Document:

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                                                                    Exhibit 10.7

          IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING: SIGNIFICANT
                     REPRESENTATIONS ARE CALLED FOR HEREIN.

                          Velocity Express Corporation

                            STOCK PURCHASE AGREEMENT

Velocity Express Corporation
7803 Glenroy Road, Suite 200
Bloomington, Minnesota 55439

Ladies and Gentlemen:

     THIS STOCK PURCHASE AGREEMENT (the "Purchase Agreement"), made effective
this      day of           2003, by and between Velocity Express Corporation, a
     ----        ---------
Delaware corporation (the "Company"), and            , a resident of the State
                                          -----------
of            .
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1.   (a)  The Company agrees to sell to the undersigned, and the undersigned
          agrees to purchase from the Company,             shares of the
                                               -----------
          Company's Series I Convertible Preferred Stock, par value $0.004 per
          share (the "Shares" or "Series I Preferred") for the subscription
          price per Share listed in paragraph 1(b) below. The rights and
          preferences of the Shares are set forth in the Certificate of
          Designation of Preferences and Rights of Series I Convertible
          Preferred Stock as set forth in Appendix A attached hereto. The
          undersigned acknowledges that this subscription is contingent upon
          acceptance in whole or in part by the Company and upon shareholder
          approval of (i) the issuance of the Series I Preferred Stock and (ii)
          the amendment of the Company's Certificate of Incorporation to
          increase the number of shares authorized for issuance to 400,000,000
          shares, of which 325,000,000 shares are Common Stock and 75,000,000
          shares are Preferred Stock, at a meeting of the Company's shareholders
          or by written consent. Concurrent with the delivery of this Agreement,
          the undersigned has delivered cash or a check or wire transfer to the
          Company in the amount of $          for payment of the full purchase
                                     --------
          price of the Shares.

     (b)  Subject to the Board of Directors of the Company varying the purchase
          price per share of the Series I Preferred if they deem such action
          necessary or appropriate to obtain sufficient funding for the Company,
          the Series I Preferred shall be sold at the following price per Share
          (the "Purchase Price"):

          .    if this Purchase Agreement is executed and the payment of the
               Purchase Price is tendered to the Company on or before October
               24, 2003, the Purchase Price shall be $1.50 per Share;

          .    if this Purchase Agreement is executed and the payment of the
               Purchase Price is tendered to the Company after October 24, 2003,
               but on or before October 31, 2003, the Purchase Price shall be
               $1.80 per Share;

          .    if this Purchase Agreement is executed and the payment of the
               Purchase Price is tendered to the Company after October 31, 2003,
               but on or before November 14, 2003, the Purchase Price shall be
               $2.20 per Share; and

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          .    if this Purchase Agreement is executed and the payment of the
               Purchase Price is tendered to the Company after November 14,
               2003, but on or before November 28, 2003, the Purchase Price
               shall be $3.30 per Share.

     (c)  The Company and the undersigned agrees that if the shareholder
          approval specified in paragraph 1(a) above is not achieved, the
          Company will return to the undersigned, without interest or deduction,
          any Purchase Price tendered by the undersigned for the purchase of the
          Series I Preferred.

2.        The undersigned acknowledges and represents as follows:

     (a)  That the undersigned has had an opportunity to carefully review the
          Company, has had the opportunity to conduct due diligence on the
          Company, has had the opportunity to review its public filings with the
          Securities and Exchange Commission and has reviewed the Risk Factors,
          attached hereto as Appendix B, relating to the Company (the "Company
          Materials"), and all documents delivered therewith or reasonably
          requested by the undersigned and is aware of the fact that the Company
          may use a portion of the funds generated from the sale of the Series I
          Preferred to replace certain letters of credit totally $7.1 million
          currently maintained by the Company and guaranteed by TH Lee Putnam
          Ventures;

     (b)  That the undersigned is able to bear the economic risk of the
          investment in the Shares;

     (c)  That the undersigned has knowledge and experience in financial and
          business matters, that the undersigned is capable of evaluating the
          merits and risks of the prospective investment in the Shares and that
          the undersigned is able to bear such risks.

     (d)  That the undersigned understands an investment in the Shares is highly
          speculative but believes that the investment is suitable for the
          undersigned based upon the investment objectives and financial needs
          of the undersigned, and has adequate means for providing for his, her
          or its current financial needs and personal contingencies and has no
          need for liquidity of investment with respect to the Shares;

     (e)  That the undersigned has been given access to full and complete
          information regarding the Company (including the opportunity to meet
          with Company officers and review such documents as the undersigned may
          have requested in writing) and has utilized such access to the
          satisfaction of the undersigned for the purpose of obtaining
          information in addition to, or verifying information included in, the
          Company Materials;

     (f)  That the undersigned recognizes that the Shares, are an investment,
          involve a high degree of risk, including, but not limited to, the
          risks described in the Company Materials;

     (g)  That the undersigned realizes that (i) the purchase of Shares is a
          long-term investment; (ii) the purchasers of the Shares must bear the
          economic risk of investment for an indefinite period of time because
          the Shares have not been registered under the Securities Act of 1933,
          as amended (the "Act") and, therefore, cannot be sold unless they are
          subsequently registered under the Act, or an exemption from such
          registration is available; and (iii) the transferability of the Shares
          is restricted, and (A) requires the written consent of the Company,
          (B) requires conformity with the restrictions contained in paragraph 3
          below, and (C) will be further restricted by a legend placed on the
          certificate(s) representing the Shares stating that the Shares have
          not been registered under the Act and referring to the restrictions on
          transferability of the Shares, and by stop

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          transfer orders or notations on the Company's records referring to the
          restrictions on transferability;

     (h)  That the undersigned is a bona fide resident of, and is domiciled in,
          the state or country listed in the Recital to this Agreement and that
          the Shares are being purchased solely for the beneficial interest of
          the undersigned and not as nominee, for, or on behalf of, or for the
          beneficial interest of, or with the intention to transfer to, any
          other person, trust or organization, except as specifically set forth
          in paragraph 4 of this Purchase Agreement;

     (i)  That pending shareholder authorization specified in paragraph 1(a)
          above, the Purchase Price received by the Company pursuant to this
          Purchase Agreement and other stock purchase agreements for the
          subscription of the Series I Preferred shall be used for the general
          corporate purposes of the Company and will not be held in a segregated
          account;

     (j)  That the Company did not solicit the undersigned in connection with
          its rights offering described in the Company's Registration Statement
          filed on October 1, 2003, (File Number 333-109362) and which was later
          withdrawn;

     (k)  That there is no minimum amount for the Company's offering of the
          Series I Preferred and that there can be no assurance that the
          offering of the Series I Preferred will result in a total proceeds to
          the Company of any set amount; and

     (l)  That the undersigned constitutes an accredited investor as defined in
          Rule 501(a) under the Securities Act of 1933.

3.        The undersigned has been advised that the Shares are not being
          registered under the Act or any other securities laws pursuant to
          exemptions from the Act and such laws, and that the Company's reliance
          upon such exemptions is predicated in part on the undersigned's
          representations to the Company as contained herein. The undersigned
          represents and warrants that the Shares are being purchased for his,
          her or its own account and for investment and without the intention of
          reselling or redistributing the same, that he, she or it has made no
          agreement with others regarding any of such Shares and that his, her
          or its financial condition is such that it is not likely that it will
          be necessary to dispose of any of such Shares in the foreseeable
          future. The undersigned is aware that, in the view of the Securities
          and Exchange Commission, a purchase of Shares with an intent to resell
          by reason of any foreseeable specific contingency or anticipated
          change in market value, or any change in the condition of the Company
          or its business, or in connection with a contemplated liquidation or
          settlement of any loan obtained for the acquisition of the Shares and
          for which the Shares were pledged as security, would represent an
          intent inconsistent with the representations set forth above. The
          undersigned further represents and agrees that if, contrary to his,
          her or its foregoing intentions, he, she or it should later desire to
          dispose of or transfer any of such Shares in any manner, he, she or it
          shall not do so without first obtaining (a) the opinion of counsel
          designated by the Company that such proposed disposition or transfer
          lawfully may be made without the registration of such Shares for such
          purpose pursuant to the Act, as then in effect, and any other
          applicable securities laws, or (b) such registrations (it being
          expressly understood that the Company shall not have any obligation to
          register the Shares for such purpose).

               The undersigned agrees that the Company may place a restrictive
          legend on the certificate(s) representing the Shares, containing
          substantially the following language:

               THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
               WITHOUT REGISTRATION UNDER THE SECURITIES

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               ACT OF 1933, AS AMENDED (THE "ACT"), AND WITHOUT REGISTRATION
               UNDER ANY OTHER SECURITIES LAWS, IN RELIANCE UPON EXEMPTIONS
               CONTAINED IN THE ACT AND SUCH LAWS. NO TRANSFER OF THESE
               SECURITIES OR ANY INTEREST THEREIN MAY BE MADE IN THE ABSENCE OF
               EITHER AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
               UNDER THE APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
               COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSACTION IS EXEMPT
               FROM REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
               SECURITIES LAWS. FURTHER, THESE SECURITIES ARE SUBJECT TO
               LIMITATIONS ON CONVERTIBILITY AS SET FORTH IN THE STOCK PURCHASE
               AGREEMENT APPLICABLE TO THE ISSUANCE OF THESE SECURITIES AND THE
               CERTIFICATE OF DESIGNATION OF THOSE SECURITIES.

               The undersigned agrees and consents that the Company may place a
          stop transfer order on the certificate(s) representing the Shares to
          assure the undersigned's compliance with this Agreement and the
          matters referenced above.

               The undersigned agrees to save and hold harmless, defend and
          indemnify the Company and its directors, officers and agents from any
          claims, liabilities, damages, losses, expenses or penalties arising
          out of any misrepresentation of information furnished by the
          undersigned to the Company in this Agreement.

          The undersigned understands that the Company at a future date may file
          a registration or offering statement (the "Registration Statement")
          with the Securities and Exchange Commission to facilitate a public
          offering of its securities. The undersigned agrees, for the benefit of
          the Company, that should an underwritten public offering be made and
          should the managing underwriter of such offering require, the
          undersigned will not, without the prior written consent of the Company
          and such underwriter, during the Lock Up Period as defined herein: (a)
          sell, transfer or otherwise dispose of, or agree to sell, transfer or
          otherwise dispose of any of the Shares beneficially held by the
          undersigned during the Lock Up Period; (b) sell, transfer or otherwise
          dispose of, or agree to sell, transfer or otherwise dispose of any
          options, rights or warrants to purchase any of the Shares beneficially
          held by the undersigned during the Lock Up Period; or (c) sell or
          grant, or agree to sell or grant, options, rights or warrants with
          respect to any of the Shares. The foregoing does not prohibit gifts to
          donees or transfers by will or the laws of descent to heirs or
          beneficiaries provided that such donees, heirs and beneficiaries shall
          be bound by the restrictions set forth herein. The term "Lock Up
          Period" shall mean the lesser of (x) 240 days or (y) the period during
          which Company officers and directors are restricted by the managing
          underwriter from effecting any sales or transfers of the Company's
          securities. The Lock Up Period shall commence on the effective date of
          the Registration Statement.

          The undersigned has read and executed the Registration Rights
          Agreement in the form appended hereto as Appendix C. The undersigned
          agrees that, notwithstanding any registration rights granted under the
          Registration Rights Agreement, the undersigned will not be entitled to
          any registration rights, whether by demand, piggyback or otherwise,
          until the shareholder approval of (i) the issuance of the Series I
          Preferred Stock and (ii) the amendment of the Company's Certificate of
          Incorporation to increase the number of shares authorized for issuance
          to 400,000,000 shares, of which 325,000,000 shares are

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          Common Stock and 75,000,000 shares are Preferred Stock, at a meeting
          of the Company's shareholders or by written consent has been obtained.

4.        NASD Affiliation. The undersigned is affiliated or associated,
          directly or indirectly, with a National Association of Securities
          Dealers, Inc. ("NASD") member firm or person.

               Yes            No
                   --------      --------

               If yes, list the affiliated member firm or person:
                                                                 ---------------

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

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          Your relationship to such member firm or person:
                                                          ----------------------

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

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5.        Entities. If the undersigned is not an individual but an entity, the
          individual signing on behalf of such entity and the entity jointly and
          severally agree and certify that:

     A.   The undersigned was not organized for the specific purpose of
          acquiring securities of the Company; and

     B.   This Agreement has been duly authorized by all necessary action on the
          part of the undersigned, has been duly executed by an authorized
          officer or representative of the undersigned, and is a legal, valid
          and binding obligation of the undersigned enforceable in accordance
          with its terms.

6.        The undersigned agrees that he/she or it shall not disclose either the
          existence, the contents or any of the terms and conditions of this
          Purchase Agreement to any other person.

7.        Miscellaneous.

     A.   Manner in which title is to be held: (check one)

                     Individual Ownership
               -----

                     Joint Tenants with Right of Survivorship*
               -----

                     Partnership*
               -----

                     Tenants in Common*
               -----

                     Corporation
               -----

                     Trust
               -----

                     Other
               -----       -------------------------------------------
                                                                       describe)
               -------------------------------------------------------

---------------------------------
*    Multiple signatures required

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     B.   The undersigned agrees that the undersigned understands the meaning
          and legal consequences of the agreements, representations and
          warranties contained herein, agrees that such agreements,
          representations and warranties shall survive and remain in full force
          and effect after the execution hereof and payment for the Shares, and
          further agrees to indemnify and hold harmless the Company, each
          current and future officer, director, employee, agent and shareholder
          from and against any and all loss, damage or liability due to, or
          arising out of, a breach of any agreement, representation or warranty
          of the undersigned contained herein.

     C.   This Agreement shall be construed and interpreted in accordance with
          Minnesota law without regard to conflict of law provisions.

     D.   The undersigned agrees to furnish to the Company, upon request, such
          additional information as may be deemed necessary to determine the
          undersigned's suitability as an investor.

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                                 SIGNATURE PAGE

Dated:                 , 2003.
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Signature

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Name Typed or Printed

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Residence Address

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City, State, Country and Zip Code

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Mailing Address

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City, State, Country and Zip Code

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Tax Identification or Social
Security Number

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Phone Number (home)

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Phone Number (work)

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Fax Number

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E-mail Address

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                            CERTIFICATE OF SIGNATORY

(To be completed if Shares are being subscribed by an entity.)

     I,                      am the                ,             (the "Entity").
        -------------------         ---------------  -----------

     I certify that I am empowered and duly authorized by the Entity to execute
and carry out the terms of the Stock Purchase Agreement, dated              ,
                                                               -------------
2003, by and between Velocity Express Corporation and the Entity to purchase and
hold the Shares, and certify further that the Stock Purchase Agreement has been
duly and validly executed on behalf of the Entity and constitutes a legal and
binding obligation of the Entity.

     IN WITNESS WHEREOF, I have set my hand this          day of        , 2003.
                                                 --------        -------

                                        ----------------------------------------
                                        (Signature)

                                        ----------------------------------------
                                        (Title)

                                        ----------------------------------------
                                        (Please Print Name)

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                            ACCEPTANCE BY THE COMPANY

     Velocity Express Corporation hereby accepts the foregoing subscription to
the extent of         Shares and shall issue such Shares upon shareholder
              -------
approval of (i) the issuance of the Series I Preferred Stock and (ii) the
amendment of the Company's Certificate of Incorporation to increase the number
of shares authorized for issuance to 400,000,000 shares, of which 325,000,000
shares are Common Stock and 75,000,000 shares are Preferred Stock, at a meeting
of the Company's shareholders.

                                        Velocity Express Corporation

                                        By
                                           -------------------------------------
                                           Wesley C. Fredenburg
                                           General Counsel and Secretary

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                                   APPENDIX A

                           Certificate of Designation

                          VELOCITY EXPRESS CORPORATION
             CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF
                      SERIES I CONVERTIBLE PREFERRED STOCK

     Pursuant to the provisions of the General Corporation Law of the State of
Delaware, the undersigned corporation certifies the following and adopts the
attached certificate of designation:

     FIRST:    The name of the corporation is Velocity Express Corporation (the
               "Corporation").

     SECOND:   Pursuant to the authority vested in the Board of Directors by
               this Corporation's Amended and Restated Certificate of
               Incorporation, as amended to date, the Board of Directors by
               unanimous written consent did adopt, without shareholder action,
               the following resolutions, authorizing the creation and
               designation of a series of preferred stock designated as Series I
               Convertible Preferred Stock as set forth in Exhibit A attached
               hereto:

               RESOLVED, that, in order to comply with and fulfill its
               obligations under certain stock purchase agreements for the
               Series I Convertible Preferred Stock (the "Stock Purchase
               Agreements"), the Corporation will be required to file a
               Certificate of Designation, in order to designate a new class or
               series of its authorized preferred shares as set forth on Exhibit
               A to these consent resolutions (the "Certificate"); and

               RESOLVED FURTHER, that the Board of Directors, acting under
               authority of the Corporation's Amended and Restated Certificate
               of Incorporation, as amended, and the General Corporate Law of
               the State of Delaware, hereby approves and adopts the
               Certificate; and

               RESOLVED FURTHER that, in the manner required by law and by the
               Corporation's Amended and Restated Certificate of Incorporation,
               as amended, the appropriate officers of the Corporation be and
               they hereby are authorized and directed to cause to be prepared,
               and to execute, and to file with the Secretary of State of the
               State of Delaware the Certificate.

     In witness whereof, this Certificate of Designation of Series I Convertible
Preferred Stock is hereby executed on behalf of the Corporation this      day of
                                                                     ----
         , 2003.
---------

                                        Velocity Express Corporation

                                        ----------------------------------------
                                        Wesley C. Fredenburg,
                                        General Counsel and Secretary

                                       10

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                                    Exhibit A

                VELOCITY EXPRESS CORPORATION (THE "CORPORATION")
                   SERIES I CONVERTIBLE PREFERRED STOCK TERMS

                       ARTICLE I DESIGNATION AND AMOUNT.

     The number of authorized shares of Series I Convertible Preferred Stock,
par value $0.004 per share (the "Series I Preferred Stock"), shall be
16,810,000.

                             ARTICLE II DIVIDENDS.

