Document:

Rights Agreement

    EXHIBIT
      4.19

     

    

      

      

      

      

      

                                                    

       

      PEREGRINE
        PHARMACEUTICALS, INC.

       

      and

       

      INTEGRITY
        STOCK TRANSFER, INC. as Rights Agent

       

                                                    

       

      RIGHTS
        AGREEMENT

       

      Dated
        as
        of March 16, 2006

       

                                                    

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      TABLE
        OF CONTENTS

       

       

       

      
        
          	 	 	Page
	
                  Section
                    1. 

                	
                  Certain
                    Definitions

                	
                  3

                
	
                  Section
                    2. 

                	
                  Appointment
                    of Rights Agent

                	
                  7

                
	
                  Section
                    3. 

                	
                  Issue
                    of Right Certificates

                	
                  7

                
	
                  Section
                    4. 

                	
                  Form
                    of Right Certificates

                	
                  9

                
	
                  Section
                    5. 

                	
                  Countersignature
                    and Registration

                	
                  9

                
	
                  Section
                    6. 

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

                	
                  10

                
	
                  Section
                    7. 

                	
                  Exercise
                    of Rights, Purchase Price; Expiration Date of Rights

                	
                  11

                
	
                  Section
                    8. 

                	
                  Cancellation
                    and Destruction of Right Certificates

                	
                  12

                
	
                  Section
                    9. 

                	
                  Availability
                    of Shares of Preferred Stock

                	
                  12

                
	
                  Section
                    10.

                	
                  Preferred
                    Stock Record Date

                	
                  14

                
	
                  Section
                    11.

                	
                  Adjustment
                    of Purchase Price, Number and Kind of Shares and Number of
                    Rights

                	
                  14

                
	
                  Section
                    12. 

                	
                  Certificate
                    of Adjusted Purchase Price or Number of Shares

                	
                  21

                
	
                  Section
                    13. 

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

                	
                  22

                
	
                  Section
                    14. 

                	
                  Fractional
                    Rights and Fractional Shares

                	
                  25

                
	
                  Section
                    15. 

                	
                  Rights
                    of Action

                	
                  26

                
	
                  Section
                    16. 

                	
                  Agreement
                    of Right Holders

                	
                  27

                
	
                  Section
                    17. 

                	
                  Right
                    Certificate Holder Not Deemed a Stockholder

                	
                  27

                
	
                  Section
                    18. 

                	
                  Concerning
                    the Rights Agent

                	
                  28

                
	
                  Section
                    19. 

                	
                  Merger
                    or Consolidation or Change of Name of Rights Agent

                	
                  28

                
	
                  Section
                    20. 

                	
                  Duties
                    of Rights Agent

                	
                  29

                
	
                  Section
                    21. 

                	
                  Change
                    of Rights Agent

                	
                  31

                
	
                  Section
                    22. 

                	
                  Issuance
                    of New Right Certificates

                	
                  31

                
	
                  Section
                    23. 

                	
                  Redemption

                	
                  32

                
	
                  Section
                    24. 

                	
                  Exchange

                	
                  32

                
	
                  Section
                    25. 

                	
                  Notice
                    of Certain Events

                	
                  33

                
	
                  Section
                    26. 

                	
                  Notices

                	
                  34

                
	
                  Section
                    27. 

                	
                  Supplements
                    and Amendments

                	
                  35

                
	
                  Section
                    28. 

                	
                  Successors

                	
                  35

                
	
                  Section
                    29. 

                	
                  Benefits
                    of this Agreement

                	
                  35

                
	
                  Section
                    30. 

                	
                  Determinations
                    and Actions by the Board of Directors

                	
                  36

                
	
                  Section
                    31. 

                	
                  Severability

                	
                  36

                
	
                  Section
                    32. 

                	
                  Governing
                    Law

                	
                  36

                
	
                  Section
                    33. 

                	
                  Counterparts

                	
                  36

                
	
                  Section
                    34. 

                	
                  Descriptive
                    Headings

                	
                  36

                

        

      

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      RIGHTS
        AGREEMENT

       

      This
        Rights Agreement, dated as of March 16, 2006 (“Agreement”),
        between Peregrine Pharmaceuticals, Inc., a Delaware corporation (the
“Company”),
        and
        Integrity Stock Transfer, Inc., as Rights Agent (the “Rights
        Agent”).

       

      The
        Board
        of Directors of the Company has authorized and declared a dividend of one
        preferred share purchase right (a “Right”)
        for
        each share of Common Stock (as hereinafter defined) of the Company outstanding
        as of the Close of Business (as defined below) on March 27, 2006 (the
“Record
        Date”),
        each
        Right representing the right to purchase one one-thousandth (subject to
        adjustment) of a share of Preferred Stock (as hereinafter defined), upon
        the
        terms and subject to the conditions herein set forth, and has further authorized
        and directed the issuance of one Right (subject to adjustment as provided
        herein) with respect to each share of Common Stock that becomes outstanding
        between the Record Date and the earlier of the Distribution Date and the
        Expiration Date (as such terms are hereinafter defined); provided,
        however, that Rights may be issued with respect to shares of Common Stock
        that
        shall become outstanding after the Distribution Date and prior to the Expiration
        Date in accordance with Section 22.

       

      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 Agreement, the following terms have the meaning
        indicated:

       

      (a) “Acquiring
        Person”
means
        any Person (as such term is hereinafter defined) who or which, together with
        all
        Affiliates and Associates (as such terms are hereinafter defined) of such
        Persons, becomes the Beneficial Owner (as such term is hereinafter defined)
        of
        15% or more of the shares of Common Stock then outstanding, but does not
        include
        an Exempt Person (as such term is hereinafter defined); provided,
        however,
        that
        (i) if the Board of Directors of the Company determines in good faith that
        a
        Person who would otherwise be an “Acquiring Person” became such inadvertently
        (including, without limitation, because (A) such Person was unaware that
        it
        beneficially owned a percentage of Common Stock that would otherwise cause
        such
        Person to be an “Acquiring Person” or (B) such Person was aware of the extent of
        its Beneficial Ownership of Common Stock but had no actual knowledge of the
        consequences of such Beneficial Ownership under this Agreement) and without
        any
        intention of changing or influencing control of the Company, then such Person
        shall not be deemed to be or to have become an “Acquiring Person” for any
        purposes of this Agreement unless and until such Person shall have failed
        to
        divest itself, as soon as practicable (as determined, in good faith, by the
        Board of Directors of the Company), of Beneficial Ownership of a sufficient
        number of shares of Common Stock so that such Person would no longer otherwise
        qualify as an “Acquiring Person”; (ii) if, as of the date hereof or prior to the
        first public announcement of the adoption of this Agreement, any Person is
        or
        becomes the Beneficial Owner of 15% or more of the shares of Common Stock
        outstanding, such Person shall not be deemed to be or to become an “Acquiring
        Person” unless and until such time as such Person, after the first public
        announcement of the adoption of this Agreement, becomes the Beneficial Owner
        of
        additional shares of Common Stock (other than pursuant to a dividend or
        distribution paid or made by the Company on the outstanding Common Stock
        or
        pursuant to a split or subdivision of the outstanding Common Stock), unless,
        upon becoming the Beneficial Owner of such additional shares of Common Stock,
        such Person is not then the Beneficial Owner of 15% or more of the shares
        of
        Common Stock then outstanding; and (iii) no Person shall become an “Acquiring
        Person” as the result of an acquisition of shares of Common Stock by the Company
        which, by reducing the number of shares outstanding, increases the proportionate
        number of shares of Common Stock beneficially owned by such Person to 15%
        or
        more of the shares of Common Stock then outstanding, provided,
        however,
        that if
        a Person shall become the Beneficial Owner of 15% or more of the shares of
        Common Stock then outstanding by reason of such share acquisitions by the
        Company and shall thereafter become the Beneficial Owner of any additional
        shares of Common Stock (other than pursuant to a dividend or distribution
        paid
        or made by the Company on the outstanding Common Stock or pursuant to a split
        or
        subdivision of the outstanding Common Stock), then such Person shall be deemed
        to be an “Acquiring Person” unless upon becoming the Beneficial Owner of such
        additional shares of Common Stock such Person does not beneficially own 15%
        or
        more of the shares of Common Stock then outstanding. For all purposes of
        this
        Agreement, any calculation of the number of shares of Common Stock outstanding
        at any particular time, including for purposes of determining the particular
        percentage of such outstanding shares of Common Stock of which any Person
        is the
        Beneficial Owner, shall be made in accordance with the last sentence of Rule
        13d-3(d)(1)(i) of the General Rules and Regulations under the Securities
        Exchange Act of 1934, as amended (the “Exchange
        Act”),
        as in
        effect on the date hereof.

       

      
        
          
          

        

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

       

      (c) A
        Person
        will be deemed the “Beneficial
        Owner”
of,
        will be deemed to have “Beneficial
        Ownership”
of,
        and
        will be deemed to “beneficially
        own”
any
        securities:

       

      (i) which
        such Person or any of such Person’s Affiliates or Associates is deemed to
        beneficially own, directly or indirectly, within the meaning of Rule l3d-3
        of
        the General Rules and Regulations under the Exchange Act as in effect on
        the
        date hereof;

       

      (ii) which
        such Person or any of such Person’s Affiliates or Associates, directly or
        indirectly, has (A) the right to acquire (whether such right is exercisable
        immediately or only after the passage of time, compliance with regulatory
        requirements, fulfillment of a condition or otherwise) 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, warrants or options, or otherwise; provided,
        however,
        that a
        Person shall not be deemed the Beneficial Owner of, or to beneficially own,
        (x)
        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, (y) securities
        which
        such Person has a right to acquire upon the exercise of Rights at any time
        prior
        to the time that any Person becomes an

       

      
        
          
          

        

        
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       Acquiring
        Person or (z) securities issuable upon the exercise of Rights from and after
        the
        time that any Person becomes an Acquiring Person if such Rights were acquired
        by
        such Person or any of such Person’s Affiliates or Associates prior to the
        Distribution Date or pursuant to Section 3(a) or Section 22 hereof
        (“Original
        Rights”)
        or
        pursuant to Section 11(i) or Section 11(n) with respect to an adjustment
        to
        Original Rights; 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 by reason of such agreement, arrangement or understanding 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 and with
        respect
        to 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 such securities of the Company; 

       

      provided,
        however,
        that no
        Person who is an officer, director or employee of an Exempt Person shall
        be
        deemed, solely by reason of such Person’s status or authority as such, to be the
“Beneficial Owner” of, or to have “Beneficial Ownership” of, or to “beneficially
        own” any securities that are “beneficially owned” (as defined in this Section
        l(c)), including, without limitation, in a fiduciary capacity, by an Exempt
        Person or by any other such officer, director or employee of an Exempt
        Person.

       

      (d) “Business
        Day”
means
        any day other than a Saturday, a Sunday or a day on which banking institutions
        in the State of California are authorized or obligated by law or executive
        order
        to close.

       

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

       

      (f) “Common
        Stock”
when
        used with reference to the Company shall mean the Common Stock, par value
        $.001
        per share, of the Company. “Common Stock” when used with reference to any Person
        other than the Company shall mean the common stock (or, in the case of an
        unincorporated entity, the equivalent equity interest) with the greatest
        voting
        power of such other Person or the equity securities or other equity interest
        having power to control or direct management, of such other person, or, if
        such
        other Person is a Subsidiary (as such term is hereinafter defined) of another
        Person, the Person or Persons that ultimately control such first-mentioned
        Person, and which has issued and outstanding such capital stock, equity
        securities or equity interests.

       

      
        
          
          

        

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

       

      (h) “Current
        Value”
has
        the
        meaning set forth in Section 11(a)(iii) hereof.

       

      (i) “Distribution
        Date”
has
        the
        meaning set forth in Section 3 hereof.

       

      (j) “Equivalent
        Preferred Shares”
has
        the
        meaning set forth in Section 11(b) hereof.

       

      (k) “Exempt
        Person”
means
        the Company or any Subsidiary (as such term is hereinafter defined) of the
        Company, in each case including, without limitation, in its fiduciary capacity,
        or any employee benefit plan of the Company or of any Subsidiary of the Company,
        or any entity or trustee holding Common Stock for or pursuant to the terms
        of
        any such plan or for the purpose of funding any such plan or funding other
        employee benefits for employees of the Company or of any Subsidiary of the
        Company.

       

      (l) “Exchange
        Ratio”
has
        the
        meaning set forth in Section 24 hereof.

       

      (m) “Expiration
        Date”
has
        the
        meaning set forth in Section 7 hereof.

       

      (n) “Flip-In
        Event”
has
        the
        meaning set forth in Section 11(a)(ii) hereof.

       

      (o) “Final
        Expiration Date”
has
        the
        meaning set forth in Section 7 hereof.

       

      (p) “Nasdaq”
means
        The Nasdaq Stock Market.

       

      (q) “Person”
means
        any individual, firm, corporation, joint venture partnership, limited liability
        company, unincorporated association, trust or other entity, and includes
        any
        successor (by merger or otherwise) to such entity.

       

      (r) “Preferred
        Stock”
means
        the Series D Participating Preferred Stock, par value $.001 per share, of
        the
        Company having the rights and preferences set forth in the Form of Certificate
        of Designation attached to this Agreement as Exhibit A.

