Document:

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Exhibit 10.1

[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]

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                             Study Funding Agreement

THIS Study Funding Agreement, dated as of October 3, 2002, is made by and
between Inspire Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Delaware, having offices located at 4222 Emperor
Boulevard, Suite 470, Durham, North Carolina 27703 ("Inspire"), and The Cystic
Fibrosis Foundation Therapeutics, Inc., a not for profit corporation organized
and existing under the laws of the State of Delaware, having offices located at
6931 Arlington Road, Bethesda, Maryland 20814 ("CFFT").

                                Witnesseth That:

Whereas, Inspire is engaged in the development and commercialization of certain
compounds and products, including without limitation, the Compound (as defined
below) which may be useful in the treatment of cystic fibrosis ("CF"); and

Whereas, CFFT is organized and operated to develop the means to cure and control
CF and to improve the quality of life for those with the disease; and

Whereas, CFFT desires to assist Inspire by funding certain of Inspire's costs
related to the conduct of a multi-center phase II clinical trial of the Compound
for the CF indication (the "Study") through CFFT's existing national network of
care centers known as the Therapeutics Development Network ("TDN") on the terms
and conditions set forth herein; and

Whereas, Inspire is willing to undertake such Study, and commit to further
development of the Compound for the CF indication in the event the Success
Criteria (as defined below) are met, on the terms and conditions set forth
herein.

Now Therefore, in consideration of the premises and mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties (as defined below)
hereto agree as follows:

1.   Definitions. As used in this Agreement, the following terms shall have the
meanings set forth in this Section 1 unless context dictates otherwise:

     1.1  "AAA" shall have the meaning assigned to such term in Section 10.2.

     1.2  "Affiliate" shall mean, with respect to a Party, any entity which
directly or indirectly controls, is controlled by, or is under common control
with, such Party. For these purposes, "control" shall refer to (A) the
ownership, directly or indirectly, of at least fifty percent (50%) of the voting
securities or other ownership interest of an entity; or (B) the possession,
directly or indirectly, of the power to direct the management or policies of an
entity, whether through the ownership of voting securities, by contract or
otherwise.

     1.3  "Agreement" shall mean this study funding agreement together with the
recitals and all exhibits hereto.

     1.4  "Breaching Party" shall have the meaning assigned to such term in
Section 8.2.

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          1.5  "CF" shall have the meaning assigned to such term in the first
whereas clause.

          1.6  "CFFT Repayment Amount" shall have the meaning assigned to such
term in Section 4.2(ii)(1).

          1.7  "Confidential Information" shall mean, with respect to either
Party, all confidential or proprietary information and materials, patentable or
otherwise, in any form (written, oral, photographic, electronic, magnetic, or
otherwise) which are disclosed by or on behalf of such Party to the other Party
pursuant to and in contemplation of this Agreement, including, without
limitation, information relating to the Compound or the Product.

          1.8  "Contribution" shall have the meaning assigned to such term in
Section 2.2(b).

          1.9  "Commercially Reasonable Efforts" shall mean, with respect to a
Party, those commercially reasonable efforts by that Party equivalent to the
efforts that Party would make in similar circumstances with respect to similar
operations entirely for its own account at that time; provided such efforts are
those as would be reasonably made by a prudent business person acting in good
faith and in the exercise of reasonable commercial judgment exerting such effort
and employing such resources as would normally be taken, exerted or employed by
such person for a product of similar market potential at a similar stage of its
product life, taking into account the competitiveness of the relevant
marketplace, the proprietary positions of Third Parties, the regulatory
structure involved, and the profitability of the product.

          1.10 "Compound" shall mean the chemical compound designated as
INS37217, whose chemical name is [CONFIDENTIAL TREATMENT REQUESTED].

          1.11 "Data Package" shall have the meaning assigned to such term in
Section 2.3(b).

          1.12 "Disclosing Party" shall have the meaning assigned to such term
in Section 6.1.

          1.13 "Effective Date" shall mean the date of this Agreement as set
forth in the Preamble.

          1.14 "Executive Officers" shall have the meaning assigned to such term
in Section 10.

          1.15 "FDA" shall mean the United States Food and Drug Administration,
or any successor agency having regulatory jurisdiction over the manufacture,
distribution and sale of drugs in the United States, and its territories and
possessions.

          1.16 "Field" shall mean the therapeutic treatment of CF lung disease
in humans.

          1.17 "Fully Burdened Development Costs" shall mean [CONFIDENTIAL
TREATMENT REQUESTED] costs for development of the Compound in the Field from the
Effective Date through (A) cessation of such activities as described in Section
4.2 of this Agreement; or (B) Registration of the Product (as defined using
Inspire's generally accepted accounting policies consistently applied)
[CONFIDENTIAL TREATMENT REQUESTED], and shall include, without limitation, all
direct expenses of research or development including

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costs of studies on the toxicological, pharmacokinetical, metabolical or
clinical aspects of the Compound conducted internally or by individual
investigators, consultants or other external services providers considered
necessary in Inspire's efforts to further development, and obtain Registration,
of the Product in the Territory, process development, process improvement and
scale-up and recovery costs, qualification lots, costs for preparing,
submitting, reviewing or developing data or information for the purpose of
submission to a governmental authority to obtain, maintain and/or expand the
Registration of the Product.

          1.18 "IND" shall mean any investigational new drug application filed
with the FDA pursuant to Part 312 of Title 21 of the U.S. Code of Federal
Regulations, including any amendments thereto.

          1.19 "Indemnitee" shall have the meaning assigned to such term in
Section 7.3.

          1.20 "Inspire Repayment Amount" shall have the meaning assigned to
such term in Section 4.2(ii)(2).

          1.21 "License Grant" shall have the meaning assigned to such term in
Section 4.2(i).

          1.22 "Licensing Income" shall have the meaning assigned to such term
in Section 4.2(iii).

          1.23 "Lower Respiratory Indication" shall mean the therapeutic
treatment by inhalation of the lower airways in humans (.i.e., chronic
bronchitis, bronchiectasis, etc.).

          1.24 "Net Sales" shall mean the gross amount invoiced for the sale of
the Product for use in the Field and in the Lower Respiratory Indication in
arm's length sales to Third Parties less deductions not otherwise reimbursed by
the Third Party for: (A) normal and customary trade, quantity and cash discounts
and sales returns and allowances, including (1) those granted on account of
price adjustments, billing errors, rejected goods, damaged goods, returns and
rebates, (2) administrative and other fees and reimbursements and similar
payments to wholesalers and other distributors, buying groups, pharmacy benefit
management organizations, health care insurance carriers and other institutions,
(3) allowances, rebates and fees paid to distributors, and (4) chargebacks; (B)
customs and excise duties and other duties related to the sales to the extent
that such items are included in the gross amount invoiced; (C) rebates and
similar payments made with respect to sales paid for by any governmental entity
or Regulatory Authority; (D) sales and other taxes and duties directly related
to the sale or delivery of the Product (but not including taxes assessed against
the income derived from such sale); and (E) the sum of [CONFIDENTIAL TREATMENT
REQUESTED] of the gross amount invoiced in lieu of the amount actually incurred,
which is intended to cover, among other things, the cost of freight, postage,
shipping, insurance, special packaging and bad debts that such Party incurs on
such sales.

     Sales between Inspire and its Affiliates or sublicensees or between CFFT
and its Affiliates or sublicensees, as the case may be, shall be excluded from
the computation of Net

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Sales and no payments will be payable on such sales except where such Affiliates
or sublicensees are end-users, in which case the amount billed therefor shall be
deemed to be the amount that would be invoiced to a Third Party in an arm's
length transaction. For purposes of determining Net Sales, Products shall be
deemed to be sold when shipped and a "sale" shall not include transfers or
dispositions for charitable, promotional, pre-clinical, clinical, regulatory or
governmental purposes.

     1.25 "Neutral Member" shall have the meaning assigned to such term in
Section 2.3.

     1.26 "Non-breaching Party" shall have the meaning assigned to such term in
Section 8.2.

     1.27 "Party" shall mean Inspire or CFFT and, when used in the plural, shall
mean Inspire and CFFT.

     1.28 "Payee" shall have the meaning assigned to such term in Section
5.1(a).

     1.29 "Payor" shall have the meaning assigned to such term in Section
5.1(a).

     1.30 "Product" shall mean of any product for use in the Field that contains
the Compound, or any structurally related analogs thereof whose therapeutic
effect in the Field is discovered after the Effective Date, as an active
ingredient.

     1.31 "Receiving Party" shall have the meaning assigned to such term in
Section 6.1.

     1.32 "Registration" shall mean, with respect to each country in the
Territory, written approval of the Registration Application for the Product
filed in such country, including pricing or reimbursement, where applicable, by
the Regulatory Authority in such country.

     1.33 "Registration Application" shall mean a New Drug Application under the
United States Federal Food, Drug and Cosmetics Act and the regulations
promulgated thereunder, or a comparable filing for Registration in a country, in
each case with respect to the Product for application in the Field in the
Territory.

     1.34 "Regulatory Authority(ies)" shall mean the FDA in the U.S., and any
health regulatory authority(ies) in any country in the Territory that is a
counterpart to the FDA and holds responsibility for granting regulatory
marketing approval for the Product in such country, and any successor(s) thereto
as well as any state or local health regulatory authorities having jurisdiction
for any activities contemplated by the Parties.

     1.35 "Rules" shall have the meaning assigned to such term in Section 10.2.

     1.36 "Study" shall have the meaning assigned to such term in the third
whereas clause.

     1.37 "Study Review Committee" or "SRC" shall have the meaning assigned to
such term in Section 2.3.

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     1.38 "Success Criteria" shall mean the criteria established by the Parties
and annexed hereto as Exhibit A, which must be met by the results of the Study
before any further development of the Compound.

     1.39 "Territory" shall mean all countries worldwide.

     1.40 "TDN" shall have the meaning assigned to such term in the third
whereas clause.

     1.41 "TDNCC" shall mean the TDN's coordinating center.

     1.42 "Third Party" shall mean any person who or which is neither a Party
nor an Affiliate of a Party.

     1.43 "United States" or "U.S." shall mean the United States of America.

     1.44 "Work Plan" shall have the meaning assigned to such term in Section
2.2.

2.   Conduct and Oversight of the Study.

     2.1  Generally. The Parties shall use Commercially Reasonable Efforts to
fulfill their respective obligations under this Agreement and shall cooperate,
in good faith, with the other in reasonably facilitating the other Party's
fulfillment of its obligations under this Agreement.

     2.2  Performance of the Study. The Study shall commence as soon as
practicable after the Effective Date and shall be performed at various sites in
the TDN, utilizing the TDN's oversight services, in accordance with the draft
summary work plan developed and agreed to by the Parties (the "Work Plan"), as
amended, from time to time, upon the mutual agreement of the Parties.

          (a)  Obligations of Inspire. Inspire shall be principally responsible
for the conduct of Study including, but not limited to, all legal, clinical and
scientific activities relating to same. Without limiting the foregoing, Inspire
shall be responsible for:

               (i)   working with the TDNCC to identify appropriate clinical
 sites to conduct the Study;

               (ii)  working with the TDNCC to monitor and/or qualify site
compliance with the Study protocol, data collection, completion of case report
forms, and the like;

               (iii) all costs associated with the centralized pulmonary
function testing laboratory and the centralized clinical laboratory;

               (iv)  the preparation and delivery of any Study-related
materials;

               (v)   the manufacture and supply of quantities of clinical trial
materials including, without limitation, the Compound required for the Study;

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               (vi)   all other non-clinical activities to support the conduct
of the Study (i.e., toxicology, pharmacology, and the like);

               (vii)  conducting a human pharmaco-kinetic study; and

               (viii) except as set forth in Section 2.2(b), all costs incurred
in connection with the conduct of the Study.

