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Exhibit 10.38

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DOT HILL SYSTEMS CORP.
And
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Rights Agent
RIGHTS AGREEMENT
Dated as of May 19, 2003

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RIGHTS AGREEMENT

        THIS RIGHTS AGREEMENT ("Agreement"), dated as of May 19, 2003, between
DOT HILL SYSTEMS CORP., a Delaware corporation (the "Company"), and AMERICAN
STOCK TRANSFER & TRUST COMPANY ("Rights Agent").

        WHEREAS, the Board of Directors of the Company (the "Board") has
authorized and declared a dividend of one preferred share purchase right (a
"Right") for each Common Share (as such term is hereinafter defined) outstanding
at the close of business on May 30, 2003 (the "Record Date"), each Right
representing the right to purchase one one-hundredth of a Preferred Share (as
such term is hereinafter defined), upon the terms and subject to the conditions
herein set forth, and has further authorized and directed the issuance of one
Right with respect to each Common Share that shall become outstanding between
the Record Date and the earliest to occur of the Distribution Date, the
Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined); provided, however, that Rights may be issued with respect to Common
Shares that shall become outstanding after the Distribution Date and prior to
the earlier of the Redemption Date and the Final Expiration Date in accordance
with the provisions of Section 22 hereof; and

        WHEREAS, the Board has approved and authorized the appointment of the
Rights Agent, and the Rights Agent desires to accept such appointment.

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

        SECTION 1.    CERTAIN DEFINITIONS.    For purposes of this Agreement,
the following terms have the meanings indicated:

        (a)   "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
then outstanding. Notwithstanding the foregoing, (A) the term "Acquiring Person"
shall not include (i) the Company, (ii) any Subsidiary (as such term is
hereinafter defined) of the Company, (iii) any employee benefit or compensation
plan of the Company or any Subsidiary of the Company or (iv) any entity holding
Common Shares for or pursuant to the terms of any such employee benefit or
compensation plan of the Company or any Subsidiary of the Company, and (B) no
Person shall become an "Acquiring Person" either (x) as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the Common Shares then outstanding;
provided, however, that if a Person shall become the Beneficial Owner of 15% or
more of the Common Shares then outstanding by reason of share purchases by the
Company and shall, following written notice from, or public disclosure by the
Company of such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares without the prior consent of the Company and shall
then Beneficially Own more than 15% of the Common Shares then outstanding, then
such Person shall be deemed to be an "Acquiring Person", (y) solely as the
result of the acquisition of Common Shares directly from the Company; provided,
however, that if a Person shall become the Beneficial Owner of 15% or more of
the Common Shares then outstanding solely by reason of share purchases directly
from the Company and shall, after that date, become Beneficial Owner of any
additional Common Shares without the prior written consent of the Company and
shall then Beneficially Own more than 15% of the Common Shares then outstanding,
then such Person shall be deemed to be an "Acquiring Person" or (z) if the Board
determines in good faith that a Person who would otherwise be an "Acquiring
Person", as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently (including, without limitation, because (1) such
Person was unaware that it beneficially owned a percentage of Common Shares that
would otherwise cause such Person to be an "Acquiring Person" or (2) such Person
was aware that it was the Beneficial Owner of 15% or more of the Common Shares
outstanding but had no actual knowledge of the consequences of being such a
Beneficial Owner under this Agreement) and without any intention of changing or

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influencing control of the Company, and such Person promptly enters into an
irrevocable written commitment in favor of the Company to divest, and thereafter
divests (without retaining any power, including voting with respect to such
Common Shares), as promptly as practicable (as determined in good faith by the
Board), following receipt of written notice from the Company of such event, of
Beneficial Ownership of a sufficient number of Common Shares so that such Person
would no longer be an "Acquiring Person", as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement; provided, however, that
if such Person shall again become the Beneficial Owner of 15% or more of the
Common Shares then outstanding, such Person shall be deemed an "Acquiring
Person", subject to the exceptions set forth in this Section 1(a).

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

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

        (i)    which such Person or any of such Person's Affiliates or
Associates is deemed to beneficially own, within the meaning of Rule 13d-3 of
the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement;

        (ii)   which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time or the occurrence or fulfillment
of a condition) pursuant to any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities and other than
customary agreements with and between initial purchasers and selling group
members with respect to a bona fide offering of securities under Rule 144A under
the Securities Act of 1933, as amended (the "Act") and other than agreements
between the Company and any Person to which the right or obligation to purchase
securities is conditioned upon the achievement of research or development
milestones which have not yet been achieved), or upon the exercise of conversion
rights (other than conversion rights applicable to securities held by
underwriters, initial purchasers or selling group members in connection with a
bona fide public offering of securities or a bona fide offering of securities
under Rule 144A under the Act pursuant to customary agreements with and between
them and the Company, so long as such securities are so held), exchange rights,
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
beneficially own, securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or exchange
or (B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act and (2) is not also
then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or

        (iii) which are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or Associates
has any agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities and other than

