Document:

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                                                                   EXHIBIT 10.14

                              CONSULTING AGREEMENT

         THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into
as of the 30th day of January, 2004, by and between Mortgage Guaranty Insurance
Corporation, a Wisconsin corporation, with its principal place of business
located at 250 East Kilbourn Avenue, Milwaukee, Wisconsin 53202 ("MGIC"), and
James S. MacLeod, an individual residing at [address appears in executed
agreement] ("MacLeod").

                                   WITNESSETH:

         WHEREAS, MacLeod currently is employed by MGIC as its Executive Vice
President - Field Operations; and

         WHEREAS, MacLeod previously has submitted to MGIC his resignation as an
officer and employee of MGIC, to become effective upon his retirement on January
30, 2004; and

         WHEREAS, following MacLeod's retirement, MGIC desires to retain, from
time to time, the consulting services of MacLeod, subject to the terms and
conditions set forth herein.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, MacLeod and MGIC
hereby agree as follows:

         1. CONFIRMATION OF RETIREMENT AND RESIGNATION. MacLeod shall retire and
resign all of his officer and employee positions with MGIC and all of MGIC's
parent, subsidiary, and affiliated corporations, effective as of the close of
MGIC's business on Friday, January 30, 2004 (the "Retirement Date").

         2. CONSULTING ASSIGNMENTS. Following the Retirement Date, MacLeod will
provide consulting services to MGIC and its affiliates on a project basis. The
nature of each project shall be specified by either the Chief Executive Officer
or the Executive Vice President - Field Operations of MGIC, and shall be subject
to acceptance by MacLeod. Each such project shall be commensurate with MacLeod's
prior officer position and status with MGIC. Nothing contained herein shall be
deemed to confer upon MacLeod any right to perform services for MGIC or receive
fees from MGIC for any particular period of time, it being understood and agreed
that either party may terminate the consulting relationship at anytime pursuant
to Section 7 below.

         3. COMPENSATION. MGIC shall pay MacLeod fees ("Consulting Fees") in the
amount of Two Hundred Dollars ($200.00) per hour for services performed by
MacLeod hereunder. In addition to the Consulting Fees, MGIC shall pay, or
reimburse MacLeod, for reasonable travel and living expenses, if any, incurred
by MacLeod in performing the Services, including transportation, hotel
accommodations and meal expenses, subject to MGIC's established expense
reimbursement guidelines and policies. MacLeod shall be responsible for all
other costs and expenses incurred by MacLeod in performing services hereunder.
MacLeod shall prepare invoices on a bi-weekly basis itemizing the number of
hours worked and the

<PAGE>

reimbursable expenses incurred during the previous two week period pursuant to
this Agreement. MGIC shall pay the Consulting Fees earned by MacLeod, and pay or
reimburse MacLeod for the reimbursable expenses, reflected on such invoices
within five (5) business days after MGIC's receipt of such invoices.

         4. CONFIDENTIALITY. MacLeod hereby acknowledges and agrees that MGIC is
engaged in a service business involving Confidential Information, that such
Confidential Information is used by MGIC in its business to obtain a competitive
advantage over Competitors, and that the success of MGIC's business is in large
part due to MGIC's exclusive retention of said Confidential Information. MacLeod
further acknowledges that the protection of such Confidential Information
against unauthorized disclosure and use is of critical importance to MGIC in
maintaining its competitive position. Accordingly, MacLeod agrees that the
following terms and conditions shall apply to all Confidential Information:

         A.       For purposes of this Agreement, the term "Confidential
                  Information" shall include, without limitation, all data,
                  reports, specifications, know how, programs, plans,
                  strategies, marketing research, documents, procedures, forms,
                  customer information, systems, software, Work Product (as
                  defined in Section 5 hereof), and other materials and
                  information concerning MGIC or its activities which MacLeod
                  may be provided, may come in contact with, or may develop
                  during the course of this relationship, that are not generally
                  available to the public.

         B.       All Confidential Information will be used by MacLeod only for
                  the purpose of providing consulting services to MGIC.

         C.       MacLeod will not reproduce or duplicate any Confidential
                  Information without the written consent of MGIC.

         D.       Except as otherwise required by any law, court order or
                  subpoena, MacLeod will not disclose, make any independent use
                  of, publish, furnish, sell, assign or transfer any
                  Confidential Information to any third party, or authorize
                  anyone else to disclose, publish, furnish, sell, assign or
                  transfer any Confidential to any person or entity, without the
                  prior written approval or instruction of an authorized officer
                  of MGIC.

         E.       The terms, conditions and provisions of this Section 3 shall
                  survive the expiration and termination of this Agreement.

         5. RETURN OF DOCUMENTS AND RECORDS. MacLeod hereby acknowledges and
agrees that all written or electronically stored materials received by MacLeod
from MGIC during the course of this Agreement are, and will remain at all times,
the sole property of MGIC. Promptly upon the expiration or termination of this
Agreement for any reason, or at any other time upon request by MGIC, MacLeod
will promptly deliver to MGIC all documents and records in the possession or
under the control of MacLeod which pertain to MGIC, any of its activities, or
any of MacLeod's services provided hereunder.

         6. WORK PRODUCT. The work product of MacLeod shall include, without
limitation, all tangible products, reports, plans, programs, procedures,
recommendations, forms, information recorded by any medium, documents, written
materials, inventions, software, data, and any and all

<PAGE>

other work product, or any portion thereof, prepared, generated or provided by
MacLeod in connection with MacLeod's performance under this Agreement ("Work
Product"). All Work Product shall be deemed "Work Made for Hire" and shall be
the sole property of MGIC. MacLeod hereby assigns all rights, title and interest
to MGIC in any and all Work Product, and all drafts thereof, including, without
limitation, all worldwide copyright, trademark, trade secret and other
proprietary rights in such Work Product. MacLeod further agrees to execute any
documentation reasonably required by MGIC in the future to reflect MGIC's rights
in and to such Work Product.

