certificates.

         (b) As promptly as  practicable  following the Record Date, the Company
will send a copy of a Summary of  Rights,  in a form  which may be  appended  to
certificates that represent shares of Company Common Stock, in substantially the
form of Exhibit B attached  hereto (the  "Summary of Rights"),  by  first-class,
postage-prepaid mail, to each record holder of shares of Company Common Stock as
of the Close of Business on the Record Date, at the address of such holder shown
on the records of the Company.

         (c) Rights shall,  without any further action,  be issued in respect of
all shares of Company  Common  Stock which are issued  (including  any shares of
Company  Common Stock held in  treasury)  after the Record Date but prior to the
earlier  of the  Distribution  Date  and  the  Expiration  Date.  To the  extent
practicable,  certificates  representing such shares of Company Common Stock and
issued after the Record Date shall bear the following legend:

                  This certificate also evidences and entitles the holder hereof
                  to certain  Rights as set forth in the  Amended  and  Restated
                  Rights  Agreement  between MIM Corporation (the "Company") and
                  American  Stock  Transfer & Trust  Company dated as of May 20,
                  1999 as it may be amended from time to time (the  "Amended and
                  Restated  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 the Company.  Under
                  certain  circumstances,  as  set  forth  in  the  Amended  and
                  Restated  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  Amended  and  Restated   Rights
                  Agreement, as in effect on the date of mailing, without charge
                  promptly after receipt of a written  request  therefor.  Under
                  certain  circumstances  set forth in the Amended and  Restated
                  Rights Agreement, Rights issued to, or held by, any Person who
                  is, was or becomes an Acquiring Person or an Adverse Person or
                  any Affiliate or Associate  thereof (as such terms are defined

                                       5
<PAGE>

                  in  the  Amended  and  Restated  Rights  Agreement),   whether
                  currently  held  by or on  behalf  of  such  Person  or by any
                  subsequent    holder,   may   become   null   and   void   and
                  nontransferable.

         With  respect to  certificates  representing  shares of Company  Common
Stock  (whether or not such  certificates  include the foregoing  legend or have
appended to them the Summary of Rights),  until the earlier of the  Distribution
Date and the Expiration  Date, the Rights  associated with the shares of Company
Common  Stock  represented  by such  certificates  shall  be  evidenced  by such
certificates  alone and registered holders of the shares of Company Common Stock
shall also be the registered  holders of the associated Rights, and the transfer
of any of such  certificates  shall also  constitute  the transfer of the Rights
associated  with  the  shares  of  Company  Common  Stock  represented  by  such
certificates.

Section 4. Form of Rights Certificates.

         (a) The Rights  Certificates  (and the form of election to purchase and
the form of assignment to be printed on the reverse side thereof)  shall each be
substantially  in the form set forth in Exhibit A  attached  hereto and may have
such marks of  identification  or  designation  and such  legends,  summaries or
endorsements  printed thereon as the Company may deem appropriate and as are not
inconsistent  with the  provisions of this  Agreement,  or as may be required to
comply with any applicable law or any rule or regulation  thereunder or with any
rule or regulation of any stock exchange or automated  quotation system on which
the Rights  may from time to time be listed or to  conform to usage.  Subject to
the provisions of Section 11 and Section 22, the Rights  Certificates,  whenever
distributed,  shall be  dated as of the  Record  Date  and on their  face  shall
entitle  the holders  thereof to  purchase  such number of Units as shall be set
forth  therein  at the price  set  forth  therein,  but the  amount  and type of
securities,  cash or other assets that may be acquired upon the exercise of each
Right and the Purchase  Price thereof shall be subject to adjustment as provided
in this Agreement.

         (b) Any Rights  Certificate  issued  pursuant  to this  Agreement  that
represents Rights  beneficially  owned by: (i) an Acquiring Person or an Adverse
Person or any of their respective Associates or Affiliates, (ii) a transferee of
an Acquiring Person or an Adverse Person (or of any such Associate or Affiliate)
which becomes a transferee  after the Acquiring Person or Adverse Person becomes
such, or (iii) a transferee of an Acquiring  Person or an Adverse  Person (or of
any  such  Associate  or  Affiliate)  which  becomes  a  transferee  prior to or
concurrently with the Acquiring Person or Adverse Person becoming such and which
receives  such  Rights  pursuant  to either (A) a transfer  (whether  or not for
consideration)  from  the  Acquiring  Person  or  Adverse  Person  (or any  such
Associate or Affiliate) to holders of equity  interests in such Acquiring Person
or Adverse  Person (or such  Associate or  Affiliate) or to any Person with whom
such Acquiring Person or Adverse Person (or such Associate or Affiliate) has any
continuing  agreement,   arrangement  or  understanding   regarding  either  the
transferred  Rights,  shares of  Company  Common  Stock or the  Company or (B) a
transfer  which a  majority  of the Board has  determined  to be part of a plan,
arrangement  or  understanding  which has as a  primary  purpose  or effect  the
avoidance of Section 7(e) shall, upon the written direction of a majority of the
Board, 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 Adverse Person or an Affiliate or Associate of an
                  Acquiring  Person  or an  Adverse  Person  (as such  terms are
                  defined  in  the  Amended  and  Restated  Rights   Agreement).
                  Accordingly,   this   Rights   Certificate   and  the   Rights
                  represented    hereby   may   become   null   and   void   and
                  nontransferable in the circumstances specified in Section 7(e)
                  of the Amended and Restated Rights Agreement.

                                       6
<PAGE>

Notwithstanding the above provision,  failure to place such legend on any Rights
Certificate  representing  Rights which are otherwise  null and void pursuant to
the terms of this  Agreement  shall not affect the null and void  status of such
Rights.

Section 5. Countersignature and Registration.

         (a) Rights  Certificates  shall be executed on behalf of the Company by
its Chairman of the Board, the Chief Executive Officer,  the President or one of
its Vice Presidents under its corporate seal reproduced  thereon attested by its
Secretary,  Treasurer or one of its Assistant Secretaries.  The signature of any
of these officers on the Rights Certificates may be manual or facsimile.  Rights
Certificates  bearing the manual or facsimile  signatures of the individuals who
were at any time the proper  officers  of the  Company  shall bind the  Company,
notwithstanding  that such  individuals  or any of them have ceased to hold such
offices prior to the  countersignature  of such Rights  Certificates  or did not
hold such offices at the date of such Rights Certificates. No Rights Certificate
shall be  entitled  to any  benefit  under  this  Agreement  or be valid for any
purpose unless there appears on such Rights Certificate a countersignature  duly
executed by the Rights Agent by manual signature of an authorized signatory, and
such  countersignature upon any Rights Certificate shall be conclusive evidence,
and the only evidence,  that such Rights Certificate has been duly countersigned
as required hereunder.

         (b)  Following  the  Distribution  Date,  the Rights Agent will keep or
cause to be kept, at its office designated for surrender of Rights  Certificates
upon  exercise or transfer,  books for  registration  and transfer of the Rights
Certificates  issued  hereunder.  Such books  shall show the name and address of
each holder of the Rights  Certificates,  the number of Rights  evidenced on its
face by each Rights Certificate and the date of each Rights Certificate.

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  4(b),  7(e) and 14, at any
time after the Close of Business on the  Distribution  Date,  and at or prior to
the  Close of  Business  on the  Expiration  Date,  any  Rights  Certificate  or
Certificates  may be  transferred,  split up,  combined or exchanged for another
Rights Certificate or Certificates,  entitling the registered holder to purchase
a like number of Units (or, following a Triggering Event, other securities, cash
or other assets,  as the case may be) as the Rights  Certificate or Certificates
surrendered  then  entitled  such  holder to  purchase.  Any  registered  holder
desiring to transfer,  split up,  combine or exchange any Rights  Certificate or
Certificates  shall make such request in writing  delivered to the Rights Agent,
and shall  surrender the Rights  Certificate or  Certificates to be transferred,
split up, combined or exchanged at the 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 executed
the  certificate set forth 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) of the Rights
represented by such Rights  Certificate  or Affiliates or Associates  thereof as
the Company shall reasonably request;  whereupon the Rights Agent shall, subject
to the provisions of Section 4(b),  Section 7(e) and Section 14, countersign and
deliver  to  the  Person  entitled  thereto  a  Rights   Certificate  or  Rights
Certificates,  as the case may be, as so  requested.  The  Company  may  require
payment 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) If a  Rights  Certificate  shall  be  mutilated,  lost,  stolen  or
destroyed,  then upon request by the registered holder of the Rights represented
thereby and upon payment to the Company and the Rights  Agent of all  reasonable
expenses  incident  thereto,  there shall be issued,  in  exchange  for and upon

                                       7
<PAGE>

cancellation of the mutilated  Rights  Certificate,  or in substitution  for the
lost,  stolen or destroyed  Rights  Certificate,  a new Rights  Certificate,  in
substantially  the form of the  prior  Rights  Certificate,  of like  tenor  and
representing the equivalent number of Rights, but, in the case of loss, theft or
destruction,  only upon receipt of evidence  satisfactory to the Company and the
Rights Agent of such loss, theft or destruction of such Rights  Certificate and,
if requested by the Company or the Rights Agent,  indemnity also satisfactory to
it.

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

         (a) Prior to the Expiration  Date, the registered  holder of any Rights
Certificate may,  subject to the provisions of Sections 7(e) and 9(c),  exercise
the  Rights  evidenced  thereby  in  whole  or in part  at any  time  after  the
Distribution  Date upon  surrender of the Rights  Certificate,  with the form of
election to  purchase  and the  certificate  on the reverse  side  thereof  duly
executed,  to the Rights Agent at the office of the Rights Agent  designated for
such  purpose,  together  with  payment  of the  aggregate  Purchase  Price  (as
hereinafter defined) for the number of Units of Preferred Stock (or, following a
Triggering Event,  other  securities,  cash or other assets, as the case may be)
for which such surrendered Rights are then exercisable.

         (b) The purchase price for one Unit pursuant to the exercise of a Right
shall  initially be $20.00,  subject to adjustment from time to time as provided
in  Sections  11 and 13(a)  (such  purchase  price,  as so  adjusted,  being the
"Purchase Price"), and shall be payable in accordance with paragraph (c) below.

         (c)  As  promptly  as  practicable  following  the  occurrence  of  the
Distribution  Date,  the Company  shall deposit with the Rights Agent or another
corporation  in good standing  organized  under the laws of the United States or
any State of the United States,  which is authorized under such laws to exercise
corporate  trust or stock  transfer  powers  and is subject  to  supervision  or
examination by federal or state authority (such  institution being the "Transfer
Agent"),  certificates representing the Units that may be acquired upon exercise
of the Rights.  Upon receipt of a Rights  Certificate  representing  exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price for the Units (or, following a Triggering Event, other securities, cash or
other assets, as the case may be) to be purchased thereby as set forth below and
an amount equal to any applicable  transfer tax or evidence  satisfactory to the
Company of  payment of such tax,  the  Rights  Agent  shall,  subject to Section
20(k),  thereupon  promptly (i)  requisition  from the  Transfer  Agent (or make
available,  if the Rights Agent is the  Transfer  Agent)  certificates  for such
number of Units as are to be purchased  and the Company will direct the Transfer
Agent to comply with all such requests,  (ii)  requisition  from the Company the
amount of cash,  if any, to be paid in lieu of  fractional  shares in accordance
with Section 14, (iii) after receipt of such certificates,  cause the same to be
delivered  to or  upon  the  order  of the  registered  holder  of  such  Rights
Certificate,  registered  in such  name or  names as may be  designated  by such
holder,  and (iv) after receipt  thereof,  deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. In the event that
the Company is obligated to issue Company Common Stock, Preferred Stock or other
securities of the Company, pay cash and/or distribute other property pursuant to
Section  11(a),  the Company will make all  arrangements  necessary so that such
Company Common Stock,  Preferred  Stock or other  securities,  cash and/or other
property  are  available  for  distribution  by the  Rights  Agent,  if and when
appropriate.  The payment of the Purchase  Price  (adjusted  pursuant to Section
11(a)(iii))  may be made in cash or by  certified  or bank check or money  order
payable to the order of the Company.

         (d) In case the  registered  holder  of any  Rights  Certificate  shall
exercise less than all the Rights evidenced  thereby,  a new Rights  Certificate
evidencing the Rights remaining  unexercised shall be issued by the Rights Agent

                                       8
<PAGE>

and  delivered  to, or upon the order of, the  registered  holder of such Rights
Certificate,  registered  in such  name or  names as may be  designated  by such
holder, subject to the provisions of Section 14.

         (e)  Notwithstanding  anything in this Agreement to the contrary,  from
and after the first  occurrence  of any  Section  11(a)(ii)  Event,  any  Rights
beneficially  owned by (i) an  Acquiring  Person  or an  Adverse  Person,  or an
Associate  or  Affiliate of an  Acquiring  Person or an Adverse  Person,  (ii) a
transferee of an Acquiring Person or an Adverse Person (or of any such Associate
or Affiliate)  which becomes a transferee  after the Acquiring Person or Adverse
Person becomes such, or (iii) a transferee of an Acquiring  Person or an Adverse
Person (or of any such Associate or Affiliate)  which becomes a transferee prior
to or concurrently with the Acquiring Person or Adverse Person becoming such and
which receives such Rights pursuant to either (A) a transfer (whether or not for
consideration)  from  the  Acquiring  Person  or  Adverse  Person  (or any  such
Associate or Affiliate) to holders of equity  interests in such Acquiring Person
or Adverse  Person (or any such  Associate or  Affiliate)  or to any Person with
whom the Acquiring Person or Adverse Person (or such Associate or Affiliate) has
any continuing agreement, arrangement or understanding regarding the transferred
Rights,  shares of Company Common Stock or the Company or (B) a transfer which a
majority  of the  Board  has  determined  to be part of a plan,  arrangement  or
understanding  which has as a primary  purpose or effect the  avoidance  of this
Section 7(e),  shall be 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) are complied with, but shall have no liability to any holder of
Rights or any other Person as a result of its failure to make any  determination
under this Section 7(e) or Section 4(b) with respect to any Acquiring  Person or
Adverse Person or any Affiliate, Associate or transferee of any Acquiring Person
or Adverse Person.