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customary agreements with and between initial purchasers and selling group
members with respect to a bona fide offering of securities under Rule 144A under
the Act) for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B) hereof) or disposing of any
securities of the Company; provided, however, an agreement, arrangement or
understanding for purposes of this Section 1(c)(iii) shall not be deemed to
include actions (including any agreement, arrangement or understanding) or
statements by (1) any member of the Board (as it is comprised on the date of
this Agreement) (the "Existing Directors"), (2) any subsequent directors of the
Company who have been nominated by a majority of the Existing Directors (the
"Successor Directors"), or by any Person of whom such Existing Director or
Successor Director is an Affiliate or Associate, or (3) any subsequent directors
of the Company who have been nominated by a majority of the Existing Directors
and/or the Successor Directors, nominating as a group; provided, however, that
this exception shall not apply to a particular Person or Persons if and to the
extent that such Person or Persons, after the date of this Agreement, acquires
Beneficial Ownership of more than an additional 5% of the then outstanding
Common Shares of the Company unless (A) the shares are acquired directly from
the Company or as part of an employee benefit or compensation plan of the
Company or a Subsidiary of the Company or (B) the Person establishes to the
satisfaction of the directors of the Company that it is acting on its own behalf
and not in concert with any other Person and will not, upon completion of any
purchases, be the Beneficial Owner of 15% or more of the outstanding Common
Shares.

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

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

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

        (f)    "Common Shares" shall mean the shares of common stock, par value
$.001 per share, of the Company; provided, however,that, "Common Shares," when
used in this Agreement in connection with a specific reference to any Person
other than the Company, shall mean the capital stock (or equity interest) with
the greatest voting power of such other Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person.

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

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

        (i)    "Interested Stockholder" shall mean any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or any other Person in which any
such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.

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

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        (k)   "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.001 per share, of the Company having
the designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions set forth in the Certificate of Designation
attached to this Agreement as EXHIBIT A.

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

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

        (n)   "Shares Acquisition Date" shall mean the first date of public
announcement by the Company that an Acquiring Person exists, or by an Acquiring
Person that such Person has become an Acquiring Person; provided, however, that,
if such Person is determined not to have become an Acquiring Person pursuant to
clause (z) of Subsection 1(a)(B) hereof, then no Shares Acquisition Date shall
be deemed to have occurred.

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

        (p)   "Transaction" shall mean any merger, consolidation or sale of
assets described in Section 13(a) hereof or any acquisition of Common Shares
which would result in a Person becoming an Acquiring Person or a Principal Party
(as such term is defined in Section 13(b)).

        (q)   "Transaction Person" with respect to a Transaction shall mean
(i) any Person who (x) is or will become an Acquiring Person or a Principal
Party if the Transaction were to be consummated and (y) directly or indirectly
proposed or nominated a director of the Company which director is in office at
the time of consideration of the Transaction, or (ii) an Affiliate or Associate
of such a Person.

        SECTION 2.    APPOINTMENT OF RIGHTS AGENT.    The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents as
it may deem necessary or desirable.

        SECTION 3.    ISSUE OF RIGHT CERTIFICATES.    

        (a)   Until the earlier of the Close of Business on (i) the Shares
Acquisition Date or (ii) the tenth Business Day (or such later date as may be
determined by action of the Board prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement (determined in accordance
with Rule 14d-2 under the Exchange Act) by any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company or any entity holding Common Shares for or
pursuant to the terms of any such plan) of, or of the first public announcement
of the intention of any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares for or pursuant to the terms of any
such plan) to commence, a tender or exchange offer (which intention to commence
remains in effect for five Business Days after such announcement), the
consummation of which would result in any Person becoming an Acquiring Person
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights, the earlier of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the Rights (and the right to receive Right
Certificates therefor) will be transferable only in connection with the transfer
of Common Shares. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,

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send) by first-class, insured, postage-prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Right Certificate,
in substantially the form of EXHIBIT B hereto (a "Right Certificate"),
evidencing one Right for each Common Share so held, subject to the adjustment
provisions of Section 11 of this Agreement. As of the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.

        (b)   On the Record Date, or as soon as practicable thereafter, the
Company will send (directly or through the Rights Agent or its transfer agent) a
copy of a Summary of Rights to Purchase Preferred Shares, in substantially the
form of EXHIBIT C hereto (the "Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for Common Shares outstanding as of
the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates registered in the names of the holders thereof. Until the
Distribution Date (or the earlier of the Redemption Date and the Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares outstanding on the Record Date shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby.

        (c)   Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:

        This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Dot Hill Systems Corp.
(the "Company") and American Stock Transfer & Trust Company as Rights Agent (the
"Rights Agent"), dated as of May 19, 2003, as amended from time to time (the
"Rights Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of
the Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of a
written request therefor. As described in the Rights Agreement, Rights issued to
any Person who becomes an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Rights Agreement) and certain related persons, whether
currently held by or on behalf of such Person or by any subsequent holder, shall
become null and void.

        With respect to such certificates containing the foregoing legend, until
the Distribution Date (or, if earlier, the earlier of the Redemption Date or the
Final Expiration Date), the Rights associated with the Common Shares represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with the Common Shares which are
no longer outstanding. Notwithstanding this Section 3(c), the omission of a
legend shall not affect the enforceability of any part of this Agreement or the
rights of any holder of the Rights.

        SECTION 4.    FORM OF RIGHT CERTIFICATES.    

        (a)   The Right Certificates (and the form of election to purchase
Preferred Shares, the form of assignment and the form of certification to be
printed on the reverse thereof) shall be substantially the same as EXHIBIT B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable

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law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or quotation system on which the Rights may
from time to time be listed, or to conform to usage. Subject to the provisions
of Sections 7, 11 and 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share as shall be set forth therein at the Purchase Price (as defined in
Section 7(b)), but the number of such one one-hundredths of a Preferred Share
and the Purchase Price shall be subject to adjustment as provided herein.