         7. INDEPENDENT CONTRACTOR. In the performance of services hereunder,
MacLeod shall be an independent contractor and not an employee or agent of MGIC.
MacLeod shall have no authority to enter agreements on behalf of MGIC or
otherwise bind MGIC to any third party. MacLeod shall have no authority to act
in any way as a representative of MGIC, unless otherwise expressly agreed in
writing by MGIC. MacLeod shall supply all services hereunder at his own risk and
MacLeod shall not, by virtue of this Agreement or the performance of services
hereunder, be entitled to Worker's Compensation Insurance or any other insurance
or benefits provided by MGIC as a result of this Agreement or the performance of
services hereunder. MacLeod shall make his/her own arrangements for insurance at
Consultant's sole cost, which insurance shall be MacLeod's sole and exclusive
remedy for any damage or personal injury suffered in connection with this
Agreement. No person engaged by MacLeod shall be entitled to compensation or
benefits of any kind from MGIC. Neither MacLeod, nor anyone employed or retained
by MacLeod, shall be eligible to participate in or be covered by any employee
benefit plan or program sponsored by or through MGIC as a result of this
Agreement or the performance of services hereunder. In the event MacLeod's
employees or subcontractors are characterized by the Internal Revenue Service or
by any other taxing authority or other government agency (whether federal, state
or local) as employees of MGIC, and MGIC shall become liable for the withholding
or payment of any tax on income earned by any person hereunder or for any other
governmental charge or assessment by reason of such characterization, then
MacLeod shall promptly indemnify MGIC for such amount and any ancillary
penalties and interest. Such indemnification shall extend to any and all
reasonable costs, including attorney's fees, incurred by MGIC in connection with
such a loss, liability or claim. Nothing herein is intended to preclude
MacLeod's simultaneous or subsequent engagement by third parties provided only
that such services do not interfere with MacLeod's obligations under this
Agreement, are consistent with MacLeod's duties of confidentiality provided for
herein, and do not otherwise violate or breach MacLeod's covenants and
obligations set forth herein. MacLeod warrants that no laws, regulations or
ordinances of the United States, or any state or other government authority or
agency, including the Fair Labor Standard Act, as amended, has been or will be
violated in the performance of services and agrees to indemnify and hold MGIC
harmless from any and all claims arising from MacLeod's breach hereof. MacLeod
shall, at MacLeod's own expense, comply with all other laws, rules and
regulations and assume all liabilities or obligations imposed by such laws,
rules and regulations with respect to MacLeod's performance of services.
Additionally, MacLeod shall be responsible for the payment of applicable taxes
and imposts levied or based upon the income of MacLeod or the fees payable to
MacLeod by MGIC including, but not limited to, FICA and federal, state and local
income taxes, unemployment insurance taxes; and any other income and employment
taxes or levies. MacLeod shall indemnify and hold MGIC harmless from any loss,
liability or claim resulting from breach of any representation, warranty or
covenant herein, or arising out of any action by MacLeod that is inconsistent
with MacLeod's status as an independent contractor hereunder.

<PAGE>

         8. TERMINATION. Either party may terminate this Agreement, without
cause, for its convenience, at any time during the course of MacLeod's
performance hereunder by providing written notice to the other party. If this
Agreement is terminated for any reason, MacLeod shall be paid all fees earned
for services performed prior to the effective date of termination which have not
been previously paid by MGIC. In no event shall MacLeod be entitled to any
unabsorbed overhead or anticipatory profit of any kind.

         9. ASSIGNMENT AND SUBCONTRACTING. This Agreement may be assigned by
MGIC to MGIC Investment Corporation, the parent of MGIC, or to any direct or
indirect subsidiary of MGIC Investment Corporation. This Agreement may not
otherwise be subcontracted or assigned by either party without the prior,
express, written consent of the other party hereto.

         10. NOTICES. Unless otherwise specified, all notices required or
permitted to be given under this Agreement must be in writing to be effective
and must be: (i) delivered to the party (in which event the notice is effective
at the time of delivery); or (ii) mailed by regular, certified or registered
mail (in which event the notice is effective as of the second Business Day
following mailing, regardless of actual receipt, if sent by certified or
registered mail or, upon receipt, if sent by regular mail); or (iii) sent by an
express delivery service with guaranteed next Business Day delivery (in which
event the notice is effective on the first Business Day following delivery to
such carrier, regardless of actual receipt); or (iv) sent by telecopy, with a
copy sent via regular, certified or registered mail (in which event the notice
is effective on the next Business Day following telecopy transmission). Notices
must be addressed to the appropriate party, as follows:

                  If to MGIC:

                          Mortgage Guaranty Insurance Corporation
                          250 East Kilbourn Avenue
                          Milwaukee, WI  53202
                          Attention:  Vice President-Human Resources

                  If to MacLeod:

                          James S. MacLeod
                          [Address appears in
                          executed agreement]

         11. EQUAL EMPLOYMENT. Unless exempt, if MacLeod hires any employees or
retains any independent contractors for any purpose, MacLeod will comply with
U.S. Department of Labor regulations regarding (a) equal employment opportunity
obligations of government contractors and subcontractors, 41 Code of Federal
Regulations ("C.F.R.") Section 60-1.4(a)(1)-(7); (b) employment by government
contractors of Vietnam-era and disabled veterans, 41 C.F.R. Section
60-250.4(a)-(m); (c) employment of the handicapped by government contractors and
subcontractors, 41 C.F.R. Section 60-741.4(a)-(f); (d) developing written
affirmative action programs, 41 C.F.R. Sections 60-1.40, 60-2.1, 60-250.5 and
60-741.5; (e) certifying no segregated facilities, 41 C.F.R. Section 60-1.8; (f)
filing annual EEO-1 reports, 41 C.F.R. Section 60-1.7; and (g) utilizing
minority-owned and female-owned business concerns, 48 C.F.R. Section 52-219.9
and 52-219.12, which are incorporated by reference herein.

<PAGE>

         12. ADVERTISING AND PROMOTIONAL ACTIVITIES. MacLeod shall not use, in
any advertising or promotional material or media, MGIC's name or logo or that of
any affiliate of MGIC, or otherwise identify MGIC as a client of MacLeod,
without MGIC's prior written consent.

         13. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.

         14. GOVERNING LAW. This Agreement shall be governed by, construed and
interpreted under the laws of the State of Wisconsin without reference to such
State's conflict of laws principles.

         15. WAIVER. Failure or delay by either party to enforce compliance with
any term or condition of this Agreement shall not constitute a waiver of such
term or condition. A waiver of any breach or default under this Agreement shall
not constitute a waiver of any subsequent breach or default.