       

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

       

      (t) “Redemption
        Date”
has
        the
        meaning set forth in Section 7 hereof.

       

      (u) “Redemption
        Price”
has
        the
        meaning set forth in Section 23 hereof.

       

      (v) “Right
        Certificate”
has
        the
        meaning set forth in Section 3 hereof.

       

      (w) “Securities
        Act”
means
        the Securities Act of 1933, as amended.

       

      
        
          
          

        

        
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      (x) “Section
        11(a)(ii) Trigger Date”
has
        the
        meaning set forth in Section 11(a)(iii) hereof.

       

      (y) “Spread”
has
        the
        meaning set forth in Section 11(a)(iii) hereof.

       

      (z) “Stock
        Acquisition Date”
means
        the first date of public announcement (which, for purposes of this definition,
        shall include, without limitation, a report filed pursuant to Section 13(d)
        of
        the Exchange Act) by the Company or an Acquiring Person that an Acquiring
        Person
        has become such, or such earlier date as a majority of the Board of Directors
        shall become aware of the existence of an Acquiring Person.

       

      (aa) “Subsidiary”
of
        any
        Person means any corporation or other entity of which securities or other
        ownership interests having ordinary voting power sufficient to elect a majority
        of the board of directors or other persons performing similar functions are
        beneficially owned, directly or indirectly, by such Person, and any corporation
        or other entity that is otherwise controlled, directly or indirectly, by
        such
        Person.

       

      (bb) “Substitution
        Period”
has
        the
        meaning set forth in Section 11(a)(iii) hereof.

       

      (cc) “Summary
        of Rights”
has
        the
        meaning set forth in Section 3 hereof.

       

      (dd) “Trading
        Day”
has
        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 be the holders of Common Stock) 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 earlier of (i) the tenth day after the Stock
        Acquisition Date or (ii) the tenth Business Day (or such later date as may
        be
        determined by action of the Board of Directors prior to such time as any
        Person
        becomes an Acquiring Person) after the date of the commencement by any Person
        (other than an Exempt Person) of, or of the first public announcement of
        the
        intention of such Person (other than an Exempt Person) to commence, a tender
        or
        exchange offer the consummation of which would result in any Person (other
        than
        an Exempt Person) becoming the Beneficial Owner of shares of Common Stock
        aggregating 15% or more of the Common Stock then outstanding (the earlier
        of
        such dates being herein referred to as the “Distribution
        Date,”
        provided,
        however,
        that if
        either of such dates occurs after the date of this Agreement and on or prior
        to
        the Record Date, then the Distribution Date shall be the Record Date), (x)
        the
        Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
        by
        the certificates for Common Stock registered in the names of the holders
        thereof
        (which certificates for Common Stock shall be deemed to be Rights Certificates)
        and not by separate Right Certificates, and (y) the Rights (and the right
        

       

      
        
          
          

        

        
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      to
        receive certificates therefor) will be transferable only in connection with
        the
        transfer of the underlying shares of Common Stock. 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 Stock as of the Close of Business on the
        Distribution Date (other than any Acquiring Person or any Associate or Affiliate
        of an Acquiring Person), 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 (subject to adjustment as provided herein) for each
        share
        of Common Stock so held. As of the Distribution Date, the Rights will be
        evidenced solely by such Right Certificates.

       

      (b) On
        the
        Record Date, or as soon as practicable thereafter, the Company will send
        a copy
        of a Summary of Rights to Purchase Shares of Preferred Stock, in substantially
        the form of Exhibit
        C
        hereto
        (the “Summary
        of Rights”),
        by
        first-class, postage-prepaid mail, to each record holder of Common Stock
        as of
        the Close of Business on the Record Date (other than any Acquiring Person
        or any
        Associate or Affiliate of any Acquiring Person), at the address of such holder
        shown on the records of the Company. With respect to certificates for Common
        Stock outstanding as of the Record Date, until the Distribution Date, the
        Rights
        will be evidenced by such certificates registered in the names of the holders
        thereof together with the Summary of Rights. Until the Distribution Date
        (or, if
        earlier, the Expiration Date), the surrender for transfer of any certificate
        for
        Common Stock outstanding on the Record Date, with or without a copy of the
        Summary of Rights, shall also constitute the transfer of the Rights associated
        with the Common Stock represented thereby.

       

      (c) Rights
        shall be issued in respect of all shares of Common Stock issued or disposed
        of
        (including, without limitation, upon disposition of Common Stock out of treasury
        stock or issuance or reissuance of Common Stock out of authorized but unissued
        shares) after the Record Date but prior to the earlier of the Distribution
        Date
        and the Expiration Date, or in certain circumstances provided in Section
        22
        hereof, after the Distribution Date. Certificates issued for Common Stock
        (including, without limitation, upon transfer of outstanding Common Stock,
        disposition of Common Stock out of treasury stock or issuance or reissuance
        of
        Common Stock out of authorized but unissued shares) after the Record Date
        but
        prior to the earlier of the Distribution Date and the Expiration Date, or
        in
        certain circumstances provided in Section 22 hereof, after the Distribution
        Date
        shall have impressed on, printed on, written on or otherwise affixed to them
        the
        following legend:

       

      This
        certificate also evidences and entitles the holder hereof to certain rights
        as
        set forth in a Rights Agreement between Peregrine Pharmaceuticals, Inc. (the
        “Company”)
        and
        Integrity Stock Transfer, Inc., as Rights Agent, dated as of March 16, 2006
        and
        as amended from time to time (the “Rights
        Agreement”),
        the
        terms of which are hereby incorporated herein by reference and a copy of
        which
        is on file at the principal executive offices of the Company. Under certain
        circumstances, as set forth in the Rights Agreement, such Rights will be
        evidenced by separate certificates and will no longer be evidenced by this
        certificate. The Company will mail to the holder of this certificate a copy
        of
        the Rights Agreement without charge after receipt of a written request therefor.
        Under
        certain circumstances, as set forth in the Rights Agreement, Rights owned
        by or
        transferred to any Person who is or becomes an Acquiring Person (as defined
        in
        the Rights Agreement) and certain transferees thereof will become null and
        void
        and will no longer be transferable.

       

      
        
          
          

        

        
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      With
        respect to such certificates containing the foregoing legend, until the
        Distribution Date (or the earlier Expiration Date) the Rights associated
        with
        the Common Stock represented by such certificates shall be evidenced by such
        certificates alone, and the surrender for transfer of any such certificate,
        except as otherwise provided herein, shall also constitute the transfer of
        the
        Rights associated with the Common Stock represented thereby. If the Company
        purchases or otherwise acquires any Common Stock after the Record Date but
        prior
        to the Distribution Date, any Rights associated with such Common Stock shall
        be
        deemed canceled and retired so that the Company shall not be entitled to
        exercise any Rights associated with the Common Stock which are no longer
        outstanding.

       

      Notwithstanding
        this paragraph (c), the omission of a legend shall not affect the enforceability
        of any part of this Agreement or the rights of any holder of the
        Rights.

       

      Section
        4.  Form
        of Right Certificates.
        The
        Right Certificates (and the forms of election to purchase shares and of
        assignment to be printed on the reverse thereof) shall be substantially in
        the
        form set forth in Exhibit
        B
        hereto
        and may have such marks of identification or designation and such legends,
        summaries or endorsements printed thereon as the Company may deem appropriate
        and as are not inconsistent with the provisions of this Agreement, or as
        may be
        required to comply with any applicable law or with any rule or regulation
        made
        pursuant thereto or with any rule or regulation of any stock exchange or
        interdealer quotation system on which the Rights may from time to time be
        listed
        or quoted, or to conform to usage. Subject to the provisions of this Agreement,
        the Right Certificates, whenever issued, shall be dated as of the Record
        Date
        and shall show the date of counter-signature by the Rights Agent on their
        face
        and shall entitle the holders thereof to purchase such number of one
        one-thousandths (1/1000th)
        of a
        share of Preferred Stock as shall be set forth therein at the price per one
        one-thousandth (1/1000th)
        of a
        share of Preferred Stock set forth therein (the “Purchase
        Price”),
        but
        the number of such one one-thousandths (1/1000th)
        of a
        share of Preferred Stock 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, or its Chief Financial
        Officer, 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 manually countersigned by the
        Rights
        Agent and shall not be valid for any purpose unless

       

      
        
          
          

        

        
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       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 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
        an
        office or agency designated for such purpose, 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 this Agreement, at any time after the Distribution Date
        and
        prior to the Close of Business on the Expiration Date, any Right Certificate
        or
        Right Certificates 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 (1/1000th)
        of a
        share of Preferred Stock 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, together
        with any required form of assignment and certificates duly completed, to
        be
        transferred, split up, combined or exchanged at the office or agency of the
        Rights Agent designated for such purpose. 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 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) Subject
        to the provisions of this Agreement, at any time after the Distribution Date
        and
        prior to the Close of Business on the Expiration Date, 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.

       

      
        
          
          

        

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

       

      (a) Except
        as
        otherwise provided herein, the Rights shall become exercisable on the
        Distribution Date, and thereafter the registered holder of any Right Certificate
        may, subject to Section 11(a)(ii) hereof and except as otherwise provided
        herein, exercise the Rights evidenced thereby in whole or in part upon surrender
        of the Right Certificate, with the form of election to purchase on the reverse
        side thereof duly executed, to the Rights Agent at the office or agency of
        the
        Rights Agent designated for such purpose, together with payment of the aggregate
        Purchase Price with respect to the total number of one one-thousandths
        (1/1000th)
        of a
        share of Preferred Stock (or other securities, cash or other assets, as the
        case
        may be) as to which the Rights are exercised, at any time which is both after
        the Distribution Date and prior to the time (the “Expiration
        Date”)
        that
        is the earliest of (i) the Close of Business on March 16, 2016 (the
“Final
        Expiration Date”),
        (ii)
        the time at which the Rights are redeemed as provided in Section 23 hereof
        (the
“Redemption
        Date”),
        (iii)
        the time at which such Rights are exchanged as provided in Section 24 hereof,
        or
        (iv) the closing of any merger or other acquisition transaction involving
        the
        Company pursuant to an agreement of the type described in Section 13(f) at
        which
        time the Rights are terminated.

       

      (b) The
        Purchase Price shall be initially $11.00 for each one one-thousandth
        (1/1000th)
        of a
        share of Preferred Stock purchasable upon the exercise of a Right. The Purchase
        Price and the number of one one-thousandths (1/1000th)
        of a
        share of Preferred Stock or other securities or property to be acquired upon
        exercise of a Right shall be subject to adjustment from time to time as provided
        in Sections 11 and 13 hereof and shall be payable in lawful money of the
        United
        States of America in accordance with paragraph (c) of this Section
        7.

       

      (c) Except
        as
        otherwise provided herein, upon receipt of a Right Certificate representing
        exercisable Rights, with the form of election to purchase duly executed,
        accompanied by payment of the aggregate Purchase Price for the shares of
        Preferred Stock 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, in cash or by certified check, cashier’s check or money
        order payable to the order of the Company, the Rights Agent shall thereupon
        promptly (i) (A) requisition from any transfer agent of the Preferred Stock
        certificates for the number of shares of Preferred Stock to be purchased
        and the
        Company hereby irrevocably authorizes its transfer agent to comply with all
        such
        requests, or (B) requisition from a depositary agent appointed by the Company
        depositary receipts representing interests in such number of one one-thousandths
        (1/1000th)
        of a
        share of Preferred Stock as are to be purchased (in which case certificates
        for
        the Preferred Stock represented by such receipts shall be deposited by the
        transfer agent with the depositary agent) and the Company hereby directs
        any
        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 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.

       

      
        
          
          

        

        
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      (d) Except
        as
        otherwise provided herein, in case the registered holder of any Right
        Certificate shall exercise less than all of the Rights evidenced thereby,
        a new
        Right Certificate evidencing Rights equivalent to the exercisable 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.

       

      (e) Notwithstanding
        anything in this Agreement to the contrary, neither the Rights Agent nor
        the
        Company shall be obligated to undertake any action with respect to a registered
        holder of Rights upon the occurrence of any purported transfer or exercise
        of
        Rights pursuant to Section 6 hereof or this Section 7 unless such registered
        holder shall have (i) completed and signed the certificate contained in the
        form
        of assignment or form of election to purchase set forth on the reverse side
        of
        the Rights Certificate surrendered for such transfer or exercise and (ii)
        provided such additional evidence of the identity of the Beneficial Owner
        (or
        former Beneficial Owner) thereof as the Company shall reasonably
        request.

       

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

       

      Section
        9.  Availability
        of Shares of Preferred Stock.

       

      (a) The
        Company covenants and agrees that it will cause to be reserved and kept
        available out of its authorized and unissued shares of Preferred Stock or
        any
        shares of Preferred Stock (and, following the occurrence of a Flip-In Event,
        out
        of its authorized and unissued Common Stock or other securities, or out of
        it
        shares held in its treasury), the number of shares of Preferred Stock (and,
        following the occurrence of a Flip-In Event, Common Stock and/or other
        securities) that will be sufficient to permit the exercise in full of all
        outstanding Rights.

