Exhibit 4.1


 


 


DIGITAL IMPACT, INC.


 


AND


 


COMPUTERSHARE INVESTOR SERVICES LLC


 


 


 


PREFERRED STOCK RIGHTS AGREEMENT


 


Dated as of March 4, 2005


 





















 


TABLE OF CONTENTS


 


	
  Section 1.

  	
  Certain Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Appointment of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Issuance of Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Form of Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Countersignature and Registration

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  Exercise of Rights; Exercise Price;
  Expiration Date of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Cancellation and Destruction of Rights
  Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.

  	
  Reservation and Availability of Preferred
  Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Record Date

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.

  	
  Adjustment of Exercise Price, Number of
  Shares or Number of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Certificate of Adjusted Exercise Price or
  Number of Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Fractional
  Rights and Fractional Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Rights of Action

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Agreement of
  Rights Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Rights
  Certificate Holder Not Deemed a Stockholder

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Concerning
  the Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 19.

  	
  Merger
  or Consolidation or Change of Name of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Duties of Rights
  Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Change of Rights
  Agent

  	
   

  



 


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  Section 22.

  	
  Issuance
  of New Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 23.

  	
  Redemption

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 24.

  	
  Exchange

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 25.

  	
  Notice of Certain
  Events

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 26.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 27.

  	
  Supplements and
  Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 29.

  	
  Determinations
  and Actions by the Board of Directors, etc

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 30.

  	
  Benefits of this
  Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 31.

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 32.

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 33.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 34.

  	
  Descriptive Headings

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Certificate of Designation

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  Form of Rights Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  Summary of Rights

  	
   

  



 


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PREFERRED STOCK RIGHTS AGREEMENT


 


This Preferred Stock Rights Agreement is dated as of March 4, 2005,
between Digital Impact, Inc., a Delaware corporation, (the “Company”), and Computershare
Investor Services LLC (the “Rights Agent”).


 


On March 4, 2005, (the  “Rights Dividend Declaration Date”),
the Board of Directors of the Company authorized and declared a dividend of one
Preferred Share Purchase Right (a “Right”)
for each Common Share (as hereinafter defined) of the Company outstanding as of
the Close of Business (as hereinafter defined) on March 16, 2005 (the “Record Date”), each Right
representing the right to purchase one one-thousandth (0.001) of a share of
Series A Participating Preferred Stock (as such number may be adjusted
pursuant to the provisions of this Agreement), having the rights, preferences
and privileges set forth in the form of Certificate of Designations of Rights,
Preferences and Privileges of Series A Participating Preferred Stock
attached hereto as Exhibit A, upon the terms and subject to the
conditions herein set forth, and further authorized and directed the issuance
of one Right (as such number may be adjusted pursuant to the provisions of this
Agreement) with respect to each Common Share that shall become outstanding
between the Record Date and the earlier of the Distribution Date and the
Expiration Date (as such terms are hereinafter defined), and in certain
circumstances after the Distribution Date.


 


NOW, THEREFORE, in consideration of the promises 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, who or which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 15% or more of the Common Shares then
outstanding, but shall not include the Company, any Subsidiary of the Company
or 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.  Notwithstanding the foregoing, no Person shall be deemed to be an
Acquiring Person 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 of the Company then outstanding; provided, however,
that if a Person shall become the Beneficial Owner of 15% or more of the Common
Shares of the Company then outstanding by reason of share purchases by the
Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company (other than pursuant
to a dividend or distribution paid or made by the Company on the outstanding
Common Shares in Common Shares or pursuant to a split or subdivision of the
outstanding Common Shares), then such Person shall be deemed to be an Acquiring
Person unless upon becoming the Beneficial Owner of such additional Common
Shares of the Company such Person does not beneficially own


 





















 


15% or more of the
Common Shares of the Company then outstanding. 
Notwithstanding the foregoing, if the Company’s Board of Directors 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 (A) such Person
was unaware that it beneficially owned a percentage of the Common Shares that
would otherwise cause such Person to be an “Acquiring Person,” as defined
pursuant to the foregoing provisions of this paragraph (a), or (B) such
Person was aware of the extent of the Common Shares it beneficially owned but
had no actual knowledge of the consequences of such beneficial ownership under
this Agreement) and without any intention of changing or influencing control of
the Company, and if such Person divested or divests as promptly as practicable
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 or to have become an “Acquiring
Person” for any purposes of this Agreement including, without limitation
Section 1(gg) hereof.


 


(b)                                 “Adjustment Fraction” shall have the
meaning set forth in Section 11(a)(i) hereof.


 


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


 


(d)                                 A
Person shall be deemed the “Beneficial Owner”
of and shall be deemed to  “beneficially own” any
securities:


 


(i)                                     which
such Person or any of such Person’s Affiliates or Associates beneficially owns,
directly or indirectly, for purposes of Section 13(d) of the Exchange Act
and Rule 13d-3 thereunder (or any comparable or successor law or
regulation);


 


(ii)                                  which
such Person or any of such Person’s Affiliates or Associates has (A) the
right to acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or understanding
(other than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of securities), or
upon the exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed pursuant to this Section 1(d)(ii)(A) to
be the Beneficial Owner of, or to beneficially own, (1) 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 (2) securities which
a Person or any of such Person’s Affiliates or Associates may be deemed to have
the right to acquire pursuant to any merger or other acquisition agreement
between the Company and such Person (or one or more of its Affiliates or
Associates) if such agreement has been approved by the Board of Directors of
the Company prior to there being an Acquiring Person; 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


 


2





















 


security under
this Section 1(d)(ii)(B) 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 of
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 (or any
Affiliate or Associate thereof) with which such Person or any of such Person’s
Affiliates or Associates has any agreement, arrangement or understanding,
whether or not in writing (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting (except
to the extent contemplated by the proviso to Section 1(d)(ii)(B)) or
disposing of any securities of the Company; provided, however,
that in no case shall an officer or director of the Company be deemed
(x) the Beneficial Owner of any securities beneficially owned by another
officer or director of the Company solely by reason of actions undertaken by
such persons in their capacity as officers or directors of the Company or
(y) the Beneficial Owner of securities held of record by the trustee of
any employee benefit plan of the Company or any Subsidiary of the Company for
the benefit of any employee of the Company or any Subsidiary of the Company,
other than the officer or director, by reason of any influence that such
officer or director may have over the voting of the securities held in the
plan.


 


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


 


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


 


(g)                                 “Common Stock Equivalents” shall
have the meaning set forth in Section 11(a)(iii) hereof.   “Common Shares”
when used with reference to the Company shall mean the shares of Common Stock
of the Company, par value at $0.001 per share. 
Common Shares when used with reference to any Person other than the
Company shall mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, if such other Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such first-mentioned
Person.


 


(h)                                 “Company” shall mean the Company as
defined in the recitals hereto, subject to the terms of
Section 13(a)(iii)(C) hereof.


 


(i)                                     “Current Per Share Market Price” of
any security (a “Security” for purposes of this definition), for all
computations other than those made pursuant to Section 11(a)(iii) hereof,
shall mean the average of the daily closing prices per share of such Security
for the thirty (30) consecutive Trading Days immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the Current Per Share Market Price of any Security on any date


 


3





















 


shall be deemed to
be the average of the daily closing prices per share of such Security for the
ten (10) consecutive Trading Days immediately prior to such date; provided,
however, that in the event that the Current Per Share Market Price of
the Security is determined during a period following the announcement by the
issuer of such Security of (i) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares
or (ii) any subdivision, combination or reclassification of such Security,
and prior to the expiration of the applicable thirty (30) Trading Day or
ten (10) Trading Day period, after the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or reclassification,
then, and in each such case, the Current Per Share Market Price shall be
appropriately adjusted to reflect the current market price per share equivalent
of such Security.  The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Security is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last sale price or, if such last sale price is not reported, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by Nasdaq or such other system then in use, or, if on any such date
the Security is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in the Security selected by the Board of Directors of the Company.  If on any such date no market maker is making
a market in the Security, the fair value of such shares on such date as determined
in good faith by the Board of Directors of the Company shall be used.  If the Preferred Shares are not publicly
traded, the Current Per Share Market Price of the Preferred Shares shall be
conclusively deemed to be (x) the Current Per Share Market Price of the
Common Shares as determined pursuant to this Section 1(j), as
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof, multiplied by (y) 1,000.  If the Security is not publicly held or so
listed or traded, Current Per Share Market Price shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.


 


(j)                                     “Current Value” shall have the
meaning set forth in Section 11(a)(iii) hereof.


 


(k)                                  “Distribution Date” shall mean the
earlier of (i) the Close of Business on the tenth (10th) day
after the Shares Acquisition Date (or, if the tenth (10th) day after
the Shares Acquisition Date occurs before the Record Date, the Close of
Business on the Record Date) or (ii) the Close of Business on the
tenth (10th) Business Day (or such later date as may be
determined by action of the Company’s Board of Directors) after the date that a
tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary
of the Company, or any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan) is first published
or sent


 


4





















 


or given within
the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if, assuming the successful consummation thereof, such Person
would be an Acquiring Person (including, for the avoidance of doubt, any tender
or exchange offer meeting such criteria that has been sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act prior to the date hereof and is continuing, it being understood
that if the Close of Business on the tenth (10th) Business Day after
the date such tender or exchange offer was first sent or given occurs prior to
the effectiveness of this Agreement, the Distribution Date shall be the date
hereof (or such later date as may be determined by action of the Company’s
Board of Directors).