         (f)   Notwithstanding   anything  in  this   Agreement  or  any  Rights
Certificate  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 by such  registered  holder  unless such
registered  holder  shall  have  (i)  completed  and  executed  the  certificate
following  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) of the  Rights  represented  by such  Rights  Certificate  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 any of its
agents,  be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent,  shall be cancelled by it, and no Rights
Certificates  shall be issued in lieu thereof  except as expressly  permitted by
this Agreement.  The Company shall deliver to the Rights Agent for  cancellation
and  retirement,  and the Rights  Agent shall so cancel and  retire,  any Rights
Certificates  acquired by the Company  otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Rights Certificates to the Company,
or shall, at the written request of the Company,  destroy such cancelled  Rights
Certificates,  and in such case  shall  deliver  a  certificate  of  destruction
thereof to the Company.

Section 9. Reservation and Availability of Capital Stock.

         (a) The Company  shall at all times  following  the  Distribution  Date
cause to be reserved  and kept  available,  out of its  authorized  and unissued
shares of capital stock, the number of shares of Preferred Stock (and, following
a Triggering Event, other securities) that, as provided in this Agreement,  will

                                       9
<PAGE>

be sufficient to permit the exercise in full of all  outstanding  Rights (or, if
the amount of authorized  shares of Preferred  Stock (or such other  securities)
not then issued or reserved for issuance  other than upon exercise of the Rights
is not  sufficient,  the maximum  amount of shares of  Preferred  Stock (or such
other securities) as is then available).  Without limiting the generality of the
foregoing,  the Company's Board will, to the extent  permitted by law, take such
action as may be required to increase  the number of shares of  Preferred  Stock
that the Company is authorized to issue,  to the extent  necessary to permit the
exercise in full of all  outstanding  Rights.  Upon the occurrence of any events
resulting  in an  increase  in the  aggregate  number of Units (or other  equity
securities  of the Company)  issuable upon  exercise of all  outstanding  Rights
above the number then reserved,  the Company shall make appropriate increases in
the number of Units or other securities so reserved.

         (b) If the Units (and,  following a Triggering Event, other securities)
to be issued and delivered  upon the exercise of the Rights may be listed on any
national  securities  exchange or automated  quotation system, the Company shall
during the period from the Distribution Date through the Expiration Date use its
best efforts to cause all securities  reserved for such issuance to be listed on
such exchange or automated  quotation  system upon  official  notice of issuance
upon such exercise.

         (c) The Company  shall use its best efforts (i) as soon as  practicable
following the occurrence of a Section 11(a)(ii) Event and a determination by the
Company  in  accordance  with  Section  11(a)(iii)  of the  consideration  to be
delivered by the Company upon  exercise of the Rights or, if so required by law,
as soon as  practicable  following  the  Distribution  Date (such date being the
"Registration  Date"),  to file a registration  statement on an appropriate form
under the Securities  Act, with respect to the  securities  that may be acquired
upon exercise of the Rights (the  "Registration  Statement"),  (ii) to cause the
Registration  Statement to become  effective as soon as  practicable  after such
filing,  (iii) to cause the  Registration  Statement to continue to be effective
(and to include a prospectus  complying with the  requirements of the Securities
Act)  until the  earlier  of (A) the date as of which the  Rights  are no longer
exercisable for the securities covered by the Registration Statement and (B) the
Expiration  Date,  and  (iv)  to  take as  soon  as  practicable  following  the
Registration  Date such action as may be required to ensure that any acquisition
of securities  upon exercise of the Rights  complies with any  applicable  state
securities or "blue sky" laws. The Company may temporarily  suspend for a period
of time not to  exceed 90 days  after  the date set  forth in clause  (i) of the
first sentence of this Section 9(c), the  exercisability  of the Rights in order
to  prepare  and file  such  registration  statement  and  permit  it to  become
effective.  Upon  any  such  suspension,   the  Company  shall  issue  a  public
announcement  stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer  in  effect.  Notwithstanding  any  provision  of this  Agreement  to the
contrary,  the Rights shall not be  exercisable in any  jurisdiction  unless the
requisite qualification in such jurisdiction shall have been obtained.

         (d) The Company  shall take such action as may be  necessary  to ensure
that all Units (and,  following the occurrence of a Triggering  Event, any other
securities  that may be delivered upon exercise of Rights) shall be, at the time
of delivery  of the  certificates  for such Units and of such other  securities,
duly and validly authorized and issued and fully paid and non-assessable.

         (e) The  Company  shall  pay any  documentary,  stamp or  transfer  tax
imposed in connection  with the issuance or delivery of the Rights  Certificates
or upon the exercise of Rights; provided, however, that the Company shall not be
required to pay any such tax imposed in connection with the issuance or delivery
of Units,  or any  certificates  or  depositary  receipts  for such  Units  (or,
following the occurrence of a Triggering  Event, any other  securities,  cash or
assets,  as the case may be) to any person other than the  registered  holder of
the Rights  Certificates  evidencing the Rights  surrendered  for exercise.  The
Company shall not be required to issue or deliver any certificates or depositary
receipts  (or,  following  the  occurrence  of a  Triggering  Event,  any  other
securities, cash or assets, as the case may be) to, or in a name other than that
of, the  registered  holder upon the  exercise of any Rights  until any such tax

                                       10
<PAGE>

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 upon  Exercise of Rights.  Each Person in whose
name any  certificate  for Units (or,  following the  occurrence of a Triggering
Event,  other  securities)  is issued upon the  exercise of Rights shall for all
purposes  be  deemed to have  become  the  holder  of  record of the Units  (or,
following the occurrence of a Triggering Event,  other  securities)  represented
thereby on, and such certificate  shall be dated, the date upon which the Rights
Certificate  evidencing  such  Rights was duly  surrendered  and  payment of the
Purchase Price (and any applicable transfer taxes) was made; provided,  however,
that if the  date  of such  surrender  and  payment  is a date  upon  which  the
Preferred  Stock (or,  following  the  occurrence  of a  Triggering  Event,  the
applicable  other  securities)  transfer  books of the Company are closed,  such
Person shall be deemed to have become the record holder of such  securities  on,
and such certificate  shall be dated, the next succeeding  Business Day on which
the Preferred  Stock (or,  following the occurrence of a Triggering  Event,  the
applicable other securities) transfer books of the Company are open; and further
provided that if delivery of the Units is delayed pursuant to Section 9(c), such
Persons  shall be deemed to have  become the  record  holders of such Units only
when such Units first  become  deliverable.  Prior to the exercise of the Rights
evidenced  thereby,  the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder  of the Company with respect to securities for which
the Rights shall be exercisable,  including,  without  limitation,  the right to
vote, to receive dividends or other  distributions or to exercise any preemptive
rights,  and shall not be entitled to receive any notice of any  proceedings  of
the Company, except as provided herein.

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

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

         (ii) In the event:

         (A) any Person shall become an Acquiring Person, other than pursuant to
any transaction which constitutes a Section 13 Event; or

                                       11
<PAGE>

         (B) the Board shall declare by  resolution  any Person to be an Adverse
Person,  upon a  determination  that such  Person,  alone or  together  with its
Affiliates and Associates,  has, at any time after this Agreement has been filed
with the Securities and Exchange  Commission as an exhibit to a filing under the
Exchange  Act,  become  the  Beneficial  Owner of a number of shares of  Company
Common  Stock which the Board  determines  to be  substantial  (which  number of
shares shall in no event  represent less than 10% of the  outstanding  shares of
Company Common Stock) and a determination by the Board, after reasonable inquiry
and investigation,  including  consultation with such persons as the Board shall
deem appropriate and  consideration of such factors selected by the Board as are
permitted by applicable law, that (a) such  Beneficial  Ownership by such Person
is  intended  to cause the  Company to  repurchase  the  shares of Common  Stock
beneficially  owned by such  Person or to cause  pressure on the Company to take
action or enter into a transaction or series of transactions intended to provide
such Person with short-term  financial gain under  circumstances where the Board
determines that the best long-term  interests of the Company would not be served
by  taking  such  action  or  entering  into  such   transaction  or  series  of
transactions  at that  time,  or (b) such  Beneficial  Ownership  is  causing or
reasonably likely to cause a material adverse impact (including, but not limited
to,  impairment of  relationships  with customers or impairment of the Company's
ability to maintain  its  competitive  position) on the business or prospects of
the  Company,  on the  Company's  employees,  customers  or  suppliers or on the
communities in which the Company operates or is located; or

         (C) any Acquiring Person (for purposes of this Section 11(a)(ii)(C) and
of Section 11(a)(ii)(D),  the term "Acquiring Person" shall be deemed to include
an Adverse Person) or any Associate or Affiliate of any Acquiring Person, at any
time after the date of this Agreement,  directly or indirectly,  (1) shall merge
into the Company or otherwise  combine with the Company and the Company shall be
the  continuing  or  surviving  corporation  of such merger or  combination  and
Company Common Stock shall remain  outstanding and unchanged,  (2) shall, in one
transaction or a series of  transactions,  transfer any assets to the Company or
to any of its  Subsidiaries  in  exchange  (in whole or in part)  for  shares of
Company  Common  Stock,  for other equity  securities of the Company or any such
Subsidiary,  or for securities  exercisable  for or  convertible  into shares of
equity  securities of the Company or any of its  Subsidiaries  (whether  Company
Common Stock or  otherwise)  or otherwise  obtain from the Company or any of its
Subsidiaries,  with or  without  consideration,  any  additional  shares of such
equity securities or securities  exercisable for or convertible into such equity
securities  (other than  pursuant to a pro rata  distribution  to all holders of
Company Common Stock),  (3) shall sell,  purchase,  lease,  exchange,  mortgage,
pledge,  transfer or otherwise  acquire or dispose of, in one  transaction  or a
series of transactions,  to, from or with the Company or any of its Subsidiaries
or  any  employee  benefit  plan  maintained  by  the  Company  or  any  of  its
Subsidiaries  or any trustee or fiduciary  with respect to such a plan acting in
such  capacity,  assets  (including  securities)  on terms and  conditions  less
favorable to the Company or such  Subsidiary  or plan than those that could have
been obtained in arm's-length  negotiations  with an  unaffiliated  third party,
other than pursuant to a transaction described in Section 13(a), (4) shall sell,
purchase,  lease, exchange,  mortgage,  pledge, transfer or otherwise acquire or
dispose of, in one transaction or a series of transactions, to, from or with the
Company  or any of the  Company's  Subsidiaries  or any  employee  benefit  plan
maintained by the Company or any of its Subsidiaries or any trustee or fiduciary
with respect to such a plan acting in such capacity (other than transactions, if
any, consistent with those engaged in, as of the date hereof, by the Company and
such  Acquiring  Person  or such  Associate  or  Affiliate),  assets  (including
securities)  having an  aggregate  fair market  value of more than  $10,000,000,
other than pursuant to a transaction set forth in Section 13(a), (5) shall sell,
purchase,  lease, exchange,  mortgage,  pledge, transfer or otherwise acquire or
dispose of, in one transaction or a series of transactions, to, from or with the
Company or any of its  Subsidiaries  or any employee  benefit plan maintained by
the Company or any of its  Subsidiaries or any trustee or fiduciary with respect
to such a plan  acting in such  capacity,  any  material  trademark  or material
service mark,  other than pursuant to a transaction  set forth in Section 13(a),
(6) shall receive,  or any designee,  agent or  representative of such Acquiring

                                       12
<PAGE>

Person or any Affiliate or Associate of such Acquiring Person shall receive, any
compensation from the Company or any of its Subsidiaries other than compensation
for full-time  employment as a regular  employee at rates in accordance with the
Company's  (or its  Subsidiaries')  past  practices,  or (7) shall  receive  the
benefit,  directly or indirectly (except  proportionately as a holder of Company
Common Stock or as required by law or  governmental  regulation),  of any loans,
advances,  guarantees,  pledges or other financial assistance or any tax credits
or other tax advantage provided by the Company or any of its Subsidiaries or any
employee  benefit plan  maintained by the Company or any of its  Subsidiaries or
any trustee or fiduciary with respect to such a plan acting in such capacity; or

         (D) during such time as there is an  Acquiring  Person,  there shall be
any  reclassification  of securities  (including  any reverse  stock split),  or
recapitalization  of the Company,  or any merger or consolidation of the Company
with any of its Subsidiaries or any other  transaction or series of transactions
involving the Company or any of its  Subsidiaries,  other than a transaction  or
transactions to which the provisions of Section 13(a) apply (whether or not with
or into or  otherwise  involving  an  Acquiring  Person),  which has the effect,
directly or indirectly, of increasing by more than 1% the proportionate share of
the outstanding  shares of any class of equity  securities of the Company or any
of its  Subsidiaries  that is directly or indirectly  beneficially  owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring Person;

         then, immediately upon the date of the occurrence of an event described
         in  Section  11(a)(ii)(A)-(D)  hereof (a  "Section  11(a)(ii)  Event"),
         proper  provision  shall be made so that each holder of a Right (except
         as provided below and in Section 7(e)) shall  thereafter have the right
         to receive, upon exercise thereof at the then current Purchase Price in
         accordance with the terms of this  Agreement,  in lieu of the number of
         Units for which a Right was exercisable  immediately prior to the first
         occurrence of a Section  11(a)(ii) Event, such number of Units as shall
         equal the result obtained by (x) multiplying the then current  Purchase
         Price by the then  number of Units  for  which a Right was  exercisable
         immediately  prior to the first occurrence of a Section 11(a)(ii) Event
         (such  product  thereafter  being,  for all purposes of this  Agreement
         other than  Section 13, the  Purchase  Price),  and (y)  dividing  that
         product by 50% of the then Current Market Price (determined pursuant to
         Section  11(d))  per Unit on the date of such  first  occurrence  (such
         number  of Units  being the  "Adjustment  Units");  provided,  that the
         Purchase  Price and the  number of  Adjustment  Units  shall be further
         adjusted as provided in this Agreement to reflect any Section 11(a)(ii)
         Event  occurring  after the initial  occurrence of a Section  11(a)(ii)
         Event.