       

      (b) So
        long
        as the shares of Preferred Stock (and, following the occurrence of a Flip-In
        Event, Common Stock and/or other Securities) issuable upon the exercise of
        Rights may be listed or admitted to trading on any national securities exchange,
        or quoted on Nasdaq, the Company shall use its best efforts to cause, from
        and
        after such time as the Rights become exercisable, all shares reserved for
        such
        issuance to be listed or admitted to trading on such exchange, or quoted
        on
        Nasdaq, upon official notice of issuance upon such exercise.

       

      
        
          
          

        

        
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      (c) From
        and
        after such time as the Rights become exercisable, the Company shall use its
        best
        efforts, if then necessary to permit the issuance of shares of Preferred
        Stock
        upon the exercise of Rights, to register and qualify such shares of Preferred
        Stock under the Securities Act and any applicable state securities or “Blue Sky”
laws (to the extent exemptions therefrom are not available), cause such
        registration statement and qualifications to become effective as soon as
        possible after such filing and keep such registration and qualifications
        effective until the earlier of the date as of which the Rights are no longer
        exercisable for such securities and the Expiration Date. The Company may
        temporarily suspend, for a period of time not to exceed 90 days, the
        exercisability of the Rights in order to prepare and file a registration
        statement under the Securities Act and permit it to become effective. Upon
        any
        such suspension, the Company shall issue a public announcement stating that
        the
        exercisability of the Rights has been temporarily suspended, as well as a
        public
        announcement at such time as the suspension is no longer in effect.
        Notwithstanding any provision of this Agreement to the contrary, the Rights
        shall not be exercisable in any jurisdiction unless the requisite qualification
        in such jurisdiction shall have been obtained and until a registration statement
        under the Securities Act (if required) shall have been declared
        effective.

       

      (d) The
        Company covenants and agrees that it will take all such action as may be
        necessary to ensure that all shares of Preferred Stock (and, following the
        occurrence of a Flip-In Event, Common Stock and/or other securities) delivered
        upon exercise of Rights shall, at the time of delivery of the certificates
        therefor (subject to payment of the Purchase Price), be duly and validly
        authorized and issued and fully paid and nonassessable shares.

       

      (e) The
        Company further covenants and agrees that it will pay when due and payable
        any
        and all federal and state transfer taxes and charges which may be payable
        in
        respect of the issuance or delivery of the Right Certificates or of any shares
        of Preferred Stock (and, following the occurrence of a Flip-In Event, Common
        Stock and/or other securities), as the case may be, upon the exercise of
        Rights.
        The Company shall not, however, be required to pay any transfer tax which
        may be
        payable in respect of any transfer or delivery of Right Certificates to a
        Person
        other than, or the issuance or delivery of certificates or depositary receipts
        for the Preferred Stock (or Common Stock and/or other securities, as the
        case
        may be) in a name other than that of, the registered holder of the Right
        Certificate evidencing Rights surrendered for exercise or to issue or deliver
        any certificates or depositary receipts for Preferred Stock (or Common Stock
        and/or other securities, as the case may be) upon the exercise of any Rights
        until any such tax shall have been paid (any such tax being payable by that
        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.

       

      
        
          
          

        

        
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      Section
        10.  Preferred
        Stock Record Date.
        Each
        Person in whose name any certificate for Preferred Stock (or Common Stock
        and/or
        other securities, as the case may be) is issued upon the exercise of Rights
        shall for all purposes be deemed to have become the holder of record of the
        shares of Preferred Stock (or Common Stock and/or other securities, as the
        case
        may be) 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
        Stock
        (or Common Stock and/or other securities, as the case may be) transfer books
        of
        the Company are closed, such Person shall be deemed to have become the record
        holder of such shares (fractional or otherwise) on, and such certificate
        shall
        be dated, the next succeeding Business Day on which the Preferred Stock 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 Stock for which the Rights shall be exercisable,
        including, without limitation, the right to vote or to receive dividends
        or
        other distributions, and shall not be entitled to receive any notice of any
        proceedings of the Company, except as provided herein.

       

      Section
        11.  Adjustment
        of Purchase Price, Number and Kind of Shares and Number of
        Rights.
        The
        Purchase Price, the number of shares of Preferred Stock or other securities
        or
        property purchasable upon exercise of each Right and the number of Rights
        outstanding are subject to adjustment from time to time as provided in this
        Section 11.

       

      (a) (i)
        If
        the Company shall at any time after the date of this Agreement (A) declare
        and
        pay a dividend on the Preferred Stock payable in shares of Preferred Stock,
        (B)
        subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred
        Stock into a smaller number of shares of Preferred Stock or (D) issue any
        shares
        of its capital stock in a reclassification of the Preferred Stock (including
        any
        such reclassification in connection with a consolidation or merger in which
        the
        Company is the continuing or surviving corporation), except as otherwise
        provided in this Section 11(a), 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
        Stock transfer books of the Company were open, the holder would have owned
        upon
        such exercise and been entitled to receive by virtue of such dividend,
        subdivision, combination or reclassification; provided,
        however,
        that in
        no event shall the consideration to be paid upon the exercise of one Right
        be
        less than the aggregate par value of the shares of capital stock of the Company
        issuable upon exercise of one Right.

       

      (ii)
        Subject to Section 24 of this Agreement, if any Person becomes an Acquiring
        Person (the first occurrence of such event being referred to hereinafter
        as the
“Flip-In
        Event”),
        then
        (A) the Purchase Price shall be adjusted to be the Purchase Price in effect
        immediately prior to the Flip-In Event multiplied by the number of one
        one-thousandths (1/1000th)
        of a
        share of Preferred Stock for which a Right was exercisable immediately prior
        to
        such Flip-In Event, whether or not such Right was then exercisable, and (B)
        each
        holder of a Right, except as otherwise provided in this Section 11(a)(ii)
        and
        Section 11(a)(iii) hereof, shall thereafter have the right to receive, upon
        exercise thereof at a price equal to the Purchase 

       

      
        
          
          

        

        
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      Price
        (as
        so adjusted), in accordance with the terms of this Agreement and in lieu
        of
        shares of Preferred Stock, such number of shares of Common Stock as shall
        equal
        the result obtained by dividing the then current Purchase Price (as so adjusted)
        by 50% of the then current per share market price of the Common Stock
        (determined pursuant to Section 11(d) hereof) on the date of such Flip-In
        Event;
provided,
        however,
        that
        the Purchase Price (as so adjusted) and the number of shares of Common Stock
        so
        receivable upon exercise of a Right shall, following the Flip-In Event, be
        subject to further adjustment as appropriate in accordance with Section 11(f)
        hereof. Notwithstanding anything in this Agreement to the contrary, however,
        from and after the Flip-In Event, any Rights that were acquired or beneficially
        owned by (x) any Acquiring Person (or any Affiliate or Associate of any
        Acquiring Person), (y) a transferee of any Acquiring Person (or any such
        Affiliate or Associate) who becomes a transferee after the Flip-In Event
        or (z)
        a transferee of any Acquiring Person (or any such Affiliate or Associate)
        who
        became a transferee prior to or concurrently with the Flip-In Event pursuant
        to
        either (I) a transfer (whether or not for consideration) from the Acquiring
        Person to holders of its equity securities or to any Person with whom it
        has any
        continuing agreement, arrangement or understanding regarding the transferred
        Rights or (II) a transfer (whether or not for consideration) which the
        Board of Directors has determined is part of a plan, arrangement or
        understanding which has the purpose or effect of avoiding the provisions
        of this
        paragraph, and subsequent transferees of such Persons, shall be void without
        any
        further action and any holder of such Rights shall thereafter have no rights
        whatsoever with respect to such Rights under any provision of this Agreement.
        The Company shall use all reasonable efforts to ensure that the provisions
        of
        this Section 11(a)(ii) are complied with, but shall have no liability to
        any
        holder of Right Certificates or other Person as a result of its failure to
        make
        any determinations with respect to an Acquiring Person or its Affiliates,
        Associates or transferees hereunder. From and after the Flip-In Event, no
        Right
        Certificate shall be issued pursuant to Section 3 or Section 6 hereof that
        represents Rights that are or have become void pursuant to the provisions
        of
        this paragraph, and any Right Certificate delivered to the Rights Agent that
        represents Rights that are or have become void pursuant to the provisions
        of
        this paragraph shall be canceled. From and after the occurrence of an event
        specified in Section 13(a) hereof, any Rights that theretofore have not been
        exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable
        only in accordance with Section 13 and not pursuant to this Section
        11(a)(ii).

       

      (iii) 
        The
        Company may at its option substitute for a share of Common Stock issuable
        upon
        the exercise of Rights in accordance with the foregoing subparagraph (ii)
        a
        number of shares of Preferred Stock or fraction thereof such that the then
        current per share market price of one share of Preferred Stock multiplied
        by
        such number or fraction is equal to the then current per share market price
        of
        one share of Common Stock. If there are not sufficient shares of Common Stock
        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
        Board
        of Directors shall, to the extent permitted by applicable law and any material
        agreements then in effect to which the Company is a party, (A) determine
        the
        excess (such excess, the “Spread”)
        of (1)
        the value of the shares of Common Stock issuable upon 

       

      
        
          
          

        

        
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      the
        exercise of a Right in accordance with the foregoing subparagraph (ii) (the
        “Current
        Value”)
        over
        (2) the Purchase Price (as adjusted in accordance with the foregoing
        subparagraph (ii)), and (B) with respect to each Right (other than Rights
        which
        have become void pursuant to the foregoing subparagraph (ii)), make adequate
        provision to substitute for the shares of Common Stock issuable in accordance
        with the foregoing subparagraph (ii) upon exercise of the Right and payment
        of
        the Purchase Price (as adjusted in accordance therewith), (1) cash, (2) a
        reduction in such Purchase Price, (3) shares of Preferred Stock or other
        equity
        securities of the Company (including, without limitation, shares or fractions
        of
        shares of preferred stock which, by virtue of having dividend, voting and
        liquidation rights substantially comparable to those of the shares of Common
        Stock, are deemed in good faith by the Board of Directors to have substantially
        the same value as the shares of Common Stock (such shares of Preferred Stock
        and
        shares or fractions of shares of preferred stock are hereinafter referred
        to as
“Common
        Stock Equivalents”)),
        (4)
        debt securities of the Company, (5) other assets, or (6) any combination
        of the
        foregoing, having a value which, when added to the value of the shares of
        Common
        Stock issued upon exercise of such Right, shall have an aggregate value equal
        to
        the Current Value (less the amount of any reduction in such Purchase Price),
        where such aggregate value has been determined by the Board of Directors
        upon
        the advice of a nationally recognized investment banking firm selected in
        good
        faith by the Board of Directors; provided,
        however,
        that if
        the Company shall not make adequate provision to deliver value pursuant to
        clause (B) above within thirty (30) days following the Flip-In Event (the
        “Section
        11(a) (ii) Trigger Date”),
        then
        the Company shall be obligated to deliver, to the extent permitted by applicable
        law and any material agreements then in effect to which the Company is a
        party,
        upon the surrender for exercise of a Right and without requiring payment
        of such
        Purchase Price, shares of Common Stock (to the extent available), and then,
        if
        necessary, such number or fractions of shares of Preferred Stock (to the
        extent
        available) and then, if necessary, cash, which shares and/or cash have an
        aggregate value equal to the Spread. If, upon the occurrence of the Flip-In
        Event, the Board of Directors shall determine in good faith that it is likely
        that sufficient additional shares of Common Stock could be authorized for
        issuance upon exercise in full of the Rights, then, if the Board of Directors
        so
        elects, the thirty (30) day period set forth above may be extended to the
        extent
        necessary, but not more than ninety (90) days after the Section 11(a) (ii)
        Trigger Date, in order that the Company may seek stockholder approval for
        the
        authorization of such additional shares (such thirty (30) day period, as
        it may
        be extended, is herein called the “Substitution
        Period”).
        To
        the extent that the Company determines that some action need be taken pursuant
        to the second and/or third sentence of this Section 11(a)(iii), the Company
        (x)
        shall provide, subject to Section 11(a)(ii) hereof and the last sentence
        of this
        Section 11(a)(iii), that such action shall apply uniformly to all outstanding
        Rights and (y) may suspend the exercisability of the Rights until the expiration
        of the Substitution Period in order to seek any authorization of additional
        shares and/or to decide the appropriate form of distribution to be made pursuant
        to such second sentence and to determine the value thereof. In the event
        of any
        such suspension, the Company shall issue a public announcement stating that
        the
        exercisability of the Rights has been temporarily suspended, as well as a
        public
        announcement at such time as the suspension is no longer in effect. For purposes
        of this Section 11(a)(iii), the value of the shares of Common Stock shall
        be the
        current per share market price (as determined pursuant to Section 11(d)(i))
        on
        the Section 11(a)(ii) Trigger Date and the per share or fractional value
        of any
“Common Stock Equivalent” shall be deemed to equal the current per share market
        price of the Common Stock. The Board of Directors of the Company may, but
        shall
        not be required to, establish procedures to allocate the right to receive
        shares
        of Common Stock upon the exercise of the Rights among holders of Rights pursuant
        to this Section 11(a)(iii).