        (b)   Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to the
second paragraph of Section 11(a)(ii) hereof and any Right Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement
or adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:

        The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement). Accordingly, this Right Certificate and the Rights
represented hereby are null and void.

        The provisions of Section 11(a)(ii) hereof shall be operative whether or
not the foregoing legend is contained on any such Right Certificate.

        SECTION 5.    COUNTERSIGNATURE AND REGISTRATION.    The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its Chief Executive Officer, its President, its Vice Chairman of the
Board or any of its Vice Presidents, either manually or by facsimile signature,
shall have affixed thereto the Company's seal or a facsimile thereof, and shall
be attested by the Chief Financial Officer of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.

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

        SECTION 6.    TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT
CERTIFICATES.    Subject to the provisions of Section 11(a)(ii), Section 14 and
Section 24 hereof, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the earlier of the Redemption
Date or the Final Expiration Date, any Right Certificate or Right Certificates
may be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of one one-hundredths of a Preferred Share as the Right Certificate
or Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right

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Certificates to be transferred, split up, combined or exchanged at the office of
the Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Right Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Right Certificate and shall have provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to
Section 11(a)(ii), Section 14 and Section 24 hereof, countersign and deliver to
the person entitled thereto a Right Certificate or Right Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.

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

        Notwithstanding any other provisions hereof, the Company and the Rights
Agent may amend this Agreement to provide for uncertificated Rights in addition
to or in place of Rights evidenced by Rights Certificates.

        SECTION 7.    EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.    

        (a)   The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office of the Rights Agent designated
for such purpose, together with payment of the Purchase Price for each one
one-hundredth of a Preferred Share (or such other number of shares or other
securities) as to which the Rights are exercised, at or prior to the earliest of
(i) the Close of Business on May 30, 2013 (the "Final Expiration Date"),
(ii) the time at which the Rights are redeemed as provided in Section 23 hereof
(the "Redemption Date") or (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof.

        (b)   The purchase price for each one one-hundredth of a Preferred Share
pursuant to the exercise of a Right shall initially be $50.00 (the "Purchase
Price") and shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.

        (c)   Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check, bank draft or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent for
the Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the Preferred Shares issuable upon exercise of the
Rights hereunder into a depository, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the

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depositary agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder and (iv) when appropriate, after receipt, deliver such
cash to or upon the order of the registered holder of such Right Certificate. In
the event that the Company is obligated to issue securities of the Company other
than Preferred Shares (including Common Shares) of the Company pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such other securities are available for distribution by the Rights Agent, if and
when appropriate.

        In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii) hereof, the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) hereof,
and, if fewer than all the Rights represented by such Right Certificate were so
exercised, the Rights Agent shall indicate on the Right Certificate the number
of Rights represented thereby which continue to include the rights provided by
Section 11(a)(ii) hereof.

        (d)   In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby (other than a partial
exercise of rights pursuant to Section 11(a)(ii) as described in Section 7(c)
hereof), a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14 hereof.

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

        (f)    Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certification following the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, (ii) tendered the Purchase Price (and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9) to the Company in the manner set forth
in Section 7(c), and (iii) provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.

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

8

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        SECTION 9.    AVAILABILITY OF PREFERRED SHARES.    The Company covenants
and agrees that so long as the Preferred Shares (and, after the time a person
becomes an Acquiring Person, Common Shares or any other securities) issuable
upon the exercise of the Rights may be listed on any national securities
exchange or quotation system, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed on such exchange or quotation system upon
official notice of issuance upon such exercise.

        The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (or Common Shares and other
securities, as the case may be) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such Preferred Shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares or other securities.

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

        As soon as practicable after the Distribution Date, the Company shall
use its best efforts to:

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

         (ii)  use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky laws of
such jurisdictions as may be necessary or appropriate.

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

        SECTION 11.    ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER
OF RIGHTS.    The Purchase Price, the number of Preferred Shares covered by each
Right and the

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number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.

        (a)   

          (i)  In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Shares payable in Preferred
Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the
outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to any adjustment required pursuant to
Section 11(a)(ii) hereof.

         (ii)  Subject to Section 24 hereof and the provisions of the next
paragraph of this Section 11(a)(ii), in the event any Person shall become an
Acquiring Person, each holder of a Right shall, for a period of 60 days after
the later of such time any Person becomes an Acquiring Person or the effective
date of an appropriate registration statement filed under the Act pursuant to
Section 9 hereof (provided, however that, if at any time prior to the expiration
or termination of the Rights there shall be a temporary restraining order, a
preliminary injunction, an injunction, or temporary suspension by the Board, or
similar obstacle to exercise of the Rights (the "Injunction") which prevents
exercise of the Rights, a new 60-day period shall commence on the date the
Injunction is removed), have a right to receive, upon exercise thereof at a
price equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares as shall equal the result obtained by
(A) multiplying the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Common Shares (determined pursuant to Section 11(d) hereof) on the date such
Person became an Acquiring Person; provided, however, that if the transaction
that would otherwise give rise to the foregoing adjustment is also subject to
the provisions of Section 13 hereof, then only the provisions of Section 13
hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a)(ii). In the event that any Person shall become an Acquiring Person
and the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights.