         16. AMENDMENTS. No modification or amendment of this Agreement shall be
binding unless in writing and signed by the party sought to be bound.

         17. TITLE AND HEADINGS. The title and section headings of this
Agreement have been inserted for convenience of reference only, do not
constitute a part of this Agreement, and shall not be construed to limit,
expand, or otherwise modify the effect of any provision of this Agreement.

         18. SEVERABILITY. If any term or provision of this Agreement, or the
application thereof, shall to any extent be invalid or unenforceable, and the
intent of the parties hereto in entering into this Agreement is not materially
frustrated or negated thereby, the remainder of this Agreement, or the
application of such term or provision to circumstances other than those to which
it is invalid or unenforceable, shall not be affected thereby, and shall be
enforced to the full extent permitted by law.

         19. ENTIRE AGREEMENT. Each of the parties hereby acknowledges that it
has read this Agreement and understands and agrees to be bound by its terms and
conditions. This Agreement is the complete and exclusive statement of the
agreement between the parties hereto which supersedes all prior agreements,
offers, proposals, understandings and other communications between the parties
hereto, oral or written, regarding the subject matter hereof.

<PAGE>

         IN WITNESS WHEREOF, MGIC and MacLeod have executed this Agreement as of
the date first set forth above.

MORTGAGE GUARANTY INSURANCE                      JAMES S. MacLEOD
CORPORATION

By:      /s/ Patrick Sinks                       /s/ James S. MacLeod
   ------------------------------                -------------------------------
    Patrick Sinks
    Senior Vice President - Field Operations<PAGE>

                                                                     EXHIBIT 4.1

                              ELI LILLY AND COMPANY

                                       And

                     FIRST CHICAGO TRUST COMPANY OF NEW YORK

                                 As Rights Agent

                                Rights Agreement

                            Dated as of July 20, 1998

<PAGE>

                                TABLE OF CONTENTS

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

Exhibit A - Form of Articles of Amendment
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Shares

<PAGE>

                                Rights Agreement

         Rights Agreement, dated as of July 20, 1998, between Eli Lilly and
Company, an Indiana corporation (the "Company"), and First Chicago Trust Company
of New York (the "Rights Agent").

         The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
of the Company outstanding on July 28, 1998 (the "Record Date"), each Right
representing the right to purchase one one-thousandth of a Preferred Share, upon
the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date and the Expiration Date.

         Accordingly, 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 Rights Agreement,
the following terms have the meanings indicated:

                  (a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall
not include (i) the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any entity holding
Common Shares for or pursuant to the terms of any such plan, (ii) any person who
becomes the Beneficial Owner of 15% or more of the Common Shares then
outstanding as the result of a reduction in the outstanding Common Shares
resulting from acquisition of Common Shares by the Company approved by a
majority of the Continuing Directors, unless and until such Person become the
Beneficial Owner of any additional Common Shares, (iii) any person who becomes
the Beneficial Owner of 15% or more of the Common Shares then outstanding
pursuant to any action or transaction or series of related actions or
transactions approved by a majority of the Continuing Directors, unless and
until such Person become the Beneficial Owner of any additional Common Shares or
(iv) Lilly Endowment, Inc. Notwithstanding the foregoing, any Person who or
which the Board of Directors of the Company (upon the approval of a majority of
the Continuing Directors) determines, in good faith, became an Acquiring Person
inadvertently, if such Person divests as promptly as practicable a sufficient
number of Common Shares so that such Person would no longer be an Acquiring
Person, shall be deemed not to be and never to have been an Acquiring Person.

                  (b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act.

<PAGE>

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

                           (i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, as determined pursuant to Rule 13d-3
under the Exchange Act;

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

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

         Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to Beneficially Own hereunder.

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

                                        2

<PAGE>

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

                  (f) "Common Shares" shall mean the shares of common stock,
without 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 (or
equity interest) with the greatest voting power of such other Person or, if such
other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.

                  (g) "Company" shall have the meaning set forth in the preamble
hereof.

                  (h) "Continuing Director" shall mean any member of the Board
of Directors of the Company, while such person is a member of the Board of
Directors, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative or nominee of an Acquiring Person or of
any such Affiliate or Associate, and who either (i) was a member of the Board of
Directors on the date of this Agreement or (ii) subsequently became a member of
the Board of Directors, and whose nomination for election or election to the
Board of Directors was recommended or approved by a majority of the Continuing
Directors then on the Board of Directors.

                  (i) "current per share market price" shall have the meaning
set forth in Section 11(d) hereof.

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

                  (k) "equivalent preferred shares" shall have the meaning set
forth in Section 11(b) hereof.

                  (l) "Exchange Act" shall mean the Securities Exchange Act of
1934.

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

                  (n) "Expiration Date" shall mean the Close of Business on July
28, 2008.

                  (o) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.

                  (p) "Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.

                                        3

<PAGE>

                  (q) "Preferred Shares" shall mean shares of Series B Junior
Participating Preferred Stock, without par value, of the Company having the
rights and preferences set forth in the Form of Articles of Amendment attached
to this Rights Agreement as Exhibit A.

                  (r) "Purchase Price" shall initially be $325 for each one
one-thousandth of a Preferred Share purchasable pursuant to the exercise of a
Right, and shall be subject to adjustment from time to time as provided in
Section 11 or 13 hereof.

                  (s) "Record Date" shall have the meaning set forth in the
second paragraph hereof.

                  (t) "Redemption Date" shall mean the time at which the Rights
are redeemed as provided in Section 23 hereof.

                  (u) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.

                  (v) "Right" shall have the meaning set forth in the second
paragraph hereof.

                  (w) "Right Certificate" shall have the meaning set forth in
Section 3(a) hereof.

                  (x) "Rights Agent" shall have the meaning set forth in the
preamble hereof.

                  (y) "Security" shall have the meaning set forth in Section
11(d)(i) hereof.

                  (z) "Stock Acquisition Date" shall mean the first date of
public announcement (including, without limitation, by a filing under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such or such earlier date as a majority of the Continuing Directors shall
become aware of the existence of an Acquiring Person.

                  (aa) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned or otherwise controlled, directly or
indirectly, by such Person.

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

         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

                                        4

<PAGE>

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.