       

      
        
          
          

        

        
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      (b) If
        the
        Company shall fix a record date for the issuance of rights, options or warrants
        to all holders of Preferred Stock entitling them (for a period expiring within
        45 calendar days after such record date) to subscribe for or purchase Preferred
        Stock (or shares having the same rights, privileges and preferences as the
        Preferred Stock (“Equivalent
        Preferred Shares”))
        or
        securities convertible into Preferred Stock or Equivalent Preferred Shares
        at a
        price per share of Preferred Stock or Equivalent Preferred Shares (or having
        a
        conversion price per share, if a security convertible into shares of Preferred
        Stock or Equivalent Preferred Shares) less than the then current per share
        market price of the Preferred Stock (determined pursuant to Section 11(d)
        hereof) on such record date, the Purchase Price to be in effect after such
        record date shall be determined by multiplying the Purchase Price in effect
        immediately prior to such record date by a fraction, the numerator of which
        shall be the number of shares of Preferred Stock and Equivalent Preferred
        Shares
        outstanding on such record date plus the number of shares of Preferred Stock
        and
        Equivalent Preferred Shares which the aggregate offering price of the total
        number of shares of Preferred Stock 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 shares of Preferred Stock
        and
        Equivalent Preferred Shares outstanding on such record date plus the number
        of
        additional shares of Preferred Stock 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, whose determination shall be described in a statement
        filed with the Rights Agent. Shares of Preferred Stock and Equivalent 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 Stock (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 Stock)
        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

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

       price
        of the Preferred Stock (determined pursuant to Section 11(d) hereof) on such
        record date, less the fair market value (as determined in good faith by the
        Board of Directors of the Company whose determination shall be described
        in a
        statement filed with the Rights Agent) of the portion of the assets or evidences
        of indebtedness so to be distributed or of such subscription rights or warrants
        applicable to one share of Preferred Stock, and the denominator of which
        shall
        be such current per share market price (determined pursuant to Section 11(d)
        hereof) of the Preferred Stock; 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.

       

      (d)
        (i) Except
        as
        otherwise provided herein, 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 (as such term is hereinafter defined) immediately prior to such
        date; provided,
        however,
        that if
        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 by the principal
        consolidated transaction reporting system with respect to securities listed
        or
        admitted to trading on the Nasdaq National Market or, if the Security is
        not
        listed or admitted to trading on the Nasdaq National Market, 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 Nasdaq or such other system then in use, or, if on
        any
        such date the Security is not quoted by any such organization, the average
        of
        the closing bid and asked prices as furnished by a professional market maker
        making a market in the Security selected by the Board of Directors of the
        Company. The term “Trading
        Day”
shall
        mean a day on which the principal national securities exchange on which the
        Security is listed or admitted to trading is open for the transaction of
        business or, if the Security is not listed or admitted to trading on any
        national securities exchange, a Business Day.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      (ii) 
        For the
        purpose of any computation hereunder, if the Preferred Stock is publicly
        traded,
        the “current per share market price” of the Preferred Stock shall be determined
        in accordance with the method set forth in Section 11(d)(i). If the Preferred
        Stock is not publicly traded but the Common Stock is publicly traded, the
        “current per share market price” of the Preferred Stock shall be conclusively
        deemed to be the current per share market price of the Common Stock as
        determined pursuant to Section 11(d)(i) multiplied by the then applicable
        Adjustment Number (as defined in and determined in accordance with the
        Certificate of Designation for the Preferred Stock). If neither the Common
        Stock
        nor the Preferred Stock is publicly traded, “current per share market price”
shall mean the fair value per share as determined in good faith by the Board
        of
        Directors of the Company, whose determination shall be described in a statement
        filed with the Rights Agent.

       

      (e) No
        adjustment in the Purchase Price shall be required unless such adjustment
        would
        require an increase or decrease of at least 1% in the Purchase Price;
provided,
        however,
        that
        any adjustments 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 hundred-thousandth of a share of Preferred Stock
        or
        one-hundredth of a share of Common Stock or 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 Expiration Date.

       

      (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 the Preferred Stock, thereafter the
        Purchase Price and the number of such other shares so receivable upon exercise
        of a 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 Stock contained in Sections 11(a), 11(b), 11(c), 11(e), 11(h),
        11(i)
        and 11(m) hereof, as applicable, and the provisions of Sections 7, 9, 10,
        13 and
        14 hereof with respect to the Preferred Stock 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 share of Preferred
        Stock
        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 11(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 share of
        Preferred Stock (calculated to the nearest one hundred-thousandth of a share
        of
        Preferred Stock) obtained by (i) multiplying (x) the number of one
        one-thousandths of a share purchasable upon the exercise of a Right immediately
        prior to such adjustment by (y) the Purchase Price in effect immediately
        prior
        to such adjustment and (ii) dividing the product so obtained by the Purchase
        Price in effect immediately after such adjustment.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (i) The
        Company may elect on or after the date of any adjustment of the Purchase
        Price
        pursuant to Sections 11(b) or 11(c) hereof to adjust the number of Rights,
        in
        substitution for any adjustment in the number of one one-thousandths of a
        share
        of Preferred Stock 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 share of Preferred Stock 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-hundredth) obtained by dividing
        the
        Purchase Price in effect immediately prior to adjustment of the Purchase
        Price
        by the Purchase Price in effect immediately after adjustment of the Purchase
        Price. The Company shall make a public announcement of its election to adjust
        the number of Rights, indicating the record date for the adjustment, and,
        if
        known at the time, the amount of the adjustment to be made. Such 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 may, 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 (1/1000th)
        of a
        share of Preferred Stock issuable upon the exercise of a Right, the Right
        Certificates theretofore and thereafter issued may continue to express the
        Purchase Price and the number of one one-thousandths (1/1000th)
        of a
        share of Preferred Stock which were expressed in the initial Right Certificates
        issued hereunder.

       

      (k) Before
        taking any action that would cause an adjustment reducing the Purchase Price
        below the then par value, if any, of the fraction of Preferred Stock or other
        shares of capital stock issuable upon exercise of a Right, 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 shares of Preferred Stock or other such shares at such adjusted
        Purchase Price.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      (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 issuing to the holder
        of
        any Right exercised after such record date the Preferred Stock and other
        capital
        stock or securities of the Company, if any, issuable upon such exercise over
        and
        above the Preferred Stock 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 adjustments 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 Stock, issuance wholly for
        cash of
        any shares of Preferred Stock at less than the current market price, issuance
        wholly for cash of Preferred Stock or securities which by their terms are
        convertible into or exchangeable for Preferred Stock, dividends on Preferred
        Stock payable in shares of Preferred Stock or issuance of rights, options
        or
        warrants referred to hereinabove in Section 11(b), hereafter made by the
        Company
        to holders of its Preferred Stock shall not be taxable to such
        stockholders.

       

      (n) Anything
        in this Agreement to the contrary notwithstanding, if at any time after the
        date
        of this Rights Agreement and prior to the Distribution Date, the Company
        shall
        (i) declare and pay any dividend on the Common Stock payable in Common Stock
        or
        (ii) effect a subdivision, combination or consolidation of the Common Stock
        (by
        reclassification or otherwise than by payment of a dividend payable in Common
        Stock) into a greater or lesser number of shares of Common Stock, then, in
        each
        such case, the number of Rights associated with each share of Common Stock
        then
        outstanding, or issued or delivered thereafter but prior to the Distribution
        Date or in accordance with Section 22, shall be proportionately adjusted
        so that
        the number of Rights thereafter associated with each share of Common Stock
        following any such event shall equal the result obtained by multiplying the
        number of Rights associated with each share of Common Stock immediately prior
        to
        such event by a fraction the numerator of which shall be the total number
        of
        shares of Common Stock outstanding immediately prior to the occurrence of
        the
        event and the denominator of which shall be the total number of shares of
        Common
        Stock outstanding immediately following the occurrence of such event. The
        adjustments provided for in this section shall be made successively whenever
        such a dividend is declared or paid or such a subdivision, combination or
        consolidation is effected.

       

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

       

      Section
        12.  Certificate
        of Adjusted Purchase Price or Number of Shares.
        Whenever an adjustment is made as provided in Section 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 Stock and the
        Preferred Stock a copy of such certificate and (c) mail a brief summary thereof
        to each holder of a Right Certificate in accordance with Section 25 hereof
        (if
        so required under Section 25 hereof). The Rights Agent shall be fully protected
        in relying on any such certificate and on any adjustment therein contained
        and
        shall not be deemed to have knowledge of any such adjustment unless and until
        it
        shall have received such certificate.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

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

       

      (a) In
        the
        event, directly or indirectly, at any time after the Flip-In Event (i) the
        Company shall consolidate with or shall merge into any other Person and the
        Company shall not be the surviving corporation, (ii) any Person shall
        consolidate with or shall 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 Stock shall be changed into or
        exchanged for stock or other securities of any other Person (or of the Company)
        or cash or any other property, or (iii) the Company shall sell or otherwise
        transfer (or one or more of its Subsidiaries shall sell, exchange, mortgage
        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 wholly-owned Subsidiaries of the Company) in one or more
        transactions each of which complies with Section 11(o), then upon the first
        occurrence of such event, proper provision shall be made so that: (A) each
        holder of a Right (other than Rights which have become void pursuant to Section
        11(a)(ii) hereof) shall thereafter have the right to receive, upon the exercise
        thereof at the then current Purchase Price (as theretofore adjusted in
        accordance with Section 11(a)(ii) hereof), in accordance with the terms of
        this
        Agreement and in lieu of shares of Preferred Stock or Common Stock of the
        Company, such number of validly authorized and issued, fully paid,
        non-assessable and freely tradeable shares of Common Stock of the Principal
        Party (as such term is hereinafter defined), not subject to any liens,
        encumbrances, rights of first refusal or other adverse claims, as shall equal
        the result obtained by dividing the Purchase Price (as theretofore adjusted
        in
        accordance with Section 11(a)(ii) hereof) by 50% of the current per share
        market
        price of the Common Stock of such Principal Party (determined pursuant to
        Section 11(d) hereof) on the date of consummation of such consolidation,
        merger,
        sale or transfer; provided,
        however,
        that
        the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii)
        hereof) and the number of shares of Common Stock of such Principal Party
        so
        receivable upon exercise of a Right shall be subject to further adjustment
        as
        appropriate in accordance with Section 11(f) hereof to reflect any events
        occurring in respect of the Common Stock of such Principal Party after the
        occurrence of such consolidation, merger, sale or transfer; (B) such Principal
        Party 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; (C) the term “Company” shall
        thereafter be deemed to refer to such Principal Party; and (D) such Principal
        Party shall take such steps (including, but not limited to, the reservation
        of a
        sufficient number of its shares of Common Stock in accordance with Section
        9
        hereof) in connection with such consummation of any such transaction as may
        be
        necessary to assure that the provisions hereof shall thereafter be applicable,
        as nearly as reasonably may be, in relation to the shares of its Common Stock
        thereafter deliverable upon the exercise of the Rights; provided that, upon
        the
        subsequent occurrence of any consolidation, merger, sale or transfer of assets
        or other extraordinary transaction in respect of such Principal Party, each
        holder of a Right shall thereupon be entitled to receive, upon exercise of
        a
        Right and payment of the Purchase Price as provided in this Section 13(a),
        such
        cash, shares, rights, warrants and other property which such holder would
        have
        been entitled to receive had such holder, at the time of such transaction,
        owned
        the Common Stock of the Principal Party receivable upon the exercise of a
        Right
        pursuant to this Section 13(a), and such Principal Party shall take such
        steps
        (including, but not limited to, reservation of shares of stock) as may be
        necessary to permit the subsequent exercise of the Rights in accordance with
        the
        terms hereof for such cash, shares, rights, warrants and other
        property.