         (iii) In the event  that the number of shares of  Preferred  Stock that
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 is
not  sufficient to permit the exercise in full of the Rights in accordance  with
Section  11(a)(ii),  the Board,  acting by resolution,  shall: (A) determine the
excess of (1) the value of the Adjustment  Units issuable upon the exercise of a
Right (the "Current  Value") over (2) the Purchase  Price (such excess being the
"Spread"),  and (B) with respect to each Right (subject to Section  7(e)),  make
adequate  provision to substitute for such Adjustment Units, upon payment of the
applicable  Purchase Price,  (1) Company Common Stock, (2) cash, (3) a reduction
in the Purchase  Price,  (4) other equity  securities  of the Company,  (5) debt
securities  of the Company,  (6) other  assets,  or (7) any  combination  of the
foregoing,  having an  aggregate  value equal to the Current  Value,  where such
aggregate  value has been  determined in good faith by the Board after receiving
advice from a nationally  recognized  investment  banking  firm  selected by the
Board which has not performed any services for the Company or any  Subsidiary of
the Company in the prior five years; provided,  however, that if pursuant to the
introductory clause of this Section 11(a)(iii) the Company shall have elected or
been required to deliver  value  pursuant to clause (B) above and shall not have
made adequate provision to deliver such value within 30 days following the later
of (x) the first  occurrence  of a Section  11(a)(ii)  Event and (y) the date on
which the Company's  right of redemption  pursuant to Section 23(a) expires (the
later of (x) and (y) being referred to herein as the "Section 11(a)(iii) Trigger
Date"),  then the Company shall be obligated to deliver,  upon the surrender for
exercise of a Right and without requiring  payment of the Purchase Price,  Units
(to the extent available) and then, if necessary, cash (to the extent available)
and then, if  necessary,  debt  securities,  which Units and/or cash and/or debt
securities shall have an aggregate value equal to the Spread. If the Board shall

                                       13
<PAGE>

determine in good faith that it is likely that sufficient  additional  shares of
Preferred  Stock could be  authorized  for issuance upon exercise in full of the
Rights,  the  30-day  period  set forth  above  may be  extended  to the  extent
necessary,  but not more than 90 days after the Section  11(a)(ii) Trigger Date,
in order that the Company may seek stockholder approval for the authorization of
such additional  shares (such 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 sentence of this Section 11(a)(iii), the Company (x)
shall provide,  subject to Section 7(e),  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 and/or to decide the  appropriate  form of
distribution  to be  made  pursuant  to  the  first  sentence  of  this  Section
11(a)(iii)  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 a Unit shall be the  current  market
price (as  determined  pursuant  to  Section  11(d)) per Unit on the date of the
first occurrence of the Section 11(a)(iii) Trigger Date.

         (b) In the event the Company  shall fix a record date for the  issuance
of rights,  options or warrants to all holders of Company Common Stock entitling
them to subscribe for or purchase (for a period expiring within 45 calendar days
after such record date) shares (or  fractional  shares) of Company  Common Stock
(or shares having  substantially the same rights,  privileges and preferences as
shares  of  Company  Common  Stock  ("Equivalent   Company  Common  Stock"))  or
securities  convertible  into Company Common Stock or Equivalent  Company Common
Stock at a price per share of Company  Common  Stock or per share of  Equivalent
Company  Common  Stock (or having a  conversion  price per share,  if a security
convertible  into Company Common Stock or Equivalent  Company Common Stock) less
than the Current  Market  Price (as  determined  pursuant to Section  11(d)) per
share of Company Common Stock on such record date, then the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price  in  effect  immediately  prior to such  record  date by a  fraction,  the
numerator  of which  shall be the sum of the number of shares of Company  Common
Stock  outstanding  on such  record  date plus the  number of shares of  Company
Common Stock which the aggregate offering price of the total number of shares of
Company  Common Stock and/or  Equivalent  Company  Common Stock so to be offered
(and/or the aggregate initial conversion price of the convertible  securities so
to be offered) would purchase at such Current Market Price,  and the denominator
of which shall be the number of shares of Company  Common Stock  outstanding  on
such record date plus the number of  additional  shares of Company  Common Stock
and/or  Equivalent  Company  Common  Stock to be  offered  for  subscription  or
purchase  (or  into  which  the  convertible  securities  so to be  offered  are
initially  convertible).  In the event  such  subscription  price may be paid by
delivery of consideration part or all of which may be in a form other than cash,
the value of such  consideration  shall be as  determined  in good  faith by the
Board,  whose  determination  shall be described  in a statement  filed with the
Rights  Agent and shall be binding on the  Rights  Agent and the  holders of the
Rights.  Shares of Company  Common Stock owned by or held for the account of the
Company or any Subsidiary shall not be deemed outstanding for the purpose of any
such  computation.  Such adjustment shall be made  successively  whenever such a
record date is fixed,  and in the event that such rights or warrants  are not so
issued,  the  Purchase  Price shall be adjusted to be the  Purchase  Price which
would then be in effect if such record date had not been fixed.

         (c) In the event the Company shall fix a record date for a distribution
to  all  holders  of  shares  of  Company  Common  Stock   (including  any  such
distribution  made in  connection  with a  consolidation  or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash (other

                                       14
<PAGE>

than a regular  quarterly  cash  dividend  paid out of funds  legally  available
therefor),  assets  (other than a dividend  payable in shares of Company  Common
Stock,  but  including any dividend  payable in stock other than Company  Common
Stock) or  subscription  rights or  warrants  (excluding  those  referred  to in
Section  11(b)),  then the Purchase Price to be in effect after such record date
shall be  determined by  multiplying  the Purchase  Price in effect  immediately
prior to such  record date by a fraction,  the  numerator  of which shall be the
Current  Market  Price (as  determined  pursuant to Section  11(d)) per share of
Company  Common  Stock  on such  record  date  less the fair  market  value  (as
determined  in good  faith by the  Company,  acting by  resolution  of its Board
(whose  determination  shall be described  in a statement  filed with the Rights
Agent and shall be binding on the Rights  Agent and the holder of the Rights) of
the cash,  assets or evidences of  indebtedness  so to be distributed or of such
subscription  rights or warrants  distributable in respect of a share of Company
Common Stock,  and the  denominator  of which shall be such Current Market Price
(as  determined  pursuant to Section  11(d)) per share of Company  Common Stock.
Such  adjustments  shall be made  successively  whenever  such a record  date is
fixed,  and in the event that such  distribution  is not so made,  the  Purchase
Price shall be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.

         (d) (i) (i) For the purpose of any computation hereunder,  the "Current
Market  Price" per share of  Company  Common  Stock or Common  Stock on any date
shall be deemed to be the average of the daily closing  prices per share of such
shares  for the ten  consecutive  Trading  Days  (as  such  term is  hereinafter
defined) immediately prior to such date; provided, however, that if prior to the
expiration  of such ten  Trading  Day period the issuer  announces  either (A) a
dividend or  distribution  on such shares  payable in such shares or  securities
convertible  into such shares (other than the Rights),  or (B) any  subdivision,
combination or reclassification of such shares,  then, following the ex-dividend
date for such dividend or the record date for such subdivision,  as the case may
be, the "Current  Market Price" shall be properly  adjusted to take into account
such event.  The  closing  price for each day shall be, if the shares are listed
and admitted to trading on a national  securities  exchange,  as reported in the
principal  consolidated  transaction reporting system with respect to securities
listed on the principal  national  securities  exchange on which such shares are
listed or  admitted  to trading or, if such shares are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market,  as reported by the Nasdaq Stock Market  ("NASDAQ") or such other system
then in use,  or,  if on any such date such  shares  are not  quoted by any such
organization,  the average of the closing bid and asked prices as furnished by a
professional  market maker making a market in such shares selected by the Board.
If on any such date no market maker is making a market in such shares,  the fair
value of such shares on such date as determined in good faith by the Board shall
be used.  If such  shares  are not  publicly  held or not so listed  or  traded,
"Current  Market  Price"  per  share  shall  mean the fair  value  per  share as
determined in good faith by the Board, whose determination shall be described in
a  statement  filed  with the  Rights  Agent  and  shall be  conclusive  for all
purposes.  The term  "Trading  Day"  shall  mean,  if such  shares are listed or
admitted  to trading on any  national  securities  exchange,  a day on which the
principal  national  securities  exchange  on which  such  shares  are listed or
admitted to trading is open for the  transaction  of business or, if such shares
are not so listed or admitted, a Business Day.

         (ii) For the purpose of any computation hereunder,  if the Units or the
Preferred  Stock are actively  publicly  traded,  the "current market price" per
Unit of  Preferred  Stock  shall be  determined  in the same manner as set forth
above for Company  Common Stock in clause (i) of this Section  11(d) (other than
the  fourth  sentence  thereof).  If the  Units or the  Preferred  Stock are not
publicly  held or listed or traded in a manner  described  in clause (i) of this
Section 11(d), the "current market price" per Unit shall be conclusively  deemed

                                       15
<PAGE>

to be the Current  Market Price per share of Company  Common  Stock.  If neither
Company  Common  Stock  nor  Preferred  Stock is  publicly  held or so listed or
traded,  the "current market price" per Unit shall mean the fair value per share
as determined in good faith by the Board, whose determination shall be described
in a  statement  filed with the Rights  Agent and shall be binding on the Rights
Agent and the holders of the Rights.

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

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

         (g) All  Rights  originally  issued by the  Company  subsequent  to any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to
purchase,  at the  adjusted  Purchase  Price,  that  number  of Units  (or other
securities or amount of cash or  combination  thereof) that may be acquired from
time to time pursuant to this Agreement upon exercise of the Rights, all subject
to further adjustment as provided herein.

         (h) Unless the Company shall have exercised its election as provided in
Section  11(i),  upon each  adjustment of the Purchase  Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding  immediately
prior to the making of such adjustment  shall  thereafter  evidence the right to
purchase,  at the adjusted  Purchase Price,  that number of Units (calculated to
the nearest one-thousandth of a Unit) obtained by (i) multiplying (x) the number
or amount of Units (or cash or other  securities)  issuable  upon  exercise of a
Right  immediately  prior to this adjustment by (y) the Purchase Price in effect
immediately  prior to such adjustment of the Purchase  Price,  and (ii) dividing
the product so obtained by the Purchase Price in effect  immediately  after such
adjustment of the Purchase Price.

         (i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights,  in lieu of any adjustment in the
number of Units or other  securities that may be acquired upon the exercise of a
Right.  Each of the Rights  outstanding  after the  adjustment  in the number of
Rights  shall be  exercisable  for that  number  of Units  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-thousandth)  obtained  by dividing  the
Purchase Price in effect  immediately  prior to adjustment of the Purchase Price
by the Purchase  Price in effect  immediately  after  adjustment of the Purchase
Price.  The Company shall make a public  announcement  of its election to adjust
the number of Rights,  indicating  the record date for the  adjustment,  and, if
known at the time,  the amount of the adjustment to be made. The record date may
be the date on which the Purchase Price is adjusted or any day thereafter,  but,
if the Rights  Certificates  have been issued,  shall be at least ten days later
than the date of such  public  announcement.  If Rights  Certificates  have been
issued,  upon each  adjustment of the number of Rights  pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates

                                       16
<PAGE>

evidencing,  subject to Section 14, the additional  Rights to which such holders
shall be  entitled  as a result of such  adjustment,  or,  at the  option of the
Company, shall cause to be distributed to such holders of record in substitution
and  replacement for the Rights  Certificates  held by such holders prior to the
date of adjustment,  and upon surrender thereof, if required by the Company, new
Rights  Certificates  evidencing  all the Rights to which such holders  shall be
entitled after such adjustment.  Rights  Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company,  the adjusted  Purchase  Price) and shall be
registered in the names of the holders of record of Rights  Certificates  on the
record date specified in the public announcement.

         (j)  Irrespective  of any adjustment or change in the Purchase Price or
the  number of Units  issuable  upon the  exercise  of the  Rights,  the  Rights
Certificates  theretofore  and  thereafter  issued may  continue  to express the
Purchase  Price per Unit and the  number of Units  which were  expressed  in the
initial Rights Certificates issued hereunder.

         (k) Before  taking any action that would cause an  adjustment  reducing
the Purchase Price below the then par value of the number of Units 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 such fully  paid and  non-assessable  Units at such
adjusted Purchase Price.

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

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

         (n) The Company shall not, at any time after the Distribution Date, (i)
consolidate  with any other Person  (other than a Subsidiary of the Company in a
transaction  which  complies  with Section  11(o)),  (ii) merge with or into any
other Person  (other than a  Subsidiary  of the Company in a  transaction  which
complies  with  Section  11(o)),  or  (iii)  sell or  transfer  (or  permit  any
Subsidiary  to  sell  or  transfer),   in  one  transaction,   or  a  series  of
transactions, assets or earning power aggregating more than 50% of the assets or
earning  power of the  Company  and its  Subsidiaries  (taken as a whole) to any
other Person or Persons (other than the Company  and/or any of its  Subsidiaries
in one or more  transactions  each of which complies with Section 11(o)), if (x)
at the time of or immediately after such consolidation, merger or sale there are
any  rights,   warrants  or  other  instruments  or  securities  outstanding  or
agreements in effect which would  substantially  diminish or otherwise eliminate

                                       17
<PAGE>

the  benefits   intended  to  be  afforded  by  the  Rights  or  (y)  prior  to,
simultaneously with or immediately after such consolidation, merger or sale, the
Person  which  constitutes,  or would  constitute,  the  "Principal  Party"  for
purposes of Section 13(a) shall have distributed or otherwise transferred to its
stockholders  or other persons  holding an equity interest in such Person Rights
previously  owned  by  such  Person  or any of its  Affiliates  and  Associates;
provided,  however,  this  Section  11(n)  shall not affect  the  ability of any
Subsidiary of the Company to  consolidate  with,  merge with or into, or sell or
transfer assets or earning power to, any other Subsidiary of the Company.

         (o) After the  Distribution  Date,  the  Company  shall not,  except as
permitted by Section 23 or Section 26, take (or permit any  Subsidiary  to take)
any action if at the time such action is taken it is reasonably foreseeable that
such action will  diminish  substantially  or otherwise  eliminate  the benefits
intended to be afforded by the Rights.

         (p) Anything in this Agreement to the contrary notwithstanding,  in the
event that the Company shall at any time after the Rights  Dividend  Declaration
Date  and  prior  to  the  Distribution  Date  (i)  declare  a  dividend  on the
outstanding  shares of Company  Common Stock payable in shares of Company Common
Stock,  (ii) subdivide the  outstanding  shares of Company  Common Stock,  (iii)
combine the outstanding  shares of Company Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock in a  reclassification  of
Company Common Stock (including any such  reclassification  in connection with a
consolidation  or merger in which the  Company is the  continuing  or  surviving
corporation),  the number of Rights associated with each share of Company Common
Stock  then  outstanding,  or issued or  delivered  thereafter  but prior to the
Distribution  Date,  shall be  proportionately  adjusted  so that the  number of
Rights  thereafter  associated with each share of Company Common Stock following
any such event shall  equal the result  obtained  by  multiplying  the number of
Rights  associated with each share of Company Common Stock  immediately prior to
such event by a fraction  the  numerator  of which shall be the total  number of
shares of Company Common Stock  outstanding  immediately prior to the occurrence
of the event and the denominator of which shall be the total number of shares of
Company Common Stock  outstanding  immediately  following the occurrence of such
event.

         Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever  an  adjustment  is made as  provided  in Section 11 or Section 13, the
Company shall (a) promptly  prepare a certificate  setting forth such adjustment
and a brief statement of the facts accounting for such adjustment,  (b) promptly
file with the Rights Agent,  and with each transfer agent for the Company Common
Stock  and  the  Preferred  Stock,  a copy  of  such  certificate,  and (c) if a
Distribution Date has occurred, mail a brief summary thereof to each holder of a
Rights  Certificate (or, if prior to the Distribution  Date, to each holder of a
certificate  representing  shares of Company  Common Stock) in  accordance  with
Section  25. The Rights  Agent shall be fully  protected  in relying on any such
certificate and on any adjustment  therein  contained and shall not be deemed to
have  knowledge of any 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 the Stock Acquisition Date,  directly
or indirectly,  (x) the Company shall  consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction  which
complies with Section  11(o)),  and the Company  shall not be the  continuing or
surviving  corporation of such  consolidation  or merger,  (y) any Person (other
than a Subsidiary  of the Company in a transaction  which  complies with Section
11(o)) shall  consolidate  with,  or merge with or into,  the  Company,  and the
Company shall be the continuing or surviving  corporation of such  consolidation
or merger and, in connection with such  consolidation or merger,  all or part of
the  outstanding  shares of Company  Common  Stock  shall be  converted  into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its  Subsidiaries  shall sell or  otherwise  transfer)  to any Person or Persons
(other than the Company or any of its  Subsidiaries in one or more  transactions
each of which complies with Section 11(o)), in one or more transactions,  assets
or earning power aggregating more than 50% of the assets or earning power of the

                                       18
<PAGE>

Company and its Subsidiaries (taken as a whole) (any such event being a "Section
13 Event"), then, and in each such case, proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e), shall thereafter
have the  right  to  receive,  upon the  exercise  thereof  at the then  current
Purchase  Price,  such number of validly  authorized and issued,  fully paid and
non-assessable  shares of Common Stock of the  Principal  Party (as such term is
hereinafter  defined),   which  shares  shall  not  be  subject  to  any  liens,
encumbrances,  rights of first refusal,  transfer  restrictions or other adverse
claims,  as shall be equal to the result  obtained by (1)  multiplying  the then
current  Purchase  Price by the number of Units for which a Right is exercisable
immediately  prior to the first  occurrence  of a  Section  13 Event  (or,  if a
Section  11(a)(ii) Event has occurred prior to the first occurrence of a Section
13  Event,  multiplying  the  number of such  Units  for which a Right  would be
exercisable  hereunder but for the occurrence of such Section 11(a)(ii) Event by
the  Purchase  Price  which  would be in  effect  hereunder  but for such  first
occurrence) and (2) dividing that product (which, following the first occurrence
of a Section 13 Event,  shall be the  "Purchase  Price" for all purposes of this
Agreement) by 50% of the Current  Market Price  (determined  pursuant to Section
11(d))  per share of the  Common  Stock of such  Principal  Party on the date of
consummation of such Section 13 Event;  provided that the Purchase Price and the
number of shares of Common Stock of such Principal  Party issuable upon exercise
of each Right shall be further adjusted as provided in this Agreement to reflect
any  events  occurring  after the date of the first  occurrence  of a Section 13
Event;  (ii) such  Principal  Party shall  thereafter  be liable for,  and shall
assume,  by virtue of such Section 13 Event,  all the  obligations and duties of
the  Company  pursuant  to  this  Agreement;  (iii)  the  term  "Company"  shall
thereafter be deemed to refer to such  Principal  Party,  it being  specifically
intended that the  provisions  of Section 11 shall apply only to such  Principal
Party following the first occurrence of a Section 13 Event;  (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient  number  of  shares  of its  Common  Stock)  in  connection  with the
consummation  of any such  transaction  as may be  necessary  to ensure that the
provisions  of this  Agreement  shall  thereafter be applicable to its shares of
Common Stock thereafter  deliverable upon the exercise of the Rights;  provided,
however, that, upon the subsequent occurrence of any merger, consolidation, sale
of  all or  substantially  all  assets,  recapitalization,  reclassification  of
shares,  reorganization  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 Purchase Price,  such cash,  shares,
rights,  warrants and other  property which such holder would have been entitled
to receive had he, at the time of such  transaction,  owned the Common  Stock of
the Principal Party purchasable upon the exercise of a Right, 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;  and (v) the provisions of Section  11(a)(ii) shall
be of no further effect following the first occurrence of any Section 13 Event.

         (b) "Principal Party" shall mean:

         (i) in the case of any  transaction  described  in clause (x) or (y) of
the first  sentence of Section  13(a),  (A) the Person that is the issuer of any
securities  into which  shares of Company  Common  Stock are  converted  in such

                                       19
<PAGE>

merger or consolidation,  or, if there is more than one such issuer,  the issuer
of Common Stock that has the highest  aggregate Current Market Price (determined
pursuant  to Section  11(d))  and (B) if no  securities  are so issued,  (x) the
Person that is the other party to such merger or consolidation and that survives
said merger or  consolidation,  or, if there is more than one such  Person,  the
Person the Common Stock of which has the highest  aggregate Current Market Price
(determined  pursuant  to Section  11(d)) or (y) if the Person that is the other
party  to  the  merger  or   consolidation   does  not  survive  the  merger  or
consolidation,  the  Person  that  does  survive  the  merger  or  consolidation
(including the Company if it survives); and

         (ii) in the case of any  transaction  described  in  clause  (z) of the
first  sentence of Section  13(a),  the Person that is the party  receiving  the
largest  portion of the assets or earning  power  transferred  pursuant  to such
transaction  or  transactions,  or,  if each  Person  that  is a  party  to such
transaction or  transactions  receives the same portion of the assets or earning
power transferred  pursuant to such transaction or transactions or if the Person
receiving  the  largest  portion  of the  assets  or  earning  power  cannot  be
determined, whichever Person the Common Stock of which has the highest aggregate
Current Market Price (determined pursuant to Section 11(d));

     PROVIDED,  HOWEVER,  that in any such case, (1) if the Common Stock of such
     Person is not at such time and has not been continuously over the preceding
     twelve-month  period  registered  under  Section  12 of  the  Exchange  Act
     ("Registered Common Stock"), or such Person is not a corporation,  and such
     Person  is a direct or  indirect  Subsidiary  of  another  Person  that has
     Registered Common Stock outstanding,  "Principal Party" shall refer to such
     other  Person;  (2) if the Common  Stock of such  Person is not  Registered
     Common  Stock or such  Person is not a  corporation,  and such  Person is a
     direct or  indirect  Subsidiary  of  another  Person but is not a direct or
     indirect  Subsidiary of another  Person which has  Registered  Common Stock
     outstanding, "Principal Party" shall refer to the ultimate parent entity of
     such first-mentioned  Person; (3) if the Common Stock of such Person is not
     Registered  Common  Stock or such  Person  is not a  corporation,  and such
     Person is directly or indirectly  controlled  by more than one Person,  and
     one or more of such other Persons has Registered Common Stock  outstanding,
     "Principal  Party" shall refer to  whichever  of such other  Persons is the
     issuer of the Registered  Common Stock having the highest aggregate Current
     Market Price (determined  pursuant to Section 11(d)); and (4) if the Common
     Stock of such Person is not Registered Common Stock or such Person is not a
     corporation,  and such Person is directly or indirectly  controlled by more
     than one Person,  and none of such other  Persons  have  Registered  Common
     Stock  outstanding,  "Principal  Party" shall refer to  whichever  ultimate
     parent entity is the corporation  having the greatest  stockholders  equity
     or, if no such  ultimate  parent  entity is a  corporation,  shall refer to
     whichever  ultimate  parent  entity is the entity  having the  greatest net
     assets.

         (c) The Company  shall not  consummate  any Section 13 Event unless the
Principal  Party  shall have a  sufficient  number of  authorized  shares of its
Common  Stock which have not been issued or reserved  for issuance to permit the
exercise in full of the Rights in  accordance  with this  Section 13, and unless
prior  thereto the  Company and such  Principal  Party shall have  executed  and
delivered to the Rights Agent a supplemental  agreement  providing for the terms
set forth in  paragraphs  (a) and (b) of this  Section 13 and further  providing
that the Principal Party, at its own expense, will:

         (i) (A) file on an appropriate  form, as soon as practicable  following
the execution of such agreement,  a registration  statement under the Securities
Act with respect to the Common Stock that may be acquired  upon  exercise of the
Rights,  (B) cause  such  registration  statement  to remain  effective  (and to
include a prospectus  complying with the  requirements  of the  Securities  Act)
until  the  Expiration  Date,  and  (C) as  soon as  practicable  following  the
execution of such agreement,  take such action as may be required to ensure that
any  acquisition  of such Common Stock upon the exercise of the Rights  complies
with any applicable state security or "blue sky" laws; and

         (ii) use its best  efforts  either (A) to list (or continue the listing
of) the Common Stock of the Principal Party on a national securities exchange or
(B) to cause such Common Stock to be reported by NASDAQ or such other comparable
transaction reporting system as may then be in use; and

                                       20
<PAGE>

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

         (d) If the  Principal  Party  which is to be a party  to a  transaction
referred  to in  this  Section  13 has a  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,  in connection  with, or as a consequence
of, the consummation of a transaction  referred to in this Section 13, shares of
Common Stock of such Principal  Party at less than the then Current Market Price
per share (determined pursuant to Section 11(d)) or securities  exercisable for,
or convertible into, Common Stock of such Principal Party at less than such then
Current  Market Price (other than to holders of Rights  pursuant to this Section
13) or (ii)  providing  for any special  payment,  tax or similar  provisions in
connection  with  the  issuance  of the  Common  Stock of such  Principal  Party
pursuant to the provisions of this Section 13; then, in such event,  the Company
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  cancelled,  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  provisions  of this  Section  13  shall  similarly  apply  to
successive  mergers or consolidations or sales or other transfers.  In the event
that a  Section  13 Event  shall  occur at any time  after the  occurrence  of a
Section  11(a)(ii)  Event,  the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).

Section 14.       Fractional Rights and Fractional Shares.

         (a) The Company  shall not be required to issue  fractions of Rights or
to distribute Rights  Certificates which evidence  fractional Rights. In lieu of
such  fractional  Rights,  there  shall be paid to the  Persons  to  which  such
fractional  Rights would otherwise be issuable,  an amount in cash equal to such
fraction of the market  value of a whole  Right.  For  purposes of this  Section
14(a),  the market  value of a whole  Right  shall be the  closing  price of the
Rights  for  the  Trading  Day  immediately  prior  to the  date on  which  such
fractional Rights would have been otherwise  issuable.  The closing price of the
Rights for any day shall be, if the Rights are listed or  admitted to trading on
a national  securities  exchange,  as  reported  in the  principal  consolidated
transaction  reporting system with respect to securities listed on the principal
national  securities  exchange  on which the Rights are  listed or  admitted  to
trading or, if the Rights are not listed or admitted to trading on any  national
securities exchange,  the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other  system  then in use or, if on any such date the Rights are
not quoted by any such  organization,  the  average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected  by the  Board.  If on any such date no such  market  maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board shall be used and such determination  shall be described
in a statement filed with the Rights Agent and the holders of the Rights.

         (b) The Company shall not be required to issue  fractions of Units upon
exercise  of the  Rights  or to  distribute  certificates  which  evidence  such
fractional  Units. In lieu of such fractional  Units, the Company may pay to the
registered holders of Rights  Certificates at the time such Rights are exercised
as herein  provided  an amount in cash  equal to the same  fraction  of the then
current market price of a Unit on the day of exercise,  determined in accordance
with Section 11(d).

                                       21
<PAGE>

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

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

         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 by transfer of the shares of Company Common Stock in respect of which those
Rights were issued;

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

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

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

         Section 17.  Rights  Certificate  Holder Not Deemed a  Stockholder.  No
holder, as such, of any Rights  Certificate  shall be entitled to vote,  receive
dividends  or be deemed  for any  purpose  the  holder of the number of Units or
other  securities  of the  Company  which  may at any  time be  issuable  on the

                                       22
<PAGE>

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,  except as provided in Section 24, to receive  notice of
meetings or other actions  affecting  stockholders,  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,
promptly  following  demand  of  the  Rights  Agent,  its  reasonable  expenses,
including  reasonable  fees  and  disbursements  of  its  counsel,  incurred  in
connection  with the  execution  and  administration  of this  Agreement and the
exercise and  performance of its duties  hereunder.  The Company shall indemnify
the Rights  Agent for, and hold it harmless  against,  any loss,  liability,  or
expense,  incurred without  negligence,  bad faith or willful  misconduct on the
part of the Rights  Agent,  for anything  done or omitted by the Rights Agent in
connection with the acceptance and  administration of this Agreement,  including
the costs and expenses of defending against any claim of liability hereunder.

         (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 Preferred  Stock or for other  securities of the
Company,  instrument of assignment or transfer, power of attorney,  endorsement,
affidavit, letter, notice, direction, consent,  certificate,  statement or other
paper or document believed by it to be genuine and to have been signed, executed
and, where necessary,  verified or acknowledged by the proper Person or Persons.
Anything in this  Agreement to the contrary  notwithstanding,  in no event shall
the Rights Agent be liable for special, indirect or consequential loss or damage
of any kind whatsoever (including but not limited to lost profits),  even if the
Rights  Agent has been  advised  of the  likelihood  of such loss or damage  and
regardless of the form of the action.

         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 or stockholder  services  businesses 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 document 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. In case at the time such successor  Rights Agent shall
succeed to the agency created by this Agreement,  any of the Rights Certificates
shall have been countersigned but not delivered, any such successor Rights Agent
may adopt the  countersignature  of a predecessor  Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been  countersigned,  any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the  successor  Rights  Agent;  and in all such  cases  such  Rights
Certificates  shall have the full force provided in the Rights  Certificates and
in this Agreement.

         (b) In case at any time the name of the Rights  Agent  shall be changed
and at such time any of the Rights  Certificates  shall have been  countersigned
but not  delivered,  the Rights Agent may adopt the  countersignature  under its

                                       23
<PAGE>

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 Market Price") be proved or established by the Company
prior to taking or  suffering  any  action  under this  Agreement,  such fact or
matter  (unless other  evidence in respect  thereof be specified  herein) may be
deemed to be conclusively  proved and established by a certificate signed by the
Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer,
the President,  any Vice President,  the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant  Secretary of the Company and delivered to the Rights
Agent;  provided,  however,  that so long as any Person is an  Acquiring  Person
under  this  Agreement,  such  certificate  shall be signed and  delivered  by a
majority  of the  members  of the  Board;  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 under this  Agreement only for its
own negligence, bad faith or willful misconduct.

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

         (e) The Rights Agent shall not have any responsibility for the validity
of this Agreement or the execution and delivery hereof (except the due execution
hereof by the  Rights  Agent) or for 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  failure by the  Company to
satisfy conditions contained in this Agreement or in any Rights Certificate; nor
shall it be  responsible  for any  adjustment  required  under the provisions of
Section  11 or  Section  13 or for the  manner,  method  or  amount  of any such
adjustment or the  ascertaining of the existence of facts that would require any
such  adjustment  (except with  respect to the  exercise of Rights  evidenced by
Rights  Certificates  after  receipt  by the  Rights  Agent  of the  certificate
describing any such adjustment  contemplated by Section 12); nor shall it by any
act under this Agreement be deemed to make any  representation or warranty as to
the authorization or reservation of any Units,  shares of Preferred Stock or any
other  securities  to be  issued  pursuant  to  this  Agreement  or  any  Rights
Certificate  or as to whether any Units or any other  securities  will,  when so
issued, be validly authorized and issued, fully paid and non-assessable.

         (f) The Company  shall  perform,  execute,  acknowledge  and deliver or
cause to be  performed,  executed,  acknowledged  and delivered all such further
acts,  instruments  and  assurances as may  reasonably be required by the Rights
Agent  for  the  performance  by the  Rights  Agent  of its  duties  under  this
Agreement.

                                       24
<PAGE>

         (g) The  Rights  Agent is  hereby  authorized  and  directed  to accept
instructions  with respect to the  performance of its duties  hereunder from the
Chairman  of the  Board,  Chief  Executive  Officer,  the  President,  any  Vice
President,  the  Secretary,  any  Assistant  Secretary,  the  Treasurer  or  any
Assistant Treasurer of the Company,  and to apply to such officers for advice or
instructions in connection  with its duties,  and it shall not be liable for any
action  taken or  suffered  to be taken by it in good faith in  accordance  with
instructions of any such officer; PROVIDED,  HOWEVER, that so long as any Person
is an Acquiring Person under this Agreement,  the Rights Agent shall accept such
instructions  and  advice  only  from a  majority  of the Board and shall not be
liable  for any  action  taken or  suffered  to be taken by it in good  faith in
accordance with such  instructions of the majority of the Board. 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 Amended and Restated 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 5 Business  Days after the date any such officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date)  unless,  prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be
taken or omitted.

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

         (i) The Rights  Agent may  execute  and  exercise  any of the rights or
powers hereby vested in it or perform any duty hereunder  either itself or by or
through its attorneys or agents.

         (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 or in the exercise of its rights  hereunder if
the Rights Agent shall have  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,  not signed 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.  If such certificate has been completed and signed and shows a negative
response to clauses 1 and 2 of such certificate,  unless  previously  instructed
otherwise in writing by the Company (which instructions may impose on the Rights
Agent   additional   ministerial   responsibilities,    but   no   discretionary
responsibilities),  the Rights Agent may assume without further inquiry that the
Rights Certificate is not owned by a person described in Section 4(b) or Section
7(e) and shall not be charged with any knowledge to the contrary.

                                       25
<PAGE>

         (l) The Rights  Agent  shall have no duties or  obligations  other than
those specifically set forth in this Agreement, or as may subsequently be agreed
to in writing by the Company and the Rights Agent.

         Section 21. Change of Rights  Agent.  The Rights Agent or any successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon 30 days'  prior  notice  in  writing  mailed  to the  Company,  and to each
transfer  agent  of the  Company  Common  Stock  and  the  Preferred  Stock,  by
registered or certified  mail, and to the holders of the Rights  Certificates by
first-class  mail.  The  Company  may remove the Rights  Agent or any  successor
Rights Agent upon 30 days' prior  notice in writing,  mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to each transfer agent of the
Company Common Stock and the Preferred  Stock,  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 30 days after giving notice of
such  removal or after it has been  notified in writing of such  resignation  or
incapacity by the resigning or incapacitated  Rights Agent or by the holder of a
Rights  Certificate (who shall, with such notice,  submit his Rights Certificate
for  inspection  by the  Company),  then any  registered  holder  of any  Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent.  Any successor  Rights  Agent,  whether  appointed by the
Company  or by such a court,  shall be (a) a  corporation  organized  and  doing
business  under the laws of the United  States or any state of the United States
in good standing, shall be authorized to do business as a banking institution in
the State of New York, shall be authorized under such laws to exercise corporate
trust or stock transfer  powers,  shall be subject to supervision or examination
by federal or state authorities and shall have at the time of its appointment as
Rights Agent a combined  capital and surplus of at least  $100,000,000 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 that 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 Company Common Stock and
the  Preferred  Stock,  and mail a notice  thereof in writing to the  registered
holders of the Rights  Certificates.  Failure to give any notice provided for in
this Section 21, however,  or any defect therein,  shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent.

         Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or 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 resolution  of its Board to reflect any  adjustment or change
made in accordance  with the  provisions of this Agreement in the Purchase Price
or the number or kind or class of shares or other  securities  or property  that
may be acquired under the Rights Certificates.  In addition,  in connection with
the  issuance  or  sale  of  shares  of  Company  Common  Stock   following  the
Distribution  Date and prior to the Expiration Date, the Company (a) shall, with
respect  to shares of Company  Common  Stock so issued or sold  pursuant  to the
exercise of stock options or under any employee plan or arrangement, or upon the
exercise,  conversion  or  exchange  of  securities  hereinafter  issued  by the
Company,  and (b) may, in any other case, if deemed  necessary or appropriate by
the Board,  issue Rights  Certificates  representing  the appropriate  number of
Rights in connection with such issuance or sale; provided,  however, that (i) no
such Rights  Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance  would create a significant  risk
of material  adverse tax  consequences to the Company or the person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that,  appropriate  adjustment shall otherwise have
been made in lieu of the issuance thereof.

                                       26
<PAGE>

         Section 23. Redemption and Termination.

         (a) The Company,  acting by resolution of its Board may, at its option,
at any time prior to the earlier of (i) the Distribution  Date or (ii) the Final
Expiration Date, redeem all but not less than all of the then outstanding Rights
at a redemption  price of $.0001 per Right, as such amount may be  appropriately
adjusted  to reflect any stock  split,  stock  dividend  or similar  transaction
occurring  after the date hereof (such  redemption  price being the  "Redemption
Price").  The  Company  may, at its option,  pay the  Redemption  Price in cash,
shares of Company  Common Stock (based on the Current  Market Price  (determined
pursuant to Section  11(d)) of the shares of Company Common Stock at the time of
redemption),  or such  other  form of  consideration  as the Board in good faith
deems appropriate.

         (b) Immediately  upon an action by the Board in accordance with Section
23(a)  ordering the  redemption of the Rights,  evidence of which shall be filed
with the Rights  Agent,  and without any further  action and without any notice,
the right to exercise the Rights will terminate and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price for each Right so
held.  Promptly  after the action of the Board  ordering the  redemption  of the
Rights in accordance  with Section 23(a),  the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights by
mailing  such notice to all such  holders at each  holder's  last  address as it
appears  upon  the  registry  books  of  the  Rights  Agent  or,  prior  to  the
Distribution  Date,  on the  registry  books of the  transfer  agent for Company
Common Stock.  Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption  will state the method by which the payment of the  Redemption  Price
will be made.

         Section 24. Notice of Certain Events.

         (a)  In  case  the  Company  shall  propose,  at  any  time  after  the
Distribution  Date, (i) to pay any dividend payable in stock of any class to the
holders of Company Common Stock or to make any other distribution to the holders
of Company  Common Stock (other than a regular  quarterly cash dividend paid out
of funds legally  available  therefor),  (ii) to offer to the holders of Company
Common Stock rights or warrants to subscribe  for or to purchase any  additional
shares  of  Company  Common  Stock or  shares of stock of any class or any other
securities,  rights or  options,  (iii) to effect  any  reclassification  of its
Company  Common  Stock  (other  than  a  reclassification   involving  only  the
subdivision of outstanding  shares of Company Common Stock),  (iv) to effect any
consolidation  or merger into or with any other Person  (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o)), or to effect
any sale or other  transfer  (or to permit  one or more of its  Subsidiaries  to
effect any sale or other transfer),  in one or more  transactions,  of more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other  Person or Persons  (other than the Company  and/or any of
its Subsidiaries in one or more transactions each of which complies with Section
11(o)),  or (v) to effect  the  liquidation,  dissolution  or  winding up of the
Company,  then,  in each such case,  the Company  shall give to each holder of a
Rights Certificate,  to the extent feasible and in accordance with Section 25, a
notice of such  proposed  action,  which  shall  specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on  which  such   reclassification,   consolidation,   merger,  sale,  transfer,
liquidation,  dissolution,  or  winding  up is to take  place  and  the  date of
participation  therein by the holders of the shares of Company Common Stock,  if
any such date is to be fixed,  and such notice  shall be so given in the case of
any  action  covered  by clause  (i) or (ii) above at least 20 days prior to the
record date for  determining  holders of the shares of Company  Common Stock for
purposes of such action,  and in the case of any such other action,  at least 20
days  prior to the date of the  taking  of such  proposed  action or the date of
participation  therein by the  holders of the  shares of  Company  Common  Stock
whichever  shall be the  earlier;  provided,  however,  no such notice  shall be
required pursuant to this Section 24, if any Subsidiary of the Company effects a
consolidation  or merger  with or into,  or effects a sale or other  transfer of
assets or earnings power to, any other Subsidiary of the Company.

                                       27
<PAGE>

         (b) In case any Section 11(a)(ii) Event shall occur,  then, in any such
case, the Company shall as soon as practicable thereafter give to each holder of
a Rights Certificate,  to the extent feasible and in accordance with Section 25,
a notice of the occurrence of such event,  which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii).

         (c) If any Section  11(a)(ii) Event shall occur, then all references in
this Section 24 to Company  Common Stock shall be deemed  thereafter to refer to
the class of Common  Stock or other  securities  for which the  Rights  are then
exercisable.

         Section 25. Notices. All notices and other communications  provided for
hereunder shall,  unless otherwise  stated herein,  be in writing  (including by
telex, telegram or cable) and mailed or sent or delivered, if to the Company, at
its address at:

                           MIM Corporation
                           100 Clearbrook Road
                           Elmsford, New York 10523
                           Attention: General Counsel
                           Tel No.: (914) 460-1600
                           Fax No.: (914) 460-1670

         and if to the Rights Agent, at its address at:

                           American Stock Transfer & Trust Company
                           40 Wall Street
                           New York, New York 10005
                           Attention: Corporate Trust Department
                           Tel No.: (718) 921-8380
                           Fax No.: (718) 259-1144

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

         Section 26. Supplements and Amendments. Prior to the Distribution Date,
the Company may by resolution of its Board,  and the Rights Agent shall,  if the
Company  pursuant  to such  resolution  so  directs,  supplement  or  amend  any
provision of this Agreement  without the approval of any holders of certificates
representing  shares of Company  Common Stock.  From and after the  Distribution
Date, the Company may by resolution of its Board, and the Rights Agent shall, if
the Company so directs,  supplement or amend this Agreement without the approval
of any holders of Rights  Certificates in order (i) to cure any ambiguity,  (ii)
to correct or supplement any provision  contained  herein which may be defective
or inconsistent with any other provisions  herein,  (iii) to shorten or lengthen
any time  period  hereunder,  or (iv) to change  or  supplement  the  provisions
hereunder  in any manner which the Company may deem  necessary or desirable  and
which  shall  not  adversely  affect  the  interests  of the  holders  of Rights
Certificates  (other  than  an  Acquiring  Person  or an  Adverse  Person  or an
Affiliate or Associate of an Acquiring Person or an Adverse  Person);  provided,
however,  that this Agreement may not be supplemented or amended, at a time when
the Rights are not  redeemable,  to  lengthen,  pursuant to clause (iii) of this
sentence,  (A)  subject to Section 30, a time  period  (including  a time period
described  in Section  3(a)(i) or  3(a)(ii))  relating to when the Rights may be
redeemed, or (B) any other time period unless in a case described in this clause
(B) such  lengthening is for the purpose of protecting,  enhancing or clarifying
the rights of, and/or the benefits to, the holders of Rights.  Upon the delivery

                                       28
<PAGE>

of a certificate  from an appropriate  officer of the Company or, so long as any
Person is an Acquiring Person  hereunder,  from a majority of the members of the
Board which states that the proposed  supplement  or amendment is in  compliance
with  the  terms of this  Section  26,  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 Company Common Stock.

         Section  27.  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 28. Determinations and Actions by the Board of Directors,  Etc.
For all purposes of this  Agreement,  any calculation of the number of shares of
Company Common Stock outstanding at any particular time,  including for purposes
of determining the particular  percentage of such outstanding  shares of Company
Common  Stock of which any  Person  is the  Beneficial  Owner,  shall be made in
accordance  with the last  sentence of Rule  13d-3(d)(1)(i)  of the Exchange Act
Regulations  as in effect on the date hereof.  Except as otherwise  specifically
provided  herein,  the Board shall have the  exclusive  power and  authority  to
administer  this  Agreement  and to exercise all rights and powers  specifically
granted to the Board or to 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.  All such actions,  calculations,  interpretations and determinations
(including,  for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith shall (x) be final,
conclusive  and binding on the  Company,  the Rights  Agent,  the holders of the
Rights  and all other  parties,  and (y) not  subject  the  Board or any  member
thereof to any liability to the holders of the Rights.

         Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company,  the Rights Agent and
the  registered   holders  of  the  Rights   Certificates  (and,  prior  to  the
Distribution  Date,  registered  holders of shares of Company  Common Stock) any
legal or  equitable  right,  remedy  or claim  under  this  Agreement;  but this
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered  holders of the Rights  Certificates (and, prior to the
Distribution Date, registered holders of shares of Company Common Stock).

         Section  30.  Severability.   If  any  term,  provision,   covenant  or
restriction  of this Agreement is held by a court of competent  jurisdiction  or
other  authority  to be invalid,  void or  unenforceable,  the  remainder of the
terms, provisions,  covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected,  impaired or invalidated;
provided,  however,  that  notwithstanding  anything  in this  Agreement  to the
contrary, if any such term,  provision,  covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good  faith  judgment  that  severing  the  invalid  language  from  this
Agreement would adversely affect the purpose or effect of this Agreement and the
Rights shall not then be  redeemable,  then the right of redemption set forth in
Section 23 shall be reinstated  and shall not expire until the Close of Business
on the tenth Business Day following the date of such determination by the Board.

         Section 31.  Governing Law. This Agreement,  each Right and each Rights
Certificate  issued under this Agreement  shall be governed by, and construed in
accordance  with,  the laws of the State of  Delaware  applicable  to  contracts
executed in and to be performed entirely in such State, without giving effect to
the conflicts of laws principles thereof.

         Section 32. Counterparts.  This Agreement may be executed (including by
facsimile) in one or more  counterparts,  and by the different parties hereto in
separate  counterparts,  each of which  when  executed  shall be deemed to be an

                                       29
<PAGE>

original,  but all of which taken  together  shall  constitute  one and the same
instrument.

         Section 33. Captions.  The captions contained in this Agreement are for
descriptive  purposes  only and  shall  not  affect  in any way the  meaning  or
interpretation of this Agreement.

         Section 34. Exchange.

         (a) The Company may at any time prior to the  Distribution  Date,  upon
resolution  of the Board,  exchange all or part of the then  outstanding  Rights
(which shall not include  Rights that have become void pursuant to Section 7(e))
for  shares of  Company  Common  Stock at an  exchange  ratio  specified  in the
following sentence, as appropriately  adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof. Subject to such
adjustment,  each Right may be  exchanged  for that  number of shares of Company
Common Stock  obtained by dividing the  Adjustment  Spread (as defined below) by
the then Current Market Price  (determined  pursuant to Section 11(d)) per share
of Company  Common  Stock on the earlier of (i) the Stock  Acquisition  Date and
(ii) the date on which a tender or exchange  offer by any Person (other than the
Company,  any Subsidiary of the Company, any employee benefit plan maintained by
the Company or any of its  Subsidiaries or any trustee or fiduciary with respect
to such a plan  acting in such  capacity)  is first  published  or sent or given
within the  meaning of Rule  14d-4(a) of the  Exchange  Act  Regulations  or any
successor rule, if upon consummation thereof such Person would be the Beneficial
Owner of 15% or more of the shares of  Company  Common  Stock  then  outstanding
(such exchange ratio being the "Exchange Ratio").  The "Adjustment Spread" shall
equal (x) the aggregate  market price on the date of such event of the number of
Adjustment  Units  determined  pursuant  to  Section  11(a)(ii),  minus  (y) the
Purchase Price.

         (b)  Immediately  upon the  action of the  Board,  in  accordance  with
Section  34(a),  ordering  the  exchange  of any Rights and  without any further
action and without any notice, the right to exercise such Rights shall terminate
and the only right  thereafter  of a holder of such  Rights  shall be to receive
that number of shares of Company Common Stock equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall promptly
give public notice of any such exchange;  provided, however, that the failure to
give,  or any defect in,  such  notice  shall not  affect the  validity  of such
exchange.  The Company  promptly shall mail a notice of any such exchange to all
of the  holders of such Rights at their last  addresses  as they appear upon the
registry  books of the Rights  Agent.  Any notice  which is mailed in the manner
herein  provided shall be deemed given,  whether or not the holder  receives the
notice.  Each  such  notice of  exchange  shall  state  the  method by which the
exchange of shares of Company  Common Stock for Rights will be effected  and, in
the event of any partial exchange, the number of Rights which will be exchanged.
Any partial  exchange  shall be effected  pro rata based on the number of Rights
(other than Rights which have become void pursuant to the  provisions of Section
7(e)) held by each holder of Rights.

         (c) In the event  that the  number of shares of  Company  Common  Stock
which are  authorized  by the Company's  Certificate  of  Incorporation  but not
outstanding  or reserved for issuance are not  sufficient to permit any exchange
of Rights as  contemplated in accordance with this Section 34, the Company shall
take all such  action as may be  necessary  to  authorize  additional  shares of
Company  Common Stock for issuance  upon exchange of the Rights or make adequate
provision to substitute  (i) cash,  (ii) debt  securities of the Company,  (iii)
other assets,  or (iv) any  combination  of the  foregoing,  having an aggregate
value  equal to the  Adjustment  Spread,  where  such  aggregate  value has been
determined by the Board.

         (d) In  connection  with any  exchange  authorized  pursuant to Section
34(a), the Company shall not be required to issue fractions of shares of Company
Common Stock or to distribute  certificates which evidence fractional shares. In

                                       30
<PAGE>

lieu of  fractional  shares,  the Company may pay to the  registered  holders of
Rights  Certificates at the time such Rights are exchanged as herein provided an
amount  in  cash  equal  to the  same  fraction  of  the  Current  Market  Price
(determined pursuant to Section 11(d)) of one share of Company Common Stock.

                                       31
<PAGE>

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

                                        MIM CORPORATION

                                        By: /s/ Barry A. Posner
                                        --------------------------------
                                        Name:  Barry A. Posner
                                        Title: Executive Vice President
                                        and Secretary

                                        AMERICAN STOCK TRANSFER & TRUST COMPANY

                                        By: /s/ Joseph F. Wolf
                                        -------------------------------
                                        Name: Joseph F. Wolf
                                        Title: Vice President

                                       32
<PAGE>

                                                                       EXHIBIT A
                                                         TO AMENDED AND RESTATED
                                                                RIGHTS AGREEMENT

                          [Form of Rights Certificate]

Certificate No. R-_________                                   __________ Rights

         NOT EXERCISABLE AFTER NOVEMBER 24, 2012 OR EARLIER IF THE RIGHTS EXPIRE
         UNDER  CERTAIN  CIRCUMSTANCES  OR  ARE  REDEEMED  OR  EXCHANGED  BY THE
         COMPANY.  THE RIGHTS ARE  SUBJECT TO  REDEMPTION,  AT THE OPTION OF THE
         COMPANY, AT $.0001 PER RIGHT, ON THE TERMS SET FORTH IN THE AMENDED AND
         RESTATED  RIGHTS  AGREEMENT.   UNDER  CERTAIN   CIRCUMSTANCES,   RIGHTS
         BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE PERSON (AS SUCH
         TERMS ARE DEFINED IN THE AMENDED AND RESTATED RIGHTS AGREEMENT) AND ANY
         SUBSEQUENT  HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
         REPRESENTED BY THIS  CERTIFICATE  ARE OR WERE  BENEFICIALLY  OWNED BY A
         PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN ADVERSE PERSON OR AN
         AFFILIATE OR ASSOCIATE OF AN ACQUIRING  PERSON OR AN ADVERSE PERSON (AS
         SUCH TERMS ARE DEFINED IN THE AMENDED AND RESTATED  RIGHTS  AGREEMENT).
         ACCORDINGLY,  THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
         MAY BECOME VOID IN THE CIRCUMSTANCES  SPECIFIED IN SECTION 7(E) OF SUCH
         AGREEMENT.]*

                               RIGHTS CERTIFICATE

                                 MIM CORPORATION

         This certifies that ___________________________, or registered assigns,
is the registered  holder of the number of Rights set forth above, each of which
entitles the registered  holder thereof,  subject to the terms and conditions of
the Amended and Restated Rights Agreement,  dated as of December 3,  2002 (the
"Amended and Restated Rights  Agreement"),  between MIM Corporation,  a Delaware
corporation (the "Company"),  and American Stock Transfer & Trust Company, a New
York  corporation,  as Rights Agent (the "Rights  Agent"),  to purchase from the
Company at any time after the Distribution Date and prior to the Expiration Date
(each as defined in the Amended and Restated Rights Agreement), at the office of
the Rights Agent, one one-thousandth of a fully paid and non-assessable share of
Series A Junior  Participating  Preferred Stock, par value $.0001 per share (the
"Preferred Stock"), of the Company at a purchase price (the "Purchase Price") of
$20.00, in cash, per one one-thousandth of a share (each such one one-thousandth
of a share of Preferred Stock being a "Unit"),  upon  presentation and surrender
of this Rights Certificate with the Election to Purchase and related certificate
duly executed.  In certain  circumstances  described in the Amended and Restated
Rights  Agreement,  the Board may elect to issue cash, assets or other equity or
debt  securities to the holder hereof in lieu of Units.  Capitalized  terms used

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

<PAGE>

but not defined in this Rights  Certificate  that are defined in the Amended and
Restated  Rights  Agreement  shall  have the  meanings  ascribed  to them in the
Amended and Restated Rights Agreement.

         UPON  THE  OCCURRENCE  OF A  SECTION  11(A)(II)  EVENT,  IF THE  RIGHTS
EVIDENCED BY THIS RIGHTS  CERTIFICATE ARE BENEFICIALLY OWNED BY (I) AN ACQUIRING
PERSON OR AN ADVERSE  PERSON OR AN AFFILIATE OR ASSOCIATE OF ANY SUCH  ACQUIRING
PERSON OR ADVERSE  PERSON,  (II) UNDER  CERTAIN  CIRCUMSTANCES  SPECIFIED IN THE
AMENDED AND RESTATED RIGHTS AGREEMENT, A TRANSFEREE OF ANY SUCH ACQUIRING PERSON
OR ADVERSE  PERSON,  OR ASSOCIATE OR AFFILIATE OF ANY SUCH  ACQUIRING  PERSON OR
ADVERSE PERSON,  OR (III) UNDER CERTAIN  CIRCUMSTANCES  SPECIFIED IN THE AMENDED
AND  RESTATED  RIGHTS  AGREEMENT,  A  TRANSFEREE  OF A PERSON  WHO,  AFTER  SUCH
TRANSFER,  BECAME AN ACQUIRING  PERSON OR AN ADVERSE PERSON,  OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON OR AN ADVERSE PERSON,  SUCH RIGHTS SHALL BECOME
NULL AND VOID AND NO HOLDER  HEREOF  SHALL HAVE ANY RIGHT  WITH  RESPECT TO SUCH
RIGHTS FROM AND AFTER THE OCCURRENCE OF SUCH SECTION 11(A)(II) EVENT.

         The number of Rights  evidenced  by this  Rights  Certificate  (and the
number of Units which may be purchased  upon exercise  thereof) set forth above,
and the  Purchase  Price  set forth  above,  are  subject  to  modification  and
adjustment  upon the occurrence of certain events as provided in the Amended and
Restated Rights Agreement.

         In certain  circumstances,  the Rights evidenced hereby may entitle the
registered  holder thereof to purchase capital stock of an entity other than the
Company or receive  common stock,  cash or other assets,  all as provided in the
Amended and Restated Rights Agreement.

         This Rights Certificate is subject to all of the terms,  provisions and
conditions of the Amended and Restated Rights Agreement, which terms, provisions
and  conditions  are hereby  incorporated  herein by  reference  and made a part
hereof and to which Amended and Restated  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.  Copies of the Amended and Restated Rights Agreement
are on file at the principal  office of the Company and are  available  from the
Company upon written request and at no charge.

