Document:

Exhibit
10.2

Arena Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan

2007
Performance-Based 

Restricted
Stock Unit Grant Agreement

(Executives)

THIS
GRANT AGREEMENT (this “Agreement”),
effective as of                            
(the “Grant Date”) between Arena Pharmaceuticals, Inc., a Delaware corporation
(the “Company”), and                         (the
“Participant”).

1.             Grant of Restricted Stock Units.  The Company hereby grants to the Participant                        Restricted
Stock Units.  Each Restricted Stock Unit
shall be deemed to be the equivalent of one Share.

2.             Subject
to the Plan.  This
Agreement is subject to the provisions of the Arena Pharmaceuticals, Inc. 2006
Long-Term Incentive Plan (the “Plan”) and, unless the context requires otherwise,
terms used herein shall have the same meaning as in the Plan.  In the event of a conflict between the
provisions of the Plan and this Agreement, the Plan shall control.  Capitalized terms not explicitly defined in
this Agreement but defined in the Plan shall have the same definitions as in
the Plan.

3.             Account.  The Company shall credit to a bookkeeping
account (the “Account”) maintained by the Company for the Participant’s benefit
the Restricted Stock Units. On each date that cash dividends are paid on the
Shares, the Company will credit the Account with a number of additional
Restricted Stock Units equal to the result of dividing (i) the product of
the total number of Restricted Stock Units credited to the Account on the
record date for such dividend and the per Share amount of such dividend by
(ii) the Fair Market Value of one Share on the date such dividend is paid
by the Company to stockholders.  The
additional Restricted Stock Units shall be or become vested to the same extent
as the Restricted Stock Units that resulted in the crediting of such additional
Restricted Stock Units.

4.             Vesting.  Except as provided in Sections 6(b), 6(c) and
10 of this Agreement, provided (i) the
Committee determines that one or more of the Performance Goals are achieved on
or before February 26, 2012 and (ii) the Participant is an Employee or, if
applicable, a Director, on February 26, 2012, the Restricted Stock Units
shall vest in the following percentages:

	
  Number of

  	
   

  	
  Vested Restricted

  	
   

  
	
  Performance Goals Achieved

  	
   

  	
  Stock Units

  	
   

  
	
  1

  	
   

  	
  25

  	
  %

  
	
  2

  	
   

  	
  50

  	
  %

  
	
  3

  	
   

  	
  87.5

  	
  %

  
	
  4

  	
   

  	
  100

  	
  %

  

 

For
purposes of this Section 4, the “Performance Goals” are as follows:

1.             Approval of lorcaserin (the Company’s
drug candidate for obesity) by the U.S. Food and Drug Administration, which
approval continues to be in effect on the applicable vesting date;

2.             Net sales of lorcaserin by the
Company or, if applicable, its partners or licensors, equal to $250,000,000
during any consecutive six-month period, determined in accordance with
Generally Accepted Accounting Principles and consistent with the Company’s or
the partners’ or licensors’ revenue recognition policies;

3.             One successful phase 3 (as defined
by 21 C.F.R. section 312.21(c)) clinical trial of a drug candidate (other than lorcaserin)
of the Company or, if applicable, under one of its partnerships or license
arrangements. “Successful” means the phase 3 clinical trial results meet the
primary efficacy endpoint and could be used, or were used, as a pivotal study
in support of a New Drug Application; and

4.             Successful phase 2 (as defined by
21 C.F.R. section 312.21(b)) clinical trials on two drug candidates (other than
lorcaserin or a drug candidate that satisfied goal 3 above) of the Company or
under one of its partnerships or license arrangements. “Successful” means
either that (i) there were statistically significant efficacy results and such
results support proceeding with an additional phase 2 or a phase 3 (as defined
by 21 C.F.R. section 312.21(b) or (c), respectively) clinical trial or (ii)
screening of patients in a phase 3 clinical trial has been commenced.

The Committee shall have the right to determine, in its sole and
exclusive discretion, whether a Performance Goal has been achieved.  In addition, the Committee reserves the right
to reasonably determine, in its sole and exclusive discretion, whether a
Performance Goal is not achievable on or before February 26, 2012.  If the Committee determines that a particular
Performance Goal is not achievable on or before February 26, 2012, then the
number of Restricted Stock Units subject to this Agreement shall be reduced, as
applicable, to reflect the failure to achieve such Performance Goal, and the
Restricted Stock Units associated with achieving such Performance Goal will expire
immediately upon such determination.

5.             Capitalization Adjustments. The number of Restricted Stock Units
credited to the Account shall be
equitably and appropriately adjusted as provided in Section 12.2 of the Plan.

6.             Termination
of Employment.

(a)  Termination of Employment Other Than Due to Death or Disability.  In
the event the Participant ceases to be an Employee and, if applicable, a
Director, for any reason other than as a result of death or Disability, the
Restricted Stock Units credited to the Account that were not vested on the date
of such termination shall be immediately forfeited.

(b)  Death.  In the event of the Participant’s death,
provided that one or more of the Performance Goals has been achieved on or
before such date, the number of Restricted Stock 

 2
 

Units credited to the
Account that would vest
had the Participant remained an employee of the Company through February 26,
2012 (based on the achievement of only those Performance Goals actually
achieved as of the date of death) shall instead vest immediately upon the date
of such Participant’s death or, if applicable, the date after such death that
the Committee determines the Performance Goals had been achieved as of the date
of death.

(c)  Disability. In the
event that the Participant ceases to be an Employee by reason of Disability,
provided that one or more of the Performance Goals has been achieved on or
before such date, the number of Restricted Stock Units credited to the
Account that would vest had the
Participant remained an employee of the Company through February 26, 2012
(based on the achievement of only those Performance Goals actually achieved as
of the date of Disability) shall instead vest immediately upon the date of
Disability or, if applicable, the date after such disability that the Committee
determines the Performance Goals had been achieved as of the date of
Disability. For purposes of this Agreement, “Disability” shall mean the
Participant’s becoming disabled within the meaning of Section 22(e)(3) of the
Code, or as otherwise determined by the Committee in its discretion. The
Committee may require such proof of Disability as the Committee in its sole and
absolute discretion deems appropriate and the Committee’s determination as to
whether the Participant has incurred a Disability shall be final and binding on
all parties concerned.

7.             Payment of Shares.  The
Company shall make a payment to the Participant of Shares based on the number
of the vested Restricted Stock Units credited to the Participant’s Account upon
the date the Restricted Stock Units vest. 
Notwithstanding the foregoing, in the event that the Company determines
that any Shares are scheduled under this Agreement to be delivered on a day
(the “Original Distribution Date”) on which a sale by the Participant of Shares
would violate any of the provisions of the federal securities laws (or any
Company policy related thereto), as determined by the Company, then such Shares
shall not be delivered on such Original Distribution Date and shall instead be
delivered as soon as practicable on the date on which the sale of Shares would
not be a violation of the federal securities laws (or a related Company
policy); provided, however, that in no event shall the delivery of the Shares
be delayed pursuant to this provision beyond the later of: (a) December 31st of
the same calendar year of the Original Distribution Date, or (b) the 15th day
of the third calendar month following the Original Distribution Date.

The Participant may elect, in
accordance with procedures adopted by the Company, to change the payment date
determined in accordance with the first sentence of the preceding paragraph by
written notice to the Company at least 12 months prior to the payment date,
provided that the new payment date must be at least five years after the
previously applicable payment date.

8.             Form of Payment.  Payments pursuant to Section 7 shall be made in Shares equal to the
number of vested Restricted Stock Units credited to the Account.  Payment shall be made as soon as practicable
after the applicable payment date, but in no event later than 30 days after the
date established pursuant to Section 7.

 3
 

9.             Beneficiary.  In  the event of the Participant’s death prior to payment of
the Restricted Stock Units credited to the Account, payment shall be made to
the last beneficiary designated in writing that is received by the Company
prior to the Participant’s death or, if no designated beneficiary survives the
Participant, such payment shall be made to the Participant’s estate.

10.          Change in Control;
Corporate Transaction.

(a)  Effect of Change
in Control on Restricted
Stock Units.  In the event of a Change in Control, the
Surviving Corporation or the Parent Corporation, if applicable, may
assume or substitute for the Restricted Stock Units credited to the Account on
substantially the same terms and conditions (which may include payment in
shares of the common stock of the Surviving
Corporation or the Parent Corporation). 
In the event of a Change in
Control, to the extent the Surviving Corporation or the Parent Corporation, if
applicable, does not assume or substitute for the Restricted Stock Units
credited to the Account on substantially the same terms and conditions (which
may include payment in shares of the common stock of the Surviving Corporation or the Parent
Corporation), that portion of the Restricted Stock Units that would have
vested had (i) the Surviving Corporation or the Parent Corporation, if
applicable, assumed the Restricted Stock Units and (ii) the Participant
remained an Employee through February 26, 2012 (based in the achievement of
only those Performance Goals actually achieved as of the date of the Change in
Control), shall become vested immediately prior to the Change in Control,
provided the Participant is then an Employee or, if applicable, a Director. In the event of a Change in Control, to the
extent the Surviving Corporation
or the Parent Corporation, if applicable, does assume or substitute for
the Restricted Stock Units credited to the Account on substantially the same
terms and conditions (which may include payment in shares of the common stock
of the Surviving Corporation or the
Parent Corporation) and within 24 months thereafter the Participant
ceases to be an Employee by reason of (x)
an involuntary termination without Cause, or (y) a voluntary termination with Good Reason, that portion
of the Restricted Stock Units that would have vested had (I) the Surviving
Corporation or the Parent Corporation, if applicable, assumed the Restricted
Stock Units and (II) the Participant remained an Employee through February 26,
2012 (based in the achievement of only those Performance Goals actually
achieved as of the date of such termination), shall become fully vested on the
date Participant ceases to be an Employee.

For purposes of this Agreement (i) 
if the Company is the Surviving Corporation or the Parent Corporation,
if applicable, it shall be deemed to have assumed the Restricted Stock Units
unless it takes explicit action to the contrary; (ii) “Good Reason” shall mean,
with respect to a Participant, any one of the following: (a) any reduction in
Participant’s annual base salary (except for salary decreases generally
applicable to the Company’s other similarly-situated employees); (b) any
material reduction in the Participant’s target bonus level or bonus
opportunities; (c) Participant’s duties or responsibilities are materially
diminished (and not simply a change in title or reporting relationships);
provided, however, that the Participant shall not have “Good Reason” to
terminate if the Company is retained as a separate legal entity or business
unit following the effective date of a Change of Control and the Participant
holds the same position in such legal entity or business unit as the eligible
employee held before the effective date of such Change of Control; (d) in the
event the Participant is a member of the Board, any failure of the Board or one

 4
 

if
its committees to re-nominate the Participant for election to the Board; (e)
any significant reduction, in the aggregate, in the employee benefit programs
made available to the Participant other than a reduction in such employee
benefit programs affecting all employees of the Company substantially equally;
or (f) a change in the location of the Participant’s principal office or
business resulting in an increase in the Participant’s one-way driving distance
from the  Participant’s principal
personal residence to the principal office or business location at which the
Participant is required to perform services of more than 20 miles, except for
required travel for the Company’s business to an extent substantially
consistent with the Participant’s prior business travel obligations; and (iii) “Cause”
shall have the meaning provided in the Company’s severance benefit plan, but
only if such plan is applicable to the Participant and, if not, then it shall
mean: a finding by the Committee that the Participant has breached his or her
employment agreement with the Company, or has been engaged in disloyalty to the
Company, including, without limitation, fraud, embezzlement, theft, commission
of a felony or proven dishonesty in the course of his or her employment, or has
disclosed trade secrets or confidential information of the Company to persons
not entitled to receive such information, or has breached any written
noncompetition or nonsolicitation agreement between the Participant and the
Company or has engaged in such other behavior detrimental to the interests of
the Company as the Committee determines.

(b)  Effect of Corporate
Transaction on Restricted Stock Units.  In
the event of a Corporate Transaction that is not a Change in Control, any
surviving corporation or acquiring corporation (or the surviving or acquiring
corporation’s parent company) may assume, continue or substitute for the Restricted
Stock Units credited to the Account on
substantially the same terms and conditions (which may include payment
in shares of the common stock of the surviving
corporation, acquiring corporation, or the surviving or acquiring corporation’s
parent company).   In the event of a
Corporate Transaction that is not a Change in Control, then notwithstanding
Section 11 of the Plan and paragraph (a) of this Section, to the extent that
the surviving corporation or acquiring corporation (or its parent company) does
not assume, continue or substitute for the Restricted Stock Units
credited to the Account on
substantially the same terms and conditions (which may include payment
in shares of the common stock of the surviving
corporation, acquiring corporation, or the surviving or acquiring corporation’s
parent company), then that portion of the Restricted Stock Units that
would have vested had (i) the Surviving Corporation or the Parent Corporation,
if applicable, assumed the Restricted Stock Units and (ii) the Participant remained
an Employee through February 26, 2012 (based in the achievement of only those
Performance Goals actually achieved as of the date of the Corporate
Transaction), shall become fully vested immediately  prior to the Corporate Transaction if the Participant is
then an Employee or, if applicable, a Director.

For purposes of this Agreement, “Corporate Transaction” means (i) the
consummation of a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or (ii) the consummation of a
merger, consolidation or similar transaction following which the Company is the
surviving corporation but the Shares outstanding immediately preceding the
merger, consolidation or similar transaction are converted or exchanged by virtue
of the merger, consolidation or similar transaction into other property,
whether in the form of securities, cash or otherwise.  Notwithstanding the foregoing, a “Corporate
Transaction” shall not 

 5
 

include
a transaction that is effected exclusively for the purpose of changing the
domicile of the Company.

(c)  Other Agreement or Plan.  The provisions of this Section, shall not  be superseded by the specific provisions, if any, of a
written employment or severance agreement between the Participant and the
Company or a severance plan of the Company covering the Participant, including
a change in control severance agreement or plan, even if such a provision in
such other agreement or plan provides a greater benefit to the Participant.

11.          Source of Payments.  The Participant’s right to receive payment
under this Agreement shall be an unfunded entitlement and shall be an unsecured
claim against the general assets of the Company.  The Participant has only the status of a
general unsecured creditor hereunder, and this Agreement constitutes only a
promise by the Company to pay the value of the Account on the payment date.

12.          Nontransferability. 
Except to the extent and under such terms and conditions as determined
by the Committee, the Restricted Stock Units shall not be transferable
otherwise than by will or the laws of descent and distribution or as provided
in Section 9.

13.          Withholding.   The Participant agrees to pay to the
Company, or to make satisfactory arrangement with the Company for payment of,
any federal, state or local taxes, if any, required by law to be withheld in
respect of the payment of the Restricted Stock Units. The Participant hereby
agrees that the Company may withhold from Participant’s wages or other
remuneration the applicable taxes. At the discretion of the Company, the
applicable taxes may be withheld in kind from the Shares otherwise deliverable
to the Participant on the payment of the Restricted Stock Units.

14.          No Rights of a Stockholder.  The Participant shall not have any of the rights
of a stockholder with respect to the Shares subject to the Restricted Stock
Units until such Shares have been issued.

15.          Notices.  All notices required or permitted under this
Agreement shall be in writing and shall be sufficiently made or given if hand
delivered or mailed by registered or certified mail postage prepaid.  Notice by mail shall be deemed delivered at
the time and on the date the same is postmarked.

Notices to the Company should be addressed to:

Arena Pharmaceuticals,
Inc.

6166 Nancy Ridge Drive

San Diego, California
92121

Attention:  Chief Financial
Officer

With a copy to:  General Counsel

 6
 

Notices to the
Participant should be addressed to the Participant at the Participant’s address
as it appears on the Company’s records.

The Company or the
Participant may by writing to the other party, designate a different address
for notices.

If the receiving party consents in advance, notice may be transmitted
and received via telecopy or via such other electronic transmission mechanism
as may be available to the parties.  Such
notices shall be deemed delivered when received.

16.              Headings.  The headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.

17.              Governing Law.  This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware, other than
its conflict of laws principles.

18.              Agreement Not a Contract.  This Agreement (and the grant of Restricted
Stock Units) is not an employment or service contract, and nothing in this
Agreement shall be deemed to create in any way whatsoever any obligation on
Participant’s part to continue as an Employee, or of the Company or a
Subsidiary to continue Participant’s service as an Employee.  The grant of the Restricted Stock Units, or
any modification thereof, is not is intended to confer, nor shall it be
construed to confer, any legal or equitable rights to continued
employment.  Participant’s employment
shall remain at-will, if applicable, and subject to termination by the Company
at any time, with or without cause or notice.

19.              Entire Agreement; Modification.  This Agreement and the Plan constitute the
entire agreement between the parties relative to the subject matter herein and
may not be modified, except as provided
in the Plan or in a written document signed by each of the parties hereto,
and may be rescinded only by a written agreement executed by both parties.

 

 7
 

 

20.              Compliance with Section 409A of the Code.

(a)  Automatic Delay of Payment.  Notwithstanding anything contained in this
Agreement to the contrary, if the Company determines that as of the date of
payment the Participant is a “specified employee” (as such term is defined
under Section 409A of the Code), any Shares (or shares of the common stock of
the successor company in the event of a Change in Control) payable by reason of
the Participant’s termination of employment with the Company and its
Subsidiaries for any reason other than death or “disability” (as such term is
defined under Section 409A of the Code) will not be paid until the date that is
six months following the date of termination of employment (or such earlier
time permitted under Section 409A of the Code without the imposition of any
accelerated or additional taxes under Section 409A of the Code).

(b)  General. This Agreement is intended to
comply and shall be administered in a manner that is intended to comply with
section 409A of the Code and shall be construed and interpreted in accordance
with such intent.  Payment under this
Agreement shall be made in a manner that will comply with section 409A of the
Code, including regulations or other guidance issued with respect thereto, as
determined by the Committee.  Any
provision of this Agreement that would cause the payment or settlement thereof
to fail to satisfy section 409A of the Code shall be amended to comply with
section 409A of the Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued under section
409A of the Code.

21.              Severability.  If
any provision of this Agreement shall be held unlawful or otherwise invalid or
unenforceable in whole or in part by a court of competent jurisdiction, such
provision shall (i) be deemed limited to the extent that such court of
competent jurisdiction deems it lawful, valid and/or enforceable and as so
limited shall remain in full force and effect, and (ii) not affect any other
provision of this Agreement or part thereof, each of which shall remain in full
force and effect.

IN
WITNESS WHEREOF, the parties have executed this Agreement
effective as of the Grant Date.

	
  

  	
   

  	
  ARENA PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Participant

  

 

 8Exhibit 4.1

 

 

 

 

 

 

 

 

 

RIGHTS
AGREEMENT

by and between

UNITED ONLINE, INC.

and

U.S. STOCK TRANSFER CORPORATION,

as Rights Agent

Dated as of

November 15, 2001

 

 

TABLE OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  Section 1.

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  
	
  Section 2.

  	
   

  	
  Appointment of Rights Agent

  	
   

  	
  4

  
	
  Section 3.

  	
   

  	
  Issue of Rights Certificates.

  	
   

  	
  4

  
	
  Section 4.

  	
   

  	
  Form of Rights Certificates.

  	
   

  	
  5

  
	
  Section 5.

  	
   

  	
  Countersignature and Registration.

  	
   

  	
  6

  
	
  Section 6.

  	
   

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

  	
   

  	
  6

  
	
  Section 7.

  	
   

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

  	
   

  	
  7

  
	
  Section 8.

  	
   

  	
  Cancellation and Destruction of Rights Certificates

  	
   

  	
  8

  
	
  Section 9.

  	
   

  	
  Reservation and Availability of Preferred Stock.

  	
   

  	
  8

  
	
  Section 10.

  	
   

  	
  Preferred Stock Record Date

  	
   

  	
  9

  
	
  Section 11.

  	
   

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

  	
   

  	
  10

  
	
  Section 12.

  	
   

  	
  Certificate of Adjusted Purchase Price or Number of
  Shares

  	
   

  	
  16

  
	
  Section 13.

  	
   

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

  	
   

  	
  16

  
	
  Section 14.

  	
   

  	
  Fractional Rights and Fractional Shares.

  	
   

  	
  19

  
	
  Section 15.

  	
   

  	
  Rights of Action

  	
   

  	
  19

  
	
  Section 16.

  	
   

  	
  Agreement of Rights Holders

  	
   

  	
  20

  
	
  Section 17.

  	
   

  	
  Rights Certificate Holder Not Deemed a Stockholder

  	
   

  	
  20

  
	
  Section 18.

  	
   

  	
  Concerning the Rights Agent

  	
   

  	
  20

  
	
  Section 19.

  	
   

  	
  Merger or Consolidation or Change of Name of Rights
  Agent.

  	
   

  	
  21

  
	
  Section 20.

  	
   

  	
  Duties of Rights Agent

  	
   

  	
  21

  
	
  Section 21.

  	
   

  	
  Change of Rights Agent

  	
   

  	
  23

  
	
  Section 22.

  	
   

  	
  Issuance of New Rights Certificates

  	
   

  	
  23

  
	
  Section 23.

  	
   

  	
  Redemption and Termination.

  	
   

  	
  24

  
	
  Section 24.

  	
   

  	
  Exchange.

  	
   

  	
  25

  
	
  Section 25.

  	
   

  	
  Notice of Certain Events.

  	
   

  	
  26

  
	
  Section 26.

  	
   

  	
  Notices

  	
   

  	
  26

  
	
  Section 27.

  	
   

  	
  Supplements and Amendments

  	
   

  	
  27

  
	
  Section 28.

  	
   

  	
  Successors

  	
   

  	
  27

  
	
  Section 29.

  	
   

  	
  Determinations and Actions by the Board of Directors

  	
   

  	
  27

  
	
  Section 30.

  	
   

  	
  Benefits of This Agreement

  	
   

  	
  28

  
	
  Section 31.

  	
   

  	
  Severability

  	
   

  	
  28

  

 

 

	
  Section 32.

  	
   

  	
  Governing Law

  	
   

  	
  28

  
	
  Section 33.

  	
   

  	
  Counterparts

  	
   

  	
  28

  
	
  Section 34.

  	
   

  	
  Descriptive Headings

  	
   

  	
  28

  

 

	
  EXHIBITS

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Form of Certificate of Designation of Series A
  Junior 

  Participating Preferred Stock

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Rights Certificate

  	
   

  	
   

  

 

 

RIGHTS AGREEMENT

    RIGHTS
AGREEMENT, dated as of November 15, 2001 (the “Agreement”), by and between
United Online, Inc., a Delaware corporation (the “Company”), and U.S.
Stock Transfer Corporation, a California corporation (the “Rights Agent”).

    WHEREAS,
effective November 15, 2001 (the “Rights Dividend Declaration Date”), the
board of directors of the Company authorized and declared a distribution of one
Right (each, a “Right”) for each share of Common Stock (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on November 26, 2001 (the “Record Date”), each Right initially
representing the right to purchase one one-thousandth of a share (a “Unit”) of
Preferred Stock (as hereinafter defined) upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each share of Common Stock of the Company
that shall become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined).

    NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements herein
set forth, the parties hereto, intending to be legally bound, hereby agree as
follows:

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

    ”Acquiring
Person” shall mean any Person (as such term is hereinafter defined) who or
which, together with all Affiliates and Associates (as such terms are
hereinafter defined) of such Person, shall be the Beneficial Owner (as such
term is hereinafter defined) of 15% or more of the shares of Common Stock of
the Company then outstanding, but shall not include the Company, any Subsidiary
(as such term is hereinafter defined) of the Company, any employee benefit plan
of the Company or any Subsidiary of the Company, or any entity holding shares
of Common Stock of the Company for or pursuant to the terms of any such plan.
Notwithstanding the foregoing:

    (i)  no Person shall
become an “Acquiring Person” as the result of an acquisition of shares of
Common Stock by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person to 15% or more of the shares of Common Stock of the Company then
outstanding; provided, however,
that if a Person shall become the Beneficial Owner of 15% or more of the shares
of Common Stock of the Company then outstanding as a result of any such
acquisition of shares of Common Stock by the Company and shall, after such
acquisition of shares by the Company, become the Beneficial Owner of any
additional shares of Common Stock of the Company (other than as a result of a
stock dividend, stock split or similar transaction effected by the Company in
which all holders of Common Stock of the Company are treated equally), then
such Person shall be deemed to be an “Acquiring Person” hereunder;

    (ii) no Person who, alone
or together with all Affiliates and Associates of such Person, was, at the time
of the public announcement by the Company of the declaration by its Board of
Directors on November 15, 2001 of the dividend distribution of the Rights,
the Beneficial Owner of 15% or more of the Common Stock of the Company then
outstanding shall be deemed to have become an Acquiring Person unless and until
such time as such Person or any Affiliate or Associate of such Person
thereafter becomes the Beneficial Owner of any additional Common Stock of the
Company (other than as a result of a stock dividend, stock split or similar
transaction effected by the Company in which all holders of Common Stock of the
Company are treated equally); and

    (iii) if the board of
directors of the Company determines in good faith that a Person who would
otherwise be an “Acquiring Person” as defined pursuant to the provisions of
subparagraph (i), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock of the
Company so that such Person would no longer be an

 1
 

“Acquiring Person, then such Person shall not be
deemed to be an “Acquiring Person” for any purpose of this Agreement.

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

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

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

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

    (ii) which such Person or
any of such Person’s Affiliates or Associates, directly or indirectly, has
(A) the right to acquire (whether such right is exercisable immediately,
contingently or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing, other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities), 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 or on
behalf of such Person or any of such Person’s Affiliates or Associates until
such tendered securities are accepted for purchase or exchange; or (B) the
right to vote pursuant to any agreement, arrangement or understanding; provided further, however, that a Person
shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” any
security under this subparagraph (ii) as a result of an agreement, arrangement
or understanding to vote such security if such agreement, arrangement or
understanding: (x) arises solely from a revocable proxy given in response
to a public proxy or consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the Exchange Act and the Exchange Act
Regulations, and (y) is not reportable by such Person on Schedule 13D
under the Exchange Act (or any comparable or successor report); or

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

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

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

 2
 

    ”Close
of Business” on any given date shall mean 5:00 p.m., New York City time,
on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., New York City time, on the next
succeeding Business Day.

    ”Common
Stock” when used with reference to the Company shall mean the shares of Common
Stock, par value $0.0001, of the Company. “Common Stock” when used with
reference to any Person other than the Company shall mean the capital stock (or
other equity interest) with the greatest voting power of such other Person or,
if such other Person is a Subsidiary of another Person, the Person or Persons
which ultimately control such first-mentioned Person.

    ”Company”
shall have the meaning set forth in the forepart of this Agreement.

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

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

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

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

    ”Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, or any successor
statute.

    ”Exchange
Act Regulations” shall mean the Rules and Regulations under the Exchange Act,
as amended from time to time (including any successor rules).

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

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

    ”NASDAQ”
shall have the meaning set forth in Section 11(d).

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

    ”Preferred
Stock” shall mean shares of Series A Preferred Stock, par value $0.0001,
of the Company having the rights and preferences set forth in the Form of
Certificate of Designation attached to this Agreement as Exhibit A.

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

    ”Principal
Party” shall have the meaning set forth in Section 13.

    ”Purchase
Price” shall have the meaning set forth in Section 7(b).

    ”Record
Date” shall have the meaning set forth in the recitals to this Agreement.

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

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

    ”Right”
shall have the meaning set forth in the recitals to this Agreement.

    ”Rights
Agent” shall have the meaning set forth in the forepart of this Agreement and
shall include any Person that shall become a successor Rights Agent pursuant to
the terms of this Agreement.

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

    ”Rights
Dividend Declaration Date” shall have the meaning set forth in the recitals to
this Agreement.

    ”Section 11(a)(ii) Event”
shall mean any event described in Section 11(a)(ii)(A), (B) or (C).

 3
 

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

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

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

    ”Securities
Act” shall mean the Securities Act of 1933, as amended, or any successor
statute.

    ”Share
Acquisition Date” shall mean the first date of public announcement (which, for
purposes of this definition, shall include, without limitation, a report filed
pursuant to Section 13(d) of the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such.

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

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

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

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

    ”Unit”
shall have the meaning set forth in the recitals to this Agreement.

    Section 2.  Appointment of Rights Agent.  The
Company hereby appoints the Rights Agent to act as agent for the Company in
accordance with the terms and conditions of this Agreement, and the Rights
Agent hereby accepts such appointment. The Company may from time to time
appoint 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 Agent.

    Section 3.  Issue of Rights Certificates.

    (a) Until
the earlier of (i) the Close of Business on the tenth day after the Share
Acquisition Date and (ii) the Close of Business on the tenth Business Day
(or such later date as may be determined by action of the Company’s board of
directors prior to such time as any Person becomes an Acquiring Person and of
which the Company will give the Rights Agent prompt written notice) after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding shares of Common Stock for or
pursuant to the terms of any such plan) is commenced within the meaning of
Rule 14d-2(a) of the Exchange Act Regulations or of the first public
announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding shares of Common Stock for or
pursuant to the terms of any such plan) to commence a tender or exchange offer,
if upon consummation thereof such Person would be the Beneficial Owner of 15%
or more of the shares of Common Stock of the Company then outstanding (the
earlier of (i) and (ii) above being the “Distribution Date”),
(x) the Rights will be evidenced (subject to the provisions of
Section 3(b)) by the certificates for shares of Common Stock of the
Company registered in the names of the holders thereof (which certificates
shall also be deemed to be Rights Certificates) and not by separate Rights
Certificates, and (y) the right to receive Rights Certificates will be
transferable only in connection with the transfer of shares of Common Stock of
the Company. As soon as practicable after the Distribution Date, the Company
will notify the Rights Agent of the occurrence of the Distribution Date and the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send) by first-class, insured, postage-prepaid mail, to each record holder of
shares of Common Stock of the Company as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Rights Certificate, in substantially the form of Exhibit B (a “Rights
Certificate”), 

 4
 

evidencing
one Right for each share of Common Stock so held. From and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.

    (b) Until
the Distribution Date (or the Expiration Date), the surrender for transfer of
any certificate for shares of Common Stock of the Company outstanding on the
Record Date shall also constitute the transfer of the Rights associated with
the shares of Common Stock represented thereby.

    (c) Certificates
evidencing shares of Common Stock which become outstanding (whether originally
issued or delivered from the Company’s treasury) after the Record Date but
prior to the earlier of the Distribution Date and the Expiration Date shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend (or such other legend as the Company may deem appropriate that
is not inconsistent with the provisions of this Agreement):

This certificate also evidences and entitles the
holder hereof to certain rights as set forth in a Rights Agreement between
United Online, Inc. and U.S. Stock Transfer Corporation, dated as of
November 15, 2001 (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 United Online, Inc. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. United Online, 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 any Person who becomes an Acquiring Person
(as defined in the Rights Agreement), whether currently held by or on behalf of
such person or by any subsequent holder, may become null and void.

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

    Section 4.  Form of Rights Certificates.

    (a) The
Rights Certificates (and the forms of election to purchase Units of Preferred
Stock and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit B and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or transaction reporting system on
which the Rights may from time to time be listed or traded, or to conform to
usage. Subject to the provisions of Sections 11 and 22, the Rights Certificates
shall entitle the holders thereof to purchase the number of Units of Preferred
Stock as shall be set forth therein at the price per Unit of Preferred Stock
set forth therein, but the number of such Units of Preferred Stock and the
Purchase Price shall be subject to adjustment as provided herein.

    (b) Any
Rights Certificate issued pursuant to this Agreement that represents Rights
beneficially owned by: (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the board of directors of the 

 5
 

Company
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) shall contain (to the
extent feasible) the following legend:

The Rights represented by this Rights Certificate are or
were beneficially owned by a Person who was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Rights Agreement by and between United Online, Inc. and U.S. Stock
Transfer Corporation, as Rights Agent, dated as of November 15, 2001 (the “Rights
Agreement”)). Accordingly, this Rights Certificate and the Rights represented
hereby may become null and void in the circumstances specified in
Section 7(e) of the Rights Agreement.

    Section 5.  Countersignature and Registration.

    (a) The
Rights Certificates shall be executed on behalf of the Company by any officer
of the Company, either manually or by facsimile signature, shall have affixed
thereto the Company’s seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent and issued and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not ceased to be such
officer of the Company. Any Rights Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of this Agreement any such person was not
such an officer.

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

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

    (a) Subject
to the provisions of Sections 4(b), 7(e) and 14, at any time after the Close of
Business on the Distribution Date, and at or prior to the Close of Business on
the Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates evidencing exercisable Rights, entitling the registered
holder to purchase a like number of Units of Preferred Stock (or, following a
Triggering Event, other securities, cash or other assets, as the case may be)
as the Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Rights Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Rights Certificates to be transferred, split up, combined
or exchanged at the office of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Sections 4(b), 7(e) and 14, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights Certificates,
as the case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that 

 6
 

may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.

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

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

    (a) The
registered holder of any Rights Certificate evidencing exercisable Rights may
exercise the Rights evidenced thereby (except as otherwise provided in this
Agreement) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the related certification duly executed, to the Rights Agent at the office of
the Rights Agent designated for such purpose, together with payment of the
Purchase Price for each Right being exercised (as such amount may be reduced
(including to zero) pursuant to Section 11(a)(iii)) and an amount equal to
any applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9 in cash, or by certified check,
wire transfer or bank draft payable to the order of the Company, at or prior to
the earliest of (i) the Close of Business on the tenth anniversary hereof
(the “Final Expiration Date”), (ii) the time at which the Rights are
redeemed as provided in Section 23 (the “Redemption Date”), and
(iii) the time at which such Rights are exchanged as provided in
Section 24 (the earliest of (i), (ii) and (iii) being the “Expiration
Date”).

    (b) The
Purchase Price for each Unit of Preferred Stock pursuant to the exercise of a
Right shall initially be $25.00, shall be subject to adjustment from time to
time as provided in Sections 11 and 13 and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.

    (c) Upon
receipt of a Rights Certificate evidencing exercisable Rights (with the form of
election to purchase duly executed) accompanied by payment as provided in
Section 7(a), the Rights Agent shall, subject to Section 20(k),
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Stock a certificate or certificates for the number of Units of Preferred Stock
to be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests or (B) if the Company shall have
elected to deposit the total number of Units of Preferred Stock issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent a depositary receipt or depositary receipts representing such
number of Units of Preferred Stock as are to be purchased (in which case
certificates for the Units of Preferred Stock represented by such receipt or
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, 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, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder; and (iv) when appropriate, after receipt
thereof, deliver such cash to or upon the order of the registered holder of
such Rights Certificate. If the Company is obligated to issue other securities
of the Company, pay cash and/or distribute other property pursuant to
Section 11(a), the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate.

 7
 

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

    (e) Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Triggering Event, any Rights beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person; (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such; (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the board of
directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e); or (iv) any subsequent transferee shall become null and
void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights or any Rights Certificate which
formerly evidenced such Rights, and neither the Company nor the Rights Agent
shall have any obligations whatsoever with respect to such Rights or any Rights
Certificate, whether under any provision of this Agreement or otherwise. The
Company shall use its best efforts to ensure that the provisions of
Section 4(b) and this Section 7(e) are complied with, but shall have
no liability to any holder of Rights Certificates or to any other Person as a
result of its making or failing to make any determinations with respect to an
Acquiring Person or any of such Acquiring Person’s Affiliates, Associates or
transferees or taking or failing to take any actions with respect any Rights or
Rights Certificates of any such Person.

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

    Section 8.  Cancellation and Destruction of Rights
Certificates.  All Rights Certificates surrendered for the
purpose of exercise, transfer, split up, combination or exchange shall, if
surrendered to the Company or 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 Rights Certificates shall be issued in
lieu thereof except as expressly permitted by this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Rights Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.

    Section 9.  Reservation and Availability of Preferred
Stock.

    (a) The
Company covenants and agrees that it will use its best efforts to cause to be
reserved and kept available out of and to the extent of its authorized and
unissued Preferred Stock not reserved for another purpose a number of shares
that will be sufficient to permit the exercise in full of all outstanding
Rights. Upon the occurrence of any events resulting in an increase in the
aggregate number of shares of Preferred Stock (or other equity securities of
the Company) issuable upon exercise 

 8
 

of all
outstanding Rights above the number then reserved, the Company shall make
appropriate increases in the number of shares so reserved.

    (b) If
the Units of Preferred Stock to be issued and delivered upon the exercise of
the Rights are at any time listed on a national securities exchange or included
for quotation on any transaction reporting system, the Company shall during the
period from the Distribution Date to the Expiration Date use its best efforts
to cause all shares reserved for such issuance to be listed on such exchange or
included for quotation on any such transaction reporting system upon official
notice of issuance upon such exercise.

    (c) The
Company shall use its best efforts to (i) file, as soon as practicable
following the earliest date after the first occurrence of a
Section 11(a)(ii) Event in which the consideration to be delivered by
the Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii), or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as 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
the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Expiration Date. The Company
will also take such action as may be appropriate under, or to ensure compliance
with, the securities or “blue sky” laws of the various states in connection
with the exercisability of the Rights. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction, unless the requisite qualification of the offering made upon
exercise of the Rights in such jurisdiction shall have been obtained, or an
exemption therefrom shall be available and until a registration statement has
been declared effective.

    (d) The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Units of Preferred Stock (and, following the
occurrence of a Triggering Event, any other securities that may be delivered
upon exercise of Rights) shall, at the time of delivery of the certificates for
such Units of Preferred Stock (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and non-assessable.

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

    Section 10.  Preferred Stock Record Date.  Each
person in whose name any certificate for Units of Preferred Stock (or,
following the occurrence of a Triggering Event, other securities) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Units of Preferred Stock (or, following the occurrence
of a Triggering Event, other securities) represented thereby on, and such
certificate shall be dated, at the Close of Business on the date upon which the
Rights Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or, following the occurrence of a Triggering Event, other
securities) transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such shares at the Close of Business
on, and such certificate shall be 

 9
 

dated,
the next succeeding Business Day on which such transfer books are open; provided further, however, that if delivery of Units of
Preferred Stock (or such other securities) is delayed pursuant to
Section 9(c), such Persons shall be deemed to have become the record
holders of such Units of Preferred Stock (or such other securities) only when
such Units first become deliverable. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to securities 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 expressly provided in this Agreement.

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

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

    (ii) Subject to
Section 24, if:

    (A) any Person shall
become an Acquiring Person, unless the event causing the Person to become an
Acquiring Person is a transaction to which the provisions of Section 13(a)
apply;

    (B) any Acquiring Person
or any Associate or Affiliate of any Acquiring Person, at any time after the
date of this Agreement, directly or indirectly, shall (1) merge into the
Company or otherwise combine with the Company and the Company shall be the
continuing or surviving corporation of such merger or combination and shares of
Common Stock of the Company shall remain outstanding and unchanged, (2) in
one transaction or a series of transactions, transfer any assets to the Company
or any of its Subsidiaries in exchange (in whole or in part) for shares of
Common Stock of the Company, for other equity securities of the Company or any
of its Subsidiaries, or for securities exercisable for or convertible into
shares of equity securities of the Company or any of its Subsidiaries (whether
shares of Common Stock of the Company or otherwise) or otherwise obtain from
the Company or any of its Subsidiaries, with or without consideration, any
additional shares of such equity securities or securities exercisable for or
convertible into such equity securities (other than pursuant to a pro rata
distribution to all holders of shares of Common Stock of the Company), (3) sell,
purchase, lease, exchange, mortgage, pledge, transfer or otherwise acquire or
dispose of, in one transaction or a series of transactions, to, from or with
the Company or any of its Subsidiaries 

 10
 

or any employee benefit plan maintained by the Company
or any of its Subsidiaries or any trustee or fiduciary with respect to such
plan acting in such capacity, assets (including securities) on terms and
conditions less favorable to the Company or such Subsidiary or plan than those
that could have been obtained in arm’s-length negotiations with an unaffiliated
third party, other than pursuant to a transaction set forth in
Section 13(a), (4) sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise acquire or dispose of, in one transaction or a series of
transactions, to, from or with the Company or any of its Subsidiaries or any
employee benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such capacity
(other than transactions, if any, consistent with those engaged in, as of the
date hereof, by the Company and such Acquiring Person or such Associate or
Affiliate), assets (including securities or intangible assets) having an
aggregate fair market value of more than $5,000,000, other than pursuant to a
transaction set forth in Section 13(a), (5) receive, or any designee,
agent or representative of such Acquiring Person or any Affiliate or Associate
of such Acquiring Person shall receive, any compensation from the Company or
any of its Subsidiaries other than compensation for full-time employment as a
regular employee at rates in accordance with the Company’s (or its Subsidiaries’)
past practices, or (6) receive the benefit, directly or indirectly (except
proportionately as a holder of shares of Common Stock of the Company or as
required by law or governmental regulation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by the Company or any of its Subsidiaries or any
employee benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such capacity; or

    (C) during such time as
there is an Acquiring Person, there shall be any reclassification of securities
(including any reverse stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any of its Subsidiaries or any
other transaction or series of transactions involving the Company or any of its
Subsidiaries, other than a transaction or transactions to which the provisions
of Section 13(a) apply (whether or not with or into or otherwise involving
an Acquiring Person), which has the effect, directly or indirectly, of
increasing by more than one percent the proportionate share of the outstanding
shares of any class of equity securities of the Company or any of its
Subsidiaries that is directly or indirectly beneficially owned by any Acquiring
Person or any Person or any Associate or Affiliate of any Acquiring Person;

    then promptly following the
occurrence of an event described in Section 11(a)(ii)(A), (B) or
(C) (a “Section 11(a)(ii) Event”), proper provision shall be
made so that each holder of a Right, except as otherwise provided in
Section 7(e), shall thereafter have the right to receive for each Right,
upon exercise thereof in accordance with the terms of this Agreement and
payment of the then-current Purchase Price, in lieu of the number of Units of
Preferred Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, such number of Units
of Preferred Stock as shall equal the result obtained by multiplying the
then-current Purchase Price by the then number of Units of Preferred Stock for
which a Right was exercisable (or would have been exercisable if the
Distribution Date had occurred) immediately prior to the first occurrence of a
Triggering Event, and dividing that product by 50% of the Current Per Share
Market Price for shares of Common Stock on the date of occurrence of the
Triggering Event (such number of Units of Preferred Stock being hereinafter
referred to as the “Adjustment Shares”). Upon the occurrence of a
Section 13 Event, any Rights that shall not have been previously exercised
pursuant to this Section 11(a)(ii) shall thereafter be exercisable
only pursuant to Section 13 and not pursuant to this
Section 11(a)(ii).

    (iii) In the event that
the number of shares of Preferred Stock which are authorized by the Company’s
certificate of incorporation but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights are not sufficient to permit
the exercise in full of the 

 11
 

Rights, or if any necessary regulatory approval for
such issuance has not been obtained by the Company, the Company shall, in lieu
of issuing Units of Preferred Stock in accordance with
Section 11(a)(ii) hereof: (A) determine the excess of
(1) the value of the Units of Preferred Stock issuable upon the exercise
of a Right (the “Current Value”) over (2) the Purchase Price (such excess
being referred to as the “Spread”) and (B) with respect to each Right,
make adequate provision to substitute for such Units of Preferred Stock, upon
exercise of the Rights, (1) cash, (2) a reduction in the Purchase
Price, (3) other equity securities of the Company (including, without
limitation, Common Stock of the Company or shares or units of shares of any
series of preferred stock which the board of directors of the Company shall
have conclusively deemed to have the same value as the Units of Preferred Stock
(such shares or units of preferred stock are herein called “Preferred Stock
Equivalents”)), except to the extent that the Company has not obtained any
necessary regulatory approval for such issuance, (4) debt securities of
the Company, except to the extent that the Company has not obtained any
necessary regulatory approval for such issuance, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to
the Current Value, as determined by the board of directors of the Company based
upon the advice of a nationally recognized investment banking firm selected by
the board of directors of the Company (which determination shall be described
in a statement filed with the Rights Agent and shall be conclusive and binding
on the Rights Agent, the holders of the Rights and all other persons); provided, however,
if the Company shall not have made adequate provision to deliver value pursuant
to clause (B) above within thirty days following the later of
(x) occurrence of a Section 11(a)(ii) Event, and (y) the
date on which the Company’s right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the “Section
11(a)(iii) Trigger Date”), then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of the
Purchase Price, Units of Preferred Stock (to the extent available), and then,
if necessary, cash, having an aggregate value equal to the Spread.

    (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 forty five 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 Unit of Preferred Stock or Equivalent Preferred Stock (or having a
conversion price per Unit, if a security convertible into Units of Preferred
Stock or Equivalent Preferred Stock) less than the then Current Per Share
Market Price (as determined pursuant to Section 11(d)) of a Unit of
Preferred Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the sum of the number of Units of Preferred Stock outstanding on
such record date plus the number of Units of Preferred Stock which the
aggregate offering price of the total number of Units 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 Per Share Market Price and the denominator of which shall be
the sum of the number of Units of Preferred Stock outstanding on such record
date plus the number of additional Units 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). If such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive and binding on the Rights Agent and the holders of the
Rights. Units 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 if such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.

 12

    (c) If
the Company shall fix a record date for a distribution to all holders of Units
of Preferred Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend), assets (other than a dividend payable in Units of Preferred
Stock but including any dividend payable in equity securities other than
Preferred Stock) or subscription rights or warrants (excluding those referred
to in Section 11(d)), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then Current Per Share Market Price (as determined pursuant to
Section 11(d)) of the Preferred Stock 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 statement filed with the
Rights Agent and shall be conclusive and binding on the Rights Agent and the
holders of the Rights) of the cash, assets or evidences of indebtedness to be
distributed or of such subscription rights or warrants distributable in respect
of a share of Preferred Stock, and the denominator of which shall be such
Current Per Share Market Price of a share of Preferred Stock. Such adjustments
shall be made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.

    (d) (i) For
the purpose of any computation hereunder, the “Current Per Share Market Price”
of any security on any date shall be deemed to be the average of the daily
closing prices per share of such security for the thirty consecutive Trading
Days (as such term is hereinafter defined) ending on and including the Trading
Day immediately prior to such date; provided,
however, that in the event that
the Current Per Share Market Price of the security is determined during a
period following the announcement by the issuer of such security of (A) a
dividend or distribution on such security payable in shares of such security or
securities convertible into such shares, or (B) any subdivision,
combination or reclassification of such security and prior to the expiration of
thirty Trading Days after and not including the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the Current Per Share Market
Price shall be appropriately adjusted to reflect the current market price per
share equivalent of such security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the Nasdaq Stock Market
(“NASDAQ”) or, if the security is not listed or admitted to trading on the
NASDAQ, 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 asked
prices in the over-the-counter market, as reported by the NASDAQ or such other
system then in use, or, if on any such date the security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the security selected by the
board of directors of the Company. If on any such date no market maker is
making a market in the security, the Current Per Share Market Price of such
security on such date shall mean the fair value per share or other trading unit
as determined in good faith by the board of directors of the Company as
provided for above (which determination shall be described in a statement filed
with the Rights Agent and shall be conclusive and binding on the Rights Agent,
the holders of the Rights and all other persons). The term “Trading Day” shall
mean a day on which the principal national securities exchange on which the
security is listed or admitted to trading is open for the transaction of
business or, if the security is not listed or admitted to trading on any
national securities exchange, a Business Day.

    (ii) For the purpose of
any computation hereunder, the Current Per Share Market Price of the Preferred
Stock shall be determined in accordance with the method set forth in
Section 11(d)(i). If the Current Per Share Market Price of the Preferred
Stock cannot be 

 13
 

determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner described
in Section 11(d)(i), the Current Per Share Market Price of the Preferred
Stock shall be conclusively deemed to be an amount equal to the product of
$1,000 (as such amount may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to shares of Common
Stock of the Company occurring after the date of this Agreement) multiplied by
the Current Per Share Market Price of Common Stock of the Company. If no shares
of the Common Stock of the Company or the Preferred Stock are publicly held or
so listed or traded, “Current Per Share Market Price” of the 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 statement
filed with the Rights Agent and shall be conclusive and binding on the Rights
Agent and the holders of the Rights. For all purposes of this Agreement, the
Current Per Share Market Price of a Unit of Preferred Stock shall be equal to
the Current Per Share Market Price of one share of Preferred Stock divided by
1,000.

    (e) No
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be
made to the nearest cent or to the nearest one-hundred-thousandth (1/100,000)
of a share of Preferred Stock or one-hundredth (1/100) of any other share or
security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be
made no later than the earlier of (i) three years from the date of the
transaction which requires such adjustment or (ii) the Expiration Date.

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

    (g) All
Rights originally issued by the Company subsequent to any adjustment made to
the Purchase Price shall evidence the right to purchase, at the adjusted
Purchase Price, the number of Units of Preferred Stock purchasable from time to
time upon exercise of the Rights, all subject to further adjustment as provided
in this Agreement.

    (h) Unless
the Company shall have exercised its election under Section 11(i), upon
each adjustment of the Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each Right outstanding immediately prior to the making
of such adjustment shall thereafter evidence the right to purchase, at the
adjusted Purchase Price, that number of Units of Preferred Stock (calculated to
the nearest one-millionth of a share of Preferred Stock) obtained by dividing
(i) the product obtained by multiplying (x) the number of Units 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, by (ii) 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 Units of 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 Units of Preferred Stock for which a
Right was exercisable immediately prior to such ajustment.  Each right held of record prior to such

 14
 

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

    (j)  Irrespective
of any adjustment or change in the Purchase Price or the number of Units of
Preferred Stock issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per Unit and the number of Units of Preferred Stock which were
expressed in the initial Rights Certificates issued hereunder.

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

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

    (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 Unit of Preferred Stock at less than
the Current Per Share Market Price, (iii) issuance wholly for cash of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for Preferred Stock, (iv) dividends on Preferred Stock
payable in Preferred Stock, or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders
of Units of its Preferred Stock shall not be taxable to such stockholders.

    (n) The
Company shall not, at any time after the Distribution Date,
(i) consolidate with any other Person (other than a Subsidiary of the
Company in a transaction 

 15
 

which complies
with Section 11(o)), (ii) merge with or into any other Person (other
than a Subsidiary of the Company in a transaction which complies with
Section 11(o)), or (iii) sell or transfer (or permit any Subsidiary
to sell or transfer), in one transaction, or a series of 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 or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), if (x) at
the time of or immediately after such consolidation, merger or sale there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale,
the Person which constitutes, or would constitute, the Principal Party (as
defined in Section 13(b)) shall have distributed or otherwise transferred
to its stockholders or other persons holding an equity interest in such Person,
Rights previously owned by such Person or any of its Affiliates and Associates;
provided, however, this Section 11(n) shall not
affect the ability of any Subsidiary of the Company to consolidate with, merge
with or into, or sell or transfer assets or earning power to, any other
Subsidiary of the Company.

    (o) After
the Distribution Date, the Company shall not, except as permitted by
Section 23 or Section 26, take (or permit any of its Subsidiaries to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.

    (p) If,
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 outstanding
shares of Common Stock of the Company payable in shares of Common Stock of the
Company or (ii) effect a subdivision, combination or consolidation of the
Common Stock of the Company (by reclassification or otherwise than by payment
of dividends in shares of Common Stock of the Company) into a greater or lesser
number of shares of Common Stock of the Company, then in any such case the
number of Units of Preferred Stock purchasable after such event upon proper
exercise of each Right shall be determined by multiplying the number of Units
of Preferred Stock so purchasable immediately prior to such event by a
fraction, the numerator of which shall be the number of shares of Common Stock
of the Company outstanding immediately before such event and the denominator of
which shall be the number of shares of Common Stock of the Company outstanding
immediately after such event. The adjustments provided for in this
Section 11(p) shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is effected.

    Section 12.  Certificate of Adjusted Purchase Price or Number of
Shares.  Whenever an adjustment is made as provided in
Sections 11 and 13, the Company shall promptly (a) prepare a certificate
setting forth such adjustment, and a brief statement of the facts accounting
for such adjustment, (b) file with the Rights Agent and with each transfer
agent for the shares of Common Stock of the Company or Units of Preferred Stock
a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Rights Certificate in accordance with Section 25 hereof.
Notwithstanding the foregoing sentence, the failure by the Company to make such
certification or give such notice shall not affect the validity of or the force
or effect of the requirement for such adjustment. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment
contained therein and shall not be deemed to have knowledge of such adjustment
unless and until it shall have received such certificate.

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

    (a) In
the event that, following a Share Acquisition Date, directly or indirectly,
(x) the Company shall consolidate with, or merge with and into, any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o)), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, (y) any Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o)) shall consolidate with the Company, or merge with and into
the Company and the Company shall be the continuing or 

 16
 

surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the shares of Common Stock of the
Company shall be changed into or exchanged for stock or other securities of any
other Person or cash or any other property, or (z) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer) to any Person or Persons (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)), in one or
more transactions, directly or indirectly, assets or earning power aggregating
50% or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole), (any such event being a “Section 13 Event”), then, and
in each such case, proper provision shall be made so that: (i) each holder
of a Right, except as provided in Section 7(e), shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price,
such number of validly authorized and issued, fully paid and non-assessable
shares of Common Stock of the Principal Party, which shares shall not be
subject to any liens, encumbrances, rights of first refusal, transfer
restrictions or other adverse claims, as shall be equal to the result obtained
by (1) multiplying the then current Purchase Price by the number of Units
of Preferred Stock for which a Right is exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such Units of Preferred Stock for which a Right would
be exercisable hereunder but for the occurrence of such
Section 11(a)(ii) Event by the Purchase Price which would be in
effect hereunder but for such first occurrence) and (2) dividing that
product (which, following the direct occurrence of a Section 13 Event,
shall be the “Purchase Price” for all purposes of this Agreement) by 50% of the
Current Per Share Market Price of the shares of Common Stock of such Principal
Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term “Company” shall, for all
purposes of this Agreement, thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to ensure that the provisions of this Agreement
shall thereafter be applicable to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the provisions of
Section 11(a)(ii) shall be of no further effect following the first
occurrence of any Section 13 Event.

    (b) ”Principal
Party” shall mean:

    (i)  in the case of
any transaction described in clause (x) or (y) of the first sentence
of Section 13(a), (A) the Person that is the issuer of any securities
into which shares of Common Stock of the Company are converted in such merger
or consolidation, or, if there is more than one such issuer, the issuer whose
outstanding shares of Common Stock have the greatest aggregate Current Per
Share Market Price and (B) if no securities are so issued, the Person that
is the other party to such merger or consolidation, or, if there is more than
one such Person, the Person whose outstanding shares of Common Stock have the
greatest aggregate Current Per Share Market Price; and

    (ii) in the case of any
transaction described in clause (z) of the first sentence of
Section 13(a), the Person that is the party receiving the largest portion
of the assets or earning power transferred pursuant to such transaction or
transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power
transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be
determined, whichever Person whose outstanding shares of Common Stock have the
greatest aggregate Current Per Share Market Price; provided, however,
that in any such case, (1) if the Common Stock of such Person is not at
such time and has not been continuously over the preceding twelve-month period
registered under Section 12 of 

 17
 

the Exchange Act (“Registered Common Stock”), or such
Person is not a corporation, and such Person is a direct or indirect Subsidiary
of another Person that has Registered Common Stock outstanding, “Principal
Party” shall refer to such other Person; (2) if the Common Stock of such
Person is not Registered Common Stock or such Person is not a corporation, and
such Person is a direct or indirect Subsidiary of another Person but is not a
direct or indirect Subsidiary of another Person which has Registered Common
Stock outstanding, “Principal Party” shall refer to the ultimate parent entity
of such first-mentioned Person; (3) if the Common Stock of such Person is
not Registered Common Stock or such Person is not a corporation, and such
Person is directly or indirectly controlled by more than one Person, and one or
more of such other Persons has Registered Common Stock outstanding, “Principal
Party” shall refer to whichever of such other Persons is the issuer of the
Registered Common Stock having the highest aggregate Current Per Share Market
Price; and (4) if the Common Stock of such Person is not Registered Common
Stock or such Person is not a corporation, and such Person is directly or
indirectly controlled by more than one Person, and none of such other Persons
has Registered Common Stock outstanding, “Principal Party” shall refer to
whichever ultimate parent entity is the corporation having the greatest
stockholders’ equity or, if no such ultimate parent entity is a corporation,
shall refer to whichever ultimate parent entity is the entity having the
greatest net assets.

    (c) The
Company shall not consummate any such consolidation, merger, sale or transfer
unless the Principal Party shall have a sufficient number of authorized shares
of its Common Stock which have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this
Section 13, and unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that the Principal Party will:

    (i)  (A) file on an
appropriate form, as soon as practicable following the execution of such
agreement, a registration statement under the Securities Act with respect to
the shares of Common Stock of such Principal Party that may be acquired upon
exercise of the Rights, (B) cause such registration statement to remain
effective (and to include a prospectus complying with the requirements of the
Securities Act) until the Expiration Date, and (C) as soon as practicable
following the execution of such agreement take such action as may be required
to ensure that any acquisition of such shares of Common Stock of such Principal
Party upon the exercise of the Rights complies with any applicable state
securities or “blue sky” laws; and

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

    (d) In
case the Principal Party which is to be a party to a transaction referred to in
this Section 13 has a provision in any of its authorized securities or in
its certificate of incorporation, bylaws or other instrument governing its
corporate affairs, which provision would have the effect of (i) causing
such Principal Party to issue, in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than the Current Per Share Market
Price or securities exercisable for, or convertible into, shares of Common
Stock of such Principal Party at less than the Current Per Share Market Price
(other than to holders of Rights pursuant to this Section 13) or
(ii) providing for any special payment, tax or similar provisions in
connection with the issuance of the shares of Common Stock of such Principal
Party pursuant to the provisions of this Section 13, then, in such event,
the Company 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 cancelled, 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.

 18
 

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

    Section 14.  Fractional Rights and Fractional Shares.

    (a) The
Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the Current Per Share
Market Price of a whole Right. For purposes of this Section 14(a), the
Current Per Share Market Price of a whole Right shall be the closing price per
share of a whole Right on the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable.

    (b) The
Company shall not be required to issue fractions of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Stock (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock).
Fractions 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,
however, 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 the Preferred Stock represented by such depositary receipts. In lieu
of fractional shares of Preferred Stock that are not integral multiples of one
one-thousandth of a share of Preferred Stock, the Company shall pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the Current
Per Share Market Price of one share of Preferred Stock.

    (c) 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 provided above).

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

 19
 

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

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

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

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

    (d) such
holder expressly waives any right to receive any fractional Rights and any
fractional securities upon exercise or exchange of a Right, except as otherwise
provided in Section 14; and

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

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

    Section 18.  Concerning the Rights Agent.  The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it under this Agreement and, from time to time, on demand
of the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder. The Company also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without gross negligence or willful
misconduct on the part of the Rights Agent, for any action taken, suffered or
omitted by the Rights Agent in connection with the execution, acceptance and
administration of this Agreement and the exercise and performance of its
duties, including the costs and expenses of defending against and appealing any
claim of liability in the premises. This indemnity shall survive the
termination of this Agreement and the expiration of 

 20
 

the
Rights. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Company.

    The
Rights Agent may conclusively rely upon and 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 and the exercise and
performance of its duties hereunder in reliance upon any Rights Certificate or
certificate for Units of 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.

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

    (a) Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, that
such corporation must 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
Rights Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.

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

    Section 20.  Duties of Rights Agent.  The
Rights Agent undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, all of which the Company and the
holders of Rights Certificates, by their acceptance thereof, shall be bound,
and no implied duties or obligations shall be read into this Agreement against
the Rights Agent:

    (a) Before
the Rights Agent acts or refrains from acting, it may consult with legal
counsel of its choice (who may be legal counsel for the Company), and the
advice or 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 good faith and in accordance with such advice or opinion.

    (b) Whenever
in the administration, exercise and 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, suffering or
omitting 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 officer of
the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken, 

 21
 

suffered
or omitted in good faith by it under the provisions of this Agreement in
reliance upon such certificate.

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

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

    (e) The
Rights Agent shall not be under any liability or responsibility in respect of
the legality, validity or enforceability of this Agreement or the execution and
delivery hereof (except the due execution by the Rights Agent) or in respect of
the legality, validity or enforceability or the execution of any Rights
Certificate (except its countersignature); nor shall it be liable or
responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
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, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Rights Certificates after
receipt of the certificate described in Section 12); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the authorization
or reservation of any Units of Preferred Stock or other securities to be issued
upon the exercise of any Rights or as to whether any such security 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 administration, exercise and performance of its duties hereunder
from any one officer of the Company, and to apply to such officer for advice or
instructions in connection with its duties, and it shall not be responsible or
liable for any action taken, suffered or omitted by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Agreement and the date on and/or after which such action shall
be taken or such omission shall be effective. The Rights Agent shall not be
liable for any action taken by, or omission of, the Rights Agent in accordance
with a proposal included in any such application on or after the date specified
in such application (which date shall not be less than five Business Days after
the date any officer of the Company actually received such application, unless
any such officer shall have consented in writing to an earlier date) unless,
prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in
response to such application specifying the action to be taken or omitted.

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

 22
 

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

    (j)  No
provision of this Agreement shall require the Rights Agent to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder or in the exercise of its rights if the Rights
Agent in good faith believes that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.

    (k) If,
with respect to any Rights Certificate surrendered to the Rights Agent for exercise,
transfer, split up, combination or exchange, the certification on the form of
assignment or form of election to purchase, as the case may be, that the Rights
evidenced by the Rights Certificate are not owned by an Acquiring Person, or an
Affiliate or Associate thereof, has either not been completed or in any manner
indicates any other response thereto, the Rights Agent shall not take any
further action with respect to such requested exercise, transfer, split up,
combination or exchange, without first consulting with the Company.

    Section 21.
Change of Rights Agent.  The
Rights Agent or any successor Rights Agent may resign and be discharged from
its duties under this Agreement upon thirty days’ notice in writing mailed to
the Company and to each transfer agent of the Common Stock of the Company or
Preferred Stock (as to which the Rights Agent has received prior written
notice) by registered or certified mail, and the Company shall mail notice
thereof to the holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
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 or Preferred
Stock (as to which the Rights Agent has received prior written notice) by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit such holder’s Rights Certificate for inspection by the
Company), then the registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the
United States or of any state of the United States, in good standing,
authorized under such laws to exercise corporate trust or stock transfer
powers, and subject to supervision or examination by federal or state authority
and which has at the time of its appointment as Rights Agent a combined capital
and surplus of at least $50 million. 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 mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.

    Section 22.
Issuance of New Rights Certificates.  Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights 

 23
 

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 Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock of
the Company following the Distribution Date and prior to the Expiration Date,
the Company (a) shall, with respect to shares of Common Stock of the
Company so issued or sold pursuant to the exercise of stock options or under
any employee benefit plan or arrangement or upon the exercise, conversion or
exchange of securities of the Company currently outstanding or issued at any
time in the future by the Company and (b) may, in any other case, if
deemed necessary or appropriate by the board of directors of the Company issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided,
however, that (i) no such
Rights Certificate shall be issued and this sentence shall be null and void ab initio if, and to the extent that, such
issuance or this sentence would create a significant risk of or result in
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued or would create a significant risk of or
result in such options’ or employee plans’ or arrangements’ failing to qualify
for otherwise available special tax treatment and (ii) no such Rights Certificate
shall be issued if, and to the extent that, appropriate adjustment shall
otherwise have been made in lieu of the issuance thereof.

    Section 23.
Redemption and Termination.

    (a) The
Company may, at its option, upon approval by the board of directors, at any
time on or prior to the Close of Business (or such later date as may be
determined by its board of directors) on the earlier of (i) the
Distribution Date or (ii) the Final Expiration Date redeem all but not
less than all the then outstanding Rights at a redemption price of $0.001 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date of this Agreement (such redemption
price being hereinafter referred to as the “Redemption Price”), and the Company
may, at its option, pay the Redemption Price either in cash, shares of Common
Stock of the Company (based on the Current Per Share Market Price thereof at
the time of redemption), or any other form of consideration deemed appropriate
by its board of directors. The redemption 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. Any such redemption will be effective immediately
upon the action of the board of directors of the Company ordering the same,
unless such action of the board of directors of the Company expressly provides
that such redemption will be effective at a subsequent time or upon the
occurrence or nonoccurrence of one or more specified events (in which case such
redemption will be effective in accordance with the provisions of such action
of the board of directors of the Company).

    (b) Immediately
upon the effectiveness of the redemption of the Rights pursuant to
Section 23(a), and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price. The Company
shall promptly give public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such notice shall not affect
the validity of such redemption. Within 10 days after the effectiveness of
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and 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 which is
mailed in such manner shall be deemed given, whether or not the holder receives
the notice. Each notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of
its Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than that specifically set forth in this
Section 23 or in Section 24, and other than in connection with the
purchase of shares of Common Stock prior to the Distribution Date.

 

 24

    (c) Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable pursuant to Section 7(a) at any time when the Rights are
redeemable hereunder.

    Section 24.
Exchange.

    (a) The
Company, at its option, upon approval by its board of directors, at any time
after any Person becomes an Acquiring Person, may exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for
Units of Preferred Stock at an exchange ratio equal to, subject to adjustment
to reflect stock splits, stock dividends and similar transactions occurring
after the date hereof, that number obtained by dividing the Purchase Price by the
then Current Per Share Market Price per Unit of Preferred Stock on the earlier
of (i) the date on which any Person becomes an Acquiring Person and
(ii) the date on which a tender or exchange offer by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan
maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity) is commenced
within the meaning of Rule 14d-2(a) of the Exchange Act Regulations or any
successor rule, if upon consummation thereof such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock of the Company
then outstanding (such exchange ratio being hereinafter referred to as the “Section 24(a)
Exchange Ratio”). Notwithstanding the foregoing, the Company may not effect
such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan maintained by the Company
or any of its Subsidiaries, or any trustee or fiduciary with respect to such
plan acting in such capacity), together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of 50% or more of the shares of
Common Stock of the Company then outstanding.

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

    (c) In
the event that the number of shares of Preferred Stock authorized by the
Company’s certificate of incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights is not sufficient
to permit any exchange of Rights as contemplated in accordance with this
Section 24, the Company shall take all such action as may be necessary to
authorize additional shares of Preferred Stock for issuance upon exchange of
the Rights or make adequate provision to substitute (1) cash,
(2) Common Stock of the Company or other equity securities of the Company,
(3) debt securities of the Company, (4) other assets, or (5) any
combination of the foregoing, having an aggregate value equal to the aggregate
Current Per Share Market Price of the Units of Preferred Stock that would
otherwise be issuable in such exchange, all as determined by the board of
directors of the Company (which determination shall be described in a statement
filed with the Rights Agent and shall be conclusive and binding on the Rights
Agent, the holders of the Rights and all other persons). To the extent that the
Company determines that some action need be taken pursuant to
Section 24(a), the board of directors of the Company may temporarily
suspend the exercisability of the Rights for a 

 25
 

period of
up to sixty days following the date on which the event described in
Section 24(a) shall have occurred, in order to seek any authorization of
additional shares of Preferred Stock and/or to decide the appropriate form of
distribution to be made pursuant to the above provision and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended.

    Section 25.  Notice of Certain Events.

    (a) In
case the Company shall propose (i) to pay any dividend payable in stock of
any class to the holders of its Preferred Stock or to make any other
distribution to the holders of its Preferred Stock (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred
Stock rights or warrants to subscribe for or to purchase any additional Units
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding Preferred Stock), (iv) to effect any consolidation or merger
into or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one or more transactions, of 50% or more of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person, (v) to effect the liquidation, dissolution or winding up of
the Company or (vi) to declare or pay any dividend on the Common Stock of
the Company payable in shares of Common Stock of the Company or to effect a
subdivision, combination or consolidation of the shares of Common Stock of the
Company (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 Rights 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, or distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock of the
Company and/or shares of Preferred Stock, if any such date is to be fixed, and
such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least ten days prior to the record date
for determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least ten days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the shares of Common Stock of the Company and/or
shares of Preferred Stock, whichever shall be the earlier.

    (b) In
case any of the events set forth in Section 11(a)(ii) shall occur,
then the Company shall as soon as practicable thereafter give to each holder of
a Rights Certificate, in accordance with Section 26, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii).
In the event any Person becomes an Acquiring Person, the Company will promptly
notify the Rights Agent thereof.

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

United Online, Inc.

2555 Townsgate Road

Westlake Village, CA 91361

Tel: (805) 418-2000

Fax: (805) 418-2012

Attn: General Counsel

 26
 

with a copy (which shall not constitute notice) to:

Brobeck, Phleger & Harrison LLP

550 South Hope Street

Los Angeles, California 90071

Tel: (213) 489-4060

Fax: (213) 239-1324

Attn: Richard S. Chernicoff

    Subject
to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sent by registered or certified
mail and shall be deemed given upon receipt and addressed (until another
address is filed in writing by the Rights Agent with the Company) as follows:

U.S. Stock Transfer Corporation

1745 Gardena Avenue

Glendale, California 91204

Tel (818) 502-1404

Fax (818) 502-0674

Attention: Richard Brown

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

    Section 27.  Supplements and Amendments.  Prior
to the Distribution Date, the Company may supplement or amend this Agreement in
any respect, without the approval of any holders of Rights, by action of its
board of directors. From and after the Distribution Date, the Company may from
time to time supplement or amend this Agreement without the approval of any
holders of Rights, by action of its board of directors in order (i) to
cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to
change or supplement the provisions hereunder in any manner which the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person), including, without
limitation, to change the Purchase Price, the Redemption Price, any time
periods herein specified, and any other term hereof, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that from and after such time as
any Person becomes an Acquiring Person, this Agreement shall not be amended in
any manner which would adversely affect the interests of the holders of Rights.
Upon receipt of a certificate from an appropriate officer of the Company that
the proposed supplement or amendment is consistent with this Section 27
and, after such time as any Person has become an Acquiring Person, that the
proposed supplement or amendment does not adversely affect the interests of the
holders of Rights, the Rights Agent shall execute such supplement or amendment.

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

    Section 29.  Determinations and Actions by the Board of Directors.  For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock of the Company outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of the Company of which any Person is the Beneficial Owner, shall
be made 

 27
 

in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
Exchange Act Regulations. The board of directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the board of directors, or the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to
(i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing), which are done or made by the board 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
Certificates and all other parties and (y) not subject the board of
directors of the Company to any liability to the holders of the Rights.

    Section 30.  Benefits of This Agreement.  Nothing
in this Agreement shall be construed to give to any person or corporation other
than the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, shares of Common Stock of
the Company) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, shares of Common Stock of
the Company).

    Section 31.  Severability.  If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated; provided,
however, that notwithstanding
anything in this Agreement to the contrary, if any such term, provision,
covenant or restriction is held by such court or authority to be invalid, void
or unenforceable and the board of directors of the Company determines in its
good faith judgment that severing the invalid language from this Agreement
would adversely affect the purpose or effect of this Agreement and the right of
redemption set forth in Section 23 shall have expired, such right shall be
reinstated and shall not expire until the tenth Business Day following the date
of such determination by the board of directors of the Company.

    Section 32.  Governing Law.  This Agreement
and each Rights Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the internal laws of the State of
Delaware applicable to contracts to be made and performed entirely within such
state, without regard to the choice-of-law or conflict-of-laws principles of
any jurisdiction.

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

    Section 34.  Descriptive Headings.  Descriptive
headings of the several sections of this Agreement are inserted or convenience
only and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.

 28
 

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

	
  

  	
  UNITED ONLINE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARK R.
  GOLDSTON

  
	
   

  	
   

  	
  Mark R. Goldston
  Chairman

  
	
   

  	
   

  	
  Chief
  Executive

  
	
   

  	
   

  	
  Officer
  and President

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. STOCK TRANSFER

  
	
   

  	
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ RICHARD
  BROWN

  
	
   

  	
   

  	
  Richard Brown

  
	
   

  	
   

  	
  Vice
  President

  
				

 

 29

Exhibit A

FORM

of

CERTIFICATE OF DESIGNATION

of

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

of

UNITED ONLINE, INC.,

(Pursuant to Section 151 of the

Delaware General Corporation Law)

    United
Online, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the “Corporation”),
hereby certifies that the following resolution was adopted by the board of
directors of the Corporation as required by Section 151 of the General
Corporation Law at a meeting duly called and held on November 15, 2001;

    RESOLVED,
that pursuant to the authority granted to and vested in the board of directors
of the Corporation (hereinafter the “Board”) in accordance with the provisions
of the certificate of incorporation of the Corporation, as currently in effect,
the Board hereby creates a series of Preferred Stock, par value $0.0001per
share (the “Preferred Stock”), of the Corporation and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:

    Series A
Junior Participating Preferred Stock:

    Section 1.  Designation and Amount.  The
shares of such series shall be designated as “Series A Junior
Participating Preferred Stock” (the “Series A Preferred Stock”) and the
number of shares constituting the Series A Preferred Stock shall be Three
Hundred Thousand (300,000). Such number of shares may be increased or decreased
by resolution of the Board; provided,
that no decrease shall reduce the number of shares of Series A Preferred
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Series A Preferred Stock.

    Section 2.  Dividends and Distributions.

    (a) Subject
to the rights of the holders of any shares of any series of Preferred Stock (or
any similar stock) ranking prior and superior to the Series A Preferred
Stock with respect to dividends, each holder of a share of Series A
Preferred Stock, in preference to the holders of shares of common stock, par
value $0.0001 per share (the “Common Stock”), of the Corporation, and of any
other junior stock, shall be entitled to receive, when declared by the Board
out of funds legally available for the purpose, dividends in an amount per
share (rounded to the nearest cent) equal to, subject to the provision for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the preceding
sentence shall be adjusted by multiplying such

amount by
a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

    (b) The
Corporation shall declare a dividend or distribution on the shares of Series A
Preferred Stock as provided in Section 2(a) immediately after it declares
a dividend or distribution on the Common Stock (other than a dividend payable
in shares of Common Stock); provided,
however, that, in no event shall
a dividend or distribution be declared by the Board on the Common Stock for
which it does not declare and pay the dividend required to be declared on the
Preferred Stock pursuant to Section 2(a).

    (c) Accrued
but unpaid dividends shall not bear interest. Dividends paid on the shares of
Series A Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
The Board may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than sixty
days prior to the date fixed for the payment thereof.

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

    (a) Subject
to the provision for adjustment hereinafter set forth, each share of
Series A Preferred Stock shall entitle the holder thereof to 1,000 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common 

 A-1
 

Stock,
then in each such case the number of votes per share to which holders of shares
of Series A Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

    (b) Except
as otherwise provided herein, in any other Certificate of Designation creating a
series of Preferred Stock or any similar stock, or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common
Stock and any other capital stock of the Corporation having general voting
rights shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.

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

    Section 4.  Certain Restrictions.

    (a) Whenever
quarterly dividends or other dividends or distributions payable on the
Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:

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

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

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

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

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

    Section 5.  Reacquired Shares.  Any shares
of Series A Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of Incorporation,
or in any other Certificate of Designation creating a series of Preferred Stock
or any similar stock or as otherwise required by law.

    Section 6.  Liquidation, Dissolution or Winding Up.

    (a) Upon
any liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (i) to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received the greater of
(x) $1,000 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon to the date of such payment (the “Series A
Liquidation Preference”) and (y) an aggregate amount per share, subject to
the provision for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount to be distributed per share to holders of shares of Common
Stock, or (ii) to the holders of shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time after November 26, 2001 declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under the proviso in
clause (i) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding

immediately
after such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.

 A-2
 

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

    Section 7.  Consolidation, Merger, etc.  In
case the Corporation shall enter into any consolidation, merger, combination or
other transaction in which the shares of Common Stock are exchanged for or
converted or changed into other stock or securities, cash and/or any other
property (or into the right to receive any of the foregoing), then in any such
case each share of Series A Preferred Stock shall at the same time be
similarly exchanged, converted or changed into an amount per share, subject to
the provision for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock is converted, changed or exchanged. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

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

    Section 9.  Rank.  The Series A
Preferred Stock shall rank, with respect to the payment of dividends and the
distribution of assets, junior to all series of any other class of the
Corporation’s Preferred Stock.

    Section 10.  Amendment.  The certificate of
incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least a majority of the outstanding
shares of Series A Preferred Stock, voting together as a single class.

 A-3

    IN
WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the
Corporation as of November       ,
2001. 

	
  

  	
  UNITED ONLINE, INC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Mark R. Goldston

  
	
   

  	
   

  	
  Title: Chairman, Chief Executive

  
	
   

  	
   

  	
  Officer

  
	
   

  	
   

  	
  and President

  
	
   

  	
   

  	
   

  

 

Exhibit B

Form of Rights Certificate 

Certificate No. R-

                                                                                                                                                               Rights

NOT EXERCISABLE AFTER NOVEMBER 26, 2011 OR
EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION
AT THE OPTION OF THE COMPANY AT $0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SUCH AGREEMENT]*

*

The bracketed language is to be inserted in
place of the preceeding sentence where applicable.

   
 

Rights Certificate

UNITED ONLINE, INC.

    This
certifies
that            ,
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of
November 15, 2001 (the “Rights Agreement”), between United
Online, Inc., a Delaware corporation (the “Company”), and U.S. Stock
Transfer Corporation, 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 5:00 p.m., New York City time, on
November 26, 2011, at the office of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one one-thousandth
(a “Unit”) of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $0.0001 per share (the “Series A
Preferred Stock”) of the Company, at a purchase price of $25.00 per Unit
of Series A Preferred Stock (the “Purchase Price”), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of Units of Series A Preferred Stock which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of November 26, 2001 based on the
Series A Preferred Stock as constituted at such date. As provided in the
Rights Agreement, the Purchase Price and the number of Units of Series A
Preferred Stock which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events.

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

 B-1
 

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

    Subject
to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at a redemption price of $0.001 per
Right.

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

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

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

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

	
  

  	
  UNITED ONLINE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name

  
	
   

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  
	
  U.S. Stock
  Transfer Corporation, as Rights Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signatory

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name: Richard
  Brown 

  	
   

  	
   

  
	
   

  	
  Title:
  Vice President

  	
   

  	
   

  

 

 B-2
 

Form of Reverse Side of Rights
Certificate

FORM OF ASSIGNMENT

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

    FOR
VALUE RECEIVED                                                                                
hereby sells, assigns and transfers 

	
  

  
	
  unto

  	
   

  
	
  (Please print
  name and address of transferee)

  

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

	
  

  	
   

  	
   

  	
   

  	
   

  
	
  DATED:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						

Signature
Guaranteed:

    Signatures
must be guaranteed by a participant in a Securities Transfer
Association Inc. recognized signature guarantee medallion program.

 B-3
 

CERTIFICATE

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

	
   

  	
   

  
	
  

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  

 

NOTICE

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

    In
the event the certification set forth above in the Form of Assignment is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (each as defined in the Rights Agreement) and
such Assignment will not be honored.

 B-4
 

FORM OF ELECTION TO PURCHASE

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

    To
United Online, Inc.

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

	
  Please insert social
  security
  or other identifying number

  	
   

  
	
  (Please print
  name and address)

  

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

	
  Please insert social
  security
  or other identifying number

  	
   

  
	
  (Please print
  name and address)

  

 

	
  

  	
   

  	
   

  	
   

  	
   

  
	
  DATED:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						

Signature
Guaranteed:

    Signatures
must be guaranteed by a participant in a Securities Transfer
Association Inc. recognized signature guarantee medallion program.

 B-5
 

CERTIFICATE

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

	
   

  	
   

  
	
  

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  

 

NOTICE

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

    In
the event the certification set forth above in the Form of Election to
Purchase, as the case may be, is not completed, the Company and the Rights
Agent will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof
(each as defined in the Rights Agreement) and such Election to Purchase will
not be honored.

 

 B-6

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