         Section 3. Issue of Right Certificates. (a) Until the Close of Business
on the day (or such later date as may be determined by action of the Board of
Directors, upon approval by a majority of the Continuing Directors) which is the
earlier of (i) the tenth day after the Stock Acquisition Date or (ii) such date,
if any, as may be determined by action of the Board of Directors of the Company
(upon approval by a majority of the Continuing Directors) after the date of the
commencement 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 entity holding Common Shares for or pursuant to the terms of any
such plan) of, or of the first public announcement of the intention of any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan) to
commence, a tender or exchange offer the consummation of which would result in
any Person becoming an Acquiring Person (including any such date which is after
the date of this Rights Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
one Right for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates. References in this
Agreement to certificates for common shares shall include certificates for
common shares as well as book-entry notations of ownership in the record book of
the Company's transfer agent whether or not represented by certificates.

                  (b) The Company will make available, as promptly as
practicable following the Record Date, a Summary of Rights to Purchase Preferred
Shares, in substantially the form of Exhibit C hereto, to any holder of Rights
who may so request from time to time prior to the Expiration Date. With respect
to certificates for Common Shares outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates and the
registered holders of the Common Shares shall also be the registered holders of
the associated Rights. Until the Distribution Date (or the earlier of the
Redemption Date or the Expiration Date), the surrender for transfer of any
certificate for Common Shares in respect of which Rights have been issued shall
also constitute the transfer of the Rights associated with such Common Shares.

                                        5

<PAGE>

                  (c) Rights shall be issued in respect of all Common Shares
which are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earliest of the Distribution Date, the
Redemption Date or the Expiration Date. Certificates representing such Common
Shares shall bear the following legend:

                  THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF
                  TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN
                  ELI LILLY AND COMPANY (THE "COMPANY") AND THE RIGHTS AGENT
                  THEREUNDER (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE
                  HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS
                  ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY. UNDER CERTAIN
                  CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH
                  RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO
                  LONGER BE EVIDENCED BY THIS CERTIFICATE. THE COMPANY WILL MAIL
                  TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS
                  AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST
                  THEREFOR. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
                  RIGHTS AGREEMENT, RIGHTS ISSUED TO ANY PERSON WHO BECOMES AN
                  ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT),
                  INCLUDING SUCH RIGHTS HELD BY A SUBSEQUENT HOLDER, MAY BECOME
                  NULL AND VOID.

         With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding.

         Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as 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 Rights Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
automated quotation system on which the Rights may from time to time be listed,
or to conform to usage. Subject to the provisions of Sections 11 and 22 hereof,
the Right Certificates shall entitle the holders thereof to purchase such number
of one one-thousandths of a Preferred Share as shall be set forth

                                        6

<PAGE>

therein at the price per one one-thousandth of a Preferred Share set forth
therein, but the number of one one-thousandths of a Preferred Share and the
Purchase Price shall be subject to adjustment as provided herein.

         Section 5. Countersignature and Registration. (a) The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its Chief Executive Officer, its President, any of its Vice Presidents,
or its Treasurer, either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be countersigned by the Rights
Agent, either manually or by facsimile signature, 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 Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the Person who signed such Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any Person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such
Right Certificate although at the date of the execution of this Rights Agreement
any such Person was not such an officer.

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

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

                  (a) Subject to the provisions of Section 14 hereof, at any
time after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the earlier of the Redemption Date or the Expiration
Date, any Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11(a)(ii) hereof
or that have been exchanged pursuant to Section 24 hereof) may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates entitling the registered holder to purchase a like number of one
one-thousandths of a Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Right Certificate
or Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as

                                        7

<PAGE>

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

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

                  (a) The registered holder of any Right Certificate may
exercise the Rights evidenced thereby (except as otherwise provided in Sections
11, 23 and 24 hereof), in whole or in part, at any time after the Distribution
Date, upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
principal office of the Rights Agent, together with payment of the Purchase
Price for each one one-thousandth of a Preferred Share as to which the Rights
are exercised, at or prior to the earliest of (i) the Expiration Date, (ii) the
Redemption Date or (iii) the time at which such Rights are exchanged as provided
in Section 24 hereof.

                  (b) The Purchase Price shall be payable in lawful money of the
United States of America in accordance with paragraph (c) below.

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

                                        8

<PAGE>

by such holder; and (iv) when appropriate, after receipt, promptly deliver such
cash to or upon the order of the registered holder of such Right Certificate.

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

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

         Section 9. Availability of Preferred Shares.

                  (a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
or any Preferred Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of all outstanding Rights
in accordance with Section 7. The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all securities delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
securities (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable.

                  (b) 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 Right
Certificates or of any Preferred Shares 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 Right Certificates to a Person other
than, or the issuance or delivery of certificates or depositary receipts for the
Preferred Shares in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue or to
deliver any certificates or depositary receipts for Preferred Shares upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's reasonable satisfaction that
no such tax is due.

                                        9

<PAGE>

                  (c) The Company will use its best efforts to ensure that any
securities issued pursuant hereto are issued in compliance with all applicable
laws.

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

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

                  (a) (i) In the event the Company shall at any time after the
date of this Rights Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares 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.

                      (ii) Subject to Section 24 of this Rights Agreement, in
the event any Person becomes an Acquiring Person, each holder of a Right shall
thereafter have a right to receive, upon exercise thereof at a price equal to
the then current Purchase Price multiplied by the number of one one-thousandths
of a Preferred Share for which a Right is then exercisable, in accordance with
the terms of this Rights Agreement and in

                                       10

<PAGE>

lieu of Preferred Shares, such number of Common Shares as shall equal the result
obtained by (A) multiplying the then current Purchase Price by the number of one
one-thousandths of a Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Company's Common Shares (determined pursuant to Section 11(d) hereof) on the
date of the occurrence of such event. In the event that any Person shall become
an Acquiring Person and the Rights shall then be outstanding, the Company shall
not take any action which would eliminate or diminish the benefits intended to
be afforded by the Rights.

         Notwithstanding anything in this Agreement to the contrary, from and
after the time that any person becomes an Acquiring Person, any Rights that are
or were acquired or Beneficially Owned by any Acquiring Person (or any Associate
or Affiliate of such Acquiring Person) shall be void and any holder of such
Rights shall thereafter have no right to exercise such Rights under any
provision of this Rights Agreement. No Right Certificate shall be issued
pursuant to Section 3 that represents Rights Beneficially Owned by an Acquiring
Person whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof; no Right Certificate shall be issued at any time
upon the transfer of any Rights to an Acquiring Person whose Rights would be
void pursuant to the preceding sentence or any Associate or Affiliate thereof or
to any nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be void pursuant to the preceding sentence shall be
cancelled.

