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Exhibit 10.9    
    

 
 

AMENDMENT NO. 3 TO
  THE ALLIANCE DATA SYSTEMS 401(K) AND RETIREMENT SAVINGS PLAN
  (amended and restated as of January 1, 2001)    

        ADS
Alliance Data Systems, Inc. hereby adopts this Amendment No. 3 to the Alliance Data Systems 401(k) and Retirement Savings Plan (the "Plan"), effective as of
January 1, 2003, except as otherwise provided. A portion of this amendment is adopted to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"),
and that portion is intended as good faith compliance with the requirements of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued thereunder. This amendment shall supersede
the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this amendment. 

	1.
	Section 1.67
shall be amended by adding new subsection (C) at the end thereof to read as follows: 

Notwithstanding
the foregoing, former employees of ExoLink, Inc., who became employees of the Company as of January 1, 2003, as the result of an asset purchase shall have the service
credited to them for purpose of determining eligibility to participate under the ExoLink, Inc. 401(k) Plan, credited to them for the same purpose under the Plan. 

	2.
	Section 1.68
of the Plan shall be amended by adding new subsection (E) at the end thereof to read as follows: 

Notwithstanding
the foregoing, former employees of ExoLink, Inc., who became employees of the Company as of January 1, 2003, as the result of an asset purchase shall have the service
credited to them for purpose of determining their right to vest under the ExoLink, Inc. 401(k) Plan, credited to them for the same purpose under the Plan. 

	3.
	Article 4
shall be amended, effective February 1, 2003, by adding new Section 4.14 at the end thereto to read as follows: 

4.14
Catch-Up Contributions 

All
Participants who are eligible to make elective deferrals under the Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make catch-up contributions
in accordance with, and subject to the limitations of, section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions
of the Plan implementing the required limitations of sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements
of section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such catch-up contributions. No Participant shall be permitted to
have elective deferrals made under the Plan, or any other qualified plan maintained by the Employer during any taxable year, in excess of the dollar limitation contained in section 402(g) of
the Code in effect for such taxable year, except to the extent permitted under this Section. 

        IN
WITNESS WHEREOF, this amendment has been executed on this            day of May, 2003, but effective as provided above. 

	 	 	ADS ALLIANCE DATA SYSTEMS, INC.
	

 	
 	

By:	

 
	 	 	 	
 Dwayne Tucker,

Chief Administrative Officer

QuickLinks

Exhibit 10.9

AMENDMENT NO. 3 TO THE ALLIANCE DATA SYSTEMS 401(K) AND RETIREMENT SAVINGS PLAN (amended and restated as of January 1, 2001)LIBERATE TECHNOLOGIES

 

 

and

 

 

EQUISERVE TRUST COMPANY, N.A.,

Rights Agent

 

 

Rights Agreement

 

Dated as of May 12, 2003

 

 

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Certain Definitions

  	
  1

  
	
  Section 2.

  	
  Appointment of Rights Agent

  	
  6

  
	
  Section 3.

  	
  Issuance of Rights Certificates

  	
  6

  
	
  Section 4.

  	
  Form of Rights Certificates

  	
  8

  
	
  Section 5.

  	
  Countersignature and Registration

  	
  9

  
	
  Section 6.

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

  	
  9

  
	
  Section 7.

  	
  Exercise of Rights; Purchase Price;
  Expiration Date of Rights

  	
  10

  
	
  Section 8.

  	
  Cancellation and Destruction of Rights
  Certificates

  	
  12

  
	
  Section 9.

  	
  Reservation and Availability of Capital
  Stock

  	
  12

  
	
  Section 10.

  	
  Preferred Stock Record Date

  	
  14

  
	
  Section 11.

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

  	
  14

  
	
  Section 12.

  	
  Certificate of Adjusted Purchase Price or
  Number of Shares

  	
  22

  
	
  Section 13.

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

  	
  22

  
	
  Section 14.

  	
  Fractional Rights and Fractional Shares

  	
  24

  
	
  Section 15.

  	
  Rights of Action

  	
  25

  
	
  Section 16.

  	
  Agreement of Rights Holders

  	
  26

  
	
  Section 17.

  	
  Rights Certificate Holder Not Deemed a
  Stockholder

  	
  26

  
	
  Section 18.

  	
  Concerning the Rights Agent

  	
  27

  
	
  Section 19.

  	
  Merger or Consolidation or Change of Name
  of Rights Agent

  	
  27

  
	
  Section 20.

  	
  Duties of Rights Agent

  	
  28

  
	
  Section 21.

  	
  Change of Rights Agent

  	
  30

  
	
  Section 22.

  	
  Issuance of New Rights Certificates

  	
  30

  
	
  Section 23.

  	
  Redemption and Termination

  	
  31

  
	
  Section 24.

  	
  Exchange

  	
  32

  
	
  Section 25.

  	
  Notice of Certain Events

  	
  33

  
	
  Section 26.

  	
  Notices

  	
  34

  
	
  Section 27.

  	
  Supplements and Amendments

  	
  34

  

 

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Successors

  	
  35

  
	
  Section 29.

  	
  Determinations and Actions by the Board of
  Directors, etc.

  	
  35

  
	
  Section 30.

  	
  Benefits of this Agreement

  	
  35

  
	
  Section 31.

  	
  Severability

  	
  35

  
	
  Section 32.

  	
  Governing Law

  	
  36

  
	
  Section 33.

  	
  Counterparts

  	
  36

  
	
  Section 34.

  	
  Descriptive Headings

  	
  36

  

 

 

3

 

EXHIBITS

 

                Exhibit
A —          Form of Certificate of
Designation, Preferences and Rights

 

                Exhibit
B —           Form of Rights Certificate

 

                Exhibit
C —           Form of Summary of Rights

 

 

4

 

RIGHTS AGREEMENT

 

This
RIGHTS AGREEMENT, dated as of May 12, 2003 (the “Agreement”), is entered
into between Liberate Technologies, a Delaware corporation (the “Company”),
and Equiserve Trust Company, N.A., a federally chartered trust company (the “Rights
Agent”).

WHEREAS,
on May 8, 2003 (the “Rights Dividend Declaration Date”), the Board of
Directors of the Company authorized and declared a dividend distribution of one
Right (as hereinafter defined) for each share of common stock, par value $.01
per share, of the Company (the “Common Stock”) outstanding at the Close
of Business on May 30, 2003 (the “Record Date”), and has authorized the
issuance of one Right (as such number may hereinafter be adjusted pursuant to
the provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company’s treasury) and the Distribution Date (as hereinafter defined)
each Right initially representing the right to purchase one one-thousandth
(1/1000) of a share of Series A Junior Participating Preferred Stock of the
Company (the “Preferred Stock”) having the rights, powers and
preferences set forth in the form of Certificate of Designation, Preferences
and Rights attached hereto as Exhibit A, upon the terms and subject to
the conditions hereinafter set forth (the “Rights”).

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

Section 1.           Certain Definitions.  For purposes of this Agreement, the following terms have the
meanings indicated:

(a)       “Acquiring
Person” shall mean (x) any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of
fifteen percent (15%) or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company,
(iii) 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, (iv) any Person who
becomes the Beneficial Owner of fifteen percent (15%) or more of the shares of
Common Stock then outstanding as a result of a reduction in the number of
shares of Common Stock outstanding due to the repurchase of shares of Common
Stock by the Company or at a time when the rights are not redeemable, unless
and until such Person, after becoming aware that such Person has become the
Beneficial Owner of fifteen percent (15%) or more of the then outstanding
shares of Common Stock, acquires beneficial ownership of additional shares of
Common Stock representing one percent (1%) or more of the shares of Common
Stock then outstanding, (v) any such Person who has reported or is required to
report such ownership (but less than twenty percent (20%)) on Schedule 13G
under the Securities Exchange Act of 1934, as amended and in effect on the date
of the Agreement (the “Exchange Act”) (or any comparable or successor
report) or on Schedule 13D under the Exchange Act (or any comparable or
successor report) which Schedule 13D does not state any intention to or reserve
the right to control or influence the management or policies of the Company or
engage in any of the actions specified in Item 4 of such schedule (other than
the disposition of the Common Stock) and, within ten (10) Business 

5

 

Days of being requested by the Company to advise it regarding
the same, certifies to the Company that such Person acquired shares of Common
Stock in excess of fourteen and nine-tenths percent (14.9%) inadvertently or
without knowledge of the terms of the Rights and who or which, together with
all Affiliates and Associates, thereafter does not acquire additional shares of
Common Stock while the Beneficial Owner of fifteen percent (15%) or more of the
shares of Common Stock then outstanding; provided,
however, that if the Person requested
to so certify fails to do so within ten (10) Business Days, then such Person
shall become an Acquiring Person immediately after such ten (10)-Business-Day
period, (vi) any Person who is, as of May 8, 2003, the Beneficial Owner of
fifteen percent (15%) or more of the shares of Common Stock then outstanding,
so long as such Person thereafter does not, while the Beneficial Owner of
fifteen percent (15%) or more of the shares of Common Stock then outstanding,
acquire additional shares of Common Stock representing one percent (1%) or more
of the shares of Common Stock then outstanding, unless any such acquisition of
additional shares is pursuant to (A) a stock dividend or distribution by the
Company or (B) a Qualified Offer (as defined in Section 11(a) (ii)); provided, however,
that such Person shall cease to be excluded from the definition of Acquiring
Person pursuant to this clause (vi) at such time, if any, as such Person ceases
to be the Beneficial Owner of fifteen percent (15%) or more of the shares of Common
Stock then outstanding, or (y) any Person who or which has entered into any
agreement or arrangement with the Company or any Subsidiary of the Company
providing for an Acquisition Transaction (as defined in Section 1(b) hereof).