 


(l)                                     “Equivalent Shares” shall mean
Preferred Shares and any other class or series of capital stock of the Company
which is entitled to the same rights, privileges and preferences as the
Preferred Shares.


 


(m)                               “Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended.


 


(n)                                 “Exchange Ratio” shall have the
meaning set forth in Section 24(a) hereof.


 


(o)                                 “Exercise Price” shall have the
meaning set forth in Section 4(a) hereof.


 


(p)                                 “Expiration Date” shall mean the
earliest to occur of: (i) the Close of Business on the Final Expiration
Date, (ii) the Redemption Date, or (iii) the time at which the Board
of Directors orders the exchange of the Rights as provided in Section 24
hereof.


 


(q)                                 “Final Expiration Date” shall mean
March 16, 2015.


 


(r)                                    “Nasdaq”  shall mean The Nasdaq Stock
Market, Inc.


 


(s)                                  “Person” shall mean any individual,
firm, corporation or other entity, and shall include any successor (by merger
or otherwise) of such entity.


 


(t)                                    “Post-Event Transferee” shall have
the meaning set forth in Section 7(e) hereof.


 


(u)                                 “Preferred Shares” shall mean shares
of Series A Participating Preferred Stock, par value $0.001 per share, of
the Company.


 


(v)                                 “Pre-Event Transferee” shall have
the meaning set forth in Section 7(e) hereof.


 


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


 


(x)                                   “Record Date” shall have the meaning
set forth in the recitals at the beginning of this Agreement.


 


5





















 


(y)                                 “Redemption Date” shall have the
meaning set forth in Section 23(a) hereof.


 


(z)                                   “Redemption Price” shall have the
meaning set forth in Section 23(a) hereof.


 


(aa)                            “Rights Agent” shall mean
(i) the Rights Agent as defined in the recitals hereto, (ii) its
successor or replacement as provided in Sections 19 and 21 hereof or
(iii) any additional Person appointed pursuant to Section 2 hereof.


 


(bb)                          “Rights Certificate”  shall mean a
certificate substantially in the form attached hereto as Exhibit B.


 


(cc)                            “Rights Dividend Declaration Date”
shall have the meaning set forth in the recitals at the beginning of this
Agreement.


 


(dd)                          “Section 11(a)(iii) Trigger Date”
shall have the meaning set forth in Section 11(a)(iii) hereof.


 


(ee)                            “Section 13 Event” shall mean
any event described in clause (i), (ii) or (iii) of Section 13(a)
hereof.


 


(ff)                                “Securities Act” shall mean the
Securities Act of 1933, as amended.


 


(gg)                          “Shares Acquisition Date” shall mean
the first date of public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to
Section 13(d) of the Exchange Act) by the Company or an Acquiring Person
that an Acquiring Person has become such; provided that, if such first
date of public announcement is prior to the date hereof and such Acquiring
Person continues to be an Acquiring Person as of the date hereof, the Shares
Acquisition Date shall be the date hereof and provided further that, if
such Person is determined not to have become an Acquiring Person pursuant to
Section 1(a) hereof, then no Shares Acquisition Date shall be deemed to
have occurred by virtue of such event.


 


(hh)                          “Spread” shall have the meaning set
forth in Section 11(a)(iii) hereof.


 


(ii)                                  “Subsidiary” of any Person shall
mean any corporation or other entity of which an amount of voting securities
sufficient to elect a majority of the directors or Persons having similar authority
of such corporation or other entity is beneficially owned, directly or
indirectly, by such Person, or any corporation or other entity otherwise
controlled by such Person.


 


(jj)                                  “Substitution Period” shall have the
meaning set forth in Section 11(a)(iii) hereof.


 


(kk)                            “Summary of Rights”  shall mean a
summary of this Agreement substantially in the form attached hereto as Exhibit C.


 


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(ll)                                  “Total Exercise Price” shall have
the meaning set forth in Section 4(a) hereof.


 


(mm)                      “Trading Day” shall mean a day on
which the principal national securities exchange on which a referenced security
is listed or admitted to trading is open for the transaction of business or, if
a referenced security is not listed or admitted to trading on any national
securities exchange, a Business Day.


 


(nn)                          A
“Triggering Event” shall be deemed
to have occurred upon any Person becoming an Acquiring Person.


 


Section 2.                                            Appointment
of Rights Agent.  The Company hereby appoints the Rights Agent to act
as agent for the Company and the holders of the Rights (who, in accordance with
Section 3 hereof, shall prior to the Distribution Date also be the holders
of the Common Shares) in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. 
The Company may from time to time appoint such co-Rights Agents as it
may deem necessary or desirable, upon ten (10) days’ prior written notice
to the Rights Agent.  The Rights Agent
shall have no duty to supervise, and shall in no event be liable for, the acts
or omissions of any co-Rights Agent.


 


Section 3.                                            Issuance
of Rights Certificates.


 


(a)                                  Until
the Distribution Date, (i) the Rights will be evidenced (subject to the
provisions of Sections 3(b) and 3(c) hereof) by the certificates for
Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates and (ii) the right to receive Rights
Certificates will be transferable only in connection with the transfer of
Common Shares.  Until the earlier of the Distribution Date or the
Expiration Date, the surrender for transfer of certificates for Common Shares
shall also constitute the surrender for transfer of the Rights associated with
the Common Shares represented thereby. 
As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, 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 Rights Certificate evidencing one Right
for each Common Share so held, subject to adjustment as provided herein.  In the event that an adjustment in the number
of Rights per Common Share has been made pursuant to Section 11 hereof,
then at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only
whole numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights (in accordance with Section 14(a) hereof).  As of the Distribution Date, the Rights will
be evidenced solely by such Rights Certificates and may be transferred by the
transfer of the Rights Certificates as permitted hereby, separately and apart
from any transfer of Common Shares, and the holders of such Rights


 


7





















 


Certificates as
listed in the records of the Company or any transfer agent or registrar for the
Rights shall be the record holders thereof.


 


(b)                                 On
the Record Date or as soon as practicable thereafter, the Company will send a
copy of 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’s transfer
agent and registrar.  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 together with the Summary of Rights.


 


(c)                                  Unless
the Board of Directors by resolution adopted at or before the time of the
issuance of any Common Shares after the Record Date but prior to the earlier of
the Distribution Date or the Expiration Date (or, in certain circumstances
provided in Section 22 hereof, after the Distribution Date) specifies to
the contrary, Rights shall be issued in respect of all Common Shares that are
so issued, and Certificates representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:


 


THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN DIGITAL IMPACT, INC.
AND COMPUTERSHARE INVESTOR SERVICES LLC, AS THE RIGHTS AGENT, DATED AS OF MARCH
4, 2005 (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 DIGITAL IMPACT, INC. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN
THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES
AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE COMPANY WILL MAIL TO
THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE
AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. 
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR
ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.


 


With respect to such certificates containing the foregoing legend,
until the earlier of the Distribution Date or the 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.


 


8





















 


(d)                                 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.


 


Section 4.                                            Form
of Rights Certificates.


 


(a)                                  The
Rights Certificates (and the forms of election to purchase Common Shares and of
assignment to be printed on the reverse thereof) shall be substantially in the
form of 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 are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or a national market system, on which the
Rights may from time to time be listed or included, or to conform to
usage.  Subject to the provisions of Section 11 and Section 22
hereof, the Rights Certificates, whenever distributed, shall be dated as of the
Record Date (or in the case of Rights issued with respect to Common Shares
issued by the Company after the Record Date, as of the date of issuance of such
Common Shares) and on their face shall entitle the holders thereof to purchase
such number of one-thousandths (0.001) of a Preferred Share as shall be set
forth therein at the price set forth therein (such exercise price per one
one-thousandth (0.001) of a Preferred Share being hereinafter referred to as
the  “Exercise
Price” and the aggregate Exercise Price of all Preferred Shares
issuable upon exercise of one Right being hereinafter referred to as the  “Total
Exercise Price”), but the number and type of securities
purchasable upon the exercise of each Right and the Exercise Price shall
be subject to adjustment as provided herein.


 


(b)                                 Any
Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by:  (i) an Acquiring Person or any Associate
or Affiliate of an Acquiring Person, (ii) a Post-Event Transferee,
(iii) a Pre-Event Transferee or (iv) any subsequent transferee
receiving transferred Rights from a Post-Event Transferee or a Pre-Event
Transferee, either directly or through one or more intermediate transferees,
and any Rights Certificate issued pursuant to Section 6 or Section 11
hereof upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:


 


THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT).  ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID
IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.


 


9





















 


Section 5.                                            Countersignature
and Registration.