       

      
        
          
          

        

        
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      (b) “Principal
        Party”
shall
        mean:

       

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

       

      (ii)
        in
        the case of any transaction described in (iii) of the first sentence of Section
        13(a) hereof, the Person that is the party receiving the greatest portion
        of the
        assets or earning power transferred pursuant to such transaction or
        transactions, or, if each Person that is a party to such transaction or
        transactions receives the same portion of the assets or earning power so
        transferred or if the Person receiving the greatest portion of the assets
        or
        earning power cannot be determined, whichever of such Persons is the issuer
        of
        Common Stock having the greatest aggregate market value of shares
        outstanding;

       

      provided,
        however, that in any such case described in the foregoing clause (b)(i) or
        (b)(ii), if the Common Stock of such Person is not at such time or has not
        been
        continuously over the preceding 12-month period registered under Section
        12 of
        the Exchange Act, then (1) if such Person is a direct or indirect Subsidiary
        of
        another Person the Common Stock of which is and has been so registered, the
        term
“Principal Party” shall refer to such other Person, or (2) if such Person is a
        Subsidiary, directly or indirectly, of more than one Person, the Common Stock
        of
        all of which is and has been so registered, the term “Principal Party” shall
        refer to whichever of such Persons is the issuer of Common Stock having the
        greatest aggregate market value of shares outstanding, or (3) if such Person
        is
        owned, directly or indirectly, by a joint venture formed by two or more Persons
        that are not owned, directly or indirectly, by the same Person, the rules
        set
        forth in clauses (1) and (2) above shall apply to each of the owners having
        an
        interest in the venture as if the Person owned by the joint venture was a
        Subsidiary of both or all of such joint venturers, and the Principal Party
        in
        each such case shall bear the obligations set forth in this Section 13 in
        the
        same ratio as its interest in such Person bears to the total of such
        interests.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      (c) The
        Company shall not consummate any consolidation, merger, sale or transfer
        referred to in Section 13(a) hereof unless prior thereto the Company and
        the
        Principal Party involved therein shall have executed and delivered to the
        Rights
        Agent an agreement confirming that the requirements of Sections 13(a) and
        (b)
        hereof shall promptly be performed in accordance with their terms and that
        such
        consolidation, merger, sale or transfer of assets shall not result in a default
        by the Principal Party under this Agreement as the same shall have been assumed
        by the Principal Party pursuant to Sections 13(a) and (b) hereof and providing
        that, as soon as practicable after executing such agreement pursuant to this
        Section 13, the Principal Party will:

       

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

       

      (ii)
        use
        its best efforts, if the Common Stock of the Principal Party shall be listed
        or
        admitted to trading on the Nasdaq National Market or on another national
        securities exchange, to list or admit to trading (or continue the listing
        of)
        the Rights and the securities purchasable upon exercise of the Rights on
        the
        Nasdaq National Market or such securities exchange, or, if the Common Stock
        of
        the Principal Party shall not be listed or admitted to trading on the Nasdaq
        National Market or a national securities exchange, to cause the Rights and
        the
        securities receivable upon exercise of the Rights to be authorized for quotation
        on Nasdaq or on such other system then in use;

       

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

       

      (iv)
        obtain waivers of any rights of first refusal or preemptive rights in respect
        of
        the Common Stock of the Principal Party subject to purchase upon exercise
        of
        outstanding Rights.

       

      (d) In
        case
        the Principal Party has a provision in any of its authorized securities or
        in
        its certificate of incorporation or by-laws or other instrument governing
        its
        affairs, which provision would have the effect of (i) causing such Principal
        Party to issue (other than to holders of Rights pursuant to this Section
        13), in
        connection with, or as a consequence 

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

       

      of,
        the
        consummation of a transaction referred to in this Section 13, shares of Common
        Stock or Common Stock Equivalents of such Principal Party at less than the
        then
        current market price per share thereof (determined pursuant to Section 11(d)
        hereof) or securities exercisable for, or convertible into, Common Stock
        or
        Common Stock Equivalents of such Principal Party at less than such then current
        market price, or (ii) providing for any special payment, tax or similar
        provision in connection with the issuance of the Common Stock of such Principal
        Party pursuant to the provisions of Section 13, then, in such event, the
        Company
        hereby agrees with each holder of Rights that it shall not consummate any
        such
        transaction unless prior thereto the Company and such Principal Party shall
        have
        executed and delivered to the Rights Agent a supplemental agreement providing
        that the provision in question of such Principal Party shall have been canceled,
        waived or amended, or that the authorized securities shall be redeemed, so
        that
        the applicable provision will have no effect in connection with, or as a
        consequence of, the consummation of the proposed transaction.

       

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

       

      (f) Notwithstanding
        anything contained herein to the contrary, upon the consummation of any merger
        or other acquisition transaction of the type described in clauses (i), (ii)
        or
        (iii) of Section 13(a) involving the Company pursuant to a merger or other
        acquisition agreement between the Company and any Person (or one or more
        of such
        Person’s Affiliates or Associates) which agreement has been approved by the
        Board of Directors of the Company prior to any Person becoming an Acquiring
        Person, this Agreement and the rights of holders of Rights hereunder shall
        be
        terminated in accordance with Section 7(a).

       

      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 (except prior to the
        Distribution Date in accordance with Section 11(n) hereof). 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.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

       

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

       

      (b) The
        Company shall not be required to issue fractions of Preferred Stock (other
        than
        fractions which are integral multiples of one one-thousandth of a share of
        Preferred Stock) or to distribute certificates which evidence fractional
        shares
        of Preferred Stock (other than fractions which are integral multiples of
        one
        one-thousandth of a share of Preferred Stock) upon the exercise or exchange
        of
        Rights. Interests in fractions of Preferred Stock in integral multiples of
        one
        one-thousandth of a share of Preferred Stock 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 Stock represented by such depositary
        receipts. In lieu of fractional shares of Preferred Stock that are not integral
        multiples of one one-thousandth of a share of Preferred Stock, the Company
        shall
        pay to the registered holders of Right Certificates at the time such Rights
        are
        exercised or exchanged as herein provided an amount in cash equal to the
        same
        fraction of the current market value of a whole share of Preferred Stock
        (as
        determined in accordance with Section 14(a) hereof) for the Trading Day
        immediately prior to the date of such exercise or exchange.

       

      (c) The
        Company shall not be required to issue fractions of shares of Common Stock
        or to
        distribute certificates which evidence fractional shares of Common Stock
        upon
        the exercise or exchange of Rights. In lieu of such fractional shares of
        Common
        Stock, the Company shall pay to the registered holders of the Right Certificates
        with regard to which such fractional shares of Common Stock would otherwise
        be
        issuable an amount in cash equal to the same fraction of the current market
        value of a whole share of Common Stock (as determined in accordance with
        Section
        14(a) hereof) for the Trading Day immediately prior to the date of such exercise
        or exchange.

       

      (d) 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 or exchange
        of a Right (except as provided above).

       

      Section
        15.  Rights
        of Action.
        All
        rights of action in respect of this Agreement, excepting the rights of action
        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 Stock); and any registered holder
        of
        any 

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      Right
        Certificate (or, prior to the Distribution Date, of the Common Stock), 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 Stock), on his own behalf
        and
        for his own benefit, may 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
        (or,
        prior to the Distribution Date, such Common Stock) in the manner provided
        therein and in this Agreement. Without limiting the foregoing or any remedies
        available to the holders of Rights, it is specifically acknowledged that
        the
        holders of Rights would not have an adequate remedy at law for any breach
        of
        this Agreement and will be entitled to specific performance of the obligations
        under, and injunctive relief against actual or threatened violations of,
        the
        obligations of any Person subject to this Agreement.

       

      Section
        16.  Agreement
        of 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 Stock;

       

      (b) after
        the
        Distribution Date, the Right Certificates are transferable only on the registry
        books of the Rights Agent if surrendered at the office or agency of the Rights
        Agent designated for such purpose, duly endorsed or accompanied by a proper
        instrument of transfer with all required certificates completed;
        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 Common Stock
        certificate) is registered as the absolute owner thereof and of the Rights
        evidenced thereby (notwithstanding any notations of ownership or writing
        on the
        Right Certificates or the Common Stock certificate made by anyone other than
        the
        Company or the Rights Agent) for all purposes whatsoever, and neither the
        Company nor the Rights Agent 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 Stock
        or any
        other securities of the Company which may at any time be issuable on the
        exercise or exchange 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 this Agreement), or
        to
        receive dividends or subscription rights, or otherwise, until the Rights
        evidenced by such Right Certificate shall have been exercised or exchanged
        in
        accordance with the provisions hereof.

       

      
        
          
          

        

        
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      Section
        18.  Concerning
        the Rights Agent.

       

      (a) The
        Company agrees to pay to the Rights Agent reasonable compensation for all
        services rendered by it hereunder and, from time to time, on demand of the
        Rights Agent, its reasonable expenses and counsel fees and other disbursements
        incurred in the administration and execution of this Agreement and the exercise
        and performance of its duties hereunder. The Company also agrees to indemnify
        the Rights Agent for, and to hold it harmless against, any loss, liability
        or
        expense, incurred without negligence, bad faith or willful misconduct on
        the
        part of the Rights Agent, for anything done or omitted by the Rights Agent
        in
        connection with the acceptance and administration of this Agreement, including
        the costs and expenses of defending against any claim of liability arising
        therefrom, directly or indirectly.

       

      (b) The
        Rights Agent shall be protected and shall incur no liability for, or in respect
        of any action taken, suffered or omitted by it in connection with, its
        administration of this Agreement in reliance upon any Right Certificate or
        certificate for the Preferred Stock or Common Stock or for other securities
        of
        the Company, instrument of assignment or transfer, power of attorney,
        endorsement, affidavit, letter, notice, direction, consent, certificate,
        statement or other paper or document believed by it to be genuine and to
        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 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 Agreement, any of
        the
        Right Certificates shall have been countersigned but not delivered, any such
        successor Rights Agent may adopt the countersignature of the predecessor
        Rights
        Agent and deliver such Right Certificates so countersigned; and in case at
        that
        time any of the Right Certificates shall not have been countersigned, any
        successor Rights Agent may countersign such Right Certificates either in
        the
        name of the predecessor Rights Agent or in the name of the successor Rights
        Agent; and in all such cases such Right Certificates shall have the full
        force
        provided in the Right Certificates and in this Agreement.

       

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

       

      
        
          
          

        

        
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      Section
        20. Duties
        of Rights Agent.
        The
        Rights Agent undertakes the duties and obligations imposed by this Agreement
        upon the following terms and conditions, by all of which the Company and
        the
        holders of 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 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, the Chief Financial Officer, 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 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 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 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 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 provided for in Sections 3, 11, 13, 23 and 24, or the ascertaining
        of the
        existence of facts that would require any such change or adjustment (except
        with
        respect to the exercise of Rights evidenced by Right Certificates after receipt
        of a certificate furnished pursuant to Section 12, describing such change
        or
        adjustment); nor shall it by any act hereunder be deemed to make any
        representation or warranty as to the authorization or reservation of any
        shares
        of Preferred Stock or other securities to be issued pursuant to this Agreement
        or any Right Certificate or as to whether any shares of Preferred Stock or
        other
        securities will, when issued, be validly authorized and issued, fully paid
        and
        nonassessable.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

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

       

      (j) If,
        with
        respect to any Rights Certificate surrendered to the Rights Agent for exercise
        or transfer, the certificate contained in the form of assignment or the form
        of
        election to purchase set forth on the reverse thereof, as the case may be,
        has
        not been completed to certify the holder is not an Acquiring Person (or an
        Affiliate or Associate thereof), the Rights Agent shall not take any further
        action with respect to such requested exercise or transfer without first
        consulting with the Company.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      (k) At
        any
        time, and from time to time after the Distribution Date, upon request of
        the
        Company, the Rights Agent shall promptly deliver to the Company a list, as
        of
        the most practicable date, of the holders of record of Rights.

       

      Section
        21. Change
        of Rights Agent.
        The
        Rights Agent or any successor Rights Agent may resign and be discharged from
        its
        duties under this Agreement upon 30 days’ notice in writing mailed to the
        Company and to each transfer agent of the Common Stock or Preferred Stock
        by
        registered or certified mail, and, following the Distribution Date, to the
        holders of the Right Certificates by first-class mail. 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 Stock or Preferred Stock by registered
        or
        certified mail, and, following the Distribution Date, to the holders of the
        Right Certificates by first-class mail. If the Rights Agent shall resign
        or be
        removed or shall otherwise become incapable of acting, the Company shall
        appoint
        a successor to the Rights Agent. If the Company shall fail to make such
        appointment within a period of 30 days after giving notice of such removal
        or
        after it has been notified in writing of such resignation or incapacity by
        the
        resigning or incapacitated Rights Agent or by the holder of a Right 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 the laws of any state of the United States or the District of
        Columbia, in good standing, having an office in California, or New York,
        which
        is authorized under such laws to exercise corporate trust or stock transfer
        powers and is subject to supervision or examination by federal or state
        authority and which has at the time of its appointment as Rights Agent a
        combined capital and surplus of at least $50 million. 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 Stock or Preferred Stock, and, following
        the Distribution Date, 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 Agreement or of the Rights
        to the
        contrary, the Company may, at its option, issue new Right Certificates
        evidencing Rights in such forms as may be approved by its Board of Directors
        to
        reflect any adjustment or change in the Purchase Price and the

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

       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 Agreement.
        In
        addition, in connection with the issuance or sale of Common Stock following
        the
        Distribution Date and prior to the Expiration Date, the Company may with
        respect
        to shares of Common Stock so issued or sold pursuant to (i) the exercise
        of
        stock options, (ii) under any employee plan or arrangement, (iii) upon the
        exercise, conversion or exchange of securities, notes or debentures issued
        by
        the Company or (iv) a contractual obligation of the Company, in each case
        existing prior to the Distribution Date, issue Rights Certificates representing
        the appropriate number of Rights in connection with such issuance or sale;
        provided, however, no such Right Certificate shall be issued if the Company
        is
        advised by counsel that such issuance would create a significant risk of
        material adverse tax consequences to the Company or such holder.

       

      Section
        23. Redemption.

       

      (a) The
        Board
        of Directors of the Company may, at any time prior to the Flip-In Event,
        redeem
        all but not less than all of the then outstanding Rights at a redemption
        price
        of $.001 per Right, appropriately adjusted to reflect any stock split, stock
        dividend or similar transaction occurring after the date hereof (the redemption
        price being hereinafter referred to as the “Redemption
        Price”).
        The
        redemption of the Rights may be made effective at such time, on such basis
        and
        with such conditions as the Board of Directors in its sole discretion may
        establish. The Redemption Price shall be payable, at the option of the Company,
        in cash, shares of Common Stock, or such other form of consideration as the
        Board of Directors shall determine.