(b)       “Acquisition
Transaction” shall mean (x) a merger, consolidation or similar transaction
involving the Company or any of its Subsidiaries as a result of which
stockholders of the Company will no longer own a majority of the outstanding
shares of Common Stock of the Company or a publicly traded entity which
controls the Company or, if appropriate, the entity into which the Company may
be merged, consolidated or otherwise combined (based solely on the shares of
Common Stock received or retained by such stockholders, in their capacity as
stockholders of the Company, pursuant to such transaction), (y) a purchase
or other acquisition of all or a substantial portion of the assets of the
Company and its Subsidiaries, or (z) a purchase or other acquisition of
securities representing fifteen percent (15%) or more of the shares of Common
Stock then outstanding.

(c)       “Adjustment
Shares” shall have the meaning set forth in Section 11(a)(ii) hereof.

(d)       “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.

(e)       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, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights, other
rights, warrants or options, or 

6

 

otherwise; provided, however,
that a Person shall not be deemed the “Beneficial Owner” of, or to
“beneficially own,” (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person’s Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, (B) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event (as hereinafter defined), or
(C) securities issuable upon exercise of Rights from and after the
occurrence of a Triggering Event which Rights were acquired by such Person or
any of such Person’s Affiliates or Associates prior to the Distribution Date
(as hereinafter defined) or pursuant to Section 3(a) or Section 22
hereof (the “Original Rights”) or pursuant to Section 11(i) hereof
in connection with an adjustment made with respect to any Original Rights;

(ii) which such Person or any of such Person’s
Affiliates or Associates, directly or indirectly, has the right to vote or
dispose of or has “beneficial ownership” of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing; provided, however, that a Person shall not be deemed
the “Beneficial Owner” of, or to “beneficially own,” any security under this
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding:  (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not reportable by such Person 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), for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (g)) or
disposing of any voting securities of the Company; provided, however,
that nothing in this paragraph (g) shall cause a Person engaged in business as
an underwriter of securities to be the “Beneficial Owner” of, or to
“beneficially own,” any securities acquired through such Person’s participation
in good faith in a firm commitment underwriting until the expiration of forty
(40) days after the date of such acquisition, and then only if such securities
continue to be owned by such Person at such expiration of forty (40) days andprovided further, however, that any stockholder of the
Company, with affiliate(s), associate(s) or other person(s) who may be deemed
representatives of it serving as director(s) of the Company, shall not be
deemed to beneficially own securities held by other Persons as a result of (i)
persons affiliated or otherwise associated with such stockholder serving as
directors or taking any action in connection therewith, (ii) discussing the
status of its shares with the Company or other stockholders of the Company
similarly situated or (iii) voting or acting in a manner similar to other
stockholders similarly situated, 

7

 

absent a specific finding by the
Board of Directors of an express agreement among such stockholders to act in
concert with one another as stockholders so as to cause, in the good faith
judgment of the Board of Directors, each such stockholder to be the Beneficial
Owner of the shares held by the other stockholder(s).

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

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

(h)       “Common
Stock” shall have the meaning ascribed in the recitals, except that “Common
Stock” when used with reference to any Person other than the Company shall mean
the capital stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such Person.

(i)        “Common
Stock Equivalents” shall have the meaning set forth in Section 11(a)(iii)
hereof.

(j)        “Current
Market Price” shall have the meaning set forth in Section 11(d)(i) hereof.

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

(l)        “Distribution
Date” shall have the meaning set forth in Section 3(a) hereof.

(m)      “Equivalent
Preferred Stock” shall have the meaning set forth in Section 11(b) hereof.

(n)       “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended and in
effect on the date of the Agreement.

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

(p)       “Expiration
Date” shall have the meaning set forth in Section 7(a) hereof.

(q)       “Final
Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

8

 

(r)        “Person”
shall mean any individual, firm, corporation, partnership or other entity.

(s)       “Preferred
Stock” shall have the meaning ascribed in the recitals, and, to the extent
that there are not a sufficient number of shares of Series A Junior
Participating Preferred Stock authorized to permit the full exercise of the
Rights, any other series of preferred stock of the Company designated for such
purpose containing terms substantially similar to the terms of the Series A
Junior Participating Preferred Stock.

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

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

(v)       “Qualified
Offer” shall have the meaning set forth in Section 11(a)(ii) hereof.

(w)      “Record
Date” shall have the meaning set forth in the preamble of this Agreement.

(x)        “Rights”
shall have the meaning set forth in the preamble of this Agreement.

(y)       “Rights
Agent” shall have the meaning set forth in the preamble of this Agreement.

(z)        “Rights
Certificate” shall have the meaning set forth in Section 3(a) hereof.

(aa)     “Rights Dividend Declaration Date” shall have the meaning
set forth in the preamble of this Agreement.

(bb)     “Section 11(a)(ii) Event” shall mean any event described
in Section 11(a)(ii) hereof.

(cc)     “Section 13 Event” shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.

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

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

(ff)       “Stock Acquisition Date” shall mean the earlier of (i)
the first date of public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed or amended pursuant to
Section 13(d) under the Exchange Act) by the Company or an Acquiring Person
that an Acquiring Person has become such pursuant to clause (x) of the 

9

 

definition of Acquiring Person other than pursuant to a
Qualified Offer, and (ii) the date that an Acquiring Person has become such
pursuant to clause (y) of the definition of Acquiring Person.

(gg)     “Subsidiary” shall mean, with reference to any Person,
any corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is beneficially owned,
directly or indirectly, by such Person, or otherwise controlled by such Person.

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

(ii)       “Summary of Rights” shall have the meaning set forth in
Section 3(b) hereof.

(jj)       “Trading Day” shall have the meaning set forth in
Section 11(d)(i) hereof.

(kk)     “Triggering Event” shall mean any Section 11(a)(ii) Event
or any Section 13 Event.

(ll)       “Value Enhancement Procedures” shall have the meaning
set forth in Section 23(c) hereof.

Section 2.           Appointment of Rights Agent.  The Company hereby appoints the Rights Agent
to act as agent for the Company in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint
such co-rights agents as it may deem necessary or desirable, upon ten (10)
days’ prior written notice to the Rights Agent.  The Rights Agent shall have not duty to supervise, and in no
event be liable for, the acts or omissions of any such co-Rights Agent.

Section 3.           Issuance of Rights Certificates.

(a)       Until the earlier of (i) the Close of
Business on the tenth Business Day after the Stock Acquisition Date (or, if the
tenth Business Day after the Stock Acquisition Date occurs before the Record
Date, the Close of Business on the Record Date), or (ii) the Close of Business
on the tenth Business Day (or such later date as the Board of Directors shall
determine) after the date of the commencement of 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) within the meaning of Rule 14d-2(a) of the General
Rules and Regulations under the Exchange Act, or any successor provision
thereto, if upon consummation thereof, such Person would become an Acquiring
Person, in either instance other than pursuant to a Qualified Offer, (the
earlier of (i) and (ii) being herein referred to as the “Distribution Date”),
(x) the Rights will be evidenced (subject to the provisions of paragraphs (b)
and (c) of this Section 3) by the certificates for the Common Stock registered
in the names of the holders of the Common Stock (which certificates for Common
Stock shall be deemed also to be certificates for Rights) and not by separate
certificates, and (y) the Rights will be transferable only in connection with
the transfer of the underlying shares of 

10

 

Common Stock (including a transfer
to the Company).  As soon as practicable
after the Distribution Date, the Rights Agent will send by first-class,
insured, postage-prepaid mail, to each record holder of the Common Stock as of
the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, one or more rights certificates, in
substantially the form of Exhibit B hereto (the “Rights Certificates”),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein.  In the
event that an adjustment in the number of Rights per share of Common Stock has
been made pursuant to Section 11(p) hereof, 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.  As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.

