10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to         

Commission file number 000-25769

ACCREDO HEALTH, INCORPORATED

(Exact name of registrant as specified in its charter)

DELAWARE	62-1642871
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1640 CENTURY CENTER PKWY, SUITE 101, MEMPHIS, TN 38134

(Address of principal executive offices)         (Zip Code)

(901) 385-3688

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year,
if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X    No

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  X    No

APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

CLASS	OUTSTANDING AT April 29, 2003
COMMON STOCK, $0.01 PAR VALUE		47,770,482
TOTAL COMMON STOCK		47,770,482

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TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS.
		CONDENSED CONSOLIDATED STATEMENTS OF INCOME
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS.
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
	Signatures
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit Index
EX-3.1 CERTIFICATE OF DESIGNATION
EX-4.1 STOCKHOLDER PROTECTION RIGHTS AGREEMENTS
EX-99.1 SECTION 906 CERTIFICATION OF THE CEO
EX-99.1 SECTION 906 CERTIFICATION OF THE CFO

ACCREDO HEALTH, INCORPORATED
INDEX

	Part I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Income (Loss) (unaudited) For the three months and nine months ended March 31, 2002 and 2003
	Condensed Consolidated Balance Sheets June 30, 2002 and March 31, 2003 (unaudited)
	Condensed Consolidated Statements of Cash Flows (unaudited) For the nine months ended March 31, 2002 and 2003
	Notes to Condensed Consolidated Financial Statements (unaudited)
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosure About Market Risk
Item 4.	Controls and Procedures
	Part II - OTHER INFORMATION
Item 1.	Legal Proceedings
Item 2.	Changes in Securities and Use of Proceeds
Item 6.	Exhibits and Reports on Form 8-K
Note:	Items 3, 4 and 5 of Part II are omitted because they are not applicable

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000’S OMITTED, EXCEPT SHARE DATA)
(UNAUDITED)

		Nine Months Ended March 31,						Three Months Ended March 31,
		2003			2002			2003			2002
Net patient revenue		$	1,024,132		$	451,408		$	357,828		$	173,563
Other revenue			27,259			12,478			8,336			4,362
Equity in net income of joint ventures			1,345			1,445			405			572
Total revenues			1,052,736			465,331			366,569			178,497
Cost of sales			836,938			391,766			290,267			148,995
Gross profit			215,798			73,565			76,302			29,502
General & administrative			97,174			31,154			33,761			11,851
Bad debts (note 2)			80,485			3,826			66,243			1,770
Depreciation and amortization			8,658			2,369			3,085			907
Income (loss) from operations			29,481			36,216			(26,787	)		14,974
Interest income (expense), net			(6,084	)		838			(2,014	)		38
Minority interest in consolidated subsidiary			(1,510	)		(966	)		(507	)		(333	)
Income (loss) before income taxes			21,887			36,088			(29,308	)		14,679
Provision for income tax expense (benefit)			8,637			14,006			(11,539	)		5,691
Net income (loss)		$	13,250		$	22,082		$	(17,769	)	$	8,988
Cash dividends declared on common stock		$	—		$	—		$	—		$	—
Earnings (loss) per share:
	Basic	$	0.28		$	0.56		$	(0.37	)	$	0.23
	Diluted	$	0.27		$	0.55		$	(0.37	)	$	0.22
Weighted average shares outstanding:
	Basic		47,419,325			39,113,457			47,698,820			39,262,335
	Diluted		48,488,663			40,459,524			48,541,507			40,718,429

See accompanying notes to condensed consolidated financial statements.

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ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(000’S OMITTED, EXCEPT SHARE DATA)

		(Unaudited)
		March 31,			June 30,
		2003			2002
ASSETS
Current assets:
	Cash and cash equivalents	$	32,062		$	42,913
	Patient accounts receivable, less allowance for doubtful accounts of $134,618 at March 31, 2003 and $81,758 at June 30, 2002		311,718			335,253
	Due from affiliates		2,772			2,255
	Other accounts receivable		21,596			22,555
	Inventories		106,692			120,809
	Prepaids and other current assets		2,300			3,470
	Income taxes receivable		16,246			—
	Deferred income taxes		9,658			5,954
Total current assets			503,044			533,209
Property and equipment, net			30,650			23,796
Other assets:
	Joint venture investments		5,332			4,637
	Goodwill, net		353,107			334,919
	Other intangible assets, net		23,744			28,268
Total assets		$	915,877		$	924,829
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable	$	191,600		$	185,047
	Accrued expenses		20,854			31,369
	Income taxes payable		—			1,701
	Current portion of long-term debt		16,250			5,312
Total current liabilities			228,704			223,429
Long-term debt			182,500			224,688
Deferred income taxes			7,013			4,383
Minority interest in consolidated joint venture			2,285			1,275
Stockholders’ equity:
	Undesignated Preferred Stock, 5,000,000 shares authorized, no shares issued		—			—
	Common Stock, $.01 par value; 100,000,000 shares authorized; 47,770,482 and 46,993,581 shares issued and outstanding at March 31, 2003 and June 30, 2002, respectively		478			470
	Additional paid-in capital		424,308			413,004
	Accumulated other comprehensive loss		(240	)		—
	Retained earnings		70,829			57,580
Total stockholders’ equity			495,375			471,054
Total liabilities and stockholders’ equity		$	915,877		$	924,829

See accompanying notes to condensed consolidated financial statements.

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ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000’S OMITTED)
(UNAUDITED)

		Nine Months Ended
		March 31,
		2003			2002
OPERATING ACTIVITIES:
Net income		$	13,250		$	22,082
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		9,941			2,369
	Provision for losses on accounts receivable		80,484			3,826
	Deferred income tax benefit		(1,074	)		(19	)
	Compensation resulting from stock transactions		—			139
	Tax benefit of disqualifying disposition of stock options		4,430			2,148
	Minority interest in income of consolidated joint venture		1,510			966
Changes in operating assets and liabilities:
	Patient receivables and other		(60,132	)		(49,333	)
	Due from affiliates		(517	)		230
	Inventories		14,117			(25,197	)
	Prepaids and other current assets		1,170			(141	)
	Accounts payable and accrued expenses		3,418			44,286
	Income taxes payable		(17,947	)		2,116
Net cash provided by operating activities			48,650			3,472
INVESTING ACTIVITIES:
Purchases of marketable securities			—			(6,000	)
Proceeds from sales and maturities of marketable securities			—			7,000
Purchases of property and equipment			(12,662	)		(4,466	)
Business acquisitions and joint venture investments			(21,275	)		(47,467	)
Change in joint venture investments, net			(1,196	)		(1,805	)
Net cash used in investing activities			(35,133	)		(52,738	)
FINANCING ACTIVITIES:
Decrease in long-term notes payable			(31,250	)		(6,111	)
Issuance of common stock			6,882			1,960
Net cash used in financing activities			(24,368	)		(4,151	)
Decrease in cash and cash equivalents			(10,851	)		(53,417	)
Cash and cash equivalents at beginning of period			42,913			54,520
Cash and cash equivalents at end of period		$	32,062		$	1,103

     See accompanying notes to condensed consolidated financial statements.

6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2003

1. BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the condensed consolidated financial position, results of operations and cash flows of Accredo Health, Incorporated (the “Company” or “Accredo”) have been included. Operating results for the three and nine-month periods ended March 31, 2003, are not necessarily indicative of the results that may be expected for the fiscal year ended June 30, 2003.

     The balance sheet at June 30, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

     For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2002.

2. BAD DEBT CHARGE

     Our bad debt expense increased from $1.8 million in the three months ended March 31, 2002 to $66.2 million in the three months ended March 31, 2003. Bad debt expense for the nine months ended March 31, 2003, increased to $80.5 million from $3.8 million in the nine months ended March 31, 2002.

     During the March quarter, the Company completed an analysis and evaluation of historical collection rates and other data used in the estimation of the Company’s allowance for doubtful accounts based on experience up to and including the current quarter. Included in the third quarter and nine month results is a charge of $58.5 million to increase the allowance for doubtful accounts applicable to accounts receivable of the Specialty Pharmaceutical Services division (“SPS division”), which we acquired on June 13, 2002. As a result of the evaluation conducted during the March quarter, we determined that the historical collection rates and other data used in estimating the reserves for contractual expense and bad debts had not provided a sufficient reserve against the recorded accounts receivable for the SPS division. If the collection rates and other data we used in estimating the reserves during the March quarter had been used at January 1, 2003, a $58.5 million charge would have been recorded as of that date.

     On May 5, 2003 we amended our credit facility with Bank of America, N.A. and other participating banks to exclude the bad debt charge recorded in the March 2003 quarter from the calculation of Consolidated EBITDA, as defined in the credit facility, and to reduce the Consolidated Net Worth requirement, as defined in the credit facility, to allow for a reduction in the minimum net worth requirement equal to the net loss incurred in the March 2003 quarter. We paid Bank of America, N. A. $200,000 as an administrative fee to obtain the amendment. We also paid the members of the lending syndicate under the credit facility a one time fee equal to 12.5 basis points of their outstanding credit commitment. Finally, we agreed to a 25 basis point increase in interest rates under the credit facility for a period of twelve months beginning May 15, 2003 and ending May 15, 2004.

3. STOCKHOLDERS’ EQUITY

     During the quarter ended March 31, 2003, employees and directors exercised stock options to acquire 193,114 shares of Accredo common stock for a weighted average exercise price of $8.44 per share.

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4. COMPREHENSIVE INCOME

     Comprehensive income includes changes in the fair value of certain derivative financial instruments that qualify for hedge accounting. Comprehensive income for all periods presented is as follows:

	Nine Months Ended March 31,					Three Months Ended March 31,
	2003			2002		2003			2002
Reported net income (loss)	$	13,250		$	22,082	$	(17,769	)	$	8,988
Unrealized gain (loss) on interest rate swap contracts, net of tax benefit		(240	)		—		126			—
Comprehensive income (loss)	$	13,010		$	22,082	$	(17,643	)	$	8,988

The adjustments made in computing comprehensive income are reflected as a component of stockholders equity under the heading “accumulated other comprehensive loss”.

5. STOCKHOLDER PROTECTION RIGHTS AGREEMENT

On April 21, 2003, we adopted a stockholder protection rights agreement (the “Rights Plan”) and issued Rights in connection with the Rights Plan. The Rights Plan provided that a dividend of one share purchase Right be issued for each outstanding share of common stock to stockholders of record as of the close of business on April 28, 2003. Generally, the Rights are exercisable only if a person or group (other than certain existing shareholders) acquires 15% or more of our common stock or announces a tender offer upon consummation of which, such person or group would beneficially own 15% or more of our common stock. Each Right entitles stockholders to buy one ten-thousandth of a share of a new series of junior participating preferred stock at an exercise price of $100.

If the Rights become exercisable, a Rights holder (other than the person or group acquiring 15% or more) will be entitled to purchase, at the Right’s then-current exercise price, a number of shares of our common stock having a market value of twice such price. If after a person has acquired 15% or more of our common stock, we are acquired by such person, each Right will entitle its holder to purchase, at the Right’s then-current exercise price, a number of shares of the acquiring company’s common stock having market value of twice such price. Following the acquisition of 15% or more of our common stock, but less than 50% by any person or group, the Board may exchange the Rights (other than Rights owned by such person or group) at an exchange ratio of one share of our common stock for each Right.

6. LITIGATION

Commencing April 8, 2003, several substantially similar putative class action lawsuits were filed in the United States District Court for the Western District of Tennessee, Memphis Division. At this time, the Company is aware of four such lawsuits, but only two of the complaints have been served. It is possible that additional lawsuits may be filed. The lawsuits name the Company, David D. Stevens, Joel Kimbrough and in one case John R. Grow, as Defendants. The Company will seek to consolidate these lawsuits and any additional putative class action lawsuits that are filed. The lawsuits allege violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and Section 20 of the Securities Exchange Act of 1934. The putative class representatives seek to represent a class of individuals and entities that purchased Company stock during the period June 16, 2002 through April 7, 2003 and who supposedly suffered damages from the alleged violations of the securities laws.

In addition, on April 17, 2003, a purported derivative lawsuit was filed in the Circuit Court of Shelby County, Tennessee for the Thirtieth Judicial District at Memphis. The derivative action names David D. Stevens, John R. Grow, Kyle J. Callahan, Kevin L. Roberg, Kenneth R. Masterson, Kenneth J. Melkus, Dick R. Gourley, Nancy Ann Deparle, Joel R. Kimbrough, Thomas W. Bell, Jr., and Patrick J. Welsh as defendants. The derivative lawsuit alleges that the defendants breached fiduciary duties owed to the Company by engaging in the same alleged conduct that is the basis of the putative class action lawsuits. On behalf of the Company, the derivative complaint seeks compensatory damages from the defendants and the disgorgement of profits, benefits and other compensation received by the defendants.

Although we believe the claims in these lawsuits are without merit, the ultimate outcome of these lawsuits cannot be predicted with certainty. We are not in a position at this time to quantify the amount or range of expenses or possible losses related to these claims.

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7. PRO FORMA NET INCOME EFFECT OF COMPANY STOCK OPTION PLANS

Pro forma information regarding net income is required by Statement of Financial Accounting Standards Number 123 (“Statement 123”) and has been determined as if the Company had accounted for its employee stock options under the fair value method of Statement 123. Significant assumptions used by the Company in the Black-Scholes option pricing model computations are as follows for the periods ended March 31:

	2002			2003
Risk-free interest rate	3.56% to 4.41%			2.61% to 3.15%
Dividend yield		0	%		0	%
Volatility factor		.65			.64
Weighted-average expected life	4.0 years			4.0 years
Estimated turnover		8	%		8	%

The Black-Scholes option model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro forma information for the nine and three month periods ended March 31 is as follows (in thousands, except share data):

		Nine Months Ended						Three Months Ended
		March 31,			March 31,			March 31,			March 31,
		2003			2002			2003			2002
Net income (loss), as reported		$	13,250		$	22,082		$	(17,769	)	$	8,988
Less stock-based employee compensation cost, net of related tax effects, applying the fair value method to all awards			(7,561	)		(2,725	)		(3,013	)		(1,250	)
Pro forma net income (loss)		$	5,689		$	19,357			(20,782	)	$	7,738
Earnings (loss) per share:
	Basic — as reported	$	0.28		$	0.56		$	(0.37	)	$	0.23
	Basic — pro forma	$	0.12		$	0.49		$	(0.44	)	$	0.20
	Diluted — as reported	$	0.27		$	0.55		$	(0.37	)	$	0.22
	Diluted — pro forma	$	0.12		$	0.48		$	(0.44	)	$	0.19

8. GOODWILL

On February 11, 2003, our obligations became fixed to make a $16 million earn-out payment in connection with our acquisition of BioPartners In Care, Inc. This obligation was paid during the quarter and was recorded as an increase in the goodwill related to the acquisition.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

Some of the information in this quarterly report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “estimate” and “continue” or similar words. You should read statements that contain these words carefully for the following reasons:

• the statements discuss our future expectations;

• the statements contain projections of our future earnings or of our financial condition; and

• the statements state other “forward-looking” information.

Specifically, this report contains, among others, forward-looking statements about:

• our expectations regarding our product mix for periods following March 31, 2003;

• our expectations regarding our payor mix for periods following March 31, 2003;

• our expectations regarding the scope and cost of our capital expenditures following March 31, 2003;

• our sources and availability of funds to satisfy our working capital needs;

• our critical accounting policies; and

• our expectations regarding the percentage of our revenues attributable to federal and state programs.

The forward-looking statements contained in this report reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties. Many important factors could cause our actual results or achievements to differ materially from any future results or achievements expressed in or implied by our forward-looking statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict. Important factors that could cause actual results or achievements to differ materially from the results or achievements reflected in our forward-looking statements include, among other things, the factors discussed in Part I, Item 2 of this report under the sub-heading “Risk Factors.”

You should read this report, the information incorporated by reference into this report and the documents filed as exhibits to this report completely and with the understanding that our actual future results or achievements may be materially different from what we currently expect or anticipate. You should be aware that the occurrence of any of the events described in the risk factors discussed elsewhere in this quarterly report and other events that we have not predicted or assessed could have a material adverse effect on our earnings, financial condition and business. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

RESULTS OF OPERATIONS

ACQUISITION

On June 13, 2002, we acquired the Specialty Pharmaceutical Services Division (“SPS division”) of Gentiva Health Services, Inc. (“Gentiva”). We acquired substantially all of the assets used in the SPS division including 100% of the outstanding stock in three of Gentiva’s subsidiaries that were exclusively in the business conducted by the SPS division. The SPS division provides specialty retail pharmacy services relating to the treatment of patients with certain costly chronic diseases. In addition to the diseases previously served by us, the SPS division is also a leading provider of specialty retail pharmacy services to patients with Pulmonary Arterial Hypertension (PAH). As a result of the acquisition, we expect to be a leading specialty retail pharmacy. The aggregate purchase price paid was $464.7 million (including $14.6 million of acquisition related costs) and consisted of $218 million of cash and accrued liabilities and 7,591,464 shares of common stock valued at $246.7 million. The results of the SPS division’s operations have been included in the consolidated financial statements since June 14, 2002.

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BAD DEBT CHARGE

Our bad debt expense increased from $1.8 million in the three months ended March 31, 2002 to $66.2 million in the three months ended March 31, 2003. Bad debt expense for the nine months ended March 31, 2003, increased to $80.5 million from $3.8 million in the nine months ended March 31, 2002.

During the March quarter, the Company completed an analysis and evaluation of historical collection rates and other data used in the estimation of the Company’s allowance for doubtful accounts based on experience up to and including the current quarter. Included in the third quarter and nine month results is a charge of $58.5 million to increase the allowance for doubtful accounts applicable to accounts receivable of the Specialty Pharmaceutical Services division (“SPS division”), which we acquired on June 13, 2002. As a result of the evaluation conducted during the March quarter, we determined that the historical collection rates and other data used in estimating the reserves for contractual expense and bad debts had not provided a sufficient reserve against the recorded accounts receivable for the SPS division. If the collection rates and other data we used in estimating the reserves during the March quarter had been used at January 1, 2003, a $58.5 million charge would have been recorded as of that date.

OVERVIEW

We provide specialty retail pharmacy services for the treatment of patients with costly, chronic diseases. We derive revenues primarily from the retail sale of 15 drugs to patients. We focus almost exclusively on a limited number of complex and expensive drugs that serve small patient populations. The following table presents the percentage of our total revenues generated from sales with respect to the diseases that we primarily serve:

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2003			2002			2003			2002
Hemophilia and Autoimmune Disorders		35	%		27	%		37	%		25	%
Multiple Sclerosis		13	%		27	%		15	%		32	%
Pulmonary Arterial Hypertension		13	%		0	%		13	%		0	%
Gaucher Disease		9	%		16	%		10	%		19	%
Growth Hormone-Related Disorders		6	%		8	%		7	%		9	%
Respiratory Syncytial Virus		11	%		19	%		6	%		13	%

Reimbursement for the products we sell comes from governmental payors, Medicare and Medicaid, and non-governmental payors. The following table presents the percentage of our total revenues reimbursed by these payors:

		Year Ended			Year Ended			Nine Months Ended
		June 30, 2001			June 30, 2002			March 31, 2003
Non-governmental			81	%		79	%		72	%
Governmental:
	Medicaid		17	%		19	%		20	%
	Medicare		2	%		2	%		8	%

The increase in Medicare reimbursement and the related decrease in non-governmental reimbursement is due to the increase in revenues from hemophilia factor and the PAH products, Flolan® and Remodulin, as a result of the acquisition of the SPS division. These are the only products we distribute for which we are reimbursed directly by Medicare. We anticipate that our payor mix for the remainder of our fiscal year 2003 will be similar to the payor mix achieved in the nine months ended March 31, 2003.

THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002

Revenues. Total revenues increased 105% from $178.5 million to $366.6 million from the three months ended March 31, 2002 to the three months ended March 31, 2003. Net patient revenues increased 106% from $173.6 million to $357.8 million from the three months ended March 31, 2002 to the three months ended March 31, 2003. The increase is primarily due to the acquisition of the SPS division from Gentiva in June 2002. In addition, we experienced volume growth with the addition of new patients and additional sales of product to existing patients. We also experienced an increase in our seasonal drug Synagis® for the treatment of Respiratory Syncytial Virus (RSV) as a result of increased patient volume. Sales of Synagis® are seasonal and the majority of our sales occur during the second and third quarters of our fiscal year.

As the product mix table above indicates, the acquisition of the SPS business resulted in a significant increase in the percentage of our revenues related to hemophilia, autoimmune disorders and PAH from 27% to 48% from the three months ended March 31, 2002 to the three months ended March 31, 2003. In addition, the acquisition of the SPS business resulted in a significant decrease in the percentage of our revenues related to multiple sclerosis, Gaucher disease and Respiratory Syncytial Virus from 62% to 33% from the three months ended March 31, 2002 to the three months ended March 31, 2003.

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During the March quarter, we completed the transition to distributing Bio-Technology General Corp.’s products Oxandrin® and Delatestryl® on a consignment basis. As a result of this transition, we will no longer record the revenue for the sale of these products, but we will continue to receive and record a distribution fee. Revenues from Oxandrin® and Delatestryl® amounted to approximately $21 million in the March quarter.

Cost of sales. Cost of sales increased 95% from $149.0 million to $290.3 million from the three months ended March 31, 2002 to the three months ended March 31, 2003, which is commensurate with the increase in revenues discussed above. As a percentage of revenues, cost of sales decreased from 83.5% to 79.2% from the three months ended March 31, 2002 to the three months ended March 31, 2003 resulting in gross margins of 16.5% and 20.8% for the three months ended March 31, 2002 and 2003, respectively. Gross margins for the individual products have remained relatively stable. However, the change in product mix as a result of the SPS acquisition discussed above resulted in an increase in the composite gross margin in the three months ended March 31, 2003. The primary drivers for the improvement in gross margins were increased revenues from our higher margin products. In addition, we benefited from lower acquisition costs on some products that we distribute.

General and Administrative. General and administrative expenses increased from $11.9 million to $33.8 million, or 184%, from the three months ended March 31, 2002 to the three months ended March 31, 2003. The increase is primarily due to the SPS acquisition. In addition, we experienced increased salaries and benefits associated with the expansion of our reimbursement, sales and marketing, clinical, administrative and support staffs, and the addition of office space and related furniture and fixtures to support the revenue growth. As a percentage of revenues, general and administrative expenses increased from 6.6% to 9.2% from the three months ended March 31, 2002 to the three months ended March 31, 2003. The increase in general and administrative expenses as a percentage of revenues is due to the product mix changes discussed above. Our higher margin products, which were a larger percentage of our total revenues in the three months ended March 31, 2003, have higher reimbursement, sales, clinical and other administrative support expenses than many of the other products we distribute.

Bad Debts. Bad debts increased from $1.8 million to $66.2 million from the three months ended March 31, 2002 to the three months ended March 31, 2003. The increase in bad debts is primarily due to the charge discussed in note 2 of the notes to our financial statements.

Depreciation and Amortization. Depreciation expense increased from $.6 million to $1.6 million from the three months ended March 31, 2002 to the three months ended March 31, 2003, as a result of the SPS acquisition, purchases of property and equipment associated with our revenue growth and expansion of our leasehold facility improvements. Amortization expense increased from $.3 million to $1.5 million from the three months ended March 31, 2002 to the three months ended March 31, 2003, due to the SPS acquisition.

Interest Income/Expense, Net. Interest income was $38 thousand for the three months ended March 31, 2002 and interest expense was $2.0 million for the three months ended March 31, 2003. The change, amounting to $2.0 million, is primarily due to the debt outstanding during the quarter that was incurred in June 2002 to finance the cash portion of the SPS acquisition and the related acquisition costs.

Income Tax Expense. The effective tax rate was 38.8% and 39.4% for the three months ended March 31, 2002 and 2003, respectively. The difference between the recognized effective tax rate and the statutory rate of 35% is primarily attributable to state income taxes.

NINE MONTHS ENDED MARCH 31, 2003 COMPARED TO NINE MONTHS ENDED MARCH 31, 2002

Revenues. Total revenues increased 126% from $465.3 million to $1,052.7 million from the nine months ended March 31, 2002 to the nine months ended March 31, 2003. Net patient revenues increased 127% from $451.4 million to $1,024.1 million from the nine months ended March 31, 2002 to the nine months ended March 31, 2003. The increase is primarily due to the acquisitions of BioPartners In Care, Inc. in December 2001 and SPS in June 2002. In addition, we experienced volume growth with the addition of new patients and additional sales of product to existing patients. We also experienced an increase in our seasonal drug Synagis® for the treatment of RSV as a result of increased patient volume. Sales of Synagis® are seasonal and the majority of our sales occur during the second and third quarters of our fiscal year.

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As the product mix table above indicates, the acquisitions of BioPartners In Care, Inc. and the SPS business resulted in a significant increase in the percentage of our revenues related to hemophilia, autoimmune disorders and PAH from 25% to 50% from the nine months ended March 31, 2002 to the nine months ended March 31, 2003. In addition, the acquisitions resulted in a significant decrease in the percentage of our revenues related to multiple sclerosis, Gaucher disease and Respiratory Syncytial Virus from 64% to 31% from the nine months ended March 31, 2002 to the nine months ended March 31, 2003.

Cost of sales. Cost of sales increased 114% from $391.8 million to $836.9 million from the nine months ended March 31, 2002 to the nine months ended March 31, 2003, which is commensurate with the increase in revenues discussed above. As a percentage of revenues, cost of sales decreased from 84.2% to 79.5% from the nine months ended March 31, 2002 to the nine months ended March 31, 2003 resulting in gross margins of 15.8% and 20.5% for the nine months ended March 31, 2002 and 2003, respectively. Gross margins for the individual products have remained relatively stable. However, the change in product mix as a result of the acquisitions discussed above resulted in an increase in the composite gross margin in the nine months ended March 31, 2003. The primary drivers for the improvement in gross margins were increased revenues from our higher margin products. In addition, we benefited from lower acquisition costs on some products that we distribute.

General and Administrative. General and administrative expenses increased from $31.2 million to $97.2 million, or 212%, from the nine months ended March 31, 2002 to the nine months ended March 31, 2003. This increase is primarily due to the acquisitions completed during fiscal 2002. In addition, we experienced increased salaries and benefits associated with the expansion of our reimbursement, sales and marketing, clinical, administrative and support staffs, and the addition of office space and related furniture and fixtures to support the revenue growth. As a percentage of revenues, general and administrative expenses increased from 6.7% to 9.2% from the nine months ended March 31, 2002 to the nine months ended March 31, 2003. The increase in general and administrative expenses as a percentage of revenues is due to the product mix changes discussed above. Our higher margin products, which were a larger percentage of our total revenues in the nine months ended March 31, 2003, have higher reimbursement, sales, clinical and other administrative support expenses than many of the other product lines we distribute.

Bad Debts. Bad debts increased from $3.8 million to $80.5 million from the nine months ended March 31, 2002 to the nine months ended March 31, 2003. The increase in bad debts is primarily due to the charge discussed in note 2 of the notes to our financial statements.

Depreciation and Amortization. Depreciation expense increased from $1.6 million to $4.1 million from the nine months ended March 31, 2002 to the nine months ended March 31, 2003, as a result of the acquisitions completed in fiscal 2002, purchases of property and equipment associated with our revenue growth and expansion of our leasehold facility improvements. Amortization expense increased from $.8 million to $4.5 million from the nine months ended March 31, 2002 to the nine months ended March 31, 2003, due to the acquisitions completed in 2002.

Interest Income/Expense, Net. Interest income was $.8 million for the nine months ended March 31, 2002 and interest expense was $6.1 million for the nine months ended March 31, 2003. The change, amounting to $6.9 million, is primarily due to the debt outstanding during the period that was incurred in June 2002 to finance the cash portion of the SPS acquisition and the related acquisition costs.

Income Tax Expense. The effective tax rate was 38.8% and 39.5% for the nine months ended March 31, 2002 and 2003, respectively. The difference between the recognized effective tax rate and the statutory rate of 35% is primarily attributable to state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2003, working capital was $274.3 million, cash and cash equivalents were $32.1 million and the current ratio was 2.2 to 1.0.

Net cash provided by operating activities was $48.7 million for the nine months ended March 31, 2003. During the nine months ended March 31, 2003, accounts receivable decreased $20.4 million, inventories decreased $14.1 million and accounts payable, accrued expenses and income taxes decreased $14.5 million. These changes are due primarily to our revenue growth and the timing of the collection of receivables, inventory purchases and payments of accounts payable.

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Net cash used in investing activities was $35.1 million for the nine months ended March 31, 2003. Cash used in investing activities consisted of $12.6 million for purchases of property and equipment, $16.0 million in earn out payments related to the acquisition of BioPartners In Care, Inc., $5.3 million for business acquisition costs and $1.2 million of undistributed earnings from our joint ventures.

Net cash used in financing activities was $24.4 million for the nine months ended March 31, 2003, which consisted of $31.3 million in debt repayments less $6.9 million from the net proceeds of stock option exercises and employee stock purchase plan transactions.

Historically, we have funded our operations and continued internal growth through cash provided by operations. We anticipate that our capital expenditures for the fiscal year ending June 30, 2003 will consist primarily of additional computer hardware, a fully integrated pharmacy and reimbursement software system and costs to build out and furnish additional space needed to meet the needs of our growth. We expect the cost of our capital expenditures in fiscal year 2003 to be approximately $17.0 million, exclusive of any acquisitions of businesses. We expect to fund our operations and these capital expenditures through cash provided by operating activities and/or borrowings under the revolving credit agreement with our bank.

During 2002, we amended and restated our $60 million revolving credit facility with Bank of America, N.A. and other participating banks to increase the size of the credit facility to $325 million. The credit facility consists of a $125 million revolving commitment due June 2007, a $75 million term loan (Tranche A Term Loan) due in periodic principal payments through March 2007, and a $125 million term loan (Tranche B Term Loan) due in periodic principal payments through March 2009. The amount available to borrow under this credit facility is based upon certain ratios calculated as of the end of each quarter. Based upon the asset coverage ratio as of March 31, 2003, the total amount available to borrow is approximately $269 million. As of March 31, 2003, the total amount outstanding under the credit facility was $198.8 million, which included $75 million under the Tranche A Term Loan and $123.8 million under the Tranche B Term Loan.

Amounts outstanding under the credit agreement bear interest at varying rates based upon a London Inter-Bank Offered Rate (LIBOR) or prime rate of interest (as selected by us), plus a variable margin rate based upon our leverage ratio as defined by the credit agreement. Our obligations under the credit agreement are secured by a lien on substantially all of our assets, including a pledge of all of the common stock or partnership interest of each of our subsidiaries in which we own an 80% or more interest.

The credit agreement contains financial covenants, including requirements to maintain certain ratios with respect to leverage, fixed charge coverage, net worth and asset coverage each as defined in the agreement. The credit agreement also includes customary affirmative and negative covenants, including covenants relating to transactions with affiliates, uses of proceeds, restrictions on subsidiaries, limitations on indebtedness, limitations on mergers, acquisitions and asset dispositions, limitations on investments, limitations on payment of dividends and stock repurchases, and other distributions. The credit agreement also contains customary events of default, including events relating to changes in control of our company.

On May 5, 2003 the Company amended its credit facility with Bank of America, N.A. and other participating banks to exclude the bad debt charge recorded in the March 2003 quarter from the calculation of Consolidated EBITDA, as defined in the credit facility, and to reduce the Consolidated Net Worth requirement, as defined in the credit facility, to allow for a reduction in the minimum net worth requirement equal to the net loss incurred in the March 2003 quarter. The Company paid Bank of America, N. A. $200,000 as an administrative fee to obtain the amendment. The Company also paid the members of the lending syndicate under the credit facility a one time fee equal to 12.5 basis points of their outstanding credit commitment. Finally, the Company agreed to a 25 basis point increase in interest rates under the credit facility for a period of twelve months beginning May 15, 2003 and ending May 15, 2004.

On July 17, 2002, we entered into an interest rate swap agreement to protect against fluctuations in interest rates. The rate swap agreement effectively converts for a period of one year, $120 million of floating-rate borrowings to fixed-rate borrowings with a fixed rate of 2.175%, plus the applicable margin rate as determined by the credit agreement.

On February 6, 2003, the Securities and Exchange Commission (“SEC”) declared effective our shelf registration statement on Form S-3 providing for the offer, from time to time, of various securities, up to an aggregate of $500 million. The shelf registration statement may enable us to more efficiently raise funds from the offering of securities covered by the shelf registration statement, subject to market conditions and our capital needs.

We believe that our cash from operations, cash available under the revolving credit facility and the proceeds from any offering of debt or equity securities allowed by the shelf registration statement will be sufficient to meet our internal operating requirements and growth plans for at least the next 12 months.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Information regarding our “Critical Accounting Policies and Estimates” can be found in our Annual Report on Form 10-K for our most recent fiscal year ended June 30, 2002, filed with the SEC on September 30, 2002. The three critical accounting policies that we believe are either the most judgmental, or involve the selection or application of alternative accounting policies, and are material to our financial statements are those relating to allowance for doubtful accounts, allowance for contractual discounts and medical claims reserve. In addition, Note 1 to our audited financial statements contained within our most recent Annual Report on Form 10-K, contains a summary of our significant accounting policies.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to adopt policies and make significant judgements and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a thorough process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that are required to prepare the financial statements. However, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. SFAS 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to SFAS 123’s fair value of accounting for stock-based compensation. SFAS 148 also amends the disclosure provisions of SFAS 123 and APB Opinion No. 28, Interim Financial Reporting, to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based compensation on reported net income and earnings per share in annual and interim financial statements. SFAS 148 does not require companies to account for stock options using the fair value method. We have not adopted the fair value of accounting provisions of SFAS 123, therefore, the transition provisions of SFAS 148 will not apply. However, SFAS 148 requires additional disclosures in our interim and annual reports beginning with this March 2003 report on Form 10-Q.

RISK FACTORS

You should carefully consider the risks and uncertainties we describe below before investing in Accredo. The risks and uncertainties described below are not the only risks and uncertainties that could develop. Other risks and uncertainties that we have not predicted or evaluated could also affect our company.

If any of the following risks occur, our earnings, financial condition or business could be materially harmed, and the trading price of our common stock could decline, resulting in the loss of all or part of your investment.

We are highly dependent on our relationships with a limited number of biopharmaceutical suppliers and the loss of any of these relationships could significantly impact our ability to sustain or grow our revenues.

     We derive a substantial percentage of our revenue and profitability from the sale of hemophilia product and intravenous immunoglobin (IVIG) that we primarily purchase from Baxter Healthcare Corporation, Aventis Pharmaceuticals, Inc., Wyeth Pharmaceuticals and Bayer Corporation. Approximately 37% of our revenue in the nine-month period ended March 31, 2003 was derived from the sale of IVIG and hemophilia product. During the nine months ended March 31, 2003 and the fiscal year ended June 30, 2002, the majority of our hemophilia product was purchased from Baxter Healthcare Corporation. We also derive a substantial percentage of our revenue and profitability from our relationships with Biogen, Genzyme, MedImmune and GlaxoSmithKline. Our revenue derived from these relationships represented approximately 40% of our revenue for the nine months ended March 31, 2003.

     Our agreements with these suppliers are short-term and cancelable by either party without cause on 30 to 90 days prior notice. These agreements also generally limit our ability to handle competing drugs during and, in some cases, after the term of the agreement, but allow the supplier to distribute through channels other than us. Further, these agreements provide that pricing and other terms of these relationships be periodically adjusted for changed market conditions or required service levels. Any termination or adverse adjustment to any of these relationships could have a material adverse effect on a significant portion of our business, financial condition and results of operations.

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Our ability to grow could be limited if we do not expand our existing base of drugs or if we lose patients.

     We primarily sell 15 products. We focus almost exclusively on a limited number of complex and expensive drugs that serve small patient populations. The drugs that we sell with respect to the following core disease markets account for approximately 88% of our revenues, with the drugs for hemophilia and autoimmune disorders constituting approximately 37% of our revenue for the nine months ended March 31, 2003:

• Hemophilia and Autoimmune Disorders

• Multiple Sclerosis

• Pulmonary Arterial Hypertension

• Gaucher Disease

• Growth Hormone-Related Disorders

• Respiratory Syncytial Virus

     Due to the small patient populations that use the drugs we handle, our future growth is highly dependent on expanding our base of drugs. Further, a loss of patient base or reduction in demand for any reason of the drugs we currently handle could have a material adverse effect on a significant portion of our business, financial condition and results of operations.

Our business would be harmed if demand for our products and services is reduced.

     Reduced demand for our products and services could be caused by a number of circumstances, including:

• patient shifts to treatment regimens other than those we offer;

• new treatments or methods of delivery of existing drugs that do not require our specialty products and services;

• a recall of a drug;

• adverse reactions caused by a drug;

• the expiration or challenge of a drug patent;

• competing treatment from a new drug or a new use of an existing drug or orphan drug status;

• the loss of a managed care or other payor relationship covering a number of high revenue patients;

• the cure of a disease we service; or

• the death of a high-revenue patient.

     There is substantial competition in our industry, and we may not be able to compete successfully.

     The specialty pharmacy industry is highly competitive and is continuing to become more competitive. Most of the drugs, supplies and services that we provide are also available from our competitors. Our current and potential competitors include:

• other specialty pharmacy distributors;

• specialty pharmacy divisions of wholesale drug distributors;

• pharmacy benefit management companies;

• hospital-based pharmacies;

• retail pharmacies;

• home infusion therapy companies;

• manufacturers that sell their products both to distributors and directly to users;

• comprehensive hemophilia treatment centers; and

• other alternative site health care providers.

     Many of our competitors have substantially greater resources and more established operations and infrastructure than we have. We are particularly at risk from any of our suppliers deciding to pursue its own distribution and services and not outsource these needs to companies like us. A significant factor in effective competition will be our ability to maintain and expand relationships with managed care companies, pharmacy benefit managers and other payors who can effectively determine the pharmacy source for their enrollees.

Our business could be harmed by changes in Medicare or Medicaid.

     Changes in the Medicare, Medicaid or similar government programs or the amounts paid by those programs for our services may adversely affect our earnings. Such programs are highly regulated and subject to frequent and substantial changes and cost containment measures. In recent years, changes in these programs have limited and reduced reimbursement to providers. According to a Kaiser Family Foundation report released on September 19, 2002, 45 states reported they took actions to decrease Medicaid

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spending in 2002, and 41 reported they would take additional actions to decrease Medicaid spending in 2003. For example, the National Conference of State Legislatures estimates that California faces a 35 billion dollar deficit over fiscal year 2003 and fiscal year 2004. We are a general partner in two California partnerships and a significant number of our patients are insured by California’s MediCal program. In order to deal with these budget shortfalls, some states are attempting to create state administered prescription drug discount plans, limit the number of prescriptions per person that are covered, raising Medicaid co-pays and deductibles, proposing more restrictive formularies and proposing reductions in pharmacy reimbursement rates. As a result of the acquisition of the SPS business, we expect the percentage of our revenues attributable to federal and state programs to increase. Any reductions in amounts reimbursable by government programs for our services or changes in regulations governing such reimbursements could materially and adversely affect our business, financial condition and results of operations.

Changes in average wholesale prices could reduce our pricing and margins.

     Many government payors, including Medicare and Medicaid, pay us directly or indirectly at a percentage off the drug’s average wholesale price (or AWP). We have also contracted with a number of private payors to sell drugs at AWP or at a percentage off AWP. AWP for most drugs is compiled and published by several private companies, including First DataBank, Inc. In February 2000, First DataBank published a Market Price Survey of 437 drugs, which was significantly lower than the historic AWP for a number of the clotting factor and IVIG products that we sell. A number of state Medicaid agencies have revised their payment methodology as a result of the Market Price Survey.

     Various federal and state government agencies have been investigating whether the reported AWP of many drugs, including some that we sell, is an appropriate or accurate measure of the market price of the drugs. There are also several whistleblower lawsuits pending against various drug manufacturers that have been reported in the business press. These government investigations and lawsuits involve allegations that manufacturers reported artificially inflated AWP prices of various drugs to First DataBank.

     On September 21, 2001, the United States House Subcommittees on Health and Oversight & Investigations held hearings to examine how Medicare reimburses providers for the cost of drugs. In conjunction with that hearing, the U.S. General Accounting Office issued its Draft Report recommending that Medicare establish payment levels for part-B prescription drugs and their delivery and administration that are more closely related to their costs, and that payments for drugs be set at levels that reflect actual market transaction prices and the likely acquisition costs to providers. On February 3, 2003, President Bush again included, in his 2004 budget, a proposal for reforms in AWP payments for Medicare outpatient drugs.

     On December 3, 2002, the Centers for Medicare and Medicaid Services (“CMS”) issued a Program Memorandum that outlined a uniform single national payment schedule for Medicare part-B drugs. Previously each Medicare carrier would come up with its own estimates of AWP. CMS will base payments on 95% of AWP as established by First DataBank and Redbook.

     On February 12, 2003, the U.S. General Accounting Office released a report to the Ranking Minority Member, Subcommittee on Health, Committee on Ways and Means, House of Representatives titled “Payment for Blood Clotting Factor Exceeds Providers’ Acquisition Cost”. The Report dated January 10, 2003 recommends that CMS establish Medicare payment levels for clotting factor that are more closely related to providers’ acquisition cost and establish separate payment for the cost of delivering clotting factor to Medicare beneficiaries.

     We cannot predict the eventual results of government proposals, investigations, lawsuits or the changes made by First DataBank. If government payors or private payors revise their pricing based on new methods of calculating the AWP for drugs we handle or implement reimbursement methodology based on some value other than AWP, this could have a material adverse effect on our business, financial condition and results of operation, including reducing the pricing and margins on certain of our products.

Our business will suffer if we lose relationships with payors.

     We are highly dependent on reimbursement from non-governmental payors. For the fiscal years ended June 30, 2001 and 2002 and the nine months ended March 31, 2003, we derived approximately 81%, 79% and 72% respectively of our gross patient revenue from non-governmental payors (including self-pay), which included 4%, 3% and 1%, respectively for those periods, from sales to private physician practices whose ultimate payor is typically Medicare.

     Many payors seek to limit the number of providers that supply drugs to their enrollees. For example, we were selected by Aetna, Inc. as one of three providers of injectable medications. We received approximately 3 % of our total revenues in the quarter ended March 31, 2003 from various relationships with Gentiva, including the distribution of specialty pharmaceuticals through the CareCentrix division of Gentiva’s home health business. From time to time, payors with whom we have relationships require that we and our competitors bid to keep their business, and there can be no assurance that

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we will be retained or that our margins will not be adversely affected when that happens. The loss of a payor relationship, for example, our relationship with Aetna, Inc. and affiliates (which is terminable on 90 days notice) or our relationship with Gentiva, or an adverse change in the financial condition of a payor like Aetna, could result in the loss of a significant number of patients and have a material adverse effect on our business, financial condition and results of operations.

We incurred additional debt to acquire the SPS business of Gentiva Health Services, Inc. which may limit our future financial flexibility.

     The current level of our debt will have several important effects on our future operations, including, among others:

• A significant portion of our cash flow from operations will be dedicated to the payment of principal and interest on the debt and will not be available for other purposes;

• Our debt covenants will require us to meet financial tests, and may impose other limitations that may limit our flexibility in planning for and reacting to changes in our business, including possible acquisition opportunities;

• Our ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited;

• Failure to meet our debt covenants could result in foreclosure by our lenders or an increase in the interest rate or administrative fees associated with our debt;

• We may be at a competitive disadvantage to similar companies that have less debt; and

• Our vulnerability to adverse economic and industry conditions may increase.

Our business could be harmed if payors decrease or delay their payments to us.

Our profitability depends on payment from governmental and non-governmental payors, and we could be materially and adversely affected by cost containment trends in the health care industry or by financial difficulties suffered by non- governmental payors. Cost containment measures affect pricing, purchasing and usage patterns in health care. Payors also influence decisions regarding the use of a particular drug treatment and focus on product cost in light of how the product may impact the overall cost of treatment. Further, some payors, including large managed care organizations and some private physician practices, have recently experienced financial trouble. The timing of payments and our ability to collect from payors also affects our revenue and profitability. If we are unable to collect from payors or if payors fail to pay us in a timely manner, it could have a material adverse effect on our business and financial condition.

The failure to integrate successfully the SPS business acquired from Gentiva may prevent us from achieving the anticipated potential benefits of the acquisition and may adversely affect our business.

     We face significant challenges in consolidating functions, integrating the procedures, operations and product lines of the SPS business in a timely and efficient manner, and retaining key personnel of the SPS business. The integration of the SPS business is complex and requires substantial attention from management. The diversion of management attention and any difficulties encountered in the transition and integration process could have a material adverse effect on our revenues, level of expenses and operating results.

If any of our relationships with medical centers are disrupted or cancelled, our business could be harmed.

     We have joint venture relationships with four medical centers that provide services primarily related to hemophilia, growth hormone-related disorders and respiratory syncytial virus. For the fiscal years ended June 30, 2001 and 2002 and the nine months ended March 31, 2003, we derived approximately 4%, 4% and 6%, respectively, of our income before income taxes from equity in the net income of unconsolidated joint ventures.

     Since April 2000, we have owned 80% of one of our joint ventures with Children’s Home Care, Inc. and the financial results of this joint venture are included in our consolidated financial results. This consolidated joint venture represented approximately 10% of our income before income taxes for the fiscal years ended June 30, 2001 and 2002 and 28% of our income before income taxes for the nine months ended March 31, 2003.

     In addition to joint venture relationships, we also provide pharmacy management services to several medical centers.

     Our agreements with medical centers have terms of between one and five years, and may be cancelled by either party without cause upon notice of between one and twelve months. Adverse changes in our relationships with those medical centers could be caused, for example, by:

     •     changes caused by consolidation within the hospital industry;

     •     changes caused by regulatory uncertainties inherent in the structure of the relationships; or

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• restrictive changes to regulatory requirements.

     Any termination or adverse change of these relationships could have a material adverse effect on our business, financial condition and results of operations.

If additional providers obtain access to favorable PHS pricing for drugs we handle, our business could be harmed.

     The federal pricing program of the Public Health Service, commonly known as PHS, allows hospitals and hemophilia treatment centers to obtain discounts on clotting factor. While we are able to access PHS pricing through our contracts to provide contract pharmacy services to hemophilia treatment centers, we are not eligible to participate directly in these programs. Increased competition from hospitals and hemophilia treatment centers that have such favorable pricing may reduce our profit margins.

Our acquisition and joint venture strategy may not be successful, which could cause our business and future growth prospects to suffer.

     As part of our growth strategy, we continue to evaluate acquisition and joint venture opportunities, but we cannot predict or provide assurance that we will complete any future acquisitions or joint ventures. Acquisitions and joint ventures involve many risks, including:

• difficulty in identifying suitable candidates and negotiating and consummating acquisitions on attractive terms;

• difficulty in assimilating the new operations;

• increased transaction costs;

• diversion of our management’s attention from existing operations;

• dilutive issuances of equity securities that may negatively impact the market price of our stock;

• increased debt; and

• increased amortization expense related to intangible assets that would decrease our earnings.

     We could also be exposed to unknown or contingent liabilities resulting from the pre-acquisition operations of the entities we acquire, such as liability for failure to comply with health care or reimbursement laws. We also face exposure if Gentiva is not able to fulfill its indemnification obligations under the terms of our asset purchase agreement. The purchase price we paid to Gentiva for the SPS business was distributed directly to the shareholders of Gentiva, and should any significant payment be required, Gentiva may not have sufficient funds and may not be able to obtain the funds to satisfy its potential indemnification obligation to us. We may suffer impairment of assets or have to bear a liability for which we are entitled to indemnification but are unable to collect.

Fluctuations in our quarterly financial results may cause our stock price to decline.

     Our results of operations may fluctuate on a quarterly basis, which could adversely affect the market price of our common stock. Our results may fluctuate as a result of:

• lower prices paid by Medicare or Medicaid for the drugs that we sell, including lower prices resulting from recent revisions in the method of establishing average wholesale price (“AWP”);

• below-expected sales or delayed launch of a new drug;

• price and term adjustments with our drug suppliers;

• increases in our operating expenses in anticipation of the launch of a new drug;

• product shortages;

• inaccuracies in our estimates of the costs of ongoing programs;

• the timing and integration of our acquisitions;

• changes in governmental regulations;

• the annual renewal of deductibles and co-payment requirements that affect patient ordering patterns;

• our provision of drugs to treat seasonal illnesses, such as respiratory syncytial virus;

• physician prescribing patterns;

• general political and economic conditions;

• interest rate fluctuations; and

• adverse experience in collection of accounts receivable.

Our business would be harmed if the biopharmaceutical industry reduces research, development and production of the types of drugs that are compatible with the services we provide.

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     Our business is highly dependent on continued research, development, manufacturing and marketing expenditures of biopharmaceutical companies, and the ability of those companies to develop, supply and generate demand for drugs that are compatible with the services we provide. Our business would be materially and adversely affected if those companies stopped outsourcing the services we provide or failed to support existing drugs or develop new drugs. Our business could also be harmed if the biopharmaceutical industry undergoes any of the following developments:

• supply shortages;

• adverse drug reactions;

• drug recalls;

• increased competition among biopharmaceutical companies;

• an inability of drug companies to finance product development because of capital shortages;

• a decline in product research, development or marketing;

• a reduction in the retail price of drugs from governmental or private market initiatives;

• changes in the Food and Drug Administration (“FDA”) approval process; or

• governmental or private initiatives that would alter how drug manufacturers, health care providers or pharmacies promote or sell products and services.

Our business could be harmed if the supply of any of the products that we distribute becomes scarce.

     The biopharmaceutical industry is susceptible to product shortages. Some of the products that we distribute, such as IVIG and some blood-related products, are collected and processed from human donors. Accordingly, the supply of these products is highly dependent on human donors and their availability has been constrained from time to time. For example, an industry wide recombinant factor VIII product shortage existed for some time, as a result of the manufacturers being unable to increase production to meet rising global demand, and has only recently returned to normal levels. If these products, or any of the other drugs that we distribute, are in short supply for long periods of time, our business could be harmed.

If some of the drugs that we provide lose their “orphan drug” status, we could face more competition.

     Our business could also be adversely affected by the expiration or challenge to the “orphan drug” status that has been granted by the FDA to some of the drugs that we handle. When the FDA grants “orphan drug” status, it will not approve a second drug for the same treatment for a period of seven years unless the new drug is chemically different or clinically superior. Not all of the drugs that we sell which are related to our core disease states have “orphan drug” status. The “orphan drug” status applicable to drugs related to the seven core disease states that we handle expires (or expired) as follows:

• Flolan® expired September 2002 (primary pulmonary hypertension) and expires April 2007 (secondary pulmonary hypertension due to intrinsic pulmonary vascular disease);

• AVONEX® expires May 2003;

• Nutropin® Depot expires July 2007;

• Tracleer™ expires November 2008;

• Remodulin® expires May 2009.

     However, despite orphan drug status, there are competing products on the market for Avonex and Nutropin® Depot. Tracleer™, Remodulin® and Flolan® also compete in the treatments of pulmonary arterial hypertension. The loss of orphan drug status, or approval of new drugs notwithstanding orphan drug status, could result in additional competitive drugs entering the market, which could harm our business. For example, despite the orphan drug status of AVONEX®, the FDA recently approved a competitive drug called Rebif®, which we do not currently expect to handle.

We rely heavily on a single shipping provider, and our business would be harmed if our rates are increased or our provider is unavailable.

     Almost all of our revenues result from the sale of drugs we deliver to our patients and principally all of our products are shipped by a single carrier, FedEx. We depend heavily on these outsourced shipping services for efficient, cost effective delivery of our product. The risks associated with this dependence include:

• any significant increase in shipping rates;

• strikes or other service interruptions by our primary carrier, FedEx, or by another carrier that could affect FedEx; or

• spoilage of high cost drugs during shipment, since our drugs often require special handling, such as refrigeration.

Disruptions in commercial activities such as those following the September 2001 terrorist attacks on the U.S. may adversely impact our results of operations, our ability to raise capital or our future growth.

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     Our operations have been and could again be harmed by terrorist attacks on the U.S. For example, transportation systems and couriers that we rely upon to deliver our drugs have been and could again be disrupted, thereby causing a decrease in our revenues. In addition, we may experience a rise in operating costs, such as costs for transportation, courier services, insurance and security. We also may experience delays in payments from payors, which would harm our cash flow. The U.S. economy in general may be adversely affected by terrorist attacks or by any related outbreak of hostilities. Any such economic downturn could adversely impact our results of operations, impair our cost of or ability to raise debt or equity capital or impede our ability to continue growing our business.

If we are unable to manage our growth effectively, our business will be harmed.

     Our rapid growth over the past several years has placed a strain on our resources, and if we cannot effectively manage our growth, our business, financial condition and results of operations could be materially and adversely affected. We have experienced a large increase in the number of our employees, the size of our programs and the scope of our operations. Our ability to manage this growth and be successful in the future will depend partly on our ability to retain skilled employees, enhance our management team and improve our management information and financial control systems.

We could be adversely affected by an impairment of the significant amount of goodwill on our financial statements.

     Our formation and our acquisitions have resulted in the recording of a significant amount of goodwill on our financial statements. The goodwill was recorded because the fair value of the net assets acquired was less than the purchase price. There can be no assurance that we will realize the full value of this goodwill. We evaluate on an on-going basis whether events and circumstances indicate that all or some of the carrying value of goodwill is no longer recoverable, in which case we would write off the unrecoverable goodwill in a charge to our earnings. As of March 31, 2003, we had goodwill, net of accumulated amortization, of approximately $353 million, or 39% of total assets and 71% of stockholders’ equity.

     Since our growth strategy may involve the acquisition of other companies, we may record additional goodwill in the future. The possible write-off of this goodwill could negatively impact our future earnings. We will also be required to allocate a portion of the purchase price of any acquisition to the value of non-competition agreements, patient base and contracts that are acquired. The amount allocated to these items could be amortized over a fairly short period. As a result, our earnings and the market price of our common stock could be negatively impacted.

We rely on a few key employees whose absence or loss could adversely affect our business.

     We depend on a few key executives, and the loss of their services could cause a material adverse effect to our company. We do not maintain “key person” life insurance policies on any of those executives. As a result, we are not insured against the losses resulting from the death of our key executives. Further, we must be able to attract and retain other qualified, essential employees for our technical operating and professional staff, such as pharmacists and nurses. If we are unable to attract and retain these essential employees, our business could be harmed.

We have been named in several shareholder class action lawsuits and a shareholders derivative lawsuit asserting claims under the securities laws.

     The uncertainty associated with these unresolved lawsuits could harm our business and financial condition. The defense of these lawsuits also could result in litigation fees and costs, as well as the diversion of resources. Negative developments with respect to the lawsuits could cause our stock price to decline significantly. The indemnification provisions contained in our Certificate of Incorporation and Bylaws require us to indemnify our current and former officers and directors who are named as defendants against the allegations contained in these suits. Even though we maintain directors and officers insurance applicable to the lawsuits, there can be no guarantee that the proceeds of such insurance will be available for defense fees and costs, or payment of any settlement or judgment in the lawsuits or, if available, will be sufficient to cover the fees and costs and any settlement or judgment imposed against us.

     The ultimate cost and effect of these lawsuits on the financial condition, results of operations, customer relations and our management is unknown at this time.

     The lawsuits are described in Part II, Item 1 — Legal Proceedings.

     In addition to the securities litigation currently pending against us and our officers and directors, as more fully described above, we may also in the future be the target of similar litigation. Additional securities litigation could result in substantial costs and divert our attention and resources.

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We may need additional capital to finance our growth and capital requirements, which could prevent us from fully pursuing our growth strategy.

     In order to implement our growth strategy, we will need substantial capital resources and will incur, from time to time, short- and long-term indebtedness, the terms of which will depend on market and other conditions. We cannot be certain that existing or additional financing will be available to us on acceptable terms, if at all. As a result, we could be unable to fully pursue our growth strategy. Further, additional financing may involve the issuance of equity or debt securities that would reduce the percentage ownership of our then current stockholders.

     Our industry is subject to extensive government regulation and noncompliance by us or our suppliers could harm our business.

     The marketing, sale and purchase of drugs and medical supplies is extensively regulated by federal and state governments, and if we fail or are accused of failing to comply with laws and regulations, we could suffer a material adverse effect on our business, financial condition and results of operations. Our business could also be materially and adversely affected if the suppliers or clients we work with are accused of violating laws or regulations. The applicable regulatory framework is complex, and the laws are very broad in scope. Many of these laws remain open to interpretation, and have not been addressed by substantive court decisions.

     The health care laws and regulations that especially apply to our activities include:

• The federal “Anti-Kickback Law” prohibits the offer or solicitation of compensation in return for the referral of patients covered by almost all governmental programs, or the arrangement or recommendation of the purchase of any item, facility or service covered by those programs. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new violations for fraudulent activity applicable to both public and private health care benefit programs and prohibits inducements to Medicare or Medicaid eligible patients. The potential sanctions for violations of these laws range from significant fines, to exclusion from participation in the Medicare and Medicaid programs, to criminal sanctions. Although some “safe harbor” regulations attempt to clarify when an arrangement will not violate the Anti-Kickback Law, our business arrangements and the services we provide may not fit within these safe harbors. Failure to satisfy a safe harbor requires analysis of whether the parties intended to violate the Anti-Kickback Law. The finding of a violation could have a material adverse effect on our business.

• The Department of Health and Human Services recently issued regulations implementing the Administrative Simplification provisions of HIPAA concerning the maintenance of privacy and security of individually identifiable health information. The new regulations require the development and implementation of measures to maintain the privacy and security of health information and require that certain health claims transactions be conducted in accordance with uniform standards. These regulations govern health care providers, health plans and health clearinghouses. Failure to comply with these regulations, or wrongful disclosure of confidential patient information could result in the imposition of administrative or criminal sanctions, including exclusion from the Medicare and state Medicaid programs. In addition, if we choose to distribute drugs through new distribution channels such as the Internet, we will have to comply with government regulations that apply to those distribution channels, which could have a material adverse effect on our business.

• The Ethics in Patient Referrals Act of 1989, as amended, commonly referred to as the “Stark Law,” prohibits physician referrals to entities with which the physician or their immediate family members have a “financial relationship.” A violation of the Stark Law is punishable by civil sanctions, including significant fines and exclusion from participation in Medicare and Medicaid.

• State laws prohibit the practice of medicine, pharmacy and nursing without a license. To the extent that we assist patients and providers with prescribed treatment programs, a state could consider our activities to constitute the practice of medicine. If we are found to have violated those laws, we could face civil and criminal penalties and be required to reduce, restructure, or even cease our business in that state.

• Pharmacies and pharmacists must obtain state licenses to operate and dispense drugs. Pharmacies must also obtain licenses in some states to operate and provide goods and services to residents of those states. Our entities that provide nursing for our patients and our nurses must obtain licenses in certain states to conduct our business. If we are unable to maintain our licenses or if states place burdensome restrictions or limitations on non-resident pharmacies or nurses, this could limit or affect our ability to operate in some states which could adversely impact our business and results of operations.

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• Federal and state investigations and enforcement actions continue to focus on the health care industry, scrutinizing a wide range of items such as joint venture arrangements, referral and billing practices, product discount arrangements, home health care services, dissemination of confidential patient information, clinical drug research trials and gifts for patients. Recently, the Office of the Inspector General, the OIG, issued a Special Advisory Bulletin focused on complex contractual joint ventures that could potentially violate the anti-kickback statute. In this bulletin, the OIG discussed the characteristics that potentially indicate a prohibited arrangement. Some of these characteristics are present in our existing joint ventures.

• The False Claims Act encourages private individuals to file suits on behalf of the government against health care providers such as us. Such suits could result in significant financial sanctions or exclusion from participation in the Medicare and Medicaid programs.

The market price of our common stock may experience substantial fluctuations for reasons over which we have little control.

     Our common stock is traded on the Nasdaq National Market. The market price of our common stock could fluctuate substantially based on a variety of factors, including the following:

• future announcements concerning us, our competitors, the drug manufacturers with whom we have relationships or the health care market;

• changes in government regulations;

• overall volatility of the stock market;

• changes in estimates by analysts; and

• changes in operating results from quarter to quarter.

     Furthermore, stock prices for many companies fluctuate widely for reasons that may be unrelated to their operating results. These fluctuations, coupled with changes in our results of operations and general economic, political and market conditions, may adversely affect the market price of our common stock.

Some provisions of our charter documents and the Stockholder Protection Rights Plan may have anti-takeover effects that could discourage a change in control, even if an acquisition would be beneficial to our stockholders.

     Our certificate of incorporation, our bylaws and Delaware law contain provisions that could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. In addition, our Board of Directors has adopted a Stockholder Protection Rights Plan, sometimes referred to as a poison pill, that would substantially dilute the interest sought by an acquiror.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to the impact of financial market risk is significant. Our primary financial market risk exposure consists of interest rate risk related to interest that we are obligated to pay on our variable-rate debt.

We use derivative financial instruments to manage some of our exposure to rising interest rates on our variable-rate debt, primarily by entering into variable-to-fixed interest rate swaps. We have fixed the interest rate through July 21, 2003 on $120.0 million of our variable-rate debt through the use of a variable-to-fixed interest rate swap. As a result, we will not benefit from any decrease in interest rates nor will we be subjected to any detriment from rising interest rates on this portion of our debt during the period of the swap agreement. Accordingly, a 100 basis point decrease in interest rates along the entire yield curve would not increase pre-tax income by $300,000 for a quarter as would be expected without this financial instrument. However, a 100 basis point increase in interest rates along the entire yield curve would also not decrease pre-tax income by $300,000 for the same period as a result of using this derivative financial instrument.

For the remaining portion of our variable-rate debt, we have not hedged against our interest rate risk exposure. As a result, we will benefit from decreasing interest rates, but we will also be harmed by rising interest rates on this portion of our debt. Accordingly, if we maintain our current level of total debt, a 100 basis point decrease in interest rates along the entire yield curve would result in an increase in pre-tax income of approximately $200,000 during a quarter. However, a 100 basis point increase in interest rates would result in a decrease in pre-tax income of approximately $200,000 for the same period.

Actual changes in rates may differ from the hypothetical assumptions used in computing the exposures in the examples cited above.

ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures

     Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) within 90 days prior to the filing of this report and concluded, as of the date that evaluation was completed, that our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

(b)  Changes in Internal Controls

     There have been no significant changes in our internal controls or in other factors that could significantly affect these controls since the date last evaluated.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

        Commencing April 8, 2003, several substantially similar putative class action lawsuits were filed in the United States District Court for the Western District of Tennessee, Memphis Division. At this time, the Company is aware of four such lawsuits, but only two of the complaints have been served. It is possible that additional lawsuits may be filed. The lawsuits name the Company, David D. Stevens, Joel Kimbrough and in one case John R. Grow, as Defendants. The Company will seek to consolidate these lawsuits and any additional putative class action lawsuits that are filed. The lawsuits allege violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and Section 20 of the Securities Exchange Act of 1934. The putative class representatives seek to represent a class of individuals and entities that purchased Company stock during the period June 16, 2002 through April 7, 2003 and who supposedly suffered damages from the alleged violations of the securities laws. The Company believes that the claims asserted in the putative class action lawsuits are without merit.

        In addition, on April 17, 2003, a purported derivative lawsuit was filed in the Circuit Court of Shelby County, Tennessee for the Thirtieth Judicial District at Memphis. The derivative action names David D. Stevens, John R. Grow, Kyle J. Callahan, Kevin L. Roberg, Kenneth R. Masterson, Kenneth J. Melkus, Dick R. Gourley, Nancy Ann Deparle, Joel R. Kimbrough, Thomas W. Bell, Jr., and Patrick J. Welsh as defendants. The derivative lawsuit alleges that the defendants breached fiduciary duties owed to the Company by engaging in the same alleged conduct that is the basis of the putative class action lawsuits. On behalf of the Company, the derivative complaint seeks compensatory damages from the defendants and the disgorgement of profits, benefits and other compensation received by the defendants. The Company believes that the claims asserted in the derivative lawsuit are without merit.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

Information with respect to our adoption of a Stockholder Protection Rights Plan effective as of April 17, 2003 may be found under Item 5 of our Current Report on the Form 8-K dated April 21, 2003, filed with the Securities and Exchange Commission on April 21, 2003. Such information is incorporated herein by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)	Exhibits
Exhibit 3.1	Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of the Company.
Exhibit 4.1	Stockholder Protection Rights Agreement, dated April 17, 2003, between the Company and American Stock Transfer & Trust Company, as Rights Agent.
Exhibit 99.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b)	Reports on Form 8-K

     April 21, 2003 — Item 5 — The Company described its adoption of a Stockholder Protection Rights Plan. No financial statements were filed with this report.

     April 9, 2003 — Item 9 — The Company provided the transcript of a conference call held on April 8, 2003. No financial statements were filed with this report.

     April 8, 2003 — Item 9 — The Company provided a press release announcing revised estimates for its fiscal year ending June 30, 2003 and an examination of certain accounts receivable acquired from Gentiva Health Services, Inc. No financial statements were filed with this report.

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     January 7, 2003 — Item 5 — The Company provided Unaudited Pro-Forma Condensed Financial Statement that gave effect to the acquisition of the SPS division from Gentiva Health Services, Inc.

Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Accredo Health, Incorporated
May 5, 2003	/s/ David D. Stevens
	David D. Stevens Chairman of the Board and Chief Executive Officer
May 5, 2003	/s/ Joel R. Kimbrough
	Joel R. Kimbrough Senior Vice President, Chief Financial Officer and Treasurer

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CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David D. Stevens, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Accredo Health, Incorporated (“the registrant”);

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

     a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 5, 2003

/s/ David D. Stevens
David D. Stevens
Chief Executive Officer

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CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joel R. Kimbrough, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Accredo Health, Incorporated (“the registrant”);

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     d) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     e) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     f) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

     c) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     d) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.     The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 5, 2003

/s/ Joel R. Kimbrough
Joel R. Kimbrough
Chief Financial Officer

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Exhibit Index

Exhibit
Number	Description of Exhibits
3.1	Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of the Company.
4.1	Stockholder Protection Rights Agreement, dated April 17, 2003, between the Company and American Stock Transfer & Trust Company, as Rights Agent.
99.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

29 EX-3.1 3 g82570aexv3w1.txt EX-3.1 CERTIFICATE OF DESIGNATION EXHIBIT 3.1 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF ACCREDO HEALTH, INCORPORATED Pursuant to Section 151 of the Delaware General Corporation Law Accredo Health, Incorporated, a corporation organized under the laws of the State of Delaware (the "Corporation"), hereby certifies that, pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation, as amended, of the Corporation, the Board of Directors on April 17, 2003, adopted the following resolution creating a series of 100,000 shares of Preferred Stock designated as Series A Junior Participating Preferred Stock: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (the "Board") in accordance with the provisions of its Certificate of Incorporation, as amended, a series of Preferred Stock of the Corporation be and it hereby is created, and that the designation and amount thereof and the voting rights or powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: 1. Series A Junior Participating Preferred Stock. There is hereby established a series of Preferred Stock, par value $1.00 per share, of the Corporation, and the designation and certain terms, powers, preferences and other rights of the shares of such series, and certain qualifications, limitations and restrictions thereon, are hereby fixed as follows: (i) The distinctive serial designation of this series shall be "Series A Junior Participating Preferred Stock" (hereinafter called "this Series"). Each share of this Series shall be identical in all respects with the other shares of this Series except as to the dates from and after which dividends thereon shall be cumulative. (ii) The number of shares in this Series shall initially be 100,000, which number may from time to time be increased or decreased (but not below the number then outstanding) by the Board of Directors. Shares of this Series purchased by the Corporation shall be canceled and shall revert to authorized but unissued shares of Preferred Stock undesignated as to series. Shares of this Series may be issued in fractional shares, which fractional shares shall entitle the holder, in proportion to such holder's fractional share, to all rights of a holder of a whole share of this Series. (iii) The holders of full or fractional shares of this Series shall be entitled to receive, when and as declared by the Board of Directors, but only out of funds legally available therefor, dividends, (A) on each date that dividends or other distributions (other than dividends or distributions payable in Common Stock of the Corporation) are payable on or in respect of Common Stock comprising part of the Reference Package (as defined below), in an amount per whole share of this Series equal to the aggregate amount of dividends or other distributions (other than dividends or distributions payable in Common Stock of the Corporation) that would be payable on such date to a holder of the Reference Package and (B) on the last day of March, June, September and December in each year, in an amount per whole share of this Series equal to the excess (if any) of $1.00 over the aggregate dividends paid per whole share of this Series during the three-month period ending on such last day. Each such dividend shall be paid to the holders of record of shares of this Series on the date, not exceeding 60 days preceding such dividend or distribution payment date, fixed for that purpose by the Board of Directors in advance of payment of each particular dividend or distribution. Dividends on each full and each fractional share of this Series shall be cumulative from the date such full or fractional share is originally issued; provided that any such full or fractional share originally issued after a dividend record date and on or prior to the dividend payment date to which such record date relates shall not be entitled to receive the dividend payable on such dividend payment date or any amount in respect of the period from such original issuance to such dividend payment date. The term "Reference Package" shall initially mean 10,000 shares of Common Stock, par value $.01 per share ("Common Stock"), of the Corporation. In the event the Corporation shall at any time (A) declare or pay a dividend on any Common Stock payable in Common Stock, (B) subdivide any Common Stock or (C) combine any Common Stock into a smaller number of shares, then and in each such case the Reference Package after such event shall be the Common Stock that a holder of the Reference Package immediately prior to such event would hold thereafter as a result thereof. Holders of shares of this Series shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on this Series. So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation), unless, in each case, the full cumulative dividends (including the dividend to be due upon payment of such dividend, distribution, redemption, purchase or other acquisition) on all outstanding shares of this Series shall have been, or shall contemporaneously be, paid. (iv) In the event of any merger, consolidation, reclassification or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of this Series shall at the same time be similarly exchanged or changed in an amount per whole share equal to the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, that a holder of the Reference Package would be entitled to receive as a result of such transaction. (v) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of full and fractional shares of this Series shall be entitled, before any distribution or payment is made on any date to the holders of the Common Stock or any other stock of the Corporation ranking junior to this Series upon liquidation, to be paid in full an amount per whole share of this Series equal to the greater of (A) $1.00 or (B) the aggregate amount distributed or to be distributed prior to such date in connection with such liquidation, dissolution or winding up to a holder of the Reference Package (such greater amount being hereinafter referred to as the "Liquidation Preference"), together with accrued dividends to such distribution or payment date, whether or not earned or declared. If such payment shall have been made in full to all holders of shares of this Series, the holders of shares of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to the first paragraph of this Section (v), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such liquidation, dissolution or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably in proportion to the full distributable, amounts for which holders of all such parity shares are respectively entitled upon such liquidation, dissolution or winding up. Upon the liquidation, dissolution or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to the first paragraph of this Section (v) before any payment shall be made to the holders of Common Stock or any other stock of the Corporation ranking junior upon liquidation to this Series. For the purposes of this Section (v), the consolidation or merger of, or binding share exchange by, the Corporation with any other corporation shall not be deemed to constitute a liquidation, dissolution or winding up of the corporation. (vi) The shares of this Series shall not be redeemable. (vii) In addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation of the Corporation, each whole share of this Series shall, on any matter, vote as a class with any other capital stock comprising part of the Reference Package and voting on such matter and shall have the number of votes thereon that a holder of the Reference Package would have. IN WITNESS WHEREOF, Accredo Health, Incorporated has caused this Certificate of Designation to be executed as of April 25, 2003. ACCREDO HEALTH, INCORPORATION By: /s/ Thomas W. Bell, Jr. ------------------------------------- Name: Thomas W. Bell, Jr. Title: Senior Vice President and General Counsel EX-4.1 4 g82570aexv4w1.txt EX-4.1 STOCKHOLDER PROTECTION RIGHTS AGREEMENTS EXHIBIT 4.1 STOCKHOLDER PROTECTION RIGHTS AGREEMENT BETWEEN ACCREDO HEALTH, INCORPORATED AND AMERICAN STOCK TRANSFER & TRUST COMPANY, AS RIGHTS AGENT APRIL 17, 2003 TABLE OF CONTENTS ARTICLE I - CERTAIN DEFINITIONS...................................................................1 ARTICLE II - THE RIGHTS...........................................................................4 2.1 Summary of Rights.......................................................................4 2.2 Issuance of Rights Certificates; Legend.................................................4 2.3 Exercise of Rights; Separation of Rights................................................5 2.4 Adjustments to Exercise Price; Number of Rights.........................................6 2.5 Date on Which Exercise is Effective.....................................................7 2.6 Execution, Authentication, Delivery and Dating of Rights Certificates...................7 2.7 Registration, Registration of Transfer and Exchange.....................................7 2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificates...............................8 2.9 Persons Deemed Owners...................................................................8 2.10 Delivery and Cancellation of Certificates...............................................8 2.11 Agreement of Rights Holders.............................................................9 ARTICLE III - ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS......................9 3.1 Flip-In.................................................................................9 3.2 Flip-Over..............................................................................11 ARTICLE IV - THE RIGHTS AGENT....................................................................11 4.1 General................................................................................11 4.2 Merger or Consolidation or Change of Name of Rights Agent..............................11 4.3 Duties of Rights Agent.................................................................12 4.4 Change of Rights Agent.................................................................13 ARTICLE V - MISCELLANEOUS........................................................................14 5.1 Termination............................................................................14 5.2 Expiration.............................................................................14 5.3 Issuance of New Rights Certificates....................................................14 5.4 Supplements and Amendments.............................................................14 5.5 Fractional Shares......................................................................15 5.6 Rights of Action.......................................................................15 5.7 Holder of Rights Not Deemed a Stockholder..............................................15 5.8 Notice of Proposed Actions.............................................................15 5.9 Notices................................................................................15 5.10 Suspension of Exercisability...........................................................16 5.11 Costs of Enforcement...................................................................16 5.12 Successors.............................................................................16 5.13 Benefits of this Agreement.............................................................16 5.14 Determination and Actions by the Board of Directors, etc...............................16 5.15 Descriptive Headings...................................................................16 5.16 Governing Law..........................................................................16 5.17 Counterparts...........................................................................17 5.18 Severability...........................................................................17 STOCKHOLDER PROTECTION RIGHTS AGREEMENT THIS STOCKHOLDER PROTECTION RIGHTS AGREEMENT (as amended from time to time, this "Agreement") is made and entered into as of April 22, 2003, but shall be effective as of April 17, 2003, between Accredo Health, Incorporated, a Delaware corporation (the "Company"), and American Stock Transfer & Trust Company, as rights agent (the "Rights Agent," which term shall include any successor rights agent hereunder). W I T N E S S E T H: WHEREAS, on April 17, 2003, the Board of Directors of the Company has (a) authorized and declared a dividend of one right ("Right") in respect of each share of Common Stock (as hereinafter defined) held of record as of the Close of Business (as hereinafter defined) on April 28, 2003 (the "Record Time") and (b) as provided in Section 2.4, authorized the issuance of one Right in respect of each share of Common Stock issued after the Record Time and prior to the Separation Time (as hereinafter defined); WHEREAS, subject to Sections 3.1, 5.1 and 5.10, each Right entitles the holder thereof, after the Separation Time, to purchase securities of the Company (or, in certain cases, of certain other entities) pursuant to the terms and subject to the conditions set forth herein; and WHEREAS, the Company desires to appoint the Rights Agent to act on behalf of the Company, and the Rights Agent is willing so to act, in connection with the issuance, transfer, exchange and replacement of Rights Certificates (as hereinafter defined), the exercise of Rights and other matters referred to herein; NOW THEREFORE, in consideration of the premises and the respective agreements set forth herein, the parties hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS 1.1 Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: "Acquiring Person" shall mean any Person who is a Beneficial Owner of 15% or more of the outstanding shares of Common Stock; provided, however, that the term "Acquiring Person" shall not include any Person (i) who is the Beneficial Owner of 15% or more of the outstanding shares of Common Stock on the date of this Agreement or who shall become the Beneficial Owner of 15% or more of the outstanding shares of Common Stock solely as a result of an acquisition by the Company of shares of Common Stock, until such time hereafter or thereafter as any such Person shall become the Beneficial Owner (other than by means of a stock dividend or stock split) of any additional shares of Common Stock, (ii) who is the Beneficial Owner of 15% or more of the outstanding shares of Common Stock but who acquired Beneficial Ownership of shares of Common Stock without any plan or intention to seek or affect control of the Company, if such Person promptly enters into an irrevocable commitment promptly to divest, and thereafter promptly divests (without exercising or retaining any power, including voting power, with respect to such shares), sufficient shares of Common Stock (or securities convertible into, exchangeable into or exercisable for Common Stock) so that such Person ceases to be the Beneficial Owner of 15% or more of the outstanding shares of Common Stock or (iii) who Beneficially Owns shares of Common Stock consisting solely of one or more of (A) shares of Common Stock Beneficially Owned pursuant to the grant or exercise of an option granted to such Person by the Company in connection with an agreement to merge with, or acquire, the Company entered into prior to a Flip-In Date, (B) shares of Common Stock (or securities convertible into, exchangeable into or exercisable for Common Stock) Beneficially Owned by such Person or its Affiliates or Associates at the time of grant of such option or (C) shares of Common Stock (or securities convertible into, exchangeable into or exercisable for Common Stock) acquired by Affiliates or Associates of such Person after the time of such grant which, in the aggregate, amount to less than 1% of the outstanding shares of Common Stock. In addition, the Company, any wholly owned Subsidiary of the Company and any employee stock ownership or other employee benefit plan of the Company or a wholly owned Subsidiary of the Company shall not be an Acquiring Person. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), as such Rule is in effect on the date of this Agreement. A Person shall be deemed the "Beneficial Owner" of, and to have "Beneficial Ownership" of, and to "Beneficially Own," any securities of which such Person or any of such Person's Affiliates or Associates is or may be deemed to be the beneficial owner pursuant to Rule 13d-3 and 13d-5 under the Securities Exchange Act, as such Rules are in effect on the date of this Agreement as well as any securities as to which such Person or any of such Person's Affiliates or Associates has the right to become Beneficial Owner (whether such right is exercisable immediately or only after the passage of time or the occurrence of conditions) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, other rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to have "Beneficial Ownership" of, or to "Beneficially Own," any security (i) solely because such security has been tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered security is accepted for payment or exchange or (ii) solely because such Person or any of such Person's Affiliates or Associates has or shares the power to vote or direct the voting of such security pursuant to a revocable proxy given in response to a public proxy or consent solicitation made to more than ten holders of shares of a class of stock of the Company registered under Section 12 of the Securities Exchange Act and pursuant to, and in accordance with, the applicable rules and regulations under the Securities Exchange Act, except if such power (or the arrangements relating thereto) is then reportable under Item 6 of Schedule 13D under the Securities Exchange Act (or any similar provision of a comparable or successor report). Notwithstanding the foregoing, no officer or director of the Company shall be deemed to Beneficially Own any securities of any other Person by virtue of any actions such officer or director takes in such capacity. For purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any time, including for purposes of determining the percentage of the outstanding shares of Common Stock with respect to which a Person is the Beneficial Owner, shall be made in accordance with the provisions of Rule 13d-3(d)(1) under the Securities Exchange Act. "Business Day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in Atlanta, Georgia are generally authorized or obligated by law or executive order to close. "Close of Business" on any given date shall mean 5:00 p.m. Atlanta, Georgia time on such date (or, if such date is not a Business Day, 5:00 p.m. Atlanta, Georgia time on the next succeeding Business Day). "Common Stock" shall mean the shares of Common Stock, par value $0.01 per share, of the Company. "Exchange Time" shall mean the time at which the right to exercise the Rights shall terminate pursuant to Section 3.1(c). "Exercise Price" shall mean, as of any date, the price at which a holder may purchase the securities issuable upon exercise of one whole Right. Until adjustment thereof in accordance with the terms hereof, the Exercise Price shall equal $100.00. "Expiration Time" shall mean the earliest of (i) the Exchange Time, (ii) the Termination Time, (iii) April 28, 2013 and (iv) the time of a merger of the Company into another corporation pursuant to an agreement entered into prior to a Flip-In Date. "Flip-In Date" shall mean the tenth Business Day after any Stock Acquisition Date or such earlier or later date as the Board of Directors of the Company may from time to time fix by resolution adopted prior to the Flip-In Date that would otherwise have occurred. -2- "Flip-Over Entity" for purposes of Section 3.2, shall mean (i) in the case of a Flip-Over Transaction or Event described in clause (i) of the definition thereof, the Person issuing any securities into which shares of Common Stock are being converted or exchanged and, if no such securities are being issued, any other party to such Flip-Over Transaction or Event and (ii) in the case of a Flip-Over Transaction or Event referred to in clause (ii) of the definition thereof, the Person receiving the greatest portion of the assets or earning power being transferred in such Flip-Over Transaction or Event; provided in all cases if such Person is a subsidiary of another Person, the ultimate controlling Person that is not an individual shall be the Flip-Over Entity. "Flip-Over Stock" shall mean the capital stock (or similar equity interest) with the greatest voting power in respect of the election of directors (or other Persons similarly responsible for direction of the business and affairs) of the Flip-Over Entity. "Flip-Over Transaction or Event" shall mean a transaction or series of transactions after a Flip-In Date in which, directly or indirectly, (i) the Company shall consolidate or merge or participate in a share exchange with any other Person if, at the time of the consolidation, merger or share exchange or at the time the Company enters into any agreement with respect to any such consolidation, merger or share exchange, the Acquiring Person Controls the Board of Directors of the Company and either (A) any term of or arrangement concerning the treatment of shares of capital stock in such consolidation, merger or share exchange relating to the Acquiring Person is not identical to the terms and arrangements relating to other holders of the Common Stock or (B) the Person with whom the transaction or series of transactions occurs is the Acquiring Person or an Affiliate or Associate of the Acquiring Person or (ii) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer) assets (A) aggregating more than 50% of the assets (measured by either book value or fair market value) or (B) generating more than 50% of the operating income or cash flow, of the Company and its Subsidiaries (taken as a whole) to any Person (other than the Company or one or more of its wholly owned Subsidiaries) or to two or more such Persons which are Affiliates or Associates or otherwise acting in concert, if, at the time of the entry by the Company (or any such Subsidiary) into an agreement with respect to such sale or transfer of assets, the Acquiring Person Controls the Board of Directors of the Company. An Acquiring Person shall be deemed to "Control" the Company's Board of Directors when, following a Flip-In Date, the Persons who were directors of the Company before the Flip-In Date shall cease to constitute a majority of the Company's Board of Directors. "Market Price" per share of any securities on any date shall mean the average of the daily closing prices per share of such securities (determined as described below) on each of the 20 consecutive Trading Days through and including the Trading Day immediately preceding such date; provided, however, that if an event of a type analogous to any of the events described in Section 2.4 shall have caused the closing prices used to determine the Market Price on any Trading Days during such period of 20 Trading Days not to be fully comparable with the closing price on such date, each such closing price so used shall be appropriately adjusted in order to make it fully comparable with the closing price on such date. The closing price per share of any securities on any date shall be the last reported sale price, regular way, or, in case no such sale takes place or is quoted on such date, the average of the closing bid and asked prices, regular way, for each share of such securities, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, Inc. or, if the securities are not listed or admitted to trading on the New York Stock Exchange, Inc., as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the securities are listed or admitted to trading or, if the securities are not listed or admitted to trading on any national securities exchange, as reported by The Nasdaq Stock Market, Inc.'s Nasdaq National Market or such other system then in use, or, if on any such date the securities are not listed or admitted to trading on any national securities exchange or 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 securities selected by the Board of Directors of the Company; provided, however, that if on any such date the securities are not listed or admitted to trading on a national securities exchange or traded in the over-the-counter market, the closing price per share of such securities on such date shall mean the fair value per share of securities on such date as determined in good faith by the Board of Directors of the Company, after consultation with a nationally recognized investment banking firm, and set forth in a certificate delivered to the Rights Agent. -3- "Person" shall mean any individual, firm, partnership, association, group (as such term is used in Rule 13d-5 under the Securities Exchange Act, as such Rule is in effect on the date of this Agreement), corporation or other entity. "Preferred Stock" shall mean the Series A Junior Participating Preferred Stock, par value $1.00 per share, of the Company created by the Certificate of Designation, Preferences and Rights in substantially the form set forth in Exhibit B hereto, appropriately completed. "Separation Time" shall mean the Close of Business on the earlier of (i) the tenth Business Day (or such later date as the Board of Directors of the Company may from time to time fix by resolution adopted prior to the Separation Time that would otherwise have occurred) after the date on which any Person commences a tender or exchange offer which, if consummated, would result in such Person's becoming an Acquiring Person and (ii) the Flip-In Date; provided, that if the foregoing results in the Separation Time being prior to the Record Time, the Separation Time shall be the Record Time and provided further, that if any tender or exchange offer referred to in clause (i) of this paragraph is canceled, terminated or otherwise withdrawn prior to the Separation Time without the purchase of any shares of Common Stock pursuant thereto, such offer shall be deemed, for purposes of this paragraph, never to have been made. "Stock Acquisition Date" shall mean the first date of public announcement by the Company (by any means) that an Acquiring Person has become such. "Subsidiary" of any specified Person shall mean any corporation or other entity of which a majority of the voting power of the equity securities or a majority of the equity interests is Beneficially Owned, directly or indirectly, by such Person. "Termination Time" shall mean the time at which the right to exercise the Rights shall terminate pursuant to Section 5.1 hereof. "Trading Day," when used with respect to any securities, shall mean a day on which the New York Stock Exchange, Inc. is open for the transaction of business or, if such securities are not listed or admitted to trading on the New York Stock Exchange, Inc., a day on which the principal national securities exchange on which such securities are listed or admitted to trading is open for the transaction of business or, if such securities are not listed or admitted to trading on any national securities exchange, a day on which The Nasdaq Stock Market, Inc.'s Nasdaq National Market or such other system then in use is open for the transaction of business or, if such securities are not listed or admitted to trading on any national securities exchange or quoted on any such system, a Business Day. ARTICLE II THE RIGHTS 2.1 Summary of Rights. As soon as practicable after the Record Time, the Company will mail a letter summarizing the terms of the Rights to each holder of record of Common Stock as of the Record Time, at such holder's address as shown by the records of the Company. 2.2 Issuance of Rights Certificates; Legend. (a) Certificates for the Common Stock issued after the Record Time but prior to the Separation Time shall evidence, in addition to the Common Stock represented by such certificate, one Right for each share of Common Stock represented thereby and shall have impressed on, printed on, written on or otherwise affixed to them the following legend: "Until the Separation Time (as defined in the Rights Agreement referred to below), this certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Stockholder Protection Rights Agreement, effective as of April 17, 2003 (as such may be amended from time to time, the "Rights Agreement"), between Accredo Health, Incorporated (the "Company") and American Stock Transfer & Trust Company, as Rights Agent, the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of -4- the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be terminated, may become exercisable for securities or assets of the Company or of another entity, may be exchanged for shares of Common Stock or other securities or assets of the Company, may expire, may become void (if they are "Beneficially Owned" by an "Acquiring Person" or an Affiliate or Associate thereof, as such terms are defined in the Rights Agreement, or by any transferee of any of the foregoing) or may be evidenced by separate certificates and may no longer be evidenced by this certificate. The Company will mail or arrange for the mailing of a copy of the Rights Agreement to the holder of this certificate without charge promptly after the receipt of a written request therefor." Certificates representing shares of Common Stock that are issued and outstanding at the Record Time shall evidence, in addition to the Common Stock represented by such certificate, one Right for each share of Common Stock evidenced thereby notwithstanding the absence of the foregoing legend. (b) Subject to Sections 2.4 and 5.3, one Right shall be issued in respect of (i) each share of Common Stock outstanding as of the Record Time and (ii) each additional share of Common Stock that becomes outstanding (whether by original issuance or out of treasury, but other than in a transaction contemplated by Section 2.4) after the Record Time but prior to the Separation Time. To the extent provided in Section 5.3, Rights shall be issued by the Company in respect of shares of Common Stock that are issued or sold by the Company after the Separation Time. 2.3 Exercise of Rights; Separation of Rights. (a) Subject to Sections 3.1, 5.1 and 5.10 and subject to adjustment as herein set forth, each Right will entitle the holder thereof, after the Separation Time and prior to the Expiration Time, to purchase, for the Exercise Price, one ten-thousandth (1/10,000th) of a share of Preferred Stock. (b) Until the Separation Time, (i) no Right may be exercised and (ii) each Right will be evidenced by the certificate that evidences the share of Common Stock with which it is associated (together, in the case of certificates issued prior to the Record Time, with the letter or notice mailed to the record holder thereof pursuant to Section 2.1) and will be transferable only together with, and will be transferred by a transfer (whether with or without such letter or notice) of, such associated share of Common Stock, and the surrender for transfer of any certificates representing outstanding Common Stock will also constitute the surrender for transfer of the Rights associated with the Common Stock represented by such certificate. (c) Subject to this Section 2.3 and to Sections 3.1, 5.1 and 5.10, after the Separation Time and prior to the Expiration Time, the Rights (i) may be exercised and (ii) may be transferred independently of shares of Common Stock. Promptly following the Separation Time, the Rights Agent will mail to each holder of record of Common Stock as of the Separation Time (other than any Person whose Rights have become void pursuant to Section 3.1(b)), at such holder's address as shown by the records of the Company (the Company hereby agreeing to furnish copies of such records to the Rights Agent for this purpose), (x) a certificate (a "Rights Certificate") in substantially the form of Exhibit A hereto appropriately completed, representing the number of Rights held by such holder at the Separation Time and having 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 law or with any rule or regulation made pursuant thereto or with any rule or regulation of any national securities exchange or quotation system on which the Rights may from time to time be listed or traded, or to conform to usage, and (y) a disclosure statement describing the Rights. (d) Subject to Sections 3.1, 5.1 and 5.10, Rights may be exercised on any Business Day after the Separation Time and prior to the Expiration Time by submitting to the Rights Agent the Rights Certificate evidencing such Rights with an Election to Exercise (an "Election to Exercise") substantially in the form attached to the Rights Certificate, duly completed, accompanied by payment by certified or official bank check or money order payable to the order of the Company, of a sum equal to the Exercise Price multiplied by the number of Rights being exercised and a sum sufficient to cover any transfer tax or charge that may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for shares or depositary receipts (or both) in a name other than that of the holder of the Rights being exercised. -5- (e) Upon receipt of a Rights Certificate, with an Election to Exercise accompanied by payment as set forth in Section 2.3(d), and subject to Sections 3.1, 5.1 and 5.10, the Rights Agent promptly will (i)(A) requisition from the Company's transfer agent(s) stock certificates evidencing such number of shares or other securities to be purchased (the Company hereby irrevocably authorizing its transfer agents to comply with all such requisitions) and (B) if the Company elects pursuant to Section 5.5 not to issue certificates representing fractional shares, requisition from the depositary selected by the Company depositary receipts representing the fractional shares to be purchased or requisition from the Company the amount of cash to be paid in lieu of fractional shares in accordance with Section 5.5 and (ii) after receipt of such certificates, depositary receipts and/or cash, deliver the same to or upon the order of the registered holder of such Rights Certificate, registered (in the case of certificates or depositary receipts) in such name or names as may be designated by such holder. In the event that the Company elects pursuant to Section 3.1(e) to issue other securities and/or assets of the Company upon exercise of the Rights, the Company will make all arrangements necessary so that such other securities and/or assets of the Company are available for distribution by the Rights Agent, if and when appropriate. (f) In case the holder of any Rights shall exercise less than all the Rights evidenced by such holder's Rights Certificate, a new Rights Certificate evidencing the Rights remaining unexercised will be issued by the Rights Agent to such holder or to such holder's duly authorized assigns. (g) The Company covenants and agrees that it will (i) take all such action as may be necessary to ensure that all shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Exercise Price), be duly and validly authorized, executed, issued and delivered and fully paid and nonassessable; (ii) take all such action as may be necessary to comply with any applicable requirements of the Securities Act of 1933, as amended, or the Securities Exchange Act, and the rules and regulations thereunder, and any other applicable law, rule or regulation, in connection with the issuance of any shares upon exercise of Rights; and (iii) pay when due and payable any and all federal and state transfer taxes and charges that may be payable in respect of the original issuance or delivery of the Rights Certificates or of any shares issued upon the exercise of Rights, provided that the Company shall not be required to pay any transfer tax or charge that may be payable in respect of any transfer involved in the transfer or delivery of Rights Certificates or the issuance or delivery of certificates for shares in a name other than that of the holder of the Rights being transferred or exercised. 2.4 Adjustments to Exercise Price; Number of Rights. (a) In the event the Company shall at any time after the Record Time and prior to the Separation Time (i) declare or pay a dividend on Common Stock payable in Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares of Common Stock, (x) the Exercise Price in effect after such adjustment will be equal to the Exercise Price in effect immediately prior to such adjustment divided by the number of shares of Common Stock (the "Expansion Factor") that a holder of one share of Common Stock immediately prior to such dividend, subdivision or combination would hold thereafter as a result thereof (assuming for such purpose that the Company would issue a fraction of a share of Common Stock, as applicable, and without giving effect to any requirement that cash be paid in lieu of the issuance of any fractional share interest) and (y) each Right held prior to such adjustment will become that number of Rights equal to the Expansion Factor, and the adjusted number of Rights will be deemed to be distributed among the shares of Common Stock with respect to which the original Rights were associated (if they remain outstanding) and the shares issued in respect of such dividend, subdivision or combination, so that each such share of Common Stock will have exactly one Right associated with it. Each adjustment made pursuant to this paragraph shall be made as of the payment or effective date for the applicable dividend, subdivision or combination. (b) In the event the Company shall at any time after the Record Time and prior to the Separation Time issue or distribute any securities or assets in respect of, in lieu of or in exchange for Common Stock (other than pursuant to a regular periodic cash dividend or a dividend paid solely in Common Stock) whether by dividend, in a reclassification or recapitalization (including any such transaction involving a merger, consolidation or share exchange), or otherwise, the Company shall make such adjustments, if any, in the Exercise Price, number of Rights and/or securities or other property purchasable upon exercise of Rights as the Board of Directors of the Company, in its sole discretion, may deem to be appropriate under the circumstances in order to adequately protect the interests of the holders of Rights generally, and the Company and the Rights Agent shall amend this Agreement as necessary to provide for such adjustments. -6- (c) Each adjustment to the Exercise Price made pursuant to this Section 2.4 shall be calculated to the nearest cent. Whenever an adjustment to the Exercise Price is made pursuant to this Section 2.4, the Company shall (i) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment and (ii) promptly file with the Rights Agent and with each transfer agent for the Common Stock a copy of such certificate. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such a certificate. Rights Certificates shall represent the right to purchase the securities purchasable under the terms of this Agreement, including any adjustment or change in the securities purchasable upon exercise of the Rights, even though such certificates may continue to express the right to purchase the securities purchasable at the time of issuance of the initial Rights Certificates. 2.5 Date on Which Exercise is Effective. Each person in whose name any certificate for shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the shares represented thereby on the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Exercise Price for such Rights (and any applicable taxes and other governmental charges payable by the exercising holder hereunder) was made; provided, however, that if the date of such surrender and payment is a date upon which the stock transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the stock transfer books of the Company are open. 2.6 Execution, Authentication, Delivery and Dating of Rights Certificates. (a) The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President or one of its Executive Vice Presidents or Senior Vice Presidents, under its corporate seal reproduced thereon and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Rights Certificates may be manual or facsimile. Rights Certificates bearing the manual or facsimile signatures of individuals who were at the time of such signature the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the countersignature and delivery of such Rights Certificates. Promptly after the Separation Time, the Company will notify the Rights Agent of such Separation Time and will deliver Rights Certificates executed by the Company to the Rights Agent for countersignature, and, subject to Section 3.1(b), an authorized signatory of the Rights Agent shall manually countersign and deliver such Rights Certificates to the holders of the Rights pursuant to Section 2.3(c). No Rights Certificate shall be valid for any purpose unless manually countersigned by an authorized signatory of the Rights Agent. (b) Each Rights Certificate shall be dated the date of countersignature thereof. 2.7 Registration, Registration of Transfer and Exchange. (a) After the Separation Time, the Company will cause to be kept a register (the "Rights Register") in which, subject to such reasonable regulations as it may prescribe, the Company will provide for the registration and transfer of Rights. The Rights Agent is hereby appointed "Rights Registrar" for the purpose of maintaining the Rights Register for the Company and registering Rights and transfers of Rights after the Separation Time as herein provided. In the event that the Rights Agent shall cease to be the Rights Registrar, the Rights Agent will have the right to examine the Rights Register at all reasonable times after the Separation Time. After the Separation Time and prior to the Expiration Time, upon surrender for registration of transfer or exchange of any Rights Certificate, and subject to the provisions of this Section 2.7(a) and Sections 2.7(c) and 2.7(d), the Company will execute and the Rights Agent will countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder's instructions, one or more new Rights Certificates evidencing the same aggregate number of Rights as did the Rights Certificate so surrendered. -7- (b) Except as otherwise provided in Section 3.1(b), all Rights issued upon any registration of transfer or exchange of Rights Certificates shall be the valid obligations of the Company, and such Rights shall be entitled to the same benefits under this Agreement as the Rights surrendered upon such registration of transfer or exchange. (c) Every Rights Certificate surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company or the Rights Agent, as the case may be, duly executed by the holder thereof or such holder's attorney duly authorized in writing. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificates until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) thereof, or the Affiliates or Associates of such Beneficial Owner (or former Beneficial Owner), as the Company shall reasonably request. As a condition to the issuance of any new Rights Certificate under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. (d) The Company shall not be required to register the transfer or exchange of any Rights after such Rights have become void under Section 3.1(b), been exchanged under Section 3.1(c) or been terminated under Section 5.1. 2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificates. (a) If any mutilated Rights Certificate is surrendered to the Rights Agent prior to the Expiration Time, then, subject to Sections 3.1(b), 3.1(c) and 5.1, the Company shall execute and the Rights Agent shall countersign and deliver in exchange therefor a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so surrendered. (b) If there shall be delivered to the Company and the Rights Agent prior to the Expiration Time (i) evidence to their satisfaction of the destruction, loss or theft of any Rights Certificate and (ii) such security or indemnity as may be required by them to save each of them and any of their agents harmless, then, subject to Sections 3.1(b), 3.1(c) and 5.1 and in the absence of notice to the Company or the Rights Agent that such Rights Certificate has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Rights Agent shall countersign and deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights Certificate evidencing the same number of Rights as did the Rights Certificate so destroyed, lost or stolen. (c) As a condition to the issuance of any new Rights Certificate under this Section 2.8, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Rights Agent) connected therewith. (d) Every new Rights Certificate issued pursuant to this Section 2.8 in lieu of any destroyed, lost or stolen Rights Certificate shall evidence an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Rights Certificate shall be at any time enforceable by anyone, and, subject to Section 3.1(b), shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Rights duly issued hereunder. 2.9 Persons Deemed Owners. Prior to due presentment of a Rights Certificate (or, prior to the Separation Time, the associated Common Stock certificate) for registration of transfer, the Company, the Rights Agent and any agent of the Company or the Rights Agent may deem and treat the person in whose name such Rights Certificate (or, prior to the Separation Time, such Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. As used in this Agreement, unless the context otherwise requires, the term "holder" of any Rights shall mean the registered holder of such Rights (or, prior to the Separation Time, the associated shares of Common Stock). 2.10 Delivery and Cancellation of Certificates. All Rights Certificates surrendered upon exercise or for registration of transfer or exchange shall, if surrendered to any Person other than the Rights Agent, be delivered to the Rights Agent and, in any case, shall be promptly canceled by the Rights Agent. The Company may at any time -8- deliver to the Rights Agent for cancellation any Rights Certificates previously countersigned and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Rights Certificates so delivered shall be promptly canceled by the Rights Agent. No Rights Certificates shall be countersigned in lieu of or in exchange for any Rights Certificates canceled as provided in this Section 2.10, except as expressly permitted by this Agreement. The Rights Agent shall return all canceled Rights Certificates to the Company. 2.11 Agreement of Rights Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Separation Time, each Right will be transferable only together with, and will be transferred by a transfer of, the associated share of Common Stock; (b) after the Separation Time, the Rights Certificates will be transferable only on the Rights Register as provided herein; (c) prior to due presentment of a Rights Certificate (or, prior to the Separation Time, the associated Common Stock certificate) for registration of transfer, the Company, the Rights Agent and any agent of the Company or the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior to the Separation Time, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary; (d) Rights beneficially owned by certain Persons will, under the circumstances set forth in Section 3.1(b), become void; (e) this Agreement may be supplemented or amended from time to time pursuant to Section 2.4(b) or 5.4; and (f) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of the Rights Agent's inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. ARTICLE III ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS 3.1 Flip-In. (a) In the event that prior to the Expiration Time a Flip-In Date shall occur, except as provided in this Section 3.1, each Right shall constitute the right to purchase from the Company, upon exercise thereof in accordance with the terms hereof (but subject to Section 5.10), that number of shares of Common Stock having an aggregate Market Price on the Stock Acquisition Date equal to twice the Exercise Price for an amount in cash equal to the Exercise Price (such right to be appropriately adjusted in order to protect the interests of the holders of Rights generally in the event that on or after such Stock Acquisition Date an event of a type analogous to any of the events described in Section 2.4(a) or (b) shall have occurred with respect to the Common Stock). (b) Notwithstanding the foregoing, any Rights that are or were Beneficially Owned on or after the Stock Acquisition Date by an Acquiring Person or an Affiliate or Associate thereof or by any transferee, direct or indirect, of any of the foregoing shall become void and any holder of such Rights (including transferees) shall thereafter have no right to exercise or transfer such Rights under any provision of this Agreement. If any Rights Certificate is presented for assignment or exercise and the Person presenting the same will not complete the -9- certification set forth at the end of the form of assignment or notice of election to exercise and provide such additional evidence of the identity of the Beneficial Owner and its Affiliates and Associates (or former Beneficial Owners and their Affiliates and Associates) as the Company shall reasonably request, then the Company shall be entitled conclusively to deem the Beneficial Owner thereof to be an Acquiring Person or an Affiliate or Associate thereof or a transferee of any of the foregoing and accordingly will deem the Rights evidenced thereby to be void and not transferable or exercisable. (c) The Board of Directors of the Company may, at its option, at any time after a Flip-In Date and prior to the time that an Acquiring Person becomes the Beneficial Owner of more than 50% of the outstanding shares of Common Stock, elect to exchange all (but not less than all) the then-outstanding Rights (other than Rights that have become void pursuant to the provisions of Section 3.1(b)) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right (appropriately adjusted in order to protect the interests of holders of Rights generally in the event that after the Separation Time an event of a type analogous to any of the events described in Section 2.4(a) or (b) shall have occurred with respect to the Common Stock) (such exchange ratio, as adjusted from time to time, being hereinafter referred to as the "Exchange Ratio"). Immediately upon the action of the Board of Directors of the Company electing to exchange the Rights, without any further action and without any notice, the right to exercise the Rights will terminate and each Right (other than Rights that have become void pursuant to Section 3.1(b)) will thereafter represent only the right to receive a number of shares of Common Stock equal to the Exchange Ratio. Promptly after the action of the Board of Directors electing to exchange the Rights, the Company shall give notice thereof (specifying the steps to be taken to receive shares of Common Stock in exchange for Rights) to the Rights Agent and the holders of the Rights (other than Rights that have become void pursuant to Section 3.1(b)) outstanding immediately prior thereto by mailing such notice in accordance with Section 5.9. Each Person in whose name any certificate for shares is issued upon the exchange of Rights pursuant to this Section 3.1(c) or Section 3.1(e) shall for all purposes be deemed to have become the holder of record of the shares represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of any applicable taxes and other governmental charges payable by the holder was made; provided, however, that if the date of such surrender and payment is a date upon which the stock transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such Certificate shall be dated, the next succeeding Business Day on which the stock transfer books of the Company are open. (d) Whenever the Company shall become obligated under Section 3.1(a) or (c) to issue shares of Common Stock upon exercise of or in exchange for Rights, the Company, at its option, may substitute therefor shares of Preferred Stock, at a ratio of one ten-thousandth (1/10,000th) of a share of Preferred Stock for each share of Common Stock so issuable. (e) In the event that there shall not be sufficient treasury shares or authorized but unissued shares of Common Stock or Preferred Stock of the Company to permit the exercise or exchange in full of the Rights in accordance with Section 3.1(a) or (c), the Company shall either (i) call a meeting of stockholders seeking approval to cause sufficient additional shares to be authorized (provided that if such approval is not obtained the Company will take the action specified in clause (ii) of this sentence) or (ii) take such action as shall be necessary to ensure and provide, to the extent permitted by applicable law and any agreements or instruments in effect on the Stock Acquisition Date to which it is a party, that each Right shall thereafter constitute the right to receive, (x) at the Company's option, either (A) in return for the Exercise Price, cash, debt or equity securities or other assets (or a combination thereof) having a fair value equal to twice the Exercise Price, or (B) without payment of consideration (except as otherwise required by applicable law), cash, debt or equity securities or other assets (or a combination thereof) having a fair value equal to the Exercise Price, or (y) if the Board of Directors of the Company elects to exchange the Rights in accordance with Section 3.1(c), debt or equity securities or other assets (or a combination thereof) having a fair value equal to the product of the Market Price of a share of Common Stock on the Flip-In Date times the Exchange Ratio in effect on the Flip-In Date, where in any case set forth in (x) or (y) above the fair value of such debt or equity securities or other assets shall be as determined in good faith by the Board of Directors of the Company, after consultation with a nationally recognized investment banking firm. -10- 3.2 Flip-Over. (a) Prior to the Expiration Time, the Company shall not enter into any agreement with respect to, consummate or permit to occur any Flip-Over Transaction or Event unless and until it shall have entered into a supplemental agreement with the Flip-Over Entity, for the benefit of the holders of the Rights (other than holders of Rights that have become void pursuant to Section 3.1(b)), providing that, upon consummation or occurrence of the Flip-Over Transaction or Event (i) each Right (other than holders of Rights that have become void pursuant to Section 3.1(b)) shall thereafter constitute the right to purchase from the Flip-Over Entity, upon exercise thereof in accordance with the terms hereof, that number of shares of Flip-Over Stock of the Flip-Over Entity having an aggregate Market Price on the date of consummation or occurrence of such Flip-Over Transaction or Event equal to twice the Exercise Price for an amount in cash equal to the Exercise Price (such right to be appropriately adjusted in order to protect the interests of the holders of Rights generally (other than holders of Rights that have become void pursuant to Section 3.1(b)) in the event that after such date of consummation or occurrence an event of a type analogous to any of the events described in Section 2.4(a) or (b) shall have occurred with respect to the Flip-Over Stock) and (ii) the Flip-Over Entity shall thereafter be liable for, and shall assume, by virtue of such Flip-Over Transaction or Event and such supplemental agreement, all the obligations and duties of the Company pursuant to this Agreement. The provisions of this Section 3.2 shall apply to successive Flip-Over Transactions or Events. (b) Prior to the Expiration Time, unless the Rights will be terminated pursuant to Section 5.1 in connection therewith, the Company shall not enter into any agreement with respect to, consummate or permit to occur any Flip-Over Transaction or Event if at the time thereof there are any rights, warrants or securities outstanding or any other arrangements, agreements or instruments that would eliminate or otherwise diminish in any material respect the benefits intended to be afforded by this Rights Agreement to the holders of Rights upon consummation of such transaction. ARTICLE IV THE RIGHTS AGENT 4.1 General. (a) The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company 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, its directors, officers, employees and agents for, and to hold each of them harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent or such other indemnified party, for anything done or suffered or omitted to be done by the Rights Agent in connection with the acceptance and administration of this Agreement or the exercise or performance of its duties hereunder, including the costs and expenses of defending against any claim of liability. The indemnity provided in this Section 4.1(a) shall survive the expiration of the Rights and the termination of this Agreement. (b) The Rights Agent shall be fully protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement or the exercise or performance of its duties hereunder in reliance upon any certificate for securities purchasable upon exercise of Rights, Rights Certificate, certificate 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. 4.2 Merger or Consolidation or Change of Name of Rights Agent. (a) Any Person 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 is a party, or any corporation succeeding to the stockholder services business of the Rights Agent or any successor Rights Agent, will be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such Person would be eligible for appointment as a successor -11- Rights Agent under the provisions of Section 4.4. In case at the time such successor Rights Agent succeeds to the agency created by this Agreement any of the Rights Certificates have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates have not been countersigned, any successor Rights Agent may countersign such Rights 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 Rights Certificates will have the full force provided in the Rights Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent is changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. 4.3 Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the advice or opinion of such counsel will be full and complete authorization and protection to the Rights Agent as to any action taken, suffered or omitted by it in good faith and in accordance with such advice or opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent deems 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 a person believed by the Rights Agent to be the Chairman of the Board, the Chief Executive Officer, the President or any Executive Vice President or Senior Vice President and by the Chief Financial Officer, the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate will be full authorization to the Rights Agent for any action taken, suffered or omitted in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent will be liable hereunder only for its own gross negligence, bad faith or willful misconduct. (d) The Rights Agent will not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the certificates for securities purchasable upon exercise of Rights or the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and will be deemed to have been made by the Company only. (e) The Rights Agent will not be under any responsibility in respect of the validity of any provision of this Agreement or the execution and delivery hereof (except the due authorization, execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any certificate for securities purchasable upon exercise of Rights or Rights Certificate (except its countersignature thereof); nor will it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor will it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 3.1(b)) or any adjustment required under any provision of this Agreement or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights after receipt of the certificate contemplated by Section 2.4 describing any such adjustment); nor will it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any securities purchasable upon exercise of Rights or any Rights or as to whether any securities purchasable upon exercise of Rights will, when issued, be duly and validly authorized, executed, issued and delivered and fully paid and nonassessable. -12- (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 believed by the Rights Agent to be the Chairman of the Board, the Chief Executive Officer, the President or any Executive Vice President or Senior Vice President or the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Company, and to apply to such persons for advice or instructions in connection with its duties, and it shall not be liable for any action taken, suffered or omitted by it in good faith in accordance with instructions of any such person, or for any delay in acting while awaiting 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, suffered or omitted by the Rights Agent under this Agreement and the date on or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date 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, suffered or omitted. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in Common Stock, Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person. (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 will 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 the Rights Agent was not grossly negligent in the selection and continued employment thereof. (j) The Rights Agent undertakes only the express duties and obligations imposed on it by this Agreement and no implied duties or obligations shall be read into this Agreement against the Rights Agent. (k) Anything in this Agreement to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits). (l) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. 4.4 Change of Rights Agent. The Rights Agent may resign and be discharged from its duties under this Agreement upon 90 days notice (or such lesser notice as is acceptable to the Company) in writing mailed to the Company and to each transfer agent of Common Stock by registered or certified mail, and to the holders of the Rights in accordance with Section 5.9. The Company may remove the Rights Agent upon 30 days notice in writing, mailed to the Rights Agent and to each transfer agent of the Common Stock by registered or certified mail, and to the holders of the Rights in accordance with Section 5.9. If the Rights Agent should resign or be removed or otherwise become incapable of acting, the Company will appoint a successor to the Rights Agent. If the Company fails to make such appointment within a period of 30 days after 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 any Rights (which holder shall, with such notice, submit such holder's Rights Certificate for inspection by the Company), then -13- the holder of any Rights may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or of the State of Georgia or any other State of the United States, in good standing, which is authorized under such laws to exercise the powers of the Rights Agent contemplated by this Agreement 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 $100,000,000 or (b) an Affiliate of a corporation described in the immediately preceding clause (a). After appointment, the successor Rights Agent will 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 will file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock, and mail a notice thereof in writing to the holders of the Rights. Failure to give any notice provided for in this Section 4.4, 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. ARTICLE V MISCELLANEOUS 5.1 Termination. (a) The Board of Directors of the Company may, at its option, at any time prior to the close of business on the Flip-In Date elect to terminate the Rights without any payment to any holder thereof. (b) Immediately upon the action of the Board of Directors of the Company electing to terminate the Rights (or, if the resolution of the Board of Directors electing to terminate the Rights states that the termination will not be effective until the occurrence of a specified future time or event, upon the occurrence of such future time or event), without any further action and without any notice, the right to exercise the Rights will terminate and each Right will thereafter be null and void. 5.2 Expiration. The Rights and this Agreement shall expire at the Expiration Time and no Person shall have any rights pursuant to this Agreement or any Right after the Expiration Time, except, if the Rights are exchanged, as provided in Section 3.1. 5.3 Issuance of New Rights Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the number or kind or class of shares of stock purchasable upon exercise of Rights made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock by the Company following the Separation Time and prior to the Expiration Time pursuant to the terms of securities convertible or redeemable into shares of Common Stock or to options, in each case issued or granted prior to, and outstanding at, the Separation Time, the Company shall issue to the holders of such shares of Common Stock, Rights Certificates representing the appropriate number of Rights in connection with the issuance or sale of such shares of Common Stock; provided, however, in each case, (i) no such Rights Certificate shall be issued, if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or to the Person to whom such Rights Certificates would be issued, (ii) no such Rights Certificates shall be issued if, and to the extent that, appropriate adjustment shall have otherwise been made in lieu of the issuance thereof, and (iii) the Company shall have no obligation to distribute Rights Certificates to any Acquiring Person or Affiliate or Associate of an Acquiring Person or any transferee of any of the foregoing. 5.4 Supplements and Amendments. The Company and the Rights Agent may from time to time supplement or amend this Agreement without the approval of any holders of Rights (i) prior to the Close of Business on the Flip-In Date, in any respect and (ii) after the Close of Business on the Flip-In Date, to make any changes that the Company may deem necessary or desirable and that shall not materially adversely affect the interests of the holders of Rights generally (other than an Acquiring Person or an Affiliate or an Associate of an Acquiring Person) -14- or in order to cure any ambiguity or to correct or supplement any provision contained herein that may be inconsistent with any other provisions herein or otherwise defective. The Rights Agent will duly execute and deliver any supplement or amendment hereto requested by the Company upon receipt of a certificate from the Company that such supplement or amendment satisfies the terms of the preceding sentence. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment that changes the rights and duties of the Rights Agent under this Agreement shall be effective without the consent of the Rights Agent. 5.5 Fractional Shares. If the Company elects not to issue certificates representing fractional shares upon exercise of Rights, the Company shall, in lieu thereof, in the sole discretion of the Board of Directors, either (a) evidence such fractional shares by depositary receipts issued pursuant to an appropriate agreement between the Company and a depositary selected by it, providing that each holder of a depositary receipt shall have all of the rights, privileges and preferences to which such holder would be entitled as a beneficial owner of such fractional share, or (b) sell such shares on behalf of the holders of Rights and pay to the registered holder of such Rights the appropriate fraction of price per share received upon such sale. 5.6 Rights of Action. Subject to the terms of this Agreement (including Section 3.1(b)), rights of action in respect of this Agreement, other than rights of action vested solely in the Rights Agent, are vested in the respective holders of the Rights; and any holder of any Rights, without the consent of the Rights Agent or of the holder of any other Rights, may, on such holder's own behalf and for such holder's own benefit and the benefit of other holders of Rights, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise such holder's Rights in the manner provided in such holder's Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and 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. 5.7 Holder of Rights Not Deemed a Stockholder. No holder, as such, of any Rights shall be entitled to vote, receive dividends or be deemed for any purpose the holder of shares or any other securities which may at any time be issuable on the exercise of such Rights, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 5.8), or to receive dividends or subscription rights, or otherwise, until such Rights shall have been exercised or exchanged in accordance with the provisions hereof. 5.8 Notice of Proposed Actions. In case the Company shall propose after the Separation Time and prior to the Expiration Time (i) to effect or permit occurrence of any Flip-Over Transaction or Event or (ii) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Right, in accordance with Section 5.9, a notice of such proposed action, which shall specify the date on which such Flip-Over Transaction or Event, liquidation, dissolution, or winding up is to take place, and such notice shall be so given at least 20 Business Days prior to the date of the taking of such proposed action. 5.9 Notices. Notices or demands authorized or required by this Agreement to be given or made by the Rights Agent or by the holder of any Rights to or on the Company shall be sufficiently given or made if delivered or sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Accredo Health, Incorporated 1640 Century Center Parkway Suite 101 Memphis, Tennessee 38134 -15- Any notice or demand authorized or required by this Agreement to be given or made by the Company or by the holder of any Rights to or on the Rights Agent shall be sufficiently given or made if delivered or sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: Notices or demands authorized or required by this Agreement to be given or made by the Company or the Rights Agent to or on the holder of any Rights shall be sufficiently given or made if delivered or sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as it appears upon the registry books of the Rights Agent or, prior to the Separation Time, on the registry books of the transfer agent for the Common Stock. Any notice that is mailed in the manner herein provided shall be deemed given on the third Business Day after mailing, whether or not the holder receives the notice. Failure to give a notice pursuant to the provisions of this Agreement shall not affect the validity of any action taken hereunder. 5.10 Suspension of Exercisability. To the extent that the Company determines in good faith that some action will or need be taken pursuant to Section 2.3(g) or Section 3.1 or otherwise to comply with federal or state securities laws, the Company may suspend the exercisability of the Rights for 90 days and any additional period that may be reasonable in order to take such action or comply with such laws. In the event of any such suspension, the Company shall issue as promptly as practicable a public announcement stating that the exercisability or exchangeability of the Rights has been temporarily suspended. Notice thereof pursuant to Section 5.9 shall not be required. 5.11 Costs of Enforcement. The Company agrees that if the Company or any other Person the securities of which are purchasable upon exercise of Rights fails to fulfill any of its obligations pursuant to this Agreement, then the Company or such Person will reimburse the holder of any Rights for the costs and expenses (including legal fees) incurred by such holder in actions to enforce such holder's rights pursuant to any Rights or this Agreement. 5.12 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. 5.13 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 holders of the Rights any legal or equitable right, remedy or claim under this Agreement and this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the holders of the Rights. 5.14 Determination and Actions by the Board of Directors, etc. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement. All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board of Directors of the Company to any liability to the holders of the Rights. 5.15 Descriptive Headings. Descriptive headings appear herein for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 5.16 Governing Law. THIS AGREEMENT AND EACH RIGHT 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. -16- 5.17 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. 5.18 Severability. If any term or provision of this Agreement or the application thereof to any circumstance shall, in any jurisdiction and to any extent, be invalid or unenforceable, such term or provision shall be ineffective as to such jurisdiction to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the remaining terms and provisions hereof or the application of such term or provision to circumstances other than those as to which it is held invalid or unenforceable. [SIGNATURES APPEAR ON FOLLOWING PAGE] -17- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. ACCREDO HEALTH, INCORPORATED By: /s/ Thomas W. Bell, Jr. ---------------------------------------------------- Name: Thomas W. Bell, Jr. Title: Senior Vice President and General Counsel AMERICAN STOCK TRANSFER & TRUST COMPANY By: /s/ Herbert J. Lemmer ---------------------------------------------------- Name: Herbert J. Lemmer Title: General Counsel -1- EXHIBIT A (Form of Rights Certificate) Certificate No. R- _______ Rights THE RIGHTS ARE SUBJECT TO TERMINATION OR MANDATORY EXCHANGE, AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT(AS DEFINED BELOW). RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR ASSOCIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF ANY OF THE FOREGOING WILL BE VOID. Rights Certificate ACCREDO HEALTH, INCORPORATED This certifies that _______________________, or registered assigns, is the registered holder of the number of Rights set forth above, each of which entitles the registered holder thereof, subject to the terms, provisions and conditions of the Stockholder Protection Rights Agreement, effective as of April 17, 2003 (as amended from time to time, the "Rights Agreement"), between Accredo Health, Incorporated, a Delaware corporation (the "Company"), and American Stock Transfer & Trust Company as rights agent (the "Rights Agent," which term shall include any successor rights agent under the Rights Agreement), to purchase from the Company at any time after the Separation Time (as such term is defined in the Rights Agreement) and prior to the Close of Business on April 28, 2003, one ten-thousandth (1/10,000) of a fully paid share of Series A Junior Participating Preferred Stock, par value $1.00 per share (the "Preferred Stock"), of the Company (subject to adjustment as provided in the Rights Agreement) at the Exercise Price referred to below, upon presentation and surrender of this Rights Certificate with the Form of Election to Exercise duly executed at the principal office of the Rights Agent. The Exercise Price shall initially be $100.00 per Right and shall be subject to adjustment in certain events as provided in the Rights Agreement. In certain circumstances described in the Rights Agreement, the Rights evidenced hereby may entitle the registered holder thereof to purchase securities of an entity other than the Company or securities or assets of the Company other than Preferred Stock, all as provided in the Rights Agreement. This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates. Copies of the Rights Agreement are on file at the principal office of the Company and are available without cost upon written request. Capitalized terms used in this Rights Certificate and not otherwise defined herein shall have the meanings ascribed to such terms in the Rights Agreement. This Rights Certificate, with or without other Rights Certificates, upon surrender at the office of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor evidencing an aggregate number of Rights equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, each Right evidenced by this Certificate may be (a) terminated by the Company under certain circumstances, at its option, or (b) exchanged by the Company under certain circumstances, at its option, for one share of Common Stock or one ten-thousandth (1/10,000) of a share of Preferred Stock) per Right (or, in certain cases, other securities or assets of the Company), subject in each case to adjustment in certain events as provided in the Rights Agreement. No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of any securities which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by this Rights Certificate shall have been exercised or exchanged as provided in the Rights Agreement. This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company. Date: ATTEST: ACCREDO HEALTH, INCORPORATED By: - ------------------------------- -------------------------------- Secretary Countersigned: - ------------------------------- By: ----------------------------- Authorized Officer -2- [Form of Reverse Side of Rights Certificate] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer this Rights Certificate.) FOR VALUE RECEIVED, _______________________________ hereby sells, assigns and transfers unto - ------------------------------------------------------------------------------ (Please print name and address of transferee) this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ________________________ attorney-in-fact, to transfer the within Rights Certificate on the books of the within-named company, with full power of substitution. Dated: ___________________, _____. Signature Guaranteed: ------------------------------------- Signature (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever) Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934. - -------------------------------------------------------------------------------- (To be completed if true) The undersigned hereby represents, for the benefit of the Company and all holders of Rights and shares of Common Stock, that the Rights evidenced by this Rights Certificate are not, and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). -------------------------- Signature - -------------------------------------------------------------------------------- NOTICE In the event the certification set forth above is not completed in connection with a purported assignment, the Company will deem the Beneficial Owner of the Rights evidenced by the enclosed Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) or a transferee of any of the foregoing and accordingly will deem the Rights evidenced by such Rights Certificate to be void and not transferable or exercisable. [To be attached to each Rights Certificate] FORM OF ELECTION TO EXERCISE (To be executed if holder desires to exercise the Rights Certificate.) TO: ACCREDO HEALTH, INCORPORATED The undersigned hereby irrevocably elects to exercise _________________ whole Rights represented by the attached Rights Certificate to purchase the shares of Series A Junior Participating Preferred Stock issuable upon the exercise of such Rights and requests that certificates for such shares be issued in the name of and delivered to: Name: -------------------------------------------------------- Address: ----------------------------------------------------- Social Security or other Taxpayer ID No.: -------------------- If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to: Name: -------------------------------------------------------- Address: ----------------------------------------------------- Social Security or other Taxpayer ID No.: -------------------- Dated: _________________, ______ Signature Guaranteed: ---------------------------------------- Signature (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever) Signatures must be guaranteed by an eligible guarantor institution (a bank, stockbroker, savings and loan association or credit union with membership in an approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934. - -------------------------------------------------------------------------------- (to be completed if true) The undersigned hereby represents, for the benefit of the Company and all holders of Rights and shares of Common Stock, that the Rights evidenced by this Rights Certificate are not, and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). ----------------------------------------- Signature - -------------------------------------------------------------------------------- NOTICE In the event the certification set forth above is not completed in connection with a purported assignment, the Company will deem the Beneficial Owner of the Rights evidenced by the enclosed Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) or a transferee of any of the foregoing and accordingly will deem the Rights evidenced by such Rights Certificate to be void and not transferable or exercisable. A-3 Exhibit B CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF ACCREDO HEALTH, INCORPORATED Pursuant to Section 151 of the Delaware General Corporation Law Accredo Health, Incorporated, a corporation organized under the laws of the State of Delaware (the "Corporation"), hereby certifies that, pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation, as amended, of the Corporation, the Board of Directors on April 17, 2003, adopted the following resolution creating a series of one hundred thousand (100,000) shares of Preferred Stock designated as Series A Junior Participating Preferred Stock: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (the "Board") in accordance with the provisions of its Certificate of Incorporation, as amended, a series of Preferred Stock of the Corporation be and it hereby is created, and that the designation and amount thereof and the voting rights or powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: 1. Series A Junior Participating Preferred Stock. There is hereby established a series of Preferred Stock, par value $1.00 per share, of the Corporation, and the designation and certain terms, powers, preferences and other rights of the shares of such series, and certain qualifications, limitations and restrictions thereon, are hereby fixed as follows: (i) The distinctive serial designation of this series shall be "Series A Junior Participating Preferred Stock" (hereinafter called "this Series"). Each share of this Series shall be identical in all respects with the other shares of this Series except as to the dates from and after which dividends thereon shall be cumulative. (ii) The number of shares in this Series shall initially be one hundred thousand (100,000), which number may from time to time be increased or decreased (but not below the number then outstanding) by the Board of Directors. Shares of this Series purchased by the Corporation shall be canceled and shall revert to authorized but unissued shares of Preferred Stock undesignated as to series. Shares of this Series may be issued in fractional shares, which fractional shares shall entitle the holder, in proportion to such holder's fractional share, to all rights of a holder of a whole share of this Series. (iii) The holders of full or fractional shares of this Series shall be entitled to receive, when and as declared by the Board of Directors, but only out of funds legally available therefor, dividends, (A) on each date that dividends or other distributions (other than dividends or distributions payable in Common Stock of the Corporation) are payable on or in respect of Common Stock comprising part of the Reference Package (as defined below), in an amount per whole share of this Series equal to the aggregate amount of dividends or other distributions (other than dividends or distributions payable in Common Stock of the Corporation) that would be payable on such date to a holder of the Reference Package and (B) on the last day of March, June, September and December in each year, in an amount per whole share of this Series equal to the excess (if any) of $1.00 over the aggregate dividends paid per whole share of this Series during the three-month period ending on such last day. Each such dividend shall be paid to the holders of record of shares of this Series on the date, not exceeding 60 days preceding such dividend or distribution payment date, fixed for that purpose by the Board of Directors in advance of payment of each particular dividend or distribution. Dividends on each full and each fractional share of this Series shall be cumulative from the date such full or fractional share is originally issued; provided that any such full or fractional share originally issued after a dividend record date and on or prior to the dividend payment date to which such record date relates shall not be entitled to receive the dividend payable on such dividend payment date or any amount in respect of the period from such original issuance to such dividend payment date. The term "Reference Package" shall initially mean 10,000 shares of Common Stock, par value $.01 per share ("Common Stock"), of the Corporation. In the event the Corporation shall at any time (A) declare or pay a dividend on any Common Stock payable in Common Stock, (B) subdivide any Common Stock or (C) combine any Common Stock into a smaller number of shares, then and in each such case the Reference Package after such event shall be the Common Stock that a holder of the Reference Package immediately prior to such event would hold thereafter as a result thereof. Holders of shares of this Series shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on this Series. So long as any shares of this Series are outstanding, no dividend (other than a dividend in Common Stock or in any other stock ranking junior to this Series as to dividends and upon liquidation) shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock or upon any other stock ranking junior to this Series as to dividends or upon liquidation, nor shall any Common Stock nor any other stock of the Corporation ranking junior to or on a parity with this Series as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to this Series as to dividends and upon liquidation), unless, in each case, the full cumulative dividends (including the dividend to be due upon payment of such dividend, distribution, redemption, purchase or other acquisition) on all outstanding shares of this Series shall have been, or shall contemporaneously be, paid. (iv) In the event of any merger, consolidation, reclassification or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of this Series shall at the same time be similarly exchanged or changed in an amount per whole share equal to the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, that a holder of the Reference Package would be entitled to receive as a result of such transaction. (v) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of full and fractional shares of this Series shall be entitled, before any distribution or payment is made on any date to the holders of the Common Stock or any other stock of the Corporation ranking junior to this Series upon liquidation, to be paid in full an amount per whole share of this Series equal to the greater of (A) $1.00 or (B) the aggregate amount distributed or to be distributed prior to such date in connection with such liquidation, dissolution or winding up to a holder of the Reference Package (such greater amount being hereinafter referred to as the "Liquidation Preference"), together with accrued dividends to such distribution or payment date, whether or not earned or declared. If such payment shall have been made in full to all holders of shares of this Series, the holders of shares of this Series as such shall have no right or claim to any of the remaining assets of the Corporation. In the event the assets of the Corporation available for distribution to the holders of shares of this Series upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such holders are entitled pursuant to the first paragraph of this Section (v), no such distribution shall be made on account of any shares of any other class or series of Preferred Stock ranking on a parity with the shares of this Series upon such liquidation, dissolution or winding up unless proportionate distributive amounts shall be paid on account of the shares of this Series, ratably in proportion to the full distributable, amounts for which holders of all such parity shares are respectively entitled upon such liquidation, dissolution or winding up. Upon the liquidation, dissolution or winding up of the Corporation, the holders of shares of this Series then outstanding shall be entitled to be paid out of assets of the Corporation available for distribution to its stockholders all amounts to which such holders are entitled pursuant to the first paragraph of this Section (v) before any payment shall be made to the holders of Common Stock or any other stock of the Corporation ranking junior upon liquidation to this Series. For the purposes of this Section (v), the consolidation or merger of, or binding share exchange by, A-2 the Corporation with any other corporation shall not be deemed to constitute a liquidation, dissolution or winding up of the corporation. (vi) The shares of this Series shall not be redeemable. (vii) In addition to any other vote or consent of stockholders required by law or by the Certificate of Incorporation of the Corporation, each whole share of this Series shall, on any matter, vote as a class with any other capital stock comprising part of the Reference Package and voting on such matter and shall have the number of votes thereon that a holder of the Reference Package would have. IN WITNESS WHEREOF, Accredo Health, Incorporated has caused this Certificate of Designation to be executed as of April ___, 2003. ACCREDO HEALTH, INCORPORATED By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- A-3 EX-99.1 5 g82570aexv99w1.txt EX-99.1 SECTION 906 CERTIFICATION OF THE CEO EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Accredo Health, Incorporated (the "Company") on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David D. Stevens, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ David D. Stevens David D. Stevens Chief Executive Officer May 5, 2003 A signed original of this written statement required by Section 906 has been provided to Accredo Health, Incorporated and will be retained by Accredo Health, Incorporated and furnished to the Securities and Exchange Commission upon request. EX-99.2 6 g82570aexv99w2.txt EX-99.1 SECTION 906 CERTIFICATION OF THE CFO EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Accredo Health, Incorporated (the "Company") on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joel R. Kimbrough, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Joel R. Kimbrough Joel R. Kimbrough Chief Financial Officer May 5, 2003 A signed original of this written statement required by Section 906 has been provided to Accredo Health, Incorporated and will be retained by Accredo Health, Incorporated and furnished to the Securities and Exchange Commission upon request. -----END PRIVACY-ENHANCED MESSAGE-----

EX-3.1

                                                                     EXHIBIT 3.1

                           CERTIFICATE OF DESIGNATION,
                            PREFERENCES AND RIGHTS OF
                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
                                       OF
                          ACCREDO HEALTH, INCORPORATED

                         Pursuant to Section 151 of the
                        Delaware General Corporation Law


         Accredo Health, Incorporated, a corporation organized under the laws of
the State of Delaware (the "Corporation"), hereby certifies that, pursuant to
the authority conferred upon the Board of Directors by the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors on April
17, 2003, adopted the following resolution creating a series of 100,000 shares
of Preferred Stock designated as Series A Junior Participating Preferred Stock:

         RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board") in accordance with the
provisions of its Certificate of Incorporation, as amended, a series of
Preferred Stock of the Corporation be and it hereby is created, and that the
designation and amount thereof and the voting rights or powers, preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:

         1. Series A Junior Participating Preferred Stock. There is hereby
established a series of Preferred Stock, par value $1.00 per share, of the
Corporation, and the designation and certain terms, powers, preferences and
other rights of the shares of such series, and certain qualifications,
limitations and restrictions thereon, are hereby fixed as follows:

             (i) The distinctive serial designation of this series shall be
"Series A Junior Participating Preferred Stock" (hereinafter called "this
Series"). Each share of this Series shall be identical in all respects with the
other shares of this Series except as to the dates from and after which
dividends thereon shall be cumulative.

             (ii) The number of shares in this Series shall initially be
100,000, which number may from time to time be increased or decreased (but not
below the number then outstanding) by the Board of Directors. Shares of this
Series purchased by the Corporation shall be canceled and shall revert to
authorized but unissued shares of Preferred Stock undesignated as to series.
Shares of this Series may be issued in fractional shares, which fractional
shares shall entitle the holder, in proportion to such holder's fractional
share, to all rights of a holder of a whole share of this Series.

             (iii) The holders of full or fractional shares of this Series shall
be entitled to receive, when and as declared by the Board of Directors, but only
out of funds legally available therefor, dividends, (A) on each date that
dividends or other distributions (other





than dividends or distributions payable in Common Stock of the Corporation) are
payable on or in respect of Common Stock comprising part of the Reference
Package (as defined below), in an amount per whole share of this Series equal to
the aggregate amount of dividends or other distributions (other than dividends
or distributions payable in Common Stock of the Corporation) that would be
payable on such date to a holder of the Reference Package and (B) on the last
day of March, June, September and December in each year, in an amount per whole
share of this Series equal to the excess (if any) of $1.00 over the aggregate
dividends paid per whole share of this Series during the three-month period
ending on such last day. Each such dividend shall be paid to the holders of
record of shares of this Series on the date, not exceeding 60 days preceding
such dividend or distribution payment date, fixed for that purpose by the Board
of Directors in advance of payment of each particular dividend or distribution.
Dividends on each full and each fractional share of this Series shall be
cumulative from the date such full or fractional share is originally issued;
provided that any such full or fractional share originally issued after a
dividend record date and on or prior to the dividend payment date to which such
record date relates shall not be entitled to receive the dividend payable on
such dividend payment date or any amount in respect of the period from such
original issuance to such dividend payment date.

             The term "Reference Package" shall initially mean 10,000 shares of
Common Stock, par value $.01 per share ("Common Stock"), of the Corporation. In
the event the Corporation shall at any time (A) declare or pay a dividend on any
Common Stock payable in Common Stock, (B) subdivide any Common Stock or (C)
combine any Common Stock into a smaller number of shares, then and in each such
case the Reference Package after such event shall be the Common Stock that a
holder of the Reference Package immediately prior to such event would hold
thereafter as a result thereof.

             Holders of shares of this Series shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided, on this Series.

             So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation) shall be declared or paid or
set aside for payment or other distribution declared or made upon the Common
Stock or upon any other stock ranking junior to this Series as to dividends or
upon liquidation, nor shall any Common Stock nor any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation), unless, in each case, the full
cumulative dividends (including the dividend to be due upon payment of such
dividend, distribution, redemption, purchase or other acquisition) on all
outstanding shares of this Series shall have been, or shall contemporaneously
be, paid.





             (iv) In the event of any merger, consolidation, reclassification or
other transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case the shares of this Series shall at the same time be similarly
exchanged or changed in an amount per whole share equal to the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, that a holder of the Reference Package would be entitled to receive
as a result of such transaction.

             (v) In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, the holders of
full and fractional shares of this Series shall be entitled, before any
distribution or payment is made on any date to the holders of the Common Stock
or any other stock of the Corporation ranking junior to this Series upon
liquidation, to be paid in full an amount per whole share of this Series equal
to the greater of (A) $1.00 or (B) the aggregate amount distributed or to be
distributed prior to such date in connection with such liquidation, dissolution
or winding up to a holder of the Reference Package (such greater amount being
hereinafter referred to as the "Liquidation Preference"), together with accrued
dividends to such distribution or payment date, whether or not earned or
declared. If such payment shall have been made in full to all holders of shares
of this Series, the holders of shares of this Series as such shall have no right
or claim to any of the remaining assets of the Corporation.

             In the event the assets of the Corporation available for
distribution to the holders of shares of this Series upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to the first paragraph of this Section (v), no such
distribution shall be made on account of any shares of any other class or series
of Preferred Stock ranking on a parity with the shares of this Series upon such
liquidation, dissolution or winding up unless proportionate distributive amounts
shall be paid on account of the shares of this Series, ratably in proportion to
the full distributable, amounts for which holders of all such parity shares are
respectively entitled upon such liquidation, dissolution or winding up.

             Upon the liquidation, dissolution or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to be
paid out of assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to the
first paragraph of this Section (v) before any payment shall be made to the
holders of Common Stock or any other stock of the Corporation ranking junior
upon liquidation to this Series.

             For the purposes of this Section (v), the consolidation or merger
of, or binding share exchange by, the Corporation with any other corporation
shall not be deemed to constitute a liquidation, dissolution or winding up of
the corporation.

             (vi) The shares of this Series shall not be redeemable.




             (vii) In addition to any other vote or consent of stockholders
required by law or by the Certificate of Incorporation of the Corporation, each
whole share of this Series shall, on any matter, vote as a class with any other
capital stock comprising part of the Reference Package and voting on such matter
and shall have the number of votes thereon that a holder of the Reference
Package would have.

         IN WITNESS WHEREOF, Accredo Health, Incorporated has caused this
Certificate of Designation to be executed as of April 25, 2003.


                                        ACCREDO HEALTH, INCORPORATION




                                        By: /s/ Thomas W. Bell, Jr.
                                           -------------------------------------
                                        Name:  Thomas W. Bell, Jr.
                                        Title: Senior Vice President and
                                               General Counsel

EX-4.1

                                                                     EXHIBIT 4.1


                     STOCKHOLDER PROTECTION RIGHTS AGREEMENT

                                     BETWEEN

                          ACCREDO HEALTH, INCORPORATED

                                       AND

            AMERICAN STOCK TRANSFER & TRUST COMPANY, AS RIGHTS AGENT


                                 APRIL 17, 2003



                                TABLE OF CONTENTS

                                                                                           
ARTICLE I - CERTAIN DEFINITIONS...................................................................1


ARTICLE II - THE RIGHTS...........................................................................4

   2.1    Summary of Rights.......................................................................4
   2.2    Issuance of Rights Certificates; Legend.................................................4
   2.3    Exercise of Rights; Separation of Rights................................................5
   2.4    Adjustments to Exercise Price; Number of Rights.........................................6
   2.5    Date on Which Exercise is Effective.....................................................7
   2.6    Execution, Authentication, Delivery and Dating of Rights Certificates...................7
   2.7    Registration, Registration of Transfer and Exchange.....................................7
   2.8    Mutilated, Destroyed, Lost and Stolen Rights Certificates...............................8
   2.9    Persons Deemed Owners...................................................................8
   2.10   Delivery and Cancellation of Certificates...............................................8
   2.11   Agreement of Rights Holders.............................................................9

ARTICLE III - ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS......................9

   3.1    Flip-In.................................................................................9
   3.2    Flip-Over..............................................................................11

ARTICLE IV - THE RIGHTS AGENT....................................................................11

   4.1    General................................................................................11
   4.2    Merger or Consolidation or Change of Name of Rights Agent..............................11
   4.3    Duties of Rights Agent.................................................................12
   4.4    Change of Rights Agent.................................................................13

ARTICLE V - MISCELLANEOUS........................................................................14

   5.1    Termination............................................................................14
   5.2    Expiration.............................................................................14
   5.3    Issuance of New Rights Certificates....................................................14
   5.4    Supplements and Amendments.............................................................14
   5.5    Fractional Shares......................................................................15
   5.6    Rights of Action.......................................................................15
   5.7    Holder of Rights Not Deemed a Stockholder..............................................15
   5.8    Notice of Proposed Actions.............................................................15
   5.9    Notices................................................................................15
   5.10   Suspension of Exercisability...........................................................16
   5.11   Costs of Enforcement...................................................................16
   5.12   Successors.............................................................................16
   5.13   Benefits of this Agreement.............................................................16
   5.14   Determination and Actions by the Board of Directors, etc...............................16
   5.15   Descriptive Headings...................................................................16
   5.16   Governing Law..........................................................................16
   5.17   Counterparts...........................................................................17
   5.18   Severability...........................................................................17





                     STOCKHOLDER PROTECTION RIGHTS AGREEMENT

         THIS STOCKHOLDER PROTECTION RIGHTS AGREEMENT (as amended from time to
time, this "Agreement") is made and entered into as of April 22, 2003, but shall
be effective as of April 17, 2003, between Accredo Health, Incorporated, a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, as rights agent (the "Rights Agent," which term shall include any
successor rights agent hereunder).

                              W I T N E S S E T H:

         WHEREAS, on April 17, 2003, the Board of Directors of the Company has
(a) authorized and declared a dividend of one right ("Right") in respect of each
share of Common Stock (as hereinafter defined) held of record as of the Close of
Business (as hereinafter defined) on April 28, 2003 (the "Record Time") and (b)
as provided in Section 2.4, authorized the issuance of one Right in respect of
each share of Common Stock issued after the Record Time and prior to the
Separation Time (as hereinafter defined);

         WHEREAS, subject to Sections 3.1, 5.1 and 5.10, each Right entitles the
holder thereof, after the Separation Time, to purchase securities of the Company
(or, in certain cases, of certain other entities) pursuant to the terms and
subject to the conditions set forth herein; and

         WHEREAS, the Company desires to appoint the Rights Agent to act on
behalf of the Company, and the Rights Agent is willing so to act, in connection
with the issuance, transfer, exchange and replacement of Rights Certificates (as
hereinafter defined), the exercise of Rights and other matters referred to
herein;

         NOW THEREFORE, in consideration of the premises and the respective
agreements set forth herein, the parties hereby agree as follows:

                                    ARTICLE I

                               CERTAIN DEFINITIONS

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

         "Acquiring Person" shall mean any Person who is a Beneficial Owner of
15% or more of the outstanding shares of Common Stock; provided, however, that
the term "Acquiring Person" shall not include any Person (i) who is the
Beneficial Owner of 15% or more of the outstanding shares of Common Stock on the
date of this Agreement or who shall become the Beneficial Owner of 15% or more
of the outstanding shares of Common Stock solely as a result of an acquisition
by the Company of shares of Common Stock, until such time hereafter or
thereafter as any such Person shall become the Beneficial Owner (other than by
means of a stock dividend or stock split) of any additional shares of Common
Stock, (ii) who is the Beneficial Owner of 15% or more of the outstanding shares
of Common Stock but who acquired Beneficial Ownership of shares of Common Stock
without any plan or intention to seek or affect control of the Company, if such
Person promptly enters into an irrevocable commitment promptly to divest, and
thereafter promptly divests (without exercising or retaining any power,
including voting power, with respect to such shares), sufficient shares of
Common Stock (or securities convertible into, exchangeable into or exercisable
for Common Stock) so that such Person ceases to be the Beneficial Owner of 15%
or more of the outstanding shares of Common Stock or (iii) who Beneficially Owns
shares of Common Stock consisting solely of one or more of (A) shares of Common
Stock Beneficially Owned pursuant to the grant or exercise of an option granted
to such Person by the Company in connection with an agreement to merge with, or
acquire, the Company entered into prior to a Flip-In Date, (B) shares of Common
Stock (or securities convertible into, exchangeable into or exercisable for
Common Stock) Beneficially Owned by such Person or its Affiliates or Associates
at the time of grant of such option or (C) shares of Common Stock (or securities
convertible into, exchangeable into or exercisable for Common Stock) acquired by
Affiliates or Associates of such Person after the time of such grant which, in
the aggregate, amount to less than 1% of the outstanding shares of Common Stock.
In addition, the Company, any



wholly owned Subsidiary of the Company and any employee stock ownership or other
employee benefit plan of the Company or a wholly owned Subsidiary of the Company
shall not be an Acquiring Person.

         "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended (the "Securities Exchange Act"), as such Rule is in effect on the date
of this Agreement.

         A Person shall be deemed the "Beneficial Owner" of, and to have
"Beneficial Ownership" of, and to "Beneficially Own," any securities of which
such Person or any of such Person's Affiliates or Associates is or may be deemed
to be the beneficial owner pursuant to Rule 13d-3 and 13d-5 under the Securities
Exchange Act, as such Rules are in effect on the date of this Agreement as well
as any securities as to which such Person or any of such Person's Affiliates or
Associates has the right to become Beneficial Owner (whether such right is
exercisable immediately or only after the passage of time or the occurrence of
conditions) pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, other rights (other than the
Rights), warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to have "Beneficial Ownership"
of, or to "Beneficially Own," any security (i) solely because such security has
been tendered pursuant to a tender or exchange offer made by such Person or any
of such Person's Affiliates or Associates until such tendered security is
accepted for payment or exchange or (ii) solely because such Person or any of
such Person's Affiliates or Associates has or shares the power to vote or direct
the voting of such security pursuant to a revocable proxy given in response to a
public proxy or consent solicitation made to more than ten holders of shares of
a class of stock of the Company registered under Section 12 of the Securities
Exchange Act and pursuant to, and in accordance with, the applicable rules and
regulations under the Securities Exchange Act, except if such power (or the
arrangements relating thereto) is then reportable under Item 6 of Schedule 13D
under the Securities Exchange Act (or any similar provision of a comparable or
successor report). Notwithstanding the foregoing, no officer or director of the
Company shall be deemed to Beneficially Own any securities of any other Person
by virtue of any actions such officer or director takes in such capacity. For
purposes of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any time, including for purposes of determining the
percentage of the outstanding shares of Common Stock with respect to which a
Person is the Beneficial Owner, shall be made in accordance with the provisions
of Rule 13d-3(d)(1) under the Securities Exchange Act.

         "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in Atlanta, Georgia are generally authorized
or obligated by law or executive order to close.

         "Close of Business" on any given date shall mean 5:00 p.m. Atlanta,
Georgia time on such date (or, if such date is not a Business Day, 5:00 p.m.
Atlanta, Georgia time on the next succeeding Business Day).

         "Common Stock" shall mean the shares of Common Stock, par value $0.01
per share, of the Company.

         "Exchange Time" shall mean the time at which the right to exercise the
Rights shall terminate pursuant to Section 3.1(c).

         "Exercise Price" shall mean, as of any date, the price at which a
holder may purchase the securities issuable upon exercise of one whole Right.
Until adjustment thereof in accordance with the terms hereof, the Exercise Price
shall equal $100.00.

         "Expiration Time" shall mean the earliest of (i) the Exchange Time,
(ii) the Termination Time, (iii) April 28, 2013 and (iv) the time of a merger of
the Company into another corporation pursuant to an agreement entered into prior
to a Flip-In Date.

         "Flip-In Date" shall mean the tenth Business Day after any Stock
Acquisition Date or such earlier or later date as the Board of Directors of the
Company may from time to time fix by resolution adopted prior to the Flip-In
Date that would otherwise have occurred.


                                      -2-


         "Flip-Over Entity" for purposes of Section 3.2, shall mean (i) in the
case of a Flip-Over Transaction or Event described in clause (i) of the
definition thereof, the Person issuing any securities into which shares of
Common Stock are being converted or exchanged and, if no such securities are
being issued, any other party to such Flip-Over Transaction or Event and (ii) in
the case of a Flip-Over Transaction or Event referred to in clause (ii) of the
definition thereof, the Person receiving the greatest portion of the assets or
earning power being transferred in such Flip-Over Transaction or Event; provided
in all cases if such Person is a subsidiary of another Person, the ultimate
controlling Person that is not an individual shall be the Flip-Over Entity.

         "Flip-Over Stock" shall mean the capital stock (or similar equity
interest) with the greatest voting power in respect of the election of directors
(or other Persons similarly responsible for direction of the business and
affairs) of the Flip-Over Entity.

         "Flip-Over Transaction or Event" shall mean a transaction or series of
transactions after a Flip-In Date in which, directly or indirectly, (i) the
Company shall consolidate or merge or participate in a share exchange with any
other Person if, at the time of the consolidation, merger or share exchange or
at the time the Company enters into any agreement with respect to any such
consolidation, merger or share exchange, the Acquiring Person Controls the Board
of Directors of the Company and either (A) any term of or arrangement concerning
the treatment of shares of capital stock in such consolidation, merger or share
exchange relating to the Acquiring Person is not identical to the terms and
arrangements relating to other holders of the Common Stock or (B) the Person
with whom the transaction or series of transactions occurs is the Acquiring
Person or an Affiliate or Associate of the Acquiring Person or (ii) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer) assets (A) aggregating more than 50% of the assets
(measured by either book value or fair market value) or (B) generating more than
50% of the operating income or cash flow, of the Company and its Subsidiaries
(taken as a whole) to any Person (other than the Company or one or more of its
wholly owned Subsidiaries) or to two or more such Persons which are Affiliates
or Associates or otherwise acting in concert, if, at the time of the entry by
the Company (or any such Subsidiary) into an agreement with respect to such sale
or transfer of assets, the Acquiring Person Controls the Board of Directors of
the Company. An Acquiring Person shall be deemed to "Control" the Company's
Board of Directors when, following a Flip-In Date, the Persons who were
directors of the Company before the Flip-In Date shall cease to constitute a
majority of the Company's Board of Directors.

         "Market Price" per share of any securities on any date shall mean the
average of the daily closing prices per share of such securities (determined as
described below) on each of the 20 consecutive Trading Days through and
including the Trading Day immediately preceding such date; provided, however,
that if an event of a type analogous to any of the events described in Section
2.4 shall have caused the closing prices used to determine the Market Price on
any Trading Days during such period of 20 Trading Days not to be fully
comparable with the closing price on such date, each such closing price so used
shall be appropriately adjusted in order to make it fully comparable with the
closing price on such date. The closing price per share of any securities on any
date shall be the last reported sale price, regular way, or, in case no such
sale takes place or is quoted on such date, the average of the closing bid and
asked prices, regular way, for each share of such securities, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange, Inc.
or, if the securities are not listed or admitted to trading on the New York
Stock Exchange, Inc., as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the securities are listed or admitted to trading
or, if the securities are not listed or admitted to trading on any national
securities exchange, as reported by The Nasdaq Stock Market, Inc.'s Nasdaq
National Market or such other system then in use, or, if on any such date the
securities are not listed or admitted to trading on any national securities
exchange or 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
securities selected by the Board of Directors of the Company; provided, however,
that if on any such date the securities are not listed or admitted to trading on
a national securities exchange or traded in the over-the-counter market, the
closing price per share of such securities on such date shall mean the fair
value per share of securities on such date as determined in good faith by the
Board of Directors of the Company, after consultation with a nationally
recognized investment banking firm, and set forth in a certificate delivered to
the Rights Agent.


                                      -3-


         "Person" shall mean any individual, firm, partnership, association,
group (as such term is used in Rule 13d-5 under the Securities Exchange Act, as
such Rule is in effect on the date of this Agreement), corporation or other
entity.

         "Preferred Stock" shall mean the Series A Junior Participating
Preferred Stock, par value $1.00 per share, of the Company created by the
Certificate of Designation, Preferences and Rights in substantially the form set
forth in Exhibit B hereto, appropriately completed.

         "Separation Time" shall mean the Close of Business on the earlier of
(i) the tenth Business Day (or such later date as the Board of Directors of the
Company may from time to time fix by resolution adopted prior to the Separation
Time that would otherwise have occurred) after the date on which any Person
commences a tender or exchange offer which, if consummated, would result in such
Person's becoming an Acquiring Person and (ii) the Flip-In Date; provided, that
if the foregoing results in the Separation Time being prior to the Record Time,
the Separation Time shall be the Record Time and provided further, that if any
tender or exchange offer referred to in clause (i) of this paragraph is
canceled, terminated or otherwise withdrawn prior to the Separation Time without
the purchase of any shares of Common Stock pursuant thereto, such offer shall be
deemed, for purposes of this paragraph, never to have been made.

         "Stock Acquisition Date" shall mean the first date of public
announcement by the Company (by any means) that an Acquiring Person has become
such.

         "Subsidiary" of any specified Person shall mean any corporation or
other entity of which a majority of the voting power of the equity securities or
a majority of the equity interests is Beneficially Owned, directly or
indirectly, by such Person.

         "Termination Time" shall mean the time at which the right to exercise
the Rights shall terminate pursuant to Section 5.1 hereof.

         "Trading Day," when used with respect to any securities, shall mean a
day on which the New York Stock Exchange, Inc. is open for the transaction of
business or, if such securities are not listed or admitted to trading on the New
York Stock Exchange, Inc., a day on which the principal national securities
exchange on which such securities are listed or admitted to trading is open for
the transaction of business or, if such securities are not listed or admitted to
trading on any national securities exchange, a day on which The Nasdaq Stock
Market, Inc.'s Nasdaq National Market or such other system then in use is open
for the transaction of business or, if such securities are not listed or
admitted to trading on any national securities exchange or quoted on any such
system, a Business Day.

                                   ARTICLE II

                                   THE RIGHTS

         2.1      Summary of Rights. As soon as practicable after the Record
Time, the Company will mail a letter summarizing the terms of the Rights to each
holder of record of Common Stock as of the Record Time, at such holder's address
as shown by the records of the Company.

         2.2      Issuance of Rights Certificates; Legend. (a) Certificates for
the Common Stock issued after the Record Time but prior to the Separation Time
shall evidence, in addition to the Common Stock represented by such certificate,
one Right for each share of Common Stock represented thereby and shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:

         "Until the Separation Time (as defined in the Rights Agreement referred
         to below), this certificate also evidences and entitles the holder
         hereof to certain Rights as set forth in a Stockholder Protection
         Rights Agreement, effective as of April 17, 2003 (as such may be
         amended from time to time, the "Rights Agreement"), between Accredo
         Health, Incorporated (the "Company") and American Stock Transfer &
         Trust Company, as Rights Agent, the terms of which are hereby
         incorporated herein by reference and a copy of which is on file at the
         principal executive offices of


                                      -4-


         the Company. Under certain circumstances, as set forth in the Rights
         Agreement, such Rights may be terminated, may become exercisable for
         securities or assets of the Company or of another entity, may be
         exchanged for shares of Common Stock or other securities or assets of
         the Company, may expire, may become void (if they are "Beneficially
         Owned" by an "Acquiring Person" or an Affiliate or Associate thereof,
         as such terms are defined in the Rights Agreement, or by any transferee
         of any of the foregoing) or may be evidenced by separate certificates
         and may no longer be evidenced by this certificate. The Company will
         mail or arrange for the mailing of a copy of the Rights Agreement to
         the holder of this certificate without charge promptly after the
         receipt of a written request therefor."

Certificates representing shares of Common Stock that are issued and outstanding
at the Record Time shall evidence, in addition to the Common Stock represented
by such certificate, one Right for each share of Common Stock evidenced thereby
notwithstanding the absence of the foregoing legend.

         (b)      Subject to Sections 2.4 and 5.3, one Right shall be issued in
respect of (i) each share of Common Stock outstanding as of the Record Time and
(ii) each additional share of Common Stock that becomes outstanding (whether by
original issuance or out of treasury, but other than in a transaction
contemplated by Section 2.4) after the Record Time but prior to the Separation
Time. To the extent provided in Section 5.3, Rights shall be issued by the
Company in respect of shares of Common Stock that are issued or sold by the
Company after the Separation Time.

         2.3      Exercise of Rights; Separation of Rights. (a) Subject to
Sections 3.1, 5.1 and 5.10 and subject to adjustment as herein set forth, each
Right will entitle the holder thereof, after the Separation Time and prior to
the Expiration Time, to purchase, for the Exercise Price, one ten-thousandth
(1/10,000th) of a share of Preferred Stock.

         (b)      Until the Separation Time, (i) no Right may be exercised and
(ii) each Right will be evidenced by the certificate that evidences the share of
Common Stock with which it is associated (together, in the case of certificates
issued prior to the Record Time, with the letter or notice mailed to the record
holder thereof pursuant to Section 2.1) and will be transferable only together
with, and will be transferred by a transfer (whether with or without such letter
or notice) of, such associated share of Common Stock, and the surrender for
transfer of any certificates representing outstanding Common Stock will also
constitute the surrender for transfer of the Rights associated with the Common
Stock represented by such certificate.

         (c)      Subject to this Section 2.3 and to Sections 3.1, 5.1 and 5.10,
after the Separation Time and prior to the Expiration Time, the Rights (i) may
be exercised and (ii) may be transferred independently of shares of Common
Stock. Promptly following the Separation Time, the Rights Agent will mail to
each holder of record of Common Stock as of the Separation Time (other than any
Person whose Rights have become void pursuant to Section 3.1(b)), at such
holder's address as shown by the records of the Company (the Company hereby
agreeing to furnish copies of such records to the Rights Agent for this
purpose), (x) a certificate (a "Rights Certificate") in substantially the form
of Exhibit A hereto appropriately completed, representing the number of Rights
held by such holder at the Separation Time and having 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
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any national securities exchange or quotation system on which the
Rights may from time to time be listed or traded, or to conform to usage, and
(y) a disclosure statement describing the Rights.

         (d)      Subject to Sections 3.1, 5.1 and 5.10, Rights may be exercised
on any Business Day after the Separation Time and prior to the Expiration Time
by submitting to the Rights Agent the Rights Certificate evidencing such Rights
with an Election to Exercise (an "Election to Exercise") substantially in the
form attached to the Rights Certificate, duly completed, accompanied by payment
by certified or official bank check or money order payable to the order of the
Company, of a sum equal to the Exercise Price multiplied by the number of Rights
being exercised and a sum sufficient to cover any transfer tax or charge that
may be payable in respect of any transfer involved in the transfer or delivery
of Rights Certificates or the issuance or delivery of certificates for shares or
depositary receipts (or both) in a name other than that of the holder of the
Rights being exercised.


                                      -5-


         (e)      Upon receipt of a Rights Certificate, with an Election to
Exercise accompanied by payment as set forth in Section 2.3(d), and subject to
Sections 3.1, 5.1 and 5.10, the Rights Agent promptly will (i)(A) requisition
from the Company's transfer agent(s) stock certificates evidencing such number
of shares or other securities to be purchased (the Company hereby irrevocably
authorizing its transfer agents to comply with all such requisitions) and (B) if
the Company elects pursuant to Section 5.5 not to issue certificates
representing fractional shares, requisition from the depositary selected by the
Company depositary receipts representing the fractional shares to be purchased
or requisition from the Company the amount of cash to be paid in lieu of
fractional shares in accordance with Section 5.5 and (ii) after receipt of such
certificates, depositary receipts and/or cash, deliver the same to or upon the
order of the registered holder of such Rights Certificate, registered (in the
case of certificates or depositary receipts) in such name or names as may be
designated by such holder. In the event that the Company elects pursuant to
Section 3.1(e) to issue other securities and/or assets of the Company upon
exercise of the Rights, the Company will make all arrangements necessary so that
such other securities and/or assets of the Company are available for
distribution by the Rights Agent, if and when appropriate.

         (f)      In case the holder of any Rights shall exercise less than all
the Rights evidenced by such holder's Rights Certificate, a new Rights
Certificate evidencing the Rights remaining unexercised will be issued by the
Rights Agent to such holder or to such holder's duly authorized assigns.

         (g)      The Company covenants and agrees that it will (i) take all
such action as may be necessary to ensure that all shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
shares (subject to payment of the Exercise Price), be duly and validly
authorized, executed, issued and delivered and fully paid and nonassessable;
(ii) take all such action as may be necessary to comply with any applicable
requirements of the Securities Act of 1933, as amended, or the Securities
Exchange Act, and the rules and regulations thereunder, and any other applicable
law, rule or regulation, in connection with the issuance of any shares upon
exercise of Rights; and (iii) pay when due and payable any and all federal and
state transfer taxes and charges that may be payable in respect of the original
issuance or delivery of the Rights Certificates or of any shares issued upon the
exercise of Rights, provided that the Company shall not be required to pay any
transfer tax or charge that may be payable in respect of any transfer involved
in the transfer or delivery of Rights Certificates or the issuance or delivery
of certificates for shares in a name other than that of the holder of the Rights
being transferred or exercised.

         2.4      Adjustments to Exercise Price; Number of Rights. (a) In the
event the Company shall at any time after the Record Time and prior to the
Separation Time (i) declare or pay a dividend on Common Stock payable in Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares of Common Stock, (x)
the Exercise Price in effect after such adjustment will be equal to the Exercise
Price in effect immediately prior to such adjustment divided by the number of
shares of Common Stock (the "Expansion Factor") that a holder of one share of
Common Stock immediately prior to such dividend, subdivision or combination
would hold thereafter as a result thereof (assuming for such purpose that the
Company would issue a fraction of a share of Common Stock, as applicable, and
without giving effect to any requirement that cash be paid in lieu of the
issuance of any fractional share interest) and (y) each Right held prior to such
adjustment will become that number of Rights equal to the Expansion Factor, and
the adjusted number of Rights will be deemed to be distributed among the shares
of Common Stock with respect to which the original Rights were associated (if
they remain outstanding) and the shares issued in respect of such dividend,
subdivision or combination, so that each such share of Common Stock will have
exactly one Right associated with it. Each adjustment made pursuant to this
paragraph shall be made as of the payment or effective date for the applicable
dividend, subdivision or combination.

         (b)      In the event the Company shall at any time after the Record
Time and prior to the Separation Time issue or distribute any securities or
assets in respect of, in lieu of or in exchange for Common Stock (other than
pursuant to a regular periodic cash dividend or a dividend paid solely in Common
Stock) whether by dividend, in a reclassification or recapitalization (including
any such transaction involving a merger, consolidation or share exchange), or
otherwise, the Company shall make such adjustments, if any, in the Exercise
Price, number of Rights and/or securities or other property purchasable upon
exercise of Rights as the Board of Directors of the Company, in its sole
discretion, may deem to be appropriate under the circumstances in order to
adequately protect the interests of the holders of Rights generally, and the
Company and the Rights Agent shall amend this Agreement as necessary to provide
for such adjustments.


                                      -6-


         (c)      Each adjustment to the Exercise Price made pursuant to this
Section 2.4 shall be calculated to the nearest cent. Whenever an adjustment to
the Exercise Price is made pursuant to this Section 2.4, the Company shall (i)
promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment and (ii) promptly file
with the Rights Agent and with each transfer agent for the Common Stock a copy
of such certificate. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein and shall not be deemed to have
knowledge of any such adjustment unless and until it shall have received such a
certificate.

         Rights Certificates shall represent the right to purchase the
securities purchasable under the terms of this Agreement, including any
adjustment or change in the securities purchasable upon exercise of the Rights,
even though such certificates may continue to express the right to purchase the
securities purchasable at the time of issuance of the initial Rights
Certificates.

         2.5      Date on Which Exercise is Effective. Each person in whose name
any certificate for shares is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the shares represented
thereby on the date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of the Exercise Price for such Rights (and any
applicable taxes and other governmental charges payable by the exercising holder
hereunder) was made; provided, however, that if the date of such surrender and
payment is a date upon which the stock transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the stock transfer books of the Company are open.

         2.6      Execution, Authentication, Delivery and Dating of Rights
Certificates. (a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer, President or one
of its Executive Vice Presidents or Senior Vice Presidents, under its corporate
seal reproduced thereon and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Rights Certificates
may be manual or facsimile.

         Rights Certificates bearing the manual or facsimile signatures of
individuals who were at the time of such signature the proper officers of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the countersignature and delivery
of such Rights Certificates.

         Promptly after the Separation Time, the Company will notify the Rights
Agent of such Separation Time and will deliver Rights Certificates executed by
the Company to the Rights Agent for countersignature, and, subject to Section
3.1(b), an authorized signatory of the Rights Agent shall manually countersign
and deliver such Rights Certificates to the holders of the Rights pursuant to
Section 2.3(c). No Rights Certificate shall be valid for any purpose unless
manually countersigned by an authorized signatory of the Rights Agent.

         (b)      Each Rights Certificate shall be dated the date of
countersignature thereof.

         2.7      Registration, Registration of Transfer and Exchange. (a) After
the Separation Time, the Company will cause to be kept a register (the "Rights
Register") in which, subject to such reasonable regulations as it may prescribe,
the Company will provide for the registration and transfer of Rights. The Rights
Agent is hereby appointed "Rights Registrar" for the purpose of maintaining the
Rights Register for the Company and registering Rights and transfers of Rights
after the Separation Time as herein provided. In the event that the Rights Agent
shall cease to be the Rights Registrar, the Rights Agent will have the right to
examine the Rights Register at all reasonable times after the Separation Time.

         After the Separation Time and prior to the Expiration Time, upon
surrender for registration of transfer or exchange of any Rights Certificate,
and subject to the provisions of this Section 2.7(a) and Sections 2.7(c) and
2.7(d), the Company will execute and the Rights Agent will countersign and
deliver, in the name of the holder or the designated transferee or transferees,
as required pursuant to the holder's instructions, one or more new Rights
Certificates evidencing the same aggregate number of Rights as did the Rights
Certificate so surrendered.


                                      -7-


         (b)      Except as otherwise provided in Section 3.1(b), all Rights
issued upon any registration of transfer or exchange of Rights Certificates
shall be the valid obligations of the Company, and such Rights shall be entitled
to the same benefits under this Agreement as the Rights surrendered upon such
registration of transfer or exchange.

         (c)      Every Rights Certificate surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company or the Rights Agent,
as the case may be, duly executed by the holder thereof or such holder's
attorney duly authorized in writing. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificates until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
thereof, or the Affiliates or Associates of such Beneficial Owner (or former
Beneficial Owner), as the Company shall reasonably request. As a condition to
the issuance of any new Rights Certificate under this Section 2.7, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto.

         (d)      The Company shall not be required to register the transfer or
exchange of any Rights after such Rights have become void under Section 3.1(b),
been exchanged under Section 3.1(c) or been terminated under Section 5.1.

         2.8      Mutilated, Destroyed, Lost and Stolen Rights Certificates. (a)
If any mutilated Rights Certificate is surrendered to the Rights Agent prior to
the Expiration Time, then, subject to Sections 3.1(b), 3.1(c) and 5.1, the
Company shall execute and the Rights Agent shall countersign and deliver in
exchange therefor a new Rights Certificate evidencing the same number of Rights
as did the Rights Certificate so surrendered.

         (b)      If there shall be delivered to the Company and the Rights
Agent prior to the Expiration Time (i) evidence to their satisfaction of the
destruction, loss or theft of any Rights Certificate and (ii) such security or
indemnity as may be required by them to save each of them and any of their
agents harmless, then, subject to Sections 3.1(b), 3.1(c) and 5.1 and in the
absence of notice to the Company or the Rights Agent that such Rights
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and upon its request the Rights Agent shall countersign and deliver, in
lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights
Certificate evidencing the same number of Rights as did the Rights Certificate
so destroyed, lost or stolen.

         (c)      As a condition to the issuance of any new Rights Certificate
under this Section 2.8, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Rights
Agent) connected therewith.

         (d)      Every new Rights Certificate issued pursuant to this Section
2.8 in lieu of any destroyed, lost or stolen Rights Certificate shall evidence
an original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Rights Certificate shall be at any time enforceable by
anyone, and, subject to Section 3.1(b), shall be entitled to all the benefits of
this Agreement equally and proportionately with any and all other Rights duly
issued hereunder.

         2.9      Persons Deemed Owners. Prior to due presentment of a Rights
Certificate (or, prior to the Separation Time, the associated Common Stock
certificate) for registration of transfer, the Company, the Rights Agent and any
agent of the Company or the Rights Agent may deem and treat the person in whose
name such Rights Certificate (or, prior to the Separation Time, such Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary. As used in this
Agreement, unless the context otherwise requires, the term "holder" of any
Rights shall mean the registered holder of such Rights (or, prior to the
Separation Time, the associated shares of Common Stock).

         2.10     Delivery and Cancellation of Certificates. All Rights
Certificates surrendered upon exercise or for registration of transfer or
exchange shall, if surrendered to any Person other than the Rights Agent, be
delivered to the Rights Agent and, in any case, shall be promptly canceled by
the Rights Agent. The Company may at any time


                                      -8-


deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Rights Certificates so delivered shall be promptly
canceled by the Rights Agent. No Rights Certificates shall be countersigned in
lieu of or in exchange for any Rights Certificates canceled as provided in this
Section 2.10, except as expressly permitted by this Agreement. The Rights Agent
shall return all canceled Rights Certificates to the Company.

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

         (a)      prior to the Separation Time, each Right will be transferable
only together with, and will be transferred by a transfer of, the associated
share of Common Stock;

         (b)      after the Separation Time, the Rights Certificates will be
transferable only on the Rights Register as provided herein;

         (c)      prior to due presentment of a Rights Certificate (or, prior to
the Separation Time, the associated Common Stock certificate) for registration
of transfer, the Company, the Rights Agent and any agent of the Company or the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Separation Time, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby for
all purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary;

         (d)      Rights beneficially owned by certain Persons will, under the
circumstances set forth in Section 3.1(b), become void;

         (e)      this Agreement may be supplemented or amended from time to
time pursuant to Section 2.4(b) or 5.4; and

         (f)      notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of the Rights Agent's inability to
perform any of its obligations under this Agreement by reason of any preliminary
or permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.

                                   ARTICLE III

                          ADJUSTMENTS TO THE RIGHTS IN
                        THE EVENT OF CERTAIN TRANSACTIONS

         3.1      Flip-In. (a) In the event that prior to the Expiration Time a
Flip-In Date shall occur, except as provided in this Section 3.1, each Right
shall constitute the right to purchase from the Company, upon exercise thereof
in accordance with the terms hereof (but subject to Section 5.10), that number
of shares of Common Stock having an aggregate Market Price on the Stock
Acquisition Date equal to twice the Exercise Price for an amount in cash equal
to the Exercise Price (such right to be appropriately adjusted in order to
protect the interests of the holders of Rights generally in the event that on or
after such Stock Acquisition Date an event of a type analogous to any of the
events described in Section 2.4(a) or (b) shall have occurred with respect to
the Common Stock).

         (b)      Notwithstanding the foregoing, any Rights that are or were
Beneficially Owned on or after the Stock Acquisition Date by an Acquiring Person
or an Affiliate or Associate thereof or by any transferee, direct or indirect,
of any of the foregoing shall become void and any holder of such Rights
(including transferees) shall thereafter have no right to exercise or transfer
such Rights under any provision of this Agreement. If any Rights Certificate is
presented for assignment or exercise and the Person presenting the same will not
complete the


                                      -9-


certification set forth at the end of the form of assignment or notice of
election to exercise and provide such additional evidence of the identity of the
Beneficial Owner and its Affiliates and Associates (or former Beneficial Owners
and their Affiliates and Associates) as the Company shall reasonably request,
then the Company shall be entitled conclusively to deem the Beneficial Owner
thereof to be an Acquiring Person or an Affiliate or Associate thereof or a
transferee of any of the foregoing and accordingly will deem the Rights
evidenced thereby to be void and not transferable or exercisable.

         (c)      The Board of Directors of the Company may, at its option, at
any time after a Flip-In Date and prior to the time that an Acquiring Person
becomes the Beneficial Owner of more than 50% of the outstanding shares of
Common Stock, elect to exchange all (but not less than all) the then-outstanding
Rights (other than Rights that have become void pursuant to the provisions of
Section 3.1(b)) for shares of Common Stock at an exchange ratio of one share of
Common Stock per Right (appropriately adjusted in order to protect the interests
of holders of Rights generally in the event that after the Separation Time an
event of a type analogous to any of the events described in Section 2.4(a) or
(b) shall have occurred with respect to the Common Stock) (such exchange ratio,
as adjusted from time to time, being hereinafter referred to as the "Exchange
Ratio").

         Immediately upon the action of the Board of Directors of the Company
electing to exchange the Rights, without any further action and without any
notice, the right to exercise the Rights will terminate and each Right (other
than Rights that have become void pursuant to Section 3.1(b)) will thereafter
represent only the right to receive a number of shares of Common Stock equal to
the Exchange Ratio. Promptly after the action of the Board of Directors electing
to exchange the Rights, the Company shall give notice thereof (specifying the
steps to be taken to receive shares of Common Stock in exchange for Rights) to
the Rights Agent and the holders of the Rights (other than Rights that have
become void pursuant to Section 3.1(b)) outstanding immediately prior thereto by
mailing such notice in accordance with Section 5.9.

         Each Person in whose name any certificate for shares is issued upon the
exchange of Rights pursuant to this Section 3.1(c) or Section 3.1(e) shall for
all purposes be deemed to have become the holder of record of the shares
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly surrendered and payment
of any applicable taxes and other governmental charges payable by the holder was
made; provided, however, that if the date of such surrender and payment is a
date upon which the stock transfer books of the Company are closed, such Person
shall be deemed to have become the record holder of such shares on, and such
Certificate shall be dated, the next succeeding Business Day on which the stock
transfer books of the Company are open.

         (d)      Whenever the Company shall become obligated under Section
3.1(a) or (c) to issue shares of Common Stock upon exercise of or in exchange
for Rights, the Company, at its option, may substitute therefor shares of
Preferred Stock, at a ratio of one ten-thousandth (1/10,000th) of a share of
Preferred Stock for each share of Common Stock so issuable.

         (e)      In the event that there shall not be sufficient treasury
shares or authorized but unissued shares of Common Stock or Preferred Stock of
the Company to permit the exercise or exchange in full of the Rights in
accordance with Section 3.1(a) or (c), the Company shall either (i) call a
meeting of stockholders seeking approval to cause sufficient additional shares
to be authorized (provided that if such approval is not obtained the Company
will take the action specified in clause (ii) of this sentence) or (ii) take
such action as shall be necessary to ensure and provide, to the extent permitted
by applicable law and any agreements or instruments in effect on the Stock
Acquisition Date to which it is a party, that each Right shall thereafter
constitute the right to receive, (x) at the Company's option, either (A) in
return for the Exercise Price, cash, debt or equity securities or other assets
(or a combination thereof) having a fair value equal to twice the Exercise
Price, or (B) without payment of consideration (except as otherwise required by
applicable law), cash, debt or equity securities or other assets (or a
combination thereof) having a fair value equal to the Exercise Price, or (y) if
the Board of Directors of the Company elects to exchange the Rights in
accordance with Section 3.1(c), debt or equity securities or other assets (or a
combination thereof) having a fair value equal to the product of the Market
Price of a share of Common Stock on the Flip-In Date times the Exchange Ratio in
effect on the Flip-In Date, where in any case set forth in (x) or (y) above the
fair value of such debt or equity securities or other assets shall be as
determined in good faith by the Board of Directors of the Company, after
consultation with a nationally recognized investment banking firm.


                                      -10-

         3.2      Flip-Over. (a) Prior to the Expiration Time, the Company shall
not enter into any agreement with respect to, consummate or permit to occur any
Flip-Over Transaction or Event unless and until it shall have entered into a
supplemental agreement with the Flip-Over Entity, for the benefit of the holders
of the Rights (other than holders of Rights that have become void pursuant to
Section 3.1(b)), providing that, upon consummation or occurrence of the
Flip-Over Transaction or Event (i) each Right (other than holders of Rights that
have become void pursuant to Section 3.1(b)) shall thereafter constitute the
right to purchase from the Flip-Over Entity, upon exercise thereof in accordance
with the terms hereof, that number of shares of Flip-Over Stock of the Flip-Over
Entity having an aggregate Market Price on the date of consummation or
occurrence of such Flip-Over Transaction or Event equal to twice the Exercise
Price for an amount in cash equal to the Exercise Price (such right to be
appropriately adjusted in order to protect the interests of the holders of
Rights generally (other than holders of Rights that have become void pursuant to
Section 3.1(b)) in the event that after such date of consummation or occurrence
an event of a type analogous to any of the events described in Section 2.4(a) or
(b) shall have occurred with respect to the Flip-Over Stock) and (ii) the
Flip-Over Entity shall thereafter be liable for, and shall assume, by virtue of
such Flip-Over Transaction or Event and such supplemental agreement, all the
obligations and duties of the Company pursuant to this Agreement. The provisions
of this Section 3.2 shall apply to successive Flip-Over Transactions or Events.

         (b)      Prior to the Expiration Time, unless the Rights will be
terminated pursuant to Section 5.1 in connection therewith, the Company shall
not enter into any agreement with respect to, consummate or permit to occur any
Flip-Over Transaction or Event if at the time thereof there are any rights,
warrants or securities outstanding or any other arrangements, agreements or
instruments that would eliminate or otherwise diminish in any material respect
the benefits intended to be afforded by this Rights Agreement to the holders of
Rights upon consummation of such transaction.

                                   ARTICLE IV

                                THE RIGHTS AGENT

         4.1      General. (a) The Company hereby appoints the Rights Agent to
act as agent for the Company in accordance with the terms and conditions hereof,
and the Rights Agent hereby accepts such appointment. The Company 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, its directors,
officers, employees and agents for, and to hold each of them harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent or such other indemnified
party, for anything done or suffered or omitted to be done by the Rights Agent
in connection with the acceptance and administration of this Agreement or the
exercise or performance of its duties hereunder, including the costs and
expenses of defending against any claim of liability. The indemnity provided in
this Section 4.1(a) shall survive the expiration of the Rights and the
termination of this Agreement.

         (b)      The Rights Agent shall be fully protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement or the exercise or
performance of its duties hereunder in reliance upon any certificate for
securities purchasable upon exercise of Rights, Rights Certificate, certificate
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.

         4.2      Merger or Consolidation or Change of Name of Rights Agent. (a)
Any Person 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 is a party, or any corporation succeeding to the stockholder services
business of the Rights Agent or any successor Rights Agent, will be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such Person would be eligible for appointment as a successor


                                      -11-


Rights Agent under the provisions of Section 4.4. In case at the time such
successor Rights Agent succeeds to the agency created by this Agreement any of
the Rights Certificates have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates have not been countersigned, any successor
Rights Agent may countersign such Rights 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 Rights Certificates will have the full force provided in the
Rights Certificates and in this Agreement.

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

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

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

         (b)      Whenever in the performance of its duties under this Agreement
the Rights Agent deems 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 a person believed by the Rights Agent to
be the Chairman of the Board, the Chief Executive Officer, the President or any
Executive Vice President or Senior Vice President and by the Chief Financial
Officer, the Treasurer or any Assistant Treasurer or the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate will be full authorization to the Rights Agent for any action taken,
suffered or omitted in good faith by it under the provisions of this Agreement
in reliance upon such certificate.

         (c)      The Rights Agent will be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.

         (d)      The Rights Agent will not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
certificates for securities purchasable upon exercise of Rights or the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and will be deemed to have been
made by the Company only.

         (e)      The Rights Agent will not be under any responsibility in
respect of the validity of any provision of this Agreement or the execution and
delivery hereof (except the due authorization, execution and delivery hereof by
the Rights Agent) or in respect of the validity or execution of any certificate
for securities purchasable upon exercise of Rights or Rights Certificate (except
its countersignature thereof); nor will it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor will it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 3.1(b)) or any adjustment required under any provision of this Agreement
or responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights after receipt of the certificate
contemplated by Section 2.4 describing any such adjustment); nor will it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any securities purchasable upon exercise of
Rights or any Rights or as to whether any securities purchasable upon exercise
of Rights will, when issued, be duly and validly authorized, executed, issued
and delivered and fully paid and nonassessable.


                                      -12-

         (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 believed by the Rights Agent to be the Chairman of the Board, the Chief
Executive Officer, the President or any Executive Vice President or Senior Vice
President or the Secretary or any Assistant Secretary or the Treasurer or any
Assistant Treasurer of the Company, and to apply to such persons for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken, suffered or omitted by it in good faith in accordance with
instructions of any such person, or for any delay in acting while awaiting
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, suffered or omitted by the Rights Agent under this
Agreement and the date on or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
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, suffered or omitted.

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

         (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 will 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 the Rights Agent was not grossly negligent in
the selection and continued employment thereof.

         (j)      The Rights Agent undertakes only the express duties and
obligations imposed on it by this Agreement and no implied duties or obligations
shall be read into this Agreement against the Rights Agent.

         (k)      Anything in this Agreement to the contrary notwithstanding, in
no event shall the Rights Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits).

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

         4.4      Change of Rights Agent. The Rights Agent may resign and be
discharged from its duties under this Agreement upon 90 days notice (or such
lesser notice as is acceptable to the Company) in writing mailed to the Company
and to each transfer agent of Common Stock by registered or certified mail, and
to the holders of the Rights in accordance with Section 5.9. The Company may
remove the Rights Agent upon 30 days notice in writing, mailed to the Rights
Agent and to each transfer agent of the Common Stock by registered or certified
mail, and to the holders of the Rights in accordance with Section 5.9. If the
Rights Agent should resign or be removed or otherwise become incapable of
acting, the Company will appoint a successor to the Rights Agent. If the Company
fails to make such appointment within a period of 30 days after 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 any Rights (which
holder shall, with such notice, submit such holder's Rights Certificate for
inspection by the Company), then



                                      -13-


the holder of any Rights may apply to any court of competent jurisdiction for
the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of the State
of Georgia or any other State of the United States, in good standing, which is
authorized under such laws to exercise the powers of the Rights Agent
contemplated by this Agreement 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 $100,000,000 or (b) an
Affiliate of a corporation described in the immediately preceding clause (a).
After appointment, the successor Rights Agent will 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 will file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock,
and mail a notice thereof in writing to the holders of the Rights. Failure to
give any notice provided for in this Section 4.4, 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.

                                    ARTICLE V

                                  MISCELLANEOUS

         5.1      Termination. (a) The Board of Directors of the Company may, at
its option, at any time prior to the close of business on the Flip-In Date elect
to terminate the Rights without any payment to any holder thereof.

         (b)      Immediately upon the action of the Board of Directors of the
Company electing to terminate the Rights (or, if the resolution of the Board of
Directors electing to terminate the Rights states that the termination will not
be effective until the occurrence of a specified future time or event, upon the
occurrence of such future time or event), without any further action and without
any notice, the right to exercise the Rights will terminate and each Right will
thereafter be null and void.

         5.2      Expiration. The Rights and this Agreement shall expire at the
Expiration Time and no Person shall have any rights pursuant to this Agreement
or any Right after the Expiration Time, except, if the Rights are exchanged, as
provided in Section 3.1.

         5.3      Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the number or kind or class of shares of stock purchasable upon exercise of
Rights made in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of shares of Common Stock by the Company
following the Separation Time and prior to the Expiration Time pursuant to the
terms of securities convertible or redeemable into shares of Common Stock or to
options, in each case issued or granted prior to, and outstanding at, the
Separation Time, the Company shall issue to the holders of such shares of Common
Stock, Rights Certificates representing the appropriate number of Rights in
connection with the issuance or sale of such shares of Common Stock; provided,
however, in each case, (i) no such Rights Certificate shall be issued, if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or to the Person to whom such Rights Certificates would be issued, (ii)
no such Rights Certificates shall be issued if, and to the extent that,
appropriate adjustment shall have otherwise been made in lieu of the issuance
thereof, and (iii) the Company shall have no obligation to distribute Rights
Certificates to any Acquiring Person or Affiliate or Associate of an Acquiring
Person or any transferee of any of the foregoing.

         5.4      Supplements and Amendments. The Company and the Rights Agent
may from time to time supplement or amend this Agreement without the approval of
any holders of Rights (i) prior to the Close of Business on the Flip-In Date, in
any respect and (ii) after the Close of Business on the Flip-In Date, to make
any changes that the Company may deem necessary or desirable and that shall not
materially adversely affect the interests of the holders of Rights generally
(other than an Acquiring Person or an Affiliate or an Associate of an Acquiring
Person)


                                      -14-


or in order to cure any ambiguity or to correct or supplement any provision
contained herein that may be inconsistent with any other provisions herein or
otherwise defective. The Rights Agent will duly execute and deliver any
supplement or amendment hereto requested by the Company upon receipt of a
certificate from the Company that such supplement or amendment satisfies the
terms of the preceding sentence. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment that changes the rights
and duties of the Rights Agent under this Agreement shall be effective without
the consent of the Rights Agent.

         5.5      Fractional Shares. If the Company elects not to issue
certificates representing fractional shares upon exercise of Rights, the Company
shall, in lieu thereof, in the sole discretion of the Board of Directors, either
(a) evidence such fractional shares by depositary receipts issued pursuant to an
appropriate agreement between the Company and a depositary selected by it,
providing that each holder of a depositary receipt shall have all of the rights,
privileges and preferences to which such holder would be entitled as a
beneficial owner of such fractional share, or (b) sell such shares on behalf of
the holders of Rights and pay to the registered holder of such Rights the
appropriate fraction of price per share received upon such sale.

         5.6      Rights of Action. Subject to the terms of this Agreement
(including Section 3.1(b)), rights of action in respect of this Agreement, other
than rights of action vested solely in the Rights Agent, are vested in the
respective holders of the Rights; and any holder of any Rights, without the
consent of the Rights Agent or of the holder of any other Rights, may, on such
holder's own behalf and for such holder's own benefit and the benefit of other
holders of Rights, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, such
holder's right to exercise such holder's Rights in the manner provided in such
holder's Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and 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.

         5.7      Holder of Rights Not Deemed a Stockholder. No holder, as such,
of any Rights shall be entitled to vote, receive dividends or be deemed for any
purpose the holder of shares or any other securities which may at any time be
issuable on the exercise of such Rights, nor shall anything contained herein or
in any Rights Certificate be construed to confer upon the holder of any Rights,
as such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except as
provided in Section 5.8), or to receive dividends or subscription rights, or
otherwise, until such Rights shall have been exercised or exchanged in
accordance with the provisions hereof.

         5.8      Notice of Proposed Actions. In case the Company shall propose
after the Separation Time and prior to the Expiration Time (i) to effect or
permit occurrence of any Flip-Over Transaction or Event or (ii) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Right, in accordance with Section
5.9, a notice of such proposed action, which shall specify the date on which
such Flip-Over Transaction or Event, liquidation, dissolution, or winding up is
to take place, and such notice shall be so given at least 20 Business Days prior
to the date of the taking of such proposed action.

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

                          Accredo Health, Incorporated
                           1640 Century Center Parkway
                                    Suite 101
                            Memphis, Tennessee 38134


                                      -15-


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


         Notices or demands authorized or required by this Agreement to be given
or made by the Company or the Rights Agent to or on the holder of any Rights
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as it
appears upon the registry books of the Rights Agent or, prior to the Separation
Time, on the registry books of the transfer agent for the Common Stock. Any
notice that is mailed in the manner herein provided shall be deemed given on the
third Business Day after mailing, whether or not the holder receives the notice.
Failure to give a notice pursuant to the provisions of this Agreement shall not
affect the validity of any action taken hereunder.

         5.10     Suspension of Exercisability. To the extent that the Company
determines in good faith that some action will or need be taken pursuant to
Section 2.3(g) or Section 3.1 or otherwise to comply with federal or state
securities laws, the Company may suspend the exercisability of the Rights for 90
days and any additional period that may be reasonable in order to take such
action or comply with such laws. In the event of any such suspension, the
Company shall issue as promptly as practicable a public announcement stating
that the exercisability or exchangeability of the Rights has been temporarily
suspended. Notice thereof pursuant to Section 5.9 shall not be required.

         5.11     Costs of Enforcement. The Company agrees that if the Company
or any other Person the securities of which are purchasable upon exercise of
Rights fails to fulfill any of its obligations pursuant to this Agreement, then
the Company or such Person will reimburse the holder of any Rights for the costs
and expenses (including legal fees) incurred by such holder in actions to
enforce such holder's rights pursuant to any Rights or this Agreement.

         5.12     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.

         5.13     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
holders of the Rights any legal or equitable right, remedy or claim under this
Agreement and this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the holders of the Rights.

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

         5.15     Descriptive Headings. Descriptive headings appear herein for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.

         5.16     Governing Law. THIS AGREEMENT AND EACH RIGHT 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.


                                      -16-


         5.17     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.

         5.18     Severability. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions hereof or the application of such term or provision to
circumstances other than those as to which it is held invalid or unenforceable.






                      [SIGNATURES APPEAR ON FOLLOWING PAGE]




                                      -17-

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

                        ACCREDO HEALTH, INCORPORATED


                        By:              /s/ Thomas W. Bell, Jr.
                           ----------------------------------------------------
                           Name:  Thomas W. Bell, Jr.
                           Title:  Senior Vice President and General Counsel


                        AMERICAN STOCK TRANSFER & TRUST COMPANY

                        By:            /s/ Herbert J. Lemmer
                           ----------------------------------------------------
                           Name:  Herbert J. Lemmer
                           Title:  General Counsel



                                      -1-

                                                                       EXHIBIT A
                          (Form of Rights Certificate)
Certificate No. R-                                              _______ Rights

THE RIGHTS ARE SUBJECT TO TERMINATION OR MANDATORY EXCHANGE, AT THE OPTION OF
THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT(AS DEFINED BELOW).
RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR ASSOCIATES
THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR TRANSFEREES OF
ANY OF THE FOREGOING WILL BE VOID.

                               Rights Certificate

                          ACCREDO HEALTH, INCORPORATED

This certifies that _______________________, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Stockholder Protection Rights Agreement, effective as of April
17, 2003 (as amended from time to time, the "Rights Agreement"), between Accredo
Health, Incorporated, a Delaware corporation (the "Company"), and American Stock
Transfer & Trust Company as rights agent (the "Rights Agent," which term shall
include any successor rights agent under the Rights Agreement), to purchase from
the Company at any time after the Separation Time (as such term is defined in
the Rights Agreement) and prior to the Close of Business on April 28, 2003, one
ten-thousandth (1/10,000) of a fully paid share of Series A Junior Participating
Preferred Stock, par value $1.00 per share (the "Preferred Stock"), of the
Company (subject to adjustment as provided in the Rights Agreement) at the
Exercise Price referred to below, upon presentation and surrender of this Rights
Certificate with the Form of Election to Exercise duly executed at the principal
office of the Rights Agent. The Exercise Price shall initially be $100.00 per
Right and shall be subject to adjustment in certain events as provided in the
Rights Agreement.

In certain circumstances described in the Rights Agreement, the Rights evidenced
hereby may entitle the registered holder thereof to purchase securities of an
entity other than the Company or securities or assets of the Company other than
Preferred Stock, all as provided in the Rights Agreement.

This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal office of the Company and are
available without cost upon written request. Capitalized terms used in this
Rights Certificate and not otherwise defined herein shall have the meanings
ascribed to such terms in the Rights Agreement.

This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
evidencing an aggregate number of Rights equal to the aggregate number of Rights
evidenced by the Rights Certificate or Rights Certificates surrendered. If this
Rights Certificate shall be exercised in part, the registered holder shall be
entitled to receive, upon surrender hereof, another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.

Subject to the provisions of the Rights Agreement, each Right evidenced by this
Certificate may be (a) terminated by the Company under certain circumstances, at
its option, or (b) exchanged by the Company under certain circumstances, at its
option, for one share of Common Stock or one ten-thousandth (1/10,000) of a
share of Preferred Stock) per Right (or, in certain cases, other securities or
assets of the Company), subject in each case to adjustment in certain events as
provided in the Rights Agreement.

No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of any securities
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights




of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Rights evidenced by this Rights Certificate shall have been exercised
or exchanged as provided in the Rights Agreement.

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

WITNESS the facsimile signature of the proper officers of the Company.

Date:

ATTEST:                                     ACCREDO HEALTH, INCORPORATED


                                            By:
- -------------------------------                --------------------------------
Secretary

Countersigned:

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


By:
   -----------------------------
      Authorized Officer


                                      -2-


                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

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

         FOR VALUE RECEIVED, _______________________________ hereby sells,
assigns and transfers unto

- ------------------------------------------------------------------------------
                  (Please print name and address of transferee)

this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________________
attorney-in-fact, to transfer the within Rights Certificate on the books of the
within-named company, with full power of substitution.

Dated:  ___________________, _____.

Signature Guaranteed:
                                         -------------------------------------
                                         Signature
                                         (Signature must correspond to name as
                                         written upon the face of this Rights
                                         Certificate in every particular,
                                         without alteration or enlargement or
                                         any change whatsoever)


Signatures must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.




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

                            (To be completed if true)

The undersigned hereby represents, for the benefit of the Company and all
holders of Rights and shares of Common Stock, that the Rights evidenced by this
Rights Certificate are not, and, to the knowledge of the undersigned, have never
been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).


                                                      --------------------------
                                                              Signature




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

                                     NOTICE

In the event the certification set forth above is not completed in connection
with a purported assignment, the Company will deem the Beneficial Owner of the
Rights evidenced by the enclosed Rights Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Rights Agreement) or a
transferee of any of the foregoing and accordingly will deem the Rights
evidenced by such Rights Certificate to be void and not transferable or
exercisable.





                   [To be attached to each Rights Certificate]
                          FORM OF ELECTION TO EXERCISE

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

TO:      ACCREDO HEALTH, INCORPORATED

The undersigned hereby irrevocably elects to exercise _________________ whole
Rights represented by the attached Rights Certificate to purchase the shares of
Series A Junior Participating Preferred Stock issuable upon the exercise of such
Rights and requests that certificates for such shares be issued in the name of
and delivered to:

                 Name:
                      --------------------------------------------------------
                 Address:
                         -----------------------------------------------------

                 Social Security or other Taxpayer ID No.:
                                                          --------------------

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

                 Name:
                      --------------------------------------------------------
                 Address:
                         -----------------------------------------------------

                 Social Security or other Taxpayer ID No.:
                                                          --------------------

Dated:  _________________, ______

Signature Guaranteed:
                                       ----------------------------------------
                                       Signature
                                       (Signature must correspond to name
                                       as written upon the face of this
                                       Rights Certificate in every particular,
                                       without alteration or enlargement or any
                                       change whatsoever)

Signatures must be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15 of the
Securities Exchange Act of 1934.


- --------------------------------------------------------------------------------
                            (to be completed if true)

The undersigned hereby represents, for the benefit of the Company and all
holders of Rights and shares of Common Stock, that the Rights evidenced by this
Rights Certificate are not, and, to the knowledge of the undersigned, have never
been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).


                                       -----------------------------------------
                                       Signature



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

                                     NOTICE

In the event the certification set forth above is not completed in connection
with a purported assignment, the Company will deem the Beneficial Owner of the
Rights evidenced by the enclosed Rights Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Rights Agreement) or a
transferee of any of




the foregoing and accordingly will deem the Rights evidenced by such Rights
Certificate to be void and not transferable or exercisable.


                                      A-3


                                                                       Exhibit B

                           CERTIFICATE OF DESIGNATION,
                            PREFERENCES AND RIGHTS OF
                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
                                       OF
                          ACCREDO HEALTH, INCORPORATED

                         Pursuant to Section 151 of the
                        Delaware General Corporation Law


         Accredo Health, Incorporated, a corporation organized under the laws of
the State of Delaware (the "Corporation"), hereby certifies that, pursuant to
the authority conferred upon the Board of Directors by the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors on April
17, 2003, adopted the following resolution creating a series of one hundred
thousand (100,000) shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:

         RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board") in accordance with the
provisions of its Certificate of Incorporation, as amended, a series of
Preferred Stock of the Corporation be and it hereby is created, and that the
designation and amount thereof and the voting rights or powers, preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:

         1.       Series A Junior Participating Preferred Stock. There is hereby
established a series of Preferred Stock, par value $1.00 per share, of the
Corporation, and the designation and certain terms, powers, preferences and
other rights of the shares of such series, and certain qualifications,
limitations and restrictions thereon, are hereby fixed as follows:

                  (i)      The distinctive serial designation of this series
shall be "Series A Junior Participating Preferred Stock" (hereinafter called
"this Series"). Each share of this Series shall be identical in all respects
with the other shares of this Series except as to the dates from and after which
dividends thereon shall be cumulative.

                  (ii)     The number of shares in this Series shall initially
be one hundred thousand (100,000), which number may from time to time be
increased or decreased (but not below the number then outstanding) by the Board
of Directors. Shares of this Series purchased by the Corporation shall be
canceled and shall revert to authorized but unissued shares of Preferred Stock
undesignated as to series. Shares of this Series may be issued in fractional
shares, which fractional shares shall entitle the holder, in proportion to such
holder's fractional share, to all rights of a holder of a whole share of this
Series.

                  (iii)    The holders of full or fractional shares of this
Series shall be entitled to receive, when and as declared by the Board of
Directors, but only out of funds legally available therefor, dividends, (A) on
each date that dividends or other distributions (other than dividends or
distributions payable in Common Stock of the Corporation) are payable on or in
respect of Common Stock comprising part of the Reference Package (as defined
below), in an amount per whole share of this Series equal to the aggregate
amount of dividends or other distributions (other than dividends or
distributions payable in Common Stock of the Corporation) that would be payable
on such date to a holder of the Reference Package and (B) on the last day of
March, June, September and December in each year, in an amount per whole share
of this Series equal to the excess (if any) of $1.00 over the aggregate
dividends paid per whole share of this Series during the three-month period
ending on such last day. Each such dividend shall be paid to the holders of
record of shares of this Series on the date, not exceeding 60 days preceding
such dividend or distribution payment date, fixed for that purpose by the Board
of Directors in advance of payment of each particular dividend or distribution.
Dividends on each full and each fractional share of this Series shall be
cumulative from the date such full or fractional share is originally issued;
provided that any such full or fractional share originally issued after a
dividend record date and on or prior to the dividend payment date to which such
record date relates shall not be entitled to receive the dividend payable on
such dividend payment date or any amount in respect of the period from such
original issuance to such dividend payment date.




                  The term "Reference Package" shall initially mean 10,000
shares of Common Stock, par value $.01 per share ("Common Stock"), of the
Corporation. In the event the Corporation shall at any time (A) declare or pay a
dividend on any Common Stock payable in Common Stock, (B) subdivide any Common
Stock or (C) combine any Common Stock into a smaller number of shares, then and
in each such case the Reference Package after such event shall be the Common
Stock that a holder of the Reference Package immediately prior to such event
would hold thereafter as a result thereof.

                  Holders of shares of this Series shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided, on this Series.

                  So long as any shares of this Series are outstanding, no
dividend (other than a dividend in Common Stock or in any other stock ranking
junior to this Series as to dividends and upon liquidation) shall be declared or
paid or set aside for payment or other distribution declared or made upon the
Common Stock or upon any other stock ranking junior to this Series as to
dividends or upon liquidation, nor shall any Common Stock nor any other stock of
the Corporation ranking junior to or on a parity with this Series as to
dividends or upon liquidation be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by the Corporation (except
by conversion into or exchange for stock of the Corporation ranking junior to
this Series as to dividends and upon liquidation), unless, in each case, the
full cumulative dividends (including the dividend to be due upon payment of such
dividend, distribution, redemption, purchase or other acquisition) on all
outstanding shares of this Series shall have been, or shall contemporaneously
be, paid.

                  (iv)     In the event of any merger, consolidation,
reclassification or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of this Series shall at the same time
be similarly exchanged or changed in an amount per whole share equal to the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, that a holder of the Reference Package would be
entitled to receive as a result of such transaction.

                  (v)      In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
the holders of full and fractional shares of this Series shall be entitled,
before any distribution or payment is made on any date to the holders of the
Common Stock or any other stock of the Corporation ranking junior to this Series
upon liquidation, to be paid in full an amount per whole share of this Series
equal to the greater of (A) $1.00 or (B) the aggregate amount distributed or to
be distributed prior to such date in connection with such liquidation,
dissolution or winding up to a holder of the Reference Package (such greater
amount being hereinafter referred to as the "Liquidation Preference"), together
with accrued dividends to such distribution or payment date, whether or not
earned or declared. If such payment shall have been made in full to all holders
of shares of this Series, the holders of shares of this Series as such shall
have no right or claim to any of the remaining assets of the Corporation.

                  In the event the assets of the Corporation available for
distribution to the holders of shares of this Series upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to the first paragraph of this Section (v), no such
distribution shall be made on account of any shares of any other class or series
of Preferred Stock ranking on a parity with the shares of this Series upon such
liquidation, dissolution or winding up unless proportionate distributive amounts
shall be paid on account of the shares of this Series, ratably in proportion to
the full distributable, amounts for which holders of all such parity shares are
respectively entitled upon such liquidation, dissolution or winding up.

                  Upon the liquidation, dissolution or winding up of the
Corporation, the holders of shares of this Series then outstanding shall be
entitled to be paid out of assets of the Corporation available for distribution
to its stockholders all amounts to which such holders are entitled pursuant to
the first paragraph of this Section (v) before any payment shall be made to the
holders of Common Stock or any other stock of the Corporation ranking junior
upon liquidation to this Series.

                  For the purposes of this Section (v), the consolidation or
merger of, or binding share exchange by,


                                      A-2


the Corporation with any other corporation shall not be deemed to constitute a
liquidation, dissolution or winding up of the corporation.

                  (vi)     The shares of this Series shall not be redeemable.

                  (vii)    In addition to any other vote or consent of
stockholders required by law or by the Certificate of Incorporation of the
Corporation, each whole share of this Series shall, on any matter, vote as a
class with any other capital stock comprising part of the Reference Package and
voting on such matter and shall have the number of votes thereon that a holder
of the Reference Package would have.


         IN WITNESS WHEREOF, Accredo Health, Incorporated has caused this
Certificate of Designation to be executed as of April ___, 2003.


                                  ACCREDO HEALTH, INCORPORATED



                                  By:
                                     ------------------------------------------
                                  Name:
                                       ----------------------------------------
                                  Title:
                                        ---------------------------------------


                                      A-3

EX-99.1

                                                                    EXHIBIT 99.1


                           CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


         In connection with the Quarterly Report of Accredo Health, Incorporated
(the "Company") on Form 10-Q for the period ended March 31, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
David D. Stevens, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to my knowledge:

(1)      The Report fully complies with the requirements of section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

(2)      The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Company.


/s/ David D. Stevens


David D. Stevens
Chief Executive Officer
May 5, 2003



     A signed original of this written statement required by Section 906 has
been provided to Accredo Health, Incorporated and will be retained by Accredo
Health, Incorporated and furnished to the Securities and Exchange Commission
upon request.

EX-99.2

                                                                    EXHIBIT 99.2


                           CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


         In connection with the Quarterly Report of Accredo Health, Incorporated
(the "Company") on Form 10-Q for the period ended March 31, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Joel R. Kimbrough, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to my knowledge:

(1)      The Report fully complies with the requirements of section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

(2)      The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Company.


/s/ Joel R. Kimbrough


Joel R. Kimbrough
Chief Financial Officer
May 5, 2003



     A signed original of this written statement required by Section 906 has
been provided to Accredo Health, Incorporated and will be retained by Accredo
Health, Incorporated and furnished to the Securities and Exchange Commission
upon request.