        Notwithstanding anything in this Agreement to the contrary, from and
after the time any Person becomes an Acquiring Person, any Rights beneficially
owned by (i) such Acquiring Person or an Associate or Affiliate of such
Acquiring Person, (ii) a transferee of such Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
became such, or (iii) a transferee of such Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person's becoming such and

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receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 11(a)(ii), shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 11(a)(ii) and Section 4(b) hereof are complied with,
but shall have no liability to any holder of Right Certificates or other Person
as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder. No
Right Certificate shall be issued at any time upon the transfer of any Rights to
an Acquiring Person whose Rights would be void pursuant to the second preceding
sentence or any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to
the Rights Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the second preceding sentence shall be canceled.

       (iii)  In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if a majority of the Board then in
office determines that such action is necessary or appropriate and not contrary
to the interests of holders of Rights, elect to (and, in the event that the
Board has not exercised the exchange right contained in Section 24(c) hereof and
there are not sufficient treasury shares and authorized but unissued Common
Shares to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Company shall) take all such action as may be
necessary to authorize, issue or pay, upon the exercise of the Rights, cash
(including by way of a reduction of the Purchase Price), property, Common
Shares, other securities or any combination thereof having an aggregate value
equal to the value of the Common Shares which otherwise would have been issuable
pursuant to Section 11(a)(ii) hereof, which aggregate value shall be determined
by a nationally recognized investment banking firm selected by a majority of the
Board then in office. For purposes of the preceding sentence, the value of the
Common Shares shall be determined pursuant to Section 11(d) hereof. Any such
election by the Board must be made within 60 days following the date on which
the event described in Section 11(a)(ii) hereof shall have occurred. Following
the occurrence of the event described in Section 11(a)(ii) hereof, a majority of
the Board then in office may suspend the exercisability of the Rights for a
period of up to 60 days following the date on which the event described in
Section 11(a)(ii) hereof shall have occurred to the extent that such directors
have not determined whether to exercise their rights of election under this
Section 11(a)(iii). In the event of any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights has been
temporarily suspended.

        (b)   In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same
designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as such term is hereinafter defined)
on such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or equivalent preferred shares so to be offered (and/or the
aggregate initial conversion price of the

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convertible securities so to be offered) would purchase at such current market
price and the denominator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of additional Preferred Shares
and/or equivalent preferred shares to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one Right. In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board, whose determination shall be described in
a statement filed with the Rights Agent. Preferred Shares owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.

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

        (d)   

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

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as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the Security is listed or admitted to trading or as reported on the Nasdaq
National Market or, if the Security is not listed or admitted to trading on any
national securities exchange or reported on the Nasdaq National Market, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("Nasdaq") or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board or, if on any such date no professional market maker is making a market in
the Security, the price as determined in good faith by the Board. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day.

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

        (e)   No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one one-hundredth
of a Preferred Share or one ten-thousandth of any other share or security as the
case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such
adjustment or (ii) the date of the expiration of the right to exercise any
Rights.

        (f)    If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Sections 11(a) through 11(c) hereof, inclusive,
and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Shares shall apply on like terms to any such other shares.

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

        (h)   Unless the Company shall have exercised its election as provided
in Section 11(i) hereof, upon each adjustment of the Purchase Price as a result
of the calculations made in Section 11(b) and Section 11(c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one

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one-hundredths of a Preferred Share (calculated to the nearest one one-millionth
of a Preferred Share) obtained by (i) multiplying (x) the number of one
one-hundredths of a Preferred Share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.

        (i)    The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.

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

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

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

        (m)  The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 27 hereof, take (or
permit any Subsidiary to take) any action the

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purpose of which is to, or if at the time such action is taken it is reasonably
foreseeable that the effect of such action is to, materially diminish or
eliminate the benefits intended to be afforded by the Rights. Any such action
taken by the Company during any period after any Person becomes an Acquiring
Person but prior to the Distribution Date shall be null and void unless such
action could be taken under this Section 11(m) from and after the Distribution
Date.

        (n)   Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the Company
to holders of its Preferred Shares shall not be taxable to such stockholders.

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

        (p)   The exercise of Rights under Section 11(a)(ii) hereof shall only
result in the loss of rights under Section 11(a)(ii) hereof to the extent so
exercised and shall not otherwise affect the rights represented by the Rights
under this Agreement, including the rights represented by Section 13 hereof.

        SECTION 12.    CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES.    Whenever an adjustment is made as provided in Sections 11 and 13
hereof, the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares or the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with
Section 25 hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein contained and shall not be deemed
to have knowledge of any adjustment unless and until it shall have received such
certificate.

        SECTION 13.    CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.