          (b)  Obligations of CFFT. CFFT shall provide such advice and
assistance as Inspire may reasonably request and shall: (1) enter into clinical
trial agreements with each applicable institution conducting the Study at its
site, which agreements shall be reviewed and approved by Inspire; (2) pay, on
behalf of Inspire, the Study-site expenses in the U.S., along with the costs
related to the conduct of the Study through the TDN, directly to such
Study-sites and the TDN; and (3) fund the central processing center for the high
resolution computed tomography scan(s). An estimated budget for such costs and
expenses been agreed to by the Parties and is annexed hereto as Exhibit B, which
may be amended, from time to time, upon the mutual agreement of the Parties. As
used in this Agreement, the "Contribution" shall mean the actual amounts paid by
CFFT under this Section 2.2(b) [CONFIDENTIAL TREATMENT REQUESTED].

               (i)    All payments due under Section 2.2(b) shall be made by
CFFT in accordance with the payment schedule(s) agreed to by and between Inspire
and the Study sites and Inspire and the TDN, as the case may be and shall
provide Inspire with copies of all invoices/payment statements and the like.

     2.3  The Study Review Committee.

          (a)  Members; Responsibility. The Parties shall establish a review
committee (the "Study Review Committee" or "SRC"), which shall consist of two
(2) representatives from each of Inspire and CFFT and a fifth (5/th/) member
mutually acceptable to both Parties (the "Neutral Member"). Each Party may
replace any or all of its representatives on the SRC at any time upon written
notice to the other Party in accordance with Section 11.6 of this Agreement. The
Neutral Member may only be replaced upon the mutual consent of both Parties. The
SRC's only responsibility shall be to review the Study results and determine
whether the Success Criteria have been met.

          (b)  Meeting. Inspire and the TDNCC shall provided each member of the
SRC a copy of the analysis, results and summary tables and data listings from
the Study (the "Data Package") promptly after they become available. Thereafter
the SRC shall promptly convene a meeting on such date, and at such place and
time, as the members of the SRC shall agree, which shall in no case be more than
thirty (30) days after receipt of the Data Package. At the meeting the SRC shall
review, discuss and compare the Data Package vis-a-vis the Success Criteria. The
Parties acknowledge and agree that the Data Package shall be Confidential
Information of Inspire pursuant to Section 6.

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          (c)  Decision-making; Minutes. The decision of the Study Review
Committee determining whether or not the Success Criteria have been met shall be
made by majority vote, with each member having one (1) vote and shall be final.
If a majority of the members find that the Success Criteria has not been met,
then this Agreement shall expire as set forth in Section 8.1(a), and be of no
further force or effect. In any case, definitive minutes of the SRC meeting
shall be finalized no later than thirty (30) days after the meeting.

          (d)  Expenses. Each Party shall be responsible for all travel and
related costs and expenses for its SRC representatives to attend meetings of,
and otherwise participate on, the SRC and shall share on an equal, 50/50 basis
all such costs and expenses of the Neutral Member, in accordance with the
consulting agreement between such Neutral Member and the Parties regarding
his/her membership.

     2.4  Use of Study Results. Notwithstanding anything contained herein to the
contrary, CFFT shall be entitled to use the Study results in furtherance of its
business purposes including sharing such Study results with other commercial
entities (subject to appropriate confidentiality obligations); provided however
that CFFT may not commercially benefit from any such sharing arrangement and
further provided that such use does not diminish the intellectual property
rights of Inspire.

3.   Further Development Efforts.

     3.1  Generally. In the event that the SRC determines that the Study meets
the Success Criteria and except as set forth elsewhere in this Agreement,
Inspire shall use Commercially Reasonable Efforts to develop and commercialize
the Product for use in the Field, including conducting all additional clinical
trials, filing all required Registration Applications, and conduct any
post-marketing clinical studies, at its sole cost and expense, as Inspire may
deem necessary or desirable to meet the requirements of the Regulatory
Authorities for Registration in the Territory.

     3.2  Statistically Significant Results. Inspire's obligation to continue
development and commercialization efforts with respect to the Product shall
terminate if any additional multi-center clinical trial fails to achieve
statistically significant results (P *** 0.05) on a clinical meaningful endpoint
acceptable to the FDA for Registration of the Product in the U.S. In such event,
CFFT shall be promptly provided with a summary of the study results and an
explanation of Inspire's methodology for calculating the statistical
significance of such results so that CFFT may verify the computation.

4.   Compensation.

     4.1  Upon Receipt of Registration by Inspire. As partial consideration to
CFFT for the Contribution, upon receipt of Registration in the U.S. and subject
to Section 4.2, Inspire shall pay to CFFT: (A) [CONFIDENTIAL TREATMENT
REQUESTED] if such Registration occurs on or before December 31, 2006; or (B)
[CONFIDENTIAL TREATMENT REQUESTED] if such Registration occurs on or after
January 1, 2007 (collectively, the "Approval Payment") in accordance with the
following payment schedule:

*** denotes less than or equal to

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               (i)   ten percent (10%) of the Approval Payment within sixty (60)
days of receipt of Registration in the U.S.;

               (ii)  twenty percent (20%) of the Approval Payment within sixty
(60) days of the first (1/st/) anniversary of receipt of Registration in the
U.S.;

               (iii) twenty percent (20%) of the Approval Payment within sixty
(60) days of the second (2/nd/) anniversary of receipt of Registration in the
U.S.;

               (iv)  twenty percent (20%) of the Approval Payment within sixty
(60) days of the third (3/rd/) anniversary of receipt of Registration in the
U.S.;

               (v)   twenty percent (20%) of the Approval Payment within sixty
(60) days of the fourth (4/th/) anniversary of receipt of Registration in the
U.S.; and

               (vi)  ten percent (10%) of the Approval Payment within sixty (60)
days of the fifth (5/th/) anniversary of receipt of Registration in the U.S

     4.2 Third Party Development. In the event that Inspire decides to transfer
all of its rights and obligations to develop and commercialize the Product in
the Field in the U.S. at any time prior to receipt of Registration in the United
States or in the event that Inspire terminates its development and
commercialized arrangements in the U.S. with respect to the Product for any
reason other than scientific reasons including, but not limited to, failure to
(A) meet the Success Criteria, or (B) to continue to achieve statistically
significant results (as described in Section 3.2). Inspire shall as partial
compensation to CFFT for the Contribution:

               (i)   grant to a Third Party mutually acceptable to the Parties,
an exclusive, right and license in the Territory, with the right to grant
sublicenses, to make, have made, use, sell, and import the Product for use in
the Field (the "License Grant");

               (ii)  exercise its good faith efforts, and cooperate with CFFT,
in locating such Third Party licensee;

               (iii) grant to such Third Party an exclusive license on
commercially reasonable terms to develop and commercialize the Product
containing terms and conditions mutually agreeable to the Parties;.

               (iv)  provide such Third Party licensee with copies of all
pre-clinical and clinical data and study results, INDs, and other regulatory
filings, studies, information and materials relating to the development and
commercialization of the Product for use in the Field generated by or on behalf
of Inspire (including pharmacology, toxicology, formulation, and stability
studies); and

               (v)   in lieu of any payments set forth in Section 4.1, share
with CFFT all compensation and consideration received from such Third Party,
whether in the form of signing fee, license fee, milestone payment, royalty or
otherwise (collectively, "Licensing Income") paid to Inspire for the grant of
any license or the transfer of Inspire's rights to develop

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and market the Product in the U.S., on [CONFIDENTIAL TREATMENT REQUESTED] basis
after the repayment of:

               (1)   [CONFIDENTIAL TREATMENT REQUESTED] to CFFT (the "CFFT
Repayment Amount"); and

               (2)   [CONFIDENTIAL TREATMENT REQUESTED] to Inspire (the "Inspire
Repayment Amount"). A final accounting of the Inspire Repayment Amount shall be
provided to CFFT promptly, but in no case later than thirty (30) days, after the
execution of the final agreement for such transfer.

          (a)  Payments under Section 4.2 from Inspire to CFFT of CFFT's share
of Licensing Income shall be made within forty-five (45) days of Inspire's
receipt any Licensing Income and shall be made as set forth in Section 4.2(v)
[CONFIDENTIAL TREATMENT REQUESTED]. For purposes of this Section 4.2, Inspire
will be considered to have terminated its commercialization and development
efforts with respect to the Product if it: (1) so notifies CFFT in writing; or
(2) fails to use Commercially Reasonable Efforts to undertake activities
designed to further the development of the Product in the U.S. (which activities
may include, but not be limited to, discussions with the FDA, additional
preclinical studies, and the like) for any period of twelve (12) consecutive
months or more.

     4.3  Net Sales Milestone. As further consideration to CFFT for the
Contribution, in the event that cumulative Net Sales by Inspire, its Affiliates
and sublicensees, if any, of the Product in the Field, and in any Lower
Respiratory Indication, in the Territory exceeds [CONFIDENTIAL TREATMENT
REQUESTED] during the period ending on the last day of the month in which the
fifth anniversary of receipt of Registration occurs, Inspire shall pay to CFFT
the following payments:

               (i)   a payment equal to [CONFIDENTIAL TREATMENT REQUESTED] which
shall be due within sixty (60) days of the sixth (6/th/) anniversary of receipt
of Registration in the U.S.; and

               (ii)  a payment equal to [CONFIDENTIAL TREATMENT REQUESTED] which
shall be due within sixty (60) days of the seventh (7/th/) anniversary of
receipt of Registration in the U.S.

5.   Payments.

     5.1  Reports.

          (a)  Payment Reports. All payments due under this Agreement shall be
accompanied by a report prepared by Inspire or CFFT, as the case may be (the
"Payor"), summarizing the calculation used as the basis for determining the
payment and providing copies or reports from Third Parties and/or other
supporting documentation for such calculations to the other Party (the "Payee").
Inspire shall in addition furnish such other information as CFFT may request
from time to time to verify any such payment and shall allow any relevant
records to be

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examined by an independent certified public accountant chosen by CFFT. Any and
all records examined by such independent accountant shall be deemed the
Inspire's Confidential Information which may not be disclosed by said
independent certified public accountant to any Third Party.

          (b)  Net Sales Reports. In order to assist CFFT in monitoring Net
Sales in connection with the milestone payment set forth in Section 4.3, Inspire
agrees to provide CFFT with a report of annual Net Sales of the Product in the
Field and in any Lower Respiratory Indication in the Territory for the first
five (5) years after Registration; such report to be provided to CFFT within
sixty (60) days of the last day of the month in which the applicable anniversary
of receipt of Registration occurs.