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

(c)       Rights
shall be issued in respect of all shares of Common Stock which are issued
(whether originally issued or from the Company’s treasury) after the Record
Date but prior to the earlier of the Distribution Date or the Expiration
Date.  Certificates representing such
shares of Common Stock 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 THE RIGHTS AGREEMENT
BETWEEN LIBERATE TECHNOLOGIES (THE “COMPANY”) AND THE RIGHTS AGENT THEREUNDER
(THE “RIGHTS AGREEMENT”), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF THE
COMPANY.  UNDER CERTAIN CIRCUMSTANCES,
AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE
CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE.  THE COMPANY WILL MAIL TO THE HOLDER OF THIS
CERTIFICATE A COPY OF THE RIGHTS AGREEMENT, AS IN EFFECT ON THE DATE OF
MAILING, WITHOUT CHARGE, PROMPTLY AFTER RECEIPT OF A WRITTEN 

11

 

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 (i) the Distribution Date or (ii) the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone and registered holders of Common Stock shall also be
the registered holders of the associated Rights, and the transfer of any of
such certificates shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates.

Section 4.           Form of Rights Certificates.

(a)       The
Rights Certificates (and the forms of election to purchase and of assignment to
be printed on the reverse thereof) shall each be substantially in the form set
forth in Exhibit B hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which the Rights may from time to time be listed, 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 and on their face
shall entitle the holders thereof to purchase such number of one one-thousandth
(1/1000) of a share of Preferred Stock as shall be set forth therein at the
price set forth therein (such exercise price per one one-thousandth (1/1000) of
a share, the “Purchase Price”), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase Price thereof
shall be subject to adjustment as provided herein.

(b)       Any
Rights Certificate issued pursuant to Section 3(a), Section 11(i), Section
11(p) 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 transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (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 such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of Section
7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section
11 hereof upon transfer, exchange, replacement or adjustment of 

12

 

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.

Section 5.           Countersignature and Registration.

(a)       The
Rights Certificates shall be executed on behalf of the Company by its Chairman
or Vice-Chairman of its Board of Directors, its Chief Executive Officer, its
President or any Vice President, its Chief Financial Officer or any Assistant
Treasurer, or its Secretary or any Assistant Secretary, either manually or by
facsimile signature, and shall have affixed thereto the Company’s seal or a
facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature.  The Rights Certificates shall be
countersigned by the Rights Agent, either manually or by facsimile signature
and shall not be valid for any purpose unless so countersigned.  In case any officer of the Company who shall
have signed any of the 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 had not ceased to be such officer of the Company; and any Rights
Certificates 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
principal office or offices designated as the appropriate place for surrender
of Rights Certificates upon exercise or transfer, 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 Section 4(b), Section 7(e) and Section 14 hereof, at any
time after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the Expiration Date, any Rights Certificates may be
transferred, split up,

13

 

combined or exchanged for any other Rights Certificates,
entitling the registered holder to purchase a like number of one one-thousandth
(1/1000) of a share of Preferred Stock (or, following a Triggering Event,
Common Stock, other securities, cash or other assets, as the case may be) as
any Rights Certificates surrendered then entitles such holder (or former holder
in the case of a transfer) to purchase. 
Any registered holder desiring to transfer, split up, combine or
exchange any Rights Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender any Rights Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
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
Associates thereof as the Company shall reasonably request.  Thereupon the Rights Agent shall, subject to
Section 4(b), Section 7(e), Section 14 and Section 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 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 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 execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu of the
Rights Certificate so lost, stolen, destroyed or mutilated.

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

(a)       Subject
to Section 7(e) hereof, at any time after the Distribution Date the registered
holder of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii)
and Section 23(a) hereof) in whole or in part upon surrender of the Rights
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-thousandth (1/1000) of a share (or other securities, cash or other assets, as
the case may be) as to which such surrendered Rights are then exercisable, at
or prior to the earlier of (i) 5:00 P.M., California time, on May 30, 2013, or
such later date as may be established by the Board of Directors prior to the
expiration of the Rights (such date, as it may be extended by the Board of
Directors, the “Final Expiration Date”), or (ii) the time at which
the Rights are redeemed or exchanged as provided in Section 23 and Section 24
hereof (the earlier of (i) and (ii) being herein referred to as the “Expiration
Date”).

14

 

(b)       The
Purchase Price for each one one-thousandth (1/1000) of a share of Preferred
Stock pursuant to the exercise of a Right initially shall be $18.00, subject to
adjustment from time to time as provided in Section 11 and Section 13(a) hereof
and shall be payable in accordance with paragraph (c) below.

(c)       Upon
receipt of a Rights Certificate representing exercisable Rights, with the form
of election to purchase and the certificate duly executed, accompanied by
payment, with respect to each Right so exercised, of the Purchase Price per one
one-thousandth (1/1000) of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable transfer tax, the Rights
Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-thousandth (1/1000) of a share of
Preferred Stock 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 the total number of shares of Preferred Stock
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such number
of one one-thousandth (1/1000) of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if
any, to be paid in lieu of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or, upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate.  The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) shall be made in
cash or by certified bank check or bank draft payable to the order of the
Company.  In the event that the Company
is obligated to issue other securities (including Common Stock) of the Company,
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.  The Company
reserves the right to require prior to the occurrence of a Triggering Event
that, upon any exercise of Rights, a number of Rights be exercised so that only
whole shares of Preferred Stock would be issued.

(d)       In
case the registered holder of any Rights Certificate shall exercise less than
all the Rights evidenced thereby, a new Rights Certificate evidencing the Rights
remaining unexercised shall be issued by the Rights Agent and 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, 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 Section 11(a)(ii) 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 

15

 

Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (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 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), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise.  The Company shall use all reasonable efforts
to insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or any other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or any of its 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 this
Section 7 unless such registered holder shall 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 any of its agents, be delivered to the Rights
Agent for cancellation or in cancelled form, or, if surrendered to the Rights
Agent, shall be cancelled by it, and no 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 other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof.  The Rights Agent shall deliver all cancelled Rights Certificates
to the Company, or shall, at the written request of the Company, destroy such
cancelled Rights Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.

Section 9.           Reservation and Availability of
Capital Stock.

(a)       The Company covenants and agrees that it
will cause to be reserved and kept available out of its authorized and unissued
shares of Preferred Stock (and, following the occurrence of a Section 11(a)(ii)
Event, out of its authorized and unissued shares of Common Stock and/or other
securities or out of its authorized and issued shares held in its treasury),
the number of shares of Preferred Stock (and, following the occurrence of a
Section 11(a)(ii) Event, Common Stock and/or other securities) that, as
provided in this Agreement including Section 11(a)(iii) hereof, will be
sufficient to permit the exercise in full of all outstanding Rights.

(b)       So
long as the shares of Preferred Stock (and, following the occurrence of a
Section 11(a)(ii) Event, Common Stock and/or other securities) issuable and 

16

 

deliverable upon the exercise of the Rights may be listed on
any national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange upon official notice
of issuance upon such exercise.

(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 Section 11(a)(ii)
Event on which the consideration to be delivered by the Company upon exercise
of the Rights has been determined in accordance with Section 11(a)(iii) hereof,
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 the
expiration of the Rights.  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. 
The Company may temporarily suspend, for a period of time 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 that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as
the suspension has been rescinded.  In
addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights until such time as a registration statement
has been declared effective. 
Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained, the exercise
thereof shall not be permitted under applicable law, or a registration
statement shall not have been declared effective.

(d)       The
Company covenants and agrees that it will take all such action as may be necessary
to ensure that all one one-thousandth (1/1000) of a share of Preferred Stock
(and, following the occurrence of a Section 11(a)(ii) Event, Common Stock
and/or other securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares (subject to payment of the
Purchase 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 issuance or delivery of the Rights Certificates and of any
certificates for a number of one one-thousandth (1/1000) of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
upon the exercise of Rights.  The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of a number of one
one-thousandth (1/1000) of a share of Preferred Stock (or Common Stock and/or
other securities, as the case may be) in respect of a name other than that of
the registered holder of the Rights Certificates evidencing Rights surrendered
for exercise or to issue or deliver any certificates for a number of one
one-thousandth (1/1000) of a share of Preferred Stock (or Common Stock and/or 

17

 

other securities, as the case may be) in a name other than
that of the registered holder upon the exercise of any Rights until such tax
shall have been paid (any such tax being payable by the holder of such Rights
Certificates at the time of surrender) or until it has been established to the
Company’s satisfaction that no such tax is due.