        (a)   In the event that, following the Shares Acquisition Date or, if a
Transaction is proposed, the Distribution Date, directly or indirectly (x) the
Company shall consolidate with, or merge with and into, any Interested
Stockholder, or if in such merger or consolidation all holders of Common Shares
are not treated alike, any other Person, (y) any Interested Stockholder, or if
in such merger or consolidation all holders of Common Shares are not treated
alike, any other Person shall consolidate with the Company, or merge with and
into the Company, and the Company shall be the continuing or surviving

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corporation of such merger (other than, in the case of either transaction
described in (x) or (y), a merger or consolidation which would result in all of
the voting power represented by the securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into securities of the surviving entity) all
of the voting power represented by the securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation and
the holders of such securities not having changed as a result of such merger or
consolidation), or (z) the Company shall sell, mortgage or otherwise transfer
(or one or more of its Subsidiaries shall sell, mortgage or otherwise transfer),
in one or more transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Interested Stockholder or Stockholders, or if in such transaction
all holders of Common Shares are not treated alike, any other Person (other than
the Company or any Subsidiary of the Company in one or more transactions each of
which individually and the aggregate does not violate Section 13(d) hereof),
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right, subject to Section 11(a)(ii) hereof, shall have the right to
receive, upon the exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable in accordance with the terms of this Agreement
and in lieu of Preferred Shares, such number of freely tradeable Common Shares
of the Principal Party (as such term is hereinafter defined), free and clear of
liens, rights of call or first refusal, encumbrances or other adverse claims, as
shall be equal to the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii) hereof) and dividing that product
by (B) 50% of the then current per share market price of the Common Shares of
such Principal Party (determined pursuant to Section 11(d) hereof) on the date
of consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply to such Principal
Party; and (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Shares in accordance with Section 9 hereof) in connection with such consummation
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights.

        (b)   "Principal Party" shall mean:

          (i)  in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a) hereof, the Person that is the issuer of any
securities into which Common Shares are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to the merger or consolidation (or, if applicable, the Company, if it is
the surviving corporation); and

         (ii)  in the case of any transaction described in clause (z) of the
first sentence of Section 13(a) hereof, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;

provided, however, that in any case, (1) if the Common Shares of such Person are
not at such time and have not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary or Affiliate of another Person the Common Shares
of which are and have been so registered, "Principal Party" shall refer to such
other Person; (2) if such Person is a Subsidiary, directly or indirectly, or
Affiliate of more than one Person, the Common Shares of two or more of which are
and have been so registered, "Principal Party" shall refer to whichever of such
Persons is the issuer of the Common Shares having the greatest aggregate

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market value; and (3) if such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in (1) and (2) above shall
apply to each of the chains of ownership having an interest in such joint
venture as if such party were a Subsidiary of both or all of such joint
venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.

        (c)   The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized Common Shares that have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and each Principal Party and each other Person
who may become a Principal Party as a result of such consolidation, merger, sale
or transfer shall have (i) executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and (ii) prepared, filed and had declared and remain
effective a registration statement under the Act on the appropriate form with
respect to the Rights and the securities exercisable upon exercise of the Rights
and further providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer of assets mentioned in paragraph (a) of
this Section 13, the Principal Party at its own expense will:

          (i)  cause the registration statement under the Act with respect to
the Rights and the securities purchasable upon exercise of the Rights on an
appropriate form to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date;

         (ii)  use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky laws of
such jurisdictions as may be necessary or appropriate;

       (iii)  list the Rights and the securities purchasable upon exercise of
the Rights on each national securities exchange on which the Common Shares were
listed prior to the consummation of such consolidation, merger, sale or transfer
of assets or on the Nasdaq National Market if the Common Shares were listed on
the Nasdaq National Market or, if the Common Shares were not listed on a
national securities exchange or the Nasdaq National Market prior to the
consummation of such consolidation, merger, sale or transfer of assets, on a
national securities exchange or the Nasdaq National Market; and

        (iv)  deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all material
respects with the requirements for registration on Form 10 under the Exchange
Act.

        The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.

        (d)   After the Distribution Date, the Company covenants and agrees that
it shall not (i) consolidate with, (ii) merge with or into, or (iii) sell or
transfer to, in one or more transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company and its subsidiaries
taken as a whole, any other Person (other than a Subsidiary of the Company in a
transaction which does not violate Section 11(m) hereof), if (x) at the time of
or after such consolidation, merger or sale there are any charter or bylaw
provisions or any rights, warrants or other instruments or securities
outstanding, agreements in effect or any other action taken which would diminish
or otherwise eliminate the benefits intended to be afforded by the Rights or
(y) prior to, simultaneously with or immediately after such consolidation,
merger or sale, the stockholders of the Person who constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) hereof shall
have received a distribution of Rights previously owned by such Person or any of
its Affiliates and Associates. The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto the Company and
such other Person shall have executed and delivered to the Rights Agent a
supplemental agreement evidencing compliance with this Section 13(d).

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        SECTION 14.    FRACTIONAL RIGHTS AND FRACTIONAL SHARES.    

        (a)   The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or as reported on the
Nasdaq National Market or, if the Rights are not listed or admitted to trading
on any national securities exchange or reported on the Nasdaq National Market,
the last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board.
If on any such date no such market maker is making a market in the Rights, the
fair value of the Rights on such date as determined in good faith by the Board
shall be used.

        (b)   The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts;
provided, however, that holders of such depositary receipts shall have all of
the designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one Preferred
Share. For the purposes of this Section 14(b), the current market value of a
Preferred Share shall be the current per share market price of the Preferred
Shares (as determined pursuant to the first and second sentences of
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise (or, if not publicly traded, in accordance with
Section 11(d)(ii) hereof).