       

      (b) Immediately
        upon the action of the Board of Directors ordering the redemption of the
        Rights
        pursuant to paragraph (a) of this Section 23 (or at such later time as the
        Board
        of Directors may establish for the effectiveness of such redemption), 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 10 days after such action of the Board
        of
        Directors ordering the redemption of the Rights (or such later time as the
        Board
        of Directors may establish for the effectiveness of such redemption), 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 Stock. Any notice which is mailed
        in
        the manner herein provided shall be deemed given, whether or not the holder
        receives the notice. Each such notice of redemption shall state the method
        by
        which the payment of the Redemption Price will be made.

       

      Section
        24. Exchange.

       

      (a) The
        Board
        of Directors of the Company may, at its option, at any time after the Flip-In
        Event, exchange all or part of the then outstanding and exercisable Rights
        (which shall not include Rights that have become void pursuant to the provisions
        of Section 11(a)(ii) hereof) for Common Stock at an exchange ratio of one
        share
        of Common Stock per 

       

      
        
          
          

        

        
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      Right,
        appropriately adjusted to reflect any stock split, stock dividend or similar
        transaction occurring after the date hereof (such amount per Right being
        hereinafter referred to as the “Exchange
        Ratio”).
        Notwithstanding the foregoing, the Board of Directors shall not be empowered
        to
        effect such exchange at any time after an Acquiring Person shall have become
        the
        Beneficial Owner of shares of Common Stock aggregating 50% or more of the
        shares
        of Common Stock then outstanding. From and after the occurrence of an event
        specified in Section 13(a) hereof, any Rights that theretofore have not been
        exchanged pursuant to this Section 24(a) shall thereafter be exercisable
        only in
        accordance with Section 13 and may not be exchanged pursuant to this Section
        24(a). The exchange of the Rights by the Board of Directors may be made
        effective at such time, on such basis and with such conditions as the Board
        of
        Directors in its sole discretion may establish.

       

      (b) Immediately
        upon the effectiveness of the action of the Board of Directors of the Company
        ordering the exchange of 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 shares of Common Stock equal to
        the
        number of such Rights held by such holder multiplied by the Exchange Ratio.
        The
        Company shall promptly give public notice of any such exchange; provided,
        however,
        that
        the failure to give, or any defect in, such notice shall not affect the validity
        of such exchange. The Company shall promptly mail a notice of any such exchange
        to all of the holders of the Rights so exchanged 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 shares of Common Stock for Rights will be effected and,
        in
        the event of any partial exchange, the number of Rights which will be exchanged.
        Any partial exchange shall be effected pro rata based on the number of Rights
        (other than Rights which have become void pursuant to the provisions of Section
        11(a)(ii) hereof) held by each holder of Rights.

       

      (c) The
        Company may at its option substitute, and, in the event that there shall
        not be
        sufficient shares of Common Stock issued but not outstanding or authorized
        but
        unissued to permit an exchange of Rights for Common Stock as contemplated
        in
        accordance with this Section 24, the Company shall substitute to the extent
        of
        such insufficiency, for each share of Common Stock that would otherwise be
        issuable upon exchange of a Right, a number of shares of Preferred Stock
        or
        fraction thereof (or Equivalent Preferred Shares, as such term is defined
        in
        Section 11(b)) such that the current per share market price (determined pursuant
        to Section 11(d) hereof) of one share of Preferred Stock (or equivalent
        preferred share) multiplied by such number or fraction is equal to the current
        per share market price of one share of Common Stock (determined pursuant
        to
        Section 11(d) hereof) as of the date of such exchange.

       

      Section
        25. Notice
        of Certain Events.

       

      (a) In
        case
        the Company shall at any time after the earlier of the Distribution Date
        or the
        Stock Acquisition Date propose (i) to pay any dividend payable in stock of
        any
        class to the holders of its Preferred Stock or to make any other distribution
        to
        the holders of its Preferred Stock (other than a regular quarterly cash
        dividend), (ii) to offer to the holders of its Preferred Stock rights or
        warrants to subscribe for or to purchase any additional shares of Preferred
        Stock or shares of stock of any class or any other securities, rights or
        options, 

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      (iii)
        to
        effect any reclassification of its Preferred Stock (other than a
        reclassification involving only the subdivision or combination of outstanding
        Preferred Stock), or to effect any consolidation or merger into or with,
        or to
        effect any sale or other transfer (or 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 (other than pursuant to a merger or other
        acquisition agreement approved by the Board before there is any Acquiring
        Person), (iv) to effect the liquidation, dissolution or winding up of the
        Company, or (v) to declare or pay any dividend on the Common Stock payable
        in
        Common Stock or to effect a subdivision, combination or consolidation of
        the
        Common Stock (by reclassification or otherwise than by payment of dividends
        in
        Common Stock), 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
        liquidation, dissolution or winding up is to take place and the date of
        participation therein by the holders of the Common Stock and/or Preferred
        Stock,
        if any such date is to be fixed, and such notice shall be so given in the
        case
        of any action covered by clause (i) or (ii) above at least 10 days prior
        to the
        record date for determining holders of the Preferred Stock 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 Stock and/or Preferred Stock, whichever shall
        be
        the earlier.

       

      (b) In
        case
        any event described in Section 11(a)(ii) or Section 13 shall occur then the
        Company shall as soon as practicable thereafter give to each holder of a
        Right
        Certificate (or if occurring prior to the Distribution Date, the holders
        of the
        Common Stock) 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) and Section 13
        hereof.

       

      (c) Notwithstanding
        anything in this Agreement to the contrary, prior to the Distribution Date,
        a
        filing by the Company with the SEC shall constitute sufficient notice to
        the
        holders of securities of the Company, including the Rights, for purposes
        of this
        Agreement, and no other notice need be given.

       

      Section
        26. Notices.
        Notices
        or demands authorized by this Agreement to be given or made by the Rights
        Agent
        or by the holder of any Right 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:

       

      Peregrine
        Pharmaceuticals, Inc.

      14272
        Franklin Avenue

      Tustin,
        California 92780

      Attention:
        Chief Financial Officer

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      with
        a
        copy to:

      Snell
        & Wilmer L.L.P.

      600
        Anton
        Boulevard, Suite 1400

      Costa
        Mesa, California 92626

      Attention:
        Mark R. Ziebell, Esq.

       

      Subject
        to the provisions of Section 21 hereof, any notice or demand authorized by
        this
        Agreement to be given or made by the Company or by the holder of any Right
        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:

       

      Integrity
        Stock Transfer, Inc.

      2920
        N.
        Green Valley Parkway

      Bldg.5
        -
        Suite 527

      Henderson,
        NV 89104

      Attention:
        Don Maddalon

       

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

       

      Section
        27. Supplements
        and Amendments.
        Except
        as provided in the penultimate sentence of this Section 27, for so long as
        the
        Rights are then redeemable, 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 in any respect without the approval of any holders
        of the Rights. At any time when the Rights are no longer redeemable, except
        as
        provided in the penultimate sentence of this Section 27, the Company may,
        and
        the Rights Agent shall, if the Company so directs, supplement or amend this
        Agreement without the approval of any holders of Rights, provided
        that no
        such supplement or amendment may (a) adversely affect the interests of the
        holders of Rights as such (other than an Acquiring Person or an Affiliate
        or
        Associate of an Acquiring Person), (b) cause this Agreement again to become
        amendable other than in accordance with this sentence or (c) cause the Rights
        again to become redeemable. Notwithstanding anything contained in this Agreement
        to the contrary, no supplement or amendment shall be made which changes the
        Redemption Price. 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.

       

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

       

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

       

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

      
        Section
          30. Determinations
          and Actions by the Board of Directors.
          The
          Board of Directors of the Company shall have the exclusive power and authority
          to administer this Agreement and to exercise the rights and powers specifically
          granted to the Board of Directors of the Company or to the Company, or
          as may be
          necessary or advisable in the administration of this Agreement,
          including, without limitation, the right and power to (i) interpret the
          provisions of this Agreement and (ii) make all determinations deemed necessary
          or advisable for the administration of this Agreement (including, without
          limitation, a determination to redeem or not redeem the Rights or to amend
          or
          not amend this Agreement). All such actions, calculations, interpretations
          and
          determinations (including, for purposes of clause (y) below, all omissions
          with
          respect to the foregoing) that are done or made by the Board of Directors
          of the
          Company in good faith, shall (x) be final, conclusive and binding on the
          Company, the Rights Agent, the holders of the Rights, as such, and all
          other
          parties, and (y) not subject the Board of Directors to any liability to
          the
          holders of the Rights.

      

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

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

       

      
        	 	 	 
	 	
                PEREGRINE
                  PHARMACEUTICALS, INC.

              
	 
 	 
 	 
 
	 	By:  	/s/ Paul
                J.
                Lytle
	 	
                

              
	 	
                Paul
                  J.
                  Lytle

                Chief Financial
                  Officer

              

      

       

      
        	 	 	 
	 	
                INTEGRITY
                  STOCK TRANSFER, INC.

                as
                  Rights
                  Agent

              
	 
 	 
 	 
 
	 	By:  	/s/ Don
                Maddalon
	 	
                

              
	 	
                Don
                  Maddalon

                President

              

      

       

      

      

      
        
          
             

          

          
          

        

        
          37

          
            

          

        

        
          
          

          
          

        

      

      Exhibit
        A

      FORM
        OF

      CERTIFICATE
        OF DESIGNATION

       

      of

       

      SERIES
        D
        PARTICIPATING PREFERRED STOCK

       

      of

       

      PEREGRINE
        PHARMACEUTICALS, INC.

       

      Pursuant
        to Section 151 of the General Corporation Law

      of
        the
        State of Delaware

       

      Peregrine
        Pharmaceuticals, Inc., a corporation organized and existing under the General
        Corporation Law of the State of Delaware, in accordance with the provisions
        of
        Section 151 thereof, DOES HEREBY CERTIFY:

       

      That
        pursuant to the authority vested in the Board of Directors in accordance
        with
        the provisions of the Certificate of Incorporation of the said Corporation,
        the
        said Board of Directors on March 16, 2006 adopted the following resolution
        creating a series of 500,000 shares of Preferred Stock designated as
“Series
        D Participating Preferred Stock”:

       

      RESOLVED,
        that pursuant to the authority vested in the Board of Directors of this
        Corporation in accordance with the provisions of the Certificate of
        Incorporation, a series of Preferred Stock, par value $.001 per share, of
        the
        Corporation be and hereby is created, and that the designation and number
        of
        shares thereof and the voting and other powers, preferences and relative,
        participating, optional or other rights of the shares of such Series and
        the
        qualifications, limitations and restrictions thereof are as
        follows:

       

      Series
        D Participating Preferred Stock

       

      1.
        Designation
        and Amount.
        There
        shall be a series of Preferred Stock that shall be designated as “Series D
        Participating Preferred Stock,” and the number of shares constituting such
        series shall be 500,000. Such number of shares may be increased or decreased
        by
        resolution of the Board of Directors; provided, however, that no decrease
        shall
        reduce the number of shares of Series D Participating Preferred Stock to
        less
        than the number of shares then issued and outstanding plus the number of
        shares
        issuable upon exercise of outstanding rights, options or warrants or upon
        conversion of outstanding securities issued by the Corporation.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      2. 
        Dividends and Distribution.

       

      (A) Subject
        to the prior and superior rights of the holders of any shares of any class
        or
        series of stock of the Corporation ranking prior and superior to the shares
        of
        Series D Participating Preferred Stock with respect to dividends, the holders
        of
        shares of Series D Participating Preferred Stock, in preference to the holders
        of shares of any class or series of stock of the Corporation ranking junior
        to
        the Series D Participating Preferred Stock in respect thereof, shall be entitled
        to receive, when, as and if declared by the Board of Directors out of funds
        legally available for the purpose, quarterly dividends payable in cash on
        the
        first day of May, August, November and February in each year (each such date
        being referred to herein as a “Quarterly
        Dividend Payment Date”),
        commencing on the first Quarterly Dividend Payment Date after the first issuance
        of a share or fraction of a share of Series D Participating Preferred Stock,
        in
        an amount per share (rounded to the nearest cent) equal to the greater of
        (a)
        $1.00 or (b) the Adjustment Number (as defined below) times the aggregate
        per
        share amount of all cash dividends, and the Adjustment Number 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, par value $.001 per share, of the
        Corporation (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 D Participating Preferred Stock. The
“Adjustment Number” shall initially be 1,000. In the event the Corporation shall
        at any time after March 16, 2006, (i) declare and pay any dividend on Common
        Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
        Stock or (iii) combine the outstanding Common Stock into a smaller number
        of
        shares, then in each such case the Adjustment Number in effect immediately
        prior
        to such event shall be adjusted by multiplying such Adjustment 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) The
        Corporation shall declare a dividend or distribution on the Series D
        Participating Preferred Stock as provided in paragraph (A) above immediately
        after it declares a dividend or distribution on the Common Stock (other than
        a
        dividend payable in shares of Common Stock).