                     (iii) If there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit the exercise in full of
the Rights in accordance with the foregoing subparagraph (ii), the Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exercise of the Rights. If the Company shall, after good faith
effort, be unable to take all such action as may be necessary to authorize such
additional Common Shares, the Company shall substitute, for each Common Share
that would otherwise be issuable upon exercise of a Right, a number of Preferred
Shares or fraction thereof (or a security with substantially similar rights,
privileges, preferences, voting power and economic rights) such that the current
per share market price of one Preferred Share (or such other security)
multiplied by such number or fraction is equal to the current per share market
price of one Common Share as of the date of issuance of such Preferred Shares or
fraction thereof (or other security).

                  (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 (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
then current per share market price of the Preferred Shares on such record date,
the Purchase Price to be in effect after such record

                                       11

<PAGE>

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

                                       12

<PAGE>

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

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

                  (e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price;

                                       13

<PAGE>

provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one-millionth of a Preferred Share or one
ten-thousandth of any other share or security as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.

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

                  (g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths 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-thousandths of a Preferred Share (calculated to the nearest one
millionth of a Preferred Share) obtained by (A) multiplying (x) the number of
one one-thousandths 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 (B) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the Purchase
Price.

                  (i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights in substitution
for any adjustment in the number of one one-thousandths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-thousandths 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 millionth) 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

                                       14

<PAGE>

for the adjustment, and, if known at the time, the amount of the adjustment to
be made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Right Certificates have been issued,
shall be at least 10 days later than the date of the public announcement. If
Right 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 Right Certificates
on such record date Right Certificates evidencing, subject to Section 14 hereof,
the additional Rights to which such holders shall be entitled as a result of
such adjustment, or, at the option of the Company, shall cause to be distributed
to such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such adjustment.
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and shall be registered in the
names of the holders of record of Right Certificates on the record date
specified in the public announcement.

                  (j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a Preferred Share issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-thousandths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder.

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

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

                  (m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that, it, in its sole discretion, shall
determine to be advisable in order that any consolidation or subdivision of the
Preferred Shares, issuance wholly for cash of any Preferred Shares at less than
the current market price, issuance wholly for cash of Preferred Shares or

                                       15

<PAGE>

securities which by their terms are convertible into or exchangeable for
Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or
issuance of rights, options or warrants referred to hereinabove in Section
11(b), hereafter made by the Company to holders of its Preferred Shares shall
not be taxable to such stockholders.

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

         Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) if a Distribution Date has
occurred, mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof.

         Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. Except for any transaction approved by the Board of Directors
(upon approval by a majority of the Continuing Directors), in the event,
directly or indirectly, at any time after a Person has become an Acquiring
Person, (a) the Company shall consolidate with, or merge with and into, any
other Person, (b) any Person shall consolidate with the Company, or merge with
and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Shares shall be changed into or exchanged for stock or other
securities of any other Person (or the Company) or cash or any other property or
(c) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one or more transactions,
assets or earning power aggregating 50% or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person other
than the Company or one or more of its wholly-owned Subsidiaries, then, and in
each such case, proper provision shall be made so that

                                       16

<PAGE>

                           (i) each holder of a Right (except as otherwise
provided herein) shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the then current Purchase Price multiplied by the
number of one one-thousandths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Rights Agreement and in lieu
of Preferred Shares, such number of Common Shares of such other Person
(including the Company as successor thereto or as the surviving corporation) as
shall equal the result obtained by (A) multiplying the then current Purchase
Price by the number of one one-thousandths of a Preferred Share for which a
Right is then exercisable and dividing that product by (B) 50% of the then
current per share market price of the Common Shares of such other Person
(determined pursuant to Section 11(d) hereof) on the date of consummation of
such consolidation, merger, sale or transfer;

                           (ii) the issuer of such Common Shares shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Company pursuant
to this Rights Agreement;

                           (iii) the term "Company" shall thereafter be deemed
to refer to such issuer; and

                           (iv) such issuer shall take such steps (including,
but not limited to, the reservation of a sufficient number of its Common Shares
in accordance with Section 9 hereof) in connection with such consummation as may
be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the Common Shares
thereafter deliverable upon the exercise of the Rights.

         The Company shall not consummate any such consolidation, merger, sale
or transfer unless prior thereto the Company and such issuer shall have executed
and delivered to the Rights Agent a supplemental agreement so providing. The
Company shall not enter into any transaction of the kind referred to in this
Section 13 if at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or arrangements which,
as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights. The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.

         Section 14. Fractional Rights and Fractional Shares.

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

                                       17

<PAGE>

price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company (upon the approval of a majority of the Continuing
Directors). If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company (upon the approval of a majority of the
Continuing Directors) shall be used.

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

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

         Section 15. Rights of Action. All rights of action in respect of this
Rights Agreement, except the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common

                                       18

<PAGE>

Shares); and any registered holder of any Right 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 Right 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 Right Certificate in the manner provided
in such Right Certificate and in this Rights 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 Rights Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to, this Rights
Agreement.

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

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

                  (b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and

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

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

                                       19

<PAGE>

         Section 18. Concerning the Rights Agent.

                  (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this Rights
Agreement, 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 Rights Agreement in reliance upon
any Right Certificate or certificate for the Preferred Shares or Common Shares
or for other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.

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

                  (a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust powers of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Rights Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
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 Rights Agreement, any of the
Right Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and, in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.

                  (b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such

                                       20

<PAGE>

Right Certificates either in its prior name or in its changed name; and in all
such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Rights Agreement.

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

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

                  (b) Whenever in the performance of its duties under this
Rights Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Treasurer or the 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 Rights Agreement in reliance upon such certificate.

                  (c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own 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 Rights Agreement or
in the Right Certificates (except its countersignature thereof) or be required
to verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.

                  (e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Rights 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 Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including the Rights becoming void pursuant to Section 11(a)(ii)
hereof) or any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or adjustment is required);
nor shall it by any act hereunder be deemed to make any

                                       21

<PAGE>

representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Rights Agreement or any Right
Certificate or as to whether any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.

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

                  (g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered by it in
good faith in accordance with instructions of any such officer or for any delay
in acting while waiting for those instructions.

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

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

         Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Rights
Agreement upon 30-days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates. The Company may
remove the Rights Agent or any successor Rights Agent upon 30-days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates. If
the Rights Agent shall resign or be removed or shall otherwise become incapable
of acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in writing of such
resignation or

                                       22

<PAGE>

incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right 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 corporation organized and doing business under the laws
of the United States or of the State of New York (or of any other state of the
United States so long as such corporation is authorized to do business as a
banking institution in the State of New York, in good standing, having an office
in the State of New York), which is (i) authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million or (ii) affiliated with a corporation described in clause (i) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
or Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.

         Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Rights Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by the Board of Directors of the Company (upon the
approval of a majority of the Continuing 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 Right Certificates made in
accordance with the provisions of this Rights Agreement.

         Section 23. Redemption. (a) The Board of Directors of the Company, at
its option, at any time prior to the Close of Business on the tenth day
following the Stock Acquisition Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.005 per Right, appropriately
adjusted 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"), provided, however, that during the time
period relating to when the Rights may be redeemed, the Board of Directors of
the Company may extend the time during which the Rights may be redeemed to be at
any time as may be determined by the Board of Directors, and provided, further,
that if the Board of Directors of the Company authorizes redemption of the
Rights or an extension of the time period during which the Rights may be
redeemed after the time that any Person becomes an Acquiring Person, then there
must be Continuing Directors then in office and such authorization or extension
shall require the concurrence of a majority

                                       23

<PAGE>

of such Continuing Directors. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of the event described in Section 11(a)(ii) until such time as the
Company's right of redemption hereunder has expired. The redemption of the
Rights by the Board of Directors of the Company may be made effective at such
time, on such basis and with such conditions as the Board of Directors of the
Company, in its sole discretion, may establish. The Company may, at its option,
pay the Redemption Price in cash, Common Shares (based on the current market
price 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 pursuant to paragraph (a) of
this Section 23, and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 14 days after such action of the Board of Directors
of the Company ordering the redemption of the Rights, the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.

         Section 24. Exchange. (a) The Board of Directors of the Company (upon
the approval of a majority of the Continuing Directors) may, at its option, at
any time after any Person becomes an Acquiring Person, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 11(a)(ii) hereof) for
Common Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors of the Company shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.

                  (b) Immediately upon the action of the Board of Directors of
the Company (upon the approval of a majority of the Continuing Directors)
ordering the exchange of

                                       24

<PAGE>

any Rights pursuant to paragraph (a) of this Section 24 and without any further
action and without any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of such Rights shall be to receive
that number of Common Shares equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

                  (c) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Shares for issuance upon exchange of the Rights. In the event the Company
shall, after good faith effort, be unable to take all such action as may be
necessary to authorize such additional Common Shares, the Company shall
substitute, for each Common Share that would otherwise be issuable upon exchange
of a Right, a number of Preferred Shares or fraction thereof (or a security with
substantially similar rights, privileges, preferences, voting power and economic
rights) such that the current per share market price of one Preferred Share (or
other such security) multiplied by such number or fraction is equal to the
current per share market price of one Common Share as of the date of issuance of
such Preferred Shares or fraction thereof (or other such security).

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

         Section 25. Notice of Certain Events. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any

                                       25

<PAGE>

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

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

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

         Eli Lilly and Company
         Lilly Corporate Center
         Indianapolis, Indiana 46285
         Attention:  Corporate Secretary

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

                                       26

<PAGE>

         First Chicago Trust Company of New York
         Suite 4660
         525 Washington Blvd.
         Jersey City, New Jersey 07310
         Attention: Tenders and Exchanges Administration

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

         Section 27. Supplements and Amendments. For as long as the Rights are
then redeemable and except as provided in the last sentence of this Section 27,
the Company may in its sole and absolute discretion, 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 the Rights. At any time when the Rights
are not then redeemable and except as provided in the last sentence of this
Section 27, the Company may, and the Rights Agent shall if the Company so
directs, supplement or amend this Rights Agreement without the approval of any
holders of Rights Certificates (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 or (iii) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable,
provided that no such supplement or amendment pursuant to this clause (iii)
shall materially adversely affect the interest of the holders of Rights
Certificates. Upon the delivery of a certificate from an appropriate officer of
the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this Rights
Agreement to the contrary, supplements or amendments may be made only upon
approval by a majority of the Continuing Directors..

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

         Section 29. Benefits of this Rights Agreement. Nothing in this Rights
Agreement shall be construed to give to any Person, other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Rights Agreement; but this Rights Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).

         Section 30. Severability. If any term, provision, covenant or
restriction of this Rights Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this

                                       27

<PAGE>

Rights Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.

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

         Section 32. Counterparts. This Rights 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 Rights Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.

                                       28

<PAGE>

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

                                       ELI LILLY AND COMPANY

                                       By: /s/ Edwin W. Miller
                                           -------------------------------------
                                           Name: Edwin W. Miller
                                           Title: Vice President and Treasurer

                                       FIRST CHICAGO TRUST COMPANY OF NEW YORK

                                       By: /s/ Joanne Gorostiolla
                                           -------------------------------------
                                           Name: Joanne Gorostiolla
                                           Title: Assistant Vice President

                                       29

<PAGE>

                                                                       Exhibit A

                                      FORM
                                       of
                              ARTICLES OF AMENDMENT
                             setting forth terms of
                  SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
                                       of
                              ELI LILLY AND COMPANY

                                   ARTICLE 1.

         The name of the corporation filing these Articles of Amendment is ELI
LILLY AND COMPANY, an Indiana corporation (the "Corporation").

                                   ARTICLE 2.

         The following sets forth the designation and number of shares, and
fixes the preferences, limitations and relative voting and other rights of the
Series B Junior Participating Preferred Stock of the Corporation:

         Section 1. Designation and Amount. The shares of such series shall be
designated as "Series B Junior Participating Preferred Stock" (the "Series B
Preferred Stock") and the number of shares constituting the Series B Preferred
Stock shall be 1,500,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided that no decrease shall reduce the
number of shares of Series B Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series B
Preferred Stock.