        (c)   Following the occurrence of one of the transactions or events
specified in Section 11 hereof giving rise to the right to receive Common
Shares, capital stock equivalents (other than Preferred Shares) or other
securities upon the exercise of a Right, the Company shall not be required to
issue fractions of Common Shares or units of such Common Shares, capital stock
equivalents or other securities upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares, capital stock equivalents
or other securities. In lieu of fractional Common Shares, capital stock
equivalents or other securities, the Company shall pay to the registered holders
of Right Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
Common Share or unit of such Common Shares, capital stock equivalents or other
securities. For purposes of this Section 14(c), the current market value shall
be the current per share market

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price (as determined pursuant to Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise and, if such capital stock
equivalent is not traded, each such capital stock equivalent shall have the
value of one one-hundredth of a Preferred Share.

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

        SECTION 15.    RIGHTS OF ACTION.    All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Sections 18 and 20 hereof, are vested in the respective registered holders of
the Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares) and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Shares), without the consent
of the Rights Agent or of the holder of any other Right Certificate (or, prior
to the Distribution Date, of the Common Shares), may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this 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. Holders
of Rights shall be entitled to recover the reasonable costs and expenses,
including attorneys fees, incurred by them in any action to enforce the
provisions of this Agreement.

        SECTION 16.    AGREEMENT OF RIGHT HOLDERS.    Every holder of a Right,
by accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

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

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

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

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

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        SECTION 18.    CONCERNING THE RIGHTS AGENT.    The Company agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. The indemnity provided
herein shall survive the expiration of the Rights and the termination of this
Agreement.

        The Rights Agent shall be protected and shall incur no liability for, or
in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof. In no case will the Rights Agent be liable for special,
indirect, incidental or consequential loss or damage at any kind whatsoever
(including but not limited to lost profits), even if the Rights Agent has been
advised of such loss or damage.

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

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

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

        (a)   The Rights Agent may consult with legal counsel of its choice (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and

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protection to the Rights Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.

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

        (c)   The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.

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

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

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

        (g)   The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
the Chief Financial Officer, any Vice President, the Secretary or the Treasurer
of the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of any such officer
or for any delay in acting while waiting for those instructions. Any application
by the Rights Agent for written instructions from the Company may, at the option
of the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent with respect to its duties or obligations under this
Agreement and the date on and/or after which such action shall be taken or
omitted and the Rights Agent shall not be liable for any action taken or omitted
in accordance with a proposal included in any such application on or after the
date specified therein (which date shall not be less than three Business

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Days after the date indicated in such application unless any such officer shall
have consented in writing to an earlier date) unless, prior to taking or
omitting any such action, the Rights Agent has received written instructions in
response to such application specifying the action to be taken or omitted.

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

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

        (j)    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.

        (k)   If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
executed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.

        SECTION 21.    CHANGE OF RIGHTS AGENT.    The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent for the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent for the Common Shares or
Preferred Shares by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be either (a) a corporation, business trust or limited liability company
organized and doing business under the laws of the United States or of any other
state of the United States which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50 million or (b) a direct or indirect wholly owned Subsidiary of such an
entity or its wholly-owning parent. After appointment, the successor Rights
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any

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further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent for
the Common Shares or Preferred Shares, and mail a notice thereof in writing to
the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

        SECTION 22.    ISSUANCE OF NEW RIGHT CERTIFICATES.    Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Shares following the Distribution Date and prior to the earlier
of the Redemption Date and the Final Expiration Date, the Company (a) shall with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement in existence prior to the
Distribution Date, or upon the exercise, conversion or exchange of securities,
notes or debentures issued by the Company and in existence prior to the
Distribution Date, and (b) may, in any other case, if deemed necessary or
appropriate by the Board, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) the Company shall not be obligated to issue any such Right Certificates
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Right Certificate would be issued, and
(ii) no Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.

        SECTION 23.    REDEMPTION.    

        (a)   The Rights may be redeemed by action of the Board pursuant to
Section 23(b) hereof and shall not be redeemed in any other manner.

        (b)   

        (i)    The Board may, at its option, at any time prior to the earlier of
(A) such time as any Person becomes an Acquiring Person, or (B) the Final
Expiration Date, redeem all but not less than all of the then outstanding Rights
at a redemption price of $0.001 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"), and the Company may, at its option, pay the Redemption Price in Common
Shares (based on the "current per share market price," as such term is defined
in Section 11(d) hereof, of the Common Shares at the time of redemption), cash
or any other form of consideration deemed appropriate by the Board. The
redemption of the Rights by the Board may be made effective at such time, on
such basis and subject to such conditions as the Board in its sole discretion
may establish. Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable pursuant to
Section 11(a)(ii) hereof prior to the expiration or termination of the Company's
right of redemption under this Section 23(b)(i).

        (ii)   In addition, the Board may, at its option, at any time after the
time a Person becomes an Acquiring Person and after the expiration of any period
during which the holder of Rights may exercise the rights under
Section 11(a)(ii) hereof but prior to any event described in clause (x), (y) or
(z) of the first sentence of Section 13 hereof, redeem all but not less than all
of the then outstanding Rights at the Redemption Price (x) in connection with
any merger, consolidation or sale or other transfer (in one transaction or in a
series of related transactions) of assets or earning power aggregating 50% or
more of the assets or earning

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power of the Company and its Subsidiaries (taken as a whole) in which all
holders of Common Shares are treated alike and not involving (other than as a
holder of Common Shares being treated like all other such holders) an Interested
Stockholder or a Transaction Person or (y)(A) if and for so long as the
Acquiring Person is not thereafter the Beneficial Owner of 15% or more of the
then outstanding Common Shares, and (B) at the time of redemption no other
Persons are Acquiring Persons.