       

      (C) Dividends
        shall begin to accrue and be cumulative on outstanding shares of Series D
        Participating Preferred Stock from the Quarterly Dividend Payment Date next
        preceding the date of issue of such shares of Series D Participating Preferred
        Stock, unless the date of issue of such shares is prior to the record date
        for
        the first Quarterly Dividend Payment Date, in which case dividends on such
        shares shall begin to accrue from the date of issue of such shares, or unless
        the date of issue is a Quarterly Dividend Payment Date or is a date after
        the
        record date for the determination of holders of shares of Series D Participating
        Preferred Stock entitled to receive a quarterly dividend and before such
        Quarterly Dividend Payment Date, in either of which events such dividends
        shall
        begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
        Accrued but unpaid dividends shall not bear interest. Dividends paid on the
        shares of Series D Participating Preferred Stock in an amount less than the
        total amount of such dividends at the time accrued and payable on such shares
        shall be allocated pro rata on a share-by-share basis among all such shares
        at
        the time outstanding. The Board of Directors may fix a record date for the
        determination of holders of shares of Series D Participating Preferred Stock
        entitled to receive payment of a dividend or distribution declared thereon,
        which record date shall be no more than 60 days prior to the date fixed for
        the
        payment thereof.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

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

       

      (A) Each
        share of Series D Participating Preferred Stock shall entitle the holder
        thereof
        to a number of votes equal to the Adjustment Number on all matters submitted
        to
        a vote of the stockholders of the Corporation.

       

      (B) Except
        as
        required by law and by Section 10 hereof, holders of Series D Participating
        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.

       

      (C) If,
        at
        the time of any annual meeting of stockholders for the election of directors,
        the equivalent of six quarterly dividends (whether or not consecutive) payable
        on any share or shares of Series D Participating Preferred Stock are in default,
        the number of directors constituting the Board of Directors of the Company
        shall
        be increased by two. In addition to voting together with the holders of Common
        Stock for the election of other directors of the Company, the holders of
        record
        of the Series D Participating Preferred Stock, voting separately as a class
        to
        the exclusion of the holders of Common Stock, shall be entitled at said meeting
        of stockholders (and at each subsequent annual meeting of stockholders),
        unless
        all dividends in arrears on the Series D Participating Preferred Stock have
        been
        paid or declared and set apart for payment prior thereto, to vote for the
        election of two directors of the Company, the holders of any Series D
        Participating Preferred Stock being entitled to cast a number of votes per
        share
        of Series D Participating Preferred Stock as is specified in paragraph (A)
        of
        this Section 3. Each such additional director shall serve until the next
        annual
        meeting of stockholders for the election of directors, or until his successor
        shall be elected and shall qualify, or until his right to hold such office
        terminates pursuant to the provisions of this Section 3(C). Until the default
        in
        payments of all dividends which permitted the election of said directors
        shall
        cease to exist, any director who shall have been so elected pursuant to the
        next
        preceding sentence may be removed at any time, without cause, only by the
        affirmative vote of the holders of the shares of Series D Participating
        Preferred Stock at the time entitled to cast a majority of the votes entitled
        to
        be cast for the election of any such director at a special meeting of such
        holders called for that purpose, and any vacancy thereby created may be filled
        by the vote of such holders. If and when such default shall cease to exist,
        the
        holders of the Series D Participating Preferred Stock shall be divested of
        the
        foregoing special voting rights, subject to revesting in the event of each
        and
        every subsequent like default in payments of dividends. Upon the termination
        of
        the foregoing special voting rights, the terms of office of all persons who
        may
        have been elected directors pursuant to said special voting rights shall
        forthwith terminate, and the number of directors constituting the Board of
        Directors shall be reduced by two. The voting rights granted by this Section
        3(C) shall be in addition to any other voting rights granted to the holders
        of
        the Series D Participating Preferred Stock in this Section 3.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      4. Certain
        Restrictions.

       

      (A) Whenever
        quarterly dividends or other dividends or distributions payable on the Series
        D
        Participating 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 D Participating Preferred Stock outstanding
        shall have been paid in full, the Corporation shall not:

       

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

       

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

       

      (iii)
        redeem, purchase or otherwise acquire for consideration any shares of Series
        D
        Participating Preferred Stock, or any shares of stock ranking on a parity
        with
        the Series D Participating Preferred Stock, except in accordance with a purchase
        offer made in writing or by publication (as determined by the Board of
        Directors) to all holders of Series D Participating Preferred Stock, or to
        such
        holders and holders of any such shares ranking on a parity therewith, 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.

       

      5. 
        Reacquired Shares. Any
        shares of Series D Participating Preferred Stock purchased or otherwise acquired
        by the Corporation in any manner whatsoever shall be retired promptly after
        the
        acquisition thereof. All such shares shall upon their retirement become
        authorized but unissued shares of Preferred Stock and may be reissued as
        part of
        a new series of Preferred Stock to be created by resolution or resolutions
        of
        the Board of Directors, subject to any conditions and restrictions on issuance
        set forth herein.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      6.  Liquidation,
        Dissolution or Winding Up. (A)
        Upon
        any liquidation, dissolution or winding up of the Corporation, voluntary
        or
        otherwise, no distribution shall be made to the holders of shares of stock
        ranking junior (either as to dividends or upon liquidation, dissolution or
        winding up) to the Series D Participating Preferred Stock unless, prior thereto,
        the holders of shares of Series D Participating Preferred Stock shall have
        received an amount per share (the “Series
        D Liquidation Preference”)
        equal
        to the greater of (i) $1,000 plus an amount equal to accrued and unpaid
        dividends and distributions thereon, whether or not declared, to the date
        of
        such payment, or (ii) the Adjustment Number times the per share amount of
        all
        cash and other property to be distributed in respect of the Common Stock
        upon
        such liquidation, dissolution or winding up of the Corporation.

       

      (B) In
        the
        event, however, that there are not sufficient assets available to permit
        payment
        in full of the Series D Liquidation Preference and the liquidation preferences
        of all other classes and series of stock of the Corporation, if any, that
        rank
        on a parity with the Series D Participating Preferred Stock in respect thereof,
        then the assets available for such distribution shall be distributed ratably
        to
        the holders of the Series D Participating Preferred Stock and the holders
        of
        such parity shares in proportion to their respective liquidation
        preferences.

       

      (C) Neither
        the merger nor consolidation of the Corporation into or with another corporation
        nor the merger or consolidation of any other corporation into or with the
        Corporation shall be deemed to be a liquidation, dissolution or winding up
        of
        the Corporation within the meaning of this Section 6.

       

      7.
         
        Consolidation, Merger, Etc. In
        case
        the Corporation shall enter into any consolidation, merger, combination or
        other
        transaction in which the outstanding 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 D Participating Preferred Stock shall
        at the
        same time be similarly exchanged or changed in an amount per share equal
        to the
        Adjustment Number 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, 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 D Participating 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. In the event the Corporation
        shall
        at any time declare or pay any dividend on the Series D Participating Preferred
        Stock payable in shares of Series D Participating Preferred Stock, or effect
        a
        subdivision, combination or consolidation of the outstanding shares of Series
        D
        Participating Preferred Stock (by reclassification or otherwise than by payment
        of a dividend in shares of Series D Participating Preferred Stock) into a
        greater or lesser number of shares of Series D Participating Preferred Stock,
        then in each such case the amount set forth in the first sentence of this
        Section 7 with respect to the exchange or change of shares of Series D
        Participating Preferred Stock shall be adjusted by multiplying such amount
        by a
        fraction, the numerator of which is the number of shares of Series D
        Participating Preferred Stock that were outstanding immediately prior to
        such
        event and the denominator of which is the number of shares of Series D
        Participating Preferred Stock outstanding immediately after such
        event.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      8. 
        No
        Redemption. Shares
        of
        Series D Participating Preferred Stock shall not be subject to redemption
        by the
        Company.

       

      9. 
        Ranking. The
        Series D Participating Preferred Stock shall rank junior to all other series
        of
        the Preferred Stock as to the payment of dividends and as to the distribution
        of
        assets upon liquidation, dissolution or winding up, unless the terms of any
        such
        series shall provide otherwise, and shall rank senior to the Common Stock
        as to
        such matters.

       

      10.
        Amendment.
        At
        any
        time that any shares of Series D Participating Preferred Stock are outstanding,
        the Certificate 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 D Participating Preferred Stock so as to affect them
        adversely without the affirmative vote of the holders of two-thirds of the
        outstanding shares of Series D Participating Preferred Stock, voting separately
        as a class.

       

      11.
        Fractional
        Shares. Series
        D
        Participating Preferred Stock may be issued in fractions of a share that
        shall
        entitle the holder, in proportion to such holder’s fractional shares, to
        exercise voting rights, receive dividends, participate in distributions and
        to
        have the benefit of all other rights of holders of Series D Participating
        Preferred Stock.

       

      IN
        WITNESS WHEREOF, the undersigned has executed this Certificate this 16th
        day of
        March, 2006.

       

      
        	 	 	 
	 	PEREGRINE
                PHARMACEUTICALS, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
                

              
	 	
                Name:
                  Steven W. King

                Title: President

              

      

       

      
        
          
             

          

          
          

        

        
          6

          
            

          

        

        
          
          

          
          

        

      

      Exhibit
        B

       

      ______
        Rights

      Form
        of
        Right Certificate

       

      Certificate
        No. R-______

       

      NOT
        EXERCISABLE AFTER MARCH 16, 2016 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
        THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT AND TO EXCHANGE ON
        THE
        TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS
        SET
        FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON
        WHO
        IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND
        CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER
        BE
        TRANSFERABLE.

       

      CAPITALIZED
        TERMS USED IN THIS RIGHT CERTIFICATE WITHOUT DEFINITION SHALL HAVE THE MEANING
        ASCRIBED TO THEM IN THE RIGHTS AGREEMENT.

       

      RIGHT
        CERTIFICATE

       

      PEREGRINE
        PHARMACEUTICALS, INC.

       

      This
        certifies that ____________________________ or registered assigns, is the
        registered owner of the number of Rights set forth above, each of which entitles
        the owner thereof, subject to the terms, provisions and conditions of the
        Rights
        Agreement, dated as of March 16, 2006, as the same may be amended from time
        to
        time (the “Rights
        Agreement”),
        between Peregrine Pharmaceuticals, Inc., a Delaware corporation (the
“Company”),
        and
        Integrity Stock Transfer, Inc., as Rights Agent (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., California time,
        on
        March 16, 2016 at the office or agency of the Rights Agent designated for
        such
        purpose, or of its successor as Rights Agent, one one-thousandth of a fully
        paid
        non-assessable share of Series D Participating Preferred Stock, par value
        $.001
        per share (the “Preferred
        Stock”),
        of
        the Company at a purchase price of $11.00 per one one-thousandth
        (1/1000th)
        of a
        share of Preferred Stock (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 Rights
        Certificate (and the number of one one-thousandths of a share of Preferred
        Stock
        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 March 16,
        2006,
        based on the Preferred Stock as constituted at such date. As provided in
        the
        Rights Agreement, the Purchase Price, the number of one one-thousandths
        (1/1000th)
        of a
        share of Preferred Stock (or other securities or property) which may be
        purchased upon the exercise of the Rights and the number of Rights evidenced
        by
        this Right Certificate are subject to modification and adjustment upon the
        happening of certain events.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      This
        Rights Certificate is subject to all of the terms, provisions and conditions
        of
        the Rights Agreement, which terms, provisions and conditions are hereby
        incorporated herein by reference and made a part hereof and to which Rights
        Agreement reference is hereby made for a full description of the rights,
        limitations of rights, obligations, duties and immunities hereunder of the
        Rights Agent, the Company and the holders of the Right Certificates. Copies
        of
        the Rights Agreement are on file at the principal executive offices of the
        Company and the above-mentioned office or agency of the Rights Agent. The
        Company will mail to the holder of this Right Certificate a copy of the Rights
        Agreement without charge after receipt of a written request
        therefor.

       

      This
        Right Certificate, with or without other Right Certificates, upon surrender
        at
        the office or agency of the Rights Agent designated for such purpose, 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 shares of Preferred Stock as the Rights evidenced by the Right Certificate
        or
        Right Certificates surrendered shall have entitled such holder to purchase.
        If
        this Right Certificate shall be exercised in part, the holder shall be entitled
        to receive upon surrender hereof another Right Certificate or Right Certificates
        for the number of whole Rights not exercised.

       

      Subject
        to the provisions of the Rights Agreement, the Rights evidenced by this
        Certificate (i) may be redeemed by the Company at a redemption price of $.001
        per Right or (ii) may be exchanged in whole or in part for shares of the
        Company’s Common Stock, par value $.001 per share, or shares of Preferred
        Stock.

       

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

       

      No
        holder
        of this Right Certificate, as such, shall be entitled to vote or receive
        dividends or be deemed for any purpose the holder of the Preferred Stock
        or of
        any other securities of the Company which may at any time be issuable on
        the
        exercise or exchange 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 or exchanged as provided in the Rights
        Agreement.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      WITNESS
        the facsimile signature of the proper officers of the Company and its corporate
        seal. Dated as of _________, 20___.