               (i)   If, after delivery of the last Net Sales report to be
delivered under Section 5.1(b) the Net Sales reports indicate that the Net Sales
milestone set forth in Section 4.3 has not been met, during the one year period
ending on the last day of the month in which the sixth (6/th/) anniversary of
receipt of Registration occurs, at the request and expense of CFFT, Inspire
shall permit an independent, certified public accountant of nationally
recognized standing appointed by the CFFT, and acceptable to Inspire, upon
reasonable notice, to examine such records as may be necessary for the sole
purpose of verifying the calculation and reporting of Net Sales of the Product
in the Field and in the Lower Respiratory Indication made under this Agreement
for the period ending on last day of the month in which the fifth anniversary of
receipt of Registration occurred. The independent, certified public accountant
shall disclose to the CFFT only the applicable Net Sales amount and shall
disclose no other information revealed in such audit. Any and all records
examined by such independent accountant shall be deemed the Inspire's
Confidential Information which may not be disclosed by said independent,
certified public accountant to (1) CFFT except as provided herein; or (2) any
Third Party. If, as a result of any inspection of the books and records of
Inspire, it is shown that the amount of cumulative Net Sales by Inspire, its
Affiliates and sublicensees, if any, of the Product in the Field, and in any
Lower Respiratory Indication, in the Territory exceeded [CONFIDENTIAL TREATMENT
REQUESTED] during the relevant period, Inspire shall pay the reasonable costs of
the audit. During such audit, the applicable time period for payment of the Net
Sales milestone(s) under this Agreement shall be tolled.

     5.2  Mode of Payment. All payments shall be paid, in full, in U.S. dollars,
and shall be made directly to the Payee, at its offices first identified in the
Preamble, or at such other location as the Payee may designate, in writing,
pursuant to Section 11.6, from time to time, or by wire transfer to an account
of the Payee, as Payee may reasonably direct, in any case without setoff,
deduction or counterclaim.

6.   Confidentiality.

     6.1  Confidential Treatment. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the Parties agree that, during
the term of this Agreement and for ten (10) years thereafter, any Party
receiving any Confidential Information (a "Receiving Party") its Affiliates, its
licensees and its sublicensees shall, and shall ensure that their respective
employees, officers and directors and agents (including each Party's

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representatives on the SRC) shall, keep completely confidential and not publish
or otherwise disclose and not use for any purpose any information furnished to
it or them by the other Party, its Affiliates, its licensees or its sublicensees
(a "Disclosing Party") except in connection with the activities contemplated by
this Agreement or in order to further the purposes of this Agreement.

     6.2 Exceptions. The obligations of confidentiality and non-use set forth in
Section 6.1 shall not apply to any such Confidential Information which:

               (i)   was already known to the Receiving Party, other than under
an obligation of confidentiality, at the time of disclosure by the Disclosing
Party; or

               (ii)  either before or after the date of the disclosure to the
Receiving Party becomes published or otherwise part of the public domain through
no fault or omission on the part of the Receiving Party or its Affiliates; or

               (iii) either before or after the date of the disclosure to the
Receiving Party is lawfully disclosed to the Receiving Party or its Affiliates
by sources other than the Disclosing Party rightfully in possession of the
Confidential Information and who does not violate any contractual, legal or
fiduciary obligation to the Disclosing Party by providing such Confidential
Information to the Receiving Party; or

               (iv)  is independently developed by or for the Receiving Party or
its Affiliates without reference to or in reliance upon the Disclosing Party's
Confidential Information as demonstrated by competent written records.

     6.3 Exclusions. Nothing in this Section 6 shall prevent (A) a Party from
issuing statements that such Party determines to be necessary to comply with
applicable law (including the disclosure requirements of the U.S. Securities and
Exchange Commission, Nasdaq or any other stock exchange on which securities
issued by such Party are traded); or (B) disclosures by the Receiving Party to
Third Parties (including those from CFFT to the TDN and various Study sites) on
a need-to-know basis under confidentiality and non-use provisions at least as
stringent as those in this Agreement, in connection with the conduct of the
Study; provided however that each institution conducting the Study shall be
entitled to use the Study data generated by such institution in accordance with
the clinical trial agreement between the institution and CFFT or its Affiliate
as set forth in Section 2.2(b).

     6.4 Limitations on Use. Each Party shall limit the use, and cause each of
its Affiliates and its sublicensees to limit the use, of any Confidential
Information obtained by such Party from another Party pursuant to this Agreement
or otherwise, so that such use is solely in connection with the activities or
transactions contemplated hereby.

     6.5 Remedies. Each Party shall be entitled, in addition to any other right
or remedy it may have, at law or in equity, to seek an injunction, enjoining or
restraining another Party, its Affiliates and/or its sublicensees from any
violation or threatened violation of this Section 6.

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7.   Indemnification.

     7.1  Indemnification by Inspire. Inspire shall indemnify, defend and hold
harmless CFFT, its Affiliates, and their respective directors, officers,
employees and agents, from and against any and all liabilities, damages, losses,
costs and expenses (including the reasonable fees of attorneys and other
professionals) arising out of or resulting from claims by Third Parties based
upon:

          (a) gross negligence, recklessness or wrongful intentional acts or
omissions of Inspire or its Affiliates and their respective directors, officers,
employees and agents, in connection with Inspire's performance of its
obligations under this Agreement; or

          (b) any tort claims of personal injury (including death) relating to
or arising out of any such injury sustained as the result of the administration
of the Compound to a Study subject during the Study; except, in each case, to
the comparative extent such claim arose out of or resulted from the negligence,
recklessness or wrongful intentional acts or omissions of CFFT, or its
Affiliates, and their respective directors, officers, employees and agents.

     7.2  Indemnification by CFFT. CFFT shall indemnify, defend and hold
harmless Inspire and its Affiliates, and their respective directors, officers,
employees and agents, from and against any and all liabilities, damages, losses,
costs and expenses (including the reasonable fees of attorneys and other
professionals) arising out of or resulting from claims by Third Parties based
upon:

          (a) gross negligence, recklessness or wrongful intentional acts or
omissions of CFFT or its Affiliates and their respective directors, officers,
employees and agents, in connection with CFFT's performance of its obligations
under this Agreement;

          (b) any tort claims of personal injury (including death) relating to
or arising out of any such injury sustained as the result of the administration
of the Compound to a Study subject during the Study; except, in each case, to
the comparative extent such claim arose out of or resulted from the negligence,
recklessness or wrongful intentional acts or omissions of Inspire, or its
Affiliates, and their respective directors, officers, employees and agents;

provided, however, that in each case, CFFT shall indemnify Inspire, and its
Affiliates, and their respective directors, officers, employees and agents to
the same extent that CFFT is indemnified against such liabilities by the
institutions conducting the Study pursuant to the clinical trial agreement
between the institution and CFFT or its Affiliate.

     7.3  Procedures for Indemnification. In the event that any person (an
"Indemnitee") entitled to indemnification under Section 7.1 or Section 7.2 is
seeking such indemnification, such Indemnitee shall (A) inform, in writing, the
indemnifying Party of the claim as soon as reasonably practicable after such
Indemnitee receives notice of such claim, (B) permit the indemnifying Party to
assume direction and control of the defense of the claim (including the sole
right to settle it at the sole discretion of the indemnifying Party; provided
that such settlement does not impose any obligation on, or otherwise adversely
affect, the Indemnitee or

<PAGE>

another Party), (C) cooperate as requested (at the expense of the indemnifying
Party) in the defense of the claim, and (D) undertake all reasonable steps to
mitigate any loss, damage or expense with respect to the claim(s).

     7.4  Complete Indemnification. All costs and expenses incurred by an
Indemnitee in connection with enforcement of Sections 7.1 and 7.2 shall also be
reimbursed by the indemnifying Party.

8.   Term and Termination.

     8.1  Term. This Agreement shall become effective as of the Effective Date
and, unless earlier terminated pursuant to the other provisions of this Section
8, shall expire as follows:

          (a) In the event the SRC determines that the Success Criteria have not
been met, or thereafter if Inspire's ongoing development efforts fail to yield
statistically significant results, this Agreement shall immediately expire and
be of no further force or effect; provided however in the event that Inspire
elects, in its sole discretion, to continue development of the Product despite
any such failure(s) or to resume development of the Product after any cessation
of this Agreement shall be in full force and effect; further provided, however
that following such failure(s) Inspire may elect to cease such development
efforts at any time, in its sole discretion, or

          (b) In the event the SRC determines that the Success Criteria have
been met, and Inspire's ongoing development activities continue to achieve
statistically significant results, this Agreement shall expire upon the
expiration of all payment obligations under this Agreement with respect to the
Product in the Field in the Territory.

     8.2  Termination for Cause. Either Inspire or CFFT (the "Non-breaching
Party") may, without prejudice to any other remedies available to it at law or
in equity, terminate this Agreement in the event the other (the "Breaching
Party") shall have materially breached or defaulted in the performance of any of
its material obligations hereunder, and such default shall have continued for
sixty (60) days after written notice thereof was provided to the Breaching Party
by the Non-breaching Party. Any such termination shall become effective
automatically at the end of such sixty (60) day period unless the Breaching
Party has cured any such breach or default prior to the expiration of such sixty
(60) day period. The right of either Inspire or CFFT to terminate this Agreement
as provided in this Section 8.2 shall not be affected in any way by such Party's
waiver or failure to take action with respect to any previous default.

     8.3  Accrued Rights; Surviving Obligations.

          (a) Termination, relinquishment or expiration of this Agreement for
any reason shall be without prejudice to any rights that shall have accrued to
the benefit of any Party prior to such termination, relinquishment or
expiration. Such termination, relinquishment or expiration shall not relieve any
Party from obligations which are expressly indicated to survive termination of
this Agreement.

<PAGE>

          (b) All of the Parties' rights and obligations under, and/or the
provisions contained in, Sections 6, 7, 8.3, 10, 11.6, 11.8, 11.13, and 11.17
shall survive expiration, termination or relinquishment of this Agreement.

9.   Force Majeure.

          No Party shall be held liable or responsible to the other Parties nor
be deemed to be in default under, or in breach of any provision of, this
Agreement for failure or delay in fulfilling or performing any obligation of
this Agreement when such failure or delay is due to force majeure, and without
the fault or negligence of the Party so failing or delaying. For purposes of
this Agreement, force majeure is defined as causes beyond the control of the
Party, including, without limitation, acts of God; acts, regulations, or laws of
any government; war; civil commotion; destruction of production facilities or
materials by fire, flood, earthquake, explosion or storm; labor disturbances;
epidemic; and failure of public utilities or common carriers. In such event
Inspire or CFFT, as the case may be, shall immediately notify the other Parties
of such inability and of the period for which such inability is expected to
continue. The Party giving such notice shall thereupon be excused from such of
its obligations under this Agreement as it is thereby disabled from performing
for so long as it is so disabled. To the extent possible, each Party shall use
reasonable efforts to minimize the duration of any force majeure.

10.  Dispute Resolution.

     10.1 The Parties recognize that disputes as to certain matters may from
time to time arise during the term of this Agreement which relate to any Party's
rights and/or obligations hereunder. If the Parties cannot resolve any such
dispute within thirty (30) calendar days after notice of a dispute from one
Party, either Party may, by notice to the other in accordance with Section 11.6,
have such dispute referred to the Chief Executive Officer of Inspire, or such
other person holding a similar position as designated by Inspire from time to
time and the Chief Executive Officer of CFFT, or such other person holding a
similar position as designated by CFFT from time to time (such officers
collectively, the "Executive Officers"). The Executive Officers shall meet
promptly to negotiate in good faith the matter referred and to determine a
resolution. During such period of negotiations, any applicable time periods
under this Agreement shall be tolled. If the Executive Officers are unable to
determine a resolution in a timely manner, which shall in no case be more than
thirty (30) days after the matter was referred to them, the matter may be
resolved through arbitration in accordance with the arbitration provisions set
forth in Section 10.2, upon notice by a Party on the other disputing Party
specifically requesting such arbitration.