     In the event that the Corporation declares or pays any dividends upon the
Common Stock (whether payable in cash, securities or other property), other than
dividends payable solely in shares of Common Stock, the Corporation shall also
declare and pay to the holders of Series I Preferred Stock at the same time that
it declares and pays such dividends to the holders of the Common Stock, the
dividends which would have been declared and paid with respect to the Common
Stock issuable upon conversion of shares of the Series I Preferred Stock which
are convertible into shares of Common Stock had all such shares of the
outstanding Series I Preferred Stock been converted immediately prior to the
record date for such dividend, or if no record date is fixed, the date as of
which the record holders of Common Stock entitled to such dividends are to be
determined.

                       ARTICLE III LIQUIDATION PREFERENCE.

     Upon liquidation, dissolution and winding up of the Corporation (whether
voluntary or involuntary) (a "Liquidation Event"), the Corporation shall pay to
the holders of the Series I Preferred Stock (unless otherwise provided for in
the resolution or resolutions creating such stock) the aggregate Liquidation
Value attributable to such shares (each, a "Share") plus any accrued but unpaid
dividends thereon. If upon any such Liquidation Event, the Corporation's assets
to be distributed among the holders of the Junior Securities, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock and Series I Preferred
Stock are insufficient to permit payment to such holders of the aggregate amount
of their respective liquidation preference pursuant to the Corporation's Amended
and Restated Certificate of Incorporation, as amended from time to time (the
"Charter"), as applicable, then the entire assets available to be distributed to
the Corporation's stockholders shall be distributed in accordance with the
priorities set forth in Article IV, Section 3 of the Charter, with the Series I
Preferred Stock ranking pari passu with the Series D, F, G and H Preferred Stock
and prior to the Series B and C Preferred Stock. Not less than sixty (60) days
prior to the payment date of the Liquidation Value, the Corporation shall mail
written notice of any such Liquidation Event to each record holder of Series I
Preferred Stock, setting forth in reasonable detail the amount of proceeds to be
paid with respect to each Share and each share of Common Stock in connection
with such Liquidation Event. A change of control of the Corporation shall not be
deemed a Liquidation Event for purposes of this Section 3.

                                      A-1

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                           ARTICLE IV VOTING RIGHTS.

     Section 4.1 Voting Rights. The Series I Preferred Stock shall have no
voting rights.

     Section 4.2 Covenants.

     Notwithstanding the above, the Corporation shall not take any of the
actions set forth below without first obtaining the affirmative consent of the
holders of at least two-thirds of the then outstanding shares of Series I
Preferred Stock for so long as at least 20% of the Series I Preferred Stock
originally issued pursuant to the Stock Purchase Agreements remains outstanding:

          (a) alter or change the preferences, rights or powers of the Series I
     Preferred Stock;

          (b) increase or decrease the authorized number of shares of the Series
     I Preferred Stock;

                             ARTICLE V CONVERSION.

     Subject to the terms of this Section 5, at any time and from time to time
after (i) the authorization by stockholders of the Corporation of the issuance
of the Series I Preferred Stock and (ii) the amendment of the Charter to
increase the number of shares of the Corporation authorized for issuance to
400,000,000 shares, of which 325,000,000 shares are Common Stock and 75,000,000
shares are Preferred Stock (the time after both conditions are met, the
"Conversion Time"), any holder of Series I Preferred Stock may convert all or
any portion of the Series I Preferred Stock (including any fraction of a Share)
held by such holder into a number of shares of Conversion Stock computed by
multiplying the number of Shares to be converted by $1.50 and dividing the
result by the Conversion Price then in effect; provided, however, that, except
for Organic Changes (as defined below) to which the following limitation does
not apply, the Series I Preferred Stock shall not be convertible into Conversion
Stock to the extent that such conversion would result in the holder of the
Series I Preferred, together with such holder's Affiliates, holding 40% or more
of all of the outstanding capital stock of the Corporation on an as converted
basis.

     Section 5.1 Conversion Procedure.

          (a) Except as otherwise provided herein, each conversion of Preferred
     Stock shall be deemed to have been effected as of the close of business on
     the date on which the certificate or certificates representing the Series I
     Preferred Stock to be converted have been surrendered for conversion at the
     principal office of the Corporation. At the time any such conversion has
     been effected, the rights of the holder of the Shares converted as a holder
     of Series I Preferred Stock shall cease and the Person or Persons in whose
     name or names any certificate or certificates for shares of Conversion
     Stock are to be issued upon such conversion shall be deemed to have become
     the holder or holders of record of the shares of Conversion Stock
     represented thereby.

          (b) Notwithstanding any other provision hereof, if a conversion of
     Preferred Stock is to be made in connection with a transaction affecting
     the Corporation, the

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     conversion of any shares of Series I Preferred Stock may, at the election
     of the holder thereof, be conditioned upon the consummation of such
     transaction, in which case such conversion shall not be deemed to be
     effective until such transaction has been consummated.

          (c) As soon as possible after a conversion has been effected (but in
     any event within three (3) Business Days in the case of subparagraph (A)
     below), the Corporation shall deliver to the converting holder:

               i.   a certificate or certificates representing the number of
                    shares of Conversion Stock issuable by reason of such
                    conversion in such name or names and such denomination or
                    denominations as the converting holder has specified;

               ii.  payment of any amount payable under subparagraph (viii)
                    below with respect to such conversion; and

               iii. a certificate representing any Shares, which were
                    represented, by the certificate or certificates delivered to
                    the Corporation in connection with such conversion but which
                    were not converted.

          (d) The issuance of certificates representing shares of Conversion
     Stock upon conversion of Preferred Stock shall be made without charge to
     the holders of such Preferred Stock for any issuance tax in respect thereof
     or other cost incurred by the Corporation in connection with such
     conversion and the related issuance of shares of Conversion Stock. Upon
     conversion of each share of Series I Preferred Stock, the Corporation shall
     take all such actions as are necessary in order to insure that the
     Conversion Stock issuable with respect to such conversion shall be validly
     issued, fully paid and nonassessable, free and clear of all taxes, liens,
     charges and encumbrances with respect to the issuance thereof.

          (e) The Corporation shall not close its books against the transfer of
     Preferred Stock or of Conversion Stock issued or issuable upon conversion
     of the Series I Preferred Stock in any manner, which interferes with the
     timely conversion of the Series I Preferred Stock. The Corporation shall
     assist and cooperate with any holder of Shares required to make any
     governmental filings or obtain any governmental approval prior to or in
     connection with any conversion of Shares hereunder (including, without
     limitation, making any filings required to be made by the Corporation).

          (f) The Corporation shall at all times after the Conversion Time
     reserve and keep available out of its authorized but unissued shares of
     Conversion Stock, solely for the purpose of issuance upon the conversion of
     the Series I Preferred Stock, such number of shares of Conversion Stock
     issuable upon the conversion of all outstanding Preferred Stock. All shares
     of Conversion Stock that are so issuable shall, when issued, be duly and
     validly issued, fully paid and nonassessable and free from all taxes, liens
     and charges. The Corporation shall take all such actions as may be
     necessary to assure that all such shares of Conversion Stock may be so
     issued without violation of any applicable law or governmental regulation
     or any requirements of any domestic securities exchange upon which shares
     of Conversion Stock may be listed (except for official notice of

                                      A-3

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     issuance which shall be immediately delivered by the Corporation upon each
     such issuance). The Corporation shall not take any action that would cause
     the number of authorized but unissued shares of Conversion Stock to be less
     than the number of such shares required to be reserved hereunder for
     issuance upon conversion of the Preferred Stock.

          (g) If any fractional interest in a share of Conversion Stock would,
     except for the provisions of this subparagraph, be delivered upon any
     conversion of the Series I Preferred Stock, the Corporation, in lieu of
     delivering the fractional share therefore, shall pay an amount to the
     holder thereof equal to the Market Price of such fractional interest as of
     the date of conversion.

          (h) If the shares of Conversion Stock issuable by reason of conversion
     of the Series I Preferred Stock are convertible into or exchangeable for
     any other stock or securities of the Corporation, the Corporation shall, at
     the converting holder's option, upon surrender of the Shares to be
     converted by such holder as provided herein together with any notice,
     statement or payment required to effect such conversion or exchange of
     Conversion Stock, deliver to such holder or as otherwise specified by such
     holder a certificate or certificates representing the stock or securities
     into which the shares of Conversion Stock issuable by reason of such
     conversion are so convertible or exchangeable, registered in such name or
     names and in such denomination or denominations as such holder has
     specified.

     Section 5.2 Conversion Price.

          (a) In order to prevent dilution of the conversion rights granted
     under this Section 5, the Conversion Price of the Series I Preferred Stock
     shall be subject to adjustment from time to time pursuant to this Section
     5B.

          (b) If and whenever after the original date of issuance of the first
     share of Series I Preferred Stock, the Corporation issues or sells, or in
     accordance with Section 5C is deemed to have issued or sold, any shares of
     its Common Stock for a consideration per share less than the Market Price
     of the Common Stock determined as of the date of such issue or sale, then
     immediately upon such issue or sale, the Conversion Price shall be reduced
     to the Conversion Price determined by multiplying the Conversion Price in
     effect immediately prior to such issue or sale by a fraction, the numerator
     of which shall be the sum of (1) the number of shares of Common Stock
     Deemed Outstanding immediately prior to such issue or sale multiplied by
     the Market Price of the Common Stock determined as of the date of such
     issuance or sale, plus (2) the consideration, if any, received by the
     Corporation upon such issue or sale, and the denominator of which shall be
     the product derived by multiplying the Market Price of the Common Stock by
     the number of shares of Common Stock Deemed Outstanding immediately after
     such issue or sale.

          (c) Notwithstanding the foregoing, there shall be no adjustment to the
     Conversion Price hereunder with respect to any issuances that are exempt
     from adjustment with respect to any shares of Preferred Stock of any series
     pursuant to Section 5B (iii) of the Charter.

                                      A-4

<PAGE>

     Section 5.3 Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under paragraph 5B, the following
shall be applicable:

          (a) Issuance of Rights or Options. If the Corporation in any manner
     grants or sells any Options and the price per share for which Common Stock
     is issuable upon the exercise of such Options, or upon conversion or
     exchange of any Convertible Securities issuable upon exercise of such
     Options, is less than the Market Price of the Common Stock determined as of
     such time, then the total maximum number of shares of Common Stock issuable
     upon the exercise of such Options or upon conversion or exchange of the
     total maximum amount of such Convertible Securities issuable upon the
     exercise of such Options shall be deemed to be outstanding and to have been
     issued and sold by the Corporation at the time of the granting or sale of
     such Options for such price per share. For purposes of this paragraph, the
     "price per share for which Common Stock is issuable" shall be determined by
     dividing (A) the total amount, if any, received or receivable by the
     Corporation as consideration for the granting or sale of such Options, plus
     the minimum aggregate amount of additional consideration payable to the
     Corporation upon exercise of all such Options, plus in the case of such
     Options which relate to Convertible Securities, the minimum aggregate
     amount of additional consideration, if any, payable to the Corporation upon
     the issuance or sale of such Convertible Securities and the conversion or
     exchange thereof, by (B) the total maximum number of shares of Common Stock
     issuable upon the exercise of such Options or upon the conversion or
     exchange of all such Convertible Securities issuable upon the exercise of
     such Options. No further adjustment of the Conversion Price shall be made
     when Convertible Securities are actually issued upon the exercise of such
     Options or when Common Stock is actually issued upon the exercise of such
     Options or the conversion or exchange of such Convertible Securities.

          (b) Issuance of Convertible Securities. If the Corporation in any
     manner issues or sells any Convertible Securities and the price per share
     for which Common Stock is issuable upon conversion or exchange thereof is
     less than the Market Price of the Common Stock determined as of such time,
     then the maximum number of shares of Common Stock issuable upon conversion
     or exchange of such Convertible Securities shall be deemed to be
     outstanding and to have been issued and sold by the Corporation at the time
     of the issuance or sale of such Convertible Securities for such price per
     share. For the purposes of this paragraph, the "price per share for which
     Common Stock is issuable" shall be determined by dividing (A) the total
     amount received or receivable by the Corporation as consideration for the
     issue or sale of such Convertible Securities, plus the minimum aggregate
     amount of additional consideration, if any, payable to the Corporation upon
     the conversion or exchange thereof, by (B) the total maximum number of
     shares of Common Stock issuable upon the conversion or exchange of all such
     Convertible Securities. No further adjustment of the Conversion Price shall
     be made when Common Stock is actually issued upon the conversion or
     exchange of such Convertible Securities, and if any such issue or sale of
     such Convertible Securities is made upon exercise of any Options for which
     adjustments of the Conversion Price had been or are to be made pursuant to
     other provisions of this Section 5, no further adjustment of the Conversion
     Price shall be made by reason of such issue or sale.

                                       A-5

<PAGE>

          (c) Change in Option Price or Conversion Rate. If the purchase price
     provided for in any Options, the additional consideration, if any, payable
     upon the conversion or exchange of any Convertible Securities or the rate
     at which any Convertible Securities are convertible into or exchangeable
     for Common Stock changes at any time, the Conversion Price in effect at the
     time of such change shall be immediately adjusted to the Conversion Price
     which would have been in effect at such time had such Options or
     Convertible Securities still outstanding provided for such changed purchase
     price, additional consideration or conversion rate, as the case may be, at
     the time initially granted, issued or sold. For purposes of Section 5C, if
     the terms of any Option or Convertible Security which was outstanding as of
     the date of issuance of the Series I Preferred Stock are changed in the
     manner described in the immediately preceding sentence, then such Option or
     Convertible Security and the Common Stock deemed issuable upon exercise,
     conversion or exchange thereof shall be deemed to have been issued and sold
     as of the date of such change; provided, that (A) no such change shall at
     any time cause the Conversion Price hereunder to be increased, and (B) no
     adjustment to the Conversion Price pursuant to this clause (iii) shall be
     made as a result of any adjustment to the exercise and/or conversion price
     with respect to the outstanding capital security of the Corporation on the
     date hereof pursuant to and in accordance with the antidilution protection
     provisions of such securities as in effect on the date hereof.

          (d) Treatment of Expired Options and Unexercised Convertible
     Securities. Upon the expiration of any Option or the termination of any
     right to convert or exchange any Convertible Security without the exercise
     of any such Option or right, the Conversion Price then in effect hereunder
     shall be adjusted immediately to the Conversion Price which would have been
     in effect at the time of such expiration or termination had such Option or
     Convertible Security, to the extent outstanding immediately prior to such
     expiration or termination, never been issued. For purposes of Section 5C,
     the expiration or termination of any Option or Convertible Security which
     was outstanding as of the date of issuance of the Series I Preferred Stock
     shall not cause the Conversion Price hereunder to be adjusted unless, and
     only to the extent that, a change in the terms of such Option or
     Convertible Security caused it to be deemed to have been issued after the
     date of issuance of the Series I Preferred Stock.

          (e) Calculation of Consideration Received. If any Common Stock, Option
     or Convertible Security is issued or sold or deemed to have been issued or
     sold for cash, the consideration received therefore shall be deemed to be
     the amount received by the Corporation therefore. If any Common Stock,
     Option or Convertible Security is issued or sold for a consideration other
     than cash, the amount of the consideration other than cash received by the
     Corporation shall be the fair value of such consideration, except where
     such consideration consists of securities, in which case the amount of
     consideration received by the Corporation shall be the Market Price thereof
     as of the date of receipt of such securities. The fair value of any
     consideration other than cash and securities shall be determined jointly by
     the Corporation and the holders of at least two-thirds of the Series I
     Preferred Stock. If such parties are unable to reach agreement within a
     reasonable period of time, the fair value of such consideration shall be
     determined by an independent appraiser experienced in valuing such type of
     consideration, jointly selected by the Corporation and the holders of at
     least two-thirds of the Series I Preferred Stock then

                                       A-6

<PAGE>

     outstanding. The determination of such appraiser shall be final and binding
     upon the parties, and the fees and expenses of such appraiser shall be
     borne by the Corporation.

          (f) Integrated Transactions. In case any Option is issued in
     connection with the issue or sale of other securities of the Corporation,
     together comprising one integrated transaction in which no specific
     consideration is allocated to such Option by the parties thereto, the
     Option shall be deemed to have been issued for a consideration of $.01.

          (g) Treasury Shares. The number of shares of Common Stock outstanding
     at any given time shall not include shares owned or held by or for the
     account of the Corporation or any Subsidiary, and the disposition of any
     shares so owned or held shall be considered an issue or sale of Common
     Stock.

          (h) Record Date. If the Corporation takes a record of the holders of
     Common Stock for the purpose of entitling them (a) to receive a dividend or
     other distribution payable in Common Stock, Options or in Convertible
     Securities or (b) to subscribe for or purchase Common Stock, Options or
     Convertible Securities, then such record date shall be deemed to be the
     date of the issue or sale of the shares of Common Stock deemed to have been
     issued or sold upon the declaration of such dividend or upon the making of
     such other distribution or the date of the granting of such right of
     subscription or purchase, as the case may be.

     Section 5.4 Subdivision or Combination of Common Stock. If the Corporation
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.

     Section 5.5 Reorganization, Reclassification, Consolidation, Merger or
Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock held by such holders, is referred to herein as an "Organic Change".
Prior to the consummation of any Organic Change, the Corporation shall make
appropriate provisions to insure that each of the holders of Series I Preferred
Stock shall thereafter have the right to acquire and receive, in lieu of the
shares of Conversion Stock immediately theretofore acquirable and receivable
upon the conversion of such holder's Series I Preferred Stock, such shares of
stock, securities or assets as such holder would have received in connection
with such Organic Change if such holder had converted its Series I Preferred
Stock immediately prior to such Organic Change. The Corporation shall not effect
any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument, the obligation to deliver to each such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.

                                      A-7

<PAGE>

     Section 5.6 Certain Events. If any event occurs of the type contemplated by
the provisions of this Section 5 but are not expressly provided for by these
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of the Series I
Preferred Stock; provided, that no such adjustment shall increase the Conversion
Price or decrease the number of shares of Conversion Stock issuable upon
conversion of each Share of Series I Preferred Stock as otherwise determined
pursuant to this Section 5.

     Section 5.7 Notices.

          (a) Immediately upon any adjustment of the Conversion Price, the
     Corporation shall give written notice thereof to all affected holders of
     the Series I Preferred Stock, setting forth in reasonable detail and
     certifying the calculation of such adjustment.