       

      
        	 	 	 
	 	PEREGRINE
                PHARMACEUTICALS, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
                

              
	 	
                Name:

                Title:

              

      

       

      ATTEST:

       

      ____________________________________

       

      Countersigned:

       

      Integrity
        Stock Transfer, Inc., as Rights Agent

       

      By__________________________________

      Authorized
        Signature

      

       

      
        
          
             

          

          
          

        

        
          3

          
            

          

        

        
          
          

          
          

        

      

      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)

       

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

       

      Dated:
        ____________________________

       

                  ____________________________________

                  Signature

       

      Signature
        Guaranteed:

       

      Signatures
        must be guaranteed by a bank, trust company, broker, dealer or other “eligible
        guarantor institution,” as defined in Rule 17Ad -15 promulgated under the
        Securities Exchange Act of 1934, as amended, participating in a recognized
        signature guarantee medallion program.

       

      ..............................................................................................................

       

      (To
        be
        completed)

       

      The
        undersigned hereby certifies that the Rights evidenced by this Right Certificate
        are not beneficially owned by, and are not being assigned to 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 undersigned did
        not
        acquire the Rights evidenced by this Right Certificate from any person who
        is,
        was, or subsequently became an Acquiring Person, or an Affiliate or Associate
        thereof.

       

                                                  ____________________________________

                                  Signature

       

      

       

      
        
          
             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      Form
        of
        Reverse Side of Right Certificate - continued

       

      FORM
        OF ELECTION TO PURCHASE

       

      (To
        be
        executed if holder desires to exercise

      Rights
        represented by the Rights Certificate)

       

      To
        PEREGRINE PHARMACEUTICALS, INC.

       

      The
        undersigned hereby irrevocably elects to exercise ________ Rights represented
        by
        this Right Certificate to purchase the shares of Preferred Stock (or other
        securities or property) issuable upon the exercise of such Rights and requests
        that certificates for such shares of Preferred Stock (or such other securities)
        be issued in the name of:

       

      _________________________________________________________________________

      (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
        must conform to holder specified on Right Certificate)

       

      Signature
        Guaranteed:

       

      Signature
        must be guaranteed by a bank, trust company, broker, dealer or other “eligible
        guarantor institution,” as defined in Rule 17Ad -15 promulgated under the
        Securities Exchange Act of 1934, as amended, participating in a recognized
        signature guarantee medallion program.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Form
        of
        Reverse Side of Right Certificate - continued

       

      _________________________________________________________________________

      (To
        be
        completed)

       

      The
        undersigned 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 undersigned’s best knowledge, the undersigned did not acquire
        the Rights from any person who is, was or subsequently became an Acquiring
        Person or an Affiliate or Associate thereof.

       

                                                          ____________________________________

                                                          Signature

       

      _________________________________________________________________________

       

      NOTICE

       

      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, such Assignment
        or
        Election to Purchase will not be honored.

       

      

      
        
          
             

          

          
          

        

        
          2

          
            

          

        

        
          
          

          
          

        

      

      Exhibit
        C

       

      UNDER
        CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED
        BY OR
        TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED
        IN
        THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND
        VOID
        AND WILL NO LONGER BE TRANSFERABLE.

       

      SUMMARY
        OF RIGHTS TO PURCHASE

      SHARES
        OF
        PREFERRED STOCK OF

      PEREGRINE
        PHARMACEUTICALS, INC.

       

      On
        March
        16, 2006, the Board of Directors of Peregrine Pharmaceuticals, Inc. (the
        “Company”)
        declared a dividend of one preferred share purchase right (a “Right”)
        for
        each outstanding share of common stock, par value $.001 per share, of the
        Company (the “Common
        Stock”).
        The
        dividend is payable on March 27, 2006 (the “Record
        Date”)
        to the
        stockholders of record on that date. Each Right entitles the registered holder
        to purchase from the Company one one-thousandth (1/1000th)
        of a
        share of Series D Participating Preferred Stock, par value $.001 per share,
        of
        the Company (the “Preferred
        Stock”)
        at a
        price of $11.00 per one one-thousandth (1/1000th)
        of a
        share of Preferred Stock (the “Purchase
        Price”),
        subject to adjustment. The description and terms of the Rights are set forth
        in
        a Rights Agreement dated as of March 16, 2006, as the same may be amended
        from
        time to time (the “Rights
        Agreement”),
        between the Company and Integrity Stock Transfer, Inc., as Rights Agent (the
        “Rights
        Agent”).

       

      Until
        the
        earlier to occur of (i) 10 days following a public announcement that a person
        or
        group of affiliated or associated persons (with certain exceptions, an
“Acquiring
        Person”)
        has
        acquired beneficial ownership of 15% or more of the outstanding shares of
        Common
        Stock or (ii) 10 business days (or such later date as may be determined by
        action of the Board of Directors prior to such time as any person or group
        of
        affiliated persons becomes an Acquiring Person) following the commencement
        of,
        or announcement of an intention to make, a tender offer or exchange offer
        the
        consummation of which would result in the beneficial ownership by a person
        or
        group of 15% or more of the outstanding shares of Common Stock (the earlier
        of
        such dates being called the “Distribution
        Date”),
        the
        Rights will be evidenced, with respect to any of the Common Stock certificates
        outstanding as of the Record Date, by such Common Stock certificate together
        with a copy of this Summary of Rights.

       

      The
        Rights Agreement provides that, until the Distribution Date (or earlier
        redemption or expiration of the Rights), the Rights will be transferred with
        and
        only with the Common Stock. Until the Distribution Date (or earlier redemption
        or expiration of the Rights), new Common Stock certificates issued after
        the
        Record Date upon transfer or new issuances of Common Stock will contain a
        notation incorporating the Rights Agreement by reference. Until the Distribution
        Date (or earlier redemption or expiration of the Rights), the surrender for
        transfer of any certificates for shares of Common Stock outstanding as of
        the
        Record Date, even without such notation or a copy of this Summary of Rights,
        will also constitute the transfer of the Rights associated with the shares
        of
        Common Stock represented by such certificate. As soon as practicable following
        the Distribution Date, separate certificates evidencing the Rights
        (“Right
        Certificates”)
        will
        be mailed to holders of record of the Common Stock as of the close of business
        on the Distribution Date and such separate Right Certificates alone will
        evidence the Rights.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      The
        Rights are not exercisable until the Distribution Date. The Rights will expire
        at the close of business on March 16, 2016 (the “Final
        Expiration Date”),
        unless the Final Expiration Date is advanced or extended or unless the Rights
        are earlier redeemed or exchanged by the Company, in each case as described
        below.

       

      The
        Purchase Price payable, and the number of shares of Preferred Stock or other
        securities or property issuable, upon exercise of the Rights is subject to
        adjustment from time to time to prevent dilution (i) in the event of a stock
        dividend on, or a subdivision, combination or reclassification of, the Preferred
        Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
        or warrants to subscribe for or purchase Preferred Stock at a price, or
        securities convertible into Preferred Stock with a conversion price, less
        than
        the then-current market price of the Preferred Stock or (iii) upon the
        distribution to holders of the Preferred Stock of evidences of indebtedness
        or
        assets (excluding regular periodic cash dividends or dividends payable in
        Preferred Stock) or of subscription rights or warrants (other than those
        referred to above).

       

      The
        number of outstanding Rights is subject to adjustment in the event of a stock
        dividend on the Common Stock payable in shares of Common Stock or subdivisions,
        consolidations or combinations of the Common Stock occurring, in any such
        case,
        prior to the Distribution Date.

       

      Shares
        of
        Preferred Stock purchasable upon exercise of the Rights will not be redeemable.
        Each share of Preferred Stock will be entitled, when, as and if declared,
        to a
        minimum preferential quarterly dividend payment of $1.00 per share but will
        be
        entitled to an aggregate dividend of 1,000 times the dividend declared per
        share
        of Common Stock. In the event of liquidation, dissolution or winding up of
        the
        Company, the holders of the Preferred Stock will be entitled to a minimum
        preferential payment of $1,000 per share (plus any accrued but unpaid dividends)
        but will be entitled to an aggregate payment of 1,000 times the payment made
        per
        share of Common Stock. Each share of Preferred Stock will have 1,000 votes,
        voting together with the Common Stock. Finally, in the event of any merger,
        consolidation or other transaction in which outstanding shares of Common
        Stock
        are converted or exchanged, each share of Preferred Stock will be entitled
        to
        receive 1,000 times the amount received per share of Common Stock. These
        rights
        are protected by customary antidilution provisions.

       

      Because
        of the nature of the Preferred Stock’s dividend, liquidation and voting rights,
        the value of the one one-thousandth interest in a share of Preferred Stock
        purchasable upon exercise of each Right should approximate the value of one
        share of Common Stock.

       

      In
        the
        event that any person or group of affiliated or associated persons becomes
        an
        Acquiring Person, each holder of a Right, other than Rights beneficially
        owned
        by the Acquiring Person (which will thereupon become void), will thereafter
        have
        the right to receive upon exercise of a Right that number of shares of Common
        Stock having a market value of two times the exercise price of the
        Right.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      In
        the
        event that, after a person or group has become an Acquiring Person, the Company
        is acquired in a merger or other business combination transaction or 50%
        or more
        of its consolidated assets or earning power are sold, proper provisions will
        be
        made so that each holder of a Right (other than Rights beneficially owned
        by an
        Acquiring Person which will have become void) will thereafter have the right
        to
        receive upon the exercise of a Right that number of shares of common stock
        of
        the person with whom the Company has engaged in the foregoing transaction
        (or
        its parent) that at the time of such transaction have a market value of two
        times the exercise price of the Right.

       

      At
        any
        time after any person or group becomes an Acquiring Person and prior to the
        earlier of one of the events described in the previous paragraph or the
        acquisition by such Acquiring Person of 50% or more of the outstanding shares
        of
        Common Stock, the Board of Directors may cause the Company to exchange the
        Rights (other than Rights owned by such Acquiring Person which will have
        become
        void), in whole or in part, for shares of Common Stock or Preferred Stock
        (or a
        series of the Company’s preferred stock having equivalent rights, preferences
        and privileges), at an exchange ratio of one share of Common Stock, or a
        fractional share of Preferred Stock (or other preferred stock) equivalent
        in
        value thereto, per Right.

       

      With
        certain exceptions, no adjustment in the Purchase Price will be required
        until
        cumulative adjustments require an adjustment of at least 1% in such Purchase
        Price. No fractional shares of Preferred Stock or Common Stock will be issued
        (other than fractions of Preferred Stock which are integral multiples of
        one
        one-thousandth of a share of Preferred Stock, which may, at the election
        of the
        Company, be evidenced by depositary receipts), and in lieu thereof an adjustment
        in cash will be made based on the current market price of the Preferred Stock
        or
        the Common Stock.

       

      At
        any
        time prior to the time an Acquiring Person becomes such, the Board of Directors
        of the Company may redeem the Rights in whole, but not in part, at a price
        of
        $.001 per Right (the “Redemption
        Price”)
        payable, at the option of the Company, in cash, shares of Common Stock or
        such
        other form of consideration as the Board of Directors of the Company shall
        determine. The redemption of the Rights may be made effective at such time,
        on
        such basis and with such conditions as the Board of Directors in its sole
        discretion may establish. Immediately upon any redemption of the Rights,
        the
        right to exercise the Rights will terminate and the only right of the holders
        of
        Rights will be to receive the Redemption Price.

       

      For
        so
        long as the Rights are then redeemable, the Company may, except with respect
        to
        the Redemption Price, amend the Rights Agreement in any manner. After the
        Rights
        are no longer redeemable, the Company may, except with respect to the Redemption
        Price, amend the Rights Agreement in any manner that does not adversely affect
        the interests of holders of the Rights.

       

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

       

      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-K dated March 17, 2006.
        A
        copy of the Rights Agreement is available free of charge from the Company.
        This
        summary description of the Rights does not purport to be complete and is
        qualified in its entirety by reference to the Rights Agreement, as the same
        may
        be amended from time to time, which is hereby incorporated herein by
        reference.

       

      3<PAGE>

EXHIBIT 10.3

               AMENDMENT TO EMPLOYMENT AGREEMENT - MICHAEL TREPETA

                        ACE MARKETING & PROMOTIONS, INC.
                               457 ROCKAWAY AVENUE
                             VALLEY STREAM, NY 11581
                                 (516) 256-7766

                                December 28, 2005

To:      Michael D. Trepeta

         This is to confirm that in lieu of the provisions of paragraph 6(ii) of
your employment contract dated March 1, 2005, you have agreed to accept an
immediate grant of Non-Statutory Stock Options to purchase 200,000 shares of the
Corporation's Common Stock at an exercise price of $1.20 per share, exercisable
from the Vesting Date as herein defined through December 28, 2015. On December
28, 2005 and on December 28, 2008, Options to purchase 100,000 shares shall vest
on each of the foregoing dates and each date shall be considered a "Vesting
Date." It is understood that in the event you terminate your employment with the
Corporation prior to December 28, 2008, you shall not be entitled to retain any
unvested Options. It is agreed that the following sentence shall be added to
paragraph 6(ii) of your employment contract: "The Board of Directors or a
Compensation Committee thereof shall have the right in its sole discretion to
grant Trepeta additional Options or other securities and other forms of
compensation at any time in the future."

                                      Very truly yours,

                                      ACE MARKETING & PROMOTIONS, INC.

                                      /s/ Dean L. Julia, Chief Executive Officer
                                      ------------------------------------------

Agreed to and accepted by:

/s/ Michael D. Trepeta
----------------------------

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