     10.2 Where a Party has served a written notice upon the other requesting
binding arbitration of a dispute pursuant to this Section 10.2, any such
arbitration shall be held in Raleigh-Durham, North Carolina, according to the
Commercial Arbitration Rules (the "Rules") of the American Arbitration
Association (the "AAA"). The arbitration shall be conducted by one arbitrator
who is knowledgeable in the subject matter which is at issue in the dispute and
who is selected by mutual agreement of the Parties or, failing such agreement,
shall be selected according to the Rules. The Parties shall have such discovery
rights as the arbitrator may allow, but in no event broader than that discovery
permitted under the Federal Rules of Civil Procedure.

<PAGE>

In conducting the arbitration, the arbitrator shall apply the Delaware Rules of
Evidence and shall be able to decree any and all relief of an equitable nature,
including but not limited to such relief as a temporary restraining order, a
preliminary injunction, a permanent injunction, or replevin of property, as well
as specific performance. The arbitrator shall also be able to award direct
damages but shall not award any other form of damages (e.g., consequential,
punitive or exemplary damages). The reasonable fees and expenses of the
arbitrators, along with the reasonable legal fees and expenses of the Parties
(including all expert witness fees and expenses), the fees and expenses of a
court reporter, and any expenses for a hearing room, shall be paid as follows:
If the arbitrators rule in favor of one Party on all disputed issues in the
arbitration, the losing Party shall pay 100% of such fees and expenses; if the
arbitrators rule in favor of one Party on some issues and the other Party on
other issues, the arbitrators shall issue with the rulings a written
determination as to how such fees and expenses shall be allocated between the
Parties. The arbitrators shall allocate fees and expenses in a way that bears a
reasonable relationship to the outcome of the arbitration, with the Party
prevailing on more issues, or on issues of greater value or gravity, recovering
a relatively larger share of its legal fees and expenses. The decision of the
arbitrator shall be final and may be entered, sued on or enforced by the Party
in whose favor it runs in any court of competent jurisdiction at the option of
such Party. Whether a claim, dispute or other matter in question would be barred
by the applicable statute of limitations, which statute of limitations also
shall apply to any claim or disputes subject to arbitration under this Section,
shall be determined by binding arbitration pursuant to this Section 10.2.

11.  Miscellaneous.

     11.1 Relationship of Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the Parties. Neither Party shall incur any debts or
make any commitments for another, except to the extent, if at all, specifically
provided herein.

     11.2 Assignment. Neither Party shall be entitled to assign its rights or
delegate its obligations hereunder without the express written consent of the
other Party hereto, except that (A) CFFT may assign its right to receive
payments under this Agreement to any Third Party upon sixty (60) days prior
written notice to Inspire; and (B) either Party may assign its rights and
transfer its duties hereunder to an Affiliate or to any successor to all or
substantially all of its business (or that portion thereof to which this
Agreement relates) or in the event of merger, consolidation or involvement in a
similar transaction. No assignment and transfer shall be valid or effective
unless done in accordance with this Section 11.2 and unless and until the
assignee/transferee shall agree in writing to be bound by the provisions of this
Agreement.

     11.3 Books and Records. Any books and records to be maintained under this
Agreement by a Party or its Affiliates or sublicensees shall be maintained in
accordance with U.S. generally accepted accounting principles, consistently
applied, except that the same need not be audited.

     11.4 Further Actions. Each Party shall execute, acknowledge and deliver
such further instruments, and do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

<PAGE>

     11.5   No Implied Rights. No right or license is granted under this
Agreement by either Party to the other, either expressly or by implication,
except as those set forth explicitly herein. Nothing contained in this Agreement
shall impose an obligation of exclusivity on one by the other. Both Parties
reserve the right to enter into and participate in other activities (either
alone or with Third Parties) including, but not limited to, clinical trials and
sponsored research projects.

     11.6   Notice. Any notice or request required or permitted to be given
under or in connection with this Agreement shall be deemed to have been
sufficiently given if in writing and personally delivered or sent by certified
mail (return receipt requested), facsimile transmission (receipt verified), or
overnight express courier service (signature required), prepaid, to the Party
for which such notice is intended, at the address set forth for such Party
below:

<TABLE>
           <S>                                 <C>
           In the case of Inspire, to:         Inspire Pharmaceuticals, Inc.
                                               4222 Emperor Boulevard, Suite 470
                                               Durham, North Carolina 27703
                                               Attention: Christy Shaffer
                                               Facsimile No.: (919) 941-9797
                                               Telephone No.: (919) 287-1223

           With copies to:                     Reed Smith LLP
                                               Princeton Forrestal Village
                                               136 Main Street
                                               Princeton, New Jersey 08540
                                               Attention: Diane Frenier, Esq.
                                               Facsimile: 609.951.0824
                                               Telephone No.: 609.514.5999

            In the case of CFFT, to:           The Cystic Fibrosis Foundation Therapeutics, Inc.
                                               6931 Arlington Road
                                               Bethesda, Maryland 20814
                                               Attention: Robert J. Beall
                                               Facsimile No.: 301-907-2540
                                               Telephone No.: 301-907-2541

           With copies to:                     Swidler, Berlin, Shereff, Friedman, LLP
                                               3000 K Street, N.W., Suite 300
                                               Washington, District of Columbia 20007
                                               Attention: Kenneth Schaner, Esq.
                                               Facsimile No.: 202.424.7500
                                               Telephone No.: 202.424.7643
</TABLE>

or to such other address for such Party as it shall have specified by like
notice to the other Parties, provided that notices of a change of address shall
be effective only upon receipt thereof. If delivered personally or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given. If sent by overnight express courier service, the
date of delivery shall be deemed to be the next business day after such notice
or request was deposited with such service. If sent by certified mail, the date
of delivery shall be deemed to be the third business day after such notice or
request was deposited with the U.S. postal service.

<PAGE>

     11.7   Use of Name. Except as may be otherwise provided herein, no Party
shall have any right, express or implied, to use in any manner the name or other
designation of the other Parties or any other trade name, trademark or logos of
the other Parties for any purpose in connection with the performance of this
Agreement.

     11.8   Public Announcements and Publications. Subject to 6.3, neither Party
shall make any public announcement or publication concerning this Agreement, the
subject matter hereof or its activities hereunder without the prior written
consent of the other Parties, which shall not be unreasonably withheld, provided
that it shall not be unreasonable for a Party to withhold consent with respect
to any public announcement containing any of such Party's Confidential
Information.

     11.9   Waiver. A waiver by any Party of any of the terms and conditions of
this Agreement in any instance shall not be deemed or construed to be a waiver
of such term or condition for the future, or of any subsequent breach hereof.
All rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of any Party.

     11.10  Compliance with Law. Each Party acknowledges that the laws and
regulations of the United States restrict the export and re-export of
commodities and technical data of United States origin. Each Party agrees that
it will not export or re-export restricted commodities or the technical data of
the other Party in any form without the appropriate United States and foreign
government licenses.

     11.11  Severability. When possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.

     11.12  Amendment. No amendment, modification or supplement of any
provisions of this Agreement shall be valid or effective unless made in writing
and signed by a duly authorized officer of each Party.

     11.13  Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Delaware without regard to conflicts
of law principles

     11.14  Entire Agreement. This Agreement, together with exhibits hereto,
sets forth the entire agreement and understanding between the Parties as to the
subject matter hereof and merges all prior discussions and negotiations between
or among any of them, and neither Party shall be bound by any conditions,
definitions, warranties, understandings or representations with respect to such
subject matter other than as expressly provided herein and therein.

<PAGE>

     11.15  Parties in Interest. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the Parties hereto and their respective permitted successors and assigns.

     11.16  Descriptive Headings. The descriptive headings of this Agreement are
for convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.

     11.17  Construction of Agreement. The terms and provisions of this
Agreement represent the results of negotiations between the Parties and their
representatives, each of which has been represented by counsel of its own
choosing, and neither of which has acted under duress or compulsion, whether
legal, economic or otherwise. Accordingly, the terms and provisions of this
Agreement shall be interpreted and construed in accordance with their usual and
customary meanings, and each of the Parties hereto hereby waives the application
in connection with the interpretation and construction of this Agreement of any
rule of law to the effect that ambiguous or conflicting terms or provisions
contained in this Agreement shall be interpreted or construed against the Party
whose attorney prepared the executed draft or any earlier draft of this
Agreement.

     11.18  Counterparts. This Agreement may be signed in counterparts, any one
of which need not contain the signature of more than one Party, and each and
every one of which shall be deemed an original, notwithstanding variations in
format or file designation which may result from the electronic transmission,
storage and printing of copies of this Agreement from separate computers or
printers. Facsimile signatures shall be treated as original signatures.

                                     * * * *

           In Witness Whereof, each of the Parties has caused this Agreement to
be executed by its duly authorized representative as of the day and year first
above written.

                                               Inspire Pharmaceuticals, Inc.

                                               By: /s/ Christy L. Shaffer
                                                   -----------------------------
                                                  Name: Christy L. Shaffer
                                                        ------------------------
                                                  Title: Chief Executive Officer
                                                         -----------------------

                                               The Cystic Fibrosis Foundation
                                               Therapeutics, Inc.

                                               By: /s/ Robert J. Beall
                                                   -----------------------------
                                                  Name: Robert J. Beall
                                                        ------------------------
                                                  Title: President/CEO
                                                         -----------------------

<PAGE>

                                    Exhibit A

                                Success Criteria

Success Criteria for Study 08-103

  (1)  Safety of at least one dose for future studies, as recommended by the
       CFFT Data Monitoring Committee (DMC) at the conclusion of Study 08-103;
       and

  (2)  Either

      [CONFIDENTIAL TREATMENT REQUESTED]

       Effect sizes discussed above may be based on either one of the three
       active dose groups versus placebo or a pooled active group vs. placebo.

  (3)  If (1) is met but neither (2)(a) or (b) is met, then the Study Review
       Committee may be requested to review the data, in consultation with one
       or more statisticians (to be agreed between the Parties) to determine
       whether a clear signal representing clinically meaningful findings (with
       respect to lung function, HRCT, and/or patient symptoms) are worthy of
       being confirmed in subsequent studies, the goal being that the treatment
       effect observed should be sufficient for designing a larger phase II
       clinical study with adequate power to detect significance on an endpoint
       acceptable to the FDA for approval of a CF product.

<PAGE>

                                    Exhibit B

                                Estimated Budget

As of the Effective Date, estimated to be approximately [CONFIDENTIAL TREATMENT
REQUESTED], excluding the mark-up.

The final budget will be approved by both Parties and will be finalized only
when a final Work Plan is in placeForm Rights Agreement

 

 

 

 

 

 

RIGHTS AGREEMENT

BETWEEN

CEPHEID

AND

COMPUTERSHARE TRUST COMPANY,

AS RIGHTS AGENT

 

 

 

 

 

DATED AS OF SEPTEMBER 26, 2002

RIGHTS AGREEMENT

This Agreement, dated as of September 26, 2002, between Cepheid, a California corporation (the "Company"), and Computershare Trust Company, a Colorado corporation, as Rights Agent (the "Rights Agent").

The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a "Right") for each Common Share (as hereinafter defined) of the Company outstanding at the Close of Business (as hereinafter defined) on October 1, 2002 (the "Record Date"), each Right representing the right to purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and subject to the conditions herein set forth, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding (i) between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are hereinafter defined) or (ii) following the Distribution Date and prior to the Redemption Date or Final Expiration Date, pursuant to the exercise of stock options or under any employee plan or arrangement or upon the exercise, conversion or exchange of other securities of the Company, which options or securities were outstanding prior to the Distribution Date.

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

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

(a)"Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% (the "Designated Percentage") or more of the Common Shares of the Company then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company or (iv) any entity holding Common Shares for or pursuant to the terms of any such plan.  Notwithstanding the foregoing,

(i)No Person shall become an Acquiring Person if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an Acquiring Person has become such inadvertently, and such Person as promptly as practicable takes such actions as may be necessary so that such Person would no longer be considered an Acquiring Person.

(ii)No Person shall become an Acquiring Person as the result of an acquisition of Common Shares by the Company that, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person and such Person's Affiliates and Associates to the Designated Percentage or more of the Common Shares of the Company then outstanding; provided, however, that if a Person, together with such Person's Affiliates and Associates, shall become the Beneficial Owner of the Designated Percentage or more of the Common Shares of the Company then outstanding by reason of share purchases by the Company and such Person, together with its Affiliates and Associates, shall, after public announcement of such share purchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company, then such Person shall be deemed to be an "Acquiring Person."

(b)"Affiliate" and "Associate" shall have the following meanings:

(i)An "Affiliate" of, or a Person "affiliated" with, a specified Person, is a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified.  For this purpose, "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise;

(ii)The term "Associate" used to indicate a relationship with any Person shall mean (A) any corporation or organization (other than the Company or a majority-owned subsidiary of the Company) of which such Person is an officer or partner or is, directly or indirectly, the Beneficial Owner of 10% or more of any class of equity securities, (B) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, and (C) any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person or who is a director or officer of the Company or of any of its parents or Subsidiaries.

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

(i)that such Person owns, directly or indirectly;

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

(iii)that are beneficially owned, directly or indirectly, by any other Person with which such Person has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), written or otherwise, for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of any securities of the Company.

Notwithstanding anything in this definition of Beneficial Ownership to the contrary, (A) the phrase "then outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Company, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding that such Person would be deemed to own beneficially hereunder, and (B) a Person who is a director or officer of the Company or who is an Affiliate or Associate of a director or officer of the Company (each, an "Exempted Person") shall not be deemed to "beneficially own" Common Shares held by another Exempted Person solely by reason of any agreement, arrangement or understanding, written or otherwise, entered into in opposition to a transaction that, at the time such agreement, arrangement or understanding was entered into, has not been approved or recommended by the Board of Directors to the shareholders of the Company.

(d)"Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the State of California are not open for business.

(e)"Close of Business" on any given date shall mean 5:00 p.m., California Time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 p.m., California Time, on the next succeeding Business Day.

(f)"Common Shares" when used with reference to the Company shall mean the shares of common stock, no par value per share, of the Company.  "Common Shares" when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, of the Person or Persons that ultimately control such first-mentioned Person.

(g)"Designated Percentage" shall have the meaning set forth in Section 1(a) hereof.

(h)"Distribution Date" shall mean the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (or such later date as may be determined by action of the Board of Directors of the Company prior to such time as any Person becomes an Acquiring Person) after the first public announcement of the intention of any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such plan) to commence a tender or exchange offer the consummation of which would result in any such Person becoming an Acquiring Person (including any such date that is after the date of this Agreement and prior to the issuance of the Rights).

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

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

(k)"Person" shall mean any individual, firm, corporation, partnership, limited partnership, business trust, limited liability company, unincorporated association or any other entity, and shall include any successor (by merger or otherwise) of such entity.

(l)"Purchase Price" shall have the meaning set forth in Section 7(b) hereof.

(m)"Preferred Shares" shall mean shares of Series A Junior Participating Preferred Stock, no par value per share, of the Company having the rights and preferences set forth in the Certificate of Determination attached to this Agreement as Exhibit A.

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

(o)"Rights" shall have the meaning set forth in the second paragraph of this Agreement, provided, however, that none of the following shall be deemed "Rights" or "outstanding Rights" for any purpose under this Agreement from and after the effective time of the event indicated:  (i) Rights that have become Void Rights pursuant to Section 7(f) hereof, and upon such occurrence, all Right Certificates therefor shall be null and void and shall not be deemed "outstanding Right Certificates"; (ii) all rights that have been redeemed pursuant to Section 23 hereof, and upon such occurrence, all Right Certificates therefor shall represent only the right to receive the consideration provided in Section 23 hereof and shall not be deemed "outstanding Right Certificates", and (iii) any Rights that have been exchanged pursuant to Section 24 hereof, and upon such occurrence, all Right Certificates therefor shall represent only the right to receive the consideration provided in Section 24 and shall not be deemed "outstanding Right Certificates".

(p)"Shares Acquisition Date" shall mean the earlier of the date of (i) the public announcement by the Company or an Acquiring Person that an Acquiring Person has become such or (ii) the public disclosure of facts by the Company or an Acquiring Person indicating that an Acquiring Person has become such.

(q)"Subsidiary" of any Person shall mean any Person of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.

(r)A "Successor" shall mean the estate or legal representative of a deceased individual, the beneficiary of a deceased individual's estate, a trust created by a deceased individual as grantor, or the beneficiary of a trust created by a deceased individual as grantor.

(s)"Void Rights" shall have the meaning set forth in Section 7(f).

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.  The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable upon ten (10) days' prior written notice to the Rights Agent.  The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agent.

Section 3.  Evidence of Rights Before Distribution Date; Transfer; Legends.

(a)From the Record Date until the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, (x) Rights will be evidenced by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates) and not by separate Right Certificates (as defined below), and (y) Rights will be transferable only in connection with the transfer of Common Shares.  On the Record Date, or as soon as practicable thereafter, the Company will send a copy of a Summary of Stock Purchase Rights, in substantially the form of Exhibit B hereto (the "Summary of Rights"), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company.  Until the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date, the surrender for transfer of any certificate for Common Shares outstanding on the Record Date, with or without a copy of the Summary of Rights attached thereto, shall also constitute the surrender for transfer of the Rights associated with the Common Shares represented thereby.

(b)Certificates for Common Shares that become outstanding (including, without limitation, reacquired Common Shares referred to in the last sentence of this Section 3(b)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS (THE "RIGHTS") AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN CEPHEID (THE "COMPANY") AND COMPUTERSHARE TRUST COMPANY, AS RIGHTS AGENT, DATED AS OF SEPTEMBER 26, 2002, AS SUCH MAY SUBSEQUENTLY BE AMENDED (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.  UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE.  THE COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.  AS DESCRIBED IN SECTION 7(F) OF THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN OTHER PERSONS SHALL BECOME NULL AND VOID.

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

Section 4.  Evidence of Rights After Distribution Date; Form of Right Certificates; Countersignatures.

(a)From and after the Distribution Date until the earlier of the Redemption Date or the Final Expiration Date, Rights will be evidenced solely by Right Certificates that, together with the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof, shall be substantially in the form set forth as Exhibit C hereto (each, a "Right Certificate"), which may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and which do not affect the rights, duties or responsibilities of the Rights Agent and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage.  Subject to the other provisions of this Agreement, the Right Certificates shall entitle the holders thereof to purchase such number of one one-hundredths of a Preferred Share as shall be set forth therein at the Purchase Price, but the number of such one one-hundredths of a Preferred Share and the Purchase Price shall be subject to adjustment as provided herein.

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

Section 5.  Distribution of Certificates; Registration.

(a)As soon as practicable after the Distribution Date (and so long as the Redemption Date and the Final Expiration Date shall not have occurred), the Company will prepare and execute, the Rights Agent will countersign and the Company will send or cause to be sent (and the Rights Agent will, if requested and provided with all necessary information, send) by first-class, insured, postage-prepaid mail to each record holder of Common Shares as of the Close of Business on the Distribution Date (other than the holder of Void Rights (as defined in Section 7(f) hereof), at the address of such holder shown on the records of the Company, Rights Certificates evidencing one Right for each Common Share so held.

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

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

(a)Subject to the provisions of Section 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Void Rights or Rights that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a Preferred Share as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase.  Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent.  Thereupon the Company shall execute and the Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested.  The Company may require payment of a sum sufficient for all taxes and governmental charges that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates.  The Rights Agent shall have no duty or obligation under this Section 6 unless and until it is satisfied that all such taxes and/or charges have been paid.

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

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

(a)The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to which the Rights are exercised and payment of all transfer taxes and governmental charges required to be paid by the holder of such Right Certificate as provided in Section 9 hereof, at or prior to the earliest of (i) the Close of Business on September 26, 2012 (the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof.

(b)The purchase price for each one one-hundredth of a Preferred Share pursuant to the exercise of a Right (the "Purchase Price") shall initially be $40.00, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with Section 7(c) hereof.

(c)Upon receipt of a Right Certificate representing exercisable Rights within the time permitted in Section 7(a), with the form of election to purchase and certificate duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to all applicable taxes and governmental charges required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check, cashier's check or money order payable to the order of the Company, the Rights Agent shall promptly (i)(A) requisition from any transfer agent of the Preferred Shares certificates for the number of one-one hundredths of a Preferred Share to be purchased, and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) requisition from any depositary agent for the Preferred Shares depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent), and the Company hereby directs the depositary agent to comply with all such requests, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional Preferred Shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, deliver such cash to or upon the order of the registered holder of such Right Certificate.

(d)In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to such holder's duly authorized assigns, subject to the provisions of Section 6 and Section 14 hereof.

(e)The Company covenants and agrees that it will cause to be reserved and kept available, out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all Rights in accordance with this Section 7.

(f)From and after the time that any Person becomes an Acquiring Person, (i) all Rights that are or were acquired or beneficially owned by such Acquiring Person (and all Rights that are or were acquired or beneficially owned by each Associate and by each Affiliate of such Acquiring Person) shall be null and void without any further action on the part of the Company, the Rights Agent or any other Person (all such Rights, "Void Rights") and (ii) any holder thereof shall thereafter have no right to exercise such Void Rights under any provision of this Agreement.  No Right Certificate shall be issued pursuant to Sections 5 or 6 that represents Rights beneficially owned by an Acquiring Person whose Rights have become Void Rights pursuant to the preceding sentence or by any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights have become Void Rights pursuant to the preceding sentence or to any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights have become Void Rights pursuant to the preceding sentence or for transfer to any Associate or Affiliate thereof shall be cancelled.  This Section 7(f) shall apply not only to an initial Acquiring Person, and each of its Affiliates and Associates, but also to all subsequent Acquiring Persons, and each of their Affiliates and Associates.

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

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

Section 9.  Status and Availability of Preferred Shares.  The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon valid exercise of Rights in compliance with Section 7 shall, at the time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and non-assessable shares.

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

Section 10.  Preferred Shares Record Date.  Each Person in whose name any certificate for Preferred Shares is issued upon the valid exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable taxes and governmental charges) was made.  Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares 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 of Shares or Number of Rights.  The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11, provided, however, that no adjustment, payment or distribution of securities or other change in the Rights or securities issuable upon exercise of any Rights as provided in this Section 11 shall apply to any Void Rights.