         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 an aggregate  number of Rights equal to the aggregate
number of Rights  evidenced  by the Rights  Certificate  or Rights  Certificates
surrendered.  If this  Rights  Certificate  shall  be  exercised  in  part,  the
registered holder shall be entitled to receive,  upon surrender hereof,  another
Rights  Certificate  or Rights  Certificates  for the number of whole Rights not
exercised.

         Subject to the provisions of the Amended and Restated Rights Agreement,
at any time prior to the earlier of (i) the Stock  Acquisition  Date or (ii) the
Final  Expiration Date, the Rights evidenced by this Certificate may be redeemed
by the Company, at its option, by resolution of the Board, at a redemption price
of $.0001 per Right,  payable at the Company's  option in cash,  common stock of
the Company or other  consideration,  subject to adjustment in certain events as
provided in the Amended and Restated Rights Agreement.

         No  fractional  Units 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 Amended and Restated 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 Preferred
Stock  or of any  other  securities  which  may at any time be  issuable  on the
exercise hereof, nor shall anything contained in the Amended and Restated 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

                                       2
<PAGE>

receive notice of meetings or other actions  affecting  stockholders  (except as
provided in the Amended and Restated Rights Agreement),  or to receive dividends
or subscription rights, or otherwise,  until the Rights evidenced by this Rights
Certificate  shall have been  exercised  as provided in the Amended and Restated
Rights Agreement.

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

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

Dated as of _____________________________________,

ATTEST:                               MIM CORPORATION

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

Countersigned:

AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Rights Agent

By:
     ---------------------------------------
      Authorized Signatory

                                       3
<PAGE>

                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

                   (To be executed by the registered holder if
             such holder desires to transfer the Rights Certificate)

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto

--------------------------------------------------------------------------------
                        (Please print name of transferee)

--------------------------------------------------------------------------------
                      (Please print address of transferee)

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

Dated: __________________________________,

Signature:
           -----------------------------------------------
(Sign exactly as your name appears on the
other side of this Rights Certificate)

Signature Guarantee:
                     --------------------------------

                                       4
<PAGE>

                                   Certificate

         The  undersigned  hereby  certifies by checking the  appropriate  boxes
that:

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

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

Dated:                                               ,
       -----------------------------------------------

Signature:
           ---------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Rights Certificate)

Signature Guarantee:
                     --------------------------------

                                     Notice

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

         Signatures  must  be  guaranteed  by  an  approved  eligible  financial
institution  acceptable  to the  Rights  Agent  in its sole  discretion  or by a
participant in the  Securities  Transfer  Agents  Medallion  Program,  the Stock
Exchange Medallion Program or the New York Stock Exchange Medallion Program.

         In the event the  certification  set forth above is not completed,  the
Company will deem the  beneficial  owner of the Rights  evidenced by this Rights
Certificate  to be an Acquiring  Person or an Adverse  Person or an Affiliate or
Associate thereof and, in the case of an Assignment, will affix a legend to that
effect  on  any  Rights   Certificates   issued  in  exchange  for  this  Rights
Certificate.

                                       5
<PAGE>

                          FORM OF ELECTION TO PURCHASE

                (To be executed by the registered holder if such
             holder desires to exercise the Rights evidenced by this
                               Rights Certificate)

To:  MIM CORPORATION

         The undersigned hereby irrevocably elects to exercise  ________________
Rights evidenced by this Rights  Certificate to purchase the Units issuable upon
the  exercise of the Rights (or such other  securities,  cash or property of the
Company or of any other  person  which may be issuable  upon the exercise of the
Rights) and requests that  certificates for such Units (or such other securities
which may be issuable  upon the exercise of the Rights) be issued in the name of
and delivered to:

Please insert social security
or other identifying number:
                             ---------------------------------------------------

--------------------------------------------------------------------------------
                                    (Please print name)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                    (Please print address)

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

Please insert social security
or other identifying number:
                             ---------------------------------------------------

--------------------------------------------------------------------------------
                                    (Please print name)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                    (Please print address)

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

Signature:
           ---------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Rights Certificate)

Signature Guarantee:
                     -----------------------------------------------------------

                                       6
<PAGE>

                                   Certificate

         The  undersigned  hereby  certifies by checking the  appropriate  boxes
that:

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

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

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

Signature:
           --------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Rights Certificate)

Signature Guarantee:
                     ----------------------------------------------------------

                                     Notice

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

         Signatures  must  be  guaranteed  by  an  approved  eligible  financial
institution  acceptable  to the  Rights  Agent  in its sole  discretion  or by a
participant  in the  Security  Transfer  Agents  Medallion  Program,  the  Stock
Exchange  Medallion Program or the New York Stock Exchange  Medallion  Signature
Guarantee Program.

         In the event the  certification  set forth above is not completed,  the
Company will deem the  beneficial  owner of the Rights  evidenced by this Rights
Certificate  to be an Acquiring  Person or an Adverse  Person or an Affiliate or
Associate thereof and, in the case of an exercise of less than all of the Rights
evidenced by this Rights Certificate,  will affix a legend to that effect on any
Rights  Certificates  issued for the balance of such Rights in exchange for this
Rights Certificate.

                                       7
<PAGE>

                                                                       EXHIBIT B

                                                         TO AMENDED AND RESTATED
                                                                RIGHTS AGREEMENT

                                   SUMMARY OF
                       RIGHTS TO PURCHASE PREFERRED STOCK

         On November  24,  1998,  the Board of  Directors  (the  "Board") of MIM
Corporation (the "Company")  declared a dividend of one right ("Right") for each
outstanding  share of the  Company's  Common  Stock,  par value $.0001 per share
("Company Common Stock"),  to stockholders of record at the close of business on
December 4, 1998 (the "Record  Date") and for each share of Company Common Stock
issued (including shares distributed from the Company's treasury) by the Company
thereafter and prior to the  Distribution  Date (as defined  below).  Each Right
entitles the registered holder, subject to the terms of the Amended and Restated
Rights  Agreement  (as  defined  below),   to  purchase  from  the  Company  one
one-thousandth of a share (a "Unit") of Series A Junior Participating  Preferred
Stock,  par value $.0001 per share  ("Preferred  Stock"),  of the Company,  at a
purchase price of $20.00 per share, in cash (the "Purchase  Price"),  subject to
adjustment.  The description and terms of the Rights are set forth in an Amended
and Restated  Rights  Agreement,  dated as of December 3, 2002 (the "Amended and
Restated Rights  Agreement"),  between the Company and American Stock Transfer &
Trust Company, as Rights Agent. In general, each Unit has substantially the same
economic  attributes  and carries  substantially  the same voting  rights as one
share of Company Common Stock.

         Copies of the Amended and  Restated  Rights  Agreement  have been filed
with the  Securities  and Exchange  Commission  as exhibits to a  Post-Effective
Amendment  No. 3 to  Registration  Statement  on Form 8-A/A  dated  December  4,
2002(the  "Form  8-A/A") and are publicly  available.  Copies of the Amended and
Restated  Rights  Agreement are also  available free of charge from the Company.
This summary  description of the Rights and the Preferred Stock does not purport
to be  complete  and is  qualified  in its  entirety  by  reference  to all  the
provisions of the Amended and Restated  Rights  Agreement and the Certificate of
Designations creating the Preferred Stock,  including the definitions therein of
certain terms,  which Amended and Restated  Rights  Agreement and Certificate of
Designations are incorporated herein by reference.

         Description of the Rights

         Initially,  the Rights  will  attach to all  certificates  representing
shares of outstanding  Company Common Stock, and no separate Rights certificates
will be distributed;  the Rights will not be separately  traded. The Rights will
separate from the Company  Common Stock and the  "Distribution  Date" will occur
upon the earliest of (i) 10 business days (or,  subject to certain  limitations,
such later date as may be  determined by action of the Board prior to such time)
following a public  announcement (the date of such announcement being the "Stock
Acquisition  Date")  that (a) a person  or group  of  affiliated  or  associated
persons (an "Acquiring Person") has acquired,  obtained the right to acquire, or
otherwise obtained  beneficial  ownership of 15% or more of the then outstanding
shares of Company  Common  Stock or (b) the Board has,  in  accordance  with the
criteria  set forth in the Amended and  Restated  Rights  Agreement,  declared a
person  who  beneficially  owns at least 10% of the then  outstanding  shares of
Company  Common  Stock to be an "Adverse  Person,"  (ii) 10  business  days (or,
subject to certain  limitations,  such later date as may be determined by action
of the Board prior to such time) following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 15% or
more of the then  outstanding  shares  of  Company  Common  Stock  and (iii) the
occurrence of a Flip-Over Event (as defined below). Until the Distribution Date,
(i) the Rights will be evidenced solely by Company Common Stock certificates and
will be transferred  with and only with such Company Common Stock  certificates,

<PAGE>

(ii) new  Company  Common  Stock  certificates  issued  after  the  Record  Date
(including  shares  distributed  from the  Company's  treasury)  will  contain a
notation  incorporating  the Amended and Restated Rights  Agreement by reference
and (iii) the  surrender for transfer of any Company  Common Stock  certificates
will also  constitute  the  transfer of the Rights  associated  with the Company
Common Stock evidenced by such certificates.

         The Rights are not  exercisable  until the  Distribution  Date and will
expire at the close of  business  on  November  24,  2012  unless the Rights are
earlier redeemed or exchanged by the Company.

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

         In the event (a "Flip-In Event") that (i) a person becomes an Acquiring
Person (other than pursuant to a Flip-Over Event (as defined  below)),  (ii) the
Board  declares  a person to be an  Adverse  Person,  (iii) the  Company  is the
surviving corporation in a merger with an Acquiring Person and shares of Company
Common Stock shall remain  outstanding,  (iv) an Acquiring Person engages in one
or more "self-dealing" transactions specified in the Amended and Restated Rights
Agreement, or (v) during such time as there is an Acquiring Person or an Adverse
Person,  an event occurs  which  results in such  Acquiring  Person's or Adverse
Person's ownership interest being increased by more than 1% (e.g., by means of a
reverse stock split or  recapitalization),  then, in each such case, each holder
of a Right will thereafter have the right to receive, upon exercise,  Units (or,
in certain  circumstances,  cash,  property or other  securities of the Company)
having a value equal to two times the exercise price of the Right.  The exercise
price is the Purchase  Price  multiplied  by the number of Units  issuable  upon
exercise of a Right prior to the Flip-In Event.  Notwithstanding  the foregoing,
following  the  occurrence  of any Flip-In  Event all Rights that are, or (under
certain  circumstances  specified in the Amended and Restated Rights  Agreement)
were,  beneficially  owned by any  Acquiring  Person or  Adverse  Person  (or by
certain related parties) will be null and void.

         For example,  at an exercise price of $100.00 per Right, each Right not
owned by an  Acquiring  Person  or an  Adverse  Person  (or by  certain  related
parties)  following a Flip-In Event would entitle its holder to purchase $200.00
worth of Units (or other  consideration,  as noted  above),  based upon its then
current  market  price  (determined  based upon the market  price of the Company
Common Stock), for $100.00. Assuming that the Company Common Stock had a current
market  price of $50.00 per share at such time,  the holder of each valid  Right
would be entitled to purchase 4 Units of Preferred Stock for $100.00.

         In the event (a  "Flip-Over  Event")  that,  at any time  following the
Stock  Acquisition  Date,  (i) the  Company  is  acquired  in a merger  or other
business   combination   transaction  and  the  Company  is  not  the  surviving
corporation,  (ii) any person consolidates or merges with the Company and all or
part of the Company Common Stock is converted or exchanged for securities,  cash
or property of any other Person, or (iii) 50% or more of the Company's assets or
earning power is sold or transferred,  then, in each such case, each holder of a
Right (except Rights which previously have been voided as described above) shall
thereafter  have the  right  to  receive,  upon  exercise,  common  stock of the
Acquiring  Person  or  Adverse  Person  having a value  equal to two  times  the
exercise price of the Right.

         The Purchase  Price  payable,  and the number of Units  issuable,  upon
exercise  of the Rights are subject to  adjustment  from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision,  combination
or reclassification of, the Company Common Stock, (ii) if holders of the Company
Common Stock are granted  certain  rights or warrants to  subscribe  for Company
Common Stock or convertible  securities at less than the current market price of

<PAGE>

the Company Common Stock,  or (iii) upon the  distribution to the holders of the
Company  Common Stock of evidences of  indebtedness,  cash or assets  (excluding
regular  quarterly cash dividends) or of subscription  rights or warrants (other
than those referred to above).

         With certain  exceptions,  no adjustment in the Purchase  Price will be
required  until  cumulative  adjustments  amount to at least 1% of the  Purchase
Price.  The Company is not required to issue  fractional Units of Company Common
Stock.  In lieu  thereof,  an adjustment in cash may be made based on the market
price of the Company Common Stock prior to the date of exercise.

         At any time prior to the Distribution  Date, except as described below,
the  Company  may  redeem the  Rights in whole,  but not in part,  at a price of
$.0001 per Right (the  "Redemption  Price"),  subject to  adjustment  in certain
events, payable, at the election of the Board, in cash, shares of Company Common
Stock  or  such  other  form  of  consideration  as  the  Board  may  determine.
Immediately  upon  effectiveness  of  the  action  of  the  Board  ordering  the
redemption  of the Rights,  the Rights will  terminate and the only right of the
holders of Rights will be to receive the Redemption Price.

         At any time prior to the  Distribution  Date,  the Company may exchange
the Rights (other than Rights owned by an Acquiring Person or an Adverse Person,
or an affiliate or an  associate  of an Acquiring  Person or an Adverse  Person,
which will have become void),  in whole or in part, for shares of Company Common
Stock at an exchange  ratio  determined  as provided in the Amended and Restated
Rights Agreement.

         Until a Right is exercised,  the holder thereof,  as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. Following exercise, the holder's rights will be
determined by the type of consideration received upon the exercise. Although the
distribution  of the Rights  should not be  taxable  to  stockholders  or to the
Company,  stockholders may, depending upon the circumstances,  recognize taxable
income in the  event  that the  Rights  become  exercisable  for Units (or other
consideration) or are exchanged as provided in the preceding paragraph.

         The  provisions  of the Amended and Restated  Rights  Agreement  may be
amended  without the approval of the holders of Company Common Stock at any time
prior to the Distribution  Date. After the Distribution  Date, the provisions of
the Amended and Restated  Rights  Agreement  may be amended in order to cure any
ambiguity,  defect or  inconsistency,  to make  changes  which do not  adversely
affect the  interests  of  holders of Rights  (excluding  the  interests  of any
Acquiring Person or Adverse  Person),  or to shorten or lengthen any time period
under the Amended and Restated  Rights  Agreement;  provided,  however,  that no
amendment to adjust the time period  governing  redemption may be made after the
Rights are no longer redeemable.

<PAGE>

                                                                       EXHIBIT C

                                                         TO AMENDED AND RESTATED
                                                                RIGHTS AGREEMENT

                                     FORM OF
                           CERTIFICATE OF DESIGNATIONS
                                       OF
                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
                                       OF
                                 MIM CORPORATION

         MIM CORPORATION, a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY:

         That,  pursuant to authority conferred upon the Board of Directors (the
"Board")  of  the  Corporation  by  its  Certificate  of  Incorporation  and  in
accordance  with  Section  151 of the  General  Corporation  Law of the State of
Delaware (the "DGCL"), the Board, on November 24, 1998 duly adopted a resolution
fixing the voting powers,  designations,  preferences  and rights  relating to a
series of preferred stock as follows:

         "RESOLVED,  that the  Board  authorizes  the  issuance  of a series  of
preferred stock  consisting of 250,000 shares,  par value $.0001 per share,  and
the Board  fixes the voting  powers,  designations,  preferences  and  relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of such preferences  and/or rights, of the shares of that series
as follows:

         Section 1. Designation and Amount; Preference Shares.

         (a) The  shares  of the  series  will be  designated  Series  A  Junior
Participating  Preferred Stock ("Series A Preferred Stock"). The total number of
authorized  shares of the series will be 250,000  shares,  par value  $.0001 per
share.

         (b) Each share of Series A Preferred Stock shall be subdivided into and
issuable in fractions of one one-thousandth  (1/1,000) of a share. Each such one
one-thousandth of a share of Series A Preferred Stock is hereinafter referred to
as a "Unit."

         Section 2. Dividends and Distributions.

         (a)  Subject  to the prior and  superior  rights of the  holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Preferred  Stock with  respect to  dividends,  each holder of a Unit
shall be entitled to receive, when, as and if declared by the Board out of funds
legally  available  for that  purpose,  quarterly  dividends  payable in cash to
holders  of  record  on the last  business  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 Unit of Series A Preferred Stock, in an amount per
Unit  (rounded  to the  nearest  cent)  equal to the greater of (a) $0.25 or (b)
subject to the provision for adjustment hereinafter set forth, the aggregate per
share amount of all cash dividends  declared on shares of the common stock,  par
value  $.0001  per  share,  of  the  Company  (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 a Unit of
Series A Preferred  Stock,  and (ii)  subject to the  provision  for  adjustment
hereinafter set forth,

<PAGE>

quarterly  distributions  (payable in kind) on each Quarterly  Dividend  Payment
Date in an  amount  per Unit  equal to the  aggregate  per  share  amount of all
non-cash  dividends  or other  distributions  declared on shares of 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 a
Unit. In the event the Corporation shall at any time following November 24, 1998
(the "Rights Declaration Date") (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding  Common Stock or (iii)
combine the  outstanding  Common Stock into a smaller number of shares,  then in
each such case the amount to which holders of Units of Series A Preferred  Stock
were entitled  immediately prior to such event under clause (b) of the preceding
sentence  shall be adjusted by  multiplying  each such amount by a fraction  the
numerator  of  which  is the  number  of  shares  of  Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

         (b) The  Corporation  shall declare a dividend or distribution on Units
of the Series A Preferred  Stock as provided in paragraph  (a) above at the time
it declares a dividend or distribution on the Common Stock;  provided,  however,
that in the event no dividend or  distribution  shall have been  declared on the
Common Stock during the period between any Quarterly  Dividend  Payment Date and
the next  subsequent  Quarterly  Dividend  Payment Date, a dividend of $0.25 per
Unit on the  Series A  Preferred  Stock  shall  nevertheless  be payable on such
subsequent Quarterly Dividend Payment Date.

         (c) No dividend or distribution shall be paid or payable to the holders
of shares of  Common  Stock  unless,  prior  thereto,  all  accrued  but  unpaid
dividends to the date of such dividend or  distribution  shall have been paid to
the holders of Units of Series A Preferred Stock.

         (d)  Dividends  shall  begin  to  accrue  and  be  cumulative  on  each
outstanding  Unit from the Quarterly  Dividend  Payment Date next  preceding the
date of issue of such  Unit,  unless  the date of issue of such Unit is prior to
the record date for the first  Quarterly  Dividend  Payment  Date, in which case
dividends  on such Unit  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 Units of Series A
Preferred  Stock  entitled  to receive a  quarterly  dividend  and  before  such
Quarterly  Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative  from such  Quarterly  Dividend  Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on Units in
an amount less than the total  amount of such  dividends at the time accrued and
payable on such Units shall be allocated pro rata on a Unit-by-Unit  basis among
all such Units at the time outstanding.  The Board may fix a record date for the
determination  of holders of Units entitled to receive  payment of a dividend or
distribution  declared thereon,  which record date shall be no more than 60 days
prior to the date fixed for the payment thereof.

         Section 3. Voting Rights. The holders of Units shall have the following
voting rights:

         (a) Subject to the provision for adjustment hereinafter set forth, each
Unit shall entitle the holder thereof to one vote on all matters  submitted to a
vote of the stockholders of the Corporation.  In the event the Corporation shall
at any time following the Rights  Dividend  Declaration  Date (i) declare or pay
any dividend on Common Stock payable in shares of Common Stock,  (ii)  subdivide
the  outstanding  shares of Common  Stock or (iii)  combine or  consolidate  the
outstanding shares of Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which  holders of Units were entitled
immediately  prior to such event shall be adjusted by multiplying such number by
a  fraction  the  numerator  of which is the  number of  shares of Common  Stock
outstanding  immediately  after such event and the  denominator  of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

                                       2
<PAGE>

         (b) Except as otherwise provided herein or by law, the holders of Units
and the  holders of shares of Common  Stock and any other  capital  stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.

         (c) (i) Whenever,  at any time or times,  dividends payable on any Unit
or Units shall be in arrears in an amount  equal to at least two full  quarterly
dividends  (whether or not declared and whether or not consecutive),  the number
of Directors then constituting the entire Board shall automatically be increased
by 2 and the holders of record of the outstanding Units and holders of any other
shares of Preferred Stock of the Corporation ranking on a parity with the Series
A Preferred  Stock shall have the exclusive  right,  voting together as a single
class,  to elect  two  directors  of the  Corporation  at a special  meeting  of
stockholders of the  Corporation to fill such  newly-created  directorships.  At
elections for such directors, the holders of Units shall be entitled to cast one
vote for each Unit held.

         (ii) So long as any Units are  outstanding,  the number of Directors of
the Corporation shall at all times be such that the exercise,  by the holders of
shares of Series A Preferred  Stock and the holders of shares of Preferred Stock
on a parity  therewith,  of the right to elect Directors under the circumstances
provided  in  paragraph  (iii) of this  subclause  (c) will not  contravene  any
provision  of the  General  Corporation  Law of the  State  of  Delaware  or the
Certificate of Incorporation of the Corporation. Any director elected by holders
of Units  pursuant  to this  Section  may be  removed  at any  annual or special
meeting,  by vote of a majority of the  stockholders  who elected such  director
voting as a class,  with or without cause. In case any vacancy shall occur among
the directors  elected by the holders of Units  pursuant to this  Section,  such
vacancy may be filled by the  remaining  director so elected,  or his  successor
then in office,  and the  director so elected to fill such  vacancy  shall serve
until the next meeting of stockholders for the election of directors.  After the
holders of Units  shall have  exercised  their right to elect  directors  in any
default  period  and  during  the  continuance  of such  period,  the  number of
directors  shall not be further  increased  or  decreased  except by vote of the
holders  of Units as herein  provided  or  pursuant  to the rights of any equity
securities ranking senior to or pari passu with the Series A Preferred Stock.

         (iii) The right of the holders of Units,  voting separately as a class,
to elect two members of the Board as aforesaid  shall continue  until,  and only
until,  such time as all arrears in dividends  (whether or not  declared) on the
Units shall have been paid or declared and set apart for payment,  at which time
such  right  shall  terminate,  except as herein or by law  expressly  provided,
subject to reinvesting in the event of each and every subsequent  default of the
character  above-mentioned.  Upon any termination of the right of the holders of
the  Units as a class to vote for  directors  as  herein  provided,  the term of
office of all directors  then in office elected by the holders of Units pursuant
to this Section shall terminate immediately.  Whenever the term of office of the
directors  elected  by the  holders  of Units  pursuant  to this  Section  shall
terminate  and the special  voting powers vested in the holders of the Preferred
Stock pursuant to this Section shall have expired, the maximum number of members
of the Board shall be such  number as may be provided  for in the By-laws of the
Corporation,  irrespective  of any increase made  pursuant to the  provisions of
this Section.

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

         Section 4. Certain Restrictions.

         (a) Whenever  quarterly  dividends or other dividends or  distributions
payable on the Units as provided in herein are in arrears,  thereafter and until
all accrued and unpaid dividends and distributions,  whether or not declared, on
outstanding  Units  outstanding  shall have been paid in full,  the  Corporation
shall not:

                                       3
<PAGE>

         (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 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 Preferred  Stock,  except dividends
paid  ratably  on the Units 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 Units and 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 Preferred Stock; provided, however,
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 Preferred Stock; or

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

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

         Section 5. Reacquired Units. Any Units purchased or otherwise  acquired
by the  Corporation  in any manner  whatsoever  shall be retired  and  cancelled
promptly  after the  acquisition  thereof.  All such  Units  shall,  upon  their
cancellation,  become  authorized  but unissued  fractional  shares of Preferred
Stock  and may be  reissued  as part of a new  series of  Preferred  Stock to be
created by resolution or resolutions of the Board, subject to the conditions and
restrictions on issuance set forth herein.

         Section 6. Liquidation, Dissolution or Winding Up.

         (a) Upon any voluntary  liquidation,  dissolution  or winding up of the
Company,  no  distribution  shall be made (i) to the  holders of shares of stock
ranking  junior  (either as to dividends  or upon  liquidation,  dissolution  or
winding up) to the Series A Preferred Stock unless,  prior thereto,  the holders
of Units shall have received $1.00 per Unit, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment (the "Series A Liquidation Preference"),  or (ii) to the holders
of stock  ranking  on a parity  (either  as to  dividends  or upon  liquidation,
dissolution  or  winding  up)  with  the  Series  A  Preferred   Stock,   except
distributions  made  ratably on the Series A Preferred  Stock and all other such
parity stock in proportion to the total amounts to which the holders of all such
shares  are  entitled  upon  such   liquidation,   dissolution  or  winding  up.
Thereafter,  the  holders of Units  shall be  entitled  to receive an  aggregate
amount per Unit, subject to the provision for adjustment  hereinafter set forth,
equal to the  aggregate  amount to be  distributed  per share to the  holders of

                                       4

<PAGE>

Common  Stock.  In the event the Company shall at any time after the date hereof
declare  or pay any  dividend  on the Common  Stock  payable in shares of Common
Stock,  or  effect  a  subdivision  or  combination  or   consolidation  or  the
outstanding  shares of Common Stock (by  reclassification  or otherwise)  into a
greater or lesser number of shares of Common  Stock,  then in each such case the
aggregate  amount to which holders of Units were entitled  immediately  prior to
such event under the preceding  sentence shall be adjusted by  multiplying  such
amount by a fraction  the  numerator  of which is the number of shares of Common
Stock  outstanding  immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding  immediately prior to
such event.

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

         Section 7. Consolidation,  Merger, Etc. In case the Company shall enter
into any  consolidation,  merger,  combination or other transaction in which the
shares of Common  Stock are  exchanged  for or  converted  into  other  stock or
securities,  cash  and/or  any other  property,  then in any such case the Units
shall at the same time be similarly  exchanged  for or converted  into an amount
per Unit (subject to the provision for adjustment  hereinafter  set forth) equal
to 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 converted or  exchanged.  In the event the Company  shall at any
time (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii)  subdivide the  outstanding  Common Stock or (iii) combine the  outstanding
Common Stock into a smaller number of shares,  then in each such case the amount
set forth in the  preceding  sentence with respect to the exchange or conversion
of Units  shall be  adjusted  by  multiplying  such  amount  by a  fraction  the
numerator  of  which  is the  number  of  shares  of  Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

         Section  8.  Redemption.  The  Units  shall  not be  redeemable  by the
Company;  provided,  however,  that the foregoing shall not limit the ability of
the Company to purchase or otherwise deal in such Units to the extent  otherwise
permitted hereby and by law.

         Section 9. Ranking.  The Series A Preferred  Stock shall rank junior to
all other series of the Company's  Preferred  Stock (whether with or without par
value) as to the payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.

         Section 10. Amendment. Neither this Certificate of Designations nor the
Certificate of  Incorporation  of the Company may be amended in any manner which
would  materially  alter or change the powers,  preferences or special rights of
the  Series A  Preferred  Stock  so as to  affect  them  adversely  without  the
affirmative vote of the holders of a majority or more of the outstanding  Units,
voting separately as a class.

Section 11. Fractional  Shares.  Series A Preferred Stock may be issued in Units
or other  fractions  of a share,  which  Units or  fractions  shall  entitle the
holder,  in proportion to such holder's Units or 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 Preferred Stock.

                                       5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00045-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00045-of-00352.parquet"}]]