         Section 2. Dividends and Distributions.

         (A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
B Preferred Stock with respect to dividends, the holders of shares of Series B
Preferred Stock, in preference to the holders of Common Stock, without par value
(the "Common Stock"), of the Corporation, and of any other junior stock, shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, quarterly dividends payable in cash
on the tenth day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the

<PAGE>

first issuance of a share or fraction of a share of Series B Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to the greater of (a)
$10 or (b) subject to the provision for adjustment hereinafter set forth, 1,000
times the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non- cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series B Preferred Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

         (B) The Corporation shall declare a dividend or distribution on the
Series B Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the
Series B Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

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

                                       A-2

<PAGE>

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

         (A) Subject to the provision for adjustment hereinafter set forth, each
share of Series B Preferred Stock shall entitle the holder thereof to 1000 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

         (B) Except as otherwise provided herein, in any other Articles of
Amendment creating a series of Preferred Stock or any similar stock, or by law,
the holders of shares of Series B Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.

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

         Section 4. Certain Restrictions.

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

         (i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preferred Stock;

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

                                       A-3

<PAGE>

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

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

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

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

         Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred Stock unless, prior thereto, the holders of shares of Series B
Preferred Stock shall have received the greater of (i) $1000 per 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 hereinafter set forth, equal to
1000 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series B Preferred Stock, except distributions made ratably on the Series B
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in

                                       A-4

<PAGE>

each such case the aggregate amount to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

         Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

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

         Section 9. Rank. The Series B Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Corporation's Preferred Stock.

         Section 10. Amendment. The Amended Articles of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series B Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series B Preferred Stock, voting
together as a single class.

         Section 11. Expiration of Rights Agreement. In the event that the
Rights Agreement dated as of July 20, 1998 between the Corporation and First
Chicago Trust Company of New York is terminated or expires prior to the issuance
of any shares of Series B Preferred Stock, all shares of Series B Preferred
Stock shall become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth in the Articles of Incorporation or in
any other Articles of Amendment creating a series of Preferred Stock or any
similar stock or as otherwise required by law.

                                       A-5

<PAGE>

                                   ARTICLE 3.

         These Articles of Amendment were duly authorized by the Board of
Directors of the Corporation at a meeting duly called and held on July 20, 1998.
Pursuant to Indiana Code Sections 23-1-25-2(d) and 23-1-38-2(7), shareholder
approval of the foregoing amendment is not required.

                                       A-6

<PAGE>

         IN WITNESS WHEREOF, these Articles of Amendment are executed on behalf
of the Corporation by its authorized officers this the ___ day of ____, 1998.

                                        ELI LILLY AND COMPANY

                                        By:_______________________
                                           Name:
                                           Title:

Attest:

By:_______________________
   Name:
   Title:

                                      A-7

<PAGE>

                                                                       Exhibit B

                            Form of Right Certificate

Certificate No. R-

_________ Rights

NOT EXERCISABLE AFTER JULY 28, 2008 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.005 PER RIGHT AND TO EXCHANGE ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT.

                               Rights Certificate

                              ELI LILLY AND COMPANY

         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 July 20, 1998 (the "Rights Agreement"), between Eli Lilly
and Company, an Indiana corporation (the "Company"), and First Chicago Trust
Company of New York (the "Rights Agent"), to purchase from the Company at any
time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 p.m., New York time, on July 28, 2008 at the
principal office of the Rights Agent, or at the office of its successor as
Rights Agent, one one-thousandth of a fully paid non-assessable share of Series
B Junior Participating Preferred Stock of the Company, without par value (the
"Preferred Shares"), at a purchase price of $325 per one one-thousandth of a
Preferred Share (the "Purchase Price"), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one
one-thousandths of a Preferred Share which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of July 20, 1998, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-thousandths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.

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

<PAGE>

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

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Right Certificate (i) may be redeemed by the Company at a redemption
price of $.005 per Right or (ii) may be exchanged, in whole or in part, for
Preferred Shares or shares of the Company's Common Stock, without par value.

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

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

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

                                       B-2

<PAGE>

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

Dated as of _______ __, 1998.

                                        ELI LILLY AND COMPANY

                                        By:_______________________
                                           Name:
                                           Title:

COUNTERSIGNED:

By_______________________________
  Name:
  Title:

                                       B-3

<PAGE>

                   [Form of Reverse Side of Right Certificate]

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Right Certificate.)

         FOR VALUE RECEIVED ___________________________________________ hereby
sells, assigns and transfers unto_______________________________________________
________________________________________________________________________________
                  (Please print name and address of transferee)

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

Dated: _______________________

Signature _________________________

Signature Guaranteed:

         Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.

                                   Certificate

         The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement). After due
inquiry and to the best knowledge of the undersigned, the Rights evidenced by
this Right Certificate were not acquired or beneficially owned by an Acquiring
Person or an Affiliate or Associate thereof.

Dated:____________________________

Signature _________________________

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

                                       B-4

<PAGE>

                          FORM OF ELECTION TO PURCHASE

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

To: ELI LILLY AND COMPANY

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

Please insert social security
or other identifying number:_________________________________________________

_____________________________________________
          (Please print name and address)

_____________________________________________

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

Please insert social security
or other identifying number:_________________________________________________

_____________________________________________
          (Please print name and address)

_____________________________________________

Dated:_______________________________

Signature_____________________________

Signature Guaranteed:

         Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.

                                       B-5

<PAGE>

                                   Certificate

         The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement). After due
inquiry and to the best knowledge of the undersigned, the Rights evidenced by
this Right Certificate were not acquired or beneficially owned by an Acquiring
Person or an Affiliate or Associate thereof.

Dated:_______________________________

Signature_____________________________

         The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.

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

                                       B-6

<PAGE>

                                                                       Exhibit C

                          SUMMARY OF RIGHTS TO PURCHASE
                                PREFERRED SHARES

         On July 20, 1998, the Board of Directors of Eli Lilly and Company (the
"COMPANY") adopted a Shareholder Rights Plan (the "RIGHTS PLAN") to replace the
expiring 1988 rights plan. The purpose of the Rights Plan is to deter certain
coercive takeover tactics and enable the Board of Directors to represent
effectively the interest of shareholders in the event of a takeover attempt. The
Rights Plan does not deter negotiated mergers or business combinations that the
Board of Directors determines to be in the best interests of the Company and its
shareholders.