 


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


 


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


 


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


 


(a)                                  Subject
to the provisions of Sections 7(e), 14 and 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 Expiration Date, any Rights Certificate or Rights Certificates
may be transferred, split up, combined or exchanged for another Rights
Certificate or Rights Certificates, entitling the registered holder to purchase
a like number of one-thousandths (0.001) of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets, as the case may be)
as the Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase.  Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Rights Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Rights Certificates to be transferred, split up, combined
or exchanged at the office of the Rights Agent designated for such
purpose.  Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Rights Certificate until the registered
holder shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or


 


10





















 


Associates thereof
as the Company shall reasonably request. 
Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and
24 hereof, countersign and deliver to the person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested.  The Company may require payment from the
registered holder of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.


 


(b)                                 Upon
receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, 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 Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.


 


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


 


(a)                                  Subject
to Sections 7(e), 23(b) and 24(b) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after the
Distribution Date and prior to the Close of Business on the Expiration Date by
surrender of the Rights 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
Exercise Price for each one-thousandth (0.001) of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets as the
case may be) as to which the Rights are exercised.


 


(b)                                 The
Exercise Price for each one-thousandth (0.001) of a Preferred Share issuable
pursuant to the exercise of a Right shall initially be $10.00, 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 Rights Certificate representing exercisable Rights, with the form
of election to purchase duly executed, accompanied by payment of the Exercise
Price for the number of one-thousandths (0.001) of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets as the
case may be) to be purchased and an amount equal to any applicable transfer tax
required to be paid by the holder of such Rights Certificate in accordance with
Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k)
hereof, thereupon promptly (i) (A) requisition from any transfer
agent of the Preferred Shares (or make available, if the Rights Agent is the
transfer agent for the Preferred Shares) a certificate or certificates for the
number of one-thousandths (0.001) of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be) to
be purchased and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests or (B) if the Company shall have elected
to deposit


 


11





















 


the total number
of one-thousandths (0.001) of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets as the case may be) issuable upon
exercise of the Rights hereunder with a depository agent, requisition from the
depository agent depository receipts representing such number of
one-thousandths (0.001) of a Preferred Share (or, following a Triggering Event,
other securities, cash or other assets as the case may be) as are to be
purchased (in which case certificates for the Preferred Shares (or, following a
Triggering Event, other securities, cash or other assets as the case may be)
represented by such receipts shall be deposited by the transfer agent with the
depository agent) and the Company hereby directs the depository 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
depository receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder and (iv) when appropriate, after
receipt thereof, deliver such cash to or upon the order of the registered
holder of such Rights Certificate.  The payment of the Exercise Price (as
such amount may be reduced (including to zero) pursuant to Section 11(a)(iii)
hereof) and an amount equal to any applicable transfer tax required to be paid
by the holder of such Rights Certificate in accordance with Section 9(e)
hereof, may be made in cash or by certified bank check, cashier’s check or bank
draft payable to the order of the Company. 
In the event that the Company is obligated to issue securities of the
Company other than Preferred Shares, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.


 


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


 


(e)                                  Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Triggering Event, any Rights beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such (a  “Post-Event
Transferee”), (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person 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 Company’s Board of Directors has determined is part of a
plan, arrangement or under­standing which has as a primary purpose or effect
the avoidance of this Section 7(e) (a  “Pre-Event Transferee”) or
(iv) any subsequent transferee receiving transferred Rights from a
Post-Event Transferee or a Pre-Event Transferee, either directly or through one
or more intermediate transferees, 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,


 


12





















 


whether under any
provision of this Agreement or otherwise.  The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or to any other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or any of such
Acquiring Person’s Affiliates, Associates or transferees hereunder.


 


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


 


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


 


Section 9.                                            Reservation
and Availability of Preferred Shares.


 


(a)                                  The
Company covenants and agrees that it will use its best efforts to cause to be
reserved and kept available out of  its
authorized and unissued Preferred Shares not reserved for another purpose (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued Common Shares and/or other securities), the number of Preferred Shares
(and, following the occurrence of the Triggering Event, Common Shares and/or
other securities) that will be sufficient to permit the exercise in full of all
outstanding Rights.


 


(b)                                 If
the Company shall hereafter list any of its Preferred Shares on a national
securities exchange, then so long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or other securities)
issuable and deliverable upon exercise of the Rights may be listed on such
exchange, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable (but only to the extent that it is
reasonably likely that the Rights will be exercised), all shares reserved for
such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.


 


13





















 


(c)                                  The
Company shall use its best efforts to (i) file, as soon as practicable
following the earliest date after the first occurrence of a Triggering Event in
which the consideration to be delivered by the Company upon exercise of the
Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as
the case may be, a registration statement under the Securities Act with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities and (B) the date of
expiration of the Rights.  The Company may temporarily suspend, for a
period not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability
of the Rights in order to prepare and file such registration statement
and permit it to become effective. 
Upon any such suspension, the Company shall issue a public announcement
stating, and notify the Rights Agent, that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement and notification
to the Rights Agent at such time as the suspension is no longer in effect.  The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or “blue sky”
laws of the various states in connection with the exercisability of the
Rights.  Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction, unless the requisite qualification in such jurisdiction shall
have been obtained, or an exemption therefrom shall be available, and until a
registration statement has been declared and remains effective.


 


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


 


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


 


14





















 


Section 10.                                      Record
Date.  Each Person in whose name any certificate for a number of
one-thousandths (0.001) of a Preferred Share (or other securities of the
Company) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of Preferred Shares (or other
securities of the Company) represented thereby on, and such certificate shall
be dated, the date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of the Total Exercise Price with respect to which
the Rights have been exercised (and any applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon
which the 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 transfer books of the
Company are open.  Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate shall not
be entitled to any rights of a holder of Preferred Shares (or other securities
of the Company) 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 Exercise Price, Number of Shares or Number of Rights.  The Exercise
Price, the number and kind of shares or other property covered by each Right
and the number of Rights outstanding are subject to adjustment from time to
time as provided in this Section 11.


 


(a)                                  (i)                                     Anything
in this Agreement to the contrary notwithstanding, in the event that 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 (by reverse stock split or otherwise) 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), then, in each such event,
except as otherwise provided in this Section 11 and Section 7(e)
hereof: (1) the Exercise Price in effect at the time of the record date
for such dividend or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that the Exercise Price thereafter shall
equal the result obtained by dividing the Exercise Price in effect immediately
prior to such time by a fraction (the  “Adjustment Fraction”), the
numerator of which shall be the total number of Preferred Shares (or shares of
capital stock issued in such reclassification of the Preferred Shares)
outstanding immediately following such time and the denominator of which shall
be the total number of Preferred Shares outstanding immediately prior to such
time; 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 such
Right; and (2) the number of one-thousandths (0.001) of a Preferred Share
(or share of such other capital stock) issuable upon the exercise of each Right
shall equal the number of one-thousandths (0.001) of a Preferred Share (or
share of such other capital stock) as was issuable upon exercise of a Right
immediately prior to the occurrence of the event described in clauses (A)-(D)
of this Section 11(a)(i), multiplied by the Adjustment Fraction; provided,
however, that, no such adjustment shall be made pursuant to this Section 11(a)(i)
to the extent that there shall have simultaneously occurred an event


 


15





















 


described in
clause (A), (B), (C) or (D) of Section 11(n) with a proportionate
adjustment being made thereunder.  Each Common Share that shall become
outstanding after an adjustment has been made pursuant to this
Section 11(a)(i) shall have associated with it the number of Rights,
exercisable at the Exercise Price and for the number of one-thousandths (0.001)
of a Preferred Share (or shares of such other capital stock) as one Common
Share has associated with it immediately following the adjustment made pursuant
to this Section 11(a)(i).


 


(ii)                                  Subject
to Section 24 of this Agreement, in the event that a Triggering Event
shall have occurred, then promptly following such Triggering Event each holder
of a Right, except as provided in Section 7(e) hereof, shall thereafter
have the right to receive for each Right, upon exercise thereof in accordance
with the terms of this Agreement and payment of the Exercise Price in effect
immediately prior to the occurrence of the Triggering Event, in lieu of a
number of one-thousandths (0.001) of a Preferred Share, such number of Common
Shares of the Company as shall equal the quotient obtained by dividing
(A) the product obtained by multiplying (1) the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event by
(2) the number of one-thousandths (0.001) of a Preferred Share for which a
Right was exercisable (or would have been exercisable if the Distribution Date
had occurred) immediately prior to the first occurrence of a Triggering Event,
by (B) fifty percent (50%) of the Current Per Share Market Price for
Common Shares on the date of occurrence of the Triggering Event; provided,
however, that the Exercise Price and the number of Common Shares of the
Company so receivable upon exercise of a Right shall be subject to further
adjustment as appropriate in accordance with Section 11(e) hereof to
reflect any events occurring in respect of the Common Shares of the Company
after the occurrence of the Triggering Event.