          (b) The Corporation shall give written notice to all holders of the
     Series I Preferred Stock at least 20 days prior to the date on which the
     Corporation closes its books or takes a record (a) with respect to any
     dividend or distribution upon Common Stock, (b) with respect to any pro
     rata subscription offer to holders of Common Stock or (c) for determining
     rights to vote with respect to any Organic Change, dissolution or
     liquidation.

          (c) The Corporation shall also give written notice to the holders of
     the Series I Preferred Stock at least 20 days prior to the date on which
     any Organic Change shall take place.

                           ARTICLE VI PURCHASE RIGHTS.

     If at any time the Corporation grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights") and such rights are not concurrently granted to the holders
of the Preferred Stock, then each holder of Initially Designated Preferred Stock
or the Series I Preferred Stock shall be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Conversion Stock acquirable upon conversion of such holder's Initially
Designated Preferred Stock or Series I Preferred Stock immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

                     ARTICLE VII REGISTRATION OF TRANSFER.

     The Corporation shall keep or have its agent keep a register for the
registration of the Series I Preferred Stock. Upon the surrender of any
certificate representing the Series I Preferred Stock at a place designated by
the Corporation, the Corporation shall, at the request of the record holder of
such certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefore representing in the aggregate
the number of Shares represented by the surrendered certificate. Each such new
certificate shall be registered in such name and shall represent such number of
Shares as is requested by the holder of the surrendered certificate

                                      A-8

<PAGE>

and shall be substantially identical in form to the surrendered certificate, and
dividends shall accrue on the Series I Preferred Stock represented by such new
certificate from the date to which dividends have been fully paid on such Series
I Preferred Stock represented by the surrendered certificate.

                           ARTICLE VIII REPLACEMENT.

     Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing the
Shares, and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor, its own
agreement to indemnify the Corporation shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of the Series I
Preferred Stock represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Shares represented by such new
certificate from the date to which dividends have been fully paid on such lost,
stolen, destroyed or mutilated certificate.

                            ARTICLE IX DEFINITIONS.

     To the extent not defined herein, terms shall have the meaning set forth in
the Charter.

     "Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through ownership of Voting
Securities, contract or otherwise.

     "Common Stock" means, collectively, the Corporation's common stock, par
value $0.004 per share, and any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.

     "Common Stock Deemed Outstanding" means, at any given time, the number of
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to subparagraphs 5C(i)
and 5C(ii) hereof whether or not the Options or Convertible Securities are
actually exercisable at such time.

     "Conversion Price" initially means $0.15 for the Series I Preferred Stock.

     "Conversion Stock" means shares of the Corporation's Common Stock;
provided, that if there is a change such that the securities issuable upon
conversion of the Series I Preferred Stock are issued by an entity other than
the Corporation or there is a change in the type or class of securities so
issuable, then the term "Conversion Stock" shall mean one share of the security
issuable upon conversion of the Series I Preferred Stock if such security is
issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.

                                       A-9

<PAGE>

     "Convertible Securities" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.

     "Corporation" means Velocity Express Corporation, a Delaware corporation,
or, where applicable (for example, in connection with agreements dated prior to
the date of incorporation of the Corporation under the GCL), UST. Where
applicable, reference to certain agreements of the Corporation entered into
prior to its incorporation under the Delaware General Corporation Law refer to
those as assumed by the surviving entity as a matter of law under the merger
between the Corporation and UST, effective on January 4, 2002.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Initially Designated Preferred Stock" shall mean the Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock and Series H Preferred Stock, together.

     "Junior Securities" has the meaning set forth in Section 1 of the Charter.

     "Liquidation Event" has the meaning set forth in Section 3.

     "Liquidation Value" of any share of Series I Preferred Stock shall be equal
to $1.50.

     "Market Price" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of the twenty (20) consecutive trading
days immediately prior to the day for which "Market Price" is being determined.
If at any time such security is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the "Market Price" shall be
the fair value thereof determined jointly by the Corporation and the holders of
at least two-thirds of each of the then outstanding classes of Preferred Stock,
voting as individual classes. If such parties are unable to reach agreement
within a reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly selected by the
Corporation and the holders of at least two-thirds of each of the then
outstanding classes of Preferred Stock, voting as individual classes. The
determination of such appraiser shall be final and binding upon the parties, and
the Corporation shall pay the fees and expenses of such appraiser.

     "Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

     "Permitted Issuances" means the acts described in Section 5B(iii) of the
Charter.

     "Person" means an individual, a partnership, a corporation, a limited
liability company, a limited liability, an association, a joint stock company, a
trust, a joint venture, an unincorporated

                                      A-10

<PAGE>

organization and a governmental entity or any department, agency or political
subdivision thereof.

     "Preferred Stock" shall have the meaning set forth in the Charter.

     "Series B Preferred Stock" shall mean the Corporation's Series B
Convertible Preferred Stock, par value $0.004 per share.

     "Series C Preferred Stock" shall mean the Corporation's Series C
Convertible Preferred Stock, par value $0.004 per share.

     "Series D Preferred Stock" shall mean the Corporation's Series D
Convertible Preferred Stock, par value $0.004 per share.

     "Series F Preferred Stock" shall mean the Corporation's Series F
Convertible Preferred Stock, par value $0.004 per share.

     "Series G Preferred Stock" shall mean the Corporation's Series G
Convertible Preferred Stock, par value $0.004 per share.

     "Series H Preferred Stock" shall mean the Corporation's Series H
Convertible Preferred Stock, par value $0.004 per share.

     "Series I Preferred Stock" shall mean the Corporation's Series I
Convertible Preferred Stock, par value $0.004 per share.

     "Share" has the meaning set forth in Section 3.

     "Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.

     "UST" means United Shipping and Technology, Inc., a Utah corporation and
the predecessor of Velocity Express Corporation, a Delaware corporation.

     "Voting Securities" means securities of the Corporation ordinarily having
the power to vote for the election of directors of the Corporation; provided,
that when the term "Voting Securities" is used with respect to any other Person,
it means the capital stock or other equity

                                      A-11

<PAGE>

interests of any class or kind ordinarily having the power to vote for the
election of directors or other members of the governing body of such Person.

                        ARTICLE X AMENDMENT AND WAIVER.

     No amendment, modification or waiver shall be binding or effective with
respect to any provisions hereof without the prior written consent of the
holders of at least two-thirds of Series I Preferred Stock outstanding, voting
as a separate class, at the time such action is taken.

                              ARTICLE XII NOTICES.

     Except as otherwise expressly provided hereunder, all notices referred to
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).

                                      A-12

<PAGE>

                                   APPENDIX B

                                  Risk Factors

     An investment in our Series I Preferred involves risks. You should
carefully consider the following risk factors, and all other information
contained and incorporated by reference in this prospectus before you decide to
purchase shares of our common stock. The risks described below are not the only
risks we face. Additional risks that we do not yet know of or that we currently
think are immaterial may also impair our business operations. Any of the events
or circumstances described in the following risks could have a material adverse
impact on our business, financial condition and results of operations if they
were to actually occur. If that happens, the trading price of our common stock
could decline, and you may lose all or part of your investment.

Risks Related To Our Business

     We have sustained losses applicable to holders of our Common Stock in the
past and we may continue to sustain losses applicable to holders of our Common
Stock in the future.

     We experienced net losses applicable to holders of our Common Stock of
approximately $35.0 million for the fiscal year ended June 30, 2001,
approximately $20.4 million for the fiscal year ended June 29, 2002 and $15.6
million for the fiscal year ended June 28, 2003. The nature and extent of any
future losses applicable to holders of our Common Stock will depend on the
success of our financial and business strategies, and on other factors, some of
which may be beyond our control. We cannot assure you that we will eliminate net
losses applicable to holders of our Common Stock and achieve profitable
operations.

     We may not be successful in implementing our growth plans.

     We face the risks, expenses and uncertainties frequently encountered by
emerging companies that operate in evolving markets. Successfully achieving our
growth plan depends upon, among other things, our ability to:

     .    continue to reduce losses and position ourselves to continue positive
          cash flow;

     .    successfully promote our national brand;

     .    deliver services that are equal or superior to those of our
          competitors; and

     .    obtain and maintain a technological competitive advantage.

     We may need additional capital to finance our growth and working capital
needs.

     We have sustained net losses in each of the past three years and may
continue to do so in the future. If we continue to experience operating losses,
we will need additional cash to offset these losses, which may not be available
to us on acceptable terms, or at all. Achieving our financial goals involves
implementing a number of strategies, some of which may not develop when or as
planned. To date, we have primarily relied upon debt and equity investments to
fund our operations and growth.

                                      B-1

<PAGE>

     We have substantial indebtedness.

     On January 28, 2002, we entered into a new $40 million revolving credit
facility with a group of banks led by Fleet Capital Corporation and repaid all
amounts outstanding under our old credit facility with a group of banks led by
General Electric Capital Corporation. As of June 28, 2003, $39.0 million was
outstanding under the new revolving credit facility and we had an additional $5
million in subordinated indebtedness. On September 24, 1999, we entered into a
Note and Warrant Purchase Agreement with Bayview Capital Partners L.P.
("Bayview"), under which the Company borrowed from Bayview $5,000,000 at a per
annum interest rate of 12%, due quarterly. On September 8, 2003, the Company
also borrowed $1,000,000 from an individual investor with an agreement to repay
the principal and a lump sum interest payment of $25,000 within 90 days.
Substantially all of our assets are pledged to secure our indebtedness. Subject
to the restrictions in our existing credit agreements, we and our subsidiaries
may incur additional indebtedness from time to time to increase working capital,
finance capital expenditures, and for other general corporate purposes.

     Our revolving credit facility matures on January 28, 2004.

     Our ability to refinance the revolving credit facility upon maturity will
depend to a great degree on our operating performance at the time of maturity.
If we cannot successfully refinance the revolving credit facility upon maturity,
we will be required to raise capital through the issuance of additional debt or
equity securities or sales of some or all of our assets in order to meet our
repayment obligations under the facility. We cannot assure you that we will be
able to raise such capital or that the terms for raising such capital would be
acceptable to us.

     Our debt instruments contain significant financial and operational
requirements.

     Our revolving credit agreement contains a number of financial covenants
that, among other things, require us to maintain specified interest coverage
ratios and specified levels of availability under the revolving credit facility
based upon our interest coverage ratio. The credit agreement also restricts our
ability to dispose of assets, incur additional indebtedness, amend our debt
instruments, make payments on subordinated debt, pay dividends or other
distributions, create liens on assets, make capital expenditures, enter into
sale and leaseback transactions, allow our subsidiaries to issue securities or
make any sales on a repurchase or return basis, make investments, loans or
advances, engage in mergers, consolidations, joint ventures, acquisitions or
structural changes, change our organizational documents or our fiscal year end,
enter into leases or negative pledges, and engage in transactions with
affiliates.

     Our ability to comply with the financial covenants in our credit agreements
will be affected by our financial performance as well as events beyond our
control, including prevailing economic, financial and industry conditions.

     The breach of any of the covenants in our credit agreements could result in
a default, which would permit the lenders to declare all amounts borrowed
thereunder to be due and payable, together with accrued and unpaid interest. If
we are unable to repay our indebtedness, the lenders could proceed against the
collateral securing the indebtedness.

     Rapid technological changes in communications technology may require
substantial expenditures by us.

     The industry in which we compete is characterized by rapidly changing
technology, evolving industry standards, frequent new service announcements,
introductions and enhancements, compromises in security and changing customer
demands. Accordingly, our future success may depend on our ability to respond to
rapidly changing technologies, to adapt our services to evolving industry
standards and to continually improve the performance, features and reliability
of our technology and services in response

                                      B-2

<PAGE>

to competitive service offerings and the evolving demands of the marketplace.
Obtaining and maintaining a technological competitive advantage may require us
to make substantial expenditures, which could have a material adverse effect on
our business, results of operations and financial condition.

     We face significant risks of tax authorities classifying independent
contractors as our employees.

     A significant number of our drivers are currently independent contractors
(meaning that they are not our employees). From time to time, federal and state
taxing authorities have sought to assert that independent contractor drivers in
the same-day delivery and transportation industries are employees. We do not pay
or withhold federal or state employment taxes with respect to drivers who are
independent contractors. Although we believe that the independent contractors we
utilize are not our employees under existing interpretations of federal and
state laws, we cannot guarantee you that federal and state authorities will not
challenge our position or that other laws or regulations, including tax laws and
laws relating to employment and worker compensation, will not change. If the IRS
were to successfully assert that our independent contractors are in fact our
employees, we would be required to pay withholding taxes and extend additional
employee benefits to these persons. In addition, we could become responsible for
past and future employment taxes. If we are required to pay withholding taxes
with respect to amounts previously paid to these persons, we could be required
to pay penalties or be subject to other liabilities as a result of incorrectly
classifying employees. If our drivers are deemed to be employees rather than
independent contractors, we could be required to increase their compensation
since they may no longer be receiving commission-based compensation. Any of the
foregoing possibilities could increase our operating costs and have a material
adverse effect on our business, financial condition and results of operations.

     We could be subject to claims for personal injury, death and property
damage.

     We could be exposed to claims for personal injury, death and property
damage as a result of accidents involving our employees and independent
contractors. While we carry liability insurance and require that our independent
contractors maintain at least the minimum amount of liability insurance required
by state law, we cannot assure you that any claims made against us will not
exceed the amount of our insurance coverage. Successful claims for personal
injury, death or property damage in excess of our insurance coverage could have
a material adverse effect on our business, financial condition and results of
operations.

     We could be subject to claims for non-delivery or delayed delivery of
packages.

     We could be subject to claims resulting from non-delivery or delayed
delivery of packages, many of which could be significant because of unique or
time sensitive deliveries. While our customer contracts contain limitations of
our liability for non-delivery or delayed delivery of packages, we cannot assure
you that we will be able to successfully limit our liability for package
deliveries by contract. Successful claims for non-delivery or delayed delivery
of packages could have a material adverse effect on our business, financial
condition and results of operations.

     We face many risks unique to the package shipping and same-day delivery
industries.

     Numerous events and factors that affect the delivery services industry
could also affect (and recently have affected) our business, financial condition
and results of operations, including:

     .    weather conditions;

     .    fuel prices and shortages;

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<PAGE>

     .    economic factors affecting customers, as well as general economic
          conditions affecting prices and operating margins;

     .    the ability of United States companies to maintain continuous
          operation of supply and communications systems;

     .    downturns in the level of general economic activity or employment in
          the United States, which could affect the demand for package and
          priority document delivery; and

     .    labor shortages and disputes.

     We must comply with various governmental regulations.

     Various local, state and federal regulations require us to obtain and
maintain permits and licenses in connection with our operations. Some of our
operations may also involve the delivery of items subject to more stringent
regulation, including hazardous materials, which would require us to obtain
additional permits. In addition, we cannot assure you that existing laws or
regulations will not be revised or that new laws or regulations, which could
have an adverse impact on our operations, will not be adopted or become
applicable to us. Our failure to maintain required permits and licenses, or to
comply with applicable regulations, could result in substantial fines or
revocation of permits and licenses, any of which could have a material adverse
effect on our business, financial condition and results of operations.

     We face intense competition in the market for same-day delivery services.

     We expect that competition will continue to intensify in the same day
delivery business. Companies such as UPS(R), Federal Express(R), and DHL(R)
dominate the next day commercial package shipping market. The market for
point-to-point delivery services is also highly competitive, with a number of
companies having multi-state and multi-city operations. A number of these
competitors have greater financial and technical resources and more industry
recognition than we do. Any of these companies could elect to enter the same-day
delivery market in direct competition with us. Increased competitive pressure
could have a material adverse effect on our business, financial condition and
results of operations.

     We depend on our key personnel.

     We depend upon the continued services of our senior management for our
success. The loss of a member of our senior management could have a material
adverse effect on our business, financial condition and results of operations.
We cannot assure you that we will be able to retain our senior management or our
other key personnel.

     The loss of significant customers could adversely affect our business.

     Our contracts with our commercial customers typically have a term of 1 to 3
years, but are terminable upon 30 or 60 days notice. Although we have no reason
to believe that these contracts will be terminated prior to the expiration of
their terms, early termination of these contracts could have a material adverse
effect on our business, financial condition and results of operations.

     Our stock may be delisted from Nasdaq because we may not meet the minimum
bid price and market capitalization requirements for continued listing.

     In the past, we have been notified by Nasdaq that our stock was subject to
delisting because our common stock has failed to maintain a minimum bid price of
$1.00 over the previous 30 consecutive trading days and that we were not in
compliance of the market capitalization requirement of $35,000,000

                                      B-4

<PAGE>

as required by The Nasdaq SmallCap Market under its Marketplace Rules. We are
currently operating under a delisting notice relative to the minimum bid price
requirements and have been given until January 16, 2004 to regain compliance. In
the event that we are unable to maintain the standards for continued listing,
our shares would be subject to delisting from The Nasdaq SmallCap Market.

     We have a substantial investment in equipment and technology.

     As a part of our business strategy, we have invested significantly in
equipment and technology, and we will continue to make investments that we
believe are necessary or appropriate to maintain our presence in the same-day
delivery industry. While we believe that these investments will give us an
advantage over our competitors, we cannot assure you that this strategy will be
successful or that we will be able to recover our investment through increased
revenues or profits. Additionally, disruptions in electrical and other energy
supplies could cause a disruption of, or damage to, our technology and
communication systems.

     Terrorist attacks and threats or actual war may negatively impact all
aspects of our operations.

Recent terrorist attacks in the United States, as well as future events
occurring in response to them, including, without limitation, future terrorist
attacks against U.S. targets, rumors or threats of war, actual conflicts
involving the United States or its allies or military or trade disruptions
impacting our domestic or foreign customers have had and could continue to have,
a significant impact on our business. These effects have included, and may
continue to include, reduced demand for our services and delays in our ability
to deliver services to our customers. More generally, any of these events could
cause consumer confidence and spending to decrease or result in increased
volatility in the U.S. and worldwide financial markets and economy. They could
also result in economic recession in the U.S. or abroad. Any of these
occurrences could have a material adverse effect on our business, financial
condition and results of operations.