         To implement the Rights Plan the Board of Directors declared a dividend
of one preferred share purchase right (a "RIGHT") for each outstanding share of
common stock (the "COMMON SHARES") of the Company. The dividend was paid on July
28, 1998 to the shareholders of record on that date. Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
Series B Junior Participating Preferred Stock of the Company, without par value
(the "PREFERRED SHARES"), at a price of $325 per one one-thousandth of a
Preferred Share, subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement (the "RIGHTS AGREEMENT") between the Company
and First Chicago Trust Company of New York, as Rights Agent.

RIGHTS ATTACH TO COMMON SHARES INITIALLY

         Initially and until a Distribution Date (as defined below) occurs, the
Rights are attached to all Common Shares and no separate Rights certificates
will be issued. During this initial period,

     -    the Rights are not exercisable;

     -    the Rights are transferred with the Common Shares and are not
          transferable separately from the Common Shares;

     -    new Common Share certificates or book entry shares issued will contain
          a notation incorporating the Rights Agreement by reference; and

     -    the transfer of any Common Shares will also constitute the transfer of
          the Rights associated with those Common Shares.

DISTRIBUTION OF RIGHTS

         Separate certificates evidencing the Rights will be mailed to holders
of record of the Common Shares on the "DISTRIBUTION DATE." The Distribution Date
is the earlier to occur of the following two events (or such later date as may
be determined by the Board of Directors, upon approval by a majority of
Continuing Directors as defined below):

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<PAGE>

     -    the tenth day after a public announcement that a person or group of
          affiliated or associated persons has acquired 15% or more of the
          outstanding Common Shares (thereby becoming an "ACQUIRING PERSON"
          under the Rights Plan); or

     -    such date as may be determined by the Board of Directors of the
          Company, upon approval of a majority of the Continuing Directors after
          the commencement or announcement of a tender or exchange offer by a
          person or group for 15% or more of the outstanding Common Shares.

         Acquisitions by the following persons will not result in the person
becoming an Acquiring Person: The Company, any subsidiary or employee benefit
plan of the Company, Lilly Endowment, Inc., or any other person approved in
advance by the Board of Directors and the Continuing Directors.

         After the Distribution Date, the Rights will be tradable separately
from the Common Shares. After the Distribution Date and after the Company's
right to redeem (as described below) has expired, the Rights will be exercisable
in two different ways depending on the circumstances as set forth below.

RIGHT TO PURCHASE LILLY STOCK

         If a person or group acquires 15% or more of the outstanding Common
Shares (thereby becoming an Acquiring Person) and the Company's redemption right
has expired, each holder of a Right (except those held by the Acquiring Person
and its affiliates and associates) will have the right to purchase, upon
exercise, Common Shares (or, in certain circumstances, Preferred Shares or other
similar securities of the Company) having a value equal to two times the
exercise price of the Right. In other words, the Rights holders other than the
Acquiring Person may purchase Common Shares at a 50% discount.

         For example, at the exercise price of $325 per Right, each Right not
owned by an Acquiring Person would entitle its holder to purchase $650 worth of
Common Shares (or other consideration, as noted above) for $325. Assuming a
value of $65 per Common Share at such time, the holder of each valid Right would
be entitled to purchase ten Common Shares for $325.

RIGHT TO PURCHASE ACQUIRING PERSON STOCK

         Alternatively, if, in a transaction not approved by the Board of
Directors and the Continuing Directors, the Company is acquired in a merger or
other business combination or 50% or more of its assets or earning power are
sold after a person or group has become an Acquiring Person, and the Company's
redemption right has expired, proper provision will be made so that each holder
of a Right will thereafter have the right to purchase, upon exercise, that
number of shares of common stock of the acquiring company as have a market value
of two times the exercise price of the Right. In other words, a Rights holder
may purchase the acquiring company's common stock at a 50% discount.

                                       C-2

<PAGE>

EXCHANGE OF LILLY STOCK FOR RIGHTS

         At any time after any person or group becomes an Acquiring Person and
before the Acquiring Person acquires 50% or more of the outstanding Common
Shares, the Board of Directors may exchange the Rights (other than Rights owned
by the Acquiring Person which will have become void), in whole or in part, at an
exchange ratio of one Common Share, or one one-thousandth of a Preferred Share
(or of a share of a class or series of the Company's preferred stock having
equivalent rights, preferences and privileges), per Right (subject to
adjustment).

REDEMPTION

         The Rights are redeemable by the Company in whole but not in part at a
price of $.005 per Right at any time up to and including the tenth day after the
time that a person or a group has become an Acquiring Person, subject to
extension of this redemption period by the Board of Directors. Immediately upon
redemption the right to exercise will terminate and the only right of holders
will be to receive the redemption price.

EXPIRATION OF RIGHTS

         The Rights will expire on July 28, 2008 unless the expiration date is
extended by amendment as described below or unless the Rights are earlier
redeemed or exchanged by the Company as described above.

AMENDMENTS

         As long as the Rights are redeemable, the terms of the Rights may be
amended by the Board of Directors (upon the approval of a majority of the
Continuing Directors) in its discretion without the consent of the Rights
holders. After that time, no amendment may adversely affect the interests of the
Rights holders (other than the Acquiring Person).

MISCELLANEOUS

         "CONTINUING DIRECTOR" means a member of the Board of Directors, who is
not an Acquiring Person or a representative or nominee of an Acquiring Person,
and who either (i) was a member of the Board of Directors on the date of the
Rights Agreement or (ii) thereafter became a member of the Board of Directors,
and whose nomination for election or election to the Board of Directors was
recommended or approved by a majority of the Continuing Directors then on the
Board of Directors.

         The number of outstanding Rights and the number of one one-thousandths
of a Preferred Share issuable upon exercise of each Right are subject to
adjustment under certain circumstances.

         Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-thousandth interest in a Preferred
Share that may be purchased upon exercise of each Right should approximate the
value of one Common Share.

                                       C-3

<PAGE>

         Until a Right is exercised, a Rights holder, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.

         A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
___ __, 1998. A copy of the Rights Agreement is available to Rights holders free
of charge upon request to the Corporate Secretary of the Company.

         This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.

                                      C-4

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