 


(iii)                               In
lieu of issuing Common Shares in accordance with Section 11(a)(ii) hereof,
the Company may, if the Company’s Board of Directors determines that such
action is necessary or appropriate and not contrary to the interest of holders
of Rights and, in the event that the number of Common Shares which are
authorized by the Company’s Certificate of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights, or if any
necessary regulatory approval for such issuance has not been obtained by the
Company, the Company shall: 
(A) determine the excess of (1) the value of the Common Shares
issuable upon the exercise of a Right (the  “Current Value”) over
(2) the Exercise Price (such excess, the  “Spread”) and (B) with
respect to each Right, make adequate provision to substitute for such Common
Shares, upon exercise of the Rights, (1) cash, (2) a reduction in the
Exercise Price, (3) other equity securities of the Company (including,
without limitation, shares or units of shares of any series of preferred stock
which the Company’s Board of Directors has deemed to have the same value as
Common Shares (such shares or units of shares of preferred stock are herein
called  “Common
Stock Equivalents”)), except to the extent that the Company has
not obtained any necessary stockholder or regulatory approval for such issuance,
(4) debt securities of the Company, except to the extent that the Company
has not obtained any necessary stockholder or regulatory approval for such
issuance, (5) other assets or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, where such aggregate
value has been determined by the Company’s Board of Directors based upon the
advice of


 


16





















 


a nationally
recognized investment banking firm selected by the Company’s Board of
Directors; provided, however, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the first occurrence of
a Triggering Event and (y) the date on which the Company’s right of
redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the  “Section 11(a)(iii) Trigger Date”),
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Exercise Price, Common Shares
(to the extent available), except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance,
and then, if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread.  If the Company’s
Board of Directors shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights or that any necessary regulatory approval for
such issuance will be obtained, the thirty (30) day period set forth above may
be extended to the extent necessary, but not more than ninety (90) days after
the Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares or take
action to obtain such regulatory approval (such period, as it may be extended,
the  “Substitution
Period”).  To
the extent that the Company determines that some action need be taken
pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all outstanding Rights and (y) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional
shares, to take any action to obtain any required regulatory approval and/or to
decide the appropriate form of distribution to be made pursuant to such first
sentence and to determine the value thereof. 
In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is
no longer in effect.  For purposes of
this Section 11(a)(iii), the value of the Common Shares shall be the
Current Per Share Market Price of the Common Shares on the Section 11(a)(ii)
Trigger Date and the value of any Common Stock Equivalent shall be deemed to
have the same value as the Common Shares on such date.


 


(b)                                 In
case the Company shall, at any time after the date of this Agreement, fix a
record date for the issuance of rights, options or warrants to all holders of
Preferred Shares entitling such holders (for a period expiring within
forty-five (45) calendar days after such record date) to subscribe for or
purchase Preferred Shares or Equivalent Shares or securities convertible into
Preferred Shares or Equivalent Shares at a price per share (or having a
conversion price per share, if a security convertible into Preferred Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the
Preferred Shares or Equivalent Shares on such record date, then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record
date, plus the number of Preferred Shares or Equivalent Shares, as the case may
be, which the aggregate offering price of the total number of Preferred Shares
or Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be offered
or issued) would purchase at such current market price, and the denominator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such


 


17





















 


record date, plus
the number of additional Preferred Shares or Equivalent Shares, as the case may
be, 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 Company’s Board of Directors, whose
determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the
Rights.  Preferred Shares and Equivalent
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 Exercise Price shall be adjusted to
be the Exercise Price which would then be in effect if such record date had not
been fixed.


 


(c)                                  In
case the Company shall, at any time after the date of this Agreement, fix a
record date for the making of a distribution to all holders of the Preferred
Shares or of any class or series of Equivalent 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, if any,
or a dividend payable in Preferred Shares) or subscription rights, options or
warrants (excluding those referred to in Section 11(b)), then, in each
such case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the Current Per
Share Market Price of a Preferred Share or an Equivalent Share on such record date,
less the fair market value per Preferred Share or Equivalent Share (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a
Preferred Share or Equivalent Share, as the case may be, and the denominator of
which shall be such Current Per Share Market Price of a Preferred Share or
Equivalent Share on such record date; 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.  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 Exercise Price shall be adjusted to be the
Exercise Price which would have been in effect if such record date had not been
fixed.


 


(d)                                 Anything
herein to the contrary notwithstanding, no adjustment in the Exercise Price
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) of the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.  All calculations
under this Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth (0.0001) of a Common Share or other share or one
hundred-thousandth (0.00001) of a Preferred Share, as the case may be.  Notwithstanding the first


 


18





















 


sentence of this
Section 11(d), any adjustment required by this Section 11 shall be
made no later than the earlier of (i) three (3) years from the date
of the transaction which requires such adjustment or (ii) the Expiration
Date.


 


(e)                                  If
as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Shares, thereafter the number of such other shares so receivable upon exercise
of any Right and, if required, the Exercise Price thereof, shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and
11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Shares shall apply on like terms to any such other shares.


 


(f)                                    All
Rights originally issued by the Company subsequent to any adjustment made to
the Exercise Price hereunder shall evidence the right to purchase, at the
adjusted Exercise Price, the number of one-thousandths (0.001) of a Preferred
Share purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.


 


(g)                                 Unless
the Company shall have exercised its election as provided in
Section 11(h), upon each adjustment of the Exercise Price as a result of
the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of Preferred
Shares (calculated to the nearest one hundred-thousandth (0.00001) of a share)
obtained by (i) multiplying (x) the number of Preferred Shares
covered by a Right immediately prior to this adjustment, by (y) the
Exercise Price in effect immediately prior to such adjustment of the Exercise
Price, and (ii) dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment of the Exercise Price.


 


(h)                                 The
Company may elect on or after the date of any adjustment of the Exercise Price
as a result of the calculations made in Section 11(b) or (c) to adjust the
number of Rights, in substitution for any adjustment in the number of Preferred
Shares 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-thousandths (0.001) 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 hundred-thousandth (0.00001)) obtained by dividing the
Exercise Price in effect immediately prior to adjustment of the Exercise Price
by the Exercise Price in effect immediately after adjustment of the Exercise
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 Exercise Price is adjusted or any day thereafter,
but, if any Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement.  If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(h),
the Company shall, as


 


19





















 


promptly as
practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment.  Rights
Certificates so to be distributed shall be issued, executed and countersigned
in the manner provided for herein (and may bear, at the option of the Company,
the adjusted Exercise Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in the public
announcement.


 


(i)                                     Irrespective
of any adjustment or change in the Exercise Price or the number of Preferred
Shares issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Exercise Price
per one one-thousandth (0.001) of a Preferred Share and the number of
one-thousandths (0.001) of a Preferred Share which were expressed in the
initial Rights Certificates issued hereunder.


 


(j)                                     Before
taking any action that would cause an adjustment reducing the Exercise Price
below the par or stated value, if any, of the number of one-thousandths (0.001)
of a Preferred Share 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 as fully paid
and nonassessable shares such number of one-thousandths (0.001) of a Preferred
Share at such adjusted Exercise Price.


 


(k)                                  In
any case in which this Section 11 shall require that an adjustment in the
Exercise 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 number of
one-thousandths (0.001) of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths (0.001) of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill
or other appropriate instrument evidencing such holder’s right to receive such
additional shares (fractional or otherwise) upon the occurrence of the event
requiring such adjustment.


 


(l)                                     Anything
in this Section 11 to the contrary notwithstanding, prior to the
Distribution Date, the Company shall be entitled to make such reductions in the
Exercise 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 (i) consolidation or
subdivision of the Preferred or Common Shares, (ii) issuance wholly for
cash of any Preferred or Common Shares at less than the current market price,
(iii) issuance wholly for cash of Preferred or Common Shares or securities
which by their terms are convertible into or exchangeable for Preferred or
Common Shares, (iv) stock dividends or (v) issuance of rights,
options or warrants referred to in this


 


20





















 


Section 11,
hereafter made by the Company to holders of its Preferred or Common Shares
shall not be taxable to such stockholders.


 


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


 


(n)                                 In
the event that the Company shall at any time after the date of this Agreement
(A) declare a dividend on the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares (by reverse stock split or otherwise) into a smaller
number of Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such event, except as
otherwise provided in this Section 11(a) and Section 7(e) hereof:
(1) each Common Share (or shares of capital stock issued in such
reclassification of the Common Shares) outstanding immediately following such
time shall have associated with it the number of Rights as were associated with
one Common Share immediately prior to the occurrence of the event described in
clauses (A)-(D) above; (2) the Exercise Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that the Exercise Price thereafter
shall equal the result obtained by multiplying the Exercise Price in effect
immediately prior to such time by a fraction, the numerator of which shall be
the total number of Common Shares outstanding immediately prior to the event
described in clauses (A)-(D) above, and the denominator of which shall be the
total number of Common Shares outstanding immediately after such event; 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 such Right; and
(3) the number of one-thousandths (0.001) of a Preferred Share (or shares
of such other capital stock) issuable upon the exercise of each Right
outstanding after such event shall equal the number of one-thousandths (0.001)
of a Preferred Share (or shares of such other capital stock) as were issuable
with respect to one Right immediately prior to such event.  Each Common
Share that shall become outstanding after an adjustment has been made pursuant
to this Section 11(n) shall have associated with it the number of Rights,
exercisable at the Exercise Price and for the number of one-thousandths (0.001)
of a Preferred Share (or shares of such other capital stock) as one Common
Share has associated with it immediately following the adjustment made pursuant
to this Section 11(n).  If an event
occurs which would require an adjustment under both this Section 11(n) and
Section 11(a)(ii) hereof, the adjustment provided for in this
Section 11(n) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.


 


Section 12.                                      Certificate
of Adjusted Exercise 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 Preferred Shares


 


21





















 


a copy of such
certificate and (c) mail a brief summary thereof to each holder of a
Rights Certificate in accordance with Section 26 hereof.  Notwithstanding the foregoing sentence, the
failure of the Company to make such certification or give such notice shall not
affect the validity of such adjustment or the force or effect of the
requirement for such adjustment.  The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment contained therein and shall not be deemed to have knowledge of such
adjustment unless and until it shall have received such certificate.


 


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


 


(a)                                  In
the event that, following a Triggering Event, directly or indirectly:


 


(i)                                     the
Company shall consolidate with, or merge with and into, any other Person (other
than a wholly-owned Subsidiary of the Company in a transaction the principal
purpose of which is to change the state of incorporation of the Company and
which complies with Section 11(m) hereof);


 


(ii)                                  any
Person shall consolidate with the Company, or merge with and into the Company
and the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such merger, all or part of the
Common Shares shall be changed into or exchanged for stock or other securities
of any other person (or the Company); or


 


(iii)                               the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one or more transactions, assets or
earning power aggregating fifty percent (50%) or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more of its wholly
owned Subsidiaries in one or more transactions, each of which individually (and
together) complies with Section 11(m) hereof),


 


then, concurrent with and in each such case,


 


(A)                              each
holder of a Right (except as provided in Section 7(e) hereof) shall
thereafter have the right to receive, upon the exercise thereof at a price
equal to the Total Exercise Price applicable immediately prior to the
occurrence of the Section 13 Event in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of the Principal Party (as
hereinafter defined), free of any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by dividing
such Total Exercise Price by an amount equal to fifty percent (50%) of the
Current Per Share Market Price of the Common Shares of such Principal Party on
the date of consummation of such Section 13 Event, provided, however,
that the Exercise Price and the number of Common Shares of such Principal Party
so receivable upon exercise of a Right shall be subject to further adjustment
as appropriate in accordance with Section 11(e) hereof;


 


22





















 


(B)                                such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement;


 


(C)                                the
term “Company” shall thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a
Section 13 Event;


 


(D)                               such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to ensure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise
of the Rights; and


 


(E)                                 upon
the subsequent occurrence of any consolidation, merger, sale or transfer of
assets or other extraordinary transaction in respect of such Principal Party,
each holder of a Right shall thereupon be entitled to receive, upon exercise of
a Right and payment of the Total Exercise Price as provided in this
Section 13(a), such cash, shares, rights, warrants and other property
which such holder would have been entitled to receive had such holder, at the
time of such transaction, owned the Common Shares of the Principal Party
receivable upon the exercise of such Right pursuant to this Section 13(a),
and such Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.


 


(F)                                 For
purposes hereof, the “earning power” of the Company and its Subsidiaries shall
be determined in good faith by the Company’s Board of Directors on the basis of
the operating income of each business operated by the Company and its
Subsidiaries during the three fiscal years preceding the date of such
determination (or, in the case of any business not operated by the Company or
any Subsidiary during three full fiscal years preceding such date, during the
period such business was operated by the Company or any Subsidiary).


 


(b)                                 For
purposes of this Agreement, the term  “Principal Party” shall mean:


 


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


 


23





















 


(ii)                                  in
the case of any transaction described in clause (iii) of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if more than one Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred and each such portion would, were it not for the other
equal portions, constitute the greatest portion of the assets or earning power
so transferred, or if the Person receiving the greatest portion of the assets
or earning power cannot be determined, whichever of such Persons is the issuer
of Common Shares having the greatest aggregate market value of shares
outstanding; provided that in any such case described in the foregoing
clause (b)(i) or (b)(ii), if the Common Shares of such Person are not at such
time or have not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, then (1) if such Person is a
direct or indirect Subsidiary of another Person the Common Shares of which are
and have been so registered, the term “Principal Party” shall refer to such
other Person, or (2) if such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of which are and have
been so registered, the term “Principal Party” shall refer to whichever of such
Persons is the issuer of Common Shares having the greatest aggregate market
value of shares outstanding, or (3) if such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly by the same Person, the rules set forth in
clauses (1) and (2) above shall apply to each of the owners having an interest
in the venture as if the Person owned by the joint venture was a Subsidiary of
both or all of such joint venturers, and the Principal Party in each such case
shall bear the obligations set forth in this Section 13 in the same ratio
as its interest in such Person bears to the total of such interests.


 


(c)                                  The
Company shall not consummate any Section 13 Event 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 such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance
with Sections 13(a) and 13(b) hereof, that all rights of first refusal or
preemptive rights in respect of the issuance of Common Shares of such Principal
Party upon exercise of outstanding Rights have been waived, that there are no
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such
Principal Party under this Agreement, and further providing that, as soon as
practicable after the date of such Section 13 Event, such Principal Party
will:


 


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


 


24





















 


(ii)                                  use
its best efforts to list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on a national securities
exchange or to meet the eligibility requirements for quotation on Nasdaq and
list (or continue the listing of) the Rights and the securities purchasable
upon exercise of the Rights on Nasdaq; and


 


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


 


In the event
that at any time after the occurrence of a Triggering Event some or all of the
Rights shall not have been exercised at the time of a transaction described in
this Section 13, the Rights which have not theretofore been exercised
shall thereafter be exercisable in the manner described in Section 13(a)
(without taking into account any prior adjustment required by
Section 11(a)(ii)).


 


(d)                                 In
case the “Principal Party” for purposes of Section 13(b) hereof has
provision in any of its authorized securities or in its certificate of
incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party
to issue (other than to holders of Rights pursuant to Section 13 hereof),
in connection with, or as a consequence of, the consummation of a
Section 13 Event, Common Shares or Equivalent Shares of such Principal
Party at less than the then Current Per Share Market Price thereof or
securities exercisable for, or convertible into, Common Shares or Equivalent
Shares of such Principal Party at less than such then Current Per Share Market
Price, or (ii) providing for any special payment, tax or similar provision
in connection with the issuance of the Common Shares of such Principal Party
pursuant to the provisions of Section 13 hereof, then, in such event, the
Company hereby agrees with each holder of Rights that it shall not consummate
any such transaction unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing that the provision in question of such Principal Party shall have
been canceled, waived or amended, or that the authorized securities shall be
redeemed, so that the applicable provision will have no effect in connection
with or as a consequence of, the consummation of the proposed transaction.


 


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


 


25





















 


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


 


Section
14.                                      Fractional Rights and Fractional Shares.


 


(a)                                  The
Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights.  In lieu of such fractional Rights, there
shall be paid to the registered holders of the Rights Certificates with regard
to which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Right.  For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable, as determined pursuant to
the second sentence of Section 1(j) hereof.


 


(b)                                 The
Company shall not be required to issue fractions of Preferred Shares (other
than fractions that are integral multiples of one one-thousandth (0.001) of a
Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions that are
integral multiples of one one-thousandth (0.001) of a Preferred Share).  Interests in fractions of Preferred Shares in
integral multiples of one one-thousandth (0.001) of a Preferred Share may, at
the election of the Company, be evidenced by depository receipts, pursuant to
an appropriate agreement between the Company and a depository selected by it; provided,
that such agreement shall provide that the holders of such depository receipts
shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depository receipts.  In lieu of
fractional Preferred Shares that are not integral multiples of one
one-thousandth (0.001) of a Preferred Share, the Company shall pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a Preferred Share.  For
purposes of this Section 14(b), the current market value of a Preferred
Share shall be (x) one thousand multiplied by (y) the closing price
of a Common Share (as determined pursuant to the second sentence of
Section 1(j) hereof) for the Trading Day immediately prior to the date of
such exercise.


 


(c)                                  The
Company shall not be required to issue fractions of Common Shares or to distribute
certificates which evidence fractional Common Shares upon the exercise or
exchange of Rights.  In lieu of such
fractional Common Shares, the Company shall pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of a
Common Share.  For purposes of this
Section 14(c), the current market value of a Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 1(j) hereof) for the Trading Day immediately prior to the date
of such exercise.


 


26





















 


(d)                                 The
holder of a Right by the acceptance of the Right expressly waives his or her
right to receive any fractional Rights or any fractional shares (other than
fractions that are integral multiples of one one-thousandth (0.001) of a
Preferred Share) upon exercise of a Right.


 


Section 15.                                      Rights
of Action.  All rights of action in respect of this Agreement,
excepting the rights of action given to the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered holders
of the Common Shares); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of the Common Shares), may, in his or her own behalf and
for his or her 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 or her right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement.  Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this Agreement.


 


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


 


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


 


(b)                                 after
the Distribution Date, the Rights Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the principal office or
offices of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed; and


 


(c)                                  subject
to Sections 6(a) and 7(f) hereof, the Company and the Rights Agent may
deem and treat the person in whose name the Rights 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 Rights
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.                                      Rights Certificate Holder Not Deemed a Stockholder. 
No holder, as such, of any Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose to be 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 Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any


 


27





















 


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 specifically provided in Section 25
hereof), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof.


 


Section
18.                                      Concerning the Rights Agent.


 


(a)                                  The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and 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 gross 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.  In no event
will the Rights Agent be liable for special, indirect, incidental or
consequential loss or damage of any kind whatsoever, even if the Rights Agent
has been advised of the possibility of such loss or damage.


 


(b)                                 The
Rights Agent shall be protected and shall incur no liability for, or in respect
of any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Rights 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 reasonably believed by it to be genuine and to be signed,
executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.


 


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


 


(a)                                  Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the 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, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof.  In case at the time such successor Rights Agent shall succeed to
the agency created by this Agreement, any of the Rights Certificates shall have
been countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may


 


28





















 


countersign such Rights Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.


 


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


 


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


 


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


 


(b)                                 Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the determination of
Current Per Share Market Price) be proved or established by the Company prior
to taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by a certificate signed by any one of
the Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this Agreement in reliance
upon such certificate.


 


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


 


(d)                                 The
Rights Agent shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the Rights Certificates
(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 


 


29





















 


the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall
it be responsible for any change in the exercisability of the Rights 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, 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 Rights Certificates
after receipt by the Rights Agent of a certificate furnished pursuant to
Section 12 describing such change or adjustment); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the authorization
or reservation of any Preferred Shares to be issued pursuant to this Agreement
or any Rights 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, any Vice President,
the Chief Financial Officer, the Secretary or any Assistant Secretary of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered by
it in good faith in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions.  Any application by
the Rights Agent for written instructions from the Company may, at the option
of the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Rights Agreement and the date on and/or
after which such action shall be taken or such omission shall be effective.  The Rights Agent shall not be liable for any
action taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date on which any officer of the Company actually receives such application,
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of
an omission), the Rights Agent shall have received written instructions in
response to such application specifying the action to be taken or omitted.


 


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


 


30





















 


(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 Rights Certificate surrendered to the Rights Agent for
exercise or transfer, the certificate attached to the form of assignment or
form of election to purchase, as the case may be, has either not been completed
or indicates an affirmative response to clause 1 and/or 2 thereof, the
Rights Agent shall not take any further action with respect to such requested
exercise or transfer without first consulting with the Company.


 


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 thirty (30) days’ notice in
writing mailed to the Company and to each transfer agent of the Preferred
Shares and the Common Shares by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail.  The Company may remove the Rights Agent or
any successor Rights Agent upon thirty (30) days’ notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Preferred Shares and the Common Shares by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail.  If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his or her Rights
Certificate for inspection by the Company), then the registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent.  After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Preferred Shares and
the Common Shares, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. 
Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the 


 


31





















 


legality or validity of the resignation or removal of
the Rights Agent or the appointment of the successor Rights Agent, as the case
may be.


 


Section
22.                                      Issuance of New Rights Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Exercise Price and the number or kind
or class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance
or sale of Common Shares following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of other securities of the Company outstanding at the
date hereof or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company and (b) may, in any other case, if
deemed necessary or appropriate by the Board of Directors of the Company, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no
such Rights Certificate shall be issued and this sentence shall be null and
void ab initio if, and to the extent that, such issuance or this
sentence would create a significant risk of or result in material adverse tax
consequences to the Company or the Person to whom such Rights Certificate would
be issued or would create a significant risk of or result in such options’ or
employee plans’ or arrangements’ failing to qualify for otherwise available
special tax treatment and (ii) no such Rights Certificate shall be issued
if, and to the extent that, appropriate adjustment shall otherwise have been
made in lieu of the issuance thereof.


 


Section 23.                                      Redemption.


 


(a)                                  The
Company may, at its option and with the approval of the Board of Directors, at
any time prior to the Close of Business on the earlier of (i)  the Shares Acquisition
Date and (ii) the Final Expiration Date, redeem all but not less than all
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 herein
referred to as the  “Redemption
Price”) and the Company may, at its option, pay the Redemption
Price either in Common Shares (based on the Current Per Share Market Price
thereof at the time of redemption) or cash. 
Such redemption of the Rights by the Company may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish.  The
date on which the Board of Directors elects to make the redemption effective
shall be referred to as the “Redemption Date.”


 


(b)                                 Immediately
upon the action of the Board of Directors of the Company ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent, and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price.  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
ten (10) days after the action of the Board of Directors ordering


 


32





















 


the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares.  Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.  Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made.  Neither
the Company nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof,
and other than in connection with the purchase of Common Shares prior to the
Distribution Date.


 


Section 24.                                      Exchange.


 


(a)                                  Subject
to applicable laws, rules and regulations, and subject to subsection 24(c)
below, the Company may, at its option, by action of the Board of Directors, at
any time after the occurrence of a Triggering Event, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 7(e) hereof)
for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the  “Exchange Ratio”). 
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.


 


(b)                                 Immediately
upon the action of the Board of Directors ordering the exchange of any Rights
pursuant to subsection 24(a) of this Section 24 and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio.  The Company shall give
public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange.  The Company shall mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent.  Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.  Each such notice of exchange
will state the method by which the exchange of the Common Shares for Rights
will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged.  Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to the provisions of
Section 7(e) hereof) held by each holder of Rights.


 


(c)                                  In
the event that there shall not be sufficient Common Shares issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in 


 


33





















 


accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right
(i) pay cash in an amount equal to the Current Value (as hereinafter
defined), in lieu of issuing Common Shares in exchange therefor, or (ii) issue
debt or equity securities or a combination thereof, having a value equal to the
Current Value, in lieu of issuing Common Shares in exchange for each such
Right, where the value of such securities shall be determined by a nationally
recognized investment banking firm selected by majority vote of the Board of
Directors, or (iii) deliver any combination of cash, property, Common
Shares and/or other securities having a value equal to the Current Value in
exchange for each Right.  For purposes of this Section 24(c) only,
the Current Value shall mean the product of the Current Per Share Market Price
of Common Shares on the date of the occurrence of the event described above in
subsection (a), multiplied by the number of Common Shares for which the Right otherwise
would be exchangeable if there were sufficient shares available.  To the extent that the Company determines
that some action need be taken pursuant to clauses (i), (ii) or (iii) of
this Section 24(c), the Board of Directors may temporarily suspend the exercisability
of the Rights for a period of up to sixty (60) days following the date on which
the event described in Section 24(a) shall have occurred, in order to seek
any authorization of additional Common Shares and/or to decide the appropriate
form of distribution to be made pursuant to the above provision and to
determine the value thereof.  In the
event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended.


 


(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, there shall be paid to the registered holders
of the Rights 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 (as determined pursuant to the
second sentence of Section 1(j) hereof).


 


(e)                                  The
Company may, at its option, by majority vote of the Board of Directors, at any
time before any Person has become an Acquiring Person, exchange all or part of
the then outstanding Rights for rights of substantially equivalent value, as
determined reasonably and with good faith by the Board of Directors based upon
the advice of one or more nationally recognized investment banking firms.


 


(f)                                    Immediately
upon the action of the Board of Directors ordering the exchange of any Rights
pursuant to subsection 24(e) of this Section 24 and without any further
action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of rights in exchange therefor as has been determined by
the Board of Directors in accordance with subsection 24(e) above. 
The Company shall give public notice of any such exchange; provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange.  The Company
shall mail a notice of any such exchange to all of the holders of such Rights
at their last addresses as they appear


 


34





















 


upon the registry books of the transfer agent for the
Common Shares of the Company.  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
Rights will be effected.


 


Section
25.                                      Notice of Certain Events.


 


(a)                                  In
case the Company shall propose to effect or permit to occur any Triggering
Event or Section 13 Event, the Company shall give notice thereof to each
holder of Rights in accordance with Section 26 hereof at least twenty (20)
days prior to occurrence of such Triggering Event or such Section 13
Event.


 


(b)                                 In
case any Triggering Event or Section 13 Event shall occur, then, in any
such case, the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Sections 11(a)(ii)
and 13 hereof.


 


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 Rights 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:


 


Digital
Impact, Inc.


177 Bovet
Road, Suite 200


San
Mateo, California  94402


Attention:                                         General
Counsel


 


with a
copy to:


 


Wilson
Sonsini Goodrich & Rosati


Professional
Corporation


650 Page
Mill Road


Palo
Alto, California  94304-1050


Attention:                           Selim Day


David J.
Berger


 


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 Rights 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:


 


Computershare
Investor Services LLC


2 North
LaSalle Street


Chicago,
Illinois  60602


Attention:                           Client Services Manager


 


35





















 


Notices or demands
authorized by this Agreement to be given or made by the Company or the Rights
Agent to the holder of any Rights Certificate 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 occurrence of a Distribution Date, the Company may supplement or
amend this Agreement in any respect without the approval of any holders of
Rights and the Rights Agent shall, if the Company so directs, execute such
supplement or amendment.  From and after
the occurrence of a Distribution Date, the Company and the Rights Agent may
from time to time supplement or amend this Agreement without the approval of
any holders of Rights 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, (iii) shorten
or lengthen any time period hereunder or (iv) to change or supplement the
provisions hereunder in any manner that the Company may deem necessary or
desirable and that shall not adversely affect the interests of the holders of
Rights (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a
time period relating to when the Rights may be redeemed at such time as the
Rights are not then redeemable or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person).  Upon the delivery of a certificate from an
appropriate officer of the Company that 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.  Prior to the Distribution Date, the interests
of the holders of Rights shall be deemed coincident with the interests of the
holders of Common Shares.


 


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


 


Section
29.                                      Determinations and Actions by the Board of
Directors, etc.  For all purposes of this Agreement, any
calculation of the number of Common Shares outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding Common Shares of 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.  The Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board, or the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power (i) to
interpret the provisions of this Agreement and (ii) to 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 


 


36





















 


omissions with respect to the foregoing) which are
done or made by the Board in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights
Certificates and all other parties and (y) with respect to claims
specifically arising from the Agreement, not subject the Board to any liability
to the holders of the Rights.


 


Section
30.                                      Benefits of this Agreement. 
Nothing in this Agreement shall be construed to give to any Person other than
the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Shares) any legal
or equitable right, remedy or claim pursuant to this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, 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;
provided, however, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant or restriction
is held by such court or authority to be invalid, void or unenforceable and the
Board of Directors of the Company determines in its good faith judgment that
severing the invalid language from this Agreement would adversely affect the
purpose or effect of this Agreement, the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the Close
of Business on the tenth day following the date of such determination by the
Board of Directors.


 


Section 32.                                      Governing Law.  This Agreement and each Right and
each Rights 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.


 


37





















 


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


 


	
  COMPANY

  	
  DIGITAL
  IMPACT, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David
  Oppenheimer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  David Oppenheimer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial
  Officer

  	
   

  
	
   

  	
   

  
	
  RIGHTS
  AGENT

  	
  COMPUTERSHARE
  INVESTOR SERVICES LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Cynthia
  Nisley

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Cynthia Nisley

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director,
  Relationship Management

  	
   

  



 





















 


EXHIBIT A


 


CERTIFICATE
OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES A
PARTICIPATING PREFERRED STOCK OF DIGITAL IMPACT, INC.


The undersigned, David Oppenheimer, does hereby certify:


 


1.             That
he is the duly elected and acting Senior Vice President, Chief Financial
Officer and Treasurer of Digital Impact, Inc., a Delaware corporation (the “Corporation”).


 


2.             That
pursuant to the authority conferred upon the Board of Directors by the Amended
and Restated Certificate of Incorporation of the said Corporation, the said
Board of Directors of the Corporation on March 4, 2005 adopted the following
resolutions creating a series of 1,000,000 shares of Preferred Stock designated
as Series A Participating Preferred Stock:


 


“NOW, THEREFORE, BE IT RESOLVED: 
That pursuant to the authority vested in the Board of Directors of the
corporation by the Amended and Restated Certificate of Incorporation, the Board
of Directors does hereby provide for the issue of a series of Preferred Stock
of the Corporation and does hereby fix and herein state and express the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of such series of Preferred Stock
as follows:


 


Section 1.               Designation
and Amount.  The shares of such
series shall be designated as “Series A
Participating Preferred Stock.” 
The Series A Participating Preferred Stock shall have a par value
of $0.001 per share, and the number of shares constituting such series shall be
1,000,000.


 


Section 2.               Proportional Adjustment.  In the event that the Corporation shall at
any time after the issuance of any share or shares of Series A
Participating Preferred Stock (i) declare any dividend on Common Stock of
the Corporation (“Common Stock”) payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock or
(iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Corporation shall simultaneously effect a
proportional adjustment to the number of outstanding shares of Series A
Participating Preferred Stock.


 


Section 3.               Dividends and Distributions.


 


(a)           Subject to the prior and superior
right of the holders of any shares of any series of Preferred Stock ranking
prior and superior to the shares of Series A Participating Preferred Stock
with respect to dividends, the holders of shares of Series A Participating
Preferred Stock shall be entitled to receive when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the last day of January, April, July, and October
in each year (each such date being referred to herein as a “Quarterly
Dividend Payment Date”), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share 


 


 





















 


or fraction of a share of Series A Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
1,000 times the aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Participating Preferred Stock.


 


(b)           The Corporation shall declare a
dividend or distribution on the Series A Participating Preferred Stock as
provided in paragraph (a) above immediately after it declares a dividend
or distribution on the Common Stock (other than a dividend payable in shares of
Common Stock).


 


(c)           Dividends shall begin to accrue on
outstanding shares of Series A Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Participating Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue from such
Quarterly Dividend Payment Date.  Accrued
but unpaid dividends shall not bear interest. 
Dividends paid on the shares of Series A Participating Preferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date
for the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to
the date fixed for the payment thereof.


 


Section 4.               Voting Rights.  The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:


 


(a)           Each share of Series A
Participating Preferred Stock shall entitle the holder thereof to 1,000 votes
on all matters submitted to a vote of the stockholders of the Corporation.


 


(b)           Except as otherwise provided herein
or by law, the holders of shares of Series A Participating Preferred Stock
and the holders of shares of Common Stock shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.


 


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


 


2





















 


Section 5.               Certain Restrictions.


 


(a)           The Corporation shall not declare any
dividend on, make any distribution on, or redeem or purchase or otherwise
acquire for consideration any shares of Common Stock after the first issuance
of a share or fraction of a share of Series A Participating Preferred
Stock unless concurrently therewith it shall declare a dividend on the
Series A Participating Preferred Stock as required by Section 3
hereof.


 


(b)           Whenever quarterly dividends or other
dividends or distributions payable on the Series A Participating Preferred
Stock as provided in Section 3 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Participating Preferred Stock outstanding shall have
been paid in full, the Corporation shall not


 


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


 


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


 


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


 


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


 


(c)           The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
could, under paragraph (a) of this Section 5, purchase or otherwise
acquire such shares at such time and in such manner.


 


3





















 


Section 6.               Reacquired Shares.  Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof.  All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein and in the Amended and Restated
Certificate of Incorporation, as then amended.


 


Section 7.               Liquidation, Dissolution or
Winding Up.  Upon any liquidation,
dissolution or winding up of the Corporation, the holders of shares of
Series A Participating Preferred Stock shall be entitled to receive an
aggregate amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock plus an amount equal
to any accrued and unpaid dividends on such shares of Series A Participating
Preferred Stock.


 


Section 8.               Consolidation, Merger, etc.  In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of Series A
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged.


 


Section 9.               No Redemption.  The shares of Series A Participating
Preferred Stock shall not be redeemable.


 


Section 10.             Ranking.  The Series A Participating Preferred
Stock shall rank junior to all other series of the Corporation’s Preferred
Stock as to the payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.


 


Section 11.             Amendment.  The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preference or special rights
of the Series A Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority of the
outstanding shares of Series A Participating Preferred Stock, voting
separately as a series.


 


Section 12.             Fractional Shares.  Series A Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder’s fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.


 


4





















 


RESOLVED FURTHER:  That the
President, Chief Executive Officer or any Vice President and the Secretary or
any Assistant Secretary of this corporation be, and they hereby are, authorized
and directed to prepare and file a Certificate of Designation of Rights,
Preferences and Privileges in accordance with the foregoing resolution and the
provisions of Delaware law and to take such actions as they may deem necessary
or appropriate to carry out the intent of the foregoing resolution.”


 


I further declare under penalty of perjury that the matters set forth
in the foregoing Certificate of Designation are true and correct of my own
knowledge.


 


Executed at San Mateo, California on March 7, 2005.


 


	
   

  
	
  David Oppenheimer

  
	
  Senior Vice President, Chief Financial Officer and
  Treasurer

  



 


 


 


 





















 


EXHIBIT B


 


FORM
OF RIGHTS CERTIFICATE


 


	
  Certificate No. R-

  	
   

  	
                   Rights

  



 


NOT EXERCISABLE
AFTER THE EARLIER OF (i) MARCH 16, 2015, (ii) THE DATE TERMINATED BY
THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE RIGHTS PURSUANT TO
THE RIGHTS AGREEMENT.  THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. 
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID.  [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).  ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH RIGHTS AGREEMENT.]*


 


RIGHTS
CERTIFICATE


 


DIGITAL
IMPACT, INC.


 


This certifies that                                                                        ,
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement dated as of March 4, 2005,
(the “Rights Agreement”), between Digital
Impact, Inc., a Delaware corporation (the  “Company”), and Computershare
Investor Services LLC (the “Rights Agent”),
to purchase from the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to 5:00 P.M., New York
time, on March 16, 2015 at the office of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one
one-thousandth (0.001) of a fully paid 


 










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


 





















 


and non-assessable share of Series A
Participating Preferred Stock, par value $0.001 per share (the  “Preferred
Shares”), of the Company, at an Exercise Price of $10.00 per
one-thousandth (0.001) of a Preferred Share (the  “Exercise Price”), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed.  The number of Rights evidenced by this Rights
Certificate (and the number of one-thousandths (0.001) of a Preferred
Share which may be purchased upon exercise hereof) set forth above are the
number and Exercise Price as of           ,       
based on the Preferred Shares as constituted at such date.  As provided in the Rights Agreement, the
Exercise Price and the number and kind of Preferred Shares or other securities
which may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.


 


This Rights Certificate
is subject to all of the terms, provisions and conditions of the Rights
Agreement, which terms, provisions and conditions are hereby incorporated
herein by reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Rights Certificates, which limitations of rights
include the temporary suspension of the exercisability of such Rights under the
specific circumstances set forth in the Rights Agreement.  Copies of the Rights Agreement are on file at
the principal executive offices of the Company and the above-mentioned office
of the Rights Agent.


 


Subject to the provisions
of the Rights Agreement, the Rights evidenced by this Rights Certificate
(i) may be redeemed by the Company, at its option, at a redemption price
of $0.001 per Right or (ii) may be exchanged by the Company in whole or in
part for Common Shares, substantially equivalent rights or other consideration
as determined by the Company.


 


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


 


No fractional portion of
less than one one-thousandth (0.001) of a Preferred Share will be issued
upon the exercise of any Right or Rights evidenced hereby but in lieu thereof a
cash payment will be made, as provided in the Rights Agreement.


 


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


 





















 


provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.


 


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


 


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


 


	
  ATTEST:

  	
  DIGITAL
  IMPACT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
  COMPUTERSHARE
  INVESTOR SERVICES LLC

  	
   

  
	
  as Rights Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
   

  
							



 





















 


Form
of Reverse Side of Rights Certificate


 


FORM OF ASSIGNMENT


 


(To be executed by the
registered holder if such

holder desires to transfer the Rights Certificate)


 


FOR VALUE RECEIVED                                           
hereby sells, assigns and transfers unto                                   


                                                                                                                                                                                                                     


(Please print name and address of transferee)


 


                                                                                                                                                                                                                     


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


 


 


	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  



 


 


Signature Guaranteed:


 


Signatures must be guaranteed by an “Eligible Guarantor Institution”
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.


 





















 


CERTIFICATE


 


The undersigned hereby certifies by checking the
appropriate boxes that:


 


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


 


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


 


 


	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  



 


 


Signature Guaranteed:


 


Signatures must be guaranteed by an “Eligible Guarantor Institution”
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.


 





















 


FORM OF ELECTION TO
PURCHASE


 


(To be executed if holder
desires to

exercise the Rights Certificate)


 


To:                                       


 


The undersigned hereby
irrevocably elects to exercise                                                           
Rights represented by this Rights Certificate to purchase the number of
one-thousandths (0.001) of a Preferred Share issuable upon the exercise of
such Rights and requests that certificates for such number of
one-thousandths (0.001) of a Preferred Share issued in the name of:


 


Please insert social
security


or other identifying
number


 


                                                                                                                                                                                                                        


(Please print name and address)


                                                                                                                                                                                                                        


 


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


 


Please insert social
security


or other identifying
number


 


                                                                                                                                                                                                                        


(Please print name and address)


                                                                                                                                                                                                                        


 


	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  



 


Signature Guaranteed:


 


Signatures must be
guaranteed by an “Eligible Guarantor Institution” (with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934, as amended.


 





















 


CERTIFICATE


 


The undersigned hereby
certifies by checking the appropriate boxes that:


 


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


 


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


 


	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  



 


 


Signature Guaranteed:


 


Signatures must be
guaranteed by an “Eligible Guarantor Institution” (with membership in an
approved signature guarantee medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934, as amended.


 





















 


NOTICE


 


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


 





















 


EXHIBIT C


 


SUMMARY OF RIGHTS


 


 


	
  Distribution
  and

  Transfer of Rights;

  Rights Certificate:

  	
   

  	
  The Board of Directors
  has declared a dividend of one Right for each share of Common Stock of
  Digital Impact, Inc. (the “Company”)
  outstanding. Prior to the Distribution Date referred to below, the Rights
  will be evidenced by and trade with the certificates for the Common Stock.
  After the Distribution Date, the Company will mail Rights certificates to the
  Company’s stockholders and the Rights will become transferable apart from the
  Common Stock.

  
	
   

  	
   

  	
   

  
	
  Distribution
  Date:

  	
   

  	
  Rights will separate
  from the Common Stock and become exercisable following (a) the tenth day
  after a person or group acquires beneficial ownership of 15% or more of the
  Company’s Common Stock or (b) the tenth business day (or such later date
  as may be determined by the Company’s Board of Directors) after a person or
  group announces a tender or exchange offer, the consummation of which would
  result in ownership by a person or group of 15% or more of the Company’s
  Common Stock.

  
	
   

  	
   

  	
   

  
	
  Preferred
  Stock

  Purchasable Upon

  Exercise of Rights:

  	
   

  	
  After the Distribution
  Date, each Right will entitle the holder to purchase for $[      ]
  (the “Exercise Price”), a
  fraction of a share of the Company’s Preferred Stock with economic terms
  similar to that of one share of the Company’s Common Stock.

  
	
   

  	
   

  	
   

  
	
  Flip-In:

  	
   

  	
  If an acquirer (an “Acquiring Person”) obtains 15% or
  more of the Company’s Common Stock, then each Right (other than Rights
  owned by an Acquiring Person or its affiliates) will entitle the holder
  thereof to purchase, for the Exercise Price, a number of shares of the
  Company’s Common Stock having a then-current market value of twice the
  Exercise Price.

  
	
   

  	
   

  	
   

  
	
  Flip-Over:

  	
   

  	
  If, after an Acquiring
  Person obtains 15% or more of the Company’s Common Stock, (a) the
  Company merges into another entity, (b) an acquiring entity merges into
  the Company or (c) the Company sells more than 50% of the Company’s
  assets or earning power, then each Right (other than Rights owned by
  an Acquiring Person or its affiliates) will entitle the holder thereof to
  purchase, for the Exercise Price, a number of shares of Common Stock of the
  person engaging in the transaction having a then current market value of
  twice the Exercise Price.

  
	
   

  	
   

  	
   

  
	
  Exchange
  Provision:

  	
   

  	
  At any time after the
  date on which an Acquiring Person obtains 15% or more of the Company’s Common
  Stock and prior to the acquisition by the Acquiring Person of 50% of the
  outstanding Common Stock, the Board of Directors of the Company may exchange
  the Rights (other than Rights owned by the Acquiring Person or its
  affiliates), in whole or in part, for shares of Common Stock of the Company
  at an exchange ratio of one share of Common Stock per Right (subject to
  adjustment).

  
	
   

  	
   

  	
   

  
	
  Redemption
  of the

  Rights:

  	
   

  	
  Rights will be
  redeemable at the Company’s option for $0.001 per Right at any time on or
  prior to public announcement that a Person has acquired 

  



 





















 


	
   

  	
   

  	
  beneficial ownership of
  15% or more of the Company’s Common Stock (the “Shares
  Acquisition Date”).

  
	
   

  	
   

  	
   

  
	
  Expiration
  of the

  Rights:

  	
   

  	
  The Rights expire on
  the earliest of (a) March 16, 2015 or (b) exchange or redemption of
  the Rights as described above.

  
	
   

  	
   

  	
   

  
	
  Amendment
  of

  Terms of Rights:

  	
   

  	
  The terms of the Rights
  and the Rights Agreement may be amended in any respect without the consent of
  the Rights holders on or prior to the Distribution Date; thereafter, the
  terms of the Rights and the Rights Agreement may be amended without the
  consent of the Rights holders in order to cure any ambiguities or to make
  changes which do not adversely affect the interests of Rights holders (other
  than the Acquiring Person).

  
	
   

  	
   

  	
   

  
	
  Voting
  Rights:

  	
   

  	
  Rights will not have
  any voting rights.

  
	
   

  	
   

  	
   

  
	
  Anti-Dilution

  Provisions:

  	
   

  	
  Rights will have the
  benefit of certain customary anti-dilution provisions.

  
	
   

  	
   

  	
   

  
	
  Taxes:

  	
   

  	
  The Rights distribution
  should not be taxable for federal income tax purposes. However, following an
  event which renders the Rights exercisable or upon redemption of the Rights,
  stockholders may recognize taxable income.

  



 


The foregoing is a
summary of certain principal terms of the Stockholder Rights Plan only and is
qualified in its entirety by reference to the Preferred Stock Rights Agreement
dated as of March 4, 2005 between the Company and Computershare Investor Services
LLC as Rights Agent (the “Rights Agreement”).  The Rights Agreement may be amended from time
to time.  A copy of the Rights Agreement
was filed with the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A dated Monday March 7, 2005.  A copy of the Rights Agreement is available
free of charge from the Company.


 


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