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<PAGE>

                                   APPENDIX C

                          REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October
   , 2003, among Velocity Express Corporation, a Delaware corporation (the
---
"Company) and the persons executing a Series I Purchaser Signature Page attached
hereto (each a "Series I Purchaser"). Capitalized terms used herein but not
otherwise defined have the meaning set forth in Section 1 hereof.

          WHEREAS, the Series I Purchasers and the Company have entered into
certain Stock Purchase Agreements, pursuant to which the Series I Purchasers
purchased from the Company certain of the shares of the Company's Series I
Convertible Preferred Stock, par value $.004 per share (the "Series I Preferred
Stock").

          WHEREAS, the Company hereby desires to, among other things, grant the
Series I Purchasers certain registration rights.

          NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

1.             Definitions.

          "Business Day" means any day other than a Saturday, a Sunday or a day
on which banks in New York City are authorized or obligated by law or executive
order to close.

          "Commission" means the United States Securities and Exchange
Commission, or any successor Commission or agency having similar powers.

          "Common Stock" means the Common Stock of the Company, $0.004 par value
per share.

          "Registrable Securities" means, the Series I Registrable Securities.

          "Registration Expenses" has the meaning set forth in Section 6(a)
hereof.

          "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

          "Series I Purchasers" means any purchasers of Series I Preferred
Stock.

2.             Demand Registrations.

(a)  Requests for Registration. Subject to the limitations and lock-up period
     set forth in the Series I Stock purchase Agreement, the holders of a
     majority of the Series I Registrable Securities may request Short-Form
     Registrations, if available. Each request for a Demand Registration (as
     defined below) shall specify the approximate number of Registrable
     Securities requested to be registered and the anticipated per share price
     range for such offering. Within ten (10) days after receipt of any such
     request, the Company will give written notice of such requested
     registration to all other holders of Registrable Securities and will
     include in such registration all Registrable Securities with respect to
     which the Company has received written requests for inclusion therein
     within twenty (20) days after the receipt of the Company's notice. All
     registrations requested pursuant to this paragraph 2(a) are referred to
     herein as "Demand Registrations".

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<PAGE>

(b)  Short-Form Registrations. Subject to the limitations and lock-up period set
     forth in the Series I Stock purchase Agreement, the holders of the Series I
     Registrable Securities will be entitled to request up to three (3)
     Short-Form Registrations in which the Company will pay all Registration
     Expenses; provided, that the holders of Registrable Securities shall not be
     entitled to require the Company to effect any Short-Form Registration if
     the aggregate offering price of Registrable Securities (based on the
     mid-point of the price range specified in the request for such Short-Form
     Registration) to be included in such Short-Form Registration is less than
     $1,000,000. Demand Registrations will be Short-Form Registrations whenever
     the Company is permitted to use any applicable short form. The Company will
     use its best efforts to make Short-Form Registrations on FormS-3 available
     for the sale of Registrable Securities.

(c)  Priority on Demand Registrations. If a Demand Registration is an
     underwritten offering and the managing underwriters advise the Company in
     writing that in their opinion the number of Registrable Securities and, if
     permitted hereunder, other securities requested to be included in such
     offering exceeds the number of Registrable Securities and other securities,
     if any, which can be sold therein without adversely affecting the
     marketability of the offering, the Company will include in such
     registration (i) first, securities requested to be registered pursuant to
     that certain Third Amended Registration Rights Agreement, by and among the
     parties thereto (the "Original Registrable Securities") , (ii) second, the
     number of Registrable Securities requested to be included in such Demand
     Registration by the holders initially requesting such Demand Registration
     pro rata, if necessary, among the holders of such Registrable Securities
     based on the number of such Registrable Securities owned by each such
     holder, and (iii) third, the number of other Registrable Securities not
     included pursuant to clause (i) above pro rata, if necessary, among the
     holders of such Registrable Securities based on the number of such
     Registrable Securities owned by each such holder, and (iii) third, any
     other securities of the Company requested to be included in such Demand
     Registration.

(d)  Restrictions on Demand Registrations. The Company will not be obligated to
     effect any Demand Registration within sixty (60) days after the effective
     date of a previous registration of equity securities by the Company. The
     Company may postpone for up to ninety (90) days the filing or the
     effectiveness of a registration statement for a Demand Registration if the
     Company's Board of Directors determines in good faith that such Demand
     Registration would reasonably be expected to be seriously detrimental to
     the Company and its shareholders; provided, that in such event, (i) the
     Company shall give written notice to the holders of Registrable Securities
     as soon after such determination as practicable, but in any event within
     ten (10) days thereafter, (ii) the holders of Registrable Securities
     initially requesting such Demand Registration will be entitled to withdraw
     such request and such Demand Registration will not count as one of the
     permitted Demand Registrations hereunder and the Company will pay all
     Registration Expenses in connection with such registration and (iii) the
     Company may postpone a Demand Registration pursuant hereto only once in any
     365-day period.

(e)  Selection of Underwriters. If any Demand Registration is an underwritten
     offering, the selection of investment banker(s) and manager(s) for the
     offering, which investment banker(s) and manager(s) shall be nationally
     recognized, shall be made by the Company.

3.             Piggyback Registrations.

(a)  Right to Piggyback. Subject to the lock-up period set forth in the Series I
     Stock purchase Agreement, whenever the Company proposes to register any of
     its securities under the Securities Act (other than pursuant to a Demand
     Registration) and the registration form to be used may be used for the
     registration of Registrable Securities (a "Piggyback Registration"), the
     Company will give prompt written notice to all holders of Registrable
     Securities of its intention to effect such a registration and will include
     in such registration all Registrable Securities with respect to which the
     Company has

                                      C-2

<PAGE>

     received written requests for inclusion therein within twenty (20) days
     after the receipt of the Company's notice.

(b)  Piggyback Expenses. The Registration Expenses of the holders of Registrable
     Securities will be paid by the Company in all Piggyback Registrations.

(c)  Priority on Primary Registrations. If a Piggyback Registration is an
     underwritten primary registration on behalf of the Company, and the
     managing underwriters advise the Company in writing that in their opinion
     the number of securities requested to be included in such registration
     exceeds the number which can be sold in such offering without adversely
     affecting the marketability of the offering, the Company will include in
     such registration (i) first, the securities the Company proposes to sell,
     and (ii) second, the securities requested to be registered pursuant to that
     certain Third Amended Registration Rights Agreement, and (iii) third, the
     Registrable Securities requested to be included in such Piggyback
     Registration, pro rata, if necessary, among the holders of such Registrable
     Securities on the basis of the number of Registrable Securities owned by
     each such holder and (iv) fourth, other securities requested to be included
     in such Piggyback Registration.

(d)  Priority on Secondary Registrations. If a Piggyback Registration is an
     underwritten secondary registration on behalf of holders of the Company's
     securities, and the managing underwriters advise the Company in writing
     that in their opinion the number of securities requested to be included in
     such registration exceeds the number which can be sold in such offering
     without adversely affecting the marketability of the offering, the Company
     will include in such Piggyback Registration (i) first, the securities
     requested to be included therein by the holders requesting such
     registration, (ii) second, the Original Registrable Securities requested to
     be included in such Piggyback Registration, pro rata among the holders of
     such Original Registrable Securities on the basis of the number of
     Registrable Securities owned by each such holder and (iii) third, the
     holders of the Registrable Securities and other securities requested to be
     included in such Piggyback Registration.

(e)  Selection of Underwriters. If any Piggyback Registration is an underwritten
     offering, the selection by the Company of investment banker(s) and
     manager(s), which investment banker(s) and manager(s) shall be nationally
     recognized, for the offering must be approved by the holders of a majority
     of the Registrable Securities included in such Piggyback Registration,
     which approval shall not be unreasonably withheld.

4.             Holdback Agreements.

(a)  Each holder of Registrable Securities agrees not to effect any public sale
     or distribution (including sales pursuant to Rule 144) of equity securities
     of the Company, or any securities convertible into or exchangeable or
     exercisable for such securities, during the seven (7) days prior to and the
     ninety (90)-day period beginning on the effective date of any underwritten
     Demand Registration or any underwritten Piggyback Registration in which
     Registrable Securities are included (except as part of such underwritten
     registration), unless the underwriters managing the registered public
     offering otherwise agree.

(b)  The Company agrees not to effect any public sale or distribution of its
     equity securities, or any securities convertible into or exchangeable or
     exercisable for such securities, during the seven (7) days prior to and
     during the ninety (90)-day period beginning on the effective date of any
     underwritten Demand Registration or any underwritten Piggyback Registration
     (except as part of such underwritten registration or pursuant to
     registrations on Form S-8 or Form S-4 or any successor forms thereto),
     unless the underwriters managing the registered public offering otherwise
     agree.

                                      C-3

<PAGE>

5.             Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof including the registration of common
stock that may be obtained upon conversion of Preferred Stock held by a holder
of Registrable Securities requesting registration, and pursuant thereto the
Company will as expeditiously as possible:

(a)  prepare and file (in the case of a Demand Registration not more than ninety
     (90) days after request therefor) with the Commission a registration
     statement with respect to such Registrable Securities and use its best
     efforts to cause such registration statement to become effective (provided
     that as far in advance as practicable before filing a registration
     statement or prospectus or any amendments or supplements thereto, the
     Company will furnish to the counsel selected by the holders of a majority
     of the Registrable Securities covered by such registration statement copies
     of all such documents proposed to be filed, which documents will be subject
     to the review of such counsel);

(b)  prepare and file with the Commission such amendments and supplements to
     such registration statement and the prospectus used in connection therewith
     as may be necessary to keep such registration statement effective for a
     period of not less than one hundred and eighty (180) days and comply with
     the provisions of the Securities Act with respect to the disposition of all
     securities covered by such registration statement during such period in
     accordance with the intended methods of disposition by the sellers thereof
     set forth in such registration statement;

(c)  furnish to each seller of Registrable Securities such number of copies of
     such registration statement, each amendment and supplement thereto, the
     prospectus included in such registration statement (including each
     preliminary prospectus) and such other documents as such seller may
     reasonably request in order to facilitate the disposition of the
     Registrable Securities owned by such seller;

(d)  use its best efforts to register or qualify such Registrable Securities
     under such other securities or blue sky laws of such jurisdictions as any
     seller reasonably requests and do any and all other acts and things which
     may be reasonably necessary or advisable to enable such seller to
     consummate the disposition in such jurisdictions of the Registrable
     Securities owned by such seller (provided that the Company will not be
     required to (i) qualify generally to do business in any jurisdiction where
     it would not otherwise be required to qualify but for this subparagraph,
     (ii) subject itself to taxation in any such jurisdiction or (iii) consent
     to general service of process in any such jurisdiction);

(e)  notify each seller of such Registrable Securities, at any time when a
     prospectus relating thereto is required to be delivered under the
     Securities Act, of the happening of any event as a result of which the
     prospectus included in such registration statement contains an untrue
     statement of a material fact or omits any fact necessary to make the
     statements therein not misleading, and, at the request of any such seller,
     the Company will prepare a supplement or amendment to such prospectus so
     that, as thereafter delivered to the purchasers of such Registrable
     Securities, such prospectus will not contain an untrue statement of a
     material fact or omit to state any fact necessary to make the statements
     therein not misleading;

(f)  cause all such Registrable Securities to be listed on each securities
     exchange on which similar securities issued by the Company are then listed
     and, if not so listed, to be listed on the National Association of
     Securities Dealers automated quotation system;

(g)  provide a transfer agent and registrar for all such Registrable Securities
     not later than the effective date of such registration statement;

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<PAGE>

(h)  enter into such customary agreements (including underwriting agreements in
     customary form) and take all such other actions as the holders of a
     majority of the Registrable Securities being sold or the underwriters, if
     any, reasonably request in order to expedite or facilitate the disposition
     of such Registrable Securities (including, without limitation, effecting a
     stock split or a combination of shares);

(i)  make available for inspection by any seller of Registrable Securities, any
     underwriter participating in any disposition pursuant to such registration
     statement and any attorney, accountant or other agent retained by any such
     seller or underwriter, all financial and other records, pertinent corporate
     documents and properties of the Company, and cause the Company's officers,
     directors, employees and independent accountants to supply all information
     reasonably requested by any such seller, underwriter, attorney, accountant
     or agent in connection with such registration statement;

(j)  permit any holder of Registrable Securities which holder, in its sole and
     exclusive judgment, might be deemed to be an underwriter or a controlling
     person of the Company, to participate in the preparation of such
     registration or comparable statement and to require the insertion therein
     of material, furnished to the Company in writing, which in the reasonable
     judgment of such holder and its counsel should be included;

(k)  in the event of the issuance of any stop order suspending the effectiveness
     of a registration statement, or of any order suspending or preventing the
     use of any related prospectus or suspending the qualification of any common
     stock included in such registration statement for sale in any jurisdiction,
     the Company will promptly notify the holders of Registrable Securities and
     will use its reasonable best efforts promptly to obtain the withdrawal of
     such order;

(l)  obtain a cold comfort letter from the Company's independent public
     accountants in customary form and covering such matters of the type
     customarily covered by cold comfort letters as the holders of a majority of
     the Registrable Securities being sold reasonably request; and

(m)  in connection with an underwritten public offering, (i) cooperate with the
     selling holders of Registrable Securities, the underwriters participating
     in the offering and their counsel in any due diligence investigation
     reasonably requested by the selling holders or the underwriters in
     connection therewith and (ii) participate, to the extent reasonably
     requested by the managing underwriter for the offering or the selling
     holder, in efforts to sell the Registrable Securities under the offering
     (including, without limitation, participating in "roadshow" meetings with
     prospective investors) that would be customary for underwritten primary
     offerings of a comparable amount of equity securities by the Company.

6.             Registration Expenses.

(a)  All expenses incident to the Company's performance of or compliance with
     this Agreement, including without limitation all registration and filing
     fees, fees and expenses of compliance with securities or blue sky laws,
     printing expenses, messenger and delivery expenses, and fees and
     disbursements of counsel for the Company and all independent certified
     public accountants, underwriters (excluding discounts and commissions) and
     other Persons retained by the Company (all such expenses being herein
     called "Registration Expenses"), will be borne as provided in this
     Agreement, except that the Company will, in any event, pay its internal
     expenses (including, without limitation, all salaries and expenses of its
     officers and employees performing legal or accounting duties), the expense
     of any annual audit or quarterly review, the expense of any liability
     insurance and the expenses and fees for listing the securities to be
     registered on each securities exchange on which similar securities issued
     by the Company are then listed or on the National Association of Securities
     Dealers automated quotation system. The Company shall not be required to
     pay an underwriting discount with respect to any

                                      C-5

<PAGE>

     shares being sold by any party other than the Company in connection with an
     underwritten public offering of any of the Company's securities pursuant to
     this Agreement.

(b)  In connection with each Demand Registration and each Piggyback
     Registration, the Company will reimburse the holders of Registrable
     Securities covered by such registration for the reasonable fees and
     disbursements of one counsel chosen by the holders of a majority of the
     Registrable Securities initially requesting such registration.

(c)  The Company will reimburse the holders of Registrable Securities for the
     reasonable fees and expenses (including the fees and expenses of counsel
     chosen by the holders of a majority of the Registrable Securities) incurred
     by such holders in enforcing any of their rights under this Agreement.

7.             Indemnification.

(a)  Indemnification of Selling Stockholders by the Company. The Company agrees
     to indemnify and hold harmless each holder of Registrable Securities which
     are registered pursuant hereto (each a "Selling Stockholder") and each
     person, if any, who controls any Selling Stockholder within the meaning of
     Section 15 of the Securities Act or Section 20 of the Securities Exchange
     Act of 1934, as amended (the "Exchange Act"), as follows:

(i)  against any and all loss, liability, claim, damage and expense whatsoever,
     as incurred, arising out of any untrue statement or alleged untrue
     statement of a material fact contained in the registration statement (or
     any amendment thereto), or the omission or alleged omission therefrom of a
     material fact required to be stated therein or necessary to make the
     statements therein not misleading or arising out of any untrue statement or
     alleged untrue statement of a material fact contained in any preliminary
     prospectus or the prospectus (or any amendment or supplement thereto), or
     the omission or alleged omission therefrom of a material fact necessary in
     order to make the statements therein, in the light of the circumstances
     under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and expense whatsoever,
     as incurred, to the extent of the aggregate amount paid in settlement of
     any litigation, or any investigation or proceeding by any governmental
     agency or body, commenced or threatened, or of any claim whatsoever based
     upon any such untrue statement or omission, or any such alleged untrue
     statement or omission; provided, that subject to Section 7(d) below any
     such settlement is effected with the prior written consent of the Company;
     and

(iii) against any and all expense whatsoever, as incurred (including the fees
     and disbursements of counsel chosen by such Selling Stockholder),
     reasonably incurred in investigating, preparing or defending against any
     litigation, or any investigation or proceeding by any governmental agency
     or body, commenced or threatened, or any claim whatsoever based upon any
     such untrue statement or omission, or any such alleged untrue statement or
     omission, to the extent that any such expense is not paid under (i) or (ii)
     above; Notwithstanding the foregoing, this indemnity agreement shall not
     apply to any loss, liability, claim, damage or expense to the extent
     arising out of any untrue statement or omission or alleged untrue statement
     or omission made in reliance upon and in conformity with written
     information furnished to the Company by the Selling Stockholder expressly
     for use in the registration statement (or any amendment thereto), or any
     preliminary prospectus or the prospectus (or any amendment or supplement
     thereto) or by such Selling Stockholder's failure to deliver a copy of the
     registration statement or prospectus or any amendments or supplements
     thereto after the Company has furnished such Selling Stockholder with a
     sufficient number of copies of the same.

(b)  Indemnification of Company by the Selling Stockholders. Each Selling
     Stockholder, severally and not jointly, agrees to indemnify and hold
     harmless the Company, its directors, each of its officers who

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<PAGE>

     signed the registration statement and each person, if any, who controls the
     Company within the meaning of Section 15 of the Securities Act or Section
     20 of the Exchange Act, against any and all loss, liability, claim, damage
     and expense described in the indemnity contained in Section 7(a) above, as
     incurred, but only with respect to untrue or alleged untrue statements or
     omissions made in the registration statement (or any amendment thereto), or
     any preliminary prospectus or any prospectus (or any amendment or
     supplement thereto) in reliance upon and in conformity with written
     information furnished to the Company by or on behalf of such Selling
     Stockholder with respect to such Selling Stockholder expressly for use in
     the registration statement (or any amendment or supplement thereto);
     provided, that such Selling Stockholder's aggregate liability under this
     Section 7 shall be limited to an amount equal to the net proceeds (after
     deducting the underwriting discount, but before deducting expenses)
     received by such Selling Stockholder from the sale of Registrable
     Securities pursuant to a registration statement filed pursuant to this
     Agreement.

(c)  Actions against Parties; Notification. Each indemnified party shall give
     notice as promptly as reasonably practicable to each indemnifying party of
     any action commenced against it in respect of which indemnity may be sought
     hereunder, but failure to so notify an indemnifying party shall not relieve
     such indemnifying party from any liability hereunder to the extent it is
     not materially prejudiced as a result thereof and in any event shall not
     relieve it from any liability which it may have otherwise than on account
     of this indemnity agreement. In the case of parties indemnified pursuant to
     Section 7(a), counsel to the indemnified parties shall be selected by the
     Company, subject to the approval of the holders of a majority of the
     Registrable Securities included in a registration hereunder, which shall
     not be unreasonably withheld and, in the case of parties indemnified
     pursuant to Section 7(b), counsel to the indemnified parties shall be
     selected by the Company. An indemnifying party may participate at its own
     expense in the defense of any such action and counsel to the indemnifying
     party shall also be counsel for the indemnified parties; provided, that if
     under applicable principals of legal ethics, there is a conflict of
     interest that prohibits such counsel from representing the indemnifying
     parties as well as the indemnified parties, the indemnifying parties shall
     be liable for fees and expenses of one additional counsel (in addition to
     any local counsel) separate from their own counsel for all indemnified
     parties in connection with any one action or separate but similar or
     related actions in the same jurisdiction arising out of the same general
     allegations or circumstances. No indemnifying party shall, without the
     prior written consent of the indemnified parties, settle or compromise or
     consent to the entry of any judgment with respect to any litigation, or any
     investigation or proceeding by any governmental agency or body, commenced
     or threatened, or any claim whatsoever in respect of which indemnification
     or contribution could be sought under this Section 7 (whether or not the
     indemnified parties are actual or potential parties thereto), unless such
     settlement, compromise or consent (i) includes an unconditional release of
     each indemnified party from all liability arising out of such litigation,
     investigation, proceeding or claim and (ii) does not include a statement as
     to or an admission of fault, culpability or a failure to act by or on
     behalf of any indemnified party.

(d)  Settlement without Consent. If at any time an indemnified party shall have
     requested an indemnifying party to reimburse the indemnified party for fees
     and expenses of counsel, such indemnifying party agrees that it shall be
     liable for any settlement of the nature contemplated by Section 7(a)(ii)
     effected without its written consent if (i) such settlement is entered into
     more than forty-five (45) days after receipt by such indemnifying party of
     the aforesaid request, (ii) such indemnifying party shall have received
     notice of the terms of such settlement at least thirty (30) days prior to
     such settlement being entered into and (iii) such indemnifying party shall
     not have reimbursed such indemnified party in accordance with such request
     prior to the date of such settlement.

(e)  Contribution.

                                      C-7

<PAGE>

(i)  If a claim for indemnification under Section 7(a) or 7(b) is unavailable to
     an indemnified party because of a failure or refusal of a governmental
     authority to enforce such indemnification in accordance with its terms (by
     reason of public policy or otherwise), then each indemnifying party, in
     lieu of indemnifying such indemnified party, shall contribute to the amount
     paid or payable by such indemnified party as a result of such losses, in
     such proportion as is appropriate to reflect the relative fault of the
     indemnifying party and the indemnified party in connection with the
     actions, statements or omissions that resulted in such losses as well as
     any other relevant equitable considerations. The relative fault of such
     indemnifying party and indemnified party shall be determined by reference
     to, among other things, whether any action in question, including any
     untrue or alleged untrue statement of a material fact or omission or
     alleged omission of a material fact, has been taken or made by, or relates
     to information supplied by, such indemnifying party or indemnified party,
     and the parties' relative intent, knowledge, access to information and
     opportunity to correct or prevent such action, statement or omission. The
     amount paid or payable by a party as a result of any losses shall be deemed
     to include, subject to the limitations set forth in this Section, any
     reasonable attorneys' or other reasonable fees or expenses incurred by such
     party in connection with any proceeding to the extent such party would have
     been indemnified for such fees or expenses if the indemnification provided
     for in this Section was available to such party in accordance with its
     terms.

(ii) The parties hereto agree that it would not be just and equitable if
     contribution pursuant to this Section 7(e) were determined by pro rata
     allocation or by any other method of allocation that does not take into
     account the equitable considerations referred to in the immediately
     preceding paragraph. Notwithstanding the provisions of this Section 7(e), a
     holder shall not be required to contribute, in the aggregate, any amount in
     excess of the amount by which the proceeds actually received by such holder
     from the sale of the Registrable Securities subject to the proceeding
     exceeds the amount of any damages that the holder has otherwise been
     required to pay by reason of such untrue or alleged untrue statement or
     omission or alleged omission. No Person guilty of fraudulent
     misrepresentation (within the meaning of Section 11(f) of the Securities
     Act) shall be entitled to contribution from any Person who was not guilty
     of such fraudulent misrepresentation.

(iii) The indemnity and contribution agreements contained in this Section are in
     addition to any liability that the indemnifying parties may have to the
     indemnified parties.

8.             Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided, that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such holder,
such holder's Registrable Securities and such holder's intended method of
distribution or to undertake any indemnification obligations to the Company or
the underwriters with respect thereto, except as otherwise provided in Section 7
hereof.

9.             Miscellaneous.

(a)  Remedies. Any Person having rights under any provision of this Agreement
     will be entitled to enforce such rights specifically to recover damages
     caused by reason of any breach of any provision

                                      C-8

<PAGE>

     of this Agreement and to exercise all other rights granted by law. The
     parties hereto agree and acknowledge that money damages may not be an
     adequate remedy for any breach of the provisions of this Agreement and that
     any party may in its sole discretion apply to any court of law or equity of
     competent jurisdiction (without posting any bond or other security) for
     specific performance and for other injunctive relief in order to enforce or
     prevent violation of the provisions of this Agreement.

(b)  Successors and Assigns. All covenants and agreements in this Agreement by
     or on behalf of any of the parties hereto will bind and inure to the
     benefit of the permitted respective successors and assigns of the parties
     hereto whether so expressed or not. In addition, whether or not any express
     assignment has been made, the provisions of this Agreement which are for
     the benefit of purchasers or holders of Registrable Securities are also for
     the benefit of, and enforceable by, any subsequent holder of Registrable
     Securities.

(c)  Notices. All notices, requests, consents and other communications provided
     for herein shall be in writing and shall be (i) delivered in person, (ii)
     transmitted by telecopy, (iii) sent by first-class, registered or certified
     mail, postage prepaid, or (iv) sent by reputable overnight courier service,
     fees prepaid, to the recipient at the address or telecopy number set forth
     below, or such other address or telecopy number as may hereafter be
     designated in writing by such recipient. Notices shall be deemed given upon
     personal delivery, seven days following deposit in the mail as set forth
     above, upon acknowledgment by the receiving telecopier or one day following
     deposit with an overnight courier service.

               If to the Company:

                    Velocity Express Corporation
                    7803 Glenroy Road
                    Suite 200
                    Bloomington, MN 55439
                    Telecopy: (612) 492-2499
                    Attention: Wesley C. Fredenburg
                               Secretary and General Counsel

               If to any of the Series I Purchasers:

                    To the address for such Series I Purchaser indicated on the
                    Series I Purchaser Signature Page.

or such other address or to the attention of such other Person as the recipient
party shall have specified by prior written notice to the sending party.

(d)  Interpretation of Agreement; Severability. The provisions of this Agreement
     shall be applied and interpreted in a manner consistent with each other so
     as to carry out the purposes and intent of the parties hereto, but if for
     any reason any provision hereof is determined to be unenforceable or
     invalid, such provision or such part thereof as may be unenforceable or
     invalid shall be deemed severed from the Agreement and the remaining
     provisions carried out with the same force and effect as if the severed
     provision or part thereof had not been a part of this Agreement.

(e)  Governing Law. The corporate law of the State of Delaware shall govern all
     issues concerning the relative rights of the Company and its stockholders.
     All other provisions of this Agreement shall be governed by and construed
     in accordance with the internal laws of the State of New York, without
     giving effect to principles of conflicts of laws or choice of law of the
     State of New York or any other

                                      C-9

<PAGE>

     jurisdiction which would result in the application of the laws of any
     jurisdiction other than the State of New York.

(f)  Counterparts. This Agreement may be executed in one or more counterparts,
     each of which shall be deemed to be an original, but all of which taken
     together shall constitute one and the same Agreement.

(g)  Entire Agreement. This document, the Purchase Agreement and the "Related
     Documents" (as defined in the Purchase Agreement) embodies the complete
     agreement and understanding among the parties hereto with respect to the
     subject matter hereof and supersede and preempt any prior understandings,
     agreements or representations by or among the parties, written or oral,
     which may have related to the subject matter hereof in any way.

(h)  Waiver of Jury Trial. The parties to this Agreement each hereby waives, to
     the fullest extent permitted by law, any right to trial by jury of any
     claim, demand, action, or cause of action (i) arising under this Agreement
     or (ii) in any way connected with or related or incidental to the dealings
     of the parties hereto in respect of this Agreement or any of the
     transactions related hereto, in each case whether now existing or hereafter
     arising, and whether in contract, tort, equity, or otherwise. The parties
     to this Agreement each hereby agrees and consents that any such claim,
     demand, action, or cause of action shall be decided by court trial without
     a jury and that the parties to this Agreement may file an original
     counterpart of a copy of this Agreement with any court as written evidence
     of the consent of the parties hereto to the waiver of their right to trial
     by jury.

                                    * * * * *

                                      C-10

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first written above.

                                             Velocity Express Corporation

                                             By:
                                                 -------------------------------

                                      C-11

<PAGE>

                                             SERIES I PURCHASERS SIGNATURE PAGE

                                             By
                                                --------------------------------

                                             Name:

                                             Address for Notices:

                                      C-12Shareholder Rights Agreement Dated February 8, 2004

  
 EXHIBIT 4.1 

 
 SUNLINK HEALTH SYSTEMS, INC. 
  
 AND 
  
 WACHOVIA BANK, N.A. 
  
 SHAREHOLDER RIGHTS AGREEMENT 
  
 Dated as of February 8, 2004 
  

  
 TABLE OF CONTENTS

  

					
	Section

	  	Page

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

  
 Exhibit A — Form of Amended
Articles of Incorporation 
  
 Exhibit B — Form of Rights Certificate

  
 Exhibit C — Form of Summary of Rights 
  

 i 

  
 SHAREHOLDER RIGHTS
AGREEMENT 
  
 This SHAREHOLDER RIGHTS AGREEMENT, dated as of
February 8, 2004 (this “Agreement”), is entered into between SunLink Health Systems, Inc., an Ohio corporation (the “Company”), and Wachovia Bank, N.A., a national banking institution (the “Rights Agent”). 

 
 WITNESSETH: 
  
 WHEREAS, on February 8, 2004 (the “Rights Dividend Declaration Date”), the Board of Directors of the Company
authorized and declared a dividend distribution of one Right for each Common Share (as hereinafter defined) of the Company outstanding at the close of business on February 10, 2004 (the “Record Date”), and has authorized the issuance of
one Right (as such number may hereinafter be adjusted pursuant to the provisions of Section 11(o) hereof) for each Common Share of the Company issued between the Record Date (whether originally issued or delivered from the Company’s treasury)
and the Distribution Date (as hereinafter defined), each Right representing the right to purchase one one-hundredth of a Series A Voting Preferred Share of the Company having the rights, powers and preferences set forth in the form of Amended
Articles of Incorporation of the Company attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth (the “Rights”); 
  
 NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as
follows: 
  
 Section 1. Certain Definitions. For purposes
of this Agreement, the following terms have the meanings indicated: 
  
 (a) “Act” shall mean the Securities Act of 1933. 
  
 (b) “Acquiring Person” shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall
become, at any time after the date of this Rights Agreement (whether or not such status continues for any period), the Beneficial Owner of Common Shares representing 20% or more of the Common Shares then outstanding. Notwithstanding the foregoing,
(A) the term “Acquiring Person” shall not include the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of
any such plan, (B) no Person shall be deemed to be an “Acquiring Person” either (X) as a result of the acquisition of Common Shares by the Company that, by reducing the number of Common Shares outstanding, increases the percentage of
shares beneficially owned by such Person together with all Affiliates and Associates of such Person; except that if (i) a Person would become an Acquiring Person (but for the operation of this subclause (X)) as a result of the acquisition of Common
Shares by the Company, and (ii) after such share acquisition by the Company, such Person, or an Affiliate or Associate of such Person, becomes the Beneficial Owner of an additional number of Common Shares equal to one percent of the number of Common
Shares outstanding on the date immediately following the date on which the Person first became the beneficial owner of 20% of the outstanding Common Shares, then such Person shall be deemed an Acquiring Person, or (Y) if (i) such Person, or an
Affiliate or Associate of such Person, inadvertently becomes the Beneficial Owner of 20% or more of the outstanding Common Shares, (ii) within eight days thereafter such Person notifies the Board of Directors that such Person did so inadvertently,
and (iii) within two days after such notification, such Person is the Beneficial Owner of less than 20% of the outstanding Common Shares and (C) a Person engaged in business as an underwriter of securities shall not be deemed to be an
“Acquiring Person” as a result of such Person participating 

  

 
in good faith in a firm commitment underwriting unless such Person is the Beneficial Owner of such securities upon the expiration of 40 days after the
commencement of such underwriting. 
  
 (c)
“Adjustment Shares” shall have the meaning set forth in Section 11(a)(ii) hereof. 
  
 (d) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and in effect on the date of this Agreement. 
  
 (e) A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “beneficially own,” any securities:

  
 (i) which such Person or any of such
Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” (A)
securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange, or (B) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (C) securities issuable upon exercise of Rights from and after the occurrence of a Triggering Event which Rights were acquired by such Person or any of such Person’s
Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the “Original Rights”) or pursuant to Section 11(a)(i) hereof in connection with an adjustment made with respect to any Original
Rights; 
  
 (ii) which such Person or any of such
Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially
own,” any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (A) arises solely from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not also then reportable by such Person on Schedule 13D or Schedule 13G
under the Exchange Act (or any comparable or successor report); or 
  
 (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person’s Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), to act together for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (ii) of this paragraph (e)) or disposing of any
voting securities of the Company; provided, however, that nothing in this paragraph (e) shall cause a person engaged in business as an underwriter of securities to be the “Beneficial Owner” of, or to “beneficially own,” any
securities acquired through such person’s participation in good faith in a firm 

  

 2 

 
commitment underwriting until the expiration of forty days after the date of such acquisition. 
  
 Notwithstanding anything in this definition of Beneficial Ownership to the contrary, no Person shall be deemed to be the Beneficial Owner
of, or to beneficially own, any security Beneficially Owned by another Person solely by reason of any agreement, arrangement or understanding with such other Person relating to the solicitation of revocable proxies made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, provided that such other Person retains the right at any time to withdraw from, revoke or terminate any such agreement, arrangement or
understanding and further provided that such Persons would not otherwise be deemed to be a group under Section 13(d) of the Exchange Act or otherwise be deemed to be acting in concert. 
  
 (f) “Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking
institutions in the State of Georgia are authorized or obligated by law or executive order to close. 
  
 (g) “Close of business” on any given date shall mean 5:00 P.M., Atlanta, Georgia time, on such date; provided however, that if
such date is not a Business Day it shall mean 5:00 P.M., Atlanta, Georgia time, on the next succeeding Business Day. 
  
 (h) “Common Shares,” each a “Common Share,” shall mean the common shares, no par value, of the Company, except that
“Common Shares” when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest aggregate voting power, or the equity securities or other equity interest having power to control
or direct the management, of such Person. 
  
 (i)
“Current market price” shall have the meaning set forth in Section 11(d)(i) hereof. 
  
 (j) “Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof. 
  
 (k) “Distribution Date” shall have the meaning set
forth in Section 3(a) hereof. 
  
 (l)
“Exchange Act” shall have the meaning set forth in Section l(d) hereof. 
  
 (m) “Expiration Date” shall have the meaning set forth in Section 7(a) hereof. 
  
 (n) “Final Expiration Date” shall mean the close
of business on the tenth anniversary of the date of this Agreement. 
  
 (o) “Original Rights” shall have the meaning set forth in Section l(e)(i) hereof. 
  
 (p) “Person” shall mean any individual, firm, corporation, partnership or other entity. 
  
 (q) “Preferred Shares,” each a “Preferred
Share,” shall mean shares of Series A Voting Preferred Shares, no par value, of the Company and, to the extent that there is not a sufficient number of Series A Voting Preferred Shares authorized to permit the full exercise of the Rights, any
other series of Preferred Shares, no par value, of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Voting Preferred Shares. 
  
 (r) “Preferred share equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.

  

 3 

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

  
 (t) “Purchase Price” shall have the
meaning set forth in Section 4(a) hereof. 
  
 (u)
“Record Date” shall have the meaning set forth in the WHEREAS clause at the beginning of this Agreement. 
  
 (v) “Redemption Price” shall have the meaning set forth in Section 23(a) hereof. 
  
 (w) “Rights” shall have the meaning set forth in
the WHEREAS clause at the beginning of this Agreement. 
  
 (x) “Rights Certificates” shall have the meaning set forth in Section 3(a) hereof. 
  
 (y) “Rights Dividend Declaration Date” shall have the meaning set forth in Section 3(a) hereof. 
  
 (z) “Section 11(a)(ii) Event” shall have the
meaning set forth in Section 11(a)(ii) hereof. 
  
 (aa) “Section 11(a)(ii) Trigger Date” shall have the meaning set forth in Section 11(a)(iii) hereof. 
  
 (bb) “Section 13 Event” shall mean any event described in clause (x), (y) or (z) of Section 13(a) hereof. 
  
 (cc) “Spread” shall have the meaning set forth in
Section 11(a)(iii) hereof. 
  
 (dd) “Share
Acquisition Date” shall mean the first date of a public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring
Person that an Acquiring Person has become such; provided, that, if such Person is determined not to have become an Acquiring Person pursuant to Section 1(a) hereof, then no Share Acquisition Date shall be deemed to occur. 
  
 (ee) “Subsidiary” shall mean, with reference to
any Person, any corporation or financial institution of which an amount of voting securities sufficient to elect at least a majority of the directors of such corporation or financial institution is beneficially owned, directly or indirectly, by such
Person, or otherwise controlled by such Person. 
  
 (ff) “Trading Day” shall have the meaning set forth in Section 11(d)(i) hereof. 
  
 (gg) “Triggering Event” shall mean any Section 11(a)(ii) Event or any Section 13 Event. 
  
 Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. 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. In the event the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agents and any Co-Rights Agents will be as the Company may determine. 
  

 4 

 Section 3. Issuance of Rights Certificates. 
  
 (a) Until the earlier of (i) the close of business on the
tenth business day after the Share Acquisition Date, (ii) the close of business on the date that an Acquiring Person becomes the beneficial owner of 35% or more of the then outstanding Common Shares, or (ii) the close of business on the tenth
business day after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such plan) that, if consummated, would result in such Person being an Acquiring Person is first published or sent or given within the meaning of Rule 14d-2(a) of the General
Rules and Regulations under the Exchange Act as in effect on the date hereof (the earlier of (i), (ii) or (iii) being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of paragraph
(b) of this Section 3) by the certificates for the Common Shares registered in the names of the holders of the Common Shares (which certificates for Common Shares shall be deemed also to be certificates for Rights) and not by separate certificates,
and (y) the Rights will be transferable only in connection with the transfer of the underlying Common Shares (including a transfer to the Company). As soon as practicable after the Distribution Date, the Rights Agent will send by first-class,
insured, postage prepaid mail, to each record holder of the Common Shares as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially the
form of Exhibit B hereto (the “Rights Certificates”), evidencing one Right for each of the Common Shares so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per Common Share has
been made pursuant to Section 11(o) hereof, at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates
representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates. 
  
 (b) As promptly as practicable following the Record Date,
the Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form attached hereto as Exhibit C, by first-class, postage prepaid mail, to each record holder of the 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. With respect to certificates for the Common Shares outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such
certificates for the Common Shares and the registered holders of the Common Shares shall also be the registered holders of the associated Rights. Until the earlier of the Distribution Date or the Expiration Date the transfer of any certificates
representing Common Shares in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with such Common Shares. 
  
 (c) Rights shall be issued in respect of all Common Shares which are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such Common Shares shall also be deemed to be certificates for Rights, and shall bear the following legend: 
  
 This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Shareholder Rights
Agreement between SunLink Health Systems, Inc. (the “Company”) and Wachovia Bank, N.A. (the “Rights Agent”) dated as of February 8, 2004 (the “Rights Agreement”), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal 

  

 5 

 
offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by
or on behalf of such Person or by any subsequent holder, may become null and void. 
  
 With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration
Date, the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone and registered holders of Common Shares shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights associated with the Common Shares represented by such certificates. 
  
 Section 4. Form of Rights Certificates. 
  
 (a) The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with
the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed,
or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the holders thereof to purchase such number of
one one-hundredths of a Preferred Share as shall be set forth therein at the price set forth therein (such exercise price per one one-hundredth of a share, the “Purchase Price”), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. 
  
 (b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights beneficially owned by any Person
known to be: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person; (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such; or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person (or from any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or in any such Associate or Affiliate) or to any Person with whom such Acquiring Person (or any such
Associate or Affiliate) has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall when issued contain (to the extent feasible in the circumstances) the following legend, modified as applicable to apply to such Person: 
  
 The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of such Agreement.

  

 6 

 Section 5. Countersignature and Registration. 
  
 (a) The Rights Certificates shall be executed on behalf of
the Company by its Chairman of the Board, its President, Chief Executive Officer or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company’s seal or a facsimile thereof which shall be attested
by the Treasurer or an Assistant Treasurer or by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate,
although at the date of the execution of this Rights Agreement any such person was not such an officer. 
  
 (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated as the appropriate place for
surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the
number of Rights evidenced on its face by each of the Rights Certificates and the certificate number and the date of each of the Rights Certificates. 
  
 Section 6. Transfer, Split-up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

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

  

 7 

 
subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split-up, combination or exchange of Rights
Certificates. 
  
 (b) Upon receipt by the Company
and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. 
  
 Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. 
  
 (a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole
or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the Form of Election to Purchase and the Certificate on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-hundredths of a Preferred Share (or other securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, prior to the earlier of (i) the Final Expiration Date, or (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the earlier of (i) and (ii) being herein referred to as the
“Expiration Date”). 
  
 (b) The
Purchase Price for each one one-hundredth of a Preferred Share pursuant to the exercise of a Right shall initially be $25 and shall be subject to adjustment from time to time as provided in Sections 11 and 13(a) hereof and shall be payable in
accordance with paragraph (c) below. 
  
 (c) Upon
receipt of a Rights Certificate representing exercisable Rights, with the Form of Election to Purchase and the Certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-hundredth of
a Preferred Share (or other shares, securities, cash or other assets, as the case may be) to be purchased as set forth below and an amount equal to any applicable transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i)(A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total 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) if the Company shall have elected to deposit the total number of Preferred Shares issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent 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 will direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered 

  

 8 

 
to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, and (iv)
after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. The payment of the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in cash
or by certified bank check or money order payable to the order of the Company. In the event that the Company is obligated to issue other securities of the Company, pay cash or distribute other property pursuant to Section 11(a) hereof, the Company
will make all arrangements necessary so that such other securities, cash or other property are available for distribution by the Rights Agent, if and when appropriate. 
  
 (d) In case the registered holder of any Rights Certificate shall exercise less than all the Rights
evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof. 
  
 (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes
such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether
or not for consideration) from the Acquiring Person (or from any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or in any such Associate or Affiliate) or to any Person with whom the Acquiring Person (or any
such Associate or Affiliate) has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined (whether before or after such transfer) is part of
a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to
such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of its respective Affiliates, Associates or transferees hereunder. 
  
 (f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the Form of Election to Purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. 
  
 Section 8. Cancellation and Destruction of Rights Certificates. All Rights Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation, and the Rights Agent shall so cancel, any other Rights 

  

 9 

 
Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates
to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. 
  
 Section 9. Reservation and Availability of Capital Stock. 

 
 (a) The Company covenants and agrees that it will cause
to be reserved and kept available out of its authorized and unissued Preferred Shares, the number of Preferred Shares that, as provided in this Agreement, including Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of all
outstanding Rights, provided that, prior to the occurrence of a Triggering Event, the number of such shares to be reserved shall be only that number as shall be sufficient for that purpose prior to such an event. 
  
 (b) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and (B) the date of the expiration of the Rights. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or
“blue sky” laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first
sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction, unless the requisite qualification in such jurisdiction shall have been obtained and until a registration statement has been declared effective. 
  
 (c) The Company covenants and agrees that it will take all such action as may be necessary to ensure that
all one one-hundredths of a Preferred Share delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and
non-assessable. 
  
 (d) The Company further
covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one
one-hundredths of a Preferred Share (or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of a number of one one-hundredths of a Preferred Share (or other securities, as the case may be) in respect of a name other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for a number of one one-hundredths of a Preferred Share (or other securities, as the case may be) in a 

  

 10 

 
name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder
of such Rights Certificate at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due. 
  
 Section 10. Preferred Share Record Date. Each person in whose name any certificate for a number of one one-hundredths of a Preferred Share (or
other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such fractional Preferred Shares (or other securities, as the case may be) represented thereby on,
and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Share (or other securities, as the case may be) transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise)
on, and such certificate shall be dated, the next succeeding Business Day on which the Preferred Share (or other securities, as the case may be) transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate, as such, shall not be entitled to any rights of a shareholder of the Company with respect to 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 and Kind of Shares or Number of Rights. 
  
 (a) The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. 
  
 (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 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) and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of Preferred Shares or capital stock, as the case may be, issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of Preferred Shares or capital stock, as the case may be, which, if
such Right had been exercised immediately prior to such date and at a time when the Preferred Share transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. 
  
 (ii) A Section 11(a)(ii) Event shall be deemed to occur in the event any Person, alone or together with its Affiliates and Associates, shall, at any time after the Rights Dividend Declaration Date, become an Acquiring
Person, unless the event causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a) hereof. 
  

 11 

 Promptly following the first occurrence of a Section 11(a)(ii) Event, proper provision
shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement,
in lieu of such number of one one-hundredths of a Preferred Share covered by each Right immediately prior to the Section 11(a)(ii) event, such number of one one-hundredths of a Preferred Share as shall equal the result obtained by (x) multiplying
the then-current Purchase Price by the then-number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which, following
such first occurrence, shall thereafter be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the current market price (determined pursuant to Section 11(d) hereof) per Common Share on the
date of such first occurrence (such number of shares, the “Adjustment Shares”). 
  
 (iii) In the event that the number of Preferred Shares which are authorized by the Company’s Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A)
determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”) over (2) the Purchase Price (such excess, the “Spread”), and (B) with respect to each Right, make adequate
provision to substitute for the Adjustment Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Shares or other equity securities of the Company (including, without limitation, preferred
shares, or units of preferred shares, which the Board of Directors of the Company has deemed to have the same value as one one-hundredth of a Preferred Share (such preferred shares, “preferred share 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 based upon the advice of one or
more investment or financial advisors selected by the Board of Directors of the Company; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the “Section 11(a)(ii)
Trigger Date”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, Preferred Shares (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. For purposes of this Section 11(a)(iii), the value of one one-hundredth of a Preferred Share shall be deemed to be the current market price per Common Share (as determined pursuant to
Section 11(d) hereof) on the Section 11(a)(ii) Trigger Date and the value of any “preferred share equivalent” shall be deemed to have the same value as one one-hundredth of a Preferred Share on such date. 
  
 (iv) In lieu of issuing Preferred Shares in accordance with
subparagraph (ii) of this Section 11(a), the Company may with respect to each Right, if a majority of members of the Board of Directors determine that such action is in the best interests of the Company and not contrary to the interests of the
holders of Rights, make adequate provision to substitute for the Adjustment Shares, (x) upon the surrender for exercise of a 

  

 12 

 
Right and payment of the Purchase Price (taking into account any reduction in the Purchase Price pursuant to this subparagraph (iv)) (1) cash, (2) a
reduction in Purchase Price, (3) Common Shares, or other equity securities of the Company (including without limitation preferred share 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 based upon the advice of one or more investment or financial advisers selected by the Board of Directors of the
Company or (y) upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, (1) cash, (2) Preferred Shares, Common Shares or other equity securities of the Company (including, without limitation, preferred share
equivalents), (3) debt securities of the Company, (4) other assets or (5) any combination of the foregoing, having an aggregate value equal to the Spread where such aggregate value has been determined by the Board of Directors of the Company based
upon the advice of one or more investment or financial advisors selected by the Board of Directors of the Company. 
  
 (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 (for a period expiring within forty-five (45) calendar days after such record date) 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 per share of equivalent preferred shares (or having a conversion price per share, if a security convertible
into Preferred Share or equivalent preferred share) less than the current market price (as determined pursuant to Section 11(d)(ii) hereof) per share of Preferred Shares on such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date, plus the number of Preferred Shares
which 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 the denominator of which shall be the number of Preferred Shares outstanding on such record date, plus 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). In case such subscription price may be paid by delivery of consideration part or all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Preferred Shares
owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants
are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. 
  
 (c) In case the Company shall fix a record date for a distribution to all holders of Preferred Shares (including any such distribution
made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Shares, but including any dividend payable in shares other than 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 the Purchase Price in effect immediately prior to such record date 

  

 13 

 
by a fraction, the numerator of which shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of Preferred Shares on
such record date, less 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) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Share and the denominator of which shall be such current market price (as determined pursuant to Section 11(d) hereof) per share of
Preferred Shares. Such adjustments shall be made successively whenever such a record-date is fixed, and in the event that such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed. 
  
 (d)
(i) For the purpose of any computation hereunder, the “current per share market price” of the Common Shares on any date shall be deemed to be the average of the daily closing prices of the Common Shares for the 30 consecutive Trading Days
immediately prior to such date; provided, however, that in the event that the current market price of a Common Share is determined during a period following the announcement by the Company of (A) a dividend or distribution on the Common Shares,
payable in Common Shares or securities convertible into Common Shares, or (B) any subdivision, combination or reclassification of the Common Shares, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or reclassification, and such announcement shall have caused the closing prices used to determine the current per share market price on any Trading Day during such period not to be
fully comparable with the closing price on such date, then, each such closing price so used shall be appropriately adjusted to make it fully comparable with the closing price on such date. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Shares are listed or admitted to trading or, if Common Shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices, as reported by The Nasdaq Stock Market, Inc. (“Nasdaq”), or, if on any such date Common Shares are not quoted by Nasdaq, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in Common Shares, selected by the Board of Directors of the Company. If on any such date no market-maker is making a market in Common Shares, the fair value of Common Shares on such date as determined in
good faith by the Board of Directors of the Company shall be used, whose determination shall be described in a statement filed with the Rights Agent. The term “Trading Day” shall mean a day on which the principal national securities
exchange on which Common Shares are listed or admitted to trading is open for the transaction of business or, if Common Shares are not listed or admitted to trading on any national securities exchange, a Business Day. If Common Shares are not
publicly held or so listed or traded, “current per share market price” shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed
with the Rights Agent. 
  
 (ii) The “current
market price” per share of Preferred Shares shall be conclusively deemed to be an amount equal to 100 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the
Common Shares occurring after the date of this Agreement) multiplied by the current market price per share of the Common Shares. If the Common Shares are not publicly held or so listed or traded, “current market price” per share of the
Preferred Shares shall mean the fair value per share as determined in good faith by the Board of 

  

 14 

 
Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. For all
purposes of this Agreement, the “current market price” of one one-hundredth of a Preferred Share shall be equal to the “current market price” of one Preferred Share divided by 100. 
  
 (e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a Common Share or other share or
one-millionth of a Preferred Share, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction
which mandates such adjustment, or (ii) the Expiration Date. 
  
 (f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than
Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), and (l), and the provisions of Sections 7, 9, 10, 13 and 14 hereof 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-millionth) 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 lieu of 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 the adjustment in 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 shall become that number of Rights (calculated to the
nearest one ten thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted
or any day thereafter, but, if the Rights 

  

 15 

 
Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record
of Rights Certificates on the record date specified in the public announcement. 
  
 (j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a Preferred Share issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a share and the number of one one-hundredths of a share which were expressed in the initial
Rights Certificates issued hereunder. 
  
 (k) In
any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any
Right exercised after such record date the number of one one-hundredths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-hundredths of a Preferred
Share and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. 
  
 (l) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors of
the Company shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Shares, (ii) issuance wholly for cash of any Preferred Shares at less than the current market price, (iii) issuance wholly for cash of
Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, (iv) share dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to
holders of its Preferred Shares shall not be taxable to such shareholders. 
  
 (m) The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction which complies with
Section 11(n) hereof), (ii) merge with or into any other Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with Section 11(n) hereof), if (x) at the time of or immediately after such consolidation, merger, sale or transfer there are any rights, warrants or other instruments or

  

 16 

 
securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights
or (y) prior to, simultaneously with or immediately after such consolidation, merger, sale or transfer, the shareholders of the Person who constitutes, or would constitute, the “Principal Party” for purposes of Section 13(a) hereof shall
have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. 
  
 (n) The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.

  
 (o) Anything in this Agreement to the
contrary notwithstanding, in the event that the Company shall at any time on or after the Rights Dividend Declaration Date and prior to the Distribution Date (i) declare a dividend on the outstanding Common Shares payable in Common Shares, (ii)
subdivide the outstanding shares of Common Shares, or (iii) combine the outstanding shares of Common Shares into a smaller number of shares, the number of Rights associated with each Common Share then outstanding, or issued or delivered thereafter
but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each Common Share following any such event shall equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction the numerator of which shall be the total number of Common Shares outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total
number of shares of Common Shares outstanding immediately following the occurrence of such event. 
  
 Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 and Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred
Shares and the Common Shares, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing Common Shares) 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 not be deemed to have knowledge of such adjustment unless and until it shall have received such
certificate. 
  
 Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power. 
  
 (a)
In the event that, following the Share Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction which complies with Section
11(n) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof) shall consolidate
with, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding Common Shares shall be
changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction
or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the 

  

 17 

 
Company or any Subsidiary of the Company in one or more transactions each of which complies with Section 11(n) hereof), then, and in each such case, proper
provision shall be made so that: (i) each holder of a Right, except holders described in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of
this Agreement, such number of validly authorized and issued, fully paid, non-assessable and freely tradeable Common Shares of the Principal Party (as such term is hereinafter defined), not subject to any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is exercisable immediately prior to the first occurrence
of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to such first occurrence), and dividing that product (which, following the first occurrence of a Section 13 Event, shall be referred to as the
“Purchase Price” for each Right and for all purposes of this Agreement) by (2) 50% of the current market price (determined pursuant to Section 13(d) hereof) per Common Share of such Principal Party on the date of consummation of such
Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall
thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Shares) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter
be applicable, as nearly as reasonably may be, in relation to its Common Shares thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the first occurrence of any
Section 13 Event. 
  
 (b) “Principal
Party” shall mean 
  
 (i) in the case of any
transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which Common Shares of the Company are converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or consolidation; and 
  
 (ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if the Common Shares of such Person are not at such time and has not been continuously over
the preceding twelve-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Shares of which are and have been so registered, “Principal Party” shall
refer to such other Person; and (2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Shares of two or more of which are and have been so registered, “Principal Party” shall refer to whichever
of such Persons is the issuer of the Common Shares having the greatest aggregate market value. 
  

 18 

 (c) The Company shall not consummate any such consolidation, merger, sale or transfer
unless the Principal Party shall have a sufficient number of authorized Common Shares which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the
Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger, sale or transfer mentioned in paragraph (a) of this Section 13, the Principal Party will: 
  
 (i) prepare and file a registration statement under the Act, with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) remain effective (with a prospectus at all times meeting the requirements
of the Act) until the Expiration Date; 
  
 (ii)
use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate; and 
  
 (iii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. 
  
 The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers.
In the event that a Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a).

  
 Section 14. Fractional Rights and Fractional Shares.

  
 (a) The Company shall not be required to
issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(o) hereof, or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of such 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 on the principal national securities exchange on which the Rights are listed or admitted to trading or, if such 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, as reported by Nasdaq, or if on any such date the Rights are not quoted by Nasdaq, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such
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 such Rights on such date 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, shall be used. 
  

 19 

 (b) The Company shall not be required to issue fractions of Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share). In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Company may pay to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one-hundredth of a Preferred Share. For purposes of this Section 14(b), the current market value of one one-hundredth of a Preferred Share
shall be the current market price of a Common Share (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. 
  
 (c) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any
fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 14. 
  
 Section 15. Rights of Action. All rights of action in respect of this Agreement, other than rights of action vested in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his own behalf and for his own benefit, enforce,
and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and
in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be
entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement. 
  
 Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: 
  
 (i) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Shares; 
  
 (ii) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed; 
  
 (iii) subject to Section 6 (a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Share certificate made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be required to be affected by any notice to the contrary; and 
  

 20 

 (iv) notwithstanding anything in this Agreement to the contrary, neither the Company nor
the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. 
  
 Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one-hundredths of a Preferred Share or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders
(except as provided in Section 24 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof. 

 
 Section 18. Concerning the Rights Agent. 
  
 (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent, its directors, officers, employees and agents for, and to hold each of them harmless against, any loss, liability, or expense,
incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by any such indemnified party in connection with the acceptance and administration of this Agreement or the exercise or
performance of the Rights Agent’s duties hereunder, including the costs and expenses of defending against any claim of liability in the premises. 
  
 (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement or the exercise or performance of the Rights Agent’s duties hereunder, in reliance upon any Rights Certificate or certificate for Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, 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. 
  
 (c) The indemnity provided in this Section 18 shall survive the expiration of the Rights, the resignation or removal of the Rights Agent and the termination of this Agreement. 
  

 21 

 Section 19. Merger or Consolidation or Change of Name of Rights Agent. 
  
 (a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by
this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and
in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all
such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. 
  
 (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. 
  
 Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: 
  
 (a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such 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 (including, without limitation, the identity of any Acquiring Person) be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President, any
Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such certificate. 
  
 (c) The Rights Agent shall not be liable hereunder to the Company or any other Person except for its own gross negligence, bad faith or
willful misconduct. 
  
 (d) The Rights Agent
shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates or be required to verify the 

  

 22 

 
same (except as to its countersignature on such Rights Certificates), but all such statements and recitals are and shall be deemed to have been made by the
Company only. 
  
 (e) The Rights Agent shall not
be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions
of Section 11 or Section 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced
by Rights Certificates after receipt of the certificate described in Section 12 hereof setting forth any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of
any Common Shares or Preferred Shares to be issued pursuant to this Agreement or any Rights Certificate or as to whether any Common Shares or Preferred Shares will, when so issued, be validly authorized and issued, fully paid and non-assessable.

  
 (f) The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement. 
  
 (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President, any Vice President, the Secretary, any Assistant Secretary,
the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer or for any delay in acting while awaiting instructions. 
  
 (h) Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in
writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date the Chairman of the
Board, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. 
  
 (i) The Rights Agent and any shareholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. 
  

 23 

 (j) The Rights Agent may execute and exercise any of the rights and powers hereby vested
in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to
the Company resulting from any such act, default, neglect or misconduct, provided that the Rights Agent was not grossly negligent in the selection or continued employment thereof. 
  
 (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 there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk
or liability is not reasonably assured to it. 
  
 (l) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the Form of Assignment or Form of Election to Purchase, as the case may be, has either not been completed
or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company. 
  
 (m) The Rights Agent undertakes only the express duties and
obligations imposed on it by this Agreement and no implied duties or obligations shall be read into this Agreement against the Rights Agent. 
  
 (n) Anything in this Agreement to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited to lost profits). 
  
 Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and thereby 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 and Preferred Shares, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail.
The Company may remove the Rights Agent or any successor Rights Agent upon 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 and
Preferred Shares, by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor
to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation or financial institution organized and doing business under the laws of the United
States or of the State of Ohio (or of any other state of the United States so long as such corporation is authorized to act as Rights Agent in the State of Ohio), in good standing, which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $25,000,000 or (b) an affiliate of a corporation or financial
institution described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or
deed; but the predecessor Rights Agent shall deliver, and transfer to the successor Rights Agent any property at the time held by it hereunder, and 

  

 24 

 
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 Share and the Preferred Share, and mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to
give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

  
 Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by 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 Certificates made in accordance with the provisions of this Agreement. In addition, in connection with
the issuance or sale of Common Shares following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to Common Shares so issued or sold pursuant to the exercise of stock options or under
any employee benefit plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company,
issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent
that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. 
  
 Section 23. Redemption and Termination. 
  
 (a) (i) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (x) the Share Acquisition Date (or, if the Share Acquisition Date shall have occurred prior to the Record Date, the
close of business on the tenth Business Day following the Record Date), or (y) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $.001 per Right, as such amount may be appropriately
adjusted, as determined by the Board of Directors, to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the “Redemption Price”).

  
 (ii) The Company may, at its option, pay the
Redemption Price in cash, Common Shares (based on the “current market price,” as defined in Section 11(d)(i) hereof, of the Common Shares at the time of redemption) or any other form of consideration deemed appropriate by the Board of
Directors. 
  
 (b) Immediately upon the action of
the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights Agent and without any further action and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder’s last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives 

  

 25 

 
the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. 
  
 Section 24. Notice of Certain Events. 
  
 (a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in shares of any class to the holders of Preferred Shares or to make any other distribution to the holders of Preferred Shares (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred Shares rights or warrants to subscribe for or to purchase any additional shares of Preferred Shares or shares of stock of any class or any other securities, rights or
options, or (iii) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), or (iv) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Company in a transaction which complies with Section 11(n) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a
series of related transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or any of its Subsidiaries in one or more transactions each
of which complies with Section 11(n) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such share dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the 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 twenty (20) 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 twenty (20) days prior to the date
of the taking of such proposed action or the date of participation therein by the holders of the Preferred Shares, whichever shall be the earlier. 
  
 (b) In case any of the events set forth in Section 11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders
of Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to Preferred Shares shall be deemed thereafter to refer to Common Shares and/or, if appropriate, other securities. 
  
 Section 25. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if delivered by hand, sent by overnight courier or sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent) as follows: 
  
 SunLink Health Systems, Inc. 
 900 Circle 75 Parkway, Suite 1300 
 Atlanta, Georgia 30339 
 Attention:
Corporate Secretary 
  

 26 

 Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if delivered by hand, sent by overnight courier or sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as follows: 
  
 Wachovia Bank, National Bank 
 1525 West W.T. Harris Boulevard, 3C3 
 Charlotte, North Carolina 28288-1153 (first class mail) 
 Charlotte, North Carolina 28262-1153 (overnight courier) 
 Attention: Shareholder Services
Division 
 Telephone: (704) 590-7384 
  
 Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights
Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Common Share) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company. 
  
 Section 26. Supplements and Amendments. Prior to the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates representing shares of Common Share. From and after the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if
the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an Affiliate or Associate of any Acquiring Person); provided, this Agreement may not be supplemented or amended to lengthen, pursuant to clause
(iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, or (B) any other time period unless such lengthening of such other time period is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of one one-hundredths of a Preferred Share for which a Right is exercisable, and no supplement or amendment that changes the rights, duties or liabilities of the Rights Agent under this
Agreement shall be effective without the consent of the Rights Agent. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Shares. 
  
 Section 27. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. 
  
 Section 28. Determinations and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding Common Shares of 

  

 27 

 
which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act as in effect on the date hereof. The Board of Directors of the Company (or, as set forth herein, certain specified members thereof) shall have the exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board of Directors of the Company or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including, but not limited to, a determination to redeem or not redeem the Rights or to amend this Agreement). All
such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors of the Company in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board to any liability to the holders of the Rights. 
  
 Section 29. Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of
the Common Shares). 
  
 Section 30. Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this
Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth business day following the date of such determination by the Board of Directors of the Company.

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

 28 

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

									
	 Attest:
	 	 	 	 SUNLINK HEALTH SYSTEMS, INC.

					
	By:	 	 /s/ James J. Mulligan
	 	 	 	By:	 	 /s/ Robert M. Thornton, Jr.

	 	 	
	 	 	 	 	 	

	 	 	 James J. Mulligan,
 Secretary
	 	 	 	 	 	 Robert M. Thornton, Jr.
 President and Chief Executive Officer

			
	 Attest:
	 	 	 	 WACHOVIA BANK, N.A.

					
	By:	 	 /s/ Patrick J. Edwards
	 	 	 	By:	 	 /s/ Johnnie H. Coble

	 	 	
	 	 	 	 	 	

	 Name:
	 	 	 	 	 	 Name:
	 	 
	 	 	
	 	 	 	 	 	

	 Title:
	 	 Vice President
	 	 	 	 Title:
	 	 Corporate Trust Officer

  

 29 

 EXHIBIT A 
  

AMENDED ARTICLES OF INCORPORATION 
  
 - of - 
  
 SUNLINK HEALTH SYSTEMS, INC. 
  
 FIRST: The name of the Corporation shall be SunLink Health Systems, Inc. 
  
 SECOND: The principal office of the Corporation shall be located in the City of Dayton, Montgomery County, Ohio 
  
 THIRD: The purpose or purposes for which the Corporation is formed are:

  
 A. To engage in the trade or business of
research, design, development and manufacture of semiautomatic and automatic equipment and components in the electrical, electromechanical and electronic fields, to consult and perform services related to design application and integration of units
and devices into systems in these fields; to conduct studies, consult, do research in, make data processing reduction and analysis of, design and manufacture and perform other services related to these units, instrumentation, test, calibration,
installation, maintenance, repair, component replacement on military and commercial flight and space vehicles and devices, the instruments thereon, the components thereof and the equipment associated therewith. 
  
 B. To manufacture, purchase or otherwise acquire, sell,
assign and transfer, exchange or otherwise dispose of, and to invest, trade, deal in or deal with goods, wares and merchandise and personal property of every class and description. 
  
 C. To purchase or otherwise acquire, construct, hold, maintain, work, develop, sell, lease, exchange,
convey, transfer, mortgage, pledge, hypothecate, loan money upon, or in any manner dispose of and deal in, within and without the State of Ohio, wherever situated, real property of every kind, character and description whatsoever and any interest
therein, and personal or mixed property of every kind, character and description whatsoever, including the shares of stock and other securities or obligations of other corporations, and any franchises, rights, licenses, or privileges necessary,
convenient or appropriate for any of the purposes herein expressed. 
  
 D. To enter into, make and perform contracts of every kind of any lawful purpose, with any person, firm, association, corporation, municipality, state or government, or any political or other subdivision of any of the
same. 
  
 E. To apply for, obtain, purchase, take
licenses in respect of or otherwise acquire, and to hold, own, use, grant, pledge or otherwise dispose of, and in any manner deal with, 

  

 A-1 

 
any and all inventions, devices, processes and any improvement and modifications thereof; and any and all letters patent of the United States or of any other
country, state, territory, or locality, and all rights connected therewith or appertaining thereunto; any and all copyrights granted by the United States or any other country, state, territory, or locality; and any and all trade-marks, trade names,
trade symbols and other indications of origin and ownership granted by or recognized under the laws of the United States or of any other country, state, territory or locality. 
  
 F. To purchase or otherwise acquire the whole or any part of the property, assets, business, goodwill and
rights, and to undertake and assume the whole or any part of the liabilities and obligations, or any person, firm, association or corporation, and to pay for the same in cash or in shares of any class or series, or in bonds, debentures, notes or
other obligations of the corporation, or otherwise, to hold or in any manner to dispose of the whole or any part of the property or assets so acquired, and to conduct the whole or any part of the business so acquired, and to exercise all the powers
necessary or convenient in and about the conduct, management and carrying on of any such business. 
  
 G. To do any and all things necessary, convenient, or expedient for the accomplishment of any of the purposes or the furtherance of any of
the powers hereinbefore set forth either alone or in association with other corporations, firms or individuals, and in general to carry on any other business not forbidden by the General Corporation Law of the State of Ohio. 
  
 Each purpose specified in any clause or paragraph contained in this Article
THIRD shall be deemed to be independent of all other purposes herein specified and shall not be limited or restricted by reference to or inference from the terms of any other clause or paragraph of these Articles of Incorporation. 

 
 FOURTH: The maximum number of shares which the Corporation is authorized
to have outstanding is 14,000,000 shares which shall be classified as follows: 
  
 2,000,000 Preferred Shares without par value (hereinafter called “Preferred Shares”); and 
  
 12,000,000 Common Shares without par value (hereinafter called “Common Shares”). 
  
 SECTION 1. The express terms and provisions of the Preferred Shares are as follows: 
  
 I. Preferred Shares may be issued in series from time to
time. Within the limitations and restrictions set forth in this Article FOURTH, the Board of Directors is expressly authorized, at one time or from time to time, to adopt amendments to the Articles of Incorporation in respect of any authorized and
unissued Preferred Shares to fix or alter the division of such shares into series, the designation and number of shares of each series, the dividend rates, the date of payment of dividends, the dates from which dividends shall be cumulative,
redemption rights, redemption prices, liquidation prices, sinking fund requirements, conversion rights, and restrictions on issuance of shares of the same series or of any other class or series. The express terms and provisions of Preferred 

  

 A-2 

 
Shares of different series shall be identical except that there may be variations in respect of any or all of the particulars hereinbefore set forth in this
subsection I. In case the stated dividends or the amounts payable on dissolution, liquidation, or sale of assets of the corporation are not paid in full, all Preferred Shares of all series shall participate ratably in the payment of dividends,
including accumulations, if any, in proportion to the sums which would be payable thereon if all dividends thereon were paid in full, and, in any distribution of assets other than by way of dividends, in proportion to the sums which would be payable
on such distribution if all sums payable thereon to holders of Preferred Shares were discharged in full. 
  
 II. The holders of Preferred Shares shall be entitled to receive when and as declared out of the surplus of the Corporation, subject to
any limitations prescribed by statute, cash dividends at the respective rates and on the respective dates fixed by the Board of Directors for the shares of the several series of Preferred Shares, and no more. Dividends on each Preferred Share shall
be cumulative from the date fixed therefor by the Board of Directors. 
  
 Subject to the provisions of this Article FOURTH, the holders of all Common Shares shall be entitled to receive such dividends as may from time to time be declared thereon by the Board of Directors. 
  
 III. Upon dissolution, liquidation or sale of all or
substantially all the assets of the Corporation, the holders of Preferred Shares shall be entitled to receive the following sums, before any payment shall be made to the holders of Common Shares with respect to payment upon dissolution, liquidation
or sale of assets: 
  
 (a) in case of any
involuntary dissolution or liquidation or forced sale of all or substantially all the assets of the Corporation, each Preferred Share of each series shall be entitled to receive the sum fixed for such contingency by the Board of Directors in respect
of such series, together with a sum, whether or not earned or declared, equivalent to all accumulated and unpaid dividends thereon to the date of such payment; or 
  
 (b) in case of any voluntary dissolution or liquidation or voluntary sale of all or substantially all the
assets of the Corporation, each Preferred Share of each series shall be entitled to receive the amount fixed for such contingency by the Board of Directors in respect of such series prior to the initial issuance of the first shares or series,
together with a sum, whether or not earned or declared, equivalent to all accumulated and unpaid dividends thereon to the date of such payment. After all sums payable on the Preferred Shares as herein provided upon a particular contingency shall
have been paid in full, but not prior thereto, the Common Shares shall be entitled to payment of all other sums then distributable. For the purposes of this subsection III, a consolidation or merger of the Corporation with or into any other
corporation, or a consolidation or merger of any other corporation, with or into the Corporation shall not be deemed a dissolution, liquidation, or sale of assets. 
  

 A-3 

 IV. The holders of Preferred Shares shall be entitled to one vote for each Preferred
Share held by them respectively. 
  
 V. So long
as any of the Preferred Shares shall remain outstanding, no dividend (other than dividends payable in Common Shares) shall be paid, nor shall any distribution (by purchase, redemption, payment to any sinking fund or market fund, or otherwise) be
made, on any of the Common Shares unless: 
  
 (a)
all dividends on all outstanding Preferred Shares shall have been paid, and full dividends thereon for the then current quarterly dividend period shall have been declared and a sum sufficient for the payment thereof set apart therefor; and

  
 (b) the Corporation shall not be in arrears
in respect of any sinking fund obligation in respect of any series of Preferred Shares. 
  
 VI. Preferred Shares acquired by the Corporation through the exercise by the holders thereof of any conversion privilege shall not be
re-issued except as hereinafter provided. Such shares and any other Preferred Shares acquired by the Corporation otherwise than through the operation of any sinking fund and not used to reduce the amount of any sinking fund installment shall, upon
compliance with such provisions of law relating to the retirement of shares as may be applicable, have the status of authorized and unissued Preferred Shares which are unclassified into any series. Preferred Shares acquired by the Corporation
through the operation of any sinking fund or which have been used to reduce the amount of any sinking fund installment shall be canceled and not reissued, and the Corporation shall from time to time take appropriate corporate action to reduce the
authorized number of Preferred Shares accordingly. 
  
 VII. Series A Voting Preferred Shares: 
  
 From the authorized number of Preferred Shares of Corporation, a series of Preferred Shares designated as “Series A Voting Preferred Shares” is hereby created and shall consist of 500,000 Preferred Shares of which the preferences,
relative and other rights, and the qualifications, limitations or restrictions thereof shall be (in addition to those set forth elsewhere in these Articles) as follows: 
  
 1. Voting Rights. The holders of Series A Voting Preferred Shares shall be entitled to one vote for
each Preferred Share held by them respectively. 
  
 2. Dividends. The Board shall declare a dividend or distribution on the Series A Voting Preferred Shares immediately after it declares any dividend or distribution on the Common Shares. Such dividends or distributions shall be in an
amount per share equal to the amount per share of the dividend or distribution declared for each Common Share, multiplied by 100. 
  
