Document:

ex10_1.htm

    

      Exhibit
10.1

      Lexmark
International, Inc.

      Stock
Incentive Plan

      

      Performance-Based Restricted
Stock Unit Award Notice

      

      This
Award Notice evidences the award of performance-based restricted stock units
(each, a “Performance
RSU” or collectively, the “Performance
RSUs”) that have been granted to you, [NAME], by Lexmark International,
Inc., a Delaware corporation (the “Company”),
subject to and conditioned upon your agreement to the terms of the attached
Performance-Based Restricted Stock Unit Award Agreement (the “Agreement”).  The
Performance RSUs are granted under the Lexmark International, Inc. Stock
Incentive Plan, as amended and restated, effective April 23, 2009 (the “Plan”),
and represent the Company’s unfunded and unsecured promise to issue shares of
the Company’s Common Stock at a future date, subject to the terms of this Award
Notice, the Agreement and the Plan.

      

      The
number of Performance RSUs awarded to you, the performance measures to earn
Performance RSUs, and the vesting schedule for earned Performance RSUs are
specified below.  This Award Notice constitutes part of, and is
subject to the terms and provisions of, the Agreement and the Plan, which are
incorporated by reference herein.  Capitalized terms used but not
defined in this Award Notice shall have the meanings set forth in the Agreement
or in the Plan.

      

      
        	
                Grant Date:

                 

              	
                [DATE]

              
	
                Number of
      Performance 

                RSUs at Target:

              	
                [      #     ],
      subject to adjustment as provided under Section 5.4 of the
      Plan.

              
	 
      	
                Minimum

              	
                Target

              	
                Maximum

              
	
                50%

                 

              	
                100%

              	
                150%

              
	
                Performance Measure:

              	
                [PERFORMANCE
      MEASURE]

                 

              
	 
      	
                Minimum

              	
                Target

              	
                Maximum

              
	 
      	 
      	 
      
	
                Performance Period:

              	
                [PERFORMANCE
      PERIOD]

                 

              
	
                Service
      Condition to 

                Earn Performance RSUs:

                 

              	
                You
      must be employed on the last day of the Performance Period to earn
      Performance RSUs.  If you have a termination of employment
      during the Performance Period for any reason, you shall forfeit the
      Performance RSUs.

              
	
                 

                Determination of Earned
      

                Performance RSUs:

              	
                 

                As
      soon as practicable after the end of the Performance Period, the Committee
      intends to review and approve the Company’s business results and certify
      the level of achievement of the Performance Measure. Performance RSUs will
      be earned if, and to the extent, the Performance Measure has been
      achieved. The Committee may use its sole discretion to determine whether
      the number of earned Performance RSUs shall be reduced, based on any
      factors it may deem appropriate.

                 

              
	
                Vesting
      Schedule for 

                Earned Performance

                RSUs:

              	
                Subject
      to the provisions of the Agreement and the Plan and provided that you
      remain continuously employed by the Company or one of its Subsidiaries
      through the respective vesting dates, set forth below, any earned
      Performance RSUs shall become vested as follows:

                 

                 

              

      

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      
        	
              	
                Vesting Dates

              	
                % of Earned Performance
  RSUs

              
	
                [Vesting
      Date for Tranche 1]

                 

              	
                34%

              
	
                [Vesting
      Date for Tranche 2]

                 

              	
                33%

              
	
                [Vesting
      Date for Tranche 3]

                 

              	
                33%

              
	
                Settlement Date:

              	
                For
      each earned Performance RSU, settlement (i.e., one share of the Company’s
      Common Stock will be issued for each vested earned Performance RSU) will
      occur on (i) the date on which such Performance RSU becomes vested in
      accordance with the Vesting Schedule, set forth above, or (ii) on such
      other date as set forth in this Award Notice, the Agreement, or the
      Plan.

                 

              
	
                Acceleration Events:

              	
                If
      a Change in Control occurs during the Performance Period, a pro-rata
      portion of the Performance RSUs will be deemed earned based on the greater
      of Target or actual achievement of the Performance Measure as of the date
      of the Change in Control, and the earned Performance RSUs shall become
      100% vested as of such date.

                 

                After
      the Performance Period has ended, any earned Performance RSUs shall become
      100% vested upon the earliest to occur of: (i) your Retirement, (ii) your
      termination of employment with the Company or one of its Subsidiaries as a
      result of your death or Disability, or (iii) upon a Change in Control of
      the Company prior to your termination of employment with the Company or
      one of its Subsidiaries.

                 

              
	
                Forfeiture of Award:

              	
                By
      accepting the award of Performance RSUs, you acknowledge that this award
      has been granted to you as an incentive to remain employed by the Company
      or one of its Subsidiaries, and that if you violate the provisions set
      forth in Section 1(d) of the Agreement or the Executive Compensation
      Recovery Policy, you (i) shall forfeit any unsettled earned or unearned
      Performance RSUs and (ii) shall be required to immediately repay to the
      Company, an amount equal to the value realized from the settlement of any
      earned Performance RSUs during the period set forth in Section 1(d) of the
      Agreement or the Recovery Period set forth in the Executive Compensation
      Recovery Policy, as applicable.

              

        

      

       

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      PERFORMANCE-BASED
RESTRICTED STOCK UNIT

      AWARD
AGREEMENT

      

      pursuant
to

      

      LEXMARK
INTERNATIONAL, INC.

      STOCK
INCENTIVE PLAN

      

      

      This PERFORMANCE-BASED RESTRICTED STOCK
UNIT AWARD AGREEMENT (the "Agreement")
between Lexmark International, Inc., a Delaware corporation (the "Company"),
and the person specified on the signature page hereof (the “Grantee”)
is entered into as of the Grant Date specified on the attached Performance-Based
Restricted Stock Unit Award Notice (the “Award
Notice”) pursuant to the Lexmark International, Inc. Stock Incentive
Plan, as the same may be amended from time to time (the "Plan").  Capitalized
terms used and not defined herein shall have the meanings assigned to such terms
in the Plan or in the Award Notice, as applicable.

      

      WHEREAS, the Committee has
determined that it would be to the advantage and in the interest of the Company
to grant performance-based restricted stock units to the Grantee as an
inducement to the Grantee to remain in the service of the Company and the
Subsidiaries and as an incentive to the Grantee to devote his or her best
efforts and dedication to the performance of such services and to maximize
shareholder value; and

      

      WHEREAS, the Grantee desires
to accept from the Company the grant of the performance-based restricted stock
units, as set forth in the Award Notice, subject to the terms and conditions of
this Agreement, the Award Notice and the Plan.

       
 

      NOW, THEREFORE, in
consideration of the premises and subject to the terms and conditions set forth
in this Agreement, the Award Notice and the Plan, the parties hereto hereby
covenant and agree as follows:

      

      
        	
                 
      

              	
                1.

              	
                Performance-Based
      Restricted Stock Unit Award.

              

      

      

      
        	
                 
      

              	
                (a)

              	
                Performance-Based
      Restricted Stock Unit Award.  The Company hereby grants
      to the Grantee, effective as of the Grant Date, the number of
      performance-based restricted stock units, as set forth in the Award
      Notice, each representing the Grantee's right to receive one share of
      Common Stock, subject to the achievement of the Performance Measure(s), at
      the time or times provided for in the Award Notice, and subject to the
      terms and conditions set forth in this Agreement, the Award Notice and the
      Plan (the "Performance
      RSUs”).

              

      

      

      
        	
                 
      

              	
                (b)

              	
                Stock Incentive
      Plan.  This Agreement is subject in all respects to the
      terms of the Plan, all of which terms are made a part of and incorporated
      in this Agreement by reference.  In the event of any conflict
      between the terms of this Agreement and the terms of the Plan, the terms
      of the Plan shall control.  The Grantee hereby acknowledges
      receipt of a copy of the Plan, either with this Performance RSU Award
      Agreement or a prior Incentive Award made under the Plan, and agrees to
      comply with and be bound by all of the terms and conditions
      thereof.  Copies of the Plan may also be obtained from the Vice
      President of Human Resources, at any
time.

              

      

      

      
        	
                 
      

              	
                (c)

              	
                Establishment of
      Account.  No shares of Common Stock will be issued on the
      Grant Date of the Performance RSUs and the Company shall not be required
      to set aside a fund for the settlement of any such Performance
      RSUs.  The Company will establish a separate bookkeeping account
      for the Grantee and will record in such account the number of Performance
      RSUs awarded to the Grantee, and, to the extent applicable, the number
      of 

              

      

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      
        	
              	
                 

              	
                Performance
      RSUs earned by the Grantee, if any, after the Performance Period has
      ended, and the number of Dividend Equivalents provided for in Section 4(b)
      hereof.

              

      

       

      
        	
                (d)  

              	
                Forfeiture.  In
      accepting this grant of Performance RSUs, the Grantee acknowledges that
      the Performance RSUs have been granted as an incentive to the Grantee to
      remain employed by the Company or any Subsidiary and to exert his or her
      best efforts to enhance the value of the Company or any Subsidiary over
      the long-term.  Accordingly, the Grantee agrees that if he or
      she (i) within 12 months following termination of employment with the
      Company or any Subsidiary, accepts employment with a competitor of the
      Company or any Subsidiary or otherwise engages in competition with the
      Company or any Subsidiary, (ii) within 36 months following termination of
      employment with the Company or any Subsidiary, directly or indirectly,
      disrupts, damages, interferes or otherwise acts against the interests of
      the Company or any Subsidiary, including, but not limited to, recruiting,
      soliciting or employing, or encouraging or assisting his or her new
      employer or any other person or entity to recruit, solicit or employ, any
      employee of the Company or any Subsidiary without the Company’s prior
      written consent, which may be withheld in its sole discretion, (iii)
      within 36 months following termination of employment with the Company, or
      any Subsidiary, disparages, criticizes, or otherwise makes any derogatory
      statements regarding the Company or any Subsidiary or their directors,
      officers or employees, or (iv) discloses or otherwise misuses confidential
      information or material of the Company or any Subsidiary, each of these
      constituting a harmful action, then any unsettled earned or unearned
      Performance RSUs shall be canceled immediately (unless canceled earlier by
      operation of another term of this Agreement) and the Grantee shall
      immediately repay to the Company an amount equal to the value of the
      earned and settled Performance RSUs (represented by the closing market
      price on the applicable Vesting Dates (as set forth in the Award Notice)
      multiplied by the number of earned Performance RSUs vested on such Vesting
      Dates, without regard to any subsequent market price decrease or increase)
      realized by the Grantee from the vesting of any earned Performance RSUs
      within 18 months preceding the earlier of (w) the commitment of any such
      harmful action and (x) the Grantee's termination of employment with the
      Company and its Subsidiaries; and through the later of (y) 18 months
      following the commitment of any such harmful action and (z) such period as
      it takes the Company to discover such harmful action.  In
      addition, the Grantee acknowledges that, if he or she is a “Covered
      Employee” subject to the Company’s Executive Compensation Recovery Policy
      (the “Recovery
      Policy”) and engages in “Prohibited Activity,” that the unsettled
      earned or unearned Performance RSUs shall be canceled immediately and the
      Grantee shall immediately repay the “Equity Gains” realized by the Grantee
      during the “Recovery Period,” as such terms are defined in the Recovery
      Policy.  The Grantee agrees that the Company or any of its
      Subsidiaries has the right to deduct from any amounts the Company or any
      of its Subsidiaries may owe the Grantee from time to time (including
      amounts owed to the Grantee as wages or other compensation, fringe
      benefits or vacation pay, as well as any other amounts owed to the Grantee
      by the Company or any of its Subsidiaries), the amounts the Grantee owes
      the Company or any of its Subsidiaries.  The Committee shall
      have the right, in its sole discretion, not to enforce the provisions of
      this paragraph with respect to the
Grantee.

              

      

      

      Grantee
agrees to be fully liable for any breach of this above described covenant,
promise and agreement.  Grantee agrees to reimburse the Company for
all costs and expenses, including attorneys’ fees, incurred by the Company in
enforcing the obligations of Grantee.  This entire provision shall
survive the termination of the Agreement and, in no manner, shall the remedies
described herein be considered as the Company’s exclusive or entire remedy for
Grantee’s breach, non-compliance or violation of any other agreement that
Grantee may have entered into with the Company.

      

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      2.     Earning Performance
RSUs. As soon as practicable after the end of the Performance Period, as
set forth in the Award Notice, the Committee shall review and approve the
Company’s business results and certify the level of achievement of the
Performance Measure(s), as set forth in the Award Notice.  Provided
you are employed on the last day of the Performance Period, and to the extent
that the Performance Measure(s) have been achieved, a number of Performance RSUs
will be deemed earned based on the level of attainment of each Performance
Measure.  Settlement of the earned Performance RSUs is subject to your
continued employment through the Vesting Dates, as set forth in Section
3(a).  The Committee may use its sole discretion to determine whether
the number of earned Performance RSUs shall be reduced, based on any factors it
may deem appropriate.  If a Change in Control occurs during the
Performance Period, a pro-rata portion of the Performance RSUs will be deemed
earned based on the greater of Target, as set forth in the Award Notice, or the
actual achievement of the Performance Measure(s) as of the effective date of the
Change in Control.

      

      3.     Vesting of Earned
Performance RSUs.

       

      
        	
              	
                (a)

              	
                Vesting.  The
      earned Performance RSUs shall become vested in such amounts and on such
      Vesting Dates as set forth in the Award Notice, subject to the Grantee’s
      continuous employment with the Company or a Subsidiary from the Grant Date
      to the applicable Vesting Date.  To the extent vesting would
      result in the settlement of a fractional number of earned Performance
      RSUs, the number shall be rounded to a whole number, but shall not exceed
      the total number of earned Performance RSUs, as determined by the
      Committee.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Acceleration.  The
      Committee may, in its discretion, accelerate the vesting of all or any
      portion of the Performance RSUs or waive any conditions to the vesting of
      such Performance RSUs.

              

      

      

      
        	
                 
      

              	
                (c)

              	
                Termination of
      Employment during the Performance Period.  In the event
      of the Grantee's termination of employment with the Company and its
      Subsidiaries for any reason during the Performance Period, the Grantee
      shall immediately forfeit all rights with respect to the Performance
      RSUs.

              

      

      

      
        	
                 
      

              	
                (d)

              	
                Termination of
      Employment after the end of the Performance Period.  In
      the event of the Grantee’s termination of employment with the Company and
      its Subsidiaries for any reason, other than death, Disability, or
      Retirement, after the end of the Performance Period, the Grantee shall
      immediately forfeit all rights with respect to any earned Performance RSUs
      (and Dividend Equivalents) which have not yet vested in accordance with
      the terms of the Award Notice, this Agreement or the
      Plan.   After the Performance Period has ended, any earned
      Performance RSUs shall become 100% vested upon the earliest to occur of:
      (i) the Grantee’s Retirement or (ii) the Grantee’s termination of
      employment with the Company and its Subsidiaries as a result of the
      Grantee’s death or Disability.

              

      

      

      
        	
                 
      

              	
                (e)

              	
                Change in
      Control. In the event of a Change in Control prior to the Grantee’s
      termination of employment, any earned Performance RSUs (including any
      Performance RSUs deemed earned on the effective date of the Change in
      Control pursuant to Section 2) shall become 100% vested as of the
      effective date of the Change in
Control.

              

      

      

      
        	
                 
      

              	
                4.

              	
                Settlement of
      Restricted Stock Unit Award.

              

      

      

      
        	
                 
      

              	
                (a)

              	
                Settlement.  On,
      or as soon as reasonably practicable after, a Vesting Date, subject to
      Section 5 hereof, the Company shall direct its stock transfer agent to
      make (or to cause to be made) an appropriate book entry in the Company's
      stock transfer books and records reflecting the transfer to the Grantee,
      and the Grantee's ownership, of one share of Common Stock for each earned
      Performance RSU that shall have become vested on
  

              

      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                 

              	
                such
      Vesting Date.  Upon the Grantee's request, subject to Section 5
      hereof, the Company shall deliver to the Grantee a stock certificate
      registered in the Grantee's name and representing such number of shares of
      Common Stock free and clear of all restrictions except any that may be
      imposed by law.   No payment will be required to be made by
      the Grantee upon the delivery of such shares of Common Stock, except as
      otherwise provided in Section 5 of the
  Agreement.

              

      

       

      
        	
              	
                (b)

              	
                Dividend
      Equivalents.  Unless otherwise determined by the
      Committee, during the period following the Performance Period and prior to
      a Vesting Date, the Company will credit to the bookkeeping account of the
      Grantee an amount equal to any dividends paid by the Company with respect
      to the number of shares of Common Stock corresponding to the number of
      Performance RSUs ("Dividend
      Equivalents").  Dividend Equivalents in respect of earned
      Performance RSUs that shall have become vested on the applicable Vesting
      Date shall be payable to the Grantee on such Vesting Date in accordance
      with Section 4(a).

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Restrictions on Sale
      upon Public Offering.  The Grantee hereby agrees that,
      notwithstanding the vesting of the earned Performance RSUs pursuant to
      Section 3(a) of this Agreement or the transfer of the shares of Common
      Stock covered thereby to the Grantee pursuant to Section 4(a) hereof, the
      Grantee will not effect any public sale or distribution of any of such
      shares of Common Stock during the 20-day period prior to and the 180 days
      following the effective date of any registration statement hereinafter
      filed by the Company under the Securities Act of 1933, as amended, with
      respect to any underwritten public offering of any shares of the Company's
      capital stock (other than as part of such underwritten public
      offering).

              

      

      

      
        	
                 
      

              	
                5.

              	
                Tax
      Withholding.  The delivery of any directions to the
      Company's stock transfer agent or any certificates for shares of Common
      Stock pursuant to Section 4 shall not be made unless and until the
      Grantee, or, if applicable, the Grantee's beneficiary or estate, has made
      appropriate arrangements for the payment to the Company of an amount
      sufficient to satisfy any applicable U.S. federal, state and local and
      non-U.S. tax withholding or other tax requirements, as determined by the
      Company.  To satisfy the Grantee's applicable withholding and
      other tax requirements, the Company may, in its sole discretion, (i)
      withhold a number of shares of Common Stock having an aggregate Fair
      Market Value on the Vesting Date equal to the applicable amount of such
      withholding and other tax requirements or (ii) require the Grantee to sell
      a number of shares of Common Stock having at least a value sufficient to
      meet the applicable amount of such withholding and other tax requirements
      to account for rounding and market fluctuations, subject to any rules
      adopted by the Committee or required to ensure compliance with applicable
      law, including, but not limited to, Section 16 of the Securities Exchange
      Act of 1934, as amended.  Shares required to be sold to satisfy
      the Grantee’s applicable withholding and other tax requirements may be
      sold as part of a block trade with the Grantee receiving an average
      price.  Any cash payment made pursuant to Section 4 shall be
      made net of any amounts required to be withheld or paid with respect
      thereto (and with respect to any shares of Common Stock delivered
      contemporaneously therewith) under any applicable U.S. federal, state and
      local and non-U.S. tax withholding and other tax
    requirements.

              

      

      

      
        	
                 
      

              	
                6.

              	
                Transferability.  Unless
      otherwise provided in accordance with the provisions of the Plan, the
      Performance RSUs may not be sold, transferred, pledged, assigned or
      otherwise alienated or hypothecated by the Grantee, other than by will or
      the laws of descent and distribution.  The term "Grantee" as
      used in this Agreement shall include any permitted transferee of the
      Performance RSUs.

              

      

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                7.

              	
                Adjustment in
      Capitalization.

              

      

      

      
        	
                 
      

              	
                (a)

              	
                The
      aggregate number of shares of Common Stock covered by the Performance RSUs
      granted hereunder shall be proportionately adjusted to reflect, as deemed
      equitable and appropriate by the Committee, an Adjustment
      Event.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                Any
      shares of stock (whether Common Stock, shares of stock into which shares
      of Common Stock are converted or for which shares of Common Stock are
      exchanged or shares of stock distributed with respect to Common Stock) or
      cash or other property received or credited to the account of the Grantee
      with respect to the Performance RSUs as a result of any Adjustment Event,
      any distribution of property or any merger, consolidation, reorganization,
      liquidation, dissolution or other similar transaction shall, except as
      otherwise provided by the Committee, be subject to the same terms and
      conditions, including restrictions on transfer, as are applicable to the
      Performance RSUs with respect to which such shares, cash or other property
      is received or so credited and stock certificate(s), if any, representing
      or evidencing any shares of stock or other property so received shall be
      legended as appropriate.

              

      

      

      
        	
                 
      

              	
                8.

              	
                Preemption by
      Applicable Laws and Regulations.  Notwithstanding
      anything in the Plan or this Agreement to the contrary, the issuance of
      shares of Common Stock hereunder shall be subject to compliance with all
      applicable U.S. federal, state and non-U.S. securities
      laws.  Without limiting the foregoing, if any law, regulation or
      requirement of any governmental authority having jurisdiction shall
      require either the Company or the Grantee (or the Grantee's beneficiary or
      estate) to take any action in connection with the issuance of any shares
      of Common Stock hereunder, the issuance of such shares shall be deferred
      until such action shall have been taken to the satisfaction of the
      Company.

              

      

      

      
        	
                 
      

              	
                9.

              	
                Interpretation;
      Construction.  All of the powers and authority conferred
      upon the Committee pursuant to any term of the Plan or the Agreement shall
      be exercised by the Committee, in its sole discretion.  All
      determinations, interpretations or other actions made or taken by the
      Committee pursuant to the provisions of the Plan or the Agreement shall be
      final, binding and conclusive for all purposes and upon all persons and,
      in the event of any judicial review thereof, shall be overturned only if
      arbitrary and capricious.  The Committee may consult with legal
      counsel, who may be counsel to the Company or any Subsidiary, and shall
      not incur any liability for any action taken in good faith in reliance
      upon the advice of counsel.

              

      

      

      
        	
                 
      

              	
                10.

              	
                Amendment.  The
      Committee shall have the right, in its sole discretion, to alter or amend
      this Agreement, from time to time, as provided in the Plan in any manner
      for the purpose of promoting the objectives of the Plan, provided that no
      such amendment shall impair the Grantee's rights under this Agreement
      without the Grantee's consent.  Subject to the preceding
      sentence, any alteration or amendment of this Agreement by the Committee
      shall, upon adoption thereof by the Committee, become and be binding and
      conclusive on all persons affected thereby without requirement for consent
      or other action with respect thereto by any such
      person.  Notwithstanding any other provision of this Agreement
      or the Plan to the contrary, the Committee may, in its sole and absolute
      discretion and without the consent of the Grantee, amend this Agreement,
      to take effect retroactively or otherwise, as it may deem necessary or
      advisable for the purpose of conforming the Agreement to any present or
      future law, regulation or rule applicable to this Agreement or the
      Plan.  The Company shall give written notice to the Grantee of
      any such alteration or amendment of this Agreement as promptly as
      practicable after the adoption thereof.  This Agreement may also
      be amended by a writing signed by both the Company and the
      Grantee.

              

      

      

      
        	
                 
      

              	
                11.

              	
                No Rights as a
      Stockholder.  The Grantee shall have no rights as a
      stockholder with respect to the Performance RSUs prior to the date as of
      which the shares of Common Stock covered thereby are transferred to the
      Grantee in accordance with Section 4(a)
hereof.

              

      

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                12.

              	
                No Guarantee of
      Employment or Future Incentive Awards. Nothing in the Plan or this
      Agreement shall be deemed to:

              

      

       

      
        	
                 
      

              	
                (a)

              	
                interfere
      with or limit in any way the right of the Company or any Subsidiary to
      terminate Grantee’s employment at any time and for any reason, with or
      without cause;

              

      

       

      
        	
                 
      

              	
                (b)

              	
                confer
      upon Grantee any right to continue in the employ of the Company or any
      Subsidiary; and

              

      

       

      
        	
                 
      

              	
                (c)

              	
                provide
      Grantee the right to receive any Incentive Awards under the Plan in the
      future or any other benefits the Company may provide to some or all of its
      employees.

              

      

       

      
        	
                 
      

              	
                13.

              	
                Miscellaneous.

              

      

      

      
        	
                 
      

              	
                (a)

              	
                Notices.  All
      notices and other communications required or permitted to be given under
      this Agreement shall be in writing and shall be deemed to have been given
      if delivered personally or sent by certified or express mail, return
      receipt requested, postage prepaid, or by any recognized international
      equivalent of such delivery, to the Company or the Grantee, as the case
      may be, at the following addresses or to such other address as the Company
      or the Grantee, as the case may be, shall specify by notice to the others
      delivered in accordance with this Section
13(a):

              

      

      

      
        	
                 
      

              	
                (i)

              	
                if
      to the Company, to it at:

              

      

      

      
        	
                 
      

              	
                One
      Lexmark Centre Drive

              

      

      
        	
                 
      

              	
                740
      West New Circle Road

              

      

      
        	
                 
      

              	
                Lexington,
      KY  40550

              

      

      
        	
                 
      

              	
                Attention:  Secretary

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                if
      to the Grantee, to the Grantee at the address set forth on the signature
      page hereof.

              

      

      

      All such
notices and communications shall be deemed to have been received on the date of
delivery or on the third business day after the mailing thereof.

      

      
        	
                 
      

              	
                (b)

              	
                Binding Effect;
      Benefits.  This Agreement shall be binding upon and inure
      to the benefit of the parties to this Agreement and their respective
      successors and assigns.  Nothing in this Agreement, express or
      implied, is intended or shall be construed to give any person other than
      the parties to this Agreement or their respective successors or assigns
      any legal or equitable right, remedy or claim under or in respect of any
      agreement or any provision contained
herein.

              

      

      

      
        	
                 
      

              	
                (c)

              	
                Waiver.  Any
      party hereto may by written notice to the other party (i) extend the
      time for the performance of any of the obligations or other actions of the
      other party under this Agreement, (ii) waive
      compliance with any of the conditions or covenants of the other party
      contained in this Agreement and (iii) waive or
      modify performance of any of the obligations of the other party under this
      Agreement.  Except as provided in the preceding sentence, no
      action taken pursuant to this Agreement, including, without limitation,
      any investigation by or on behalf of any party, shall be deemed to
      constitute a waiver by the party taking such action of compliance with any
      representations, warranties, covenants or agreements contained
      herein.  The waiver by any party hereto of a breach of any
      provision of this Agreement shall not operate or be construed as a waiver
      of any preceding or succeeding breach and no failure by a party to
      exercise any right or privilege hereunder shall be deemed a waiver of such
      party's rights or privileges hereunder or shall be deemed a waiver of such
      party's rights to exercise the same at any subsequent time or times
      hereunder.

              

      

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                (d)

              	
                Assignability.  Neither
      this Agreement nor any right, remedy, obligation or liability arising
      hereunder or by reason hereof shall be assignable by the Company or the
      Grantee without the prior written consent of the other
    party.

              

      

      

      
        	
                 
      

              	
                (e)

              	
                Applicable
      Law.  This Agreement shall be governed by and construed
      in accordance with the laws of the State of Delaware, regardless of the
      law that might be applied under principles of conflict of laws and
      excluding any conflict or choice of law rule or principle that may
      otherwise refer construction or interpretation of the Plan or this
      Agreement to the substantive law of another
  jurisdiction.

              

      

      

      
        	
                 
      

              	
                (f)

              	
                Jurisdiction.  The
      Grantee hereby irrevocably and unconditionally submits to the jurisdiction
      and venue of the state courts of the Commonwealth of Kentucky and of the
      United States District Court of the Eastern District of Kentucky located
      in Fayette County, Kentucky, and any appellate court from any thereof, in
      any action or proceeding arising out of or relating to this Agreement, or
      for recognition or enforcement of any judgment, and each of the parties
      hereby irrevocably agree that all claims in respect of any such action or
      proceeding may be heard and determined in such Kentucky state or United
      States federal courts located in such jurisdiction.  Each of the
      parties hereto agrees that a final judgment in any such action or
      proceeding shall be conclusive and may be enforced in other jurisdictions
      by suit on the judgment or in any other manner provided by
      law.  The parties hereby irrevocably waive, to the fullest
      extent permitted by applicable law, any objection which they may now or
      hereafter have to the laying of venue of any such proceeding brought in
      such a court and any claim that any such proceeding brought in such a
      court has been brought in an inconvenient forum.  Grantee
      further agrees that any action related to, or arising out of, this
      Agreement shall only be brought by Grantee exclusively in the federal and
      state courts located in Fayette County, Kentucky.  Nothing in
      this Agreement shall affect any right that the Company may otherwise have
      to bring any action or proceeding relating to this Agreement in the courts
      of any jurisdiction.

              

      

      

      
        	
                 
      

              	
                (g)

              	
                Severability.  If
      any provision of this Agreement or the Plan shall be held invalid or
      unenforceable, such invalidity or unenforceability shall not affect any
      other provisions of this Agreement or the Plan, and the Agreement and the
      Plan shall be construed and enforced as if such provision had not been
      included.

              

      

      

      
        	
                 
      

              	
                (h)

              	
                Survival.  Any
      provision of this Agreement which contemplates performance or observance
      subsequent to any termination or expiration of this Agreement shall
      survive any termination or expiration of this Agreement and continue in
      full force and effect.

              

      

      

      
        	
                 
      

              	
                (i)

              	
                Internal Revenue Code
      Section 409A.  It is intended that the settlement of the
      Performance RSUs shall constitute a “short-term deferral” for purposes of
      Section 409A of the Code and the Treasury Department regulations and other
      interpretive guidance issued thereunder, or as otherwise exempt from the
      provisions of Section 409A of the Code. To the extent any portion of the
      settlement of the Performance RSUs cannot be so characterized, this
      Agreement shall be interpreted and construed in compliance with Section
      409A of the Code and Treasury Department regulations and other
      interpretive guidance issued thereunder, including the restriction that
      payments made to a “specified employee” (within the meaning of Section
      409A of the Code) on account of a termination of employment shall be
      delayed for six months and one day from the date of
      termination.

              

      

      

      
        	
                (j)  

              	
                Section and Other
      Headings, Etc.  The section and other headings contained
      in this Agreement are for reference purposes only and shall not affect the
      meaning or interpretation of this
Agreement.

              

      

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      
        	
                (k)  

              	
                Counterparts.  This
      Agreement may be executed in any number of counterparts, each of which
      shall be deemed to be an original and all of which together shall
      constitute one and the same
instrument.

              

      

      

      *           *           *           *           *

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      IN WITNESS WHEREOF, the
Company and the Grantee have executed this Agreement, effective as of the Grant
Date.

      

      LEXMARK INTERNATIONAL,
INC.

      

      

      By: ________________________________                                                               

      Jeri L. Isbell

      Vice President of Human
Resources

      

      GRANTEE:

      

      

      By: ________________________________                                                               

      (Sign Here)

      

      Address
of the Grantee:

      ___________________________________

       

      ___________________________________

      

      

      

      

      

      

      

      

      Designation of
Beneficiary

      

      In the
event of my death, I hereby designate the following person(s), as my
beneficiary, to receive any unsettled earned Performance RSUs that become vested
upon my death pursuant to this Agreement.  I acknowledge that if I
fail to designate a beneficiary, below, that any unsettled earned Performance
RSUs that become vested upon my death shall be paid to my estate.

       
 

      

      

      

       

      
        ___________________________________

        Beneficiary Name

      

      

      

      
        
           

        

        
          9Unassociated Document

    Exhibit
4.01

    

    

    
 

    WPCS
INTERNATIONAL INCORPORATED

    

    AND

    

    INTERWEST
TRANSFER CO., INC.,

    as Rights Agent

     

    RIGHTS AGREEMENT

    

    dated as of

    

    February 24, 2010

     

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    TABLE
OF CONTENTS

     

    
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	
              Page

            	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
              Section
      1.

            	 
      	
              Certain
      Definitions

            	 
      	 
      	
              1

            	 
      
	
              Section
      2.

            	 
      	
              Appointment
      of Rights Agent

            	 
      	 
      	
              7

            	 
      
	
              Section
      3.

            	 
      	
              Issue
      of Right Certificates

            	 
      	 
      	
              7

            	 
      
	
              Section
      4.

            	 
      	
              Form
      of Right Certificates

            	 
      	 
      	
              9

            	 
      
	
              Section
      5.

            	 
      	
              Countersignature
      and Registration

            	 
      	 
      	
              9

            	 
      
	
              Section
      6.

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

            	 
      	 
      	
              9

            	 
      
	
              Section
      7.

            	 
      	
              Exercise
      of Rights: Purchase Price; Expiration Date of Rights

            	 
      	 
      	
              9

            	 
      
	
              Section
      8.

            	 
      	
              Cancellation
      and Destruction of Right Certificates

            	 
      	 
      	
              10

            	 
      
	
              Section
      9.

            	 
      	
              Reservation
      and Availability of Shares of Preferred Stock

            	 
      	 
      	
              10

            	 
      
	
              Section
      10.

            	 
      	
              Preferred
      Stock Record Date

            	 
      	 
      	
              11

            	 
      
	
              Section
      11.

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

            	 
      	 
      	
              12

            	 
      
	
              Section
      12.

            	 
      	
              Certificate
      of Adjusted Purchase Price or Number of Shares

            	 
      	 
      	
              15

            	 
      
	
              Section
      13.

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

            	 
      	 
      	
              15

            	 
      
	
              Section
      14.

            	 
      	
              Fractional
      Rights and Fractional Shares

            	 
      	 
      	
              17

            	 
      
	
              Section
      15.

            	 
      	
              Rights
      of Action

            	 
      	 
      	
              18

            	 
      
	
              Section
      16.

            	 
      	
              Agreement
      of Right Holders

            	 
      	 
      	
              18

            	 
      
	
              Section
      17.

            	 
      	
              Right
      Certificate Holder Not Deemed a Stockholder

            	 
      	 
      	
              18

            	 
      
	
              Section
      18.

            	 
      	
              Concerning
      the Rights Agent

            	 
      	 
      	
              18

            	 
      
	
              Section
      19.

            	 
      	
              Merger
      or Consolidation or Change of Name of Rights Agent

            	 
      	 
      	
              19

            	 
      
	
              Section
      20.

            	 
      	
              Duties
      of Rights Agent

            	 
      	 
      	
              19

            	 
      
	
              Section
      21.

            	 
      	
              Change
      of Rights Agent

            	 
      	 
      	
              21

            	 
      
	
              Section
      22.

            	 
      	
              Issuance
      of New Right Certificates

            	 
      	 
      	
              21

            	 
      
	
              Section
      23.

            	 
      	
              Redemption

            	 
      	 
      	
              21

            	 
      
	
              Section
      24.

            	 
      	
              Exchange

            	 
      	 
      	
              22

            	 
      
	
              Section
      25.

            	 
      	
              Notice
      of Certain Events

            	 
      	 
      	
              23

            	 
      
	
              Section
      26.

            	 
      	
              Notices

            	 
      	 
      	
              23

            	 
      
	
              Section
      27.

            	 
      	
              Supplements
      and Amendments

            	 
      	 
      	
              24

            	 
      
	
              Section
      28.

            	 
      	
              Successors

            	 
      	 
      	
              24

            	 
      
	
              Section
      29.

            	 
      	
              Benefits
      of this Agreement

            	 
      	 
      	
              24

            	 
      
	
              Section
      30.

            	 
      	
              Determinations
      and Actions by the Board of Directors of the Company

            	 
      	 
      	
              24

            	 
      
	
              Section
      31.

            	 
      	
              Periodic
      Review by Independent Directors

            	 
      	 
      	
              25

            	 
      
	
              Section
      32.

            	 
      	
              Severability

            	 
      	 
      	
              25

            	 
      
	
              Section
      33.

            	 
      	
              Governing
      Law

            	 
      	 
      	
              25

            	 
      
	
              Section
      34.

            	 
      	
              Descriptive
      Headings; References

            	 
      	 
      	
              25

            	 
      
	
              Section
      35.

            	 
      	
              Counterparts

            	 
      	 
      	
              25

            	 
      
	
              Section
      36.

            	 
      	
              Force
      Majeure

            	 
      	 
      	
              25

            	 
      

    

    

    Exhibit A

    Form of
Certificate of Designations for Series E Junior Participating Preferred
Stock

    

    Exhibit B

    Form of
Right Certificate

    Form of
Assignment

    Form of
Election to Purchase

    

    Exhibit C

    Summary
of Rights to Purchase Preferred Stock

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    RIGHTS AGREEMENT

    

    This
Rights Agreement, dated as of February 24, 2010 (this “Agreement”), is
entered into by and between WPCS INTERNATIONAL INCORPORATED, a Delaware
corporation (the “Company”), and
INTERWEST TRANSFER CO., INC., as Rights Agent (the “Rights
Agent”).

    

    WITNESSETH:

    

    WHEREAS, the Board of
Directors of the Company has authorized and declared a dividend distribution of
one preferred share purchase right (a “Right”) for each
outstanding share of Common Stock (as defined below) outstanding as of the close
of business on March 8, 2010 (the “Record Date”), and
has authorized the issuance of one Right (subject to adjustment) in respect of
each share of Common Stock issued between the Record Date and the earliest to
occur of the Distribution Date, the Redemption Date and the Expiration Date (as
such terms are hereinafter defined), with each Right representing the right to
purchase one one-thousandth (1/1,000th) of one share of Series D Junior
Participating Preferred Stock of the Company having the rights and preferences
set forth in the form of Certificate of Designations attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth;

    

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

    

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

    

    (a)
“Acquiring
Person” shall mean any Person who or that, together with all Affiliates
and Associates of such Person, shall be or become the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding, but shall not include
(i) any employee benefit plan of the Company or of any Subsidiary of the
Company, or (ii) any entity organized, appointed or established pursuant to
the terms of any such plan, or (iii) the Company or (iv) any
Subsidiary of the Company. Notwithstanding the foregoing, no Person shall be
deemed to be an “Acquiring Person”
solely by reason that such Person, alone or together with Affiliates and
Associates of such Person, Beneficially Owns on the date of this Agreement, 15%
or more of the shares of Common Stock currently outstanding; provided, however, that if
after the date of this Agreement, such Person, alone or together with Affiliates
and Associates of such Person, becomes the Beneficial Owner of an additional
amount of Common Stock equal to 1% or more of the shares of Common Stock then
outstanding (other than by reason of a stock dividend, stock split or other
corporate action effected by the Company), then such Person shall be deemed to
be an “Acquiring
Person,” subject to the following sentences of this Section 1(a),
unless, upon consummation of the acquisition of such additional Common Stock,
such Person, alone or together with all Affiliates and Associates of such
Person, does not beneficially own 18% or more of the Common Stock then
outstanding.

    

    Notwithstanding
the foregoing, no Person shall become an “Acquiring Person” as
the result of an acquisition of Common Stock by the Company or any Subsidiary of
the Company that, by reducing the number of shares outstanding, increases the
proportionate number of shares Beneficially Owned by a Person to 15% or more of
the Common Stock then outstanding; provided, however, that if such
Person becomes the Beneficial Owner of 15% or more of the Common Stock then
outstanding by reason of share acquisitions by the Company and its Subsidiaries
and shall, after such share acquisitions by the Company and its Subsidiaries,
become the Beneficial Owner of any additional Common Stock (other than by reason
of a stock dividend, stock split or other corporate action effected by the
Company), then such Person shall be deemed to be an “Acquiring Person,”
subject to the following sentence of this Section 1(a),
unless, upon consummation of the acquisition of such additional Common Stock,
such Person does not beneficially own 15% or more of the Common Stock then
outstanding.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    Notwithstanding
the foregoing, if the Board of Directors of the Company determines in good faith
that a Person who otherwise would be an “Acquiring Person,” as
defined pursuant to the foregoing provisions of this Section 1(a),
became the Beneficial Owner of a number of shares of Common Stock such that such
Person would otherwise be an Acquiring Person inadvertently (including, without
limitation, because (X) such Person was unaware that it Beneficially Owned
a percentage of Common Stock that would cause such Person to be an “Acquiring Person” or
(Y) such Person was aware of the extent of its Beneficial Ownership of
Common Stock but had no actual knowledge of the consequences of such Beneficial
Ownership under this Agreement) and without any intention of changing or
influencing control of the Company, then such Person shall not be deemed to be
an “Acquiring
Person” or to have become an “Acquiring Person,”
for all purposes of this Agreement (such that, for the avoidance of doubt, under
such circumstances no Distribution Date shall be deemed to have occurred and no
adjustment pursuant to Section 11(a)(ii) or
Section 13
shall be made in respect thereof) unless such Person fails to divest itself as
soon as practicable if the Company so requests (as determined in good faith by
the Board of Directors of the Company) of a sufficient number of shares of
Common Stock (or of Derivative Securities underlying a transaction entered into
by or acquired by such Person or any of such Person’s Affiliates or Associates)
so that such Person would no longer qualify as an Acquiring Person; provided, however, that if such
Person, after such determination and divestment, becomes the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding by reason of becoming
the Beneficial Owner of any additional shares of Common Stock, then such Person
shall be deemed to be an “Acquiring Person”
unless a subsequent determination and divestment is made.

    

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

    

    (c)
“Agreement”
shall have the meaning set forth in the preamble hereto.

    

    (d)
“Associate,”
when used to indicate a relationship with any Person, shall mean each, any and
all of the following:

    

    (i) any
firm, corporation, limited liability company, partnership, joint venture, bank,
trust or other entity of which such Person (A) is an officer or partner or
(B) is, directly or indirectly, the Beneficial Owner of 10% or more of any
class of equity securities; provided, however, that a firm,
corporation, limited liability company, partnership, joint venture, bank, trust
or other entity described in clause (B) shall not be an “Associate” of a
Person if, and only for so long as, such Person (1) has reported Beneficial
Ownership of the equity securities of such firm, corporation, limited liability
company, partnership, joint venture, bank, trust or other entity on
Schedule 13G under the Exchange Act and is not required to report its
ownership of such equity securities on Schedule 13D under the Exchange Act,
(2) satisfies the criteria set forth in both Rule 13d-1(b)(1)(i) and
Rule 13d-1(b)(1)(ii) of the General Rules and Regulations under the
Exchange Act, (3) is the Beneficial Owner of less than 15% of the shares of
Common Stock then outstanding (including any such shares that are beneficially
owned by such Person’s Affiliates and Associates after giving effect to this
proviso) and (4) has not reported and is not required to report its
ownership of Common Stock on Schedule 13D under the Exchange
Act;

    

    (ii) any
trust or other estate in which such Person has a substantial beneficial interest
or as to which such Person serves as trustee or in a similar fiduciary capacity;
and

    

    (iii) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person.

    

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

    

    (i) that
such Person, or any of such Person’s Affiliates or Associates, beneficially
owns, directly or indirectly, within the meaning of Rule 13d-3 of the
General Rules and Regulations under the Exchange Act as in effect on the date of
this Agreement;

    

    (ii) that
such Person, or any of such Person’s Affiliates or Associates, has (A) the
right to acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or understanding
(other than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), written or
otherwise, or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the “Beneficial Owner” of,
or to “beneficially
own,” 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; or (B) the right to vote
pursuant to any agreement, arrangement or understanding, written or otherwise;
provided, however, that a
Person shall not be deemed the “Beneficial Owner” of,
or to “beneficially
own,” any security under this clause (B) if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is not then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor
report);

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    (iii)
that are beneficially owned, directly or indirectly, by any other Person with
which such Person, or any of such Person’s Affiliates or Associates, has any
agreement, arrangement or understanding, whether or not in writing, for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to Section 1(e)(ii)(B))
or disposing of any securities of the Company; provided, however, that nothing
in this Section
1(e) 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 days after the date of such acquisition, and then only if
such securities continue to be owned by such Person at the expiration of such
forty-day period. Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase “then outstanding,”
when used with reference to a Person’s Beneficial Ownership of securities of the
Company, shall mean the number of such securities then issued and outstanding
together with the number of such securities not then actually issued and
outstanding that such Person would be deemed to own beneficially hereunder;
or

    

    (iv) that
are the subject of a derivative transaction entered into by such Person or any
of such Person’s Affiliates or Associates, or derivative security acquired by
such Person or any of such Person’s Affiliates or Associates, which gives such
Person or any of such Person’s Affiliates or Associates the economic equivalent
of ownership of an amount of such securities due to the fact that the value of
the derivative is explicitly determined by reference to the price or value of
such securities, or which provides such Person or any of such Person’s
Affiliates or Associates an opportunity, directly or indirectly, to profit, or
to share in any profit, derived from any change in the value of such securities,
in any case without regard to whether (A) such derivative conveys any
voting rights in such securities to such Person or any of such Person’s
Affiliates or Associates, (B) the derivative is required to be, or capable
to being, settled through delivery of such securities, or (C) such Person
or any of such Person’s Affiliates or Associates may have entered into other
transactions that hedge the economic effect of such derivative. In determining
the number of shares of Common Stock of the Company Beneficially Owned by virtue
of the operation of this Section 1(e)(iv),
the subject Person shall be deemed to Beneficially Own (without duplication) the
notional or other number of shares of Common Stock of the Company specified in
the documentation evidencing the derivative position as being subject to be
acquired upon the exercise or settlement of the applicable right or as the basis
upon which the value or settlement amount of such right, or the opportunity of
the holder of such right to profit or share in any profit, is to be calculated
in whole or in part, and in any case (or if no such number of shares of Common
Stock of the Company is specified in such documentation or otherwise), as
determined by the Board of Directors in good faith to be the number of shares of
Common Stock of the Company to which the derivative position relates. Such
shares of Common Stock of the Company that are deemed so Beneficially Owned
pursuant to the operation of this Section 1(e)(iv)
shall be referred to herein as “Derivative Common
Shares;” provided, however, that a
Person will not be deemed to be the Beneficial Owner of, or to beneficially own,
any security if such beneficial ownership arises solely out of such Person’s
status either as a bona fide swaps dealer or as a “clearing agency,” as defined
in Section 3(a)(23) of the Exchange Act, and such Person is acting in the
ordinary course of its business and without any intent to evade, or assist any
other Person to evade, the purposes and intent of this Agreement.

    

    (f)
“Business Day”
shall mean any day other than a Saturday, Sunday, or a day on which banking
institutions in the Commonwealth of Pennsylvania or the State of New York 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., New York time, on such
date; provided,
however, that
if such date is not a Business Day it shall mean 5:00 p.m., New York time, on
the next succeeding Business Day.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    (h)
“Common Stock”
shall mean the common stock, $0.0001 par value (or as such par value may be
changed from time to time), of the Company.

    

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

    

    (j)
“Company” shall
have the meaning set forth in the preamble hereto.

    

    (k)
“Current Market Price
Per Share” shall have the meaning set forth in Section 11(d).

    

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

    

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

    

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

    

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

    

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

    

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

    

    (r)
“Independent
Directors” shall mean members of the Board of Directors of the Company
who are not officers, employees or Affiliates (or designees of Affiliates) of
either the Company or any Acquiring Person.

    

    (s)
“Invalidation
Time” shall have the meaning set forth in Section
11(a)(ii).

    

    (t)
“NASDAQ” shall
mean the NASDAQ Stock Market.

    

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

    

    (v)
“Preferred
Stock” shall mean the Series D Junior Participating Preferred Stock
of the Company having the rights and preferences set forth in the form of
Certificate of Designations attached hereto as Exhibit A.

    

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

    

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

    

    (y)
“Record Date”
shall have the meaning set forth in the recitals hereof.

    

    (z)
“Redemption
Date” shall have the meaning set forth in Section 7(a).

    

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

    

    (bb)
“Right” shall
have the meaning set forth in the recitals hereof.

    

    (cc)
“Right
Certificate” shall have the meaning set forth in
Section 3(a).

    

    (dd)
“Rights Agent”
shall have the meaning set forth in the preamble hereto.

    

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

    

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

    

    (gg)
“Security”
shall have the meaning set forth in Section 11(d).

    

    (hh)
“Senior Voting
Stock” shall have the meaning set forth in Section 13(b).

     

    
      
        
        

      

      
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    (ii)
“Shares Acquisition
Date” shall mean the first date of public announcement by the Company or
an Acquiring Person (including, without limitation, pursuant to a report filed
or amended pursuant to Section 13(d) of the Exchange Act) that a Person has
become an “Acquiring
Person” for purposes of this Agreement, or such earlier date as a
majority of the Board of Directors shall become aware of the existence of an
Acquiring Person.

    

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

    

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

    

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

    

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

    

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

    

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

    

    Section 3.
Issue of Right
Certificates.

    

    (a) Until
the close of business on the tenth day after the Shares Acquisition Date (the
“Distribution
Date”), (i) the Rights will be evidenced (subject to the provisions
of Section 3(b)) by
the certificates for the Common Stock registered in the names of the holders
thereof (which certificates shall be deemed also to be Right Certificates) and
not by separate Right Certificates, and (ii) the right to receive Right
Certificates will be transferable only in connection with the transfer of the
Common Stock. As soon as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign, and the Company
will send or cause to be sent (and the Rights Agent will, if so requested by
written notice and provided with a stockholder list and all other relevant
information that the Rights Agent may reasonably request, send), by first class,
postage-prepaid mail, to each record holder of Common Stock as of the close of
business on the Distribution Date (other than an Acquiring Person or any
Affiliate or Associate of an Acquiring Person), at the address of such holder
shown on the records of the Company, a Right Certificate, in substantially the
form of Exhibit B hereto (a “Right Certificate”),
evidencing one Right for each share of Common Stock so held. As of and after the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates. The Company shall promptly notify the Rights Agent in writing upon
the occurrence of the Distribution Date. Until such notice is received by the
Rights Agent, the Rights Agent may presume conclusively for all purposes that
the Distribution Date has not occurred.

    

    (b) On
the Record Date or as soon as practicable thereafter, the Company will make
available a copy of a Summary of Rights to Purchase Preferred Stock, 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 shares of Common Stock outstanding
as of the Record Date, until the Distribution Date (or the earlier of the
Redemption Date or the Expiration Date), the Rights will be evidenced by the
certificates for such shares registered in the names of the holders thereof.
Until the Distribution Date (or the earlier of the Redemption Date or the
Expiration Date), the surrender for transfer of any certificate for Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights,
shall also constitute the transfer of the Rights associated with the Common
Stock represented thereby.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

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

    

    This
certificate also evidences and entitles the holder hereof to certain Rights as
set forth in the Rights Agreement between WPCS International Incorporated. and
Interwest Transfer Co., Inc., as Rights Agent, dated as of February 24, 2010, as
the same may be supplemented or amended from time to time (the “Rights Agreement”),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of WPCS International
Incorporated. 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. Interwest Transfer Co., Inc. will mail to the
holder of this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances, as set forth
in the Rights Agreement, Rights issued to, acquired or beneficially owned by any
Person who is or becomes an Acquiring Person or any Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement) and their
transferees will become null and void and will no longer be
transferable.

    

    With
respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificates.

    

    In the
event that the Company purchases or acquires any shares of Common Stock after
the Record Date but prior to the Distribution Date, any Rights associated with
such shares of Common Stock shall be deemed cancelled and retired so that the
Company shall not be entitled to exercise any Rights associated with the shares
of Common Stock that are no longer outstanding.

    

    Notwithstanding
this Section 3(c),
the omission of a legend shall not affect the enforceability of any part of this
Agreement or the rights of any holder of the Rights.

    

    Section 4. Form of
Right Certificates. The Right Certificates (and
the forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially the same as Exhibit B hereto
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
(but that do not affect the rights, duties or obligations of the Rights Agent as
set forth in this Agreement) and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange or automated quotation system on which the Rights may from
time to time be listed, or to conform to usage. Subject to the provisions of
Section 22, the
Right Certificates, in each case, on their face shall entitle the holders
thereof to purchase such number of shares (or fraction of a share) of the
Preferred Stock as shall be set forth therein at the price per share (or
fraction of a share) set forth therein (the “Purchase Price”), but
the amount and type of securities purchasable upon exercise of each Right, and
the Purchase Price, shall be subject to adjustment as provided
herein.

    

    Section 5. Countersignature
and Registration.
The Right Certificates shall be executed on behalf of the Company in the manner
provided in the By-Laws of the Company for Common Stock certificates. The Right
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.

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    In case
any officer of the Company who shall have signed any of the Right Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Agreement any such person was not such an
officer.

    

    Following
the Distribution Date, and receipt by the Rights Agent of (i) written
notice of the Distribution Date pursuant to Section 3(a),
and (ii) a stockholder list and all relevant information reasonably
requested by the Rights Agent pursuant to Section 3(a),
the Rights Agent will keep or cause to be kept, at its office designated for
such purposes, books for registration and transfer of the Right Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Right Certificates, the number of Rights evidenced on
its face by each of the Right Certificates and the date of each of the Right
Certificates.

    

    Section 6. Transfer,
Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates. Subject to the provisions of
Section 7(e) and
Section 14, at
any time after the close of business on the Distribution Date, and prior to the
close of business on the earlier of the Redemption Date and the Expiration Date,
any Right Certificate or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to Section 11(a)(ii)
or that have been exchanged pursuant to Section 24) may
be transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
shares (or fraction of a share) of the Preferred Stock (or, following an event
described in either Section 11(a)(ii)
or Section 13,
Common Stock, other securities, cash or other assets, as the case may be) as the
Right Certificate or Right Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right Certificate
or Right Certificates to be transferred, split up, combined or exchanged at the
office of the Rights Agent designated for such purposes. Thereupon the Rights
Agent shall countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. As a
condition to such transfer, division, combination or exchange, the Company may
require payment by the surrendering holder of a sum sufficient to cover any tax
or charge that may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates. The Rights Agent shall have no
duty or obligation to take any action under any section of this Agreement that
requires the payment by a Rights holder of applicable taxes and/or charges
unless and until it is satisfied that all such taxes and/or charges have been
paid.

    

    Upon
receipt by the Company and the Rights Agent of evidence reasonably satisfactory
to them of the loss, theft, destruction or mutilation of a Right Certificate,
and, in the case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, which may include the posting of an (open end)
lost instrument bond, and, at the Company’s request, reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered owner in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.

    

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

    

    (a) The
registered holder of any Right Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date upon surrender of the Right Certificate, with the
form of election to purchase on the reverse side thereof duly executed, to the
Rights Agent at the office of the Rights Agent designated for such purposes,
together with payment of the Purchase Price for each one one-thousandth of one
share of the Preferred Stock (or other securities, cash or assets, as the case
may be) as to which the Rights are exercised, at or prior to the earliest of
(i) the close of business on February 24, 2020 (the “Expiration Date”), or
(ii) the date on, and time at, which the Rights are redeemed as provided in
Section 23
(“Redemption
Date”), or (iii) the time at which such Rights are exchanged as
provided for in Section 24.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (b) The
Purchase Price for each one one-thousandth of one share of the Preferred Stock
pursuant to the exercise of a Right shall initially be $15.00, shall be subject
to adjustment from time to time as provided in Section 11 and
Section 13, and
shall be payable in lawful money of the United States of America in accordance
with Section 7(c).

    

    (c) Upon
receipt of a Right Certificate representing exercisable Rights, with the form of
election to purchase duly executed, accompanied by payment of the Purchase Price
for each one one-thousandth of one share of the Preferred Stock (or other
securities, cash or assets, as the case may be) to be purchased and an amount
equal to any applicable tax or charge required to be paid by the holder of such
Right Certificate in accordance with Section 6 in cash, or
by certified check or cashier’s check payable to the order of the Company, the
Rights Agent shall thereupon (i) (A) promptly requisition from any transfer
agent of the Preferred Stock of the Company, or make available if the Rights
Agent is the transfer agent of the Preferred Stock, certificates for the number
of shares (or fractions thereof) of the Preferred Stock to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) promptly requisition from the depositary agent depositary
receipts representing such number of one one-thousandths 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 hereby directs the depositary
agent to comply with such request, (ii) when appropriate, promptly
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 14,
(iii) after receipt of such certificates or depositary receipts, promptly
cause the same to be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may be designated by
such holder, and (iv) when appropriate, after receipt, promptly deliver such
cash to or upon the order of the registered holder of such Right Certificate. 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 property are available for distribution by the Rights
Agent, if and when appropriate.

    

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

    

    (e)
Notwithstanding anything in this Agreement to the contrary, neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the purported transfer or exercise of Rights pursuant to Section 6 or
this Section 7
unless the registered holder shall have duly completed and executed the form of
assignment or election to purchase on the reverse side of the Right Certificate
surrendered for such transfer or exercise and shall have provided such
additional evidence of the identity of the Beneficial Owner (or such former or
proposed Beneficial Owner) thereof or such Beneficial Owner’s Affiliates or
Associates as the Company or the Rights Agent shall reasonably
request.

    

    Section 8. Cancellation
and Destruction of Right Certificates. All Right Certificates
surrendered for the purpose of exercise, transfer, split up, combination,
redemption or exchange shall, if surrendered to the Company or to 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 Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. Subject to applicable law and
regulation, the Rights Agent shall maintain, in a retrievable database,
electronic records of all cancelled or destroyed stock certificates which have
been canceled or destroyed by the Rights Agent. The Rights Agent shall maintain
such electronic records or physical records for the time period required by
applicable law and regulation. Upon written request of the Corporation (and at
the expense of the Corporation), the Rights Agent shall provide to the
Corporation or its designee copies of such electronic records or physical
records relating to rights certificates cancelled or destroyed by the Rights
Agent.

    

    Section 9. Reservation
and Availability of Shares of Preferred Stock. The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Stock, or its authorized and issued Preferred
Stock held in its treasury, the number of shares of the Preferred Stock that
will be sufficient to permit the exercise in full of all outstanding Rights in
accordance with this Agreement.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    So long
as the Preferred Stock (and, following the time that a Person becomes an
Acquiring Person, shares of Common Stock) issuable upon the exercise of Rights
may be listed or admitted to trading 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 or
admitted for trading on such exchange upon official notice of issuance upon such
exercise.

    

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

    

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

    

    The
Company shall, if legally required, (i) prepare and file, as soon as
reasonably practicable following the Distribution Date, a registration statement
under the Securities Act with respect to the securities purchasable upon
exercise of or exchangeable for the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
reasonably 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 no longer required to do so under the
Securities Act with respect to securities purchasable upon exercise of or
exchangeable for the Rights. The Company also shall take all such action as may
be required or as is appropriate under the securities or “blue sky” laws of such
jurisdictions as may be necessary or appropriate with respect to the securities
purchasable upon the exercise of or exchangeable for the Rights. The Company may
temporarily suspend, for a period not to exceed 120 days following the
Distribution Date, the exercisability of the Rights in order to prepare and file
such registration statement and permit it to become effective. Upon any such
suspension of exercisability of Rights referred to in this paragraph, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction 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.

    

    Section 10. Preferred
Stock Record Date. Each Person in whose name
any certificate for shares of the Preferred Stock is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
the Preferred Stock represented thereby on, and such certificate shall be dated,
the date upon which the Right Certificate evidencing such Rights, together with
the form of election to purchase duly completed and executed, was duly
surrendered and payment of the Purchase Price (and any applicable taxes or
charges) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the Preferred Stock transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a
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.

    

    
      
        
        

      

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

    

    (ii)
Subject to Section 23(a)
and Section 24, in
the event any Person becomes an Acquiring Person, each holder of a Right shall
thereafter have a right to receive, upon exercise thereof at a price equal to
the Purchase Price in effect immediately prior to such Person becoming an
Acquiring Person multiplied by the number of one one-thousandths of a share of
Preferred Stock for which a Right is then exercisable, in accordance with the
terms of this Agreement and in lieu of shares of Preferred Stock, such number of
shares of Common Stock as shall equal the result obtained by
(A) multiplying such Purchase Price by the number of one one-thousandths of
a share of Preferred Stock for which a Right is then exercisable and dividing
that product by (B) 50% of the Current Market Price Per Share of the Common
Stock (determined pursuant to Section 11(d))
on the date of the occurrence of such event; provided, however, that if the
transaction that would otherwise give rise to the adjustment is also subject to
the provisions of Section 13, then
only the provisions of Section 13 shall
apply and no adjustment shall be made pursuant to this Section 11(a)(ii).
In the event that any Person shall become an Acquiring Person and the Rights
shall then be outstanding, the Company shall not take any action that would
eliminate or diminish the benefits intended to be afforded by the Rights.
Notwithstanding anything in this Agreement to the contrary, however, from and
after the time (the “Invalidation Time”)
when any Person first becomes an Acquiring Person, any Rights that are or were
acquired or beneficially owned by any Acquiring Person (or any Affiliate or
Associate of any Acquiring Person), including, without limitation, any such
Rights when held by (1) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who becomes a transferee after the Invalidation Time,
(2) a transferee of any Acquiring Person (or any such Affiliate or
Associate) who became a transferee prior to or concurrently with the
Invalidation Time pursuant to either (x) a transfer from the Acquiring
Person to holders of its equity securities or to any Person with whom it has any
continuing agreement, arrangement or understanding, written or otherwise,
regarding the transferred Rights or (y) a transfer that the Board of
Directors of the Company determines is part of a plan, arrangement or
understanding, written or otherwise, that has the purpose or effect of avoiding
the provisions of this Section 11(a)(ii),
or (3) a subsequent transferee of any Person described in the foregoing
clauses (1) or (2), shall be void without any further action and any holder
of such Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 11(a)(ii)
are complied with, but shall have no liability to any holder of Rights or other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder. No
Right Certificate shall be issued pursuant to Section 3, Section 6 or
Section 7(d)
that represents Rights beneficially owned by an Acquiring Person whose Rights
would be void pursuant to the preceding sentence or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person or any
Associate or Affiliate whose Rights would be void pursuant to the provisions of
this paragraph shall be cancelled.

    

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

    

    
      
        
        

      

      
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    (b) If
the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them (for a period expiring
within 45 calendar days after such record date) to subscribe for or purchase
Preferred Stock (or shares having the same rights, privileges and preferences as
the Preferred Stock (“Equivalent Preferred
Stock”)) or securities convertible into Preferred Stock or Equivalent
Preferred Stock at a price per share of Preferred Stock or Equivalent 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 Per Share of the Preferred Stock (as defined in Section 11(d))
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 that 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); provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of Preferred Stock issuable upon
exercise of one Right. In case such subscription price may be paid in
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a written
statement filed with the Rights Agent and shall be conclusive for all purposes.
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 that would then be in effect if such
record date had not been fixed.

    

    (c) If
the Company shall fix a record date for the making of 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) of evidences of indebtedness or assets (other than (i) a
regular periodic cash dividend, the record date for which occurs at a time when
there is no Acquiring Person, or (ii) a regular periodic cash dividend, the
record date for which occurs at a time when there is an Acquiring Person, at a
rate not in excess of 125% of the rate of the last cash dividend theretofore
paid or (iii) a dividend payable in Preferred Stock) or subscription rights
or warrants (excluding those referred to in Section 11(b)),
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 Per
Share of the Preferred Stock (as defined in Section 11(d))
on such record date, less the fair market value (as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a written statement filed with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to one share of Preferred Stock and the denominator of which
shall be such Current Market Price Per Share of the Preferred Stock; provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of Preferred Stock issuable upon
exercise of one Right. Such adjustments shall be made successively whenever such
a record date is fixed; and in the event that such distribution is not so made,
the Purchase Price shall again be adjusted to be the Purchase Price that would
then be in effect if such record date had not been fixed.

    

    (d)
(i) For the purpose of any computation hereunder, the “Current Market Price Per
Share” of any security (a “Security”) on any
date shall be deemed to be the average of the daily closing prices per share of
such Security for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that in the
event that the Current Market Price Per Share of the Security is determined
during the period following the announcement by the issuer of such Security of
(A) a dividend or distribution on such Security payable in shares of such
Security or securities convertible into shares of such Security, or (B) any
subdivision, combination or reclassification of such Security, and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Market Price Per
Share shall be appropriately 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
ask prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low ask prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use, or, if on any
such date the Security is not quoted by such organization, the average of the
closing bid and ask prices as furnished by a professional market maker making a
market in the Security selected by the Board of Directors of the Company. The
term “Trading
Day” shall mean a day on which the principal national securities exchange
on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day.

    

    
      
        
        

      

      
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    (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
Common Stock in Section 11(d)(i).
If the Preferred Stock is not publicly traded or if the current market price per
share of Preferred Stock cannot be determined in the manner provided above, the
current market price per share of Preferred Stock shall be conclusively deemed
to be the current market price per share of Common Stock (appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof), multiplied by one thousand. If neither the Common Stock
nor the Preferred Stock is publicly held or so listed or traded, the Current
Market Price Per Share of Preferred Stock shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a written statement filed with the Rights
Agent and shall be conclusive for all purposes.

    

    (e) No
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any
adjustments that 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 (other than Preferred Stock) 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 (A) three years from the date of the
transaction that mandates such adjustment or (B) the Expiration
Date.

    

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

    

    (g) All
Rights originally issued by the Company subsequent to any adjustment made to the
Purchase Price hereunder shall evidence the right to purchase, at the adjusted
Purchase Price, the number of one one-thousandths of a share of the 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
Section 11(b)
and Section 11(c),
each Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-thousandths of a share of Preferred Stock (calculated to the
nearest ten-millionth) obtained by (i) multiplying (x) the number of
one one-thousandths of a share of Preferred Stock covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in effect immediately
prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.

    

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

    

    
      
        
        

      

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

    

    (k)
Before taking any action that would cause an adjustment reducing the Purchase
Price below one one-thousandth of the then par value, if any, of the shares of
the Preferred Stock issuable upon exercise of the Rights, the Company shall take
any corporate action that may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable shares of such 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 (with prompt written
notice of such election to the Rights Agent) to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of the
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder’s right to receive such additional shares upon the
occurrence of the event requiring such adjustment.

    

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

    

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

    

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

    

    Section 12. Certificate
of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is
made as provided in Section 11 and
Section 13, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief written statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for
the Common Stock and the Preferred Stock a copy of such certificate and
(c) mail a brief summary thereof to each holder of a Right Certificate (if
the Distribution Date has occurred) or of a certificate representing shares of
Common Stock (if prior to the Distribution Date) in accordance with Section 25. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment or statement contained therein and shall have no duty or
liability with respect to and shall not be deemed to have knowledge of such
adjustment or event unless and until it shall have received such
certificate.

    

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

    

    (a) If,
following the Shares Acquisition Date, (i) the Company shall consolidate
with, or merge with and into, any other Person, (ii) any Person shall
consolidate with or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Stock shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (iii) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person (other than the Company or one or more of its wholly owned
Subsidiaries in or more transactions, each of which complies with Section 11(o)),
then, and in each such case (except as contemplated by Section 13(f)),
proper provision shall be made so that (A) each holder of a Right (except
as otherwise provided herein) shall thereafter have the right to receive, upon
the exercise thereof at the Purchase Price in effect immediately prior to such
Person becoming an Acquiring Person multiplied by the number of one
one-thousandths of a share of Preferred Stock for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu of
shares of Preferred Stock, such number of shares of validly issued, fully paid,
non-assessable and freely tradable Senior Voting Stock (as hereinafter defined)
of the Principal Party (as hereinafter defined) (including the Company as
successor thereto or as the surviving corporation), unencumbered and not subject
to any liens, encumbrances, rights of call or first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying such
Purchase Price by the then number of one one-thousandths of share of Preferred
Stock for which a Right is then exercisable and dividing that product by
(2) 50% of the Current Market Price Per Share of the Senior Voting Stock of
such Principal Party (determined in the manner described in Section 11(d))
on the date of consummation of such consolidation, merger, sale or transfer;
(B) the Principal Party shall thereafter be liable for, and shall assume,
by virtue of such consolidation, merger, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (C) the term “Company” shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 shall
apply to such Principal Party following the occurrence of such consolidation,
merger, sale or transfer; and (D) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Senior Voting Stock in accordance with Section 9, with
each reference to Preferred Stock in Section 9 being
deemed to be a reference to the shares of its Senior Voting Stock) in connection
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
the shares of its Senior Voting Stock thereafter deliverable upon the exercise
of the Rights.

    

    
      
        
        

      

      
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    (b)
“Principal
Party” shall mean (i) in the case of any transaction described in
Section 13(a)(i)
or Section 13(a)(ii),
the Person that is the issuer of any securities into which shares of Common
Stock are converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to the merger or consolidation; and
(ii) in the case of any transaction described in Section 13(a)(iii),
the Person that is the other party to such transaction or, if more than one, the
Person that is the party receiving the greatest portion of the assets or earning
power transferred pursuant to such transaction; provided, however, that, in any
such case, if the Senior Voting Stock of such Person is not at such time and has
not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (A) if such Person is a direct or
indirect Subsidiary of another Person the Senior Voting Stock of which is and
has been so registered, the term “Principal Party”
shall refer to such other Person; or (B) if such Person is a Subsidiary,
directly or indirectly, of more than one Person and the Senior Voting Stock of
any two or more of such Persons is and has been so registered, the term “Principal Party”
shall refer to whichever of such Persons is the issuer of the Senior Voting
Stock having the greatest aggregate market value of shares outstanding; or (C)
if such Person is owned, directly or indirectly, by a joint venture formed by
two or more Persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in clauses (A) and (B) above shall apply
to each of the owners having an interest in such joint venture as if such joint
venture were a Subsidiary of both or all of such joint venturers and the
Principal Party in each such chain shall bear the obligations set forth in this
Section 13
in the same ratio as their direct or indirect interests in such joint venture
bear to the total of such interests. “Senior Voting Stock”
shall mean the capital stock (or equity interest) of the Principal Party with
the greatest voting power.

    

    (c) The
Company shall not consummate any such consolidation, merger, sale or transfer
unless, prior thereto the Company and such Principal Party or Parties shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in Section 13(a)
and Section 13(b)
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale or transfer of assets mentioned in Section 13(a),
the Principal Party or Parties will (i) prepare and file a registration
statement under the Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, will use its
best efforts (A) to cause such registration statement to become effective
as soon as practicable after such filing, (B) to cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the date of expiration of the Rights,
and (C) to similarly comply with applicable state securities laws, and use
its best efforts to list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on a national securities
exchange; and (ii) will deliver to holders of the Rights historical
financial statements for the Principal Party or Parties and each of its
Affiliates that comply in all respects with the requirements for registration on
Form 10 (or any successor form) under the Exchange Act.

    

    (d) If
the Principal Party has a provision in any of its authorized securities or in
its certificate of incorporation or by-laws or other instrument governing its
affairs, which provision would have the effect of (i) causing such
Principal Party to issue (other than to holders of Rights pursuant to this Section 13), in
connection with, or as a consequence of, the consummation of a transaction
referred to in this Section 13,
shares of Senior Voting Stock or Senior Voting Stock equivalents of such
Principal Party at less than the then-Current Market Price Per Share thereof
(determined pursuant to Section 11(d))
or securities exercisable for, or convertible into, Senior Voting Stock or
Senior Voting Stock equivalents of such Principal Party at less than such
then-current market price or (ii) providing for any special payment, tax or
similar provision in connection with the issuance of the Senior Voting Stock of
such Principal Party pursuant to the provisions of this Section 13,
then, in such event, the Company hereby covenants and agrees with each holder of
Rights that it shall not consummate any such transaction unless, prior thereto,
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.

    

    (e) The
Company covenants and agrees that it shall not, at any time after a Person first
becomes an Acquiring Person, enter into any transaction of the kind referred to
in this Section 13 if
(x) at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or arrangements that, as
a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights,
(y) prior to, simultaneously with or immediately after such transaction,
the stockholders of the Person who constitutes, or would constitute, the
Principal Party for purposes of Section 13(b)
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates or (z) the form or nature of
organization of the Principal Party would preclude or limit the exercisability
of the Rights. The provisions of this Section 13 shall
similarly apply to successive mergers or consolidations or sales or other
transfers.

    

    
      
        
        

      

      
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    Section 14.
Fractional Rights and
Fractional Shares.

    

    (a) The
Company shall not be required to issue fractions of Rights or to distribute
Right Certificates that evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates,
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and ask 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 ask 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 ask prices as
furnished by a professional market maker making a market in the Rights, selected
by the Board of Directors of the Company. If on any such date, no such market
maker is making a market in the Rights, the fair market value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.

    

    (b) The
Company shall not be required to issue fractions of shares of Preferred Stock
(other than fractions that are integral multiples of one one-thousandth of a
share of Preferred Stock) upon exercise or exchange of the Rights or to
distribute certificates that evidence fractional shares of Preferred Stock
(other than fractions that are integral multiples of one one-thousandth of a
share of Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of shares of Preferred Stock. In lieu of
fractional shares that are not integral multiples of one one-thousandth of a
share of Preferred Stock, the Company shall pay to the registered holders of
Right Certificates with regard to which such fractional shares would otherwise
be issuable an amount in cash equal to the same fraction of the current market
value of a whole share of Preferred Stock. For purposes of this Section 14(b),
the current market value of a whole share of Preferred Stock shall be the
closing price of a share of Preferred Stock (as determined pursuant to the
second sentence of Section 11(d)(i))
for the Trading Day immediately prior to the date of such exercise or
exchange).

    

    (c) The
Company shall not be required to issue fractions of shares of Common Stock upon
exercise or exchange of the Rights or to distribute certificates that evidence
fractional shares of Common Stock. In lieu of such fractional shares, the
Company shall pay to the registered holders of Right Certificates with regard to
which such fractional shares 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 purposes of this Section 14(c),
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))
for the Trading Day immediately prior to the date of such exercise or
exchange).

    

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

    

    
      
        
        

      

      
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    Section 15. Rights of
Action. All
rights of action in respect of this Agreement are vested in the respective
registered holders of the Right Certificates (and, prior to the Distribution
Date, the registered holders of the Common Stock); and any registered holder of
any Right Certificate (or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any other Right
Certificate (or, prior to the Distribution Date, of the Common Stock), may, in
such holder’s own behalf and for such holder’s own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce this Agreement, or otherwise act in respect of such holder’s right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this
Agreement.

    

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

    

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

    

    (b) after
the Distribution Date, the Right Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the office of the Rights
Agent designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer;

    

    (c) the
Company and the Rights Agent may deem and treat the Person in whose name the
Right Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated Common Stock certificates made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary; 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 the Company’s or the Rights Agent’s inability to perform
any of their respective obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, judgment, decree or ruling
(whether interlocutory or final) issued by a court or by a governmental,
regulatory, self-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.

    

    Section 17. Right
Certificate Holder Not Deemed a Stockholder. No holder, as such, of any
Right Certificate shall be entitled to vote, receive dividends or be deemed for
any purpose the holder of the Preferred Stock or any other securities of the
Company that may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in Section 23,
Section 24
or Section 25),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.

    

    Section 18. Concerning
the Rights Agent.
The Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability, or
expense (including, without limitation, the reasonable fees and expenses of
legal counsel), incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent (which gross negligence, bad faith or
willful misconduct must be determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction), for any action
taken, suffered or omitted by the Rights Agent in connection with the
acceptance, administration and performance of its duties under this Agreement,
including the costs and expenses of defending against any claim of liability in
the premises and the enforcement of this indemnification. This indemnification
shall survive the termination of this Agreement, the exercise of or expiration
of the Rights and the resignation, replacement or removal of the Rights
Agent.

    

    The
Rights Agent shall be protected and shall incur no liability for or in respect
of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons or
otherwise upon the advice of counsel as set forth in Section
20.

    

    
      
        
        

      

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

    

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

    

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

    

    (a) The
Rights Agent may consult with the 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,
suffered or omitted by it in accordance with such opinion.

    

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

    

    (c) The
Rights Agent shall be liable hereunder for only its own gross negligence, bad
faith or willful misconduct (which gross negligence, bad faith or willful
misconduct must be determined by a final, non-appealable order, judgment, decree
or ruling of a court of competent jurisdiction).

    

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

    

    
      
        
        

      

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

    

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

    

    (g) The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from the Chairman of the
Board, the Chief Executive Officer, the Chief Financial Officer, any Vice
President, the Secretary or the Treasurer of the Company, and such instructions
shall be full authorization and protection to the Rights Agent and the Rights
Agent shall not be liable for or in respect of any action taken, suffered or
omitted by it in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. The Rights Agent shall be
fully authorized and protected in relying upon the most recent instructions
received by 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 interested money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other Person.

    

    (i) The
Rights Agent may execute and exercise any of the rights or powers hereby vested
in it or perform any duty hereunder either itself or by or through its attorneys
or agents, and the Rights Agent 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,
absent gross negligence, bad faith or willful misconduct in the selection and
continued employment thereof (which gross negligence, bad faith or willful
misconduct must be determined by a final, non-appealable order, judgment, decree
or ruling of a court of competent jurisdiction).

    

    (j) If,
with respect to any Right Certificate surrendered to the Rights Agent for
exercise or transfer, the certificate attached to the form of assignment or form
of election to purchase, as the case may be, has either not been completed or
indicates that the Rights are beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof, the Rights Agent shall not take any further
action with respect to such requested exercise or transfer without first
consulting with the Company.

    

    (k) The
Rights Agent shall have no responsibility to the Company, any holders of Rights
or any holders of shares of Preferred Stock or other securities for interest or
earnings on any monies held by the Rights Agent pursuant to this Agreement,
except as otherwise specifically agreed in a separate writing by the Company and
the Rights Agent.

    

    (l) The
Rights Agent shall not be required to take notice or be deemed to have notice of
any event or condition hereunder, including, but not limited to, a Distribution
Date, a Redemption Date, any adjustment of the Purchase Price, the existence of
an Acquiring Person or any other event or condition that may require action by
the Rights Agent, unless the Rights Agent shall be specifically notified in
writing of such event or condition by the Company, and all notices or other
instruments required by this Agreement to be delivered to the Rights Agent must,
in order to be effective, be received by the Rights Agent as specified in Section 26, and
in the absence of such notice so delivered, the Rights Agent may conclusively
assume no such event or condition exists.

    

    
      
        
        

      

      
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    Section 21. Change of
Rights Agent. The
Rights Agent or any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon 30 days’ notice in writing mailed to the
Company and to each transfer agent of the Common Stock and the Preferred Stock
by registered or certified mail, and, if such resignation occurs after the
Distribution Date, to the registered holders of the Right Certificates by first
class mail. The Company may remove the Rights Agent or any successor Rights
Agent upon 30 days’ notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and the Preferred Stock by registered or certified mail, and, if
such resignation occurs after the Distribution Date, to the registered holders
of the Right Certificates by first class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit such holder’s Right Certificate
for inspection by the Company), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a Person (or an Affiliate of such a Person)
organized and doing business under the laws of the United States or of the
Commonwealth of Pennsylvania or the State of New York (or of any other state of
the United States so long as such Person is authorized to do business as a
banking institution in the Commonwealth of Pennsylvania or the State of New
York), in good standing, having a principal office in the Commonwealth of
Pennsylvania or the State of New York, that is authorized under such laws to
exercise corporate trust powers or stock transfer powers and is subject to
supervision or examination by federal or state authority and that has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100 million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock or Preferred Stock, and, if such resignation occurs after the
Distribution Date, mail a notice thereof in writing to the registered holders of
the Right Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.

    

    Section 22. Issuance
of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company, at
its option, may issue new Right Certificates evidencing Rights in such form as
may be approved by its 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 Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Stock following the Distribution Date and prior to the Expiration
Date, the Company may, with respect to shares of Common Stock so issued or sold
pursuant to (a) the exercise of stock options, (b) under any employee
plan or arrangement, (c) the exercise, conversion or exchange of
securities, notes or debentures issued by the Company or (d) a contractual
obligation of the Company, in each case existing prior to the Distribution Date,
issue Right Certificates representing the appropriate number of Rights in
connection with such issuance or sale.

    

    Section 23.
Redemption.

    

    (a) The
Board of Directors of the Company may, at its option, at any time prior to the
earlier of (i) 5:00 p.m., New York time, on the Distribution Date, or
(ii) 5:00 p.m., New York time, on the Expiration Date, redeem all but not
less than all of the then outstanding Rights at a redemption price of $0.001 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the “Redemption Price”).
Notwithstanding anything in this Agreement to the contrary, the Rights shall not
be exercisable after the first occurrence of an event described in Section 11(a)(ii)
until such time as the Company’s right of redemption under this Section 23(a)
has expired. The redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board of Directors of the Company in
its sole discretion may establish. The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the current market
price of the Common Stock at the time of redemption as determined pursuant to
Section 11(d)(i))
or any other form of consideration deemed appropriate by the Board of Directors
of the Company, or any combination thereof.

    

    
      
        
        

      

      
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    (b)
Immediately upon the action of the Board of Directors of the Company ordering
the redemption of the Rights pursuant to Section 23(a),
without any further action and without any notice, the right to exercise the
Rights will terminate and each Right will thereafter represent only the right to
receive the Redemption Price. The Company shall promptly give public notice of
any such redemption and, within ten days after such action causing a redemption
of the Rights pursuant to Section 23(a),
the Company shall mail a notice of redemption to all the holders of the then
outstanding Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock. Any notice that 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. Notwithstanding the
foregoing, the failure to give, or any defect in, any notice required to be made
or given pursuant to this Section 23(b)
shall not affect the validity of the redemption of the Rights.

    

    (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 or in
Section 24, and
other than in connection with the purchase or repurchase by any of them of
Common Stock prior to the Distribution Date.

    

    Section 24.
Exchange.

    

    (a) The
Board of Directors of the Company may, at its option, at any time after the
Shares Acquisition Date, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii))
for shares of 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 of the Company shall not
be empowered to effect such exchange at any time after any Acquiring Person,
together with all Affiliates and Associates of such Acquiring Person, becomes
the Beneficial Owner of 50% or more of the voting power of the shares of Common
Stock then outstanding. From and after the occurrence of an event specified in
Section 13(a),
any Rights that theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be only exercisable in accordance with Section 13 and
may not be exchanged pursuant to this Section 24(a).
The exchange of the Rights by the Board of Directors of the Company may be made
effective at such time, on such basis and with such conditions as the Board of
Directors of the Company in its sole discretion may establish.

    

    (b)
Immediately upon the effectiveness of the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to Section 24(a)
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 by
first class mail 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 that 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 Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights that will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights that have become void pursuant to the provisions of Section 11(a)(ii))
held by each holder of Rights.

    

    (c) The
Company may, at its option, substitute for a share of Common Stock issuable upon
the exchange of Rights in accordance with Section 24(a) a
number of shares of Preferred Stock (or equivalent preferred stock) or fraction
thereof such that the Current Market Price Per Share of one share of Preferred
Stock multiplied by such number or fraction is equal to the Current Market Price
Per Share of one share of Common Stock.

    

    
      
        
        

      

      
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    Section 25. Notice of
Certain Events.
In case the Company shall propose at any time following the Distribution Date
(a) to pay any dividend payable in stock of any class to the holders of its
Preferred Stock or to make any other distribution to the holders of its
Preferred Stock (other than a regular periodic cash dividend at a rate not in
excess of 125% of the rate of the last cash dividend theretofore paid),
(b) to offer to the holders of its Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of the Preferred Stock or
shares of stock of any class or any other securities, rights or options,
(c) to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding Preferred Stock),
(d) to effect any consolidation or merger into or with, or to effect any
sale or other transfer (or to permit one or more of its Subsidiaries to effect
any sale or other transfer), in one or more transactions, of more than 50% of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (e) to effect the liquidation, dissolution or
winding up of the Company or (f) to declare or pay any dividend on the
shares of Common Stock payable in shares of Common Stock or to effect a
subdivision, combination or consolidation of the shares of Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock), then, in each such case, the Company shall give to each holder of a
Right Certificate, in accordance with Section 26, 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 Common Stock and/or the 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 (a) or (b) above at least ten
days prior to the record date for determining holders of the Preferred Stock for
purposes of such action, and in the case of any such other action, at least ten
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Stock and/or the Preferred
Stock, whichever shall be the earlier. In case the event set forth in Section 11(a)(ii)
shall occur, then the Company shall as soon as practicable thereafter give to
each holder of a Right, in accordance with Section 26, 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).

    

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

    

    WPCS
International Incorporated

    One East
Uwchlan Avenue, Suite 301

    Exton, PA
19341

    Attention:
Corporate Secretary

    

    With a copy to:

    

    Sichenzia Ross Friedman Ference
LLP

    61 Broadway, 32nd
Floor

    New York, New York 10005

    Attn:  Thomas A. Rose,
Esq.

    

    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 Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by overnight delivery service or first class
mail, postage prepaid, addressed (until another address is filed in writing by
the Rights Agent with the Company) as follows:

    

    Interwest
Transfer Co., Inc.

    1981
Murray Holladay Road, Suite 100

    Salt Lake
City Utah 84117

    Attention:
Legal Department

    

    With a copy to:

    

    W. Sterling Mason, Jr. &
Associated, LTD.

    1981
Murray Holladay Road, Suite 100B

    Salt Lake
City Utah 84117

    

    

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

    

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    Section 27. Supplements
and Amendments. Except as otherwise provided in this Section 27, and
prior to the Distribution Date, the Company may, from time to time in its sole
and absolute discretion, and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement in any respect without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date, except as otherwise provided in this Section 27, the
Company may, and the Rights Agent shall, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Right
Certificates in order to (a) cure any ambiguity, (b) correct or
supplement any provision contained herein that may be defective or inconsistent
with any other provisions herein, (c) shorten or lengthen any time period
hereunder or (d) change or supplement the provisions hereunder in any
manner that the Company may deem necessary or desirable and which would not
adversely affect the interests of the holders of Right Certificates as such
(other than any holder who is an Acquiring Person, or an Affiliate or Associate
of any Acquiring Person), but may not cause
this Agreement to become amendable other than in accordance with this Section 27 or
cause the Rights to again become redeemable. Upon the delivery of a certificate
from an appropriate officer of the Company that states that the proposed
supplement or amendment is in compliance with the terms of this Section 27, the
Rights Agent shall execute such supplement or amendment; provided that, any
supplement or amendment that does not amend Section 18,
Section 19,
Section 20,
Section 21
or this Section 27 in a
manner adverse to the Rights Agent shall become effective immediately upon
execution by the Company, whether or not also executed by the Rights
Agent.

    

    Notwithstanding
anything contained in this Agreement to the contrary, the Rights Agent may, but
shall not be obligated to, enter into any supplement or amendment that affects
the Rights Agent’s own rights, duties, obligations or immunities under this
Agreement.

    

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

    

    Section 29. Benefits
of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the 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 Right Certificates (and, prior to the Distribution
Date, the registered holders of the Common Stock).

    

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

    

    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)(l)(i) of the
General Rules and Regulations under the Exchange Act.

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    Section 31. Periodic
Review by Independent Directors. A committee of Independent
Directors (the “Committee”), which
shall be the Executive Committee of the Board of Directors of the Company (or
any successor committee) as long as the members of such committee meet the
applicable Independent Director requirements, shall review and evaluate this
Agreement at least every five years in order to consider whether the maintenance
of this Agreement continues to be in the best interests of the Company and the
stockholders of the Company. Following each such review, the Committee shall
communicate its conclusions to the full Board of Directors of the Company,
including any recommendation in light thereof as to whether this Agreement
should be modified or the Rights should be redeemed. The Committee, when
considering whether this Agreement should be modified or the Rights should be
redeemed, shall have the power and authority (a) to set their own agenda,
(b) to retain, at the expense of the Company, its choice of legal counsel,
investment bankers and other advisors and (c) to review all information of
the Company and to consider any and all factors it deems relevant to an
evaluation of whether this Agreement should be modified or the Rights should be
redeemed.

    

    Section 32. 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 the Board of Directors in accordance with applicable law and the
Company’s Restated Certificate of Incorporation and Bylaws.

    

    Section 33. Governing
Law. This
Agreement and each Right Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such
state.

    

    Section 34. Descriptive
Headings; References. 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. Except as otherwise specifically provided, any reference to any section
or exhibit will be deemed to refer to such section of or exhibit to this
Agreement.

    

    Section 35. 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 36. Force
Majeure.
Notwithstanding anything to the contrary contained herein, the Rights Agent
shall not be liable for any delays or failures in performance resulting from
acts beyond its reasonable control including, without limitation, acts of God,
terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or
malfunction of computer facilities, or loss of data due to power failures or
mechanical difficulties with information storage or retrieval systems, labor
difficulties, war, or civil unrest.

    

    [Remainder
of Page Left Intentionally Blank]

    

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

         IN
WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly
executed and their respective seals to be hereunto affixed and attested, all as
of the day and year first above written.

    

    
      	 
      	 
      	 
      	 
      	 
      
	 
      	
              WPCS
      INTERNATIONAL INCORPORATED

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              By:  

            	
              /s/ JOSEPH A. HEATER

            	 
      
	 
      	 
      	
              Name:  

            	
              Joseph
      A. Heater

            	 
      
	 
      	 
      	
              Title:  

            	
              Chief
      Financial Officer

            	 
      
	 
      
	 
      	
              INTERWEST
      TRANSFER CO., INC.

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              By:  

            	
              /s/ KURTIS D. HUGHES

            	 
      
	 
      	 
      	
              Name:  

            	
              Kurtis
      D. Hughes

            	 
      
	 
      	 
      	
              Title:  

            	
              Vice
      President

            	 
      

    

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    EXHIBIT A

    Form of Certificate of Designations
for Series D Junior Participating Preferred Stock

    

    

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    EXHIBIT B

    

    Form of Right
Certificate

    

    
      	 
      	 
      	 
      
	
              Certificate
      No. R- ________________                   

            	 
      	
                    
                    
      ________________Rights

            

    

    

    NOT
EXERCISABLE AFTER FEBRUARY 24, 2020 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
THE RIGHTS ARE SUBJECT, AT THE OPTION OF THE COMPANY, TO REDEMPTION AT $0.001
PER RIGHT OR TO EXCHANGE, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY
OWNED BY ACQUIRING PERSONS (AS DEFINED IN SECTION 1 OF THE RIGHTS AGREEMENT) OR
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.

    

    Right
Certificate

    

    WPCS
INTERNATIONAL INCORPORATED

    

    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 February 24, 2010
(the “Rights
Agreement”) between WPCS International Incorporated, a Delaware
corporation (the “Company”), and
Interwest Transfer Co., Inc., as Rights Agent (the “Rights Agent”), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to the close of business (as such
term is defined in the Rights Agreement) on February 24, 2020 at the office of
the Rights Agent, or its successors as Rights Agent, designated for such
purposes, one one-thousandth of one fully paid and non-assessable share of the
Series D Junior Participating Preferred Stock (the “Preferred Stock”) of
the Company, at a purchase price of $___.00 per one one-thousandth of one share
(the “Purchase
Price”), upon presentation and surrender of this Right Certificate with
the Form of Election to Purchase duly executed. The number of Rights evidenced
by this Right Certificate (and the number of one one-thousandths of a share of
Preferred Stock that 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                     ,
20___, based on the shares of the Preferred Stock of the Company as constituted
at such date.

    

    As
provided in the Rights Agreement, the Purchase Price and the number and kind or
class of shares of stock of the Company that may be purchased upon the exercise
of the Rights evidenced by this Right Certificate are subject to modification
and adjustment upon the happening of certain events.

    

    This
Right Certificate is subject to all of the terms, provisions and conditions of
the Rights Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the office of the Rights Agent.

    

    This
Right Certificate, with or without other Right Certificates, upon surrender at
the office of the Rights Agent designated for such purposes, may be exchanged
for another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
shares (or fractions of a share) of the Preferred Stock as the Rights evidenced
by the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase.

    

    If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.

    

    Subject
to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may, but are not required to, be redeemed by the Company at its
option at a redemption price of $.001 per Right at any time prior to the earlier
of (i) the close of business on the Distribution Date (as such time period
may be extended pursuant to the Rights Agreement), and (ii) the close of
business on the Expiration Date. In addition, under certain circumstances
following the Shares Acquisition Date, the Rights may be exchanged, in whole or
in part, for shares of 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.

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    No
fractional shares of the Preferred Stock will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions that are integral
multiples of one one-thousandth of one 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 Right Certificate shall be entitled to vote or receive dividends or be
deemed for any purpose the holder of the Preferred Stock or of any other
securities of the Company that may at any time be issuable on the exercise
hereof, nor shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.

    

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

    

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

    

    Dated as
of                     ,
20___.

    

    
      	 
      	 
      	 
      	 
      	 
      
	 
      	
              WPCS
      INTERNATIONAL INCORPORATED

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              By:  

            	 
      	 
      
	 
      	 
      	
              Name:  

            	 
      	 
      
	 
      	 
      	
              Title:  

            	 
      	 
      
	 
      
	 
      	
              Countersigned:

               

              INTERWEST
      TRANSFER CO., INC.

            	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              By:  

            	 
      	 
      
	 
      	 
      	
              Name:  

            	 
      	 
      
	 
      	 
      	
              Title:  

            	 
      	 
      

    

    

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

     

    [Form of
Reverse Side of Right Certificate]

    

    FORM
OF ASSIGNMENT

    

    (To be
executed by the registered holder if such holder desires to transfer the Right
Certificate)

    

         FOR
VALUE RECEIVED                                         
hereby sells, assigns and transfers unto

    

    

     

    
      	 
	(Please print name
      and address of transferee)

    

     

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

    

    Dated:
                    ,
20___

    

              
                               
                    
                   

    Signature

    

    (Signature
must conform in all respects to the name of holder as written upon the
face

    of this Right Certificate, without
alteration or enlargement or any change whatsoever.)

    

    

    Signature
Medallion Guaranteed:

    

    

    Signatures
must be guaranteed by an “eligible guarantor institution” as defined in Rule
17Ad-15 promulgated under the Securities Exchange Act of 1934, as
amended.

    

    
    

     

    
      	 
	(to be completed if
      applicable)

    

     

     

    

    The
undersigned hereby certifies that the Rights evidenced by this Right Certificate
are not beneficially owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).

    

    

    

                                        
                         
                   

    Signature

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    FORM
OF ELECTION TO PURCHASE

    

    (To be
executed by the registered holder if such holder desires to exercise the Right
Certificate)

    

    TO:  WPCS
INTERNATIONAL INCORPORATED

    

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

    

    

      	 
	(Please print name
      and address)

    

    

    [Please
insert social security or other identifying number]              
                  
                    
                   
                    

    

    

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

    

    

      	 
	(Please print name
      and address)

    

     

    [Please
insert social security or other identifying number]              
                  
                    
                   
                    

    

    Dated:
                    ,
20___

    

              
                               
                    
                   

    Signature

    

    (Signature
must conform in all respects to the name of holder as written upon the
face

    of this Right Certificate, without
alteration or enlargement or any change whatsoever.)

    

    

    Signature
Medallion Guaranteed:

    

    

    Signatures
must be guaranteed by an “eligible guarantor institution” as defined in Rule
17Ad-15 promulgated under the Securities Exchange Act of 1934, as
amended.

    

    

      	 
	(to be completed if applicable)

    

    

    The
undersigned hereby certifies that the Rights evidenced by this Right Certificate
are not beneficially owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).

    

    

    

                                        
                         
                   

    Signature

    

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    EXHIBIT C

    

    WPCS
INTERNATIONAL INCORPORATED

    

    SUMMARY
OF RIGHTS TO PURCHASE PREFERRED STOCK

    

    On
February 24, 2010, the Board of Directors of WPCS International Incorporated
(the “Company”) declared a dividend of one preferred share purchase right (a
“Right”) for each outstanding share of the Company’s common stock, par value
$0.0001 per share (the “Common Stock”), and authorized the issuance of one Right
for each share of Common Stock which shall become outstanding between the Record
Date (as hereinafter defined) and the earliest to occur of the Distribution Date
(as hereinafter defined), the redemption or exchange of the Rights, or the
expiration of the Rights. The dividend is payable at the close of business on
March 8, 2010 (the “Record Date”) to the stockholders of record on that date.
Each Right entitles the registered holder to purchase from the Company one
one-thousandth (1/1000th) of a share of Series D Junior Participating
Preferred Stock, $0.0001 par value (the “Preferred Stock”), of the Company at a
price of $15.00 (the “Purchase Price”), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement dated February 24,
2010 (the “Rights Agreement”), between the Company and Registrar and Transfer
Company, as Rights Agent (the “Rights Agent”).

    

    A copy of
the Rights Agreement has been filed with the Securities and Exchange Commission
as an Exhibit to a Registration Statement on Form 8-A dated February 26, 2010.
Copies of the Rights Agreement are available free of charge from the Rights
Agent, Interwest Transfer Co., Inc. The following 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 hereby incorporated herein by
reference.

    

    Until the
close of business on the Distribution Date, the Rights will be evidenced, with
respect to any of the Common Stock certificates outstanding as of the Record
Date, by such Common Stock certificate and this Summary of Rights, and no
separate certificates evidencing the rights (“Right Certificates”) will be
issued. The Rights will separate from the Common Stock, Right Certificates will
be issued and the Rights will become exercisable on the tenth day (the
“Distribution Date”) after the earlier of (i) the public announcement
(including pursuant to a report filed or amended pursuant to Section 13(d) of
the Exchange Act) that, or (ii) a determination by a majority of the
Company’s Board of Directors that, a person or group has become an Acquiring
Person (as defined below) (the “Shares Acquisition Date”). An “Acquiring Person”
is a person or group that, together with its affiliates and associates, is the
beneficial owner of 15% or more of the outstanding Common Stock. Certain
persons, including the Company, any subsidiary of the Company, and Company
benefit plan related holders, are excluded from the definition of Acquiring
Person. Moreover, a person or group of affiliated or associated persons, who (i)
beneficially owns 15% or more of the Common Stock outstanding on the date of the
Rights Agreement (provided such person or group does not accumulate additional
shares of Common Stock equal to 1% or more of the shares of Common Stock then
outstanding) or (ii) acquires the beneficial ownership of 15% or more of
the Common Stock then outstanding either (a) by reason of share purchases
by the Company reducing the number of shares of Common Stock outstanding
(provided such person or group does not acquire additional shares of Common
Stock), or (b) inadvertently, if the Company’s Board of Directors
determines such 15% beneficial ownership was acquired inadvertently and as
promptly as practicable such person or group divests itself of enough shares of
Common Stock or derivative securities so as to no longer have the beneficial
ownership of 15% of the outstanding Common Stock, will not be an Acquiring
Person.

    

    For
purposes of the Rights Agreement, “beneficial ownership” includes not only the
right to vote or dispose of the Company’s Common Stock, but also rights related
to derivative transactions or derivative securities which grant to the holder
thereof the economic equivalent of ownership of an amount of Company Common
Stock (whether or not such derivative (i) conveys voting rights in the
Company Common Stock or (ii) may be settled through delivery of Company
Common Stock, and whether or not the economic effect of such derivative has been
hedged).

    

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

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    The
Rights are not exercisable until the Distribution Date. The Rights will expire
at 5:00 p.m. (Eastern time) on February 24, 2020 (the “Expiration Date”), unless
the Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.

    

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

    

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

    

    Preferred
Stock will not be redeemable and will be, in ranking as to dividend and
liquidation preferences, senior to the Common Stock. Each share of Preferred
Stock will be entitled to a minimum preferential quarterly dividend payment of
the greater of (i) $0.10 per share, or (ii) 1,000 times the aggregate per share
amount of all cash dividends and 1,000 times the aggregate per share amount of
all non-cash dividends and other distributions (other than dividends payable in
Common Stock) declared per share of Common Stock. In the event of liquidation,
the holders of the interests in Preferred Stock will receive a preferential
liquidation payment of $1,000 per share, plus accrued and unpaid dividends,
provided that such holders will be entitled to receive an aggregate liquidation
payment equal to 1,000 times the payment made on one share of Common Stock. Each
share of Preferred Stock will have 1,000 votes, voting together with the Common
Stock. If dividends on any Preferred Stock are in arrears in an amount equal to
six quarterly dividends thereon, all holders of Preferred Stock with dividends
in arrears in an amount equal to six quarterly dividends thereon, voting as a
class, have the right to elect one director. The term of such director will
terminate automatically upon the expiration of the default period. The rights of
the Preferred Stock as to dividends, liquidation and voting, and in the event of
mergers and consolidations, are protected by customary antidilution provisions
as more fully described in the Rights Agreement. Because of the nature of the
Preferred Stock dividend, liquidation and voting rights, the value of the one
one-thousandth interest in a share of Preferred Stock purchasable upon exercise
of each Right (subject to adjustment) should approximate the value of one share
of Common Stock.

    

    In the
event any person becomes an Acquiring Person, then each holder of a Right, other
than Rights beneficially owned by the Acquiring Person and its affiliates and
associates (which will thereafter be null and void for all purposes of the
Rights Agreement and the holder thereof shall thereafter have no rights with
respect to such Rights, whether under the Rights Agreement or otherwise), will
thereafter have the right to receive upon exercise, in lieu of Preferred Stock,
that number of shares of Common Stock having a market value of two times the
Purchase Price. Under some circumstances, upon payment of the Purchase Price,
the Company may substitute other equity and debt securities, property, cash or
combinations thereof, including combinations with Common Stock, of equal value
to the number of shares of Common Stock for which the Right is
exercisable.

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    If,
following the Shares Acquisition Date, (i) the Company is acquired in a
merger or other business combination transaction, (ii) the Company is the
surviving corporation in a merger or other business combination transaction and
the shares of Common Stock are changed or exchanged or (iii) 50% or more of
its consolidated assets or earning power is sold, proper provision will be made
so that each holder of a Right (other than Rights beneficially owned by an
Acquiring Person or affiliates or associates thereof) will thereafter generally
have the right to receive, upon the exercise thereof at the then current
Purchase Price, that number of shares of the senior voting stock of the
acquiring company that, at the time of such transaction, would have a market
value of two times the Purchase Price.

    

    At any
time prior to the earlier of (i) 5:00 p.m., Eastern time, on the
Distribution Date, or (ii) 5:00 p.m., Eastern time, on the Expiration Date,
the Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $0.001 per Right (the “Redemption Price”), which may be paid
in cash or with Common Stock or any other form of consideration deemed
appropriate by the Board of Directors of the Company. Immediately upon the
action of the Board of Directors of the Company to redeem or exchange the
Rights, the Company shall make announcement thereof, and upon such action, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price, or the shares of Common Stock or
Preferred Stock exchangeable for the Rights, as applicable.

    

    A
committee of independent directors of the Company will review and evaluate the
Rights Agreement at least every five years in order to consider whether the
maintenance of the Rights Agreement continues to be in the best interests of the
Company and its stockholders. Following each such review, the committee shall
communicate its conclusions to the full Board of Directors of the Company,
including any recommendation in light thereof as to whether the Rights Agreement
should be modified or the Rights should be redeemed.

    

    Under
certain circumstances, after the Shares Acquisition Date but prior to the time
the Acquiring Person, together with all affiliates and associates of such
Acquiring Person, becomes the Beneficial Owner of 50% or more of the outstanding
Common Stock, the Board of Directors of the Company may exchange the Rights
(other than Rights that were or are beneficially owned by an Acquiring Person or
its affiliates and associates), in whole or in part, at an exchange ratio of one
share of Common Stock (or, if there is an insufficient number of issued but not
outstanding or authorized but unissued shares of Common Stock to permit such
exchange, then one one-thousandth of a share of Preferred Stock) per Right
(subject to adjustment).

    

    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.

    

    Except as
otherwise provided in the Rights Agreement, and prior to the Distribution Date,
the Company may, in its sole and absolute discretion, amend or supplement the
Rights Agreement in any respect without the consent of the holders of
certificates representing Common Stock. At any time after the Rights are no
longer redeemable, the Company may supplement or amend the Rights Agreement
without the consent of the holders of the Right Certificates at any time to cure
any ambiguity or to correct or supplement any defective or inconsistent
provisions, to shorten or lengthen any time period hereunder, or to change or
supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and which would not adversely affect the interests of the
holders of Right Certificates (other than any holder who is an Acquiring Person
or its affiliates and associates) or to cause the Rights to again become
redeemable. The foregoing notwithstanding, no amendment may be made to the
Rights Agreement at 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.

    

    The
Rights have certain anti-takeover effects. The Rights will cause substantial
dilution to a person or group that attempts to acquire the Company without
conditioning the offer on the redemption of the Rights by the Board of Directors
of the Company. The Rights should not interfere with any merger or other
business combination that is in the best interests of the Company and its
stockholders because the Board of Directors may, at its option, at any time
prior to the Shares Acquisition Date, redeem all but not less than all the then
outstanding Rights at the Redemption Price.

     

    34

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