(a)(i)In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such dividend, subdivision, combination or reclassification, and the number and kind of shares of capital stock that would be issuable upon exercise of a Right on such date (if such Rights were then exercisable), shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock that, 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; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of the class or series of capital stock of the Company issuable upon exercise of one Right.

(ii)Subject to Section 7(f) and Section 24 of this Agreement, in the event that any Person shall become an Acquiring Person, unless the event causing the Designated Percentage threshold to be crossed and the Person to thereby become an Acquiring Person is a transaction set forth in Section 13 hereof, each holder of a Right shall thereafter have a right to receive, upon exercise of such Right at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (y) 50% of the then current per share market price of the Company's Common Shares (determined pursuant to Section 11(d) hereof) on the date such Person became an Acquiring Person.

(iii)In the event that the number of Common Shares that are authorized by the Company's Articles of Incorporation and not outstanding or subscribed for, or reserved or otherwise committed for issuance for purposes other than upon exercise of the Rights, is not sufficient to permit the holder of each Right to purchase the number of Common Shares to which such holder would be entitled upon the exercise in full of the Rights in accordance with Section 11(a)(ii), the Company shall:  (A) determine the excess of (1) the value of the Common Shares issuable upon the exercise of a Right (calculated as provided in the last sentence of this Section 11(a)(iii)) pursuant to Section 11(a)(ii) hereof (the "Current Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for such Common Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Shares or other equity securities of the Company (including, without limitation, shares of the Company's Preferred Stock, or units of shares of the Company's capital stock) that the Board of Directors of the Company has determined to have the same value as Common Shares (such equity securities, "common stock equivalents")), (4) debt securities of the Company, (5) other assets or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board of Directors of the Company in good faith; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) of this paragraph within thirty (30) days following the first occurrence of an event triggering the rights to purchase Common Shares described in Section 11(a)(ii) (the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right without requiring payment of the Purchase Price, Common Shares (to the extent available) and then, if necessary, cash, which shares and cash have an aggregate value equal to the Spread.  If the Board of Directors of the Company shall determine in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder 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 needs to be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(g) hereof, that such action shall apply uniformly to all 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 such first sentence and to determine the value thereof.  In the event of any such suspension, the Company shall make a public announcement, and shall deliver to the Rights Agent a statement, stating that the exercisability of the Rights has been temporarily suspended.  At such time as the suspension is no longer in effect, the Company shall make another public announcement, and deliver to the Rights Agent a statement, so stating.  For purposes of this Section 11(a)(iii), the value of the Common Shares shall be the current per share market price (as determined pursuant to Section 11(d)(i) hereof) of the Common Shares on the Section 11(a)(ii) Trigger Date and the value of any "common stock equivalent" shall be deemed to have the same value as the Common Shares on such date.

(b)In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares ("equivalent preferred shares")) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the then current per share market price of the Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying (x) the Purchase Price in effect immediately prior to such record date by (y) a fraction, (1) the numerator of which shall be the sum of (A) number of Preferred Shares outstanding on such record date plus (B) the number of Preferred Shares that the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and (2) the denominator of which shall be the sum of (A) number of Preferred Shares outstanding on such record date plus (B) the number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the class or series of shares of capital stock of the Company issuable upon exercise of one Right.  In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.  Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation.  Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price that would then be in effect if such record date had not been fixed.

(c)In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying (x) the Purchase Price in effect immediately prior to such record date by (y) a fraction, (1) the numerator of which shall be the difference of (A) then current per share market price of the Preferred Shares on such record date, less (B) the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and (2) the denominator of which shall be such current per share market price of the Preferred Shares; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the class or series of shares of capital stock of the Company to be issued upon exercise of one Right.  Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price that would then be in effect if such record date had not been fixed.

(d)(i)For the purpose of any computation hereunder, the "current per share market price" of any security (a "Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the thirty (30) consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security and prior to the expiration of thirty (30) Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security.  The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last 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 the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company.  The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.

(ii)For the purpose of any computation hereunder, the "current per share market price" of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i).  If the Preferred Shares are not publicly traded, the "current per share market price" of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares as determined pursuant to Section 11(d)(i) (appropriately adjusted to reflect each stock split, stock combination, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred.  If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, "current per share market price" shall mean the fair value per share thereof as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

(e)No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments that 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 one-millionth of a Preferred Share or one one-thousandth of any other share or security 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 three years from the date of the transaction that, but for such sentence of this Section 11(e), would have required such adjustment.

(f)If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Shares, the number of such other shares so receivable upon exercise of any Right shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Section 11(a) through (c), inclusive, and the provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares shall apply on like terms to any such other shares.

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

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

(i)The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights in substitution for any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right.  Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment.  Each Right held of record prior to such adjustment of the number of Rights and outstanding thereafter shall become that number of Rights (calculated to the nearest one one-thousandth) obtained by dividing (x) the Purchase Price in effect immediately prior to adjustment of the Purchase Price by (y) the Purchase Price in effect immediately after adjustment of the Purchase Price.  The Company shall make a public announcement (with prompt notice thereof to the Rights Agent) of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made.  This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been distributed, shall be at least ten (10) days later than the date of the public announcement.  If Right Certificates have been distributed, 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 Right Certificates on such record date, Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment.  Right Certificates to be so distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right 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 one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-hundredths of a Preferred Share that were expressed in the initial Right Certificates issued hereunder.

(k)Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable Preferred Shares at such adjusted Purchase Price.

(l)In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (and shall promptly notify the Rights Agent of any such elections), until the occurrence of such event, the issuing to the holder of any Right exercised after such record date, the additional Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares 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 it in its sole discretion shall determine to be advisable in order that any (i) subdivision, combination or consolidation of the Preferred Shares, (ii) issuance wholly for cash of Preferred Shares or securities that by their terms are convertible into or exchangeable for Preferred Shares, (iii) dividends on Preferred Shares payable in Preferred Shares or (iv) issuance of any rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such shareholders.

(n)In the event that at any time after the date of this Agreement, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares or (ii) effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise other than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then in any such case (i) the number of one one-hundredths of a Preferred Share purchasable after such event upon proper exercise of each Right shall be determined by multiplying (x) the number of one one-hundredths of a Preferred Share so purchasable immediately prior to such event by (y) a fraction, (1) the numerator of which is the number of Common Shares outstanding immediately before such event and (2) the denominator of which is the number of Common Shares outstanding immediately after such event, and (ii) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights that each Common Share outstanding immediately prior to such event had issued with respect to it.  The adjustments provided for in this Section 11(n) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.

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

Section 12.  Certificate of Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts and computations accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Shares or the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof.  The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall have no duty with respect to and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate.

Section 13.  Consolidation, Merger or Sale or Transfer of Assets or Earning Power.  In the event that any Person shall become an Acquiring Person, and, directly or indirectly, (a) the Company shall consolidate with, or merge with and into, an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, (b) an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, then, and in each such case, proper provision shall be made so that (i) each holder of a Right (other than Rights that have become Void Rights) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Person in the transaction (including the Company as successor thereto or as the surviving corporation) who is issuing the consideration with the greatest fair market value to the Company and its shareholders in connection with such transaction (the "Principal Issuer") as shall equal the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (B) 50% of the then current per share market price of the Common Shares of the Principal Issuer (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (ii) the Principal Issuer shall be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to the Principal Issuer; and (iv) the Principal Issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the Common Shares thereafter deliverable upon the exercise of the Rights.  The Company covenants and agrees that it shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and the Principal Issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing.  The Company shall not enter into any transaction of the kind referred to in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities outstanding or any agreements or arrangements that, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights.  The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers.

Section 14.  Fractional Rights and Fractional Shares.

(a)The Company shall not be required to issue fractions of Rights or to distribute Right Certificates that evidence fractional Rights.  In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right.  For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable.  The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the 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 of Directors of the Company.  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 of Directors of the Company shall be used.

(b)The Company shall not be required to issue fractions of Preferred Shares (other than fractions that are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates that evidence fractional Preferred Shares (other than fractions that are integral multiples of one one-hundredth of a Preferred Share).  Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts.  In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fractions of the current market value of one Preferred Share.  For the purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.

(c)The holder of a Right by the acceptance of the Right expressly waives any right to receive fractional Rights or fractional shares upon exercise of a Right (except as provided above).

Section 15.  Rights of Action.  All rights of action in respect of this Agreement, excepting the rights of action of the Rights Agent and the Company, are vested in the respective registered holders of the Rights; and any registered holder of any Right may, without the consent of the Rights Agent or of the holder of any other Right, in such holder's own behalf and for such holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise the Rights in the manner provided in this Agreement and in any issued and outstanding Right Certificate representing such Right.  Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement.

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

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

(b)after the Distribution Date, the Right Certificates are transferable only on the registry books maintained by the Rights Agent if surrendered at the office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer and payment of taxes and governmental changes, all as otherwise provided in Section 6; and

(c)the Company and the Rights Agent shall deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice (other than notice provided by transfer documentation properly completed and tendered in accordance with this Agreement) to the contrary.

(d)notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its failure to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree, judgment or ruling (whether interlocutory final) issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation.

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

Section 18.  Compensation and Indemnity of the Rights Agent.  (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the preparation, delivery, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder.  The Company also agrees to indemnify the Rights Agent (including employees, directors, officers and agents of the Rights Agent (the Rights Agent together with such Persons, the "Agent Indemnitees")) for, and to hold each Agent Indemnitee harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or expense (each an "Agent Loss"), incurred on the part of such Agent Indemnitee for any action taken, suffered or omitted by any of the Agent Indemnitees in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises, provided, however, that the Company shall not be required to indemnify any Agent Indemnitee hereunder for any Agent Loss that resulted from any action taken, suffered or omitted by the Agent Indemnitee in bad faith or through gross negligence or willful misconduct of the Rights Agent or any other Agent Indemnity, as each is finally determined by a court of competent jurisdiction, and the respective Agent Indemnitee shall promptly refund to the Company all sums advanced to such Agent Indemnitee as or against indemnification for Agent Losses upon such judicial determination.  If an Agent Indemnitee brings an action to enforce its right to indemnification under this Section 18, the Company shall pay the costs of such action to the extent that such Agent Indemnitee is a prevailing party in such litigation.  Anything to the contrary notwithstanding, in no event shall any Agent Indemnitee be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if such Agent Indemnitee has been advised of the likelihood of such loss or damage.  Any liability of an Agent Indemnitee under this Rights Agreement will be limited to the amount of fees paid by the Company to the Rights Agent.  The provisions of this Section 18 and Section 20 below shall survive the termination of this Agreement, the exercise or expiration of the Rights and the resignation or removal of the Rights Agent.

(b)The Rights Agent shall be authorized to rely on, shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with the acceptance and administration of this Agreement or the exercise or performance of its duties hereunder in reliance upon any Right Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, instruction, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons.

Section 19.  Merger or Consolidation or Change of Name of Rights Agent.  Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the shareholder service business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof.  In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

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

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

(a)The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in good faith and in accordance with such advice or 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 be proved or established by the Company prior to taking, suffering or omitting any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the General Counsel, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitting in good faith by it under the provisions of this Agreement in reliance upon such certificate.

(c)The Rights Agent shall be liable hereunder only for its own bad faith, gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.  The Rights Agent makes no representation or warranty with respect to and is not responsible or liable for the validity, value or availability of the Rights, the Right Certificates or the Preferred Shares.

(d)The Rights Agent shall be protected and shall incur no liability for any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice or opinion of counsel as set forth in this Section 20.

(e)The Rights Agent shall not be assumed to have knowledge of and shall not be required to take note of or act upon any fact or circumstance including, without limitation, the occurrence of facts or circumstances leading to the Shares Acquisition Date or the Distribution Date, facts or circumstances relating to whether any Person may be an Affiliate or an Associate of any other Person, facts or circumstances relevant to an adjustment to the Purchase Price, facts or circumstances relevant to events described in Section 13 (mergers, etc.), Section 23 (redemption) and Section 24 (exchange) that may be relevant to performance by the Rights Agent under this Agreement unless the Company has provided written notice thereof to the Rights Agent; and the Company agrees that it will (i) promptly notify the Rights Agent in writing of the occurrence of the Shares Acquisition Date (including the identity of the Acquiring Person and the date on which the Shares Acquisition Date occurred), the Distribution Date, the Redemption Date, and of any events described in Section 13 (merger), and (ii) promptly provide the Rights Agent with such other information as the Rights Agent may reasonably request in connection with the performance of its duties under this Agreement.

(f)The Rights Agent shall not have any liability for or be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due authorization and execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 7(f) hereof) or any change or adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of the certificate described in Section 12 hereof, upon which the Rights Agent may rely); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.

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

(h)The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the General Counsel, the Secretary or the 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 by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions.  Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent with respect to its duties or obligations under this Rights Agreement and the date on and/or after which such action shall be taken or omitted and the Rights Agent shall not be liable for any action taken, suffered or omitted in accordance with a proposal included in any such application on or after the date specified therein (which date shall not be less than three (3) Business Days after the date any such officer actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking or omitting any such action, the Rights Agent has received written instructions in response to such application specifying the action to be taken or omitted.

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

(j)The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and, with regard to acts performed through its attorneys, the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or for any loss to the Company resulting from any such act, default, neglect or misconduct, absent bad faith, gross negligence or willful misconduct of the Rights Agent (as finally determined by a court of competent jurisdiction) in the selection and continued employment of such attorneys.

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

Section 21.  Change of Rights Agent.  The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail.  The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail.  If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right (who shall, with such notice, submit such holder's Right Certificate or, before the Distribution Date, certificate representing Common Shares, for inspection by the Company), then the registered holder of any Right may apply to any court of the United States or of any state thereof having competent jurisdiction over such matter for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (i) a Person organized and doing business under the laws of the United States or of the State of California (or of any other state of the United States), so long as such Person in good standing, which is authorized under such laws to exercise shareholder service powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million dollars or (ii) an Affiliate of a Person described in clause (i) of this sentence.  After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares or Preferred Shares, and mail a notice thereof in writing to the registered holders of Rights.  Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

Section 22.  Issuance of New Right Certificates.  Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights made in accordance with the provisions of this Agreement.  In addition, following the Distribution Date and prior to the Redemption Date or Final Expiration Date, in connection with the issuance or sale of Common Shares pursuant to the exercise of stock options or under any employee plan or arrangement or upon the exercise, conversion or exchange of other securities of the Company, in each case, which options or securities are outstanding prior to the Distribution Date, the Board of Directors shall issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Right Certificate shall be issued and this sentence shall be null and void ab initio if, and to the extent that, such issuance or this sentence would create a significant risk of or result in material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued or would create a significant risk of or result in such options' or employee plans' or arrangements' failing to qualify for otherwise available special tax treatment and (ii) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

Section 23.  Redemption.

(a)The Board of Directors of the Company may, at its option, at any time from and after the Record Date and prior to such time as any Person becomes an Acquiring Person (the "Redemption Period"), redeem all but not less than all the then outstanding Rights at a redemption price of $0.0001 per Right, appropriately adjusted to reflect each stock split, stock combination, stock dividend or similar transaction occurring after the date hereof (such redemption price, as so adjusted, being hereinafter referred to as the "Redemption Price").  After the Redemption Period has expired, the Board of Directors may not extend the period for redemption of the Rights or otherwise provide for their redemption.  The redemption of the Rights by the Board of Directors may be made effective at such time during the Redemption Period, on such basis and subject to such conditions as the Board of Directors in its sole discretion may establish.

(b)Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights pursuant to Section 23(a), and without any further action and without any notice, the right to exercise all then outstanding Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price.  The Company shall promptly give notice to the Rights Agent and public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption.  Within ten (10) days after such action of the Board of Directors ordering the redemption of the Rights pursuant to Section 23(a), the Company shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares.  Any notice that is mailed in the manner herein provided shall be deemed given upon mailing, whether or not the holder receives the notice.  If the payment of the Redemption Price is not included in such notice, each such notice shall state the method by which the payment of the Redemption Price will be made.  Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than (i) as specifically set forth in this Section 23 or in Section 24 hereof, or (ii) in connection with the purchase of Common Shares prior to the Distribution Date.

Section 24.  Exchange.

(a)The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, authorize and direct the exchange of all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become Void Rights) for Common Shares at an exchange ratio (the "Exchange Ratio") of one Common Share per Right, appropriately adjusted to reflect each stock split, stock combination, stock dividend or similar transaction occurring after the date hereof.  Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of a majority of the Common Shares then outstanding.

(b)Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant Section 24(a) hereof and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give notice to the Rights Agent and 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 that is mailed in the manner herein provided shall be deemed given when mailed, whether or not the holder receives the notice.  Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights that will be exchanged.  Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights that have become Void Rights) held by each holder of Rights.

(c)In any exchange pursuant to this Section 24, the Company, at its option, may substitute Preferred Shares (or common stock equivalents, as such term is defined in Section 11(a)(iii) hereof) for Common Shares exchangeable for Rights, at the initial rate of one one-hundredth of a Preferred Share (or common stock equivalents) for each Common Share, as appropriately adjusted to reflect adjustments in the voting rights of the Preferred Shares pursuant to the terms thereof, so that the fraction of a Preferred Share delivered in lieu of each Common Share shall have the same voting rights as one Common Share.

(d)In the event that there shall not be sufficient Common Shares, Preferred Shares or common stock equivalents authorized by the Company's Articles of Incorporation and not outstanding or subscribed for, or reserved or otherwise committed for issuance for purposes other than upon exercise of Rights, to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional Common Shares, Preferred Shares or common stock equivalents for issuance upon exchange of the Rights.

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

Section 25.  Notice of Certain Events.

(a)In case the Company shall propose (i) to pay any dividend payable in stock of any class to the holders of its Preferred Shares or to make any other distribution to the holders of its Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), (iv) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the liquidation, dissolution or winding up of the Company or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Company shall give to the Rights Agent and each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, 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 ten (10) days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least ten (10) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred Shares, whichever shall be the earlier.

(b)If any event set forth in Section 11(a)(ii) hereof shall occur, then the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof.

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

904 Caribbean Drive

Sunnyvale, CA   94089

Attention:  Corporate Secretary

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

350 Indiana Street, Suite 800

Golden, CO  80401

Attention:  Trust Department

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

Section 27.  Supplements and Amendments.  The Company may, by resolution of its Board of Directors, from time to time, and the Rights Agent shall, if the Company directs, supplement or amend this Agreement without the approval of any holders of Rights in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions or changes with respect to the Rights that the Company may deem necessary or desirable, including, without limitation, to modify or amend the definition of Acquiring Person set forth in Section 1(a) hereof, to change the Purchase Price set forth in Section 7(b), or to extend or shorten the period for redemption of the Rights; provided, however, that from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended in any manner that would adversely affect the interests of the holders of Rights (other than Void Rights of an Acquiring Person and its Affiliates and Associates), including, without limitation, to extend the period for redemption of the Rights, or otherwise provide for their redemption, or to provide for an earlier Final Expiration Date.  Any such supplement or amendment will be evidenced by a writing signed by the Company and the Rights Agent.  Upon the delivery of a certificate from an appropriate officer of the Company and, if requested by the Rights Agent, an opinion of counsel, that states that the proposed supplement or amendment complies with this Section 27, the Rights Agent shall execute such supplement or amendment, provided, however, the Rights Agent shall not be obligated to enter into any amendment or supplement to this Agreement that in the opinion of the Rights Agent, may adversely affect the rights, duties, liabilities of the Rights Agent.

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

Section 29.  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 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.

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, then such term, provision, covenant or restriction shall be enforced to the maximum extent permissible, and the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

Section 31.  Governing Law.  This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of California and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State.

Section 32.  Counterparts.  This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

Section 33.  Descriptive Headings.  Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

Section 34.  Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof.

[Signatures on Following Page]

 

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

Company:

CEPHEID

By:   /s/ John L. Bishop

Name:  John L. Bishop

Title:  Chief Executive Officer

Rights Agent:

COMPUTERSHARE TRUST COMPANY

By:   /s/ Kellie Gwin

Name:   Kellie Gwin

Title:   Vice President

By:   /s/ Laura Sisneros

Name:   Laura Sisneros

Title:   Vice President

 

 

 

 

 

[SIGNATURE PAGE TO RIGHTS AGREEMENT]

Exhibit A

FORM

of

CERTIFICATE OF DETERMINATION

of

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

of

CEPHEID 

(Pursuant to Section 401 of the

California General Corporation Law)

                                 

Cepheid, a corporation organized and existing under the General Corporation Law of the State of California (hereinafter called the "Corporation"), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 401 of the General Corporation Law at a meeting duly called and held on September 24, 2002:

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Articles of Incorporation of the Corporation, the Board of Directors hereby creates a series of Preferred Stock, no par value per share (the "Preferred Stock"), of the Corporation, none of which have been issued as of the date hereof, and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

Series A Junior Participating Preferred Stock:

Section 1.Designation and Amount.  The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 1,000,000.  Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.

Section 2.Dividends and Distributions.

(A)Subject to the rights of the holders of any shares of any series of Preferred Stock (or any other stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount (if any) per share (rounded to the nearest cent), subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock, no par value per share (the "Common Stock"), of the Company or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying (x) such amount by (y) a fraction, (1) the numerator of which is the number of shares of Common Stock outstanding immediately after such event and (2) 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 the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).

(C)Dividends due pursuant to paragraph (A) of this Section shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear interest.  Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than sixty (60) days prior to the date fixed for the payment thereof.

Section 3.Voting Rights.  The holders of shares of Series A Preferred Stock shall have the following voting rights:

(A)Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareholders of the Corporation.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying (x) such number by (y) a fraction, (1) the numerator of which is the number of shares of Common Stock outstanding immediately after such event and (2) the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B)Except as otherwise provided herein, in any other Certificate of Determination creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock 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 shareholders of the Corporation.

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

Section 4.Certain Restrictions.

(A)Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i)declare or pay dividends, or make any other distributions, on 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, 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 Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or

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

(B)The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5.Reacquired Shares.  Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof.  All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6.Liquidation, Dissolution or Winding Up.