 3. Reacquired Shares. Any Series A Voting Preferred Shares purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled 

  

 A-4 

 
promptly after such acquisition. All such shares, upon their cancellation, shall become authorized but unissued Preferred Shares, without designation as to
series, and may be reissued as part of any series of Preferred Shares created by the Board (including Series A Voting Preferred Shares) subject to the condition and restrictions on issuance set forth herein. 
  
 4. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall be made to: 
  
 (a) the holders of (x) Preferred Shares ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Voting Preferred Shares or (y) any holder of Common Shares, unless (prior thereto) the holders of Series A Voting Preferred Shares have received the greater of: (i) One Dollar ($1.00) per share ($0.01 per one one-hundredth of a share), plus
an amount equal to accrued and unpaid dividends and distributions thereon (whether or not declared) to the date of such payment, or (ii) an aggregate amount per share, subject to the provision for adjustment herein set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of Common Shares; or 
  
 (b) the holders of Preferred Shares ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Voting Preferred Shares, except distributions made ratably on the
Series A Voting Preferred Shares and all other such parity Preferred Shares in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. 
  
 If the Corporation shall at any time declare or pay any
dividend on Common Shares payable in Common Shares, or effect a subdivision or combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a greater or lesser number of Common Shares, then (and in each such
event) the aggregate amount to which the holder of each share of Series A Voting Preferred Shares was entitled immediately prior to such event under paragraph (a) of this Section 4 shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of Common Shares outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event. 
  
 5. Combination. If the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the Common Shares are exchanged for or changed into other stock, securities, cash or any other property, then (in each such event) the Series A Voting Preferred Shares shall at the
same time be similarly exchanged or changed in an amount per Share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash or any other property (payable in kind), as the
case may be, into which or for which each Common Share is changed or exchanged. If, at any time on or after the Rights Declaration Date, the Corporation (i) declares any dividend on Common Shares payable outstanding Common Shares into a smaller
number of Shares, (ii) subdivides the outstanding Common Shares; or (iii) combines the outstanding Common Shares into a smaller number of Shares, then (in each such case) the amount set forth in the preceding sentence with respect to the exchange or
change of Series A Voting Preferred Shares shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of Common Shares 

  

 A-5 

 
outstanding immediately after such event and the denominator of which is the number of Common Shares that were outstanding immediately prior to such event.

  
 6. No Redemption. The Series A Voting
Preferred Shares shall not be redeemable; provided, however, that the Corporation may acquire Series A Voting Preferred Shares in any other manner permitted by law or these Articles. 
  
 7. Ranking. Unless otherwise provided in these Articles or any subsequent amendment of these Articles
relating to a subsequent series of Preferred Shares of the Corporation, the Series A Voting Preferred Shares shall rank junior to all other series of the Corporation’s Preferred Shares as to the payment of dividends and the distribution of
assets on liquidation, dissolution or winding up and shall rank senior to the Common Shares. 
  
 8. Amendment. These Articles shall not, following the issuance of any shares of Series A Voting Preferred, be further amended in
any manner which would materially and adversely alter or change the powers, preference or special rights of the Series A Voting Preferred Shares without the affirmative vote of the holders of at least a majority of the outstanding Series A Voting
Preferred Shares, voting together as a single series. 
  
 9. Fractional Shares. Series A Voting Preferred Shares may be issued in fractions of a share (in one one-hundredths (1/100) of a Share and integral multiples thereof) that shall entitle the holder (in proportion to such holder’s
fractional shares) to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Voting Preferred Shares. 
  
 SECTION 2. The express terms and provisions of the Common Shares are as follows: 
  
 I. The rights and preferences of the Common Shares shall be
subject in all respects to the rights and preferences of the Preferred Shares in the manner and to the extent provided in this Article FOURTH. 
  
 II. The Common Shares shall rank junior to the Preferred Shares with respect to the payment of dividends. Out of the assets of the
Corporation available for dividends remaining after there shall have been paid or declared and set apart for payment full dividends on the Preferred Shares, and subject to the restrictions or limitations contained in the express terms and provisions
of any series of Preferred Shares with respect to the payment of dividends, dividends may be declared and paid upon the Common Shares, but only when and as determined by the Board of Directors. 
  

 A-6 

 III. The Common Shares shall rank junior to the Preferred Shares with respect to payment
upon dissolution, liquidation or sale of assets of the Corporation. Upon the dissolution, liquidation or sale of all or substantially all the assets of the Corporation, after there shall have been paid to or set apart for holders of the Preferred
Shares the full preferential amounts to which they are entitled, the holders of Common Shares shall be entitled to receive pro rata all of the remaining assets of the Corporation available for distribution to its shareholders. 
  
 IV. The holders of Common Shares shall be entitled to one
vote for each Common Share held by them respectively. 
  
 SECTION
3. No shareholder of the Corporation shall have the right to vote cumulatively in the election of directors of the Corporation. 
  
 FIFTH: When authorized by the affirmative vote of the Board of Directors, without the action or approval of the shareholders of this Corporation, this
Corporation may purchase, or contract to purchase, at any time and from time to time, shares of any class issued by this Corporation, voting trust certificates for shares, bonds, debentures, notes, scrip, warrants, obligations, evidences of
indebtedness or any other securities of this Corporation, for such prices and upon and subject to such terms and conditions as the Board of Directors may determine, provided that no such purchase shall be made, pursuant to any such contract or
otherwise, if after such purchase the assets of this Corporation would be less than its liabilities plus stated capital or if it is insolvent as defined in the General Corporation Law of Ohio or if there is reasonable ground to believe that by such
purchase it would be rendered insolvent. 
  
 SIXTH: No shareholder
of this Corporation shall be entitled, as such, as a matter of right to subscribe for or purchase shares of any class now or hereafter authorized, or to purchase or subscribe for securities convertible into or exchangeable for shares of the
Corporation or to which shall be attached or appertain any warrants or rights entitling the holder thereof to subscribe for or purchase shares except such rights of subscription or purchase, if any, at such price or prices and upon such terms and
conditions as the Board of Directors, in its discretion, from time to time may determine. 
  
 SEVENTH: This Corporation may amend its Articles of Incorporation in any respect in the manner provided by law, and may make amendments substantially changing the purposes for which the Corporation is formed.

  
 EIGHTH: The Board of Directors is hereby authorized to fix and
determine and to vary the amount of working capital of the Corporation, to determine to the extent permitted by the General Corporation Law of Ohio whether any, and, if any, what part of its surplus, however created or arising, shall be used or
disposed of or declared in dividends or paid to shareholders. 
  
 NINTH: Every statute of the State of Ohio hereafter enacted whereby the rights or privileges of shareholders of a corporation organized under the General Corporation Law of said State are increased, diminished or in any way affected, or
whereby effect is given to any action authorized, ratified or approved, by less than all the Shareholders of any such corporation, shall 

  

 A-7 

 
apply to this Corporation and shall be binding upon every shareholder thereof to the same extent as if such statute had been in force at the date of the
filing of these Amended Articles of Incorporation. 
  
 TENTH: A
director of this Corporation shall not be disqualified by his office from dealing or contracting with the Corporation as a vendor, purchaser, employee, agent or otherwise; nor shall any transaction or contract or act of this Corporation be void or
voidable or in any way affected or invalidated by reason of the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder or director is in any way interested in such transaction
or contract or act, provided the fact that such director or such firm or such corporation is so interested shall be disclosed or shall be known to the Board of Directors or such members thereof as shall be present at any meeting of the Board of
Directors at which action upon any such contract or transaction or act shall be taken; nor shall any such director be accountable or responsible to the Corporation for or in respect of any such transaction or contract or act of this Corporation or
for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder or director is interested in such transaction or contract or act; and any such director may be
counted in determining the existence of a quorum at any meeting of the Board of Directors of the Corporation which shall authorize or take action in respect to any such contract or transaction or act, and may vote thereat to authorize, ratify or
approve any such contract or transaction or act, with like force and effect as if he or any firm of which he is a member or any corporation of which he is a shareholder or director were not interested in such transaction or contract or act.

  
 The Board of Directors shall have the power to fix
compensation of officers or directors or both and a director may be counted in determining the existence of a quorum at any meeting of the Board of Directors which shall take such action and may vote thereat in favor or against such action whether
or not such director may be interested in the action so taken. 
  
 ELEVENTH: These Amended Articles of Incorporation supersede the existing Articles of Incorporation and all amendments thereto. 
  

 A-8 

 EXHIBIT B 
  

FORM OF RIGHTS CERTIFICATE 
  

			
	 Certificate No. R-
	 	                     Rights

  
 NOT EXERCISABLE AFTER
                    , 20     OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]1 
  
 RIGHTS CERTIFICATE 
  
 SUNLINK HEALTH SYSTEMS, INC. 
  
 This certifies
that                     , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the
owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of February 8, 2004 (the “Rights Agreement”), between SunLink Health Systems, Inc., an Ohio corporation (the “Company”), and
Wachovia Bank, N.A., a national banking institution, (the “Rights Agent”), to purchase from the Company at any time prior to 5:00 P.M. (Atlanta, Georgia time) on February 8, 2014 at the office or offices of the Rights Agent designated for
such purpose, or its successors as Rights Agent, one one-hundredth of a fully paid, non-assessable share of Series A Voting Preferred Shares (the “Preferred Shares”) of the Company, at a purchase price of $25 per one one-hundredth of a
share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. The Purchase Price may be paid in cash or by certified bank check or
money order payable to the order of the Company. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of                     , 20    , based on the Preferred Shares as constituted at
such date. 

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

  

 B-1 

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

As provided in the Rights Agreement, the Purchase Price and the number and kind of Preferred Shares or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events, including Triggering Events (as such term is defined in the Rights Agreement). 
  
 This Rights Certificate is subject to all of the terms, provisions, and
conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific
circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are available upon written request to the Company. 
  
 This Rights Certificate, with or without other Rights Certificates, upon surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-hundredths of a Preferred Share as the Rights evidenced
by the Rights Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate
or Rights Certificates for the number of whole Rights not exercised. 
  
 Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $.001 per Right at any time prior to the earlier of the close of business on
(i) the tenth business day following the Share Acquisition Date (as such time period may be extended pursuant to the Rights Agreement), and (ii) the Final Expiration Date. After the expiration of the redemption period, the Company’s right of
redemption may be reinstated if an Acquiring Person reduces his beneficial ownership to less than 20% of the outstanding Common Shares in a transaction or series of transactions not involving the Company and there are no other Acquiring Persons.

  
 The Company may (but shall not be required to) issue
fractional Preferred Shares upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth of a Preferred Shares, which may, at the election of the 

  

 B-2 

 
Company, be evidenced by depositary receipts), and in lieu thereof a cash payment may be made, as provided in the Rights Agreement. 
  
 No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a 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 Rights Certificate shall have been exercised as provided in the Rights Agreement. 
  
 This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. 
  
 WITNESS, the facsimile signature of the proper officers of the Company and its corporate seal. 
  
 Dated as of
                    , 20     
  

									
	 ATTEST:
	 	 	 	 SUNLINK HEALTH SYSTEMS, INC.

					
	 	 	 	 	 	 	By:	 	 
	
	 	 	 	 	 	

	 Secretary
	 	 	 	 Name:
	 	 
	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 Title:
	 	 
	 	 	 	 	 	 	 	 	

			
	 COUNTERSIGNED:
	 	 	 	 
					
	 	 	 	 	 	 	 	 	 
	
	 	 	 	 	 	 
					
	By:	 	 	 	 	 	 	 	 
	 	 	
	 	 	 	 	 	 
	 	 	 Authorized Signature
	 	 	 	 	 	 

  

 B-3 

 FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE 
  
 FORM OF ASSIGNMENT 
  
 (To be executed by the registered holder if 
 such holder desires to transfer the Rights 
 Certificate.) 
  
 FOR VALUE RECEIVED hereby
                                        
                                        
                                        
                             
 sells, assigns and transfers unto
                                        
                                        
                                        
                                        

                                        
                             (Please print name and address of transferee) 
  
 this Rights Certificate, together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint                      Attorney, to transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution. 
  
 Dated:
                     
  

	
	
	  
	

	Signature

  
 Signature Guaranteed: 
  
 Certificate 
  
 The undersigned hereby certifies by checking the appropriate boxes that:

  

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

  

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

  
 Dated:                      
  

	
	
	  
	

	Signature

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

 B-4 

 FORM OF ELECTION TO PURCHASE 
  
 (To be executed if holder desires to 
 exercise Rights represented by the 
 Rights Certificate.) 
  
 To: SUNLINK HEALTH SYSTEMS, INC. 
  
 The undersigned hereby irrevocably elects to exercise
                     Rights represented by this Rights Certificate to purchase the Preferred Shares issuable upon the exercise of the Rights
(or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to: 
  
 Please insert social security or other identifying number:
                     
  

			
	 	  	 
	
	 	 
	(Please print name and address)	  	 

  
 If such number of Rights shall not be
all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to: 
  
 Please insert social security or other identifying number:
                     
  

			
	 	  	 
	
	 	 
	(Please print name and address)	  	 

  
 Dated:
                     
  

	
	
	  
	

	Signature

  
 Signature Guaranteed: 
  

 B-5 

 Certification 
  
 The undersigned hereby certifies by checking the appropriate boxes that: 
  

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

  

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

  
 Dated:                      
  

	
	
	  
	

	Signature

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

 B-6 

 EXHIBIT C 
  

SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES 
  
 On February 8, 2004, the Board of Directors of SunLink Health Systems, Inc. (the “Company”) declared a dividend distribution of one Series A
Voting Preferred purchase right (a “Right”) for each outstanding Common Share of the Company to shareholders of record at the close of business on February 10, 2004. One Right will also be distributed for each Common Share issued after
February 10, 2004 until the Distribution Date (which is described in the next paragraph). Except as set forth below, each Right entitles the registered holder to purchase from the Company units of Series A Voting Preferred Shares, no par value (the
“Preferred Shares”), at an exercise price of $25 per Right. The description and terms of the Rights are set forth in a Shareholder Rights Agreement dated as of February 8, 2004 (the “Rights Agreement”) between the Company and
Wachovia Bank, N.A., as Rights Agent. The exercise price has been set at $25 based upon the advice of the Company’s financial adviser. 
  
 The Rights Agreement provides that the Rights will be evidenced by the share certificates representing the Common Shares and no separate Rights
Certificates will be distributed until the “Distribution Date” which will be the earlier to occur of: 
  

	 	•	the close of business 10 business days following a public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of 20% or more of
the outstanding Common Shares (an “Acquiring Person”), 

  

	 	•	the date that a person or group of affiliated or associated persons has acquired beneficial ownership of 35% or more of the outstanding Common Shares, or 

 

	 	•	the close of business 10 business days after the commencement of, or 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 definition of Acquiring Person excludes the Company, any subsidiary of the Company or any of the Company’s employee benefit plans. 
  
 Until the Distribution Date: 
  

	 	•	the Rights will be evidenced by the Common Share certificates and will be transferred with and only with the Common Share certificates, 

  

	 	•	new Common Share certificates issued after February 10, 2004 will contain a notation incorporating the Rights Agreement by reference, and 

  

	 	•	the surrender for transfer of any certificates for Common Shares outstanding will also constitute the transfer of the Rights associated with the Common Shares represented by the
certificate. 

  
 The Rights are not exercisable
until the Distribution Date and will expire on February 8, 2014, unless the Company redeems them at an earlier date. The Company may redeem the 

  

 C-1 

 
Rights in whole, but not in part, at a price of $.001 per Right, at any time prior to a public announcement that a person has become an Acquiring Person.

  
 As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Shares as of the close of business on the Distribution Date and thereafter the separate Rights Certificates alone will represent the Rights. Except for the issuance of Common Shares in
connection with outstanding options, convertible securities and as otherwise determined by the Board of Directors, only Common Shares issued prior to the Distribution Date will be issued with Rights. 
  
 In the event that any person becomes an Acquiring Person, each holder of a
Right, other than the Acquiring Person, will then have the right (the “Flip-In Right”) to receive upon exercise of the Right units of Preferred Shares (or, in certain circumstances, other securities of the Company) having a value
(immediately prior to such triggering event) equal to two times the exercise price of the Right. For this purpose, a unit of Preferred Shares is deemed to have the same value as the market price of the Company’s Common Shares at that time. One
unit of Preferred Shares has rights which are comparable in terms of dividends and upon liquidation to one Common Share. Each Flip-In Right will entitle the holder, other than the Acquiring Person, to purchase from the Company units of Preferred
Shares at 50% of market value. 
  
 All Rights that are
beneficially owned by any Acquiring Person will be null and void. 
  
 In the event that, at any time following the acquisition of 20% or more of the Company’s Common Shares by a person or group, (i) the Company is acquired in a merger or other business combination transaction in which the Company is not
the surviving corporation, or (ii) 50% or more of the Company’s assets or earning power is sold or transferred, each holder of a Right, other than the Acquiring Person, will then have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the Right. 
  
 A person or group of affiliated persons will not trigger the separation and exercisability of the Rights if that person or group becomes the beneficial owner of 20% or more of the Common Shares solely as a result of
the Company’s reducing the number of outstanding shares, unless that person or group subsequently acquires an additional 1.0% or more of the then outstanding Common Shares. 
  
 Until a Right is exercised, the holder of the Right, as such, will have no rights as a shareholder of the Company,
including, without limitation, the right to vote or to receive dividends. 
  
 Other than those provisions relating to the principal economic terms of the Rights, any of the provisions of the Rights Agreement may be amended by the Board of Directors of the Company prior to the Distribution Date.
After the Distribution Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, to make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement; 

  

 C-2 

 
provided, however, that no amendment to adjust the time period governing redemption shall be made when the Rights are not redeemable. 
  
 The inability of a person or group that acquires 20% or more of the
Company’s Common Shares to exercise the Rights will result in a substantial dilution of that person’s ownership level and voting power if there is any significant exercise of the Rights by other shareholders. The ability of the Board of
Directors to redeem the Rights, and other provisions of the Rights Plan, will enable the Board of Directors to avoid the effect of the Rights in any negotiated acquisition of the Company that is approved by the Board of Directors. 
  
 A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Current Report on Form 8-K filed on February 10, 2004. 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. 
  

 C-3

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