Section 10.         Preferred Stock Record Date.  Each person in whose name any certificate
for a number of one one-thousandth (1/1000) of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder
of record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided,
however, that if the date of such
surrender and payment is a date upon which the Preferred Stock (or Common Stock
and/or other securities, as the case may be) transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
shares (fractional or otherwise) on, and such certificate shall be dated, the
next succeeding Business Day on which the Preferred Stock (or Common Stock
and/or other securities, as the case may be) 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 stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.

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

(a)           (i)            In the
event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the Preferred Stock payable in shares of Preferred Stock,
(B) subdivide the outstanding Preferred Stock, (C) combine the outstanding
Preferred Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, and the number and
kind of shares of Preferred Stock or capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so that the holder of
any Right exercised after such time shall be entitled to receive, upon payment
of the Purchase Price then in effect, the aggregate number and kind of shares
of Preferred Stock or capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification.  If an event occurs which would require an
adjustment under both this 

18

 

Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.

(ii)           In
the event any Person shall, at any time after the Rights Dividend Declaration
Date, become an Acquiring Person, unless the event causing such Person to
become an Acquiring Person is a transaction set forth in Section 13(a) hereof,
or is an acquisition of shares of Common Stock pursuant to a tender offer or an
exchange offer for all outstanding shares of Common Stock at a price and on
terms determined by at least a majority of the members of the Board of
Directors who are not officers of the Company and who are not representatives,
nominees, Affiliates or Associates of an Acquiring Person, after receiving
advice from one or more investment banking firms, to be (a) at a price which is
fair to stockholders and not inadequate (taking into account all factors which
such members of the Board of Directors deem relevant, including, without
limitation, prices which could reasonably be achieved if the Company or its
assets were sold on an orderly basis designed to realize maximum value) and (b)
otherwise in the best interests of the Company and its stockholders (a “Qualified
Offer”), then, promptly following the occurrence of such event, proper
provision shall be made so that each holder of a Right (except as provided
below and in Section 7(e) hereof) shall thereafter have the right to receive,
upon exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of a number of one one-thousandth (1/1000) of
a share of Preferred Stock, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-thousandth (1/1000) of a share of
Preferred Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and (y) dividing that product
(which, following such first occurrence, shall thereafter be referred to as the
“Purchase Price” for each Right and for all purposes of this Agreement)
by fifty percent (50%) of the Current Market Price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the “Adjustment Shares”).

(iii)          In
the event that the number of shares of Common Stock which is authorized by the
Company’s Amended and Restated Certificate of Incorporation, but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights, is not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall (A) determine the value of the Adjustment Shares issuable upon
the exercise of a Right (the “Current Value”), and (B) with respect to
each Right (subject to Section 7(e) hereof), make adequate provision to
substitute for the Adjustment Shares, upon the exercise of a Right and payment
of the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of preferred stock,
such as the Preferred Stock, which the Board of Directors has deemed to have
essentially the same 

19

 

value or economic rights as shares of Common Stock (such
shares of preferred stock being referred to as “Common Stock Equivalents”)),
(4) debt securities of the Company, (5) other assets, or (6) any combination of
the foregoing, having an aggregate value equal to the Current Value (less the
amount of any reduction in the Purchase Price), where such aggregate value has
been determined by the Board of Directors based upon the advice of a nationally
recognized investment banking firm selected by the 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 Section 11(a)(ii) 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)(ii) Trigger Date”),
then the Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, shares of
Common Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread.  For purposes of the preceding sentence, the
term “Spread” shall mean the excess of (i) the Current Value over (ii)
the Purchase Price.  If the Board of
Directors determines in good faith that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon exercise in full
of the Rights, the thirty (30) day period set forth above may be extended to
the extent necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval
for the authorization of such additional shares (such thirty (30) day period,
as it may be extended, is herein called the “Substitution Period”).  To the extent that the Company determines
that action should be taken pursuant to the first and/or third sentences of
this Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights, and
(2) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such stockholder approval for such
authorization of additional shares 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 each Adjustment Share shall be the Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the per share or per unit value of any Common Stock Equivalent
shall be deemed to equal the Current Market Price per share of the Common Stock
on such date.

(b)           In case
the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them to subscribe for or
purchase (for a period expiring within forty-five (45) calendar days after such
record date) Preferred Stock (or shares having the same rights, privileges and
preferences as the shares of Preferred Stock (“Equivalent Preferred Stock”))
or securities convertible into Preferred Stock or Equivalent Preferred Stock at
a price per share of Preferred Stock or per share of Equivalent 

20

 

Preferred
Stock (or having a conversion price per share, if a security convertible into
Preferred Stock or Equivalent Preferred Stock) less than the Current Market
Price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date, the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock which the aggregate offering
price of the total number of shares of Preferred Stock and/or Equivalent
Preferred Stock so to be offered (and/or the aggregate initial conversion price
of the convertible securities so to be offered) would purchase at such Current
Market Price, and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number of additional
shares of Preferred Stock and/or Equivalent Preferred Stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible).  In
case such subscription price may be paid by delivery of consideration, part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the 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.  Shares of Preferred Stock 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 or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.

(c)           In case
the Company shall fix a record date for a distribution to all holders of
Preferred Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation),
cash (other than a regular quarterly cash dividend out of the earnings or
retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or evidences of indebtedness, or of subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on such record
date, less the fair market value (as determined in good faith by the Board of
Directors, 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
share of Preferred Stock, and the denominator of which shall be such Current
Market Price (as determined pursuant to Section 11(d) hereof) per share of
Preferred Stock.  Such adjustments shall
be made successively whenever such a record date is fixed, and in the event
that such distribution is not so made, the Purchase Price shall be adjusted to
be the Purchase Price which would have been in effect if such record date had
not been fixed.

(d)           (i)            For
the purpose of any computation hereunder, other than computations made pursuant
to Section 11(a)(iii) hereof, the Current Market Price per share of Common
Stock on any date shall be deemed to be the average of the daily closing prices
per share of such Common Stock for the thirty (30) consecutive Trading Days
immediately prior to such date, and for purposes of computations made pursuant
to 

21

 

Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per share of the Common Stock
is determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such
Common Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading.  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 shares of Common Stock are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers Automated Quotation System (“NASDAQ”) or such other system then
in use, or, if on any such date the shares of Common Stock are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors.  If
on any such date no market maker is making a market in the Common Stock, the fair
value of such shares on such date as determined in good faith by the Board of
Directors shall be used.  The term “Trading
Day” shall mean a day on which the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading is open
for the transaction of business or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, a Business
Day.  If the Common Stock is not publicly
held or not so listed or traded, Current Market Price per share shall mean the
fair value per share as determined in good faith by the Board of Directors,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.

(ii)           For
the purpose of any computation hereunder, the Current Market Price per share of
Preferred Stock shall be determined in the same manner as set forth above for
the Common Stock in clause (i) of this Section 11(d) (other than the last
sentence thereof).  If the Current
Market Price per share of Preferred Stock cannot be determined in the manner
provided above or if the Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section 11(d), the Current
Market Price per share of Preferred Stock shall be conclusively deemed to be an
amount equal to one thousand (1000) 

22

 

(as such number may be appropriately adjusted for such events
as stock splits, stock dividends and recapitalizations with respect to the
Common Stock occurring after the date of this Agreement) multiplied by the
Current Market Price per share of the Common Stock.  If neither the Common Stock nor the Preferred Stock is publicly
held or so listed or traded, Current Market Price per share of the Preferred
Stock shall mean the fair value per share as determined in good faith by the
Board of Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.

(e)           Anything
herein to the contrary notwithstanding, no adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this
Section 11 shall be made to the nearest cent or to the nearest ten-thousandth
of a share of Common Stock or other share or ten-millionth of a share of
Preferred Stock, as the case may be. 
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.

(f)            If as a
result of an adjustment made pursuant to Section 11(a)(ii) 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 Stock, thereafter the
number of such other shares so receivable upon exercise of any Right and the
Purchase 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 Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Stock shall apply on like terms to any
such other shares.

(g)           All Rights
originally issued by the Company subsequent to any adjustment made to the
Purchase Price hereunder shall evidence the right to purchase, at the adjusted
Purchase Price, the number of one one-thousandth (1/1000) of a share of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

(h)           Unless the
Company shall have exercised its election as provided in Section 11(i), upon
each adjustment of the Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each Right outstanding immediately prior to the making
of such adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of one one-thousandth (1/1000) of a share
of Preferred Stock (calculated to the nearest one-millionth) obtained by (i)
multiplying (x) the number of one one-thousandth (1/1000) of a share covered by
a Right immediately prior to this adjustment, by (y) the Purchase Price in
effect immediately prior to such adjustment of the Purchase Price, and (ii)
dividing the product so obtained by the Purchase Price in effect immediately
after such adjustment of the Purchase Price.

(i)            The
Company may elect on or after the date of any adjustment of the Purchase Price
to adjust the number of Rights, in lieu of any adjustment in the number of one 

23

 

one-thousandth
(1/1000) of a share of Preferred Stock purchasable upon the exercise of a
Right.  Each of the Rights outstanding
after the adjustment in the number of Rights shall be exercisable for the
number of one one-thousandth (1/1000) of a share of Preferred Stock for which a
Right was exercisable immediately prior to such adjustment.  Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price.  The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made.  This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the 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(i), the Company shall, as
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 Purchase 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.

(j)            Irrespective
of any adjustment or change in the Purchase Price or the number of one
one-thousandth (1/1000) of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth
(1/1000) of a share and the number of one one-thousandth (1/1000) of a share
which were expressed in the initial Rights Certificates issued hereunder.

(k)           Before
taking any action that would cause an adjustment reducing the Purchase Price
below the then stated value, if any, of the number of one one-thousandth
(1/1000) of a share of Preferred Stock issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable such number of one one-thousandth (1/1000) of a
share of Preferred Stock at such adjusted Purchase Price.

(l)            In any
case in which this Section 11 shall require that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event the issuance to the
holder of any Right exercised after such record date the number of one
one-thousandth (1/1000) of a share of Preferred Stock and other capital stock
or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-thousandth (1/1000) of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon
such exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the 

24

 

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) or securities upon the occurrence of the event requiring such
adjustment.

(m)          Anything in
this Section 11 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Purchase Price, in addition to those adjustments
expressly required by this Section 11, as and to the extent that in their good
faith judgment the Board of Directors shall determine to be advisable in order
that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance
wholly for cash of any shares of Preferred Stock at less than the Current
Market Price, (iii) issuance wholly for cash of shares of Preferred Stock or
securities which by their terms are convertible into or exchangeable for shares
of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or
warrants referred to in this Section 11, hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such stockholders.

(n)           The
Company covenants and agrees that it shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than fifty percent (50%) 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 and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale 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 or (y) prior to, simultaneously
with or immediately after such consolidation, merger or sale, the stockholders
of the Person who constitutes, or would constitute, the “Principal Party” for
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.

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

(p)           Anything
in this Agreement to the contrary notwithstanding, in the event that the
Company shall at any time after the Rights Dividend Declaration Date and prior
to the earlier of the Distribution Date or the Expiration Date (i) declare a
dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding,
or issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated
with each share of Common Stock following any such event shall equal the result
obtained by multiplying the 

25

 

number of
Rights associated with each share of Common Stock immediately prior to such
event by a fraction the numerator which shall be the total number of shares of
Common Stock outstanding immediately prior to the occurrence of the event and
the denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.

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

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

(a)       In
the event that, following the Stock Acquisition Date, directly or indirectly,
(x) the Company shall consolidate with, or merge with and into, any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any
other property, or (z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one transaction
or a series of related transactions, assets, cash flow or earning power
aggregating more than fifty percent (50%) of the assets, cash flow or earning
power of the Company and its Subsidiaries (taken as a whole) to any Person or
Persons (other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof), then, and in
each such case (except as may be contemplated by Section 13(d) hereof), proper
provision shall be made so that: (i) 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 the then current Purchase Price in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradeable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be
equal to the result obtained by (1) multiplying the then current Purchase Price
by the number of one one-thousandth (1/1000) of a share of Preferred Stock for
which a Right is exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of such one one-thousandth
(1/1000) of a share for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first 

26

 

occurrence of a Section 11(a)(ii) Event), and (2) dividing
that product (which, following the first occurrence of a Section 13 Event,
shall be referred to as the “Purchase Price” for each Right and for all
purposes of this Agreement) by fifty percent (50%) of the Current Market Price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) 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; (iii) the term “Company” shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.

(b)       “Principal
Party” shall mean:

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

(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets, cash flow or earning power
transferred pursuant to such transaction or transactions; provided, however,
that in any such case, (1) if the Common Stock of such Person is not at such
time and has not been continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary of another Person the Common Stock of which is and has been
so registered, “Principal Party” shall refer to such other Person; and (2) in
case such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Stock of two or more of which are and have been so
registered, “Principal Party” shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.

(c)       The
Company shall not consummate any such consolidation, merger, sale or transfer
unless the Principal Party shall have a sufficient number of authorized shares
of its Common Stock which 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 Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and
further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will

27

 

(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, and will use
its best efforts to cause such registration statement to (A) become effective
as soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date; and

(ii) take all such other action as may be necessary
to enable the Principal Party to issue the securities purchasable upon exercise
of the Rights, including but not limited to the registration or qualification
of such securities under all requisite securities laws of jurisdictions of the
various states and the listing of such securities on such exchanges and trading
markets as may be necessary or appropriate; and

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

The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. 
In the event that a Section 13 Event shall occur at any time after the
occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore
been exercised shall thereafter become exercisable in the manner described in
Section 13(a).

(d)       Notwithstanding
anything in this Agreement to the contrary, Section 13 shall not be applicable
to a transaction described in subparagraphs (x) and (y) of Section 13(a) if (i)
such transaction is consummated with a Person or Persons who acquired shares of
Common Stock pursuant to a tender offer or exchange offer for all outstanding
shares of Common Stock which is a Qualified Offer as such term is defined in
Section 11(a)(ii) hereof (or a wholly owned subsidiary of any such Person or
Persons), (ii) the price per share of Common Stock offered in such transaction
is not less than the price per share of Common Stock paid to all holders of
shares of Common Stock whose shares were purchased pursuant to such tender
offer or exchange offer and (iii) the form of consideration being offered to
the remaining holders of shares of Common Stock pursuant to such transaction is
the same as the form of consideration paid pursuant to such tender offer or
exchange offer.  Upon consummation of
any such transaction contemplated by this Section 13(d), all Rights hereunder
shall expire.

Section 14.         Fractional Rights and Fractional Shares.

(a)       The
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(i) or Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights.  In lieu of such fractional Rights, the
Company shall pay 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 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 

28

 

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

(b)       The
Company shall not be required to issue fractions of shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth
(1/1000) of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth
(1/1000) of a share of Preferred Stock). 
In lieu of fractional shares of Preferred Stock that are not integral
multiples of one one-thousandth (1/1000) of a share of Preferred Stock, the
Company may 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 one one-thousandth (1/1000) of a
share of Preferred Stock.  For purposes
of this Section 14(b), the current market value of one one-thousandth (1/1000)
of a share of Preferred Stock shall be one one-thousandth (1/1000) of the
closing price of a share of Preferred Stock (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of such
exercise.

(c)       Following
the occurrence of a Triggering Event, the Company shall not be required to
issue fractions of shares of Common Stock upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Common Stock.  In lieu of fractional shares of Common
Stock, the Company may 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 one (1) share of Common
Stock.  For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
closing price per share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) on the Trading Day immediately prior to the date of such
exercise.

(d)       The
holder of a Right by the acceptance of the Rights expressly waives his right to
receive any fractional Rights or any fractional shares upon exercise of a
Right, except as permitted by this Section 14.

Section 15.         Rights of Action. 
All rights of action in respect of this Agreement are vested in the
respective registered holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the Common Stock); and any
registered holder of any 

29

 

Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), may, in
his own behalf and for his own benefit, enforce, and may institute and maintain
any suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such 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 shall be entitled to
specific performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder 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 Common Stock;

(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;

(c)       subject
to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may
deem and treat the Person in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Rights Certificates or the
associated Common Stock certificate made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be
required to be affected by any notice to the contrary; and

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

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 the holder of the
number of one one-thousandth (1/1000) of a share of Preferred Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the 

30

 

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 of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except
as provided in Section 25 hereof), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such 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 disbursements 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.

(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 Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.

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,
stock transfer or other stockholder services 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; but only if 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 a 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 countersign such Rights Certificates either in
the name of the predecessor or in the name of the successor Rights 

31

 

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 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 the Chairman of
the Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, 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 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 or
be required to verify the same (except as to its countersignature on such
Rights Certificates), but all such statements and recitals are and shall be
deemed to have been made by the Company only.

(e)       The
Rights Agent shall not be under any responsibility in respect of the validity
of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the validity or
execution of any 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 adjustment required under the provisions of Section
11, Section 13 or Section 24 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect 

32

 

to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Common Stock or Preferred Stock will, when so 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 the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Secretary, any Assistant Secretary, the Chief Financial Officer, the Treasurer
or any Assistant Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.

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

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

33

 

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 Common
Stock and Preferred Stock, by registered or certified mail, and, if such
resignation occurs after the Distribution Date, to the registered 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
Common Stock and Preferred Stock, by registered or certified mail, and, if such
removal occurs after the Distribution Date, 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 Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent.  Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a legal business entity organized and doing business under the
laws of the United States or of the State of California or of any other state
of the United States, in good standing, having an  office in the State of California, which is authorized under such
laws to exercise corporate trust, stock transfer or stockholder services powers
and which has at the time of its appointment as Rights Agent a combined capital
and surplus of at least $50,000,000 or (b) an affiliate of a legal business
entity described in clause (a) of this sentence.  After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any
such appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and, if such appointment occurs after the Distribution Date,
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 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 the Board of Directors to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement.  In
addition, in connection with the issuance or sale of shares of Common Stock following
the Distribution Date and prior to the redemption or expiration of the Rights,
the Company (a) shall, with respect to shares of Common Stock so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, granted or awarded as of the Distribution Date, 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, issue Rights Certificates 

34

 

representing
the appropriate number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued, 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 and Termination.

(a)       The
Board of Directors may, at its option, at any time prior to the earlier of (i)
the Close of Business on the tenth Business Day following the Stock Acquisition
Date (or, if the Stock Acquisition Date shall have occurred prior to the Record
Date, the Close of Business on the tenth Business Day following the Record
Date), or (ii) the Final Expiration Date, redeem all but not less than all of
the then outstanding Rights at a redemption price of $.001 per Right, as such
amount may be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the “Redemption Price”).  Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event until such time as the Company’s right
of redemption hereunder has expired. 
The Company may, at its option, pay the Redemption Price in cash, shares
of Common Stock (based on the Current Market Price, as defined in Section
11(d)(i) hereof, of the Common Stock at the time of redemption) or any other
form of consideration deemed appropriate by the Board of Directors.

(b)       Immediately
upon the action of the Board of Directors 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 for each Right so held.  Promptly after the action of the Board of
Directors ordering 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 each holder’s last address
as it appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock.  Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder receives
the notice.  Each such notice of redemption
will state the method by which the payment of the Redemption Price will be
made.

(c)       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 and other than in connection with the purchase or
repurchase by any of them of Common Stock prior to the Distribution Date.

35

 

Section
24.         Exchange.

(a)       The Board of
Directors may, at its option, at any time after any Person becomes an Acquiring
Person, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to the
provisions of Section 7(e) hereof) for Common Stock at an exchange ratio of one
share of Common Stock 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 Stock for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty
percent (50%) or more of the Common Stock then outstanding.

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

(c)       In
any exchange pursuant to this Section 24, the Company, at its option, may
substitute Preferred Stock (or Equivalent Preferred Stock, as such term is
defined in paragraph (b) of Section 11 hereof) for Common Stock exchangeable
for Rights, at the initial rate of one one-thousandth (1/1000) of a share of
Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock,
as appropriately adjusted to reflect stock splits, stock dividends and other
similar transactions after the date hereof.

(d)       In
the event that there shall not be sufficient shares of Common Stock issued but
not outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional shares of Common Stock
for issuance upon exchange of the Rights.

(e)       The
Company shall not be required to issue fractions of shares of Common Stock or
to distribute certificates which evidence fractional shares of Common
Stock.  In lieu of such fractional
shares of Common Stock, there shall be paid to the registered holders of 

36

 

the Rights Certificates with regard to which such fractional
shares of Common Stock would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole share of Common
Stock.  For the purposes of this
subsection (e), the current market value of a whole share of Common Stock shall
be the closing price of a share of Common Stock (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.

Section 25.         Notice of Certain Events.

(a)       In
case the Company shall propose, at any time after the Distribution Date, (i) to
pay any dividend payable in stock of any class to the holders of Preferred
Stock or to make any other distribution to the holders of Preferred Stock
(other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than fifty percent (50%) of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of a Rights Certificate, to
the extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least twenty (20) days prior to the record date
for determining holders of the shares of Preferred Stock for purposes of such action,
and in the case of any such other action, at least twenty (20) days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the shares of Preferred Stock, whichever shall be the
earlier.

(b)       In
case a Section 11(a)(ii) Event shall occur, then, in any such case, (i) the
Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and 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 Section 11(a)(ii) hereof,
and (ii) all references in the preceding paragraph to Preferred Stock shall be
deemed thereafter to refer to Common Stock and/or, if appropriate, other
securities.

37

 

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 by the Rights Agent with the Company) as follows:

Liberate
Technologies

2
Circle Star Way

San
Carlos, California  94070-6200

Attention:  Corporate Secretary

 

Subject to the provisions of Section 21, 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 by the Rights
Agent with the Company) as follows:

 

Equiserve Trust Company,
N.A.

150 Royall Street

Canton, Massachusetts 02021

Attention: Client
Administration

 

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 (or, if prior to the
Distribution Date, to the holder of certificates representing shares of Common
Stock) 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.

(a)       Prior
to the Distribution Date, and subject to the provisions of Section 27(b)
hereof, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock.  From and after the Distribution Date, and
subject to the provisions of Section 27(b) hereof, the Company and the Rights
Agent shall, if the Company so directs, supplement or amend this Agreement
without the approval of any holders of Rights Certificates in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of
the holders of Rights Certificates (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 which states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment.  Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.

38

 

(b)       Notwithstanding
anything herein to the contrary, no supplement or amendment shall be made to
this Agreement at a time when the Rights are not redeemable, except as
contemplated by clause (i) or (ii) of Section 27(a) hereof.

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 shares of Common Stock or any other class of
capital stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common
Stock of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act.  The
Board of Directors shall have the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically granted to
the Board of Directors or to the Company, or as may be necessary or advisable
in the administration of this Agreement, including, without limitation, the
right and power to (i) interpret the provisions of this Agreement, and
(ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). 
All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board of Directors in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent,
the holders of the Rights and all other parties, and (y) not subject the Board
of Directors, or any of the directors on the Board of Directors, 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, registered holders
of the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered holders of the
Common Stock).

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 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 Business Day following the date
of such determination by the Board of Directors.  Without limiting the foregoing, if any provision requiring a
specific group of directors to act is held to by any court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such determination
shall then be made by 

39

 

 

the
Board of Directors in accordance with applicable law and the Company’s Amended
and Restated Certificate of Incorporation and Bylaws.

Section 32.         Governing Law. 
This Agreement, 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 made and to be 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.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

40

 

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

	
   

  	
  LIBERATE
  TECHNOLOGIES

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  KENT WALKER

  
	
   

  	
   

  	
  Name:

  	
  Kent Walker

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EQUISERVE
  TRUST COMPANY, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  MARGRET M. PRENTICE

  
	
   

  	
   

  	
  Name:

  	
  Margret M. Prentice

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  

 

 

 

Exhibit A

 

 

FORM OF

CERTIFICATE OF DESIGNATION, PREFERENCES AND

RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

 

of

 

LIBERATE TECHNOLOGIES

 

 

Pursuant
to Section 151 of the General Corporation Law

of
the State of Delaware

 

 

We,
the undersigned officers of Liberate Technologies, a corporation organized and
existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY:

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 on May 8, 2003, adopted the following resolution creating a
series of two million (2,000,000) shares of Preferred Stock designated as
Series A Junior Participating Preferred Stock:

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

Section
1.  Designation and Amount.  The shares of such series shall be
designated as “Series A Junior Participating Preferred Stock” and the number of
shares constituting such series shall be two hundred thousand (200,000).

Section
2.  Dividends and Distributions.

(A)  Subject to the prior and superior rights of
the holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Junior Participating Preferred Stock with
respect to dividends, the holders of shares of Series A Junior 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 August 31, November 30, February 28, and May 31 of
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 Junior
Participating 

A-1

 

Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $.01 or (b) subject to the provision for adjustment
hereinafter set forth, one thousand (1,000) times the aggregate per share
amount of all cash dividends, and one thousand (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, par value $.001 per share, of the Corporation (the “Common
Stock”) since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior Participating
Preferred Stock.  In the event the
Corporation shall at any time after May 12, 2003 (the “Rights Declaration
Date”) (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

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

(C)  Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Junior Participating Preferred
Stock from the Quarterly Dividend Payment Date next preceding the date of issue
of such shares of Series A Junior 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 Junior Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date.  Accrued but unpaid dividends
shall not bear interest.  Dividends paid
on the shares of Series A Junior 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 Junior Participating Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be no more than thirty (30) days prior to the date fixed for the
payment thereof.