(A)Upon any liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any assets of the Corporation to the holders of Common Stock, the amount of $1.00 per share for each share of Series A Preferred Stock then held by them.  Thereafter, the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock plus an amount equal to any accrued and unpaid dividends.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying (x) such amount by (y) a fraction (1) the numerator of which is the number of shares of Common Stock outstanding immediately after such event and (2) the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B)If the assets of the Corporation legally available for distribution to the holders of shares of Series A Preferred Stock upon liquidation, dissolution or winding up of the Corporation are insufficient to pay the full preferential amount set forth in the first sentence of paragraph (A) above, then the entire assets of the Corporation legally available for distribution to the holders of Series A Preferred Stock shall be distributed among such holders in proportion to the shares of Series A Preferred Stock then held by them.

(C)The foregoing rights upon liquidation, dissolution or winding up provided to the holders of Series A Preferred Stock shall be subject to the rights of the holders of any other series of Preferred Stock (or any other stock) ranking prior and superior to the Series A Preferred Stock upon liquidation, dissolution or winding up.

Section 7.Consolidation, Merger, etc.  In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.  In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying (x) such amount by (y) a fraction, (1) the numerator of which is the number of shares of Common Stock outstanding immediately after such event and (2) the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

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

IN WITNESS WHEREOF, this Certificate of Determination is executed on behalf of the Corporation this 30th day of September, 2002.

CEPHEID

By:
John L. Bishop

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[SIGNATURE PAGE TO CERTIFICATE OF DETERMINATION]

Exhibit B

SUMMARY OF STOCK PURCHASE RIGHTS

On September 24, 2002, the Board of Directors of Cepheid (the "Company") declared a dividend of one stock purchase right (a "Right") for each outstanding share of common stock, no par value per share (the "Common Shares"), of the Company.  The dividend is payable to shareholders of record on October 1, 2002 (the "Record Date").  In addition, one Right will be issued with each share of Company common stock that becomes outstanding (i) between the Record Date and the earliest of the Distribution Date (as defined below), the date the Rights are redeemed and the date the Rights expire or (ii) following the Distribution Date and prior to the date the Rights are redeemed and the date the Rights expire, pursuant to the exercise of employee stock options or upon the exercise, conversion or exchange of other securities of the Company, outstanding prior to the Distribution Date.  Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of the Company's Series A Junior Participating Preferred Stock (the "Preferred Shares") at a price of $40.00 per one one-hundredth of a Preferred Share (the "Purchase Price"), subject to adjustment.  A complete description of the terms of the Rights are set forth in a Rights Agreement between the Company and Computershare Trust Company, as Rights Agent.

Until the earlier to occur of (i) ten days following a public announcement or disclosure that a person or group of affiliated or associated persons (an "Acquiring Person"), has acquired beneficial ownership of 15% or more of the Company's outstanding common stock or (ii) ten business days (or a later date determined by the Company's Board of Directors before a person or group becomes an Acquiring Person) following the announcement of an intention to make a tender offer or exchange offer the consummation of which would result in a person or group becoming an Acquiring Person (the earlier of such dates being called the "Distribution Date"), the Rights will be represented by common stock certificates with a copy of this Summary of Rights attached.  No person or group will become an Acquiring Person if the Company's Board of Directors determines that such person crossed the ownership threshold inadvertently, and such person or group promptly sells shares of Company common stock until they own less than 15% of the outstanding common stock.

The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred only with Company common stock.  Until the Distribution Date (or earlier redemption or expiration of the Rights), new common stock certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference.  Until the Distribution Date (or earlier redemption or expiration of the Rights), the transfer of any common stock certificates, even without such notation or a copy of this Summary of Rights being attached, will also constitute the transfer of the Rights associated with the Company common stock represented by such certificate.  After the Distribution Date, separate certificates representing the Rights will be mailed to record holders of Company common stock on the Distribution Date and such separate certificates alone will evidence the Rights.  If shares of Company common stock are issued or sold after the Distribution Date (but prior to the redemption or expiration of the Rights) in connection with the exercise of stock options or upon the exercise, conversion or exchange of other securities of the Company outstanding prior to the Distribution Date, the Company shall issue the appropriate number of Rights in connection with such issuance or sale.

The Rights are not exercisable until the Distribution Date.  The Rights will expire on September 26, 2012, unless the expiration date is extended or unless the Rights are earlier redeemed or exchanged by the Company, as described below.  Until a Right is exercised, the holder of a Right, as such, will have no rights as a shareholder of the Company.

The purchase price payable, and the number of Preferred Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution.  The number of Rights and the number of one one-hundredths of a Preferred Share issuable upon exercise of each Right are also subject to adjustment upon certain events occurring before the Distribution Date.

The Preferred Shares have been structured so that each Preferred Share has dividend, liquidation and voting rights equal to those of 100 shares of Company common stock.  Because of this, the value of the one one-hundredth interest in a Preferred Share purchasable upon exercise of each Right should approximate the value of one Common Share.  The Preferred Shares are not redeemable.

In the event that any person or group owns more than 15% of the Company's outstanding common stock and thereby becomes an Acquiring Person, unless the event causing the person to become an Acquiring Person is a merger, acquisition or other business combination described in the next paragraph, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter be void), will thereafter have the right to receive upon exercise and payment of the exercise price that number of shares of common stock having a market value of two times the exercise price of the Right.  If the Company does not have enough authorized but unissued shares of common stock to satisfy this obligation to issue common shares, the Company will deliver upon payment of the exercise price of a Right an amount of cash or other securities equivalent in value to the common stock issuable upon exercise of a Right.

In the event that any person or group becomes an Acquiring Person and the Company merges into or engages in certain other business combinations with an Acquiring Person, or 50% or more of its consolidated assets or earning power are sold to an Acquiring Person, each holder of a Right, other than Rights owned by an Acquiring Person, will thereafter have the right to receive, upon exercise and payment of the exercise price, that number of shares of common stock of the acquiring company that at the time of such transaction will have a market value of two times the exercise price of the Right.

At any time after a person or group becomes an Acquiring Person and prior to such person acquiring a majority of the outstanding Company common stock, the Company Board of Directors may exchange all or some of the Rights (other than Rights owned by the Acquiring Person), at an exchange ratio of one common share, or one one-hundredth of a Preferred Share (or other equivalent securities), per Right.

At any time before a person or group becomes an Acquiring Person, the Company Board of Directors may redeem all (but not some) of the Rights at a price of $0.0001 per Right and on such terms and conditions as the Board of Directors may establish.  After the period for redemption of the Rights has expired, the Board may not amend the Rights Agreement to extend the period for redemption of the Rights.  Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the redemption price.

The terms of the Rights may be amended by a resolution of the Board of Directors without the consent of the holders of the Rights, except that after a person or group becomes an Acquiring Person, no such amendment may adversely affect the interests of the holders of the Rights (other than an Acquiring Person).

A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated October 3, 2002.  A copy of the Rights Agreement is available free of charge from the Company.  This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is deemed to be incorporated into this summary.

Exhibit C

FORM OF RIGHT CERTIFICATE

Certificate No. R-    _____ Rights
NOT EXERCISABLE AFTER SEPTEMBER 26, 2012, OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.0001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.

RIGHT CERTIFICATE

CEPHEID

This certifies that ____________________ or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of September 26, 2002 (the "Rights Agreement"), between Cepheid, a California corporation (the "Company"), and Computershare Trust Company (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m., Pacific Time, on September 26, 2012 at the office of the Rights Agent, or at the office of its successor as Rights Agent, one one-hundredth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock, no par value per share (the "Preferred Shares"), of the Company, at a purchase price of __________ Dollars ($_____) per one one-hundredth (1/100) of a Preferred Share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Certification and the Form of Election to Purchase duly executed.  The number of Rights evidenced by this Right Certificate (and the number of one one-hundredths of a Preferred Share that may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of _________, based on the Preferred Shares as constituted at such date.  As provided in the Rights Agreement, the Purchase Price and the number of one one-hundredths of a Preferred Share that may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events.

This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates.  Copies of the Rights Agreement are on file at the principal executive offices of the Company and the above-mentioned offices of the Rights Agent.

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

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the Company at a redemption price of $0.0001 per Right or (ii) may be exchanged in whole or in part for Preferred Shares or shares of the Company's Common Stock, no par value per share.

No fractional Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions that are integral multiples of one one-hundredth of a Preferred Share, which may, at the election of the Company, be evidenced by depository receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.

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

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

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

Dated as of _________________________

ATTEST:
CEPHEID

By: By: 

Countersigned:

COMPUTERSHARE TRUST COMPANY

By:
Authorized Signature

Form of Reverse Side of Right Certificate

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Right Certificate)

FOR VALUE RECEIVED ___________________________________ hereby sells, assigns and transfers unto ___________________________________________________ (Please print name and address of transferee) this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint __________________________________________________, Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution.

Dated:  ________________________

__________________________________

Signature

Signature(s) Guaranteed:

SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15

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The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).

_________________________________

Signature

Form of Reverse Side of Right Certificate--continued

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to

exercise the Right Certificate)

To _______________________:

The undersigned hereby irrevocably elects to exercise _____________ Rights represented by this Right Certificate to purchase the Preferred Shares issuable upon the exercise of such Rights and requests that certificates for such Preferred Shares be issued in the name of:

Please insert social security

or other identifying number_______________________

_____________________________________________

(Please print name and address)

_____________________________________________

_____________________________________________

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

Please insert social security

or other identifying number_______________________

_____________________________________________

(Please print name and address)

_____________________________________________

_____________________________________________

Dated: 

Signature

Signature(s) Guaranteed:

SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15

Form of Reverse Side of Right Certificate--continued

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The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement).
________________________________

Signature

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NOTICE

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

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

TABLE OF CONTENTS

	 	 	
Page

	 	
Certain Definitions
	
1

	 	
Appointment of Rights Agent
	
4

	 	
Evidence of Rights Before Distribution Date; Transfer; Legends
	
5

	 	
Evidence of Rights After Distribution Date; Form of Right Certificates; Countersignatures
	
6

	 	
Distribution of Certificates; Registration
	
6

	 	
Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates
	
7

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

	 	
Cancellation and Destruction of Right Certificates
	
9

	 	
Status and Availability of Preferred Shares
	
9

	 	
Preferred Shares Record Date
	
10

	 	
Adjustment of Purchase Price, Number of Shares or Number of Rights
	
10

	 	
Certificate of Adjusted Purchase Price or Number of Shares
	
16

	 	
Consolidation, Merger or Sale or Transfer of Assets or Earning Power
	
16

	 	
Fractional Rights and Fractional Shares
	
17

	 	
Rights of Action
	
18

	 	
Agreement of Right Holders
	
18

	 	
Right Certificate Holder Not Deemed a Shareholder
	
19

	 	
Compensation and Indemnity of the Rights Agent
	
19

	 	
Merger or Consolidation or Change of Name of Rights Agent
	
20

	 	
Rights and Duties of Rights Agent
	
20

	 	
Change of Rights Agent
	
23

	 	
Issuance of New Right Certificates
	
23

	 	
Redemption
	
24

	 	
Exchange
	
24

	 	
Notice of Certain Events
	
26

	 	
Notices
	
26

	 	
Supplements and Amendments
	
27

	 	
Successors
	
27

	 	
Benefits of this Agreement
	
27

	 	
Severability
	
27

	 	
Governing Law
	
28

	 	
Counterparts
	
28

	 	
Descriptive Headings
	
28

	 	
Entire Agreement
	
28

	 	
Signatures
	
29

	 	
Form of Certificate of Determination of Series A Junior Participating Preferred Stock
	 
	 	
Summary of Rights to Purchase Preferred Shares
	 
	 	
Form of Right Certificate

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