Document:

<PAGE>

                                                                    EXHIBIT 10.1

                         [LETTERHEAD OF EEX CORPORATION]

                                  July 16, 2002

BP Exploration & Production Inc.
Attention:  Mr. E. Peter Zseleczky
501 WestLake Park Boulevard
Houston, Texas 77079

                                 Re:  AMENDATORY LETTER
                                      Asset Purchase, Farmout & Joint
                                      Exploration Agreement dated March 1, 2002
                                      Treasure Island Project
                                      OCS Gulf of Mexico

Gentlemen:

This Amendatory Letter is by and between EEX Corporation ("EEX"), and BP
Exploration & Production Inc. ("BP"). EEX and BP are sometimes hereinafter
referred to collectively as the "Parties". Capitalized terms used in this
Amendatory Letter but not otherwise defined herein shall have the meaning
ascribed to them in the "Agreement" (as hereinafter defined).

WHEREAS, under date of March 1, 2002, EEX and BP entered into that certain Asset
Purchase, Farmout & Joint Exploration Agreement ("Agreement"), whereby BP
acquired certain interests in oil and gas leases on the OCS Shelf, and BP and
EEX agreed to cooperate in further evaluation of such leases, the acquisition of
additional oil and gas leases, and possibly, in the drilling of future wells as
further set forth in the Agreement.

WHEREAS, since the date of execution of the Agreement, it has been determined
that OCS-G 14505 (Ship Shoal Block 261) expired of its own terms prior to the
date that the Parties executed the Agreement.

WHEREAS, since the date of execution of the Agreement, OCS-G 18020 (Ship Shoal
Block 260) has expired of its own terms.

WHEREAS, since the date of execution of the Agreement, OCS-G 23905 (Ship Shoal
Block 212) and OCS-G 23908 (Ship Shoal Block 235) have been awarded by the MMS

<PAGE>

July 16, 2002-Amendatory Letter-Treasure Island Project-(Page 2)

to the Parties as a result of their successful bids placed on such lease blocks
at OCS Lease Sale No. 182.

WHEREAS, the Parties desire a) to amend the Agreement to provide for an
appropriate reduction in the Project Costs as a result of the expiration of
OCS-G 14505 (Ship Shoal Block 261) prior to the execution date of the Agreement;
and, b) to amend Exhibit "A" and Exhibit "D" of the Agreement to provide for
deletion and/or addition of reference certain leases listed therein as a result
of expiration and/or acquisition of such leases.

NOW, THEREFORE, for and in consideration of the premises, EEX and BP hereby
covenant and agree as follows:

   1. The initial paragraph of Section 4 (BP Work Commitment, Seismic and Lease
      Acquisition) is amended to change the amount of Project Costs, as
      referenced therein, from five million dollars ($5,000,000.00) to four
      million seven hundred and two thousand five hundred sixty-nine dollars and
      thirty cents ($4,702,569.30), and from three million dollars
      ($3,000,000.00) to two million seven hundred and two thousand five hundred
      sixty-nine dollars and thirty cents ($2,702,569.30), respectively.
   2. Subparagraph 2. of Section 5 (Failure to Fund Work Commitment, Seismic and
      Lease Acquisition) is amended to change the amount from three million
      dollars ($3,000,000.00) to two million seven hundred and two thousand five
      hundred sixty-nine dollars and thirty cents ($2,702,569.30).
   3. The second item (as referenced by a dot) under Section 6 (Initial Well
      Commitment) is amended to change the amount from five million dollars
      ($5,000,000.00) to four million seven hundred and two thousand five
      hundred sixty-nine dollars and thirty cents ($4,702,569.30).
   4. Section 8 (Full Expenditure of Project Costs) is amended to change the
      reference from five million dollars ($5,000,000.00) to four million seven
      hundred and two thousand five hundred sixty-nine dollars and thirty cents
      ($4,702,569.30).
   5. Subparagraph 2. and the second item (as referenced by a dot) under
      Subsection B) of Section 9 (Initial Well Termination Events) are both
      amended to change the reference from five million dollars ($5,000,000.00)
      to four million seven hundred and two thousand five hundred sixty-nine
      dollars and thirty cents ($4,702,569.30).
   6. Exhibit "A" to the Agreement is deleted in its entirety, and substituted
      therefor is the revised Exhibit "A" attached hereto as Attachment "1".
   7. Exhibit "A" of the Offshore Operating Agreement attached as Exhibit "D" to
      the Agreement is hereby deleted in its entirety, and substituted therefor
      is the revised Exhibit "A" attached hereto as Attachment "2".
   8. Except as amended hereby, the Agreement shall continue in full force and
      effect and EEX and BP ratify and confirm the Agreement as amended hereby.

<PAGE>

July 16, 2002-Amendatory Letter-Treasure Island Project-(Page 3)

Upon execution on behalf of BP, each of the Parties has caused this Amendatory
Letter to be executed as of the date shown above, and to be effective as of the
date hereof.

                                            Sincerely yours,

                                            EEX CORPORATION

                                            /s/ Ben Davis
                                            Ben Davis
                                            Land Manager

BP EXPLORATION & PRODUCTION INC.

By:     /s/ O. Kirk Wardlaw
   --------------------------------
Printed Name: O. Kirk Wardlaw
             ----------------------
Title:    Attorney-in-Fact
      -----------------------------

<PAGE>

                                 ATTACHMENT "1"
          To that certain Amendatory Letter dated July 16, 2002, by and
          between EEX Corporation and BP Exploration & Production Inc.

                                  EXHIBIT 'A'
 Attached to and made a part of that certain Joint Venture Agreement
                      dated March 1, 2002, by and between
              BP Exploration & Production Inc. and EEX Corporation

SECTION I:  EEX Owned Leases

<TABLE>
<CAPTION>
                                                                 EXPIRATION
PROSPECT            AREA NAME          BLOCK NO.      OCS-G         DATE             RI              WI             NRI
------------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                <C>           <C>          <C>            <C>             <C>              <C>
Dawson              S. Timbalier          188         21670*      4/30/05        16.66667%       100.00000%      83.33333%
                                          224         21673       4/30/05        16.66667%       100.00000%      83.33333%
                                          226         21674       4/30/05        16.66667%       100.00000%      83.33333%
                                          227         21675       4/30/05        16.66667%       100.00000%      83.33333%

Blackbeard, W.      S. Timbalier          141         21665       4/30/05        16.66667%       100.00000%      83.33333%
                                          142         21666       4/30/05        16.66667%       100.00000%      83.33333%
                                          167         21668       4/30/05        16.66667%       100.00000%      83.33333%
                                          168         21669       4/30/05        16.66667%       100.00000%      83.33333%
                    Ship Shoal            188**       22712       4/30/06        16.66667%       100.00000%      78.33330% ***

Blackbeard, E.      S. Timbalier          144         21667       6/30/05        16.66667%       100.00000%      83.33333%

Morgan              S. Timbalier          215         21672       4/30/05        16.66667%       100.00000%      83.33333%
                    Ship Shoal            211         22714       4/30/06        16.66667%       100.00000%      83.33333%
                    Ship Shoal            236         22716       4/30/06        16.66667%       100.00000%      83.33333%
</TABLE>

<PAGE>

<TABLE>

<S>               <C>                     <C>          <C>          <C>           <C>             <C>             <C>
Capt. Kidd          Ship Shoal               260**       18020       6/30/02        16.66667%        20.00000%      16.26667%   ***
                                             263         21658       4/30/05        16.66667%       100.00000%      83.33333%
                                             281         21660       4/30/05        16.66667%       100.00000%      83.33333%
                                             282         22720       4/30/06        16.66667%       100.00000%      83.33333%

Bellamy             Ship Shoal               306         22724       4/30/06        16.66667%       100.00000%      83.33333%
                    Ship Shoal               331         21661       4/30/05        16.66667%        50.00000%      41.66667%

Lafitte             Eugene Island            222         22672       4/30/06        16.66667%       100.00000%      83.33333%
                                             223         21640       4/30/05        16.66667%       100.00000%      83.33333%

Barataria           S. Marsh Island           80**       14439         HBP          16.66667%        11.25000%       9.15000%   ***
</TABLE>

  *Lease covers only S 1/2 and NE 1/4 of Block.
 **Depth Limitations
   SS 188 - EEX owns 100% Operating Rights WI from 17,000' subsea down to
                100,000' subsea.
   SS 260 - EEX owns 20% WI below 12,000' TVD.
   SMI 80 - S/2 N/2 N/2; S/2 N/2; S/2: EEX owns 11.25% WI below the
                stratigraphic equivalent of the deepest productive reservoir
                discovered in the field which is defined as the base of the
                11200' Sand as seen in the OCS-G 14439 Well No. A-5 ST at
                approximately 13,146' MD; and
            N/2 N/2 N/2:  EEX owns 11.25% WI below 9,000' subsea.

***SS 188 burdened by 5% ORI to Aviara Energy Corporation.
   SS 260 and SMI 80 burdened by 2% ORI in favor of Lee B. Backsen, et al.

EEX is designated Operator of all Leases except OCS-G 18020
(Ship Shoal Block 260), OCS-G 21661 (Ship Shoal Block 331) and OCS-G 14439
(South Marsh Island Block 80)

<PAGE>

SECTION II:  Leases Acquired by the Parties at OCS Lease Sale No. 182

<TABLE>
<CAPTION>
                                                                    EXPIRATION
PROSPECT            AREA NAME              BLOCK NO.     OCS-G         DATE             RI              WI             NRI
---------------------------------------------------------------------------------------------------------------------------------
<S>               <C>                     <C>           <C>        <C>             <C>             <C>            <C>
Morgan              Ship Shoal               212         23905       6/30/07        16.66667%       25.00000%       20.83333%
                                             235         23908       6/30/07        16.66667%       25.00000%       20.83333%

Blackbeard, W.      Ship Shoal               186         23904       4/30/07        16.66667%       25.00000%       20.83333%

Bellamy             Ship Shoal               309         23916       5/31/07        16.66667%       25.00000%       20.83333%
                                             310         23917       5/31/07        16.66667%       25.00000%       20.83333%

Lafitte             Eugene Island            201         23870       4/30/07        16.66667%       25.00000%       20.83333%
</TABLE>

SECTION III:  Currently Existing Agreements

               1.   Offshore Operating Agreement attached as Exhibit "B-3" to
                    that certain Amended Acquisition & Management Agreement
                    dated March 5, 1994, by and between General Atlantic
                    Resources, Inc., General Atlantic Oils Ltd., General
                    Atlantic Gulf Coast, Inc. and Taurus Exploration U.S.A.,
                    Inc., covering OCS-G 14439 (South Marsh Island Block 80).

               2.   Offshore Operating Agreement dated August 1, 1997, by and
                    between UMC Petroleum Corporation, Taurus Exploration
                    U.S.A., Inc. and Smacko, Ltd., covering OCS-G 10820 (Ship
                    Shoal Block 260).

               3.   Offshore Operating Agreement dated May 1, 2000, by and
                    between Remington Oil & Gas Corporation and EEX Corporation,
                    covering OCS-G 21661 (Ship Shoal Block 331).

               4.   Letter Agreement dated January 22, 2002, by and between
                    Aviara Energy Corporation and EEX Corporation, covering
                    OCS-G 22712 (Ship Shoal 188).

<PAGE>

                                 ATTACHMENT "2"
    To that certain Amendatory Letter dated July 16, 2002, by and between EEX
                Corporation and BP Exploration & Production Inc.

                                   EXHIBIT "A"
 Attached to and made a part of that certain Offshore Operating Agreement dated
   March 1, 2002, by and between BP Exploration & Production Company and EEX
                                  Corporation.

SECTION I:  LEASES AND WORKING INTERESTS OF THE PARTIES

<TABLE>
<CAPTION>
                                                        WORKING INTEREST
                                                     ---------------------
OCS #             AREA/BLOCK                         BP                EEX
-----             ------------------                 --                ---
<S>             <C>                               <C>                <C>
21665             South Timbalier 141                75%               25%
21666             South Timbalier 142                75%               25%
21667             South Timbalier 144                75%               25%
21668             South Timbalier 167                75%               25%
21669             South Timbalier 168                75%               25%
21670             South Timbalier 188*               75%               25%
21672             South Timbalier 215                75%               25%
21673             South Timbalier 224                75%               25%
21674             South Timbalier 226                75%               25%
21675             South Timbalier 227                75%               25%
23904             Ship Shoal 186                     75%               25%
22712             Ship Shoal 188**                   75%               25%
22714             Ship Shoal 211                     75%               25%
23905             Ship Shoal 212                     75%               25%
23908             Ship Shoal 235                     75%               25%
22716             Ship Shoal 236                     75%               25%
21658             Ship Shoal 263                     75%               25%
21660             Ship Shoal 281                     75%               25%
22720             Ship Shoal 282                     75%               25%
22724             Ship Shoal 306                     75%               25%
23916             Ship Shoal 309                     75%               25%
23917             Ship Shoal 310                     75%               25%
</TABLE>

<PAGE>

<TABLE>

<S>             <C>                        <C>               <C>
21661             Ship Shoal 331              37.5%             12.5%
23870             Eugene Island 201             75%               25%
22672             Eugene Island 222             75%               25%
21640             Eugene Island 223             75%               25%
14439             South Marsh Island 80***  8.4375%           2.1825%
</TABLE>

*OCS-G 21670 covers only the South Half and Northeast Quarter of South Timbalier
Block 188.
**Only as to depths below 17,000 feet.
***South Half and South Three-Fourths of North Half-Only as to depths below
11,200' Sand as seen in OCS-G 14439 Well No. A-5 ST at depth of approximately
13,146' measured depth. North One-Fourth of North Half-Only as to depths below
9,000' subsea.

SECTION II:  OPERATOR

BP is designated as the Operator of all blocks except for OCS-G 21661 (Ship
Shoal Block 331), and OCS-G 14439 (South Marsh Island Block 80), which are
covered by existing operating agreements naming other parties as Operator.

SECTION III: DESCRIPTION OF AREA OF PROSPECTS
<TABLE>
<CAPTION>
Prospect Name                       Area                               Block Numbers
-------------                       ----                               -------------
<S>                                 <C>                                <C>
Dawson                              South Timbalier                    160, 176-180, 184-189,
                                                                       204-208, 223-228, 232-235,
                                                                       252, 253, 262, 263

Blackbeard West                     Ship Shoal                         186, 188-190
                                    South Timbalier                    141, 142, 167-170

Blackbeard East                     South Timbalier                    108-110, 143-145, 164-166,
                                                                       171-173, 192, 193, 201

Morgan                              Ship Shoal                         211-214, 234-237, 258, 259
                                    South Timbalier                    196-198, 214-217

Captain Kidd                        Ship Shoal                         238, 256, 257, 260-263, 280-282

Bellamy                             Ship Shoal                         285, 286, 305, 306, 308-310,
                                                                       329, 331

Lafitte                             South Marsh Island                 62-65
                                    Eugene Island                      200, 201, 221, 223, 225, 241,
                                                                       242, 244

Barataria                           Eugene Island                      77-81
</TABLE>

SECTION IV:  PRE-EXISTING, CARVED-OUT INTERESTS

OCS-G 22712 (Ship Shoal Block 188)-Five percent of eight-eighths (5% x 8/8)
overriding royalty interest in favor of Aviara Energy Corporation.
OCS-G 14439(South Marsh Island Block 80)-Two percent of eight-eighths (2% x 8/8)
overriding royalty interest in favor of Lee B. Backsen, et al.

<PAGE>

SECTION V:  ADDRESSES OF THE PARTIES

BP Exploration & Production Company              E. P. Zseleczky
501 WestLake Park Boulevard                      Tel:  (281) 366-0939
Houston, Texas 77079                             Fax:  (281) 366-7569

EEX Corporation                                  Ben Davis
2500 CityWest Blvd, Suite 1400                   Tel: (713) 243-3247
Houston, Texas 77042                             Fax: (713) 243-3422EXHIBIT 4.2

 

 

 

 

 

 

 

 

 

 

FINISAR CORPORATION

 

AND

 

AMERICAN STOCK TRANSFER & TRUST
COMPANY

 

Rights Agent

 

 

 

 

RIGHTS AGREEMENT

 

Dated as of
September 25, 2002

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Certain Definitions

  	
  1

  
	
  2.

  	
  Appointment of Rights
  Agent

  	
  6

  
	
  3.

  	
  Issuance of Right
  Certificates

  	
  6

  
	
  4.

  	
  Form of Right Certificates

  	
  8

  
	
  5.

  	
  Countersignature and
  Registration

  	
  9

  
	
  6.

  	
  Transfer,
  Split Up, Combination and Exchange of Right Certificates; Mutilated,

  Destroyed, Lost or Stolen Right Certificates

  	
  9

  
	
  7.

  	
  Exercise
  of Rights; Purchase Price; Expiration Date of Rights

  	
  10

  
	
  8.

  	
  Cancellation
  and Destruction of Right Certificates

  	
  11

  
	
  9.

  	
  Reservation
  and Availability of Shares of Preferred Stock

  	
  11

  
	
  10.

  	
  Preferred Stock Record
  Date

  	
  13

  
	
  11.

  	
  Adjustments
  to Number and Kind of Shares, Number of Rights or Purchase Price

  	
  13

  
	
  12.

  	
  Certification of
  Adjustments

  	
  21

  
	
  13.

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

  	
  22

  
	
  14.

  	
  Fractional
  Rights and Fractional Shares

  	
  25

  
	
  15.

  	
  Rights of Action

  	
  26

  
	
  16.

  	
  Agreement of Right Holders

  	
  26

  
	
  17.

  	
  Right
  Certificate Holder Not Deemed a Stockholder

  	
  27

  
	
  18.

  	
  Concerning the Rights
  Agent

  	
  27

  
	
  19.

  	
  Merger
  or Consolidation or Changed Name of Rights Agent

  	
  28

  
	
  20.

  	
  Duties of Rights Agent

  	
  28

  
	
  21.

  	
  Change of Rights Agent

  	
  30

  
	
  22.

  	
  Issuance of New
  Right Certificates

  	
  31

  
	
  23.

  	
  Redemption

  	
  32

  
	
  24.

  	
  Exchange of Rights
  for Common Stock

  	
  32

  

 

 

 

 

 

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  25.

  	
  Notice of Proposed Actions

  	
  34

  
	
  26.

  	
  Notices

  	
  34

  
	
  27.

  	
  Supplements and Amendments

  	
  35

  
	
  28.

  	
  Successors

  	
  36

  
	
  29.

  	
  Benefits of this
  Rights Agreement

  	
  36

  
	
  30.

  	
  Governing Law

  	
  36

  
	
  31.

  	
  Counterparts

  	
  36

  
	
  32.

  	
  Descriptive Headings

  	
  36

  
	
  33.

  	
  Severability

  	
  36

  

 

 

 

 

 

 

ii

 

RIGHTS AGREEMENT

This Rights Agreement (“Rights Agreement”), is
dated as of September 25, 2002, between Finisar Corporation, a
Delaware corporation (the “Company”), and American Stock
Transfer & Trust Company (the “Rights Agent”).

W  I  T  N  E  S  S
E  T  H:

WHEREAS, the Board of Directors of the Company on September 25, 2002
(i) authorized the issuance and declared a dividend of one right (“Right”)
for each share of the common stock, par value $0.001 per share, of the Company
outstanding as of the Close of Business (as such term is hereinafter defined)
on October 16, 2002 (the “Record Date”), each Right representing the
right to purchase one one-thousandth of a share of Series RP Preferred Stock of the Company having the rights,
powers and preferences set forth in the form of Certificate of Designation
attached hereto as Exhibit A upon the terms and subject to the
conditions hereinafter set forth, and (ii) further authorized the issuance
of one Right with respect to each share of Common Stock of the Company that shall
become outstanding between the Record
Date, and the Distribution Date (as such term is hereinafter defined);

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

1.             Certain Definitions.  For purposes of this Rights Agreement the
following terms shall 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
outstanding Common Stock of the Company, without the prior approval of the
Board of Directors; provided, however, that in no event shall a
Person who or which, together with all Affiliates and Associates of such
Person, is the Beneficial Owner of less than 20% of the Company’s outstanding
Common Stock, become an Acquiring Person solely as a result of a reduction of
the number of shares of outstanding Common Stock, including repurchases of
outstanding shares of Common Stock by the Company, which reduction increases
the percentage of outstanding shares of Common Stock beneficially owned by such
Person; provided, further, that if a Person shall become the
Beneficial Owner of 20% or more of the Company’s Common Stock then outstanding
solely by reason of a reduction of the number of shares of outstanding Common
Stock, and shall thereafter become the Beneficial Owner of any additional
shares of Common Stock of the Company, then such Person shall be deemed to be
an Acquiring Person unless upon the consummation of the acquisition of such
additional shares of Common Stock such person does not own 20% or more of the
shares of Common Stock then outstanding. 
An Acquiring Person shall not include an Exempt Person (as such term is
hereinafter defined) or a Grandfathered
Person (as such term is hereinafter defined); provided, however,
that (i) a Grandfathered Person shall become an Acquiring Person if,
without the prior approval of the Board of Directors, the Grandfathered Person
becomes the Beneficial Owner of 30% or more of the Company’s outstanding Common
Stock; but (ii) a Grandfathered

 

 

1

 

Person shall not become an
Acquiring Person solely by reason of a reduction of the number of shares of
outstanding Common Stock.  Notwithstanding the foregoing, if
(i) either (x) the Board of Directors of the Company determines in
good faith that a Person who would otherwise be an Acquiring Person, as defined
pursuant to the foregoing provisions of this paragraph (a), has become
such inadvertently (including, without limitation, because (A) such Person
was unaware that it beneficially owned a percentage of Common Stock that would
otherwise cause such Person to be an “Acquiring Person” or (B) such Person
was aware of the extent of its Beneficial Ownership but had no actual knowledge
of the consequences of such Beneficial Ownership under this Rights Agreement)
and without any intention of changing or influencing control of the Company, or
(y) within two Business Days of being requested by the Company to advise
the Company regarding same, such Person certifies in writing that such Person
acquired Beneficial Ownership of 20% or more of the Company’s outstanding
Common Stock inadvertently or without knowledge of the terms of the Rights, and
(ii) such Person divests as promptly as practicable a sufficient number of
shares of Common Stock so that such Person would no longer be an Acquiring
Person, as defined pursuant to the foregoing provisions of this
paragraph (a), then such Person shall not be deemed to be or to have
become an Acquiring Person for any purposes of this Rights Agreement.

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

(c)           A Person shall be deemed the “Beneficial
Owner” of any securities

(i)            which
such Person or any of such Person’s Affiliates or Associates beneficially owns,
directly or indirectly;

(ii)           which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities), whether or not in writing, or upon the exercise
of conversion rights, exchange rights, rights (other than the Rights), warrants
or options, or otherwise; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to “beneficially own,” securities
tendered pursuant to a tender or exchange offer made by such Person or any of
such Person’s Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote or dispose of
or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of
the General Rules and Regulations under the Exchange Act, or any comparable or
successor rule), including pursuant to any agreement, arrangement or understanding
(whether or not in writing); provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to “beneficially own”, any
securities 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, and in accordance with,
the applicable rules and regulations 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

 

 

 

2

 

(iii)          which
are beneficially owned, directly or indirectly, by any other Person with which
such Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting except as described in the proviso to
clause (B) of subparagraph (ii) of this Section 1(c) or
disposing of any securities of the Company; provided, however,
that no Person who is an officer, director or employee of an Exempt Person
shall be deemed, solely by reason of such Person’s status or authority as such,
to be the Beneficial Owner of, to have “beneficial ownership” of or to
“beneficially own” any securities that are “beneficially owned” (as defined in
this Section 1(c)), including, without limitation, in a fiduciary
capacity, by an Exempt Person or by any other such officer, director or
employee of an Exempt Person.

For all purposes of this Rights Agreement, any
calculation of the number of shares of Common Stock outstanding at any
particular time, including any calculation for purposes of determining the
particular percentage of such outstanding shares of Common Stock of which any
Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under
the Exchange Act, as in effect on the date hereof.

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

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

(f)            “Common
Stock” when used with reference to the Company shall mean the common stock,
par value $0.001 per share, of the Company. 
“Common Stock” when used with reference to any Person other than
the Company which shall be organized in corporate form shall mean the capital
stock or other equity security with the greatest per share voting power of such
Person or, if such Person is a Subsidiary of or is controlled by another
Person, the Person which ultimately controls such first-mentioned Person.  “Common Stock” when used with
reference to any Person other than the Company which shall not be organized in
corporate form shall mean units of beneficial interest which shall represent
the right to participate in profits, losses, deductions and credits of such
Person and which shall be entitled to exercise the greatest voting power per
unit of such Person.

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

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

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

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

 

 

 

3

 

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

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

(m)          “Exempt
Person” shall mean the Company or any Subsidiary of the Company, including,
without limitation, in its fiduciary capacity, any employee benefit plan or
employee or director stock plan of the Company or of any Subsidiary of the
Company, or any Person, organized, appointed, established or holding Common
Stock for or pursuant to the terms of any such plan or any Person funding other
employee benefits for employees of the Company or any Subsidiary of the
Company.

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

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

(p)           “Flip-In
Event” shall mean any event described in Section 11(a)(ii)(A),
11(a)(ii)(B) or 11(a)(ii)(C) hereof.

(q)           “Flip-In
Exercise Payment” shall have the meaning set forth in
Section 11(a)(ii) hereof.

(r)            “Flip-In
Trigger Date” shall have the meaning set forth in Section 11(a)(iii)
hereof.

(s)           “Flip-Over
Event” shall mean any event described in clause (x), (y) or (z) of
Section 13(a) hereof.

(t)            “Flip-Over
Exercise Payment” shall have the meaning set forth in Section 13(a)
hereof.

(u)           “Grandfathered
Person” shall mean each of the Persons listed in Schedule A-1
hereto together with (i) any other Persons wholly-owned by one or more of the
Persons listed on Schedule A-1 and (ii) any trusts the beneficiaries of which
are comprised solely of one or more of the Persons listed on Schedule A-1
and/or one or more of the Persons referred to in subclause (i); provided that any such Person shall cease
to be a Grandfathered Person at such time as both (A) such Person, together
with and all other Grandfathered Persons, ceases to beneficially own, in the
aggregate, in excess of 20% of the Company’s outstanding Common Stock, and (B)
the number of shares of Company Common Stock which have been the subject of
dispositions (other than to other Grandfathered Persons) by Grandfathered
Persons between the date of this Agreement and the first occurrence of an event
resulting in the applicability of subclause (A) represent, in the aggregate, at
least 40% of the total number of shares of Company Common Stock of which all
Grandfathered Persons, in the aggregate, have Beneficial Ownership as of the
date of this Agreement, as set forth on Schedule A-1.

 

 

 

4

 

(v)           “NASDAQ”
shall mean the National Association of Securities Dealers, Inc. Automated
Quotations Systems.

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

(x)            “Preferred
Stock” shall mean the Series RP
Preferred Stock, par value $0.001 per share, of the Company having the rights,
powers and preferences set forth in Exhibit A hereto, and, to the
extent that there is not a sufficient number of shares of Series RP Preferred Stock authorized to
permit the full exercise of the Rights, any other series of Preferred Stock,
par value $0.001 per share, of the Company designated for such purpose
containing terms substantially similar to the terms of the Series RP Preferred Stock.

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

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

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

(bb)         “Record
Date” shall have the meaning set forth in the Recitals within this Rights
Agreement.

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

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

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

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

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

(hh)         “Stock
Acquisition Date” shall mean the first date of public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such or such
earlier date as a majority of the directors shall become aware of the existence
of an Acquiring Person.

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

(jj)           “Subsidiary”
of a Person shall mean any corporation or other entity of which securities or
other ownership interests having ordinary voting power sufficient to elect a
majority of the board of directors or other persons performing similar
functions are beneficially owned, directly or indirectly, by such Person and
any corporation or other entity that is otherwise controlled by such Person.

 

 

 

5

 

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

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

(mm)       “Triggering
Event” shall mean any event described in Section 11(a)(ii)(A),
11(a)(ii)(B) or 11(a)(ii)(C) or Section 13 hereof.

(nn)         “Voting
Power” shall mean the voting power of all securities of the Company then
outstanding and generally entitled to vote for the election of directors of the
Company.

Any determination required by the definitions
contained in this Section 1 shall be made by the Board of Directors of the
Company in its good faith judgment, which determination shall be binding on the
Rights Agent and the holders of the Rights.

2.             Appointment of Rights Agent.  The Company hereby appoints the Rights Agent
to act as agent for the Company in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint
such Co-Rights Agents as it may deem necessary or desirable.  In the event the Company appoints one or
more Co-Rights Agents, the respective duties of the Rights Agents and any
Co-Rights Agents shall be as the Company shall determine.

3.             Issuance of
Right Certificates.

(a)           Until
the earlier of (i) the Stock Acquisition Date (or, if the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date) or (ii) the tenth Business Day (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) after the date of the commencement by any Person
(other than an Exempt Person or a Person who, on the applicable date, is a
Grandfathered Person) of, or of the first public announcement of the intent of
any Person (other than an Exempt Person or a Person who, on the applicable
date, is a Grandfathered Person) to commence (which intention to commence
remains in effect for five business days after such announcement), a tender or
exchange offer upon the successful consummation of which such Person, together
with its Affiliates and Associates, would be the Beneficial Owner of 20% or
more of the outstanding Common Stock (irrespective of whether any shares are
actually purchased pursuant to any such offer) (including any such date which
is after the date of this Rights Agreement and prior to the issuance of the
Rights; the earlier of such dates being herein referred to as the “Distribution
Date”), (x) the Rights will be evidenced (subject to the provisions
of Section 3(c) hereof) by the certificates for the Common Stock
registered in the names of the holders of the Common Stock and not by separate
Right Certificates, and (y) each Right will be transferable only in
connection with the transfer of a share (subject to adjustment as hereinafter
provided) of Common Stock.  As soon as
practicable after the Distribution Date, the Rights Agent will mail, by
first-class, postage prepaid mail, to each record holder of the Common Stock

 

 

 

6

 

as of
the Close of Business on the Distribution Date, as shown by the records of the
Company, to the address of such holder shown on such records, a Right
certificate in substantially the form of Exhibit B hereto (a “Right
Certificate”) evidencing one Right for each share of Common Stock so
held.  As of and after the Distribution
Date, the Rights will be evidenced solely by such Right Certificates.

 

(b)           On
the Record Date, or as soon as practicable thereafter, the Company will send a
copy of a Summary of Rights to Purchase Preferred Stock, substantially in the
form attached hereto as Exhibit C (a “Summary of Rights”),
by first-class, postage prepaid mail, to each record holder of Common Stock as
of the Close of Business on the Record Date, at the address of such holder
shown on the records of the Company.

(c)           Rights
shall be issued in respect of all shares of Common Stock that are issued
(either as an original issuance or from the Company’s treasury) after the
Record Date prior to the earlier of the Distribution Date or the Expiration
Date.  With respect to certificates
representing such shares of Common Stock, the Rights will be evidenced by such
certificates for Common Stock registered in the names of the holders thereof
together with the Summary of Rights. 
Until the Distribution Date (or, if earlier, the Expiration Date), the
surrender for transfer of any certificate for Common Stock outstanding on the
Record Date (with or without a copy of the Summary of Rights attached thereto),
shall also constitute the surrender for transfer of the Rights associated with
the Common Stock represented thereby.

(d)           Certificates
issued for Common Stock (including, without limitation, certificates issued upon
transfer or exchange of Common Stock) after the Record Date but prior to the
earlier of the Distribution Date or the Expiration Date shall have impressed
on, printed on, written on or otherwise affixed to them the following legend:

This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in the Rights Agreement between
Finisar Corporation and American Stock
Transfer & Trust Company, as Rights Agent, dated as of
September 25, 2002, as the same may be amended from time to time (the
“Rights Agreement”), the terms of which are incorporated herein by reference
and a copy of which is on file at the principal executive office of Finisar Corporation.  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.  Finisar Corporation will mail to the holder of this certificate a
copy of the Rights Agreement without charge after receipt by it of a written
request therefor.  Under certain circumstances as provided in the Rights
Agreement, Rights issued to, beneficially owned by or transferred to any person
who is or becomes an Acquiring Person (as defined in the Rights Agreement) or
an Associate or Affiliate (as defined in the Rights Agreement) thereof and
certain transferees thereof will be null and void and will no longer be
transferable.

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

 

 

 

7

 

thereby.  In the event that the Company purchases or
acquires any shares of Common Stock after the Record Date but prior to the
earlier of the Distribution Date, the Redemption Date or the Expiration Date,
any Rights associated with such shares of Common Stock 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 no longer outstanding.

 

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

4.             Form of Right
Certificates.

(a)           The
Right Certificates (and the forms of election to purchase shares and of
assignment to be printed on the reverse thereof), when, as and if issued, shall
be substantially in the form set forth in Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Rights Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Rights may from time to time be listed, or to conform to usage.  Subject to the provisions of Sections 11,
13 and 22 hereof, the Right Certificates evidencing the Rights issued on the
Record Date whenever such certificates are issued, shall be dated as of the
Record Date and the Right Certificates evidencing Rights to holders of record
of Common Stock issued after the Record Date shall be dated as of the Record
Date but shall also be dated to reflect the date of issuance of such Right
Certificate.  On their face, Right
Certificates shall entitle the holders thereof to purchase, for each Right, one one-thousandth of a share of
Preferred Stock, or other securities or property as provided herein, as the
same may from time to time be adjusted as provided herein, at the price per one one-thousandth of a share of
Preferred Stock of $14.00, as the same may from time to time be adjusted as
provided herein (the “Purchase Price”).

(b)           Notwithstanding
any other provision of this Rights Agreement, any Right Certificate that
represents Rights that are or were at any time on or after the earlier of the
Stock Acquisition Date or the Distribution Date beneficially owned by an
Acquiring Person or any Affiliate or Associate thereof (or any transferee of
such Rights) shall have impressed on, printed on, written on or otherwise
affixed to it (if the Company or the Rights Agent has knowledge that such
Person is an Acquiring Person or an Associate or Affiliate thereof or
transferee of such Persons or a nominee of any of the foregoing) the following
legend:

The beneficial owner of the Rights represented by this
Right Certificate is an Acquiring Person or an Affiliate or Associate (as
defined in the Rights Agreement) of an Acquiring Person or a subsequent holder
of such Right Certificates beneficially owned by such Persons.  Accordingly, this Right Certificate and the
Rights represented hereby are null and void and will no longer be transferable
as provided in the Rights Agreement.

The provisions of Section 11(a)(ii) and
Section 24 of this Rights Agreement shall be operative whether or not the
foregoing legend is contained on any such Right Certificates.

 

 

 

8

 

5.             Countersignature
and Registration.

(a)           The
Right Certificates shall be executed on behalf of the Company by its Chief
Executive Officer, its President or any Vice President, either manually or by
facsimile signature, and have affixed thereto the Company’s seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature.  The Right Certificates shall be
countersigned, either manually or by facsimile, by the Rights Agent and shall
not be valid for any purpose unless so countersigned.  In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights
Agent, issued and delivered with the same force and effect as though the person
who signed such Right Certificates had not ceased to be such officer of the
Company; and any Right Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Right Certificate,
shall be a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this 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 for such purposes, records for registration and
transfer of the Right Certificates issued hereunder.  Such records 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, the date of each of the Right Certificates
and the certificate numbers for each of the Right Certificates.

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

(a)           Subject
to the provisions of Sections 7(e), 11(a)(ii) and 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
(other than Right Certificates representing Rights that have become void
pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant
to Section 24 hereof) may be (i) transferred or (ii) split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of shares of
Preferred Stock or other securities as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase.  Any registered holder desiring to transfer
any Right Certificate shall surrender the Right Certificate at the office of
the Rights Agent designated for such purposes with the form of assignment on
the reverse side thereof duly endorsed (or enclose with such Right Certificate
a written instrument of transfer in form satisfactory to the Company and the
Rights Agent), duly executed by the registered holder thereof or his attorney
duly authorized in writing, and with such signature guaranteed by a member of a
securities approved medallion program. 
Any registered holder desiring to 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 Right Certificates to be
split up, combined or exchanged at the principal office of the Rights
Agent.  Thereupon the Rights Agent
shall, subject to Sections 4(b), 7(e), 11 and 14 hereof, countersign (by
manual or facsimile signature) and deliver to the person entitled thereto a Right
Certificate or Right Certificates, as

 

 

 

9

 

the
case may be, as so requested.  The
Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.

 

(b)           Subject
to the provisions of Section 11(a)(ii) hereof, 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 reasonably satisfactory to them,
and, if requested by the Company, reimbursement to the Company 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 delivery to the registered owner in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.

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

(a)           Subject
to Section 11(a)(ii) hereof, the Rights shall become exercisable, and may
be exercised to purchase Preferred Stock, except as otherwise provided herein,
in whole or in part at any time after the Distribution Date upon surrender of
the Right Certificate, with the form of election to purchase on the reverse
side thereof duly executed (with such signature duly guaranteed), to the Rights
Agent at 59 Maiden Lane, New York, NY  10038, together with payment
of the Purchase Price with respect to each Right exercised, subject to
adjustment as hereinafter provided, at or prior to the Close of Business on the
earliest of (i) September 24, 2012 (the “Final Expiration Date”),
(ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (such date being herein referred to as the “Redemption
Date”) or (iii) the time at which all such Rights are exchanged as
provided in Section 24 hereof (the earliest of (i), (ii) and (iii) being
herein referred to as the “Expiration Date”).

(b)           The
Purchase Price and the number of shares of Preferred Stock or other securities
or consideration to be acquired upon exercise of a Right shall be subject to
adjustment from time to time as provided in Sections 11 and 13
hereof.  The Purchase Price shall be
payable in lawful money of the United States of America, in accordance with
Section 7(c) hereof.

(c)           Except
as provided in Section 11(a)(ii) hereof, upon receipt of a Right
Certificate with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price (as such amount may be reduced pursuant to
Section 11(a)(iii) hereof) or so much thereof as is necessary for the
shares to be purchased and an amount equal to any applicable transfer tax, by
cash, certified check or official bank check payable to the order of the
Company or the Rights Agent, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) requisition from any
transfer agent of the Preferred Stock (or make available if the Rights Agent is
the transfer agent) certificates for the number of shares of Preferred Stock so
elected to be purchased and the Company will comply and hereby authorizes and
directs such transfer agent to comply with all such requests,
(ii) requisition from the Company the amount of cash to be paid in lieu of
issuance of fractional shares in accordance with Section 14(b) hereof, and
(iii) promptly after receipt of such Preferred Stock certificates cause
the same to be delivered to or upon the order of the

 

 

 

10

 

registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder, and, when appropriate, after receipt of the cash
requisitioned from the Company promptly deliver such cash to or upon the order
of the registered holder of such Right Certificate.  In the event of a purchase of securities, other than Preferred
Stock, pursuant to Section 11(a) or Section 13 hereof, the Rights Agent
shall promptly take the appropriate actions corresponding to the foregoing
clauses (i) through (iii).  In the
event that the Company is obligated to issue other securities of the Company,
pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate.

 

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

(e)           Notwithstanding
anything in this Rights Agreement to the contrary, neither the Rights Agent nor
the Company shall be obligated to undertake any action with respect to a
registered holder upon the occurrence of any purported exercise as set forth in
this Section 7 unless such registered holder shall have (i) completed
and signed the certificate contained in the form of election to purchase set forth
on the reverse side of the 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.

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 to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement.  The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any 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, or shall, at the
written request of the Company, destroy such canceled Right Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.

9.             Reservation
and Availability of Shares of Preferred Stock.

(a)           The
Company covenants and agrees that at all times it will cause to be reserved and
kept available, out of and to the extent of its authorized and unissued shares
of Preferred Stock not reserved for another purpose (and, following the
occurrence of a Triggering Event, other securities) or held in its treasury,
the number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, other securities) that, as provided in this Rights Agreement,
including Section 11(a)(iii) hereof, will be sufficient to permit the
exercise in full of all outstanding Rights; provided, however,
that the Company shall be required to reserve and keep available shares of
Preferred Stock or other securities sufficient to permit the exercise in full
of all outstanding Rights pursuant to the adjustments set forth in
Section 11(a)(ii),

 

 

 

11

 

Section 11(a)(iii)
or Section 13 hereof only if, and to the extent that, the Rights become
exercisable pursuant to such adjustments.

 

(b)           The
Company shall (i) use its best efforts to cause, from and after such time
as the Rights become exercisable, the Rights and all shares of Preferred Stock
(and following the occurrence of a Triggering Event, other securities) issued
or reserved for issuance upon exercise thereof to be reported by NASDAQ or such other system then in
use, and if the Preferred Stock shall become listed on any national securities
exchange, to cause, from and after such time as the Rights become exercisable,
the Rights and all shares of Preferred Stock (and, following the occurrence of
a Triggering Event, other securities) issued or reserved for issuance upon
exercise thereof to be listed on such exchange upon official notice of issuance
upon such exercise and (ii) if then necessary, to permit the offer and
issuance of such shares of Preferred Stock (and, following the occurrence of a
Triggering Event, other securities), register and qualify such shares of
Preferred Stock (and, following the occurrence of a Triggering Event, other
securities) under the Securities Act and any applicable state securities or
“blue sky” laws (to the extent exemptions therefrom are not available), cause
such registration statement and qualifications to become effective as soon as
possible after such filing and keep such registration and qualifications
effective until the Expiration Date of the Rights.  The Company may temporarily suspend, for a period of time not to
exceed 90 days, the exercisability of the Rights in order to prepare and file a
registration statement under the Securities Act and permit it to become
effective.  Upon any such suspension,
the Company shall issue a public announcement stating that the exercisability
of the Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect.  Notwithstanding any provision of this Rights
Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction
unless the requisite qualification in such jurisdiction shall have been
obtained and until a registration statement under the Securities Act (if
required) shall have been declared effective.

(c)           The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all shares of Preferred Stock (and following the
occurrence of a Triggering Event, other securities) delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price in respect thereof), be duly and
validly authorized and issued and fully paid and nonassessable shares in
accordance with applicable law.

(d)           The
Company further covenants and agrees that it will pay when due and payable any
and all federal and state transfer taxes which may be payable in respect of the
issuance or delivery of the Right Certificates or of any shares of Preferred
Stock (or other securities, as the case may be) upon the exercise of
Rights.  The Company shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates for Preferred Stock (or other securities,
as the case may be) upon exercise of Rights in a name other than that of, the
registered holder of the Right Certificate, and the Company shall not be
required to issue or deliver a Right Certificate or certificate for Preferred
Stock (or other securities, as the case may be) to a person other than such
registered holder until any 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.

 

 

12

 

10.           Preferred Stock Record Date.  Each Person in whose name any certificate
for shares of Preferred Stock (or other securities, as the case may be) is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the shares of Preferred Stock (or other
securities, as the case may be) 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 Purchase Price (and any
applicable transfer taxes) was made. 
Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company with respect to the 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,
if any, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.

11.           Adjustments to Number and Kind of
Shares, Number of Rights or Purchase Price.  The number and kind of shares subject to purchase upon the
exercise of each Right, the number of Rights outstanding and the Purchase Price
are subject to adjustment from time to time as follows:

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

(ii)           Subject to Section 24, in the
event

(A)          any
Acquiring Person or any Associate or Affiliate of any Acquiring Person, at any
time after the date of this Rights Agreement, directly or indirectly,
(1) shall consolidate with or merge with and into the Company or any of
its Subsidiaries or otherwise combine with the Company or any of its
Subsidiaries and the Company or such Subsidiary shall be the continuing or
surviving corporation of such consolidation, merger or combination and the Common
Stock of the Company shall remain outstanding and no shares thereof shall be
changed into or exchanged for stock or other securities of the Company or of
any

 

 

 

13

 

other
Person or cash or any other property, or (2) shall, in one or more
transactions, other than in connection with the exercise of a Right or Rights
and other than in connection with the exercise or conversion of securities
exercisable for or convertible into securities of the Company or of any
Subsidiary of the Company, transfer any assets or property to the Company or
any of its Subsidiaries in exchange (in whole or in part) for any shares of any
class of capital stock of the Company or any of its Subsidiaries or any
securities exercisable for or convertible into shares of any class of capital
stock of the Company or any of its Subsidiaries, or otherwise obtain from the
Company or any of its Subsidiaries, with or without consideration, any
additional shares of any class of capital stock of the Company or any of its
Subsidiaries or any securities exercisable for or convertible into shares of
any class of capital stock of the Company or any of its Subsidiaries (other
than as part of a pro rata offer or distribution by the Company or such
Subsidiary to all holders of such shares), or (3) shall sell, purchase,
lease, exchange, mortgage, pledge, transfer or otherwise acquire (other than as
a pro rata dividend) or dispose of, to, from or with, as the case may be (in
one transaction or a series of transactions), the Company or any of its
Subsidiaries, any assets (including securities) on terms and conditions less
favorable to the Company or such Subsidiary than the Company or such Subsidiary
would be able to obtain in arm’s-length negotiation with an unaffiliated third
party, or (4) shall receive any compensation from the Company or any of
its Subsidiaries for services other than compensation for employment as a
regular or part-time employee, or fees for serving as a director, at rates in
accordance with the Company’s (or its Subsidiary’s) past practices, or
(5) shall receive the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees, pledges
or other financial assistance or any tax credits or tax advantage provided by
the Company or any of its Subsidiaries, or (6) shall engage in any
transaction with the Company (or any of its Subsidiaries) involving the sale,
license, transfer or grant of any right in, or disclosure of, any patents, copyrights,
trade secrets, trademarks, know-how or any other intellectual or industrial
property rights recognized under any country’s intellectual property laws which
the Company (including its Subsidiaries) owns or has the right to use on terms
and conditions not approved by the Board; or

 

(B)           any
Person, alone or together with its Affiliates and Associates, shall become an
Acquiring Person; or

(C)           during
such time as there is an Acquiring Person, there shall be any reclassification
of securities (including any reverse stock split), or any recapitalization of
the Company, or any merger or consolidation of the Company with any of its
Subsidiaries or any other transaction or series of transactions involving the
Company or any of its Subsidiaries (whether or not with or into or otherwise
involving an Acquiring Person or any Affiliate or Associate of such Acquiring
Person) which has the effect, directly or indirectly, of increasing by more
than 1% the proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its Subsidiaries, or securities exercisable
for or convertible into equity securities of the Company or any of its
Subsidiaries, which is directly or indirectly beneficially owned by any
Acquiring Person or any Affiliate or Associate of any Acquiring Person (any of
(A), (B) or (C) being referred to herein as a “Flip-In Event”);

then upon the first occurrence of a Flip-In Event
(i) the Purchase Price shall be adjusted to be the Purchase Price in
effect immediately prior to the Flip-In Event multiplied by the number of  one one-thousandth of a share of
Preferred Stock for which a Right was exercisable immediately

 

 

 

14

 

prior
to such Flip-In Event, whether or not such Right was then exercisable, and
(ii) each holder of a Right, except as otherwise provided in this
Section 11(a)(ii) and Section 11(a)(iii) hereof, shall thereafter
have the right to receive, upon exercise thereof at a price equal to the
Purchase Price (as so adjusted), in accordance with the terms of this Rights
Agreement and in lieu of shares of Preferred Stock, such number of shares of
Common Stock as shall equal the result obtained by dividing the Purchase Price
(as so adjusted) by 50% of the Current Market Price per share of the Common
Stock (determined pursuant to Section 11(d) hereof) on the date of such
Flip-In Event; provided, however, that the Purchase Price (as so
adjusted) and the number of shares of Common Stock so receivable upon the
exercise of a Right shall, following the Flip-In Event, be subject to further
adjustment as appropriate in accordance with Section 11(f) hereof.  Notwithstanding anything in this Rights
Agreement to the contrary, however, from and after the Flip-In Event, any
Rights that are beneficially owned by (x) any Acquiring Person (or any
Affiliate or Associate of any Acquiring Person), (y) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who becomes a transferee
after the Flip-In Event or (z) a transferee of any Acquiring Person (or
any such Affiliate or Associate) who became a transferee prior to or
concurrently with the Flip-In Event pursuant to either (I) a transfer from
the Acquiring Person to holders of its equity securities or to any Person with
whom it has any continuing agreement, arrangement or understanding, whether
written or otherwise, regarding the transferred Rights or (II) a transfer
which the Board of Directors has determined is part of a plan, arrangement or
understanding, whether written or otherwise, which has the purpose or effect of
avoiding the provisions of this paragraph, and subsequent transferees of such
Persons, shall be void without any further action and any holder of such Rights
shall thereafter have no rights whatsoever with respect to such Rights under
any provision of this Rights Agreement. 
The Company shall use all reasonable efforts to ensure that the
provisions of this Section 11(a)(ii) are complied with, but shall have no
liability to any holder of Right Certificates or other Person as a result of
its failure to make any determinations with respect to an Acquiring Person or
its Affiliates, Associates or transferees hereunder.  From and after the Flip-In Event, no Right Certificate shall be
issued pursuant to Section 3 or Section 6 hereof that represents
Rights that are or have become void pursuant to the provisions of this
paragraph, and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the provisions of this
paragraph shall be canceled.

 

(iii)          The
Company may at its option substitute for a share of Common Stock issuable upon
the exercise of Rights in accordance with the foregoing subparagraph (ii)
such number or fractions of shares of Preferred Stock having an aggregate
current market value equal to the Current Market Price of a share of Common
Stock.  In the event that there shall
not be sufficient shares of Common Stock issued but not outstanding or
authorized but unissued to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii), the Board of Directors
shall, to the extent permitted by applicable law and any material agreements
then in effect to which the Company is a party (A) determine the excess
(such excess, the “Spread”) of (1) the value of the shares of
Common Stock issuable upon the exercise of a Right in accordance with the
foregoing subparagraph (ii) (the “Current Value”) over (2) the
Purchase Price (as adjusted in accordance with the foregoing
subparagraph (ii)), and (B) with respect to each Right (other than
Rights which have become void pursuant to the foregoing
subparagraph (ii)), make adequate provision to substitute for the shares
of Common Stock issuable in accordance with the foregoing paragraph (ii)
upon exercise of the Right and payment of the Purchase Price (as adjusted in
accordance therewith), (1) cash, (2) a reduction in such

 

 

 

15

 

Purchase
Price, (3) shares of Preferred Stock or other equity securities of the
Company, including, without limitation, shares or fractions of shares of
preferred stock which, by virtue of having dividend, voting and liquidation
rights substantially comparable to those of the shares of Common Stock, are
deemed in good faith by the Board of Directors to have substantially the same
value as the shares of Common Stock (such shares of Preferred Stock and shares
or fractions of shares of preferred stock being hereinafter referred to as “Common
Stock Equivalents”), (4) debt securities of the Company,
(5) other assets, or (6) any combination of the foregoing, having a
value which, when added to the value of the shares of Common Stock actually
issued upon exercise of such Right, shall have an aggregate value equal to the
Current Value (less the amount of any reduction in such Purchase Price), where
such aggregate value has been determined by the Board of Directors upon the
advice of a nationally recognized investment banking firm selected in good
faith by the Board of Directors; provided, however, that if the
Company shall not make adequate provision to deliver value pursuant to
clause (B) above within 30 days following the date of the Flip-In Event
(the “Flip-in Trigger Date”), then the Company shall be obligated to
deliver, to the extent permitted by applicable law and any material agreements
then in effect to which the Company is a party, upon the surrender for exercise
of a Right and without requiring payment of such Purchase Price, shares of
Common Stock (to the extent available), and then, if necessary, such number or
fractions of shares of Preferred Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to the
Spread.  If the Board of Directors of
the Company shall determine in good faith that it is likely that sufficient
additional shares of Common Stock and/or Common Stock Equivalents 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 90
days after the Flip-In Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares of Common
Stock or Common Stock Equivalents (such 30-day period, as it may be extended,
being hereinafter referred to as the “Substitution Period”).  To the extent that the Company determines
that some action need be taken pursuant to the second and/or third sentence of
this Section 11(a)(iii), the Company (x) shall provide, subject to
the last sentence of this Section 11(a)(ii) 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 the first sentence of
Section 11(a)(iii) and to determine the value thereof.  In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii), the value of the
Common Stock shall be the Current Market Price per share of the Common Stock on
the Flip-In Trigger Date and the per share or per unit value of any Common
Stock Equivalent shall be deemed to equal the Current Market Price per share of
the Common Stock on such date.  The
Board of Directors may, but shall not be required to, establish procedures to
allocate the right to receive Common Stock upon the exercise of the Rights
among holders of Rights pursuant to this Section 11(a)(iii).

 

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

 

 

 

16

 

Stock
Equivalent at a price per share of Preferred Stock or Preferred Stock
Equivalent (or having a conversion price per share, if a security convertible
into Preferred Stock or Preferred Stock Equivalent) less than the Current
Market Price per share of Preferred Stock on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock and/or Preferred Stock Equivalent (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number
of additional shares of Preferred Stock and/or Preferred Stock Equivalent to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). 
In case such subscription price may be paid by delivery of consideration
part or all of which is in a form other than cash, the value of such non-cash
consideration shall be as determined in good faith by the Board of Directors,
whose determination shall be described in a statement filed with the Rights
Agent.  Shares of Preferred Stock owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. 
Such adjustment shall be made successively whenever such a record date
is fixed, and in the event that such rights or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be
in effect if such record date had not been fixed.

 

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

(d)           (i)            For the purpose of any computation
hereunder, other than computations made pursuant to Section 11(a)(iii)
hereof, the “Current Market Price” per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of the
Common Stock for the 30 consecutive Trading Days immediately prior to such
date, and for purpose of computations made pursuant to Section 11(a)(iii)
hereof, the “Current Market Price” per share of the Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
the Common Stock for the 10 consecutive Trading Days immediately following
such date; provided, however, that in the event that the Current
Market Price per share

 

 

 

17

 

of the
Common Stock is determined during a period following the announcement by the
issuer of the Common Stock of (i) any dividend or distribution on the
Common Stock (other than a regular quarterly cash dividend and other than the
Rights), (ii) any subdivision, combination or reclassification of the
Common Stock, and prior to the expiration of the requisite 30 Trading Day
or 10 Trading Day period, as set forth above, after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification occurs, then, and in each such case, the
Current Market Price shall be properly adjusted to take into account
ex-dividend trading.  The closing price
for each day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common Stock are
not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted sale price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use, or, if on any such date the shares of
Common Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board of Directors.  If the Common Stock is not publicly held or
not so listed or traded, “Current Market Price” per share shall mean the
fair value per share as determined in good faith by the Board of Directors,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.

 

(ii)           For
the purpose of any computation hereunder, the “Current Market Price” per share
(or one one-thousandth of a share) of Preferred Stock shall be determined in
the same manner as set forth above for the Common Stock in clause (i) of
this Section 11(d) (other than the last sentence thereof).  If the Current Market Price per share (or one one-thousandth of a share) of
Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner described
in clause (i) of this Section 11(d), the “Current Market Price”
per share of Preferred Stock shall be conclusively deemed to be an amount equal
to 1,000 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and recapitalizations
with respect to the Common Stock occurring after the date of this Rights
Agreement) multiplied by the Current Market Price per share of the Common
Stock, and the “Current Market Price” per one one-thousandth of a share of Preferred Stock shall be equal to
the Current Market Price per share of the Common Stock (as appropriately
adjusted).  If neither the Common Stock
nor the Preferred Stock is publicly held or so listed or traded, “Current
Market Price” shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.

(e)           Anything
herein to the contrary notwithstanding, no adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken

 

 

 

18

 

into
account in any subsequent adjustment. 
All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a share of Common Stock or other share
or one-hundred-thousandth of a share of Preferred Stock, as the case may
be.  Notwithstanding the first sentence
of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three years from the date
of the transaction which mandates such adjustment, or (ii) the Expiration
Date.

 

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

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

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

(i)            The
Company may elect on or after the date of any adjustment of the Purchase Price
or any adjustment to the number of shares of Preferred Stock for which a Right
may be exercised made pursuant to Sections 11(a)(i), 11(b) or 11(c), to
adjust the number of Rights in lieu of 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
shares 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 hundred-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price.  The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. 
This record date may be the date on which the Purchase Price is adjusted
or any day thereafter, but, if the Right Certificates have been issued, shall
be at least 10 days later than the date of the public announcement.  If Right Certificates have been

 

 

 

19

 

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 to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and may bear, at the option of
the Company, the adjusted Purchase Price) and shall be registered in the names
of the holders of record of Right Certificates on the record date specified in
the public announcement.

 

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

(k)           Before
taking any action that would cause an adjustment reducing the Purchase Price
below the then par value, if any, of the shares of Common Stock, Preferred
Stock or other capital stock issuable upon exercise of the Rights, the Company
shall take any corporate action, including using its best efforts to obtain any
required stockholder approvals, 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 Common Stock, Preferred Stock or other capital
stock at such adjusted Purchase Price. 
If upon any exercise of the Rights, a holder is to receive a combination
of Common Stock and Common Stock Equivalents, a portion of the consideration
paid upon such exercise, equal to at least the then par value of a share of
Common Stock of the Company, shall be allocated as the payment for each share
of Common Stock of the Company so received.

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

(m)          Anything
in this Section 11 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Purchase Price, in addition to those
adjustments expressly permitted or required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation
or subdivision of the Preferred Stock, (ii) issuance for cash of any
shares of

 

 

 

20

 

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

 

(n)           The
Company covenants and agrees that it shall not, at any time after the
Distribution Date, (i) consolidate with any other Person, (ii) merge
with or into any other Person, 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 more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person or Persons, if (x) at the time of or immediately after such
consolidation, merger or sale there are any charter or by-law provisions or any
rights, warrants or other instruments or securities outstanding or agreements
in effect which substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with
or immediately after such consolidation, merger or sale, the stockholders of
the Person who constitutes, or would constitute, the Principal Party for
purposes of Section 13(a) hereof shall have received a distribution of
Rights previously owned by such Person or any of its Affiliates and
Associates.  The Company shall not
consummate any such consolidation, merger or sale unless prior thereto the
Company and such other Person shall have executed and delivered to the Rights
Agent a supplemental agreement evidencing compliance with this subsection.

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

(p)           Anything
in this Rights Agreement to the contrary notwithstanding, in the event that the
Company shall at any time after the Record Date and prior to the Distribution
Date (i) declare or pay any dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock, or (iii) combine the outstanding shares of Common
Stock into a smaller number of shares, the number of Rights associated with
each share of Common Stock then outstanding, or issued or delivered thereafter,
shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event equals the
result obtained by multiplying the number of Rights associated with each share
of Common Stock immediately prior to such event by a fraction, the numerator or
which shall be the number of shares of Common Stock outstanding immediately
prior to the occurrence of such event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately following the
occurrence of such event.

12.           Certification of Adjustments.  Whenever an adjustment is made as provided
in Sections 11 and 13 hereof, the Company shall (a) promptly prepare
a certificate signed by its Chief Executive Officer, its President or any Vice
President and by the Treasurer or any Assistant Treasurer or the Secretary or
any Assistant Secretary of the Company setting forth such adjustment and a
brief statement of the facts giving rise to such adjustment, (b) promptly
file

 

 

 

21

 

with
the Rights Agent and with each transfer agent for the Preferred Stock and the
Common Stock 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) in
accordance with Section 26 hereof. 
Notwithstanding the foregoing sentence, the failure of the Company to
give such notice shall not affect the validity of or the force or effect of or
the requirement for such adjustment. 
The Rights Agent shall be fully protected in relying on any certificate
prepared by the Company pursuant to Sections 11 and 13 and on any
adjustment therein contained and shall not be deemed to have knowledge of any
such adjustment unless and until it shall have received such certificate.  Any adjustment to be made pursuant to Sections 11
and 13 of this Rights Agreement shall be effective as of the date of the event
giving rise to such adjustment.

 

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

(a)           In
the event that following the first occurrence of a Flip-In Event, directly or
indirectly, (x) the Company shall consolidate with, or merge with and
into, any other Person or Persons and the Company, as the case may be, shall
not be the surviving or continuing corporation of such consolidation or merger,
or (y) any Person or Persons shall consolidate with, or merge with and
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or of the Company or cash or any other property other than, in the case
of the transactions described in subparagraphs (x) or (y), a merger or
consolidation which would result in all of the Voting Power represented by the
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
securities of the surviving entity) all of the Voting Power represented by the
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation and the holders of such securities not
having changed as a result of such transactions), or (z) the Company or
one or more of its Subsidiaries shall sell, mortgage or otherwise transfer to
any other Person or any Affiliate or Associate of such Person, in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole), then, on the first occurrence of any such
event (a “Flip-Over Event”), proper provision shall be made so that
(i) each holder of a Right (other than Rights which have become void
pursuant to Section 11(a)(ii) hereof) shall thereafter have the right to
receive, upon the exercise thereof at the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof), in accordance with
the terms of this Rights Agreement and in lieu of shares of Preferred Stock or
Common Stock of the Company, such number of validly authorized and issued,
fully paid, non-assessable and freely tradeable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall equal
the result obtained by dividing the Purchase Price (as theretofore adjusted in
accordance with Section 11(a)(ii) hereof) by 50% of the Current Market
Price per share of the Common Stock of such Principal Party (determined
pursuant to Section 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; provided, however, that
the Purchase Price (as theretofore adjusted in accordance with
Section 11(a)(ii) hereof) and the number of shares of Common Stock of such
Principal Party so receivable upon exercise of a Right shall be subject to
further adjustment as

 

 

 

22

 

appropriate
in accordance with Section 11(f) hereof to reflect any events occurring in
respect of the Common Stock of such Principal Party after the occurrence of
such consolidation, merger, sale or transfer; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Flip-Over
Event, all the obligations and duties of the Company pursuant to this Rights
Agreement; (iii) the term “Company” for all purposes of this Rights
Agreement shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall only
apply to such Principal Party following the first occurrence of a Flip-Over
Event; 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 in accordance with Section 9 hereof) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; provided, however, that, upon the
subsequent occurrence of any merger, consolidation, sale of all or
substantially all assets, recapitalization, reclassification of shares,
reorganization or other extraordinary transaction in respect of such Principal
Party, each holder of a Right shall thereupon be entitled to receive, upon
exercise of a Right, such cash, shares, rights, warrants and other property
which such holder would have been entitled to receive had he, at the time of
such transaction, owned the shares of Common Stock of the Principal Party
purchasable upon the exercise of a Right, and such Principal Party shall take
such steps (including, but not limited to, reservation of shares of stock) as
may necessary to permit the subsequent exercise of the Rights in accordance
with the terms hereof for such cash, shares, rights, warrants and other
property.

 

(b)           “Principal Party” shall mean

(i)            in
the case of any transaction described in (x) or (y) of the first sentence of
Section 13(a) hereof:  (A) the
Person that is the issuer of the 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 the Common Stock of which has the
greatest aggregate market value or (B) if no securities are so issued,
(x) the Person that is the other party to the merger or consolidation and
that survives said merger or consolidation, or, if there is more than one such
Person, the Person the Common Stock of which has the greatest market value or
(y) if the Person that is the other party to the merger or consolidation
does not survive the merger or consolidation, the Person that does survive the
merger or consolidation (including the Company if it survives); and

(ii)           in
the case of any transaction described in (z) of the first sentence in
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power so
transferred or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons that is the
issuer of Common Stock having the greatest aggregate market value of shares
outstanding;

provided, however, that in any such case described in
the foregoing paragraphs (b)(i) or (b)(ii), (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,
and such

 

 

 

23

 

Person
is a direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, the term “Principal Party” shall refer to
such other Person, or (2) if such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Stocks of all of which are and
have been so registered, the term “Principal Party” shall refer to
whichever of such Persons is the issuer of the Common Stock having the greatest
market value of shares outstanding, or (3) if such Person is owned,
directly or indirectly, by a joint venture formed by two or more Persons that
are not owned, directly or indirectly, by the same Person, the rules set forth
in clauses (1) and (2) above shall apply to each of the owners having an
interest in the joint venture as if the Person owned by the joint venture was a
Subsidiary of both or all of such joint venturers, and the Principal Party in
each such case shall bear the obligations set forth in this Section 13 in
the same ratio as its interest in such Person bears to the total of such
interests.

 

(c)           The
Company shall not consummate any consolidation, merger, sale or transfer
referred to in Section 13(a) unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock that have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and
the Principal Party involved therein shall have executed and delivered to the
Rights Agent an agreement confirming that the requirements of
Sections 13(a) and (b) hereof shall promptly be performed in accordance
with their terms and that such consolidation, merger, sale or transfer of
assets shall not result in a default by the Principal Party under this Rights
Agreement as the same shall have been assumed by the Principal Party pursuant
to Sections 13(a) and (b) hereof and further providing that, as soon as
practicable after executing such agreement pursuant to this Section 13,
the Principal Party at its own expense shall:

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

(ii)           use
its best efforts, if the Common Stock of the Principal Party shall become
listed on a national securities exchange, to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on such
securities exchange and, if the Common Stock of the Principal Party shall not
be listed on a national securities exchange, to cause the Rights and the
securities purchased upon exercise of the Rights to be reported by NASDAQ or such other system then in
use;

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

(iv)          obtain
waivers of any rights of first refusal or preemptive rights in respect of the
shares of Common Stock of the Principal Party subject to purchase upon exercise
of outstanding Rights.

 

 

 

24

 

In the event that any of the transactions described in
Section 13(a) hereof shall occur at any time after the occurrence of a
transaction described in Section 11(a)(ii) hereof, the Rights which have
not theretofore been exercised shall thereafter be exercisable in the manner
described in Section 13(a).

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

14.           Fractional Rights and Fractional
Shares.

(a)           The
Company shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights.  In lieu of such fractional Rights, there shall be paid to the
holders of record 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 then current market value of a whole Right.  For the purposes of this Section 14(a),
the then current market value of a Right shall be determined in the same manner
as the Current Market Price of a share of Common Stock shall be determined
pursuant to Section 11(d) hereof.

(b)           The
Company shall not be required to issue fractions of shares of Preferred Stock
or Preferred Stock Equivalents (other than fractions which are integral
multiples of one one-thousandth
of a share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock or Preferred
Stock Equivalents (other than fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock).  Fractions of shares
of Preferred Stock in integral multiples of one one-thousandth of a share of Preferred Stock or Preferred
Stock Equivalents may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company
and a depositary selected by it, provided that such agreement shall provide
that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the shares of Preferred Stock or Preferred Stock Equivalents represented by
such depositary receipts.  In lieu of
fractional shares of Preferred Stock or Preferred Stock Equivalents that are
not integral multiples of one
one-thousandth  of a share of Preferred Stock or Preferred
Stock Equivalents, the Company may pay to the registered holders

 

 

 

25

 

of
Right Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one one-thousandth of a share of
Preferred Stock or a Preferred Stock Equivalent.  For purposes of this Section 14(b), the current market value
of one one-thousandth of a share
of Preferred Stock or Preferred Stock Equivalent shall be the Current Market
Price of a share of Common Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the
date of such exercise.

 

(c)           Following
the occurrence of a Flip-In Event, the Company shall not be required to issue
fractions of shares or units of Common Stock or Common Stock Equivalents or
other securities upon exercise of the Rights or to distribute certificates
which evidence fractional shares of such Common Stock or Common Stock Equivalents
or other securities.  In lieu of
fractional shares or units of such Common Stock or Common Stock Equivalents or
other securities, 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 Current Market Value of a share or
unit of such Common Stock or Common Stock Equivalent or other securities.  For purposes of this Section 14(c), the
Current Market Value shall be determined in the manner set forth in
Section 11(d) hereof for the Trading Day immediately prior to the date of
such exercise and, if such Common Stock Equivalent is not traded, each such
Common Stock Equivalent shall have the value of one one-thousandth of a share of Preferred Stock.

(d)           The
holder of a Right by the acceptance of a Right expressly waives his right to
receive any fractional Right or any fractional shares upon exercise of a Right.

15.           Rights of Action.  As of the record date, all rights of action in respect of this
Rights Agreement, other than any rights of action vested in the Rights Agent
pursuant to Sections 18 and 20 hereof, are vested in the respective
holders of record of the Right Certificates (and, prior to the Distribution
Date, the holders of record of the Common Stock); and any holder of record of
any Right Certificate (or, prior to the Distribution Date, of the Common
Stock), without the consent of the Rights Agent or of the holder of any other
Right Certificate (or, prior to the Distribution Date, of the Common Stock),
may, in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company or any other Person
to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced
by such Right Certificate in the manner provided in such Right Certificate and
in this Rights 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 Rights Agreement and,
accordingly, that they will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Rights
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 Rights
Agreement.

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:

 

 

 

26

 

(a)           prior
to the Distribution Date, the Rights will not be evidenced by a Right
Certificate and will be transferable only in connection with the transfer of
Common Stock;

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

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

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

17.           Right Certificate Holder Not Deemed
a Stockholder.  No holder of a
Right, as such, shall be entitled to vote, receive dividends in respect of or
be deemed for any purpose to be the holder of Common Stock or any other securities
of the Company which may at any time be issuable upon the exercise of the
Rights, 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 in 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 in
respect of any such stock or securities, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in accordance
with the provisions hereof.

18.           Concerning
the Rights Agent.

(a)           The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Rights 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
any thing done or omitted to be done by the Rights Agent in connection with the
acceptance and administration of this Rights Agreement,

 

 

 

27

 

including
the cost and expenses of defending against any claim of liability in the
premises.  The indemnity provided herein
shall survive the expiration of the Rights and the termination of this Rights
Agreement.  Anything in this Rights
Agreement to the contrary notwithstanding, in no event shall the Rights Agent
be liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the likelihood of such loss damage and regardless of
the form of action.

 

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

19.           Merger or Consolidation or Changed
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
stock transfer business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Rights 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 Rights
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and, in case at that time any of the Right Certificates shall
not have been countersigned, any successor Rights Agent may countersign such
Right Certificates either in the name of the predecessor Rights Agent or in the
name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and
in this Rights 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 such 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 Certificate shall have the full
force provided in the Right Certificates and in this Rights Agreement.

20.           Duties of Rights Agent.  The Rights Agent undertakes the duties and
obligations imposed by this Rights 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:

 

 

 

28

 

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

(b)           Whenever
in the performance of its duties under this Rights Agreement the Rights Agent
shall deem it necessary or desirable that any fact or matter (including,
without limitation, the identity of any Acquiring Person and the determination
of Current Market Price) be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by certificate signed by the President
or any Vice President and by the Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Rights 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 Rights 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 Rights 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 Rights Agreement or in any Right Certificate; nor shall it be
responsible for any adjustment required under the provisions of
Sections 11, 13, 23 or 24 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by Right Certificates after receipt of a Certificate furnished
pursuant to Section 12 describing any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued
pursuant to this Rights Agreement or any Right Certificate or as to whether any
shares of Common Stock will, when issued, be validly authorized and issued,
fully paid and nonassessable.

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

(g)           The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from the Chairman of the
Board, the Chief Executive Officer, the President or any Vice President or the
Secretary or any Assistant

 

 

 

29

 

Secretary
or the Treasurer or any Assistant Treasurer of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer.  Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Rights Agreement and the date on and/or after which such
action shall be taken or such omission shall be effective.  Subject to Section 20(c) hereof, the
Rights Agent shall not be liable for any action taken by, or omission of, the
Rights Agent in accordance with a proposal included in any such application on
or after the date specified in such application (which date shall not be less
than five Business Days after the date any officer of the Company actually
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 Rights Agreement.  Nothing herein
shall preclude the Rights Agent from acting in any other capacity for the
Company or for any other entity.

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

(j)            No
provision of this Rights 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 contained in the form of assignment or
the form of election to purchase set forth on the reverse thereof, as the case
may be, has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise of transfer without first
consulting with the Company.

21.           Change of Rights Agent.  The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Rights Agreement
upon 30 days’ notice in writing, or such earlier period as shall be agreed
to in writing, mailed to the Company and to each transfer agent of the Common
Stock by registered or certified mail, and to the holders of the Right
Certificates by first-class mail.  The
Company may remove the Rights Agent or any

 

 

 

30

 

successor
Rights Agent (with or without cause) upon 30 days’ notice in writing, or
such earlier period as shall be agreed to in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Stock by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. 
If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights
Agent.  Notwithstanding the foregoing
provisions of this Section 21, in no event shall the resignation or
removal of a Rights Agent be effective until a successor Rights Agent shall
have been appointed and have accepted such appointment.  If the Company shall fail to make such
appointment within a period of 30 days after 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 holder of record 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 or any State thereof, in good standing, which is authorized
under such laws to exercise corporate trust or stock transfer 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 $50,000,000 or (b) an Affiliate controlled by a
corporation described in clause (a) of this sentence.  After appointment, the successor Rights
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose.  Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock,
and mail a notice thereof in writing to the registered holders of the Right
Certificates.  Failure to give any
notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.

 

22.           Issuance of New Right Certificates.  Notwithstanding any of the provisions of
this Rights 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 its Board of Directors to reflect any adjustment or change in the
Purchase 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 Rights Agreement.  In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, in each
case existing prior to the Distribution Date, issue Right Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; 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 of
material adverse tax consequences to the Company or the Person to whom such
Right

 

 

 

31

 

Certificate
would be issued, and (ii) no such Right Certificate shall be issued, if,
and to the extent that, appropriate adjustment shall otherwise have been made
in lieu of the issuance thereof.

 

23.           Redemption.

(a)           The
Board of Directors of the Company may, at its option, at any time prior to the
earlier of (x) the first occurrence of a Flip-In Event or (y) the
Close of Business on the Expiration Date, redeem all but not less than all the
then outstanding Rights at a redemption price of $0.001 per Right, as such
amount may be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the “Redemption Price”).

(b)           Immediately
upon the action of the Board of Directors of the Company ordering the
redemption of the Rights (or at such later time as the Board of Directors may
establish for the effectiveness of such redemption), and without any further
action and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price.  The Company shall
promptly give public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such notice shall not affect
the validity of such redemption.  Within
10 days after such action of the Board of Directors ordering the redemption of
the Rights (or such later time as the Board of Directors may establish for the
effectiveness of such redemption), the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock.  Any notice 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 shall state the method by which the payment of the
Redemption Price will be made.  The
failure to give notice required by this Section 23(b) or any defect
therein shall not affect the legality or validity of the action taken by the
Company.

(c)           In
the case of a redemption permitted under Section 23(a) hereof, the Company
may, at its option, discharge all of its obligations with respect to the Rights
by (i) issuing a press release announcing the manner of redemption of the
Rights and (ii) mailing payment of the Redemption Price to the registered
holders of the Rights at their last addresses as they appear on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent of the Common Stock, and upon such action, all
outstanding Right Certificates shall be null and void without any further
action by the Company.

24.           Exchange of Rights for Common Stock.

(a)           The
Board of Directors of the Company may, at its option, at any time after the
occurrence of a Flip-In Event, exchange all or part of the then outstanding and
exercisable Rights (which (i) shall not include Rights that have become
void pursuant to the provisions of Section 11(a)(ii) hereof, and (ii)
shall include, without limitation, any Rights issued after the Distribution
Date in accordance with Section 22 hereof) for shares of Common Stock at
an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (the “Exchange Ratio”).  Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect

 

 

 

32

 

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 shares of Common Stock aggregating 50% or more of the shares of Common Stock
then outstanding.  From and after the
occurrence of an event specified in Section 13(a) hereof, any Rights that
theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be exercisable only in accordance with Section 13 and may not
be exchanged pursuant to this Section 24(a).

 

(b)           Immediately
upon the action of the Board of Directors of the Company ordering the exchange
of any Rights pursuant to subsection (a) of this Section 24 and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock equal to the number
of such Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public
notice of any such exchange; provided, however, that the failure
to give, or any defect in, such notice shall not affect the validity of such
exchange.  The Company promptly shall
mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights
Agent.  Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice
of exchange will state the method by which the exchange of the shares of Common
Stock for Rights will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. 
Any partial exchange shall be effected pro rata based on the number of
Rights (other than Rights which have become void pursuant to the provisions of
Section 11(a)(ii) hereof) held by each holder of Rights.

(c)           In
any exchange pursuant to this Section 24, the Company, at its option, may
substitute, and, in the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 24,
the Company shall substitute to the extent of such insufficiency, for each
share of Common Stock that would otherwise be issuable upon exchange of a
Right, a number of shares of Preferred Stock Equivalents or fractions thereof
having an aggregate current per share market price (determined pursuant to
Section 11(d) hereof) equal to the current per share market price of one
share of Common Stock (determined pursuant to Section 11(d) hereof) as of
the date of the Flip-In Event.

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

(e)           The
Company shall not be required to issue fractions of shares of Common Stock or
to distribute certificates which evidence fractional shares of Common
Stock.  In lieu of such fractional
shares of Common Stock, the Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional shares of Common Stock
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole share of Common Stock.  For the purposes of this paragraph (d),
the current market value of a whole share of Common Stock shall be the Current
Market Price of a share of

 

 

 

33

 

Common
Stock (as defined in Section 11(d) hereof for the purposes of computations
made other than pursuant to Section 11(a)(iii)) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.

 

25.           Notice
of Proposed Actions.

(a)           In
case the Company, after the Distribution Date, shall propose (i) to effect
any of the transactions referred to in Section 11(a)(i) hereof or to pay
any dividend to the holders of record of its Preferred Stock payable in stock
of any class or to make any other distribution to the holders of record of its
Preferred Stock (other than a regular periodic cash dividend), or (ii) to
offer to the holders of record of its Preferred Stock or options, warrants, or
other rights to subscribe for or to purchase shares of Preferred Stock
(including any security convertible into or exchangeable for Preferred Stock)
or shares of stock of any other class or any other securities, options,
warrants, convertible or exchangeable securities or other rights, or
(iii) to effect any reclassification of its Preferred Stock or any
recapitalization or reorganization of the Company, or (iv) to effect any
consolidation or merger with or into, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person or Persons, or (v) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
each holder of record of a Right Certificate, in accordance with
Section 26 hereof, notice of such proposed action, which shall specify the
record date for the purposes of such transaction referred to in
Section 11(a)(i) hereof, or such dividend or distribution, or the date on
which such reclassification, recapitalization, reorganization, consolidation,
merger, sale or transfer of assets, liquidation, dissolution or winding up is
to take place and the record date for determining participation therein by the
holders of record of Preferred Stock, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i)
or (ii) above at least 10 days prior to the record date for determining
holders of record of the Preferred Stock for purposes of such action, and in
the case of any such other action, at least 10 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of record of Preferred Stock, whichever shall be the earlier.

(b)           In
case any of the transactions referred to in Section 11(a)(ii) or
Section 13 of this Rights Agreement are proposed, then, in any such case,
the Company shall give to each holder of Rights, in accordance with
Section 26 hereof, notice of the proposal of such transaction at least
10 days prior to consummating such transaction, which notice shall specify
the proposed event and the consequences of the event to holders of Rights under
Section 11(a)(ii) or Section 13 hereof, as the case may be, and, upon
consummating such transaction, shall similarly give notice thereof to each
holder of Rights.

(c)           The
failure to give notice required by this Section 25 or any defect therein
shall not affect the legality or validity of the action taken by the Company or
the vote upon any such action.

26.           Notices. 
Notices or demands authorized by this Rights Agreement to be given or
made by the Rights Agent or by the holder of record of any Right Certificate or
Right to or on

 

 

 

34

 

behalf
of the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:

 

 

	
   

  	
  Finisar Corporation

  1308 Moffett Park Drive

  Sunnyvale, CA  94089

  Attention:  Corporate Secretary

  	
   

  

 

Subject to the provisions of Section 20 hereof,
any notice or demand authorized by this Rights Agreement to be given or made by
the Company or by the holder of record of any Right Certificate or Right to or
on the Rights Agent shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Company) as follows:

	
   

  	
  American Stock Transfer & Trust Company

  59 Maiden Lane

  New York, NY  10038

  Attention:  Corporate Trust Department

  	
   

  

 

Notices or demands authorized by this Rights Agreement
to be given or made by the Company or the Rights Agent to the holder of record
of any Right Certificate or Right 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 it appears upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the Transfer Agent.

27.           Supplements and Amendments.  Except as provided in the penultimate
sentence of this Section 27, for so long as the Rights are then redeemable,
the Company may in its sole and absolute discretion, and the Rights Agent shall
if the Company so directs, supplement or amend any provision of this Rights
Agreement in any respect without the approval of any holders of the Rights.  At any time when the Rights are no longer
redeemable, except as provided in the penultimate sentence of this
Section 27, the Company may, and the Rights Agent shall, if the Company so
directs, supplement or amend this Rights Agreement without the approval of any
holders of Right Certificates in order to (i) cure any ambiguity,
(ii) correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, (iii) shorten
or lengthen any time period hereunder, or (iv) change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable; provided that no such supplement or amendment shall adversely
affect the interests of the holders of Rights as such (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person), and no such
amendment may cause the Rights again to become redeemable or cause the
Agreement again to become amendable other than in accordance with this
sentence.  Notwithstanding anything
contained in this Rights Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price.  Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Stock.

 

 

 

35

 

28.           Successors. 
All of the covenants and provisions of this Rights 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.

29.           Benefits of this Rights Agreement.  Nothing in this Rights 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) any legal or equitable right,
remedy or claim under this Rights Agreement; this Rights Agreement shall be for
the sole and exclusive benefit of the Company, the Rights Agent and the holders
of record of the Right Certificates (and, prior to the Distribution Date, the
Common Stock).

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

31.           Counterparts. 
This Rights 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.

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

33.           Severability. 
If any term, provision, covenant or restriction of this Rights Agreement
is held by a court of competent jurisdiction or other authority to be invalid,
illegal or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Rights Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.

 

 

 

36

 

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

	
  [SEAL]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  FINISAR CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ STEPHEN K. WORKMAN

  	
   

  	
  By:

  	
    /s/ JERRY S. RAWLS

  
	
   

  	
    Name: 
  Stephen K. Workman

  	
   

  	
   

  	
    Name: 
  Jerry S. Rawls

  
	
   

  	
    Title: 
  Secretary

  	
   

  	
   

  	
    Title: 
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [SEAL]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  AMERICAN STOCK TRANSFER & TRUST
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ SUSAN SILBER

  	
   

  	
  By:

  	
    /s/ MICHAEL KARFUNKEL

  
	
   

  	
    Name:

  	
   

  	
   

  	
    Name:

  
	
   

  	
    Title: 
  Assistant Secretary

  	
   

  	
   

  	
    Title: 
  President

  
						

 

 

37

Exhibit A

FINISAR CORPORATION

FORM OF CERTIFICATE

OF DESIGNATION, PREFERENCES AND RIGHTS

OF THE TERMS OF THE

SERIES RP PREFERRED STOCK

Pursuant to Section 151 of the General
Corporation Law of the State of Delaware

We, the Chief Executive Officer and the Secretary,
respectively, of Finisar Corporation, organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:

That pursuant to the authority conferred upon the
Board of Directors by the Certificate of Incorporation of the said Corporation,
the said Board of Directors on September 25, 2002, adopted the following
resolution creating a series of 500,000 shares of Preferred Stock designated as
Series RP Preferred Stock:

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

Section 1.               Designation
and Amount.  The shares of such
series shall be designated as “Series RP Preferred Stock” (the “Series RP
Preferred Stock”), $0.001 par value per share, and the number of shares
constituting such series shall be 500,000.

Section 2.               Dividends and Distributions.

(A)          The
dividend rate on the shares of Series RP Preferred Stock shall be for each
quarterly dividend (hereinafter referred to as a “quarterly dividend period”),
which quarterly dividend periods shall commence on February 1, May 1,
August 1 and November 1 each year (each such date being referred to
herein as a “Quarterly Dividend Payment Date”) (or in the case of original
issuance, from the date of original issuance) and shall end on and include the
day next preceding the first date of the next quarterly dividend period, at a
rate per quarterly dividend period (rounded to the nearest cent) equal to the
greater of (a) $350.00 or (b) subject to the provisions for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
cash, based upon the fair market value at the time the non-cash dividend or
other distribution is declared as determined in good faith by the Board of
Directors) 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 (but not
withdrawn) on the Common Stock, par value $0.001 per share, of the Corporation
(the

 

 

 

A-1

 

“Common
Stock”) during the immediately preceding quarterly dividend period, or, with
respect to the first quarterly dividend period, since the first issuance of any
share or fraction of a share of Series RP Preferred Stock.  In the event this Company shall at any time
after October 16, 2002 (the “Rights Declaration Date”) (i) declare
any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series RP Preferred Stock were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

 

(B)           Dividends
shall begin to accrue and be cumulative on outstanding shares of Series RP
Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares of Series RP 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 RP 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 RP
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date
for the determination of holders of shares of Series RP Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 45 days prior to the date fixed for the
payment thereof.

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

(A)          Subject
to the provision for adjustment hereinafter set forth, each share of Series RP
Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters
submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the number of votes per share to which
holders of shares of Series RP Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

(B)           Except
as otherwise provided herein, in the Certificate of Incorporation or Bylaws,
the holders of shares of Series RP Preferred Stock and the holders of shares of
Common

 

 

 

A-2

 

Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.

 

(C)           Except
as set forth herein, in the Certificate of Incorporation and in the Bylaws,
holders of Series RP 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.               Reacquired
Shares.  Any shares of Series RP
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 5.               Liquidation, Dissolution or
Winding Up.

(A)          In
the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, the holders of the Series RP Preferred Stock shall be
entitled to receive the greater of (a) $14,000.00 per share, plus accrued
dividends to the date of distribution, whether or not earned or declared, or
(b) an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock.  In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares of Series
RP Preferred Stock were entitled immediately prior to such event pursuant to
clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

Section 6.               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 RP 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 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged.  In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend
on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of
Series RP 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

 

 

 

A-3

 

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

 

Section 7.               No
Redemption.  The shares of Series RP
Preferred Stock shall not be redeemable.

Section 8.               Fractional
Shares.  Series RP Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder’s fractional shares, to exercise voting rights,
receive dividends, participate in distributions and have the benefit of all
other rights of holders of Series RP Preferred Stock.  All payments made with respect to fractional shares hereunder
shall be rounded to the nearest whole cent.

Section 9.               Certain Restrictions.

(A)          Whenever
quarterly dividends or other dividends or distributions payable on the Series
RP 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 RP 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 RP 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 RP
Preferred Stock, except dividends paid ratably on the Series RP Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled;

                (iii)          redeem or purchase or otherwise
acquire for consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series RP
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 RP Preferred Stock; or

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

 

 

 

A-4

 

(B)           The
Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation
unless the Corporation could, under paragraph (A) of this Section 9,
purchase or otherwise acquire such shares at such time and in such manner.

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

Section 11.             Amendment.  The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series RP 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 RP Preferred
Stock voting together as a single class.

IN WITNESS WHEREOF, we have executed and subscribed
this Certificate and do affirm the foregoing as true under the penalties of
perjury this 25th day of September, 2002.

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Jerry S.
  Rawls

  	
   

  
	
   

  	
   

  	
  Title:  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Stephen K. Workman 

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  	
   

  

 

 

 

 

A-5

 

Exhibit B

[Form of Right
Certificate]

	
  Certificate No. W-

  	
   

  	
  Series RP Preferred Stock
  Rights

  

 

NOT
EXERCISABLE AFTER SEPTEMBER 24, 2012, OR EARLIER IF REDEEMED OR
EXCHANGED.  AT THE OPTION OF THE
COMPANY, THE RIGHTS MAY BE REDEEMED AT $0.001 PER RIGHT OR EXCHANGED FOR COMMON
STOCK ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  IN THE EVENT THAT THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE
ISSUED TO A PERSON WHO IS AN ACQUIRING PERSON OR CERTAIN TRANSFEREE OF THE
RIGHTS PREVIOUSLY OWNED BY SUCH PERSONS, THIS RIGHT CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY SHALL BE NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

RIGHT CERTIFICATE

FINISAR 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 Rights Agreement dated
as of September 25, 2002 (the “Rights Agreement”) between Finisar
Corporation, a