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

(A)  Subject to the provision for adjustment
hereinafter set forth, each share of Series A Junior Participating Preferred
Stock shall entitle the holder thereof to one thousand 

A-2

 

(1000)
votes on all matters submitted to a vote of the stockholders of the
Corporation.  In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the number of votes per share
to which holders of shares of Series A Junior Participating Preferred Stock
were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.

(B)  Except as otherwise provided herein or by
law, the holders of shares of Series A Junior 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)           (i) 
If at any time dividends on any Series A Junior Participating Preferred
Stock shall be in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark the beginning of a
period (herein called a “default period”) which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. 
During each default period, all holders of Preferred Stock (including
holders of the Series A Junior Participating Preferred Stock) with dividends in
arrears in an amount equal to six (6) quarterly dividends thereon, voting as a
class, irrespective of series, shall have the right to elect two (2) directors.

(ii)  During any default period, such voting right
of the holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to subparagraph (iii)
of this Section 3(C) or at any annual meeting of stockholders, and thereafter
at annual meetings of stockholders, provided that neither such voting right nor
the right of the holders of any other series of Preferred Stock, if any, to
increase, in certain cases, the authorized number of directors shall be
exercised unless the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or by proxy.  The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of Preferred Stock of
such voting right.  At any meeting at
which the holders of Preferred Stock shall exercise such voting right initially
during an existing default period, they shall have the right, voting as a
class, to elect directors to fill such vacancies, if any, in the Board of
Directors as may then exist up to two (2) directors or, if such right is
exercised at an annual meeting, to elect two (2) directors.  If the number which may be so elected at any
special meeting does not amount to the required number, the holders of the
Preferred Stock shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by them of the required
number.  After the holders of the
Preferred Stock shall have exercised their right to elect directors in any
default period and during the continuance of such period, the number of
directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu
with the Series A Junior Participating Preferred Stock.

A-3

 

(iii)  Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding, irrespective of series,
may request, the calling of a special meeting of the holders of Preferred
Stock, which meeting shall thereupon be called by the President, a
Vice-President or the Secretary of the Corporation.  Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this Paragraph (C)(iii)
shall be given to each holder of record of Preferred Stock by mailing a copy of
such notice to him at his last address as the same appears on the books of the
Corporation.  Such meeting shall be
called for a time not earlier than twenty (20) days and not later than sixty
(60) days after such order or request or in default of the calling of such
meeting within sixty (60) days after such order or request, such meeting may be
called on similar notice by any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding. 
Notwithstanding the provisions of this Paragraph (C)(iii), no such
special meeting shall be called during the period within sixty (60) days
immediately preceding the date fixed for the next annual meeting of the
stockholders.

(iv)  In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if applicable, shall
continue to be entitled to elect the whole number of directors until the
holders of Preferred Stock shall have exercised their right to elect two (2)
directors voting as a class, after the exercise of which right (x) the directors
so elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of Directors
may (except as provided in Paragraph (C)(ii) of this Section 3) be filled by
vote of a majority of the remaining directors theretofore elected by the
holders of the class of stock which elected the director whose office shall
have become vacant.  References in this
Paragraph (C) to directors elected by the holders of a particular class of
stock shall include directors elected by such directors to fill vacancies as
provided in clause (y) of the foregoing sentence.

(v)  Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a class to elect
directors shall cease, (y) the term of any directors elected by the holders of
Preferred Stock as a class shall terminate, and (z) the number of directors
shall be such number as may be provided for in the Amended and Restated
Certificate of Incorporation or Bylaws irrespective of any increase made
pursuant to the provisions of Paragraph (C)(ii) of this Section 3 (such number
being subject, however, to change thereafter in any manner provided by law or
in the certificate of incorporation or by-laws).  Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may be filled by a
majority of the remaining directors.

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

A-4

 

Section
4.  Certain Restrictions.

(A)  Whenever quarterly dividends or other
dividends or distributions payable on the Series A Junior Participating
Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Junior 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 Junior 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
Junior Participating Preferred Stock, except dividends paid ratably on the
Series A Junior 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 Junior
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
Junior Participating Preferred Stock; or

(iv)  purchase or otherwise acquire for
consideration any shares of Series A Junior Participating Preferred Stock, or
any shares of stock ranking on a parity with the Series A Junior 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.

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

Section
5.  Reacquired Shares.  Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof.  All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued 

A-5

 

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.

Section
6.  Liquidation, Dissolution or
Winding Up.  (A)  Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Corporation, no distribution shall
be made to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Series A Junior Participating Preferred Stock shall have received an
amount equal to equal to one thousand times the purchase price per share of
Series A Participating Preferred Stock, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment (the “Series A Liquidation Preference”).  Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Common Stock shall have received an
amount per share (the “Common Adjustment”) equal to the quotient
obtained by dividing (i) the Series A Liquidation Preference by (ii) one
thousand (1,000) (as appropriately adjusted as set forth in subparagraph (C)
below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause
(ii), the “Adjustment Number”). 
Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series A Junior Participating Preferred Stock and Common Stock, respectively,
holders of Series A Junior Participating Preferred Stock and holders of shares
of Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.

(B)  In the event, however, that there are not
sufficient assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of all other series of
preferred stock, if any, which rank on a parity with the Series A Junior
Participating Preferred Stock, then such remaining assets shall be distributed
ratably to the holders of such parity shares in proportion to their respective
liquidation preferences.  In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.

(C)  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the Adjustment Number in effect immediately prior to
such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

Section
7.  Consolidation, Merger, etc.  In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, 

A-6

 

then
in any such case the shares of Series A Junior Participating Preferred Stock
shall at the same time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to one
thousand (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.  In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

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

Section
9.  Ranking.  The Series A Junior 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
10.  Amendment.  At any time when any shares of Series A
Junior Participating Preferred Stock are outstanding, neither the Amended and
Restated Certificate of Incorporation of the Corporation nor this Certificate
of Designation shall be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.

Section
11.  Fractional Shares.  Series A Junior 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 Junior Participating Preferred Stock.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

A-7

 

IN WITNESS WHEREOF, we have executed and
subscribed this Certificate and do affirm the foregoing as true under the
penalties of perjury this _______ day of May, 2003. 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  

 

 

 

A-8

 

Exhibit B

 

 

 

Form
of Rights Certificate

 

 

	
  Certificate No. R-

  	
   

  	
   

  	
   

  	
  Rights

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

NOT EXERCISABLE AFTER MAY 30, 2013 OR EARLIER
IF REDEEMED BY THE COMPANY.  THE RIGHTS
ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. 
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON (AS SUCH TERM IS 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 AGREEMENT.]1

 

 

1                    The portion of the legend in brackets
shall be inserted only if applicable and if so inserted shall replace the
preceding sentence.

 

 

 

 

 

Rights Certificate

 

LIBERATE
TECHNOLOGIES

 

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 May 12, 2003 (the “Rights Agreement”), between
Liberate Technologies, a Delaware corporation (the “Company”), and
Equiserve Trust Company, N.A., a federally chartered trust company (the “Rights
Agent”), to purchase from the Company at any time prior to 5:00 P.M.
(California time) on May 30, 2013 (unless such date is extended prior thereto
by the Board of Directors) at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one
one-thousandth (1/1000) of a fully paid, non-assessable share of Series A
Junior Participating Preferred Stock (the “Preferred Stock”) of the
Company, at a purchase price of $18.00 per one one-thousandth (1/1000) of a
share (the “Purchase 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 shares which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
per share set forth above, are the number and Purchase Price as of May 12,
2003, based on the Preferred Stock as constituted at such date.  The Company reserves the right to require
prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.

Upon
the occurrence of a Section 11(a)(ii) Event (as such term is defined in the
Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of a person who, after such transfer, became an Acquiring Person, or
an Affiliate or Associate of an Acquiring Person, such Rights shall become null
and void and no holder hereof shall have any right with respect to such Rights
from and after the occurrence of such Section 11(a)(ii) Event.

As
provided in the Rights Agreement, the Purchase Price and the number and kind of
shares of Preferred Stock 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, including
Triggering 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 above-mentioned office of the Rights Agent and are
also available upon written request to the Rights Agent.

B-2

 

This
Rights Certificate, with or without other Rights Certificates, upon surrender
at the principal office or offices 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 number of one one-thousandth (1/1000) of a share of Preferred
Stock 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.