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

        (d)   The Company may, at its option, discharge all of its obligations
with respect to any redemption of the Rights by (i) issuing a press release
announcing the manner of redemption of the Rights and (ii) mailing payment of
the Redemption Price to the registered holders of the Rights at their last
addresses as they appear on the registry books of the Rights Agent or, prior to
the Distribution Date, on the registry books of the transfer agent for the
Common Shares, and upon such action, all outstanding Right Certificates shall be
null and void without any further action by the Company.

        SECTION 24.    EXCHANGE.    

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

        (b)   Immediately upon the action of the Board ordering the exchange of
any Rights pursuant to Section 24(a) hereof and without any further action and
without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall be to receive that number
of Common Shares equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to

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all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

        (c)   In lieu of issuing Common Shares in accordance with Section 24(a)
hereof, the Company may, if a majority of the Board then in office determines
that such action is necessary or appropriate and not contrary to the interests
of the holders of Rights, elect to (and, in the event that there are not
sufficient treasury shares and authorized but unissued Common Shares to permit
any exchange of the Rights in accordance with Section 24(a) hereof, the Company
shall) take all such action as may be necessary to authorize, issue or pay, upon
the exchange of the Rights, cash, property, Common Shares, other securities or
any combination thereof having an aggregate value equal to the value of the
Common Shares which otherwise would have been issuable pursuant to Section 24(a)
hereof, which aggregate value shall be determined by a nationally recognized
investment banking firm selected by a majority of the Board then in office. For
purposes of the preceding sentence, the value of the Common Shares shall be
determined pursuant to Section 11(d) hereof. Any election pursuant to this
Section 24(c) by the Board must be made by resolution within 60 days following
the date on which the event described in Section 11(a)(ii) hereof shall have
occurred. Following the occurrence of the event described in
Section 11(a)(ii) hereof, a majority of the Board then in office may suspend the
exercisability of the Rights for a period of up to 60 days following the date on
which the event described in Section 11(a)(ii) hereof shall have occurred to the
extent that such directors have not determined whether to exercise their right
of election under this Section 24(c). In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended.

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

        (e)   The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exchange of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts;
provided, however, that holders of such depositary receipts shall have all of
the designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein

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provided an amount in cash equal to the same fraction of the current market
value of one Preferred Share. For the purposes of this Section 24(e), the
current market value of a Preferred Share shall be one hundred (100) times the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately after the date of
the first public announcement by the Company that an exchange is to be effected
pursuant to this Section 24.

        SECTION 25.    NOTICE OF CERTAIN EVENTS.    

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

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

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

Dot Hill Systems Corp.
6305 El Camino Real
Carlsbad, California 92009
Attention: Chief Financial Officer

with a copy to:

Cooley Godward llp
4401 Eastgate Mall
San Diego, California 92121
Attention: Thomas A. Coll, Esq.

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

American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, New York 10038
Attention: Wilbert Myles

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

        SECTION 27.    SUPPLEMENTS AND AMENDMENTS.    Prior to the Distribution
Date, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of the Rights. From and after the Distribution Date, the Company and the
Rights Agent shall, if the Company so directs, from time to time supplement or
amend any provision of this Agreement without the approval of any holders of
Right Certificates in order to (i) cure any ambiguity, (ii) correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or (iii) change any other provisions with
respect to the Rights which the Company may deem necessary or desirable;
provided, however, that no such supplement or amendment from or after the
Distribution Date shall be made which would adversely affect the interests of
the holders of Rights (other than the interests of an Acquiring Person or its
Affiliates or Associates). Any supplement or amendment adopted during any period
after any Person has become an Acquiring Person but prior to the Distribution
Date shall become null and void unless such supplement or amendment could have
been adopted by the Company from and after the Distribution Date. Any such
supplement or amendment shall be evidenced by a writing signed by the Company
and the Rights Agent. Upon delivery of a certificate from an appropriate officer
of the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment unless the Rights Agent shall have determined in
good faith that such supplement or amendment would adversely affect its interest
under this Agreement. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Shares.

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        SECTION 28.    DETERMINATION AND ACTIONS BY THE BOARD, ETC.    For all
purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares or any other securities
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement. The Board
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board, or the
Company, or as may be necessary or advisable in the administration of this
Agreement, including without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the 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 Rights Agent and the holders of the Rights, and (y) not subject
the Board to any liability to the holders of the Rights.

        SECTION 29.    SUCCESSORS.    All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

        SECTION 30.    BENEFITS OF THIS AGREEMENT.    Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).

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

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

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

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

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

    DOT HILL SYSTEMS CORP.
 
 
/s/  JAMES L. LAMBERT      

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James L. Lambert
Chief Executive Officer, President, Chief Operating Officer and Director
 
 
AMERICAN STOCK TRANSFER & TRUST COMPANY
 
 
By:
 
/s/  HERBERT J. LEMMER      

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Name:
 
Herbert J. Lemmer

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Title:
 
Vice President

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EXHIBIT A

CERTIFICATE OF DESIGNATION

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EXHIBIT B

RIGHT CERTIFICATE

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EXHIBIT C

SUMMARY OF RIGHTS

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DOT HILL SYSTEMS CORP.

SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES

        On May 17, 2003, the Board of Directors (the "Board") of DOT HILL
SYSTEMS CORP. (the "Company") declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of common stock, par value
$0.001 per share (the "Common Shares"), of the Company. The dividend is
effective as of May 30, 2003 (the "Record Date") with respect to the
stockholders of record on that date. The Rights will also attach to new Common
Shares issued after the Record Date. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $0.001 per share (the "Preferred
Shares"), of the Company at a price of $50.00 per one one-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment. Each Preferred
Share is designed to be the economic equivalent of 100 Common Shares. The
description and terms of the Rights are set forth in a Rights Agreement dated as
of May 19, 2003 (the "Rights Agreement"), between the Company and AMERICAN STOCK
TRANSFER & TRUST COMPANY (the "Rights Agent").

DETACHMENT AND TRANSFER OF RIGHTS

        Initially, the Rights will be evidenced by the stock certificates
representing Common Shares then outstanding, and no separate Right Certificates
will be distributed. Until the earlier to occur of (i) a public announcement
that a person or group of affiliated or associated persons, has become an
"Acquiring Person" (as such term is defined in the Rights Agreement) or (ii) 10
business days (or such later date as the Board may determine prior to such time
as any person or group becomes an Acquiring Person) following the commencement
of, or announcement of an intention to make, a tender offer or exchange offer
which would result in the beneficial ownership by an Acquiring Person of 15% or
more of the outstanding Common Shares (the earlier of such dates being called
the "Distribution Date"), the Rights will be evidenced, with respect to any of
the Common Share certificates outstanding as of the Record Date, by such Common
Share certificate. In general, an "Acquiring Person" is a person, the affiliates
or associates of such person, or a group, which has acquired beneficial
ownership of 15% or more of the outstanding Common Shares.

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

EXERCISABILITY OF RIGHTS

        The Rights are not exercisable until the Distribution Date. The Rights
will expire on May 30, 2013 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below. Until a Right is
exercised, the holder thereof, as such, will have no rights as a stockholder of
the Company, including, without limitation, the right to vote or to receive
dividends.

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        The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable or payable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution. The number of
outstanding Rights and the number of one one-hundredths of a Preferred Share
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of the Common Shares or a stock dividend on the Common Shares
payable in Common Shares, or subdivisions, consolidations or combinations of the
Common Shares occurring, in any such case, prior to the Distribution Date. With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Purchase
Price. No fractional Preferred Shares will be issued (other than fractions which
are integral multiples of one one-hundredth of a Preferred Share, which may, at
the election of the Company, be evidenced by depositary receipts) and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Shares on the last trading day prior to the date of exercise.

TERMS OF PREFERRED SHARES

        Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $l per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each Preferred
Share will have 100 votes, voting together with the Common Shares. Finally, in
the event of any merger, consolidation or other transaction in which Common
Shares are exchanged, each Preferred Share will be entitled to receive 100 times
the amount received per Common Share. These rights are protected by customary
anti-dilution provisions. Because of the nature of the Preferred Shares'
dividend, liquidation and voting rights, the value of the one one-hundredth
interest in a Preferred Share purchasable upon exercise of each Right should
approximate the value of one Common Share. The Preferred Shares would rank
junior to any other series of the Company's preferred stock.

TRIGGER OF FLIP-IN AND FLIP-OVER RIGHTS

        In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
or any affiliate or associate thereof (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right. This right
will commence on the date of public announcement that a person has become an
Acquiring Person (or the effective date of a registration statement relating to
the securities purchasable upon exercise of the Rights, if later) and terminate
60 days later (subject to adjustment in the event exercise of the Rights is
enjoined or suspended).

        In the event that the Company is acquired in a merger or other business
combination transaction by, or 50% or more of its consolidated assets or earning
power are sold to, an Acquiring Person, its affiliates or associates or certain
other persons in which such persons have an interest, proper provision will be
made so that each such holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right.

REDEMPTION AND EXCHANGE OF RIGHTS

        At any time prior to the earliest of (i) such time as any person becomes
an Acquiring Person, or (ii) the Final Expiration Date, the Board may redeem the
Rights in whole, but not in part, at a price of $0.001 per Right (the
"Redemption Price"). In general, the redemption of the Rights may be made

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effective at such time on such basis with such conditions as the Board in its
sole discretion may establish. Immediately upon action of the Board ordering any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.

        At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by any person or group of 50% or more of the
outstanding Common Shares, the Board may exchange the Rights (other than Rights
owned by such person or group which will have become void), in whole or in part,
at an exchange ratio of one Common Share, or, under circumstances set forth in
the Rights Agreement, cash, property or other securities of the Company, per
Right (with value equal to such Common Shares).

AMENDMENT OF RIGHTS

        The terms of the Rights generally may be amended by the Board without
the consent of the holders of the Rights, except that from and after the
Distribution Date no such amendment may adversely affect the interests of the
holders of the Rights (excluding the interest of any Acquiring Person).

ADDITIONAL INFORMATION

        A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Current Report on Form 8-K dated May 19,
2003. A copy of the Rights Agreement is available from the Company by writing
to: Dot Hill Systems Corp., 6305 El Camino Real, Carlsbad, California 92009,
Attention: Corporate Secretary. This summary description of the Rights is not
intended to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by reference.

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QuickLinks

Exhibit 10.38

RIGHTS AGREEMENT
EXHIBIT A CERTIFICATE OF DESIGNATION
EXHIBIT B RIGHT CERTIFICATE
EXHIBIT C SUMMARY OF RIGHTS
DOT HILL SYSTEMS CORP. SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES