Document:

Exhibit 4.2

 

NORTHSTAR
REALTY FINANCE CORP.

 

NRFC NNN HOLDINGS, LLC

$80,000,000 11.50% EXCHANGEABLE SENIOR NOTES DUE 2013

 

Registration Rights Agreement

 

May 28, 2008

 

WACHOVIA
CAPITAL MARKETS, LLC

JMP
SECURITIES LLC

c/o
Wachovia Capital Markets, LLC

One
Wachovia Center

301
South College Street

Charlotte,
North Carolina 28288

 

Ladies
and Gentlemen:

 

NRFC
NNN Holdings, LLC, a Delaware limited liability company (the “Issuer”), proposes to issue and
sell to Wachovia Capital Markets, LLC and JMP Securities LLC, as the initial
purchasers (the “Initial Purchasers”)
$80,000,000 in aggregate principal amount of its 11.50% Exchangeable Senior
Notes due 2013 (the “Notes”), guaranteed as to payment by the
Guarantors (as defined below) (the “Guarantees” and, together with the Notes, the “Securities”), upon the terms set forth in the Purchase Agreement by and
among the Issuer, NorthStar Realty Finance Corp., a Maryland corporation (the “Company”), NorthStar Realty
Finance Limited Partnership, a Delaware limited partnership (the “Operating
Partnership”), NRFC Sub-REIT Corp., a Maryland corporation (“Sub-REIT”,
the Company, the Operating Partnership and Sub-REIT are collectively referred
to herein as the “Guarantors”), and the Initial Purchasers, dated May 22,
2008 (the “Purchase Agreement”),
relating to the initial placement (the “Initial Placement”) of the Securities.  The Notes will be exchangeable, subject to
certain conditions, at the option of the holder prior to maturity (unless
previously redeemed or otherwise repurchased by the Issuer) for shares of cash,
common stock, $.01 par value, of the Company (the “Common Stock”
and, specifically as to the Common Stock issued or issuable upon exchange of
the Notes, the “Underlying Shares”),
or a combination of cash and shares of Common Stock, at the Issuer’s
option.  To induce the Initial Purchasers
to enter into the Purchase Agreement and to satisfy obligations thereunder, the
holders of the Securities will have the benefit of this registration rights
agreement by and among the Issuer, the Company and the Initial Purchasers
whereby the Company agrees with you for your benefit and the benefit of the
holders from time to time of the Securities (including the Initial Purchasers)
and of the Registrable Securities (as defined below) (each a “Holder” and, collectively, the “Holders”), as follows:

 

1.             Definitions.  Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement.  As used in this Agreement,
the following capitalized defined terms shall have the following meanings:

 

 

“Act” shall mean the Securities Act
of 1933, as amended, and the rules and regulations of the Commission
promulgated thereunder.

 

“Affiliate” shall have the meaning
specified in Rule 405 under the Act.

 

“Automatic Shelf Registration Statement”
shall mean a Registration Statement filed by a Well-Known Seasoned Issuer which
shall become effective upon filing thereof pursuant to General Instruction I.D
for Form S-3.

 

“Broker-Dealer” shall mean any
broker or dealer registered as such under the Exchange Act.

 

“Business Day” shall mean any day
other than a Saturday, a Sunday or a legal holiday or a day on which banking
institutions or trust companies are authorized or obligated by law to close in
New York City.

 

“Closing Date” shall mean the date
of the first issuance of the Securities.

 

“Commission” shall mean the
Securities and Exchange Commission.

 

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

 

 “Control”
shall have the meaning specified in Rule 405 under the Act and the terms “controlling”
and “controlled” shall have meanings correlative thereto.

 

“Deferral Period” shall have the
meaning indicated in Section 3(h) hereof.

 

“Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended, and the rules and regulations
of the Commission promulgated thereunder.

 

“Exchange Price” shall have the
meaning specified in the Indenture.

 

“Final Circular” shall mean the
offering circular, dated May 22, 2008, relating to the Securities, including
any and all annexes thereto and any information incorporated by reference
therein as of such date.

 

“Guarantors”
shall have the meaning set forth in the preamble hereto.

 

“Holder” shall have the meaning
set forth in the preamble hereto.

 

“Indenture” shall mean the
Indenture relating to the Securities, dated as of May 28, 2008, by and
among the Issuer, the Guarantors and Wilmington Trust Company, as trustee, as
the same may be amended from time to time in accordance with the terms thereof.

 

“Initial Placement” shall have the
meaning set forth in the preamble hereto.

 

“Initial Purchasers” shall have
the meaning set forth in the preamble hereto.

 

“Liquidated Damages” shall have
the meaning set forth in Section 6 hereof.

 

2

 

“Losses” shall have the meaning
set forth in Section 5(d) hereof.

 

“Majority Holders” shall mean, on
any date, Holders of a majority of the aggregate principal amount of the
Securities which, for purposes of this determination, shall include Holders of
Registrable Securities based on the aggregate principal amount of Securities
exchanged for such Registrable Securities.

 

“NASD Rules” shall mean the Conduct Rules and
the By-Laws of the National Association of Securities Dealers, Inc.

 

“Notice and Questionnaire” shall
mean a written notice delivered to the Company substantially in the form
attached as Annex A to the Final Circular.

 

“Notice Holder” shall mean, on any
date, any Holder that has delivered a Notice and Questionnaire and such other
information as the Company shall reasonably request in connection with naming a
holder as a Selling Securityholder to the Company on or prior to such date;
provided that not all of such Holders of Registrable Securities that have been
registered for resale have not been sold in accordance with a Shelf
Registration Statement.

 

“Operating
Partnership” shall have the meaning set forth in the preamble hereto.

 

 “Prospectus”
shall mean a prospectus included in the Shelf Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A or Rule 430B under the Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Underlying Shares covered by the Shelf
Registration Statement, and all amendments and supplements thereto, including
any and all exhibits thereto and any information incorporated by reference
therein.

 

“Purchase Agreement” shall have
the meaning set forth in the preamble hereto.

 

“Registrable Securities” shall
mean all or any portion of the Underlying Shares issued or issuable in exchange
for the Notes initially sold to the Initial Purchasers pursuant to the Purchase
Agreement, other than the Underlying Shares that (i) have been sold
pursuant to the Shelf Registration Statement, (ii) are freely transferable
by persons who are not affiliates (as defined in Rule 144 under the Act)
of the Company without registration under the Act pursuant to the second
sentence of Rule 144(b)(1)(i) under the Act, (iii) are
outstanding one year after the maturity date of the Securities, and (iv) are
no longer outstanding.

 

“Securities” shall have the
meaning set forth in the preamble.

 

“Selling Securityholder” shall
have the meaning set forth in Section 2(e) hereof.

 

“Shelf Registration Period” shall
have the meaning set forth in Section 2(c) hereof.

 

“Shelf Registration Statement”
shall mean a “shelf” registration statement of the Company pursuant to the
provisions of Section 2 hereof which covers some or all of the
Underlying Shares on an appropriate form under Rule 415 under the Act, or
any similar rule that 

 

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may be adopted by the Commission, amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.

 

“Sub-REIT”
shall have the meaning set forth in the preamble hereto.

 

 “WKSI”
shall mean a Well-Known Seasoned Issuer, as set forth in Rule 405 under
the Act.

 

2.             Shelf
Registration.

 

(a)           The Company shall,
within 60 days of the Closing Date, file with the Commission a Shelf
Registration Statement (which may be, if the Company is then a WKSI, an
Automatic Shelf Registration Statement) or designate an existing shelf
registration statement filed with the Securities and Exchange Commission
providing for the registration of, and the sale on a continuous or delayed
basis by the Holders of, all of the Registrable Securities, from time to time
in accordance with the methods of distribution set forth therein, pursuant to Rule 415
under the Act or any similar rule that may be adopted by the Commission.

 

(b)           If the Shelf
Registration Statement is not an Automatic Shelf Registration Statement, the
Company shall use its commercially reasonable efforts to cause the Shelf
Registration Statement to become or be declared effective under the Act within
150 days of the Closing Date.

 

(c)           The Company shall use
its commercially reasonable efforts to keep the Shelf Registration Statement
continuously effective, supplemented and amended as required by the Act, in
order to permit the Prospectus forming part thereof to be usable by Holders for
a period (the “Shelf Registration
Period”) from the date the Shelf Registration Statement is declared
effective by the Commission (or becomes effective in the case of an Automatic
Shelf Registration Statement) until the earlier of (i) the date that all
of the Underlying Shares have been sold pursuant to the Shelf Registration
Statement, (ii) the date on which the Underlying Shares are freely
transferable persons who are not affiliates (as defined in Rule 144 under
the Act) of the Company without registration under the Act pursuant to the
second sentence of Rule 144(b)(1)(i) of the Act, (iii) one year
after the maturity date of the Securities, and (iv) the date on which
there are no Registrable Securities outstanding. The Company shall be deemed
not to have used its commercially reasonable efforts to keep the Shelf
Registration Statement effective during the Shelf Registration Period if it
voluntarily takes any action that would result in Holders of Registrable
Securities not being able to offer and sell such Registrable Securities at any
time during the Shelf Registration Period, unless such action is (x) required
by applicable law or otherwise undertaken by the Company in good faith and for
valid business reasons (not including avoidance of the Company’s obligations
hereunder), including the acquisition or divestiture of assets, or (y) permitted
by Section 3(h) hereof.

 

(d)           The Company shall cause
the Shelf Registration Statement and the related Prospectus and any amendment
or supplement thereto, as of the effective date of the Shelf Registration
Statement or such amendment or supplement: (i) to comply in all material
respects with the applicable requirements of the Act; and (ii) not to
contain any untrue statement of a 

 

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material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein (in the case of the Prospectus, in the light of the circumstances under
which they were made) not misleading.

 

(e)           Subject to applicable
law, the Company shall issue a press release through a reputable national
newswire service announcing the anticipated effective date of the Shelf
Registration Statement at least 10 Business Days prior to the anticipated
effective date thereof.  Each Holder of
Registrable Securities agrees that if it wishes to be named as a selling
securityholder (“Selling
Securityholder”) in the Prospectus and use the Prospectus for resales
of the Underlying Shares it must in connection with naming such Holder as a
Selling Securityholder in the Shelf Registration Statement deliver a Notice and
Questionnaire and such other information as the Company may reasonably request
in writing, if any, in connection with naming such Holder as a Selling
Securityholder in the Shelf Registration Statement to the Company at least 5
Business Days prior to the anticipated effective date of the Shelf Registration
Statement as announced in the press release. From and after the effective date
of the Shelf Registration Statement, the Company shall use reasonable best
efforts, as promptly as is practicable after the date a Notice and
Questionnaire is delivered, and in any event within 15 Business Days after such
date, (i) if required by applicable law, to file with the Commission a
post-effective amendment to the Shelf Registration Statement (provided, however, that
the Company shall not be required to file more than one post-effective
amendment in any 90-day period in accordance with this Section 2(e)(i))
or to prepare and, if permitted or required by applicable law, to file a
supplement to the related Prospectus or an amendment or supplement to any
document incorporated therein by reference or file any other required document
(including a report filed under the Exchange Act, if permitted by applicable
law) so that the Holder delivering such Notice and Questionnaire is named as a
Selling Securityholder in the Shelf Registration Statement and the related
Prospectus, and so that such Holder is permitted to deliver such Prospectus to
purchasers of the Registrable Securities in accordance with applicable law and,
if the Company shall file a post-effective amendment to the Shelf Registration
Statement, use commercially reasonable efforts to cause such post-effective
amendment to be declared effective under the Act as promptly as is practicable;
(ii) provide such Holder, upon request, copies of any documents filed
pursuant to Section 2(e)(i) hereof; and (iii) notify such
Holder as promptly as practicable after the effectiveness under the Act of any
post-effective amendment filed pursuant to Section 2(e)(i) hereof; provided, however, that if
such Notice and Questionnaire is delivered during a Deferral Period, the
Company shall so inform the Holder delivering such Notice and Questionnaire and
shall take the actions set forth in clauses (i), (ii) and
(iii) above upon expiration of the Deferral Period in accordance
with Section 3(h) hereof. 
The Company shall be under no obligation to name any Holder that is not
a Notice Holder as a Selling Securityholder in the Shelf Registration Statement
or related Prospectus; provided, however,
that any Holder that becomes a Notice Holder pursuant to the provisions of this
Section 2(e) (whether or not such Holder was a Notice Holder
at the effective date of the Shelf Registration Statement) shall be named as a
Selling Securityholder in the Shelf Registration Statement or related
Prospectus in accordance with the requirements of this Section 2(e).  Notwithstanding the foregoing, if (i) the
Notes are called for redemption and the then prevailing market price of the
Common Stock is above the Exchange Price or (ii) the Notes are exchanged
as provided for in the Indenture, then the Company shall use reasonable best
efforts to file the post-effective amendment or supplement within five Business
Days after the redemption date or the end of the exchange 

 

5

 

period, as applicable, or if such Notice and Questionnaire
is delivered during a Deferral Period, upon expiration of the Deferral Period.

 

3.             Registration Procedures.  The following provisions shall apply in
connection with the Shelf Registration Statement.

 

(a)           The Company shall:

 

(i)            furnish to each of the
Initial Purchasers and to counsel for the Notice Holders, not less than four
Business Days prior to the initial filing thereof with the Commission, a copy
of the Shelf Registration Statement and shall use its commercially reasonable
efforts to reflect in each such document, when so filed with the Commission,
such comments as the Initial Purchasers reasonably propose; and

 

(ii)           include information
regarding the Notice Holders and the methods of distribution for the
Registrable Securities provided to the Company in Notices and Questionnaires as
necessary to permit such distribution by the methods specified therein; and

 

(iii)          promptly amend any
post-effective amendment, supplement or Exchange Act report filed with respect
to the Shelf Registration Statement upon being notified of inaccuracies in
Notice Holder information.

 

(b)           The Company shall
advise the Initial Purchasers and the Notice Holders that have provided in
writing to the Company a telephone or facsimile number and address for notices,
and confirm such advice in writing, if requested (which notice pursuant to clauses (ii) through
(v) hereof shall be accompanied by an instruction to suspend the
use of the Prospectus until the Company shall have remedied the basis for such
suspension):

 

(i)            when the Shelf
Registration Statement and any amendment thereto (other than an incorporated
document) has been filed with the Commission and when the Shelf Registration
Statement or any post-effective amendment thereto has become effective;

 

(ii)           of any request by the
Commission for any amendment or supplement to the Shelf Registration Statement
or the Prospectus or for additional information;

 

(iii)          of the issuance by the
Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement or the institution or threatening of any proceeding for
that purpose;

 

(iv)          of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Underlying Shares included therein for sale in any jurisdiction or the
institution or threatening of any proceeding for such purpose; and

 

(v)           of the happening of any
event that requires any change in the Shelf Registration Statement or the
Prospectus so that, as of such date, they (A) do not contain any untrue
statement of a material fact, and (B) do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus, in the light of the circumstances under which they
were made) not misleading.

 

6

 

(c)           The Company shall use
its commercially reasonable efforts to prevent the issuance of any order
suspending the effectiveness of the Shelf Registration Statement or the
qualification of the securities therein for sale in any jurisdiction and, if
issued, to obtain as soon as possible the withdrawal thereof.

 

(d)           Upon request, the
Company shall furnish to each Notice Holder, without charge, at least one copy
of the Shelf Registration Statement and any post-effective amendment thereto,
but not including material incorporated therein by reference, and, if a Notice
Holder so requests in writing, all exhibits thereto (including exhibits
incorporated by reference therein).

 

(e)           During the Shelf
Registration Period, the Company shall promptly deliver to each Notice Holder,
without charge, as many copies of the Prospectus (including the preliminary
Prospectus, if any) included in the Shelf Registration Statement and any
amendment or supplement thereto as any such person may reasonably request.  The Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the foregoing in
connection with the offering and sale of the Underlying Shares.

 

(f)            Prior to any offering
of the Underlying Shares pursuant to the Shelf Registration Statement, the
Company shall arrange for the qualification of the Underlying Shares for sale
under the laws of such U.S. jurisdictions as any Notice Holder shall reasonably
request and shall maintain such qualification in effect so long as required; provided, however, that in no event shall
the Company be obligated to qualify to do business in any jurisdiction where it
is not then so qualified or to take any action that would subject it to service
of process in suits, other than those arising out of the Initial Placement or
any offering pursuant to the Shelf Registration Statement, in any jurisdiction
where it is not then so subject.

 

(g)           Upon the occurrence of
any event contemplated by Section 3(b)(ii) through (v) above,
the Company shall promptly (or within the time period provided for by Section 3(i) hereof,
if applicable) prepare a post-effective amendment to the Shelf Registration
Statement or an amendment or supplement to the related Prospectus or file any
other required document so that, as thereafter delivered to subsequent
purchasers of the securities included therein, the Prospectus will not include
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

 

(h)           Upon the occurrence or
existence of any pending corporate development, public filings with the
Commission (except in the case of a suspension period as the result of the
filing of a post-effective amendment solely to add additional Selling
Securityholders), or any other material event that, in the reasonable judgment
of the Company, makes it appropriate to suspend the availability of the Shelf Registration
Statement and the related Prospectus, the Company shall give notice (without
notice of the nature or details of such events) to the Notice Holders that the
availability of the Shelf Registration Statement is suspended and, upon receipt
of any such notice, each Notice Holder agrees (i) not to sell any
Registrable Securities pursuant to the Shelf Registration Statement until such
Notice Holder’s receipt of copies of the supplemented or amended Prospectus
provided for in Section 3(g) hereof, or until it is advised in
writing by the Company that the Prospectus may be used, and has received copies
of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in 

 

7

 

such Prospectus, and (ii) to hold such notice in
confidence.  Except in the case of a
suspension of the availability of the Shelf Registration Statement and the
related Prospectus solely as the result of the filing of a post-effective
amendment or supplement to the Prospectus to add additional Selling
Securityholders therein, the period during which the availability of the Shelf
Registration Statement and any Prospectus is suspended (the “Deferral Period”) shall not
exceed 120 days in any 360-day period;
provided, however, that, if the event triggering the Deferral Period
relates to a proposed or pending material business transaction, the disclosure
of which the board of directors of the Company determines in good faith would
be reasonably likely to impede the ability to consummate the transaction or
would otherwise be seriously detrimental to the Company and its subsidiaries
taken a whole, the Company may extend the Deferral Period from 120 days to
150 days in any 360-day period.

 

(i)            The Company shall
comply with all applicable rules and regulations of the Commission and
shall make generally available to its securityholders an earnings statement
satisfying the provisions of Section 11(a) of the Act as soon as
practicable after the effective date of the Shelf Registration Statement and in
any event no later than 45 days after the end of a 12 month period
(or 90 days, if such period is a fiscal year) beginning with the first
month of the Company’s first fiscal quarter commencing after the effective date
of the Shelf Registration Statement.

 

(j)            The Company may
require each Holder of Underlying Shares to be sold pursuant to the Shelf
Registration Statement to furnish to the Company such information regarding the
Holder and the distribution of such Underlying Shares as the Company may from
time to time reasonably require for inclusion in the Shelf Registration
Statement. The Company may exclude from the Shelf Registration Statement the
Underlying Shares of any Holder that unreasonably fails to furnish such information
within a reasonable time after receiving such request.

 

(k)           Subject to Section 6
hereof, the Company shall take appropriate actions in order to expedite or
facilitate the registration or the disposition of the Underlying Shares, provided, however, that
the Company shall not be required to take any actions to facilitate an
underwritten disposition of Underlying Shares.

 

4.             Registration Expenses.  The Company shall bear all expenses incurred
in connection with the performance of its obligations under Sections 2
and 3 hereof and shall reimburse the Holders for the reasonable fees and
disbursements of one firm or counsel to act as counsel for the Holders in
connection therewith.

 

5.             Indemnification
and Contribution.

 

(a)           The Company agrees to
indemnify and hold harmless each Holder of Underlying Shares covered by the
Shelf Registration Statement, each Initial Purchaser, and the directors,
officers and, employees of each such Holder or Initial Purchaser and each
person who controls any such Holder or Initial Purchaser within the meaning of
either the Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims, 

 

8

 

damages or liabilities (or actions in respect thereof)
are caused by any untrue statement or alleged untrue statement of a material
fact contained in the Shelf Registration Statement as originally filed or in
any amendment thereof, or in any preliminary Prospectus or the Prospectus, or
in any amendment thereof or supplement thereto, or are caused by the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
preliminary Prospectus or the Prospectus, in the light of the circumstances
under which they were made) not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action;
provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability is caused by
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of the party
claiming indemnification specifically for inclusion therein.

 

(b)           Each Holder of
securities covered by the Shelf Registration Statement (including each Initial
Purchaser that is a Holder, in such capacity) severally and not jointly agrees
to indemnify and hold harmless the Issuer, the Company and each of the
Guarantors, each of their respective members, directors, and officers who signs
the Shelf Registration Statement and each person who controls the Issuer, the
Company or the other Guarantors within the meaning of either the Act or the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
each such Holder, but only with reference to written information relating to
such Holder furnished to the Company by or on behalf of such Holder
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement shall be acknowledged by each Notice Holder
that is not an Initial Purchaser in such Notice Holder’s Notice and
Questionnaire and shall be in addition to any liability that any such Notice
Holder may otherwise have.

 

(c)           Promptly after receipt
by an indemnified party under this Section 5 or notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses; and (ii) will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above.  The indemnifying party shall be entitled to
appoint counsel (including local counsel) of the indemnifying party’s choice at
the indemnifying party’s expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying
party shall not thereafter be responsible for the fees and expenses of any
separate counsel, other than local counsel if not appointed by the indemnifying
party, retained by the indemnified party or parties except as set forth below); provided, however, that such counsel
shall be satisfactory to the indemnified party. 
Notwithstanding the indemnifying party’s election to appoint counsel
(including local counsel) to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel
chosen by 

 

9

 

the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest; (ii) the
actual or potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available to
it and/or other indemnified parties that are different from or additional to
those available to the indemnifying party; (iii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action; or (iv) the indemnifying party shall authorize
the indemnified party to employ separate counsel at the expense of the
indemnifying party.  An indemnifying
party will not, without the prior written consent of the indemnified parties
(which consent may not unreasonably be withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding.

 

(d)           In the event that the
indemnity provided in paragraph (a) or (b) of this
Section 5 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party shall have a
joint and several obligation to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending loss, claim, liability, damage or
action) (collectively “Losses”)
to which such indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from the
Initial Placement and the Shelf Registration Statement which resulted in such
Losses; provided, however, that
in no event shall any Initial Purchaser be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to the
Securities, as set forth in the Final Circular, nor shall any underwriter be
responsible for any amount in excess of the underwriting discount or commission
applicable to the securities purchased by such underwriter under the Shelf
Registration Statement which resulted in such Losses.  If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the indemnifying party and
the indemnified party shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations.  Benefits received by the Company and the
Issuer shall be deemed to be equal to the total net proceeds from the Initial
Placement (before deducting expenses) as set forth in the Final Circular.  Benefits received by the Initial Purchasers
shall be deemed to be equal to the total purchase discounts and commissions as
set forth on the cover page of the Final Circular, and benefits received
by any other Holders shall be deemed to be equal to the increase in value in
having their Underlying Shares registered under the Act.  Benefits received by any underwriter shall be
deemed to be equal to the total underwriting discounts and commissions, as set
forth on the cover page of the Prospectus forming a part of the Shelf
Registration Statement which resulted in such Losses.  Relative fault shall be determined by
reference to, among other things, whether any untrue or any alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information provided by the indemnifying party, on the one hand, or
by the 

 

10

 

indemnified party, on the other hand, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.  The parties agree that it would not be just
and equitable if contribution were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or any other method of
allocation which does not take account of the equitable considerations referred
to above.  Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.  For purposes of this Section 5,
each person who controls a Holder within the meaning of either the Act or the
Exchange Act and each director, officer and employee of such Holder shall have
the same rights to contribution as such Holder, and each person who controls
the Company or the Issuer within the meaning of either the Act or the Exchange
Act, each officer or member of the Company or the Issuer who shall have signed
the Shelf Registration Statement and each director or member of the Company or
the Issuer shall have the same rights to contribution as the Company and the
Issuer, subject in each case to the applicable terms and conditions of this paragraph (d).

 

(e)           The provisions of this Section 5
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any Holder or the Company or the Issuer or any of the indemnified
persons referred to in this Section 5, and shall survive the sale
by a Holder of securities covered by the Shelf Registration Statement.

 

6.             Registration Defaults.  Each of the following events shall constitute
a Registration Default:

 

(a)           if the Shelf Registration
Statement (which may be, if the Company is then a WKSI, an Automatic Shelf
Registration Statement) is not filed with the Commission, or if an existing
shelf registration statement is not designated by the Company for the purpose
of registering the Securities, within 60 days following the Closing Date;

 

(b)           if the Shelf
Registration Statement is not declared effective by the Commission (or has not
become effective in the case of an Automatic Shelf Registration Statement)
within 150 days following the Closing Date;

 

(c)           if the Shelf
Registration Statement has been declared or becomes effective but ceases to be
effective or usable for the offer and sale of the Registrable Securities (other
than in connection with (A) a Deferral Period or (B) as a result of a
requirement to file a post-effective amendment or supplement to the
Prospectus to make changes to the information regarding Selling Securityholders
or the plan of distribution provided for therein at any time during the Shelf
Registration Period) and the Company does not cure the lapse of effectiveness
or usability within either (i) ten Business Days or (ii) if a Deferral Period is then in effect and subject to
the 15 Business Day filing requirement and the proviso regarding the filing of
post-effective amendments in Section 2(e) with respect to any Notice
and Questionnaire received during such period, ten Business Days following the
expiration of such Deferral Period or period permitted pursuant to Section 2(e);
or

 

11

 

(d)           if the Company through
its omission fails to name as a Selling Securityholder any Holder that had
complied timely with its obligations hereunder in a manner to entitle such
Holder to be so named in (i) the Shelf Registration Statement at the time
it first became effective, or (ii) any Prospectus at the later of time of
filing thereof or the time the Shelf Registration Statement of which the
Prospectus forms a part becomes effective, or (iii) if permitted, an
Exchange Act filing or post-effective amendment; or

 

(e)           if the aggregate duration of Deferral Periods in any period exceeds the
number of days permitted in respect of such period pursuant to Section 3(h) hereof;

 

provided, however,
that a Registration Default will be deemed to end upon the day before the
earlier of (i) the day on which such Registration Default has been cured
or waived, and (ii) the date the Shelf Registration Statement is no longer
required to be kept effective for the Underlying Shares;  and provided,
further however, if a Registration Default occurs and is continuing
during a period of time that the Notes are exchangeable for Underlying Shares,
liquidated damages consisting solely of additional interest (“Liquidated Damages”) will be paid
to those entitled to interest payments on such dates semi-annually in arrears
on each interest payment date and will accrue at a rate per year equal to (i) 0.25%
of the outstanding principal amount of the Notes to and including the 90th day
following such registration default, and (ii) 0.50% of the outstanding
principal amount of the Notes from and after the 91st day following such
Registration Default. In no event will any additional interest on the Notes
exceed 0.50% per year.  No Liquidated
Damages will be paid on any Note after it has been exchanged for Underlying
Shares.  If a Note ceases to be
outstanding during any period for which additional interest is accruing, the
Liquidated Damages to be paid with respect to that Note will be prorated.

 

The
occurrence and continuance of a Registration Default shall not have any effect
on the Issuer’s rights with respect to the Securities under the Indenture,
including but not limited to its right to redeem the Securities pursuant to the
Indenture.

 

7.             No Inconsistent Agreements.  The Company has entered into, and agrees not
to enter into, any agreement with respect to its securities that is
inconsistent with the registration rights granted to the Holders herein.

 

8.             Rule 144A and Rule 144.  So long as any Registrable Securities remain outstanding,
the Company shall use its commercially reasonable efforts to file the reports
required to be filed by it under Rule 144A(d)(4) under the Act and
the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written request of any Holder
of Registrable Securities, make available other information so long as
necessary to permit sales of such Holder’s Registrable Securities pursuant to Rules 144
and 144A of the Act.  The Company covenants
that it will take such further action as any Holder of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the Act
within the limitation of the exemptions provided by Rules 144 and 144A
(including, without limitation, the requirements of Rule 144A(d)(4)).  Upon the written request of any Holder of
Registrable Securities, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements.  Notwithstanding the foregoing, nothing in
this Section 8 shall 

 

12

 

be deemed to require the Company or the Issuer to
register any of its securities pursuant to the Exchange Act.

 

9.             Listing. 
The Company shall use its commercially reasonable efforts to maintain
the approval of the Underlying Shares for listing on the New York Stock
Exchange.

 

10.           Amendments and Waivers.  The provisions of this Agreement may not be
amended, qualified, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the Company has
obtained the written consent of the Majority Holders; provided, however, that, with respect to any matter that
directly or indirectly affects the rights of any Initial Purchaser hereunder,
the Company shall obtain the written consent of each such Initial Purchaser
against which such amendment, qualification, modification, supplement, waiver
or consent is to be effective; provided,
further, that no amendment, qualification, modification, supplement,
waiver or consent with respect to Section 6 hereof shall be
effective as against any Holder of Registrable Securities unless consented to
in writing by such Holder; and provided,
further, that the provisions of this Section 10 may not
be amended, qualified, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the Company has
obtained the written consent of the Initial Purchasers and each Holder.

 

11.           Notices. 
All notices and other communications provided for or permitted hereunder
shall be made in writing by hand-delivery, first-class mail, telex, telecopier
or air courier guaranteeing overnight delivery:

 

(a)           if to a Holder, at the
most current address given by such holder to the Company in accordance with the
provisions of the Notice and Questionnaire;

 

(b)           if to the Initial
Purchasers, initially at the address or addresses set forth in the Purchase
Agreement; and

 

(c)           if to the Company,
initially at its address set forth in the Purchase Agreement.

 

All
such notices and communications shall be deemed to have been duly given when
received. The Initial Purchasers and the Company by notice to the other parties
may designate additional or different addresses for subsequent notices or
communications.

 

Notwithstanding
the foregoing, notices given to Holders holding Notes in book-entry form may be
given through the facilities of DTC or any successor depository.

 

12.           Remedies. 
Each Holder, in addition to being entitled to exercise all rights
provided to it herein or in the Purchase Agreement or granted by law, will be
entitled to specific performance of its rights under this Agreement.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by them of the provisions of this Agreement and hereby agree to waive in any
action for specific performance the defense that a remedy at law would be adequate.

 

13

 

13.           Successors.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective successors and
assigns, including, without the need for an express assignment or any consent
by the Company thereto, subsequent Holders of Underlying Shares, and the
indemnified persons referred to in Section 5 hereof.  The Company hereby agrees to extend the
benefits of this Agreement to any Holder of Underlying Shares, and any such
Holder may specifically enforce the provisions of this Agreement as if an
original party hereto.

 

14.           Counterparts.  This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.

 

15.           Headings.  The section headings used herein are for
convenience only and shall not affect the construction hereof.

 

16.           Applicable
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York.  The parties hereto each hereby waive
any right to trial by jury in any action, proceeding or counterclaim arising
out of or relating to this Agreement.

 

17.           Severability.  In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

14

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NORTHSTAR REALTY FINANCE CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Albert Tylis

  
	
   

  	
   

  	
  Name:

  	
  Albert Tylis

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President & General

  Counsel

  

 

 

Accepted and agreed to as

of the date first above written:

 

	
  WACHOVIA CAPITAL MARKETS,
  LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Lear Beyer

  	
   

  
	
   

  	
  Name:

  	
  Lear Beyer

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  JMP SECURITIES LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Carter Mack

  	
   

  
	
   

  	
  Name:

  	
  Carter Mack

  	
   

  
	
   

  	
  Title:

  	
  Co-President and Director of Investment BankingExhibit
4.1

 

ACTIVIDENTITY
CORPORATION

 

AND

 

AMERICAN STOCK TRANSFER &
TRUST COMPANY LLC

 

AS RIGHTS AGENT

 

STOCKHOLDER RIGHTS
AGREEMENT

 

DATED AS OF JULY 25,
2008

 

 

TABLE OF CONTENTS

 

	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1. Certain
  Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2. Appointment
  of Rights Agent

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 3. Issue of
  Right Certificates

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 4. Form of
  Right Certificates

  	
   

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 5.
  Countersignature and Registration

  	
   

  	
  10

  
	
   

  	
   

  	
   

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

  	
   

  	
  11

  
	
   

  	
   

  	
   

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

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 8. Cancellation
  and Destruction of Right Certificates

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 9. Reservation
  and Availability of Preferred Stock

  	
   

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 10. Preferred
  Stock Record Date

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 11. Adjustment
  of Exercise Price, Number and Kind of Shares or Number of Rights

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 12. Certificate
  of Adjusted Exercise Price or Number of Shares

  	
   

  	
  23

  
	
   

  	
   

  	
   

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

  	
   

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 14. Fractional
  Rights and Fractional Shares

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 15. Rights of
  Action

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 16. Agreement
  of Right Holders

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 17. Right
  Certificate Holder Not Deemed a Stockholder

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 18. Concerning
  the Rights Agent

  	
   

  	
  28

  
	
   

  	
   

  	
   

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

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 20. Duties of
  Rights Agent

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 21. Change of
  Rights Agent

  	
   

  	
  31

  

 

i

 

	
  Section 22. Issuance of
  New Right Certificates

  	
   

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 23. Redemption

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 24. Exchange

  	
   

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 25. Notice of
  Certain Events

  	
   

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 26. Notices

  	
   

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section 27. Supplements
  and Amendments

  	
   

  	
  37

  
	
   

  	
   

  	
   

  
	
  Section 28. Successors

  	
   

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 29.
  Determinations and Actions by the Board of Directors

  	
   

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 30. Benefits of
  this Agreement

  	
   

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 31.
  Severability

  	
   

  	
  38

  
	
   

  	
   

  	
   

  
	
  Section 32. Governing
  Law

  	
   

  	
  39

  
	
   

  	
   

  	
   

  
	
  Section 33.
  Counterparts

  	
   

  	
  39

  
	
   

  	
   

  	
   

  
	
  Section 34. Descriptive
  Headings

  	
   

  	
  39

  
	
   

  	
   

  	
   

  
	
  Section 35. Force
  Majeure

  	
   

  	
  39

  

 

	
  Exhibit A —

  	
  Certificate of
  Designations of Series A Junior Participating Cumulative Preferred Stock

  
	
   

  	
   

  
	
  Exhibit B —

  	
  Form of Right Certificate

  

 

ii

 

STOCKHOLDER RIGHTS AGREEMENT

 

Agreement, dated as of July 25,
2008, between ActivIdentity Corporation, a Delaware corporation (the “Company”),
and American Stock Transfer & Trust Company, LLC, a New York Limited
Liability Trust Company (the “Rights Agent”).

 

W I T N E S S E T H

 

WHEREAS, the Board of
Directors of the Company desires to provide stockholders of the Company with
the opportunity to benefit from the long-term prospects and value of the
Company and to ensure that stockholders of the Company receive fair and equal
treatment in the event of any proposed takeover of the Company;

 

WHEREAS, on July 15,
2008, the Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as such term is hereinafter defined) for each outstanding share of Common Stock, par
value $0.001 per share, of the Company (the “Common Stock”) outstanding
as of July 25, 2008 (the “Record Date”), and authorized the issuance of
one Right for each share of Common Stock of the Company issued (whether or not
originally issued or sold from the Company’s treasury, except in the case of
treasury shares having associated Rights) between the Record Date and the
earlier of the Distribution Date or the Expiration Date (as such terms are
hereinafter defined), each Right initially representing the right to purchase
one ten-thousandth of a share of Series A Junior Participating Cumulative
Preferred Stock of the Company having the rights, powers and preferences set
forth on Exhibit A hereto, upon the terms and subject to the
conditions hereinafter set forth (the “Rights”); and

 

WHEREAS, the Company
desires to appoint the Rights Agent to act as rights agent hereunder, in
accordance with the terms and conditions hereof.

 

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

 

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

 

(a)           “Acquiring Person”
shall mean any Person (as such term is hereinafter defined) who or which,
together with all Affiliates (as such term is hereinafter defined) and
Associates (as such term is hereinafter defined) of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of 20% or more of the
shares of Common Stock of the Company then outstanding, but shall not include (i) the
Company, (ii) any Subsidiary (as such term is hereinafter defined) of the
Company, (iii) any employee benefit plan or compensation arrangement of
the Company or any Subsidiary of the Company or (iv) any Person holding
shares of Common Stock of the Company organized, appointed or established by
the Company or any Subsidiary of the Company for or pursuant to the terms of
any such employee benefit plan or compensation arrangement (the Persons
described in clauses (i) through (iv) above are 

 

 

referred to herein
as “Exempt Persons”); provided, however, that the term “Acquiring
Person” shall not include any Grandfathered Person, unless such Grandfathered
Person becomes the Beneficial Owner of a percentage of the shares of Common
Stock of the Company then outstanding equal to or exceeding such Grandfathered
Person’s Grandfathered Percentage.

 

Notwithstanding the
foregoing, no Person shall become an “Acquiring Person” as the result of an
acquisition by the Company of Common Stock of the Company which, by reducing
the number of shares outstanding, increases the proportionate number of shares
Beneficially Owned by such Person to 20%  (or
in the case of a Grandfathered Person, the Grandfathered Percentage applicable
to such Grandfathered Person) 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 20% (or in the case of a Grandfathered
Person, the Grandfathered Percentage applicable to such Grandfathered Person)
or more of the shares of Common Stock of the Company then outstanding by reason
of share purchases by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional shares (other than
pursuant to a stock split, stock dividend or similar transaction) of Common
Stock of the Company and immediately thereafter be the Beneficial Owner of 20%
(or in the case of a Grandfathered Person, the Grandfathered Percentage
applicable to such Grandfathered Person) or more of the shares of Common Stock
of the Company then outstanding, then such Person shall be deemed to be an “Acquiring
Person.”

 

In addition,
notwithstanding the foregoing, and notwithstanding anything to the contrary
provided in the Agreement including without limitation in Sections 1(jj), 3(a) or
27, a Person shall not be an “Acquiring Person” if the Board of Directors of
the Company determines at any time that a Person who would otherwise be an “Acquiring
Person,” has become such without intending to become an “Acquiring Person,” and
such Person divests as promptly as practicable (or within such period of time
as the Board of Directors of the Company determines is reasonable) a sufficient
number of shares of Common Stock of the Company so that such Person would no
longer be an “Acquiring Person,” as defined pursuant to the foregoing
provisions of this Section 1(a).

 

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

 

(c)           “Affiliate”
and “Associate” shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations (the “Rules”)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as
in effect on the date of this Agreement; provided, however, that
no Person who is a director or officer of the Company shall be deemed an
Affiliate or an Associate of any other director or officer of the Company
solely as a result of his or her position as director or officer of the
Company.

 

(d)           A Person shall be
deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially
Own” and have “Beneficial Ownership” of, any securities:

 

(i)         which such Person or any of such Person’s
Affiliates or Associates, directly or indirectly, Beneficially Owns (as
determined pursuant to Rule 13d-3 of the Rules under the Exchange
Act, as in effect on the date of this Agreement);

 

2

 

(ii)        which such Person or any of such Person’s
Affiliates or Associates, directly or indirectly, has:

 

(A)          the right to acquire (whether or not
such right is exercisable immediately or only after the passage of time or upon
the satisfaction of any conditions or both) 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” or have “Beneficial
Ownership” of, (1) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person’s Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange; (2) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event; or (3) securities issuable
upon exercise of Rights from and after the occurrence of a Triggering Event,
which Rights were acquired by such Person or any of such Person’s Affiliates or
Associates prior to the Distribution Date or pursuant to Sections 3(a), 11(i) or
22 hereof; or

 

(B)           the right to vote pursuant to any
agreement, arrangement or understanding (whether or not in writing); provided,
however, that a Person shall not be deemed the “Beneficial Owner” of, or
to “Beneficially Own” or have “Beneficial Ownership” of, any security under
this clause (B) if the agreement, arrangement or understanding to vote
such security (1) arises solely from a revocable proxy or consent given in
response to a public proxy or consent solicitation made pursuant to a written
proxy or consent solicitation statement filed with the Securities and Exchange
Commission in accordance with the Rules of the Exchange Act and (2) is
not also then reportable by such person on Schedule 13D under the Exchange Act
(or any comparable or successor report); or

 

(C)           the right to dispose of pursuant to
any agreement, arrangement or understanding (whether or not in writing) (other
than customary arrangements with and between underwriters and selling group
members with respect to a bona fide public offering of securities); 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 pursuant to a revocable proxy or consent as
described in clause (B) of Section 1(d)(ii) hereof) or disposing
of any securities of the Company;

 

3

 

provided,
however, that (1) no Person engaged in business as an underwriter
of securities shall be deemed the Beneficial Owner of any securities acquired
through such Person’s participation as an underwriter in good faith in a firm
commitment underwriting until the expiration of forty (40) days after the date
of such acquisition, and (2) no Person who is a director or an officer of
the Company shall be deemed, as a result of his or her position as director or
officer of the Company, the Beneficial Owner of any securities of the Company
that are Beneficially Owned by any other director or officer of the Company.

 

For all purposes of this
Agreement, the phrase “then outstanding,” when used with reference to the
percentage of the then outstanding securities Beneficially Owned by a Person,
shall mean the number of 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.

 

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

 

(f)            “Certificate of
Incorporation” when used in reference to the Company shall mean the Amended
and Restated Certificate of Incorporation, as may be amended from time to time,
of the Company.

 

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

 

(h)           “Common Stock”
when used in reference to the Company shall mean the common stock, par value
$0.001 per share, of the Company or any other shares of capital stock of the
Company into which such stock shall be reclassified or changed.  “Common Stock” when used with reference to
any Person other than the Company organized in corporate form shall mean (i) the
capital stock or other equity interest of such Person with the greatest voting
power, (ii) the equity securities or other equity interest having power to
control or direct the management of such Person or (iii) if such Person is
a Subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person and which have issued any such outstanding capital
stock, equity securities or equity interest. 
“Common Stock” when used with reference to any Person not organized in
corporate form shall mean units of beneficial interest which (x) shall
represent the right to participate generally in the profits and losses of such
Person (including without limitation any flow-through tax benefits resulting
from an ownership interest in such Person) and (y) shall be entitled to
exercise the greatest voting power of such Person or, in the case of a limited
partnership, shall have the power to remove or otherwise replace the general
partner or partners.

 

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

 

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

 

4

 

(k)           “Depositary Agent”
shall have the meaning set forth in Section 7(c) hereof.

 

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

 

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

 

(n)           “Exempt Person”
shall have the meaning set forth in the definition of “Acquiring Person.”

 

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

 

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

 

(q)           “Fair Market
Value” of any securities or other property shall be as determined in
accordance with Section 11(d) hereof.

 

(r)            “Grandfathered
Percentage” shall mean, with respect to any Grandfathered Person, the
percentage of the outstanding shares of Common Stock of the Company that such
Grandfathered Person, together with all Affiliates and Associates of such
Grandfathered Person, Beneficially Owns as of the Grandfathered Time, plus an
additional 1⁄2%; provided, however, that, in the event any Grandfathered Person
shall sell, transfer, or otherwise dispose of any outstanding shares of Common
Stock of the Company after the Grandfathered Time, the Grandfathered Percentage
shall, subsequent to such sale, transfer or disposition, mean, with respect to
such Grandfathered Person, the lesser of (i) the Grandfathered Percentage
as in effect immediately prior to such sale, transfer or disposition or (ii) the
percentage of outstanding shares of Common Stock of the Company that such
Grandfathered Person Beneficially Owns immediately following such sale,
transfer or disposition, plus an additional 1⁄2%.

 

(s)           “Grandfathered
Person” shall mean any Person who or which, together with all Affiliates
and Associates of such Person, is, as of the Grandfathered Time, the Beneficial
Owner of 20% or more of the shares of Common Stock of the Company then
outstanding.  Notwithstanding anything to
the contrary provided in this Agreement, any Grandfathered Person who after the
Grandfathered Time becomes the Beneficial Owner of less than 20% of the shares
of Common Stock of the Company then outstanding shall cease to be a
Grandfathered Person and shall be subject to all of the provisions of this
Agreement in the same manner as any Person who is not and was not a
Grandfathered Person.

 

(t)            “Grandfathered
Time” shall mean 12:01 a.m., New York, New York time, on July 25,
2008.

 

(u)           “Group” shall
have the meaning set forth in clause (b) of the definition of “Person.”

 

(v)           “Person”
shall mean (a) an individual, a corporation, a partnership, a limited
liability company, an association, a joint stock company, a trust, a business
trust, a 

 

5

 

government or
political subdivision, any unincorporated organization, or any other
association or entity including any successor (by merger or otherwise) thereof
or thereto, and (b) a “group” as that term is used for purposes of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.

 

(w)          “Preferred Stock” shall mean
shares of Series A Junior Participating Cumulative Preferred Stock, par
value $0.001 per share, of the Company having the rights and preferences set
forth in the form of Certificate of Designations attached hereto as Exhibit A.

 

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

 

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

 

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

 

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

 

(bb)         “Registered Common Stock” shall
have the meaning set forth in Section 13(b) hereof.

 

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

 

(dd)         “Section 11(a)(ii) Event”
shall have the meaning set forth in Section 11(a)(ii) hereof.

 

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

 

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

 

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

 

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

 

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

 

(jj)           “Stock Acquisition Date” shall
mean the date of the first public announcement (which for purposes of this
definition shall include, without limitation, the issuance of a press release
or the filing of a publicly-available report or other document with the
Securities and Exchange Commission or any other governmental agency) by the
Company, acting pursuant to a resolution adopted by the Board of Directors of
the Company, or by an 

 

6

 

Acquiring Person,
subject in each case to the last paragraph of Section 1(a), that an
Acquiring Person has become such.

 

(kk)         “Subsidiary”
shall mean, with reference to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power
sufficient, in the absence of contingencies, to elect a majority of the board
of directors or other persons performing similar functions of such corporation
or other entity are at the time directly or indirectly Beneficially Owned or
otherwise controlled by such Person either alone or together with one or more
Affiliates of such Person.

 

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

 

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

 

Section 2.  Appointment of Rights Agent.  The Company hereby appoints the Rights Agent
to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3 hereof, shall prior to the Distribution Date (as
hereinafter defined in Section 3(a)) also be the holders of the Common
Stock of the Company) in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint
such Co-Rights Agents as it may deem necessary or desirable.  In the event the Company appoints one or more
Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights
Agents shall be as the Company shall determine. 
The Company shall give ten (10) days’ prior written notice to the
Rights Agent of the appointment of one or more Co-Rights Agents and the
respective duties of the Rights Agent and any such Co-Rights Agents.  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 Right Certificates.

 

(a)           From the date hereof
until the earlier of (i) the Close of Business on the tenth calendar day
after the Stock Acquisition Date or (ii) the Close of Business on the
tenth Business Day (or such later calendar day, if any, as the Board of
Directors of the Company may determine in its sole discretion) after the date a
tender or exchange offer by any Person, other than an Exempt Person, is first
published or sent or given within the meaning of Rule 14d-4(a) of the
Exchange Act, or any successor rule, if, upon consummation thereof, such Person
could become the Beneficial Owner of 20% (or in the case of a Grandfathered
Person, the Grandfathered Percentage applicable to such Grandfathered Person)
or more of the shares of Common Stock of the Company then outstanding
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights) (the earliest of such dates being herein referred
to as the “Distribution Date”), (x) the Rights will be evidenced (subject
to the provisions of Section 3(b) hereof) by the certificates for the
Common Stock of the Company registered in the names of the holders of the
Common Stock of the Company (which certificates for Common Stock of the Company
shall be deemed also to be certificates for Rights) and not by separate
certificates, and (y) the Rights will be transferable only in connection
with the transfer of the underlying shares of Common Stock of the Company.  As soon as practicable after the 

 

7

 

Distribution Date,
the Rights Agent will, at the Company’s expense send, by first-class, insured,
postage prepaid mail, to each record holder of the 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, one or more certificates, in
substantially the form of Exhibit B hereto (the “Right Certificates”),
evidencing one Right for each share of Common Stock of the Company so held, subject
to adjustment as provided herein.  In the
event that an adjustment in the number of Rights per share of Common Stock of
the Company has been made pursuant to Section 11(o) hereof, the Company may
make the necessary and appropriate rounding adjustments (in accordance with Section
14(a) hereof) at the time of distribution of the Right Certificates, so that
Right Certificates representing only whole numbers of Rights are distributed
and cash is paid in lieu of any fractional Rights.  As of and after the Close of Business on the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.

 

(b)           With respect to
certificates for the Common Stock of the Company issued prior to the Close of
Business on the Record Date, the Rights will be evidenced by such certificates
for the Common Stock of the Company on or until the Distribution Date (or the
earlier redemption, expiration or termination of the Rights), and the
registered holders of the Common Stock of the Company also shall be the registered
holders of the associated Rights.  Until
the Distribution Date (or the earlier redemption, expiration or termination of
the Rights), the transfer of any of the certificates for the Common Stock of
the Company outstanding prior to the date of this Agreement shall also
constitute the transfer of the Rights associated with the Common Stock of the
Company represented by such certificate.

 

(c)           Certificates for the
Common Stock of the Company issued after the Record Date, but prior to the
earlier of the Distribution Date or the Expiration Date, shall be deemed also
to be certificates for Rights, and shall bear a legend, substantially in the
form set forth below:

 

This certificate also
evidences and entitles the holder hereof to certain Rights as set forth in a
Stockholder Rights Agreement between ActivIdentity Corporation and American
Stock Transfer & Trust Company, LLC (or any successor thereto), as
Rights Agent, dated as of July 25, 2008 as amended, restated, renewed,
supplemented or extended from time to time (the “Rights Agreement”), the terms
of which are hereby incorporated herein by reference and a copy of which is on
file at the principal offices of ActivIdentity Corporation and the stock
transfer administration office of the Rights Agent.  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.  ActivIdentity Corporation may redeem the
Rights at a redemption price of $0.001 per Right, subject to adjustment, under
the terms of the Rights Agreement. 
ActivIdentity Corporation will mail to the holder of this certificate a
copy of the Rights Agreement, as in effect on the date of mailing, without
charge promptly after receipt of a written request therefor.  Under certain circumstances, Rights issued to
or held by Acquiring Persons or

 

8

 

any Affiliates or
Associates thereof (as defined in the Rights Agreement), and any subsequent
holder of such Rights, may become null and void.  The Rights shall not be exercisable, and
shall be void so long as held, by a holder in any jurisdiction where the
requisite qualification, if any, to the issuance to such holder, or the
exercise by such holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.

 

With respect to such certificates containing the foregoing legend, the
Rights associated with the Common Stock of the Company represented by such
certificates shall be evidenced by such certificates alone until the earlier of
the Distribution Date or the Expiration Date, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock of the Company represented by such certificates.  In the event that 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 Common Stock of
the Company shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with the shares of Common Stock
of the Company which are no longer outstanding. 
The failure to print the foregoing legend on any such certificate
representing Common Stock of the Company or any defect therein shall not affect
in any manner whatsoever the application or interpretation of the provisions of
Section 7(e) hereof.

 

Section 4.  Form of Right Certificates.

 

(a)           The Right Certificates (and the forms
of election to purchase shares and of assignment and certificate to be printed
on the reverse thereof) shall each be substantially in the form of Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law, rule or
regulation or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to customary
usage.  The Right Certificates shall be
in a machine printable format and in a form reasonably satisfactory to the
Rights Agent.  Subject to the provisions
of Section 11 and Section 22 hereof, the Right Certificates, whenever
distributed, shall be dated as of the Record Date, shall show the date of
countersignature, and on their face shall entitle the holders thereof to
purchase such number of one ten-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (the “Exercise Price”),
but the number of such shares and the Exercise Price shall be subject to
adjustment as provided herein.

 

(b)           Any Right Certificate issued pursuant
to Section 3(a) or Section 22 hereof that represents Rights
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 Associate or Affiliate of an Acquiring Person) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding 

 

9

 

(whether or not in writing) regarding the transferred
Rights, the shares of Common Stock of the Company associated with such Rights
or the Company 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 Section 7(e) hereof,
and any Right Certificate issued pursuant to Section 6, Section 11 or
Section 22 upon transfer, exchange, replacement or adjustment of any other
Right Certificate referred to in this sentence, shall have deleted therefrom
the second sentence of the existing legend on such Right Certificate and in
substitution therefor shall contain the following legend:

 

The Rights represented by
this Right Certificate are or were Beneficially Owned by a Person who was or
became an Acquiring Person or an Affiliate or an Associate of an Acquiring
Person (as such terms are defined in the Rights Agreement).  This Right Certificate and the Rights
represented hereby may become null and void under certain circumstances as
specified in Section 7(e) of the Rights Agreement.

 

The Company shall give notice to the Rights Agent promptly after it
becomes aware of the existence and identity of any Acquiring Person or any
Associate or Affiliate thereof.  The
Company shall instruct the Rights Agent in writing of the Rights which should
be so legended.  The failure to print the
foregoing legend on any such Right Certificate or any defect therein shall not
affect in any manner whatsoever the application or interpretation of the
provisions of Section 7(e) hereof.

 

Section 5.  Countersignature and Registration.

 

(a)           The Right Certificates shall be
executed on behalf of the Company by its Chairman of the Board of Directors, or
its President or any Vice President and by its Treasurer or any Assistant
Treasurer, or by its Secretary or any Assistant Secretary, either manually or
by facsimile signature, and shall have affixed thereto the Company’s seal or a
facsimile thereof which shall be attested to by the Secretary or any Assistant
Secretary of the Company, either manually or by facsimile signature.  The Right Certificates shall be manually
countersigned by an authorized signatory of the Rights Agent and shall not be
valid for any purpose unless so countersigned, and such countersignature upon
any Right Certificate shall be conclusive evidence, and the only evidence, that
such Right Certificate has been duly countersigned as required hereunder.  In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery
by the Company, such Right Certificates, nevertheless, may be countersigned by
an authorized signatory of the Rights Agent, and issued and delivered by the
Company with the same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the Company; and any
Right Certificates may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.

 

(b)           Following the Distribution Date, the
Rights Agent will keep or cause to be kept, at one of its offices designated as
the appropriate place for surrender of Right Certificates 

 

10

 

upon exercise or transfer, books for registration and
transfer of the Right Certificates issued hereunder.  Such books shall show the names and addresses
of the respective holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates and the date of each of
the Right Certificates.

 

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

 

(a)           Subject to the provisions of Section 4(b),
Section 7(e) and Section 14 hereof, at any time after the Close
of Business on the Distribution Date, and at or prior to the Close of Business
on the Expiration Date, any Right Certificate or Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Certificates, entitling the registered holder to purchase a like number of one
ten-thousandths  of a share of Preferred Stock (or
following a Triggering Event, Common Stock of the Company, cash, property, debt
securities, Preferred Stock or any combination thereof, including any such
securities, cash or property following a Section 13 Event) as the Right
Certificate or Certificates surrendered then entitled such holder to purchase
and at the same Exercise Price.  Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Certificates to be transferred,
split up, combined or exchanged, with the form of assignment and certificate
duly executed, at the office or offices of the Rights Agent designated for such
purpose.  Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Right Certificate until the registered
holder shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Right Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.  Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14
hereof, countersign and deliver to the Person entitled thereto a Right
Certificate or Certificates, as the case may be, as so requested.  The Company may require payment by the
registered holder of a Right Certificate, of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.

 

(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 Right Certificate, and, in case of loss, theft
or destruction, of indemnity or security satisfactory to them, and reimbursement
to the Company and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of the Right
Certificate, if mutilated, the Company will execute and deliver a new Right
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.

 

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

 

(a)           Subject to Section 7(e) hereof,
the registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon surrender of the Right Certificate, 

 

11

 

with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the Rights Agent at
the office or offices of the Rights Agent designated for such purpose, together
with payment of the aggregate Exercise Price for the total number of one
ten-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercised, at or prior to the earlier of (i) the Close of Business on the
tenth anniversary of the Record Date (the “Final Expiration Date”), (ii) the
time at which the Rights are redeemed as provided in Section 23 hereof
(the “Redemption Date”) or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof (the “Exchange Date”) (the
earliest of (i), (ii) or (iii) being herein referred to as the “Expiration
Date”).  Except as set forth in Section 7(e) hereof
and notwithstanding any other provision of this Agreement, any Person who prior
to the Distribution Date becomes a record holder of shares of Common Stock of
the Company may exercise all of the rights of a registered holder of a Right
Certificate with respect to the Rights associated with such shares of Common
Stock of the Company in accordance with the provisions of this Agreement, as of
the date such Person becomes a record holder of shares of Common Stock of the
Company.

 

(b)           The Exercise Price for each one
ten-thousandth of a share of Preferred Stock pursuant to the exercise of a
Right shall initially be Eleven United States Dollars (U.S. $11.00), shall be
subject to adjustment from time to time as provided in Section 11 and Section
13 hereof and shall be payable in lawful money of the United States of America
in accordance with Section 7(c) below.

 

(c)           As promptly as practicable following
the Distribution Date, the Company shall deposit with a corporation, trust,
bank or similar institution in good standing organized under the laws of the
United States or any State of the United States, which is authorized under such
laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by a federal or state authority (such institution is
hereinafter referred to as the “Depositary Agent”), certificates representing
the shares of Preferred Stock that may be acquired upon exercise of the Rights
and the Company shall cause such Depositary Agent to enter into an agreement
pursuant to which the Depositary Agent shall issue receipts representing interests
in the shares of Preferred Stock so deposited. 
Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate on the reverse side
thereof duly executed, accompanied by payment of the Exercise Price for the
shares to be purchased and an amount equal to any applicable transfer tax (as
determined by the Rights Agent) by certified check or bank draft payable to the
order of the Company or by money order, the Rights Agent shall, subject to Section 20(k) and
Section 14(b) hereof, thereupon promptly (i) requisition from
the Depositary Agent (or make available, if the Rights Agent is the Depositary
Agent) depositary receipts or certificates for the number of one
ten-thousandths of a share of Preferred Stock to be purchased and the Company
hereby irrevocably authorizes the Depositary Agent to comply with all such
requests, (ii) when appropriate, requisition from the Company the amount
of cash, if any, to be paid in lieu of issuance of fractional shares in
accordance with Section 14 hereof, (iii) promptly after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate, registered
in such name or names as may be designated by such holder and (iv) when
appropriate, after receipt of each certificate or depositary receipts promptly
deliver such cash to or upon the order of the registered holder of such Right
Certificate.  In the event that the
Company is obligated to issue other securities (including Common Stock of the
Company) of the 

 

12

 

Company, pay cash or distribute other property
pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash or other property
are available for distribution by the Rights Agent, if and when
appropriate.  The payment of the Exercise
Price may be made by certified or bank check payable to the order of the
Company, or by money order or wire transfer of immediately available funds to
the account of the Company (provided that notice of such wire transfer shall be
given by the holder of the related Right to the Rights Agent).

 

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

 

(e)           Notwithstanding anything in this
Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event
or Section 13 Event, any 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 Associate or Affiliate of an
Acquiring Person) who becomes a transferee after the Acquiring Person becomes
such or (iii) a transferee of an Acquiring Person (or of any Associate or
Affiliate of an Acquiring Person) 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, the shares of
Common Stock of the Company associated with such Rights or the Company, 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), shall be null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise.  The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and Section
4(b) hereof are complied with, but shall have no liability to any holder of
Right Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or any Affiliates or
Associates of an Acquiring Person or any transferee of any of them hereunder.

 

(f)            Notwithstanding anything in this
Agreement to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder of Rights
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 Right 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 Right
Certificates.  All Right Certificates
surrendered for the purpose of exercise, transfer, split up, combination or
exchange shall, if surrendered to the Company or any of its agents, be
delivered to the Rights Agent for 

 

13

 

cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled by it,
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement.  The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. 
The Rights Agent shall deliver all canceled Right Certificates to the
Company.

 

Section 9.  Reservation and Availability of Preferred
Stock.

 

(a)           The Company covenants and agrees that
it will cause to be reserved and kept available out of its authorized and
unissued shares of Preferred Stock or any authorized and issued shares of
Preferred Stock held in its treasury, the number of shares of Preferred Stock
that will be sufficient to permit the exercise in full of all outstanding and
exercisable Rights.  Upon the occurrence
of any events resulting in an increase in the aggregate number of shares of
Preferred Stock issuable upon exercise of all outstanding Rights in excess of
the number then reserved, the Company shall make appropriate increases in the
number of shares so reserved.

 

(b)           The Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable,
all shares of Preferred Stock issued or reserved for issuance to be listed,
upon official notice of issuance, upon the principal national securities
exchange, if any, upon which the Common Stock of the Company is listed or, if
the principal market for the Common Stock of the Company is not on any national
securities exchange, to be eligible for quotation on the National Association
of Securities Dealers Automated Quotation System (“NASDAQ”) or any successor
thereto or other comparable quotation system.

 

(c)           The Company shall use its best
efforts to (i) file, as soon as practicable following the earliest date
after the occurrence of a Section 11(a)(ii) Event on which the
consideration to be delivered by the Company upon exercise of the Rights has
been determined in accordance with Section 11(a)(iii) hereof, or as
soon as required by law following the Distribution Date, as the case may be, a
registration statement under the Securities Act of 1933, as amended (the “Securities
Act”), with respect to the securities purchasable upon exercise of the Rights
on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing and (iii) cause such
registration statement to remain effective (with a prospectus that at all times
meets 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 or (B) the
Expiration Date.  The Company will also
take such action as may be appropriate under, and which will ensure compliance
with, the securities or “blue sky” laws of the various states in connection
with the exercisability of the Rights. 
The Company may temporarily suspend, for a period of time not to exceed
ninety (90) days after the date determined in accordance with the provisions of
the first sentence of this Section 9(c), the exercisability of the Rights
in order to prepare and file such registration statement and permit it to
become effective.  Upon such suspension,
the Company shall issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect, in each case with prompt
written notice to the Rights Agent. 
Notwithstanding any such provision of this Agreement to the contrary,
the Rights shall not be exercisable in any jurisdiction unless the requisite
qualification in such jurisdiction shall have been obtained.

 

14

 

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

 

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

 

Section 10.  Preferred Stock Record Date.  Each Person in whose name any certificate for
Preferred Stock or other securities (including any fraction of a share of
Preferred Stock or such other securities) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
shares of Preferred Stock or such other securities represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Exercise 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
transfer books of the Company for the Preferred Stock or such other securities,
as applicable, are closed, such person shall be deemed to have become the
record holder of such shares of Preferred Stock or such other securities on,
and such certificate shall be dated, the next succeeding Business Day on which
the transfer books of the Company are open; and further provided, however,
that if delivery of shares of Preferred Stock or such other securities is
delayed pursuant to Section 9(c), such Person shall be deemed to have
become the record holder of such shares of Preferred Stock or such other
securities only when such shares or such other securities first become
deliverable.  Prior to the exercise of
the Right evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.

 

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

 

(a)           (i)            In
the event the Company shall at any time after the date of this Agreement (A) declare
a dividend on the Preferred Stock payable in shares of Preferred Stock, 

 

15

 

(B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller number of shares or (D) issue,
change or alter any shares of its capital stock in a reclassification or
recapitalization of the Preferred Stock (including any such reclassification or
recapitalization in connection with a consolidation or merger in which the
Company is the continuing or surviving Person), except as otherwise provided in
this Section 11(a) and Section 7(e) hereof, the Exercise
Price in effect at the time of the record date for such dividend or the
effective time of such subdivision, combination, reclassification or
recapitalization, and the number and kind of shares of capital stock issuable
on such date or at such time, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Stock transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination, reclassification or recapitalization; provided,
however, that in no event shall the consideration to be paid upon the
exercise of a Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of a Right.  If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii) hereof,
the adjustment provided for in this Section 11(a)(i) shall be in addition to,
and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii)
hereof.

 

(ii)           Subject to the provisions of Section 24
hereof, in the event any Person, alone or together with its Affiliates and
Associates, shall become an Acquiring Person, then, promptly following any such
occurrence (a “Section 11(a)(ii) Event”), proper provision shall be made so
that each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have a right to receive, upon exercise thereof at the then
current Exercise Price in accordance with the terms of this Agreement, in lieu
of a number of one ten-thousandths of a share of Preferred Stock, such number
of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying
the then current Exercise Price by the then number of one ten-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event, whether or not
such Right was then exercisable, and dividing that product by (y) 50% of
the Fair Market Value per share of Common Stock of the Company (determined
pursuant to Section 11(d)) on the date of the occurrence of a Section 11(a)(ii) Event
(such number of shares being referred to as the “Adjustment Shares”).

 

(iii)          In lieu of issuing any shares of
Common Stock of the Company in accordance with Section 11(a)(ii) hereof, the
Company, acting by or pursuant to a resolution of the Board of Directors of the
Company, may, and in the event that the number of shares of Common Stock of the
Company 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 is not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a),
the Company, acting by or pursuant to a resolution of the Board of Directors of
the Company, shall:  (A) determine
the excess of (X) the Fair Market Value of the Adjustment Shares issuable
upon the exercise of a Right (the “Current Value”) over (Y) the Exercise
Price attributable to each Right (such excess being referred to as the 

 

16

 

“Spread”) and (B) with respect to all or a
portion of each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon payment of the
applicable Exercise Price, (1) Common Stock of the Company or equity
securities, if any, of the Company other than Common Stock of the Company
(including without limitation shares, or units of shares, of Preferred Stock
that the Board of Directors of the Company has determined to have the same
value as shares of  Common Stock of the
Company (such shares of Preferred Stock being referred to herein as “Common
Stock Equivalents”)), (2) cash, (3) a reduction in the Exercise
Price, (4) Preferred Stock Equivalents which the Board of Directors of the
Company has deemed to have the same value as shares of Common Stock of the
Company, (5) debt securities of the Company, (6) other assets or
securities of the Company or (7) any combination of the foregoing, having
an aggregate value equal to the Current Value, where such aggregate value has
been determined by the Board of Directors of the Company after receiving the
advice of a nationally recognized investment banking firm selected by the Board
of Directors of the Company; provided, however, that if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the
first occurrence of a Section 11(a)(ii) Event and (y) the date
on which the Company’s right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger
Date”), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Exercise Price, shares
of Common Stock of the Company (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to the
Spread.  If the Board of Directors of the
Company shall determine in good faith that it is likely that sufficient
additional shares of Common Stock of the Company could be authorized for
issuance upon exercise in full of the Rights, the 30-day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company
may seek stockholder approval for the authorization of such additional shares
(such period, as it may be extended, being referred to herein as the “Substitution
Period”).  To the extent that the Company
determines that some action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights and (y) may suspend the exercisability
of the Rights until the expiration of the Substitution Period in order to seek
any authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof.  In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended and a public
announcement at such time as the suspension is no longer in effect.   For purposes of this Section 11(a)(iii),
the value of the Common Stock of the Company and of the Preferred Stock shall
be the Fair Market Value (as determined pursuant to Section 11(d) hereof)
per share of the Common Stock of the Company and the Preferred Stock,
respectively, on the Section 11(a)(ii) Trigger Date, the value of any Common
Stock Equivalent shall be deemed to have the same value as the Common Stock of
the Company on such date and the value of any Preferred Stock Equivalent shall
be deemed to have the same value as the Preferred Stock on such date.

 

17

 

(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 (45) calendar
days after such record date) to subscribe for or purchase Preferred Stock (or
securities having the same or more favorable rights, privileges and preferences
as the shares of Preferred Stock (“Preferred Stock Equivalents”)) or securities
convertible into Preferred Stock or Preferred Stock Equivalents at a price per
share of Preferred Stock or per share of Preferred Stock Equivalents (or having
a conversion price per share, if a security convertible into Preferred Stock or
Preferred Stock Equivalents) less than the Fair Market Value (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on
such record date, the Exercise Price to be in effect after such record date
shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of shares of Preferred Stock which the aggregate offering price of the
total number of shares of Preferred Stock and/or Preferred Stock Equivalents to
be offered (and the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Fair Market Value and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares of
Preferred Stock and Preferred Stock Equivalents to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of a Right be less than the
aggregate par value of the shares of stock of the Company issuable upon
exercise of a Right.  In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be the Fair
Market Value thereof determined in accordance with Section 11(d) hereof.  Shares of Preferred Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation.  Such
adjustments shall be made successively whenever such a record date is fixed;
and in the event that such rights or warrants are not so issued, the Exercise
Price shall be adjusted to be the Exercise Price which would then be in effect
if such record date had not been fixed.

 

(c)           If the Company shall fix a record
date for the making of a distribution to all holders of Preferred Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), of
evidences of indebtedness, cash (other than a regular periodic cash dividend
out of the earnings or retained earnings of the Company), assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in
stock other than Preferred Stock) or convertible securities, subscription
rights or warrants (excluding those referred to in Section 11(b)), the Exercise
Price to be in effect after such record date shall be determined by multiplying
the Exercise Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the Fair Market Value (as determined pursuant
to Section 11(d) hereof) per one ten-thousandth of a share of Preferred Stock
on such record date, less the Fair Market Value (as determined pursuant to Section
11(d) hereof) of the portion of the cash, assets or evidences of indebtedness
so to be distributed or of such convertible securities, subscription rights or
warrants applicable to one ten-thousandth of a share of Preferred Stock and the
denominator of which shall be the Fair Market Value (as determined pursuant to Section 11(d) hereof)
per one ten-thousandth of a share of Preferred Stock; provided, however,
that in no event shall the consideration to be paid upon the exercise of a
Right be less than the aggregate par value of the shares of stock of the
Company issuable upon exercise of a Right. 
Such adjustments shall be made successively whenever such a

 

18

 

record date is
fixed; and in the event that such distribution is not so made, the Exercise
Price shall again be adjusted to be the Exercise Price which would be in effect
if such record date had not been fixed.

 

(d)          For
the purpose of this Agreement, the “Fair Market Value” of any share of
Preferred Stock, Common Stock or any other stock or any Right or other security
or any other property shall be determined as provided in this Section 11(d).

 

(i)            In the case of a publicly-traded
stock or other security, the Fair Market Value on any date shall be deemed to
be the average of the daily closing prices per share of such stock or per unit
of such other security for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however,
that in the event that the Fair Market Value per share of any share of stock is
determined during a period following the announcement by the issuer of such
stock of (x) a dividend or distribution on such stock payable in shares of
such stock or securities convertible into shares of such stock or (y) any
subdivision, combination or reclassification of such stock, and prior to the
expiration of the 30 Trading Day period after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the Fair Market Value shall
be properly adjusted to take into account ex-dividend trading.  The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the securities are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which such security is listed or admitted to trading;
or, if not listed or admitted to trading on any national securities exchange,
the last quoted price (or, if not so quoted, the average of the last quoted
high bid and low asked prices) in the in the over-the-counter market, as
reported by the OTC Bulletin Board, the Pink Sheets or such other system then
in use; or, if on any such date no bids for such security are 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 such security selected by the
Board of Directors of the Company.  If on
any such date no market maker is making a market in such security, the Fair
Market Value of such security on such date shall be determined reasonably and
with utmost good faith to the holders of the Rights by the Board of Directors
of the Company, provided, however, that if at the time of such
determination there is an Acquiring Person, the Fair Market Value of such
security on such date shall be determined by 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 binding on the Rights Agent and the holders of the Rights.  The term “Trading Day” shall mean a day on
which the principal national securities exchange on which such security is
listed or admitted to trading is open for the transaction of business or, if
such security is not listed or admitted to trading on any national securities
exchange, a Business Day.

 

19

 

(ii)           If a security is not publicly held or
not so listed or traded, “Fair Market Value” shall mean the fair value per
share of stock or per other unit of such security, determined reasonably and in
good faith to the holders of the Rights by the Board of Directors of the
Company; provided, however, that if at the time of such
determination there is an Acquiring Person, the Fair Market Value of such
security on such date shall be determined by 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 binding on the Rights Agent and the holders of the Rights; provided,
however, that for the purposes of making any adjustment provided for by Section 11(a)(ii) hereof,
the Fair Market Value of a share of Preferred Stock shall not be less than the
product of the then Fair Market Value of a share of Common Stock multiplied by
the higher of the then Dividend Multiple or Vote Multiple (as both of such
terms are defined in the Certificate of Designations attached as Exhibit A
hereto) applicable to the Preferred Stock and shall not exceed 105% of the
product of the then Fair Market Value of a share of Common Stock multiplied by
the higher of the then Dividend Multiple or Vote Multiple applicable to the
Preferred Stock.

 

(iii)          In the case of property other than
securities, the Fair Market Value thereof shall be determined reasonably and in
good faith to the holders of Rights by the Board of Directors of the Company; provided,
however, that if at the time of such determination there is an Acquiring
Person, the Fair Market Value of such property on such date shall be determined
by 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 binding upon the Rights Agent and the
holders of the Rights.

 

(e)           Anything herein to
the contrary notwithstanding, no adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% in the Exercise 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-millionth of a share of
Common Stock of the Company or hundred-millionth of a share of Preferred Stock,
as the case may be, or to such other figure as the Board of Directors of the
Company may deem appropriate. 
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which
mandates such adjustment or (ii) the Expiration Date.

 

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

 

20

 

(g)           All Rights
originally issued by the Company subsequent to any adjustment made to the
Exercise Price hereunder shall evidence the right to purchase, at the adjusted
Exercise Price, the number of one ten-thousandths of a share of Preferred Stock
(or other securities or amount of cash or combination thereof) purchasable from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.

 

(h)           Unless the Company
shall have exercised its election as provided in Section 11(i), upon each
adjustment of the Exercise Price as a result of the calculations made in Section 11(b) and
(c), each Right outstanding immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the adjusted Exercise
Price, that number of one ten-thousandths of a share of Preferred Stock
(calculated to the nearest hundred-millionth) as the Board of Directors of the
Company determines is appropriate to preserve the economic value of the Rights,
including, by way of example, that number obtained by (i) multiplying (x) the
number of one ten-thousandths of a share of Preferred Stock for which a Right
may be exercisable immediately prior to this adjustment by (y) the
Exercise Price in effect immediately prior to such adjustment of the Exercise
Price and (ii) dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment of the Exercise Price.

 

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

 

(j)            Irrespective of any
adjustment or change in the Exercise Price or the number of one ten-thousandths
of a share of Preferred Stock issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may continue to express
the

 

21

 

Exercise Price per
share and the number of shares which were expressed in the initial Right
Certificates issued hereunder without prejudice to any adjustment or change.

 

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

 

(l)            In any case in
which this Section 11 shall require that an adjustment in the Exercise
Price be made effective as of a record date for a specified event, the Company
may elect to defer until the occurrence of such event the issuing to the holder
of any Right exercised after such record date the number of one ten-thousandths
of a share of Preferred Stock or other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the number of one
ten-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however,
that the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder’s right to receive such additional shares
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 Exercise Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that in its good faith
judgment the Board of Directors of the Company shall determine to be advisable
in order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any shares of Preferred Stock at less than the Fair Market
Value, issuance wholly for cash of shares of Preferred Stock or securities
which by their terms are convertible into or exchangeable for shares of
Preferred Stock, stock dividends or issuance of rights, options or warrants
referred to hereinabove in this Section 11, hereafter made by the Company
to holders of its Preferred Stock, shall not be taxable to such stockholders.

 

(n)           The Company
covenants and agrees that it shall not, at any time after the Distribution Date
and so long as the Rights have not been redeemed pursuant to Section 23
hereof or exchanged pursuant to Section 24 hereof, (i) consolidate
with (other than a Subsidiary of the Company in a transaction that complies
with the proviso at the end of this sentence), (ii) merge with or into, or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in
one transaction or a series of related transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and its
Subsidiaries taken as a whole, to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of
which complies with the proviso at the end of this sentence) if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments outstanding or agreements or arrangements
in effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights, or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale the
stockholders of a Person who constitutes, or would constitute, the “Principal
Party” for the purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any

 

22

 

of its Affiliates
and Associates; provided, however, that, subject to the following
sentence, this Section 11(n) shall not affect the ability of any
Subsidiary of the Company to consolidate with, or merge with or into, or sell
or transfer assets or earning power to, any other Subsidiary of the
Company.  The Company further covenants
and agrees that after the Distribution Date it will not, except as permitted by
Section 23 or Section 27 hereof, take (or permit any Subsidiary to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights.

 

(o)           Notwithstanding
anything in this Agreement to the contrary, in the event the Company shall at
any time after the date of this Agreement and prior to the Distribution Date (i) declare
or pay any dividend on the outstanding Common Stock of the Company payable in
shares of Common Stock of the Company or (ii) effect a subdivision,
combination or consolidation of the outstanding shares of 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 (A) the
number of one ten-thousandths of a share of Preferred Stock purchasable after
such event upon proper exercise of each Right shall be determined by
multiplying the number of one ten-thousandths of a share of Preferred Stock so
purchasable immediately prior to such event by a fraction, the numerator of
which is the number of shares of Common Stock of the Company outstanding
immediately prior to such event and the denominator of which is the number of
shares of Common Stock of the Company outstanding immediately after such event,
and (B) each share of Common Stock of the Company outstanding immediately
after such event shall have issued with respect to it that number of Rights
which each share of Common Stock of the Company outstanding immediately prior
to such event had issued with respect to it. 
The adjustments provided for in this Section 11(o) shall be
made successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected.

 

(p)           The exercise of
Rights under Section 11(a)(ii) shall only result in the loss of
rights under Section 11(a)(ii) to the extent so exercised and neither such
exercise nor any exchange of Rights pursuant to Section 24 shall otherwise
affect the rights of holders of Right Certificates under this Rights Agreement,
including rights to purchase securities of the Principal Party following a Section 13
Event which has occurred or may thereafter occur, as set forth in Section 13
hereof.  Upon exercise of a Right
Certificate under Section 11(a)(ii), the Rights Agent shall return such Right
Certificate duly marked to indicate that such exercise has occurred.

 

Section 12.  Certificate
of Adjusted Exercise Price or Number of Shares. 
Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent and with each transfer
agent for the Preferred Stock and the Common Stock of the Company a copy of
such certificate and (c) mail a brief summary thereof to each holder of a
Right Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock of the Company) in accordance
with Section 26 hereof.  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 any
such adjustment unless and until it shall have received such certificate.

 

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

 

23

 

(a)           In the event that,
following the Stock Acquisition Date, directly or indirectly, (x) the
Company shall consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Company in a transaction which is not prohibited by Section 11(n) hereof),
and the Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which is not prohibited by the proviso at the end of
the first sentence of Section 11(n) hereof) shall consolidate with
the Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the 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, mortgage or
otherwise transfer (or one or more of its Subsidiaries shall sell, mortgage or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating 50% or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company or any Subsidiary of the Company in one or more
transactions, each of which is not prohibited by the proviso at the end of the
first sentence of Section 11(n) hereof), 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) hereof, shall
have the right to receive, upon the exercise thereof at the then current
Exercise Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid and nonassessable shares of freely
tradable Common Stock of the Principal Party (as hereinafter defined in Section 13(b)),
free and clear of rights of call or first refusal, liens, encumbrances,
transfer restrictions or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Exercise Price by the number
of one ten-thousandths of a share of Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13
Event (without taking into account any adjustment previously made pursuant to Section 11(a)(ii) or
11(a)(iii) hereof), and dividing that product by (2) 50% of the Fair
Market Value (determined pursuant to Section 11(d) hereof) per share
of the Common Stock of such Principal Party on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale, mortgage or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term “Company” shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply to such
Principal Party; and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock to permit exercise of all outstanding Rights in
accordance with this Section 13(a) and the making of payments in cash
and/or other securities in accordance with Section 11(a)(iii) hereof)
in connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights.

 

(b)           “Principal
Party” shall mean

 

(i)            in the case of any transaction
described in clause (x) or (y) of the first sentence of Section 13(a),
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 of Common Stock that has the highest
aggregate Fair Market Value (determined pursuant to Section 11(d)), and if
no securities

 

24

 

are so issued, the Person that is the other party to
the merger or consolidation, or, if there is more than one such Person, the
Person the Common Stock of which has the highest aggregate Fair Market Value
(determined pursuant to Section 11(d)); and

 

(ii)           in the case of any transaction
described in clause (z) of the first sentence of Section 13(a), the
Person that is the party receiving the greatest portion of the assets 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 the Common
Stock of which has the highest aggregate Fair Market Value (determined pursuant
to Section 11(d));

 

provided,
however, that in any such case described in clauses (i) or (ii) of
Section 13(b) hereof, (1) if the Common Stock of such Person is
not at such time and has not been continuously over the preceding 12-month period
registered under Section 12 of the Exchange Act (“Registered Common Stock”)
or such Person is not a corporation, and such Person is a direct or indirect
Subsidiary or Affiliate of another Person who 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 Fair Market Value (determined pursuant to Section 11(d)); 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, “Principal Party” 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 prior thereto (x) 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 (y) the Company and each
Principal Party and each other Person who may become a Principal Party as a
result of such consolidation, merger, sale or transfer shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in Section 13(a) and (b) and further providing that,
as soon as practicable after the date of any consolidation, merger, sale or
transfer of assets mentioned in Section 13(a), the Principal Party at its
own expense will:

 

(i)            prepare and file a registration statement
under the Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on

 

25

 

an appropriate form, cause such registration statement
to become effective as soon as practicable after such filing and cause such
registration statement to remain effective (with a prospectus that at all times
meets the requirements of the Securities Act) until the Expiration Date;

 

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

 

(iii)          list (or continue the listing of) the
Rights and the securities purchasable upon exercise of the Rights on a national
securities exchange; and

 

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

 

(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 or By-laws or other instrument governing its affairs, which
provision would have the effect of (i) causing such Principal Party to
issue (other than to holders of Rights pursuant to this Section 13), in
connection with, or as a consequence of, the consummation of a transaction
referred to in this Section 13, shares of Common Stock of such Principal
Party at less than the then current Fair Market Value (determined pursuant to Section 11(d))
or securities exercisable for, or convertible into, Common Stock of such
Principal Party at less than such Fair Market Value, or (ii) providing for
any special payment, tax or similar provisions in connection with the issuance
of the 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 canceled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.

 

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

 

Section 14.  Fractional
Rights and Fractional Shares.

 

(a)           The Company shall
not be required to issue fractions of Rights, except prior to the Distribution
Date as provided in Section 11(o) hereof, or to distribute Right
Certificates which evidence fractional Rights. 
If the Company elects not to issue such fractional Rights, the Company
shall pay, in lieu of such fractional Rights, to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the Fair Market
Value of a whole Right, as determined pursuant to Section 11(d) hereof.

 

(b)           The Company shall
not be required to issue fractions of shares of Preferred Stock (other than
fractions which are integral multiples of one ten-thousandth of a

 

26

 

share of Preferred
Stock) upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Preferred Stock (other than fractions which are integral
multiples of one ten-thousandth of a share of Preferred Stock).  In lieu of fractional shares of Preferred
Stock that are not integral multiples of one ten-thousandth of a share of Preferred
Stock, the Company may pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the Fair Market Value of one ten-thousandth of a share
of Preferred Stock.  For purposes of this
Section 14(b), the Fair Market Value of one ten-thousandth of a share of
Preferred Stock shall be determined pursuant to Section 11(d) hereof
for the Trading Day immediately prior to the date of such exercise.

 

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

 

Section 15.  Rights
of Action.  All rights of action in respect
of this Agreement, other than rights of action vested in the Rights Agent
pursuant to Sections 18 and 20 hereof, are vested in the respective registered
holders of the Right Certificates (or, prior to the Distribution Date, the
registered holders of the Common Stock of the Company); and any registered
holder of any Right Certificate (or, prior to the Distribution Date, of the
Common Stock of the Company), without the consent of the Rights Agent or of the
holder of any other Right Certificate (or, prior to the Distribution Date, of
the Common Stock of the Company), may, in such registered holder’s own behalf
and for such registered 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, his right to exercise the Right evidenced by such
Right Certificate in the manner provided in such Right Certificate and in this
Agreement.  Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to
specific performance of the obligations hereunder and injunctive relief against
actual or threatened violations of the obligations hereunder of any Person
subject to this Agreement.  Holders of
Rights shall be entitled to recover the reasonable costs and expenses,
including attorneys’ fees, incurred by them in any action to enforce the
provisions of this Agreement.

 

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

 

(a)           prior to the
Distribution Date, each Right will be transferable only simultaneously and
together with the transfer of shares of Common Stock of the Company;

 

(b)           after the
Distribution Date, the Right Certificates are transferable only on the registry
books of the Rights Agent if surrendered at the office or offices 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 a Right Certificate (or, prior to the Distribution Date,
the associated certificate representing Common Stock of the Company) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of

 

27

 

ownership or
writing on the Right Certificates or the associated certificate representing
Common Stock of the Company made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and, subject to the last sentence of Section 7(e),
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary; and

 

(d)           notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent shall have any liability to any holder of a Right or other Person as the
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 obligations;
provided, however, that the Company must use its best efforts to
have any such order, decree or ruling lifted or otherwise overturned as soon as
possible.

 

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

 

Section 18.  Concerning
the Rights Agent.

 

(a)           The Company agrees
to pay to the Rights Agent such compensation as shall be agreed to in writing
between the Company and the Rights Agent for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and attorney fees and disbursements and other disbursements incurred
in the administration and execution of this Agreement and the exercise and
performance of its duties hereunder.  The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, or expense, incurred without gross negligence,
bad faith or willful misconduct on the part of the Rights Agent, for anything
done or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability arising therefrom, directly or indirectly.  The provisions of this Section 18(a) shall
survive the expiration of the Rights and the termination of this Agreement.

 

(b)           The Rights Agent
shall be protected and shall incur no liability for or in respect of any action
taken, suffered or omitted by it in connection with its administration of this
Agreement in reliance upon any Right Certificate or certificate representing
Common Stock of the Company, Preferred Stock, or other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate,

 

28

 

statement, or
other paper or document believed by it in good faith and without negligence to
be genuine and to be signed and executed by the proper Person or Persons.

 

(c)           The Rights Agent
shall not be liable for consequential damages under any provision of this
Agreement or for any consequential damages arising out of any act or failure to
act hereunder.

 

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

 

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

 

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

 

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

 

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

 

(b)           Whenever in the performance
of its duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without limitation, the identity
of any Acquiring Person and the determination of “Fair Market Value”)

 

29

 

be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof shall be herein
specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by a person believed by the Rights Agent to
be the Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the President, a Vice President, the Treasurer, any Assistant Treasurer,
the Secretary or an Assistant Secretary of the Company and delivered to the
Rights Agent.  Any such certificate shall
be full authorization to the Rights Agent for any action taken or suffered in
good faith by it under the provisions of this Agreement in reliance upon such
certificate.

 

(c)           The Rights Agent
shall be liable hereunder only for its own gross negligence, bad faith or
willful misconduct.

 

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

 

(e)           The Rights Agent
shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming void
pursuant to Section 7(e) hereof) or any adjustment required under the
provisions of Sections 11, 13 or 23(c) hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after receipt of a
certificate describing any such adjustment furnished in accordance with Section 12
hereof), nor shall it be responsible for any determination by the Board of
Directors of the Company of the Fair Market Value of the Rights or Preferred
Stock pursuant to the provisions of Section 14 hereof; nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock of the Company or
Preferred Stock to be issued pursuant to this Agreement or any Right
Certificate or as to whether or not any shares of Common Stock of the Company
or Preferred Stock will, when so issued, be validly authorized and issued,
fully paid and nonassessable.

 

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

 

(g)           The Rights Agent is
hereby authorized and directed to accept instructions with respect to the
performance of its duties hereunder and certificates delivered pursuant to any
provision hereof from any person believed by the Rights Agent to be the
Chairman of the Board of Directors, any Vice Chairman of the Board of
Directors, the President, a Vice President, the Secretary, an Assistant
Secretary, the Treasurer or an Assistant Treasurer of the Company, and is
authorized to apply to such officers for advice or instructions in connection
with its duties, and it

 

30

 

shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.  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 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 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 receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.

 

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

 

(i)            The Rights Agent
may execute and exercise any of the rights or powers hereby vested in it or
perform any duty hereunder either itself or by or through its attorneys or
agents.

 

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

 

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

 

Section 21.  Change
of Rights Agent.  The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days’ notice in writing mailed to the Company by
first class mail, provided, however, that in the event the
transfer agency relationship in effect between the Company and the Rights Agent
with respect to the Common Stock of the Company terminates, the Rights Agent
will be deemed to have resigned automatically on the effective date of such
termination.  The Company may remove the
Rights Agent or any successor Rights Agent (with or without cause), effective
immediately or on a specified date, by written notice given to the Rights Agent
or successor Rights Agent, as the case may be, and to each transfer agent of
the Common Stock of the Company and Preferred Stock, and by giving notice to
the holders of the Right Certificates by any means reasonably determined by the
Company to inform such holders of such removal (including without 

 

31

 

limitation, by
including such information in one or more of the Company’s reports to
stockholders or reports or filings with the Securities and Exchange
Commission).  If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. 
If the Company shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the incumbent Rights Agent or the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent.  Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a corporation organized and doing business under the laws of
the United States, the State of Delaware or the State of New York (or of any other
state of the United States so long as such corporation is authorized to do
business as a banking institution in the State of Delaware or the State of New
York), in good standing, which is authorized under such laws to exercise stock
transfer or corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $10,000,000 or (b) an
Affiliate of a Person described in clause (a) of this sentence.  After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock of the
Company and the Preferred Stock, and give notice to the holders of the Right
Certificates by any means reasonably determined by the Company to inform such
holders of such appointment (including without limitation, by including such
information in one or more of the Company’s reports to stockholders or reports
or filings with the Securities and Exchange Commission).  Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.

 

Section 22.  Issuance
of New Right Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by the Board of Directors of
the Company to reflect any adjustment or change in the Exercise Price per share
and the number or kind or class of shares of stock or other securities or
property purchasable under the Right Certificates made in accordance with the provisions
of this Agreement.  In addition, in
connection with the issuance or sale of shares of Common Stock of the Company
following the Distribution Date and prior to the redemption or expiration of
the Rights, the Company (a) shall, with respect to shares of Common Stock
of the Company so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereafter issued by the Company, and (b) may, in
any other case, if deemed necessary or appropriate by the Board of Directors of
the Company, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however,
that (i) no such Right Certificate shall be issued if, and to the extent
that, the Company shall be advised by counsel that such issuance would create a
significant risk

 

32

 

of material
adverse tax consequences to the Company or the person to whom such Right
Certificate would be issued, and (ii) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjustments shall otherwise have
been made in lieu of the issuance thereof.

 

Section 23.  Redemption.

 

(a)           The Board of Directors
of the Company may, at its option, redeem all but not less than all of the then
outstanding Rights at a redemption price of $0.001 per Right, appropriately
adjusted to reflect any stock dividend declared or paid, any subdivision or
combination of the outstanding shares of Common Stock of the Company or any
similar event occurring after the date of this Agreement (such redemption
price, as adjusted from time to time, being hereinafter referred to as the “Redemption
Price”).  The Rights may be redeemed only
until the earlier to occur of (i) the time at which any Person becomes an
Acquiring Person or (ii) the Final Expiration Date.

 

(b)           Immediately upon the
action of the Board of Directors of the Company ordering the redemption of the
Rights in accordance with Section 23 hereof, and without any further
action and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. 
Promptly after the action of the Board of Directors of the Company
ordering the redemption of the Rights in accordance with Section 23
hereof, the Company shall give notice of such redemption to the Rights Agent
and the holders of the then outstanding Rights by mailing such notice to the
Rights Agent and to all such holders at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the Transfer Agent for the Common Stock of the Company.  Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.  The Company promptly shall mail
a notice of any such exchange to all of the holders of such Rights at their
last addresses as they appear upon the registry books of the Rights Agent.  Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.  Each such notice of 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 Section 24 hereof or in connection with the purchase of shares of
Common Stock of the Company prior to the Distribution Date.

 

(c)           The Company may, at
its option, pay the Redemption Price in cash, shares of Common Stock of the
Company (based on the Fair Market Value of the Common Stock of the Company as
of the time of redemption) or any other form of consideration deemed
appropriate by the Board of Directors of the Company.

 

(d)           The Board of
Directors of the Company shall establish a Stockholder Rights Plan Committee
that shall periodically consider whether the maintenance of this Agreement
continues to be in the best interests of the Company and its stockholders.  The Stockholder Rights Plan Committee shall
conduct such review when, as and in such manner as such committee deems
appropriate, after giving due regard to all relevant circumstances; provided,
however, that the committee shall take such action at least once every 3 years.
Following each such review, the Stockholder Rights Plan Committee will report
its conclusions

 

33

 

to the full Board
of Directors of the Company, including any recommendation in light thereof as
to whether this Agreement should be modified, terminated or the Rights
redeemed.  The Stockholder Rights Plan
Committee is authorized to retain such legal counsel, financial advisors and
other advisors as such committee deems appropriate in order to assist the
Stockholder Rights Plan Committee in carrying out its foregoing
responsibilities under this Agreement. 
The Stockholder Rights Plan Committee shall consist of non-management
directors who are otherwise eligible to serve on the committee in accordance
with the Company’s bylaws.

 

Section 24.  Exchange.

 

(a)           (i)            The Board of Directors of the
Company may, at its option, at any time on or after the occurrence of a Section 11(a)(ii) Event,
exchange all or part of the then outstanding and exercisable Rights (which
shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for shares of Common Stock of the Company at an exchange ratio of one share of
Common Stock of the Company per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the “Section 24(a)(i) Exchange
Ratio”).  Notwithstanding the foregoing,
the Board of Directors of the Company shall not be empowered to effect such
exchange at any time after any Person (other than an Exempt Person), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Stock of the Company.

 

(ii)           Notwithstanding the foregoing, the
Board of Directors of the Company may, at its option, at any time on or after
the occurrence of a Section 11(a)(ii) Event, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights
that have become null and void pursuant to the provisions of Section 7(e) hereof)
for shares of Common Stock of the Company at an exchange ratio specified in the
following sentence, as appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date of this
Agreement.  Subject to the adjustment
described in the foregoing sentence, each Right may be exchanged for that
number of shares of Common Stock of the Company obtained by dividing the Spread
(as defined in Section 11(a)(iii)) by the then Fair Market Value per one
ten-thousandth of a share of Preferred Stock on the earlier of (x) the
date on which any person becomes an Acquiring Person or (y) the date on
which a tender or exchange offer by any Person (other than an Exempt Person) is
first published or sent or given within the meaning of Rule 14d-4(a) of
the Exchange Act or any successor rule, if upon consummation thereof such
Person could become an Acquiring Person (such exchange ratio being referred to
herein as the “Section 24(a)(ii) Exchange Ratio”).  Notwithstanding the foregoing, the Board of
Directors of the Company shall not be empowered to effect such exchange at any
time after any Person (other than an Exempt Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50%
or more of the Common Stock of the Company.

 

(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
pursuant to Section 11(a)(ii) shall terminate and the only right
thereafter of a holder of such Rights shall be to

 

34

 

receive that
number of shares of Common Stock of the Company equal to the number of such
Rights held by such holder multiplied by the Section 24(a)(i) Exchange
Ratio or the Section 24(a)(ii) Exchange Ratio, as applicable; provided,
however, that the holder of a Right exchanged pursuant to this Section 24
shall continue to have the right to purchase securities or other property of
the Principal Party following a Section 13 Event that has occurred or may
thereafter occur.  The Company shall
promptly give notice of any such exchange in accordance with Section 26
hereof and shall promptly 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; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such exchange.  Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice.  Each such notice of exchange
will state the method by which the exchange of the shares of Common Stock of
the Company 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 null
and void pursuant to the provisions of Section 7(e) hereof) held by
each holder of Rights.

 

(c)           In any exchange
pursuant to this Section 24, the Company, at its option, may substitute
Preferred Stock (or Preferred Stock Equivalent, as such term is defined in Section 11(b) hereof)
for Common Stock of the Company exchangeable for Rights, at the initial rate of
one ten-thousandth of a share of Preferred Stock (or Preferred Stock
Equivalent) for each share of Common Stock of the Company, as appropriately
adjusted to reflect adjustments in the voting rights of the Preferred Stock
pursuant to the terms thereof, so that the fraction of a share of Preferred
Stock delivered in lieu of each share of Common Stock of the Company shall have
the same voting rights as one share of Common Stock of the Company.

 

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

 

(e)           The Company shall
not be required to issue fractions of Common Stock of the Company or to
distribute certificates which evidence fractional shares of Common Stock of the
Company.  If the Company elects not to
issue such fractional shares of Common Stock of the Company, the Company shall
pay, in lieu of such fractional shares of Common Stock of the Company, to the
registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock of the Company would otherwise be issuable,
an amount in cash equal to the same fraction of the Fair Market Value of a
whole share of Common Stock of the Company. 
For the purposes of this paragraph (e), the Fair Market Value of a
whole share of Common Stock of the Company shall be the closing price of a
share of Common Stock of the Company (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.

 

35

 

Section 25.  Notice of
Certain Events.

 

(a)           In case the Company shall propose, at
any time after the Distribution Date, (i) to pay any dividend payable in
stock of any class to the holders of Preferred Stock or to make any other
distribution to the holders of Preferred Stock (other than a regular periodic
cash dividend out of earnings or retained earnings of the Company), or (ii) to
offer to the holders of Preferred Stock rights or warrants to subscribe for or
to purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding shares of Preferred Stock), or (iv) to
effect any consolidation or merger into or with, or to effect any sale,
mortgage or other transfer (or to permit one or more of its Subsidiaries to
effect any sale, mortgage or other transfer), in one transaction or a series of
related 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 (other
than a Subsidiary of the Company in one or more transactions each of which is
not prohibited by the proviso at the end of the first sentence of Section 11(n) hereof),
or (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 Common Stock of the Company or to effect a subdivision,
combination or consolidation of the Common Stock of the Company (by
reclassification or otherwise than by payment of dividends in Common Stock of
the Company) then in each such case, the Company shall give to each holder of a
Right Certificate and to the Rights Agent, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock of the
Company and/or Preferred Stock, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or
(ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Common Stock of the
Company and/or Preferred Stock, whichever shall be the earlier; provided,
however, no such notice shall be required pursuant to this Section 25
as a result of any Subsidiary of the Company effecting a consolidation or
merger with or into, or effecting a sale or other transfer of assets or
earnings power to, any other Subsidiary of the Company in a manner not
inconsistent with the provisions of this Agreement.

 

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

 

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

 

36

 

ActivIdentity Corporation

6623 Dumbarton Circle

Fremont, California

Facsimile No. (510) 574-0101

Attention: Chief Executive Officer

 

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

 

American Stock Transfer & Trust Company, LLC

59 Maiden Lane

New York, NY 10038

Facsimile No. (718)
236-4588

Attention:
Executive Vice President

 

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

 

Section 27.  Supplements
and Amendments.  Prior to the occurrence
of a Section 11(a)(ii) Event, the Company and the Rights Agent shall,
if the Board of Directors of the Company so directs, supplement or amend any
provision of this Agreement as the Board of Directors of the Company may deem
necessary or desirable without the approval of any holders of certificates
representing shares of Common Stock of the Company.  From and after the occurrence of a Section 11(a)(ii) Event,
the Company and the Rights Agent shall, if the Board of Directors of the
Company so directs, supplement or amend this Agreement without the approval of
any holder of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or
lengthen any time period hereunder, or (iv) to change or supplement the
provisions hereof in any manner which the Board of Directors of the Company may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Right Certificates (other than an Acquiring Person or any
Affiliate or Associate of an Acquiring Person); provided, however,
that from and after the occurrence of a Section 11(a)(ii) Event this
Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of
this sentence, (A) a time period relating to when the Rights may be
redeemed at such time as the Rights are not then redeemable or (B) any
other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and the benefits to, the holders of
Rights (other than an Acquiring Person or any Affiliate or Associate of an
Acquiring Person).  Without limiting the foregoing, the Company
may at any time prior to the occurrence of a Section 11(a)(ii) Event
amend this Agreement to lower the threshold set forth in Section 1(a) to
not less than the greater of (i) the sum of .001% and the largest
percentage of the outstanding Common Stock of the Company then known by the
Company to be Beneficially Owned by any Person (other than the

 

37

 

Company, any Subsidiary of the Company, any employee benefit plan of
the Company or any Subsidiary of the Company, or any entity holding Common
Stock of the Company for or pursuant to the terms of any such plan) and (ii) 10%.  Upon the delivery of such certificate
from an appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 27,
the Rights Agent shall execute such supplement or amendment, and any failure of
the Rights Agent to so execute such supplement or amendment shall not affect
the validity of the actions taken by the Board of Directors of the Company
pursuant to this Section 27.  Prior
to the occurrence of a Section 11(a)(ii) Event, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock of the Company. 
Notwithstanding any other provision hereof, the Rights Agent’s consent
must be obtained regarding any amendment or supplement pursuant to this Section 27
which alters the Rights Agent’s rights or duties.

 

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. 
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 to the Company, or as may be
necessary or advisable in the administration of this Agreement, including
without limitation, the right and power to (i) interpret the provisions of
this Agreement and (ii) make all determinations and computations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the
Agreement).  All such actions,
calculations, interpretations and determinations (including, for purposes of clause
(y) below, all omissions with respect to the foregoing) which are done or
made by the Board of Directors in good faith shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject any member of the Board
of Directors to any liability to the holders of the Rights or to any other
person.

 

Section 30.  Benefits
of this Agreement.  Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common 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 Right Certificates (and,
prior to the Distribution Date, registered holders of the 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 the Agreement would adversely affect the

 

38

 

purpose or effect
of the Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Board of Directors.

 

Section 32.  Governing
Law.  This Agreement, each Right and each
Right Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and to be performed entirely within such State.  The courts of the State of Delaware and of
the United States of America located in the State of Delaware (the “Delaware
Courts”) shall have exclusive jurisdiction over any litigation arising out of
or relating to this Agreement and the transactions contemplated hereby, and any
Person commencing or otherwise involved in any such litigation shall waive any
objection to the laying of venue of such litigation in the Delaware Courts and
shall not plead or claim in any Delaware Court that such litigation brought
therein has been brought in an inconvenient forum.

 

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

 

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

 

Section 35.  Force
Majeure.  Notwithstanding anything to the
contrary contained herein, neither the Company nor the Rights Agent shall be
liable for any delay or failure in performance resulting directly from any act
or event beyond its reasonable control and without the fault or gross
negligence of the delayed or non-performing party that causes a sudden,
substantial or widespread disruption in business activities, including, without
limitation, fire, flood, natural disaster or act of God, strike or other
industrial disturbance, war (declared or undeclared), embargo, blockade, legal
restriction, riot, insurrection, act of terrorism, disruption in transportation,
communications, electric power or other utilities, or other vital
infrastructure or any means of disrupting or damaging internet or other
computer networks or facilities (each, a “Force Majeure Condition”); provided,
that such delayed or non-performing party shall use reasonable commercial
efforts to resume performance as soon as practicable.  If any Force Majeure Condition occurs, the
party delayed or unable to perform shall give immediate written notice to the
other party, stating the nature of the Force Majeure Condition and any action
being taken to avoid or minimize its effect.

 

[Remainder of page intentionally left blank]

 

39

 

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

 

 

	
  ATTEST:

  	
  ACTIVIDENTITY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   /s/ Jerome Pintar

  
	
   

  	
  Name:
  Jerome Pintar

  
	
   

  	
  Title:
  Vice President, Finance

  
	
   

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
  AMERICAN STOCK TRANSFER
  & TRUST

  COMPANY, LLC

  
	
   

  	
  as Rights Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Donna Ansbro

  	
   

  	
  By:

  	
   /s/ Herbert J.
  Lemmer

  
	
   

  	
  Name:
  Herbert J. Lemmer

  
	
   

  	
  Title:
  Vice President

  

 

 

Exhibit A

 

CERTIFICATE OF DESIGNATIONS

of

SERIES A JUNIOR PARTICIPATING CUMULATIVE

PREFERRED STOCK

of

ACTIVIDENTITY CORPORATION

 

Section 1.               Designation
and Amount.  The shares of such
series shall be designated as “Series A Junior Participating Cumulative
Preferred Stock” (the “Series A Preferred Stock”), and the number of
shares initially constituting such series shall be 50,000; provided, however,
that if more than a total of 50,000 shares of Series A Preferred Stock
shall be issuable upon the exercise of Rights (the “Rights”) issued pursuant to
the Stockholder Rights Agreement dated as of July 25, 2008, between the
Corporation and American Stock Transfer & Trust Company, LLC, as
Rights Agent (the “Rights Agreement”), the Board of Directors of the Corporation,
pursuant to Section 151(g) of the General Corporation Law of the
State of Delaware, may direct by resolution or resolutions that a certificate
be properly executed, acknowledged, filed and recorded, in accordance with the
provisions of Section 103 thereof, providing for the total number of
shares of Series A Preferred Stock authorized to be issued to be increased
(to the extent that the Certificate of Incorporation then permits) to the
largest number of whole shares (rounded up to the nearest whole number)
issuable upon exercise of such Rights.

 

Section 2.               Dividends
and Distributions.

 

(A)          (i)            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, the holders of shares of Series A Preferred Stock, in
preference to the holders of shares of common stock and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June, September and December in
each year (each such date being referred to herein as a “Quarterly Dividend
Payment Date”), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $1.00 or (b) subject to the provisions for adjustment
hereinafter set forth, 10,000 times the aggregate per share amount of all cash
dividends, and 10,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of common stock or a subdivision of the outstanding shares of common
stock (by reclassification or otherwise), declared on the common stock since
the immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock.  The multiple of cash and non-cash dividends
declared on the common stock to which holders of the Series A Preferred
Stock are entitled, which shall be 10,000 initially but which shall be adjusted
from time to time as hereinafter provided, is hereinafter referred to as the “Dividend
Multiple.”  In the event the Corporation
shall at any time after July 25, 2008 (the “Rights Declaration Date”) (i) declare
or pay any dividend on common stock 

 

 

payable in shares of common stock, or (ii) 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 Dividend Multiple thereafter applicable to
the determination of the amount of dividends which holders of shares of Series A
Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied 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.

 

(ii)           Notwithstanding
anything else contained in this paragraph (A), the Corporation shall, out of
funds legally available for that purpose, declare a dividend or distribution on
the Series A Preferred Stock as provided in this paragraph (A) immediately
after it declares a dividend or distribution on the common stock (other than a
dividend payable in shares of common stock); provided that, in the event no
dividend or distribution shall have been declared on the common stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.

 

(B)           Dividends shall
begin to accrue and be cumulative on outstanding shares of Series A
Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares of Series A Preferred Stock, unless the date
of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. 
Accrued but unpaid dividends shall not bear interest.  Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix in accordance
with applicable law 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 such
number of days prior to the date fixed for the payment thereof as may be
allowed by applicable law.

 

Section 3.  Voting Rights.  In addition to any other voting rights
required by law, 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 10,000 votes on all matters
submitted to a vote of the stockholders of the Corporation.  The number of votes which a holder of a share
of Series A Preferred Stock is entitled to cast, which shall initially be
10,000 but which may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the “Vote Multiple.” 
In the event the Corporation shall at any time after the Rights
Declaration Date 

 

2

 

(i) declare or pay any dividend on common stock
payable in shares of common stock, or (ii) 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 Vote Multiple thereafter applicable to the determination of the
number of votes per share to which holders of shares of Series A Preferred
Stock shall be entitled shall be the Vote Multiple immediately prior to such
event multiplied by a fraction, the numerator of which is the number of shares
of common stock outstanding immediately after such event and the denominator of
which is the number of shares of common stock that were outstanding immediately
prior to such event.

 

(B)           Except as otherwise
provided herein or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of common stock and the holders of shares of
any other capital stock of this 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 otherwise
required by applicable law or as set forth herein, 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 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 on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;

 

(ii)           declare or pay
dividends on or make any other distributions on any shares of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock, except dividends paid ratably on
the 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)          except as permitted
in subsection 4(A)(iv) below, redeem, purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock;
or

 

(iv)          purchase or
otherwise acquire for consideration any shares of Series A Preferred
Stock, or any shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all 

 

3

 

holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.

 

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

 

Section 5.  Reacquired
Shares.  Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof.  All such shares shall upon
their cancellation become authorized but unissued shares of preferred stock and
may be reissued as part of a new series of preferred stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.

 

Section 6.  Liquidation,
Dissolution or Winding Up.  Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made (x) 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 an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, plus an amount equal to the
greater of (1) $10,000.00 per share or (2) an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
10,000 times the aggregate amount to be distributed per share to holders of
common stock, or (y) to the holders 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 other 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 the Rights
Declaration Date (i) declare or pay any dividend on common stock payable
in shares of common stock, or (ii) 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 per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause (x) 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.

 

Neither the consolidation of nor merging of the Corporation with or
into any other corporation or corporations, nor the sale or other transfer of
all or substantially all of the assets of the Corporation, shall be deemed to
be a liquidation, dissolution or winding up of the Corporation within the
meaning of this Section 6.

 

4

 

Section 7.  Consolidation,
Merger, etc.  In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of common stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Preferred Stock shall at the same time be similarly exchanged
or changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 10,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of common stock is changed or exchanged,
plus accrued and unpaid dividends, if any, payable with respect to the Series A
Preferred Stock.  In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare
or pay any dividend on common stock payable in shares of common stock, or (ii) 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.  Redemption.  The shares of Series A Preferred Stock shall
not be redeemable; provided, however, that the foregoing shall
not limit the ability of the Corporation to purchase or otherwise deal in such
shares to the extent otherwise permitted hereby and by law.

 

Section 9.  Ranking.  Unless otherwise expressly provided in the
Certificate of Incorporation or a Certificate of Designations relating to any
other series of preferred stock of the Corporation, the Series A Preferred
Stock shall rank junior to every other series of the Corporation’s preferred
stock previously or hereafter authorized, as to the payment of dividends and
the distribution of assets on liquidation, dissolution or winding up and shall
rank senior to the common stock.

 

Section 10.  Amendment.  The Certificate of Incorporation and this
Certificate of Designations 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 two-thirds or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.

 

Section 11.  Fractional
Shares.  Series A Preferred
Stock may be issued in whole shares or in any fraction of a share that is one
ten-thousandth (1/10,000) of a share or any integral multiple of such fraction,
which shall entitle the holder, in proportion to such holder’s fractional
shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series A
Preferred Stock.  In lieu of fractional
shares, the Corporation may elect to make a cash payment as provided in the
Rights Agreement for fractions of a share other than one ten-thousandth
(1/10,000) of a share or any integral multiple thereof.

 

5

 

Exhibit B

 

FORM OF RIGHT CERTIFICATE

 

Certificate
No. R-            
Rights

 

NOT EXERCISABLE AFTER JULY 25, 2018 OR EARLIER IF NOTICE OF REDEMPTION
IS GIVEN.  THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF ACTIVIDENTITY CORPORATION, AT $0.001 PER RIGHT, ON
THE TERMS SET FORTH IN THE STOCKHOLDER RIGHTS AGREEMENT BETWEEN ACTIVIDENTITY
CORPORATION AND AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, AS
RIGHTS AGENT, DATED AS OF JULY 25, 2008 (THE “RIGHTS AGREEMENT”).  UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF
THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN
ASSOCIATE OR AFFILIATE 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.

 

Right
Certificate

 

ACTIVIDENTITY
CORPORATION

 

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 Stockholder Rights Agreement dated as of July 25,
2008 (the “Rights Agreement”) between ActivIdentity Corporation (the “Company”)
and American Stock Transfer & Trust Company, LLC, as Rights Agent (the
“Rights Agent”), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior
to the close of business on July 25, 2018 at the office or offices of the
Rights Agent designated for such purpose, or its successors as Rights Agent,
one ten-thousandth of a fully paid, non-assessable share of the Series A
Junior Participating Cumulative Preferred Stock (the “Preferred Stock”) of the
Company, at a purchase price of
$           per one
ten-thousandth of a share (the “Exercise Price”), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase
and the related Certificate duly executed. 
The number of Rights evidenced by this Right Certificate (and the number
of shares which may be purchased upon exercise thereof) set forth above, and
the Exercise Price per share set forth above, are the number and Exercise Price
as of                   ,
based on the Preferred Stock as constituted at such date.

 

Upon the occurrence of a Section 11(a)(ii) Event (as such
term is defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement), (ii) a transferee of any such Acquiring Person or
Associate or Affiliate thereof, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a Person who, after such
transfer, became an Acquiring Person or an Affiliate or Associate of an 

 

6

 

Acquiring Person, such Rights shall become null and
void and no holder hereof shall have any right with respect to such Rights from
and after the occurrence of such Section 11(a)(ii) Event.

 

As provided in the Rights Agreement, the Exercise Price and the number
of shares of Preferred Stock or other securities which may be purchased upon
the exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.

 

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

 

This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Certificates surrendered shall have entitled such holder
to purchase.  If this Right Certificate
shall be exercised in part, the holder shall be entitled to receive upon surrender
hereof another Right Certificate or Certificates for the number of whole Rights
not exercised.  If this Right Certificate
shall be exercised in whole or in part pursuant to Section 11(a)(ii) of
the Rights Agreement, the holder shall be entitled to receive this Right
Certificate duly marked to indicate that such exercise has occurred as set
forth in the Rights Agreement.

 

Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
or any part of the Rights evidenced by this Certificate for shares of the
Company’s Common Stock or Preferred Stock at an exchange ratio (subject to
adjustment) specified in the Rights Agreement.

 

Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Board of Directors of the Company at
its option at a redemption price of $0.001 per Right (payable in cash, Common
Stock or other consideration deemed appropriate by the Board of Directors).

 

The Company is not obligated to issue fractional shares of stock upon
the exercise of any Right or Rights evidenced hereby (other than fractions
which are integral multiples of one ten-thousandth of a share of Preferred
Stock, which may, at the election of the Company, be evidenced by depositary
receipts).  If the Company elects not to
issue such fractional shares, in lieu thereof a cash payment will be made, as
provided in the Rights Agreement.

 

No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock, Common Stock or any 

 

7

 

other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in the Rights Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate shall
have been exercised as provided in the Rights Agreement.

 

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

 

WITNESS the facsimile signature of the proper officers of the Company
as a document under corporate seal.

 

	
  Attested:

  	
      
  ACTIVIDENTITY CORPORATION

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  	
   

  
	
   

  	
  [Secretary or Assistant
  Secretary]

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
   Title:

  	
  [Chairman, Vice
  Chairman, 

  
	
   

  	
   

  	
   

  	
   

  	
  President or Vice
  President]

  

 

 

	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
  AMERICAN STOCK TRANSFER & TRUST COMPANY,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
			

 

8

 

[Form of Reverse Side of Right Certificate]

 

FORM OF ASSIGNMENT

 

(To be executed by the registered holder if such

 

holder desires to transfer the Right Certificate.)

 

FOR VALUE RECEIVED
                                          
hereby sells, assigns and transfers unto
                                  
(Please print name and address of transferee)
                                      
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
                         
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.

 

	
  Dated:
                    ,

  	
   

  
	
   

  
	
  Signature

  
	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  
				

 

CERTIFICATE

 

The undersigned hereby certifies by checking the appropriate boxes
that:

 

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

 

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

 

	
  Dated:
                    ,

  	
   

  	
   

  
	
   

  
	
  Signature

  

 

 

NOTICE

 

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

 

 

FORM OF ELECTION TO PURCHASE

 

(To be executed if holder desires to

 

exercise the Right Certificate.)

 

To
ACTIVIDENTITY CORPORATION:

 

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

 

	
  Please insert social
  security or other identifying taxpayer number:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

(Please
print name and address)

 

If such number of Rights shall not be all the Rights evidenced by this
Right Certificate or if the Rights are being exercised pursuant to Section 11(a)(ii) of
the Rights Agreement, a new Right Certificate for the balance of such Rights
shall be registered in the name of and delivered to:

 

	
  Please insert social
  security or other identifying taxpayer number:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

(Please print name and
address)

 

Dated:
                  ,

 

Signature

 

	
  Signature Guaranteed:

  	
   

  	
   

  

 

 

CERTIFICATE

 

The undersigned hereby certifies by checking the appropriate boxes
that:

 

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

 

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

 

Dated:
                  ,

 

Signature

 

 

NOTICE

 

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

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