Subject
to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.001 per Right at any time prior to the earlier of the Close of Business on
(i) the tenth Business Day following the Stock Acquisition Date (as such time
period may be extended pursuant to the Rights Agreement), and (ii) the Final
Expiration Date.  In addition, under
certain circumstances following the Stock Acquisition Date, the Rights may be
exchanged, in whole or in part, for shares of the Common Stock, or shares of
preferred stock of the Company having essentially the same value or economic
rights as such shares.  Immediately upon
the action of the Board of Directors authorizing any such exchange, and without
any further action or any notice, the Rights (other than Rights which are not
subject to such exchange) will terminate and the Rights will only enable
holders to receive the shares issuable upon such exchange.

No
fractional shares of Preferred Stock will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth (1/1000) of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.

No
holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
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 consent to or withhold consent from 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.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

B-3

 

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

Dated
as of ____________________________.

	
  ATTEST:

  	
   

  	
  LIBERATE
  TECHNOLOGIES

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Secretary

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EQUISERVE TRUST COMPANY,
  N.A.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Authorized
  Signature

  	
   

  	
   

  	
   

  
					

 

 

 

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:

  	
   

  	
   

  
										

 

 

 

 

Certificate

 

 

The
undersigned hereby certifies by checking the appropriate boxes that:

(1)  this Rights Certificate [ ] is [ ] 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 Acquiring Person
(as such terms are defined pursuant to the Rights Agreement);

(2)  after due inquiry and to the best knowledge
of the undersigned, it [ ] did [ ] 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 an Acquiring Person.

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  

 

 

 

 

NOTICE

 

 

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

 

 

 

FORM OF ELECTION TO PURCHASE

 

(To
be executed if holder desires to exercise 

Rights represented by the Rights Certificate.)

 

To:          Liberate
Technologies:

 

The
undersigned hereby irrevocably elects to exercise ________________ Rights
represented by this Rights Certificate to purchase the shares of Preferred
Stock issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:

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 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:

  
				

 

Certificate

 

 

The
undersigned hereby certifies by checking the appropriate boxes that:

(1)  the Rights evidenced by this Rights
Certificate [  ] are [  ] 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 Acquiring Person (as such terms are defined pursuant to the Rights
Agreement);

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

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  
					

 

 

 

 

NOTICE

 

 

 

The
signature to the foregoing Election to Purchase and Certificate must correspond
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 TO PURCHASE

PREFERRED STOCK

 

 

On
May 9, 2003, the Board of Directors of Liberate Technologies (the “Company”)
declared a dividend distribution of one Right for each outstanding share of
Company Common Stock to stockholders of record at the Close of Business on May
30, 2003 (the “Record Date”). 
Each Right entitles the registered holder to purchase from the Company a
unit consisting of one one-thousandth (1/1000) of a share (a “Unit”) of
Series A Junior Participating Preferred Stock, par value $.001 per share (the “Series
A Preferred Stock”) at a Purchase Price of $18.00 per Unit, subject to
adjustment.  The description and terms
of the Rights are set forth in a Rights Agreement (the “Rights Agreement”)
between the Company and Equiserve Trust Company, N.A., as Rights Agent.

Initially,
the Rights will be attached to all Common Stock certificates representing
shares then outstanding, and no separate Rights Certificates will be distributed.  Subject to certain exceptions specified in
the Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) ten (10) business days
following a public announcement that a person or group of affiliated or
associated persons (an “Acquiring Person”) has acquired beneficial
ownership of fifteen percent (15%) or more of the outstanding shares of Common
Stock other than as a result of repurchases of stock by the Company, certain
inadvertent actions by institutional or certain other stockholders or the
beneficial ownership by a person of fifteen percent (15%) or more of the
outstanding Common Stock as of May 30, 2003, or the date a Person has entered
into an agreement or arrangement with the Company or any Subsidiary of the
Company providing for an Acquisition Transaction  (the “Stock Acquisition Date”) or (ii) ten (10) business
days (or such later date as the Board of Directors shall determine) following
the commencement of a tender offer or exchange offer that would result in a
person or group becoming an Acquiring Person. 
An Acquisition Transaction is defined in the Rights Agreement as (x) a
merger, consolidation or similar transaction involving the Company or any of
its Subsidiaries as a result of which stockholders of the Company will no
longer own a majority of the outstanding shares  of Common Stock of the Company or a publicly traded entity which
controls the Company or, if appropriate, the entity into which the Company may
be merged, consolidated or otherwise combined (based solely on the shares of
Common Stock received or retained by such stockholders, in their capacity as
stockholders of the Company, pursuant to such transaction), (y) a purchase or
other acquisition of all or a substantial portion of the assets of the Company
and its Subsidiaries, or (z) a purchase or other acquisition of securities
representing fifteen percent (15%) or more of the shares of Common Stock then
outstanding.  Until the Distribution
Date, (i) the Rights will be evidenced by the Common Stock certificates and
will be transferred with and only with such Common Stock certificates, (ii) new
Common Stock certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Common Stock outstanding will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate.  Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event (as defined below) that, upon any 

 

exercise
of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock will be issued.

The
Rights are not exercisable until the Distribution Date and will expire at
5:00 P.M. (California time) on May 30, 2013, unless such date is extended
or the Rights are earlier redeemed or exchanged by the Company as described
below.

As
soon as practicable after the Distribution Date, Rights Certificates will be
mailed to holders of record of the Common Stock as of the Close of Business on
the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights.  Except as
otherwise determined by the Board of Directors, only shares of Common Stock
issued prior to the Distribution Date will be issued with Rights.

In
the event that a Person becomes an Acquiring Person, except pursuant to an
offer for all outstanding shares of Common Stock which the independent
directors determine to be fair and not inadequate and to otherwise be in the
best interests of the Company and its stockholders, after receiving advice from
one or more investment banking firms (a “Qualified Offer”), each holder
of a Right will thereafter have the right to receive, upon exercise, Common
Stock (or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the
Right.  Notwithstanding any of the
foregoing, following the occurrence of the event set forth in this paragraph,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void.  However, Rights are not
exercisable following the occurrence of the event set forth above until such
time as the Rights are no longer redeemable by the Company as set forth below.

For
example, at an exercise price of $200 per Right, each Right not owned by an
Acquiring Person (or by certain related parties) following an event set forth
in the preceding paragraph would entitle its holder to purchase $400 worth of
Common Stock (or other consideration, as noted above) for $200.  Assuming that the Common Stock had a per
share value of $40 at such time, the holder of each valid Right would be
entitled to purchase 10 shares of Common Stock for $200.

In
the event that, at any time following the Stock Acquisition Date, (i) the
Company engages in a merger or other business combination transaction in which
the Company is not the surviving corporation (other than with an entity which
acquired the shares pursuant to a Qualified Offer), (ii) the Company engages in
a merger or other business combination transaction in which the Company is the
surviving corporation and the Common Stock of the Company is changed or
exchanged, or (iii) fifty percent (50%) or more of the Company’s assets, cash
flow or earning power is sold or transferred, each holder of a Right (except
Rights which have previously been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right.  The events set forth in this paragraph and
in the second preceding paragraph are referred to as the “Triggering Events.”

At
any time after a person becomes an Acquiring Person and prior to the
acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common 

C-2

 

Stock,
the Board of Directors may exchange the Rights (other than Rights owned by such
person or group which have become void), in whole or in part, at an exchange
ratio of one share of Common Stock, or one one-thousandth (1/1000) of a share
of Preferred Stock (or of a share of a class or series of the Company’s
preferred stock having equivalent rights, preferences and privileges), per
Right (subject to adjustment).

At
any time until ten (10) business days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.001
per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). 
Immediately upon the action of the Board of Directors ordering redemption
of the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the $.001 redemption price.

Until
a Right is exercised, the holder thereof, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends.  While the
distribution of the Rights will not be taxable to stockholders or to the
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Common Stock (or
other consideration) of the Company or for common stock of the acquiring
company or in the event of the redemption of the Rights as set forth above.

Any
of the provisions of the Rights Agreement may be amended by the Board of
Directors prior to the Distribution Date. 
After the Distribution Date, the provisions of the Rights Agreement may
be amended by the Board of Directors in order to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of Rights, or to shorten
or lengthen any time period under the Rights Agreement.  The foregoing notwithstanding, no amendment
may be made to the Rights Agreement during a time when the Rights are not
redeemable, except to cure any ambiguity or correct or supplement any provision
contained in the Rights Agreement which may be defective or inconsistent with
any other provision therein.

A
copy of the Rights Agreement is being filed with the Securities and Exchange
Commission as an Exhibit to a Registration Statement on Form 8-A/Current Report
on Form 8–K.  A copy of the
Rights Agreement is available free of charge from the Rights Agent.  This summary description of the Rights does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.

 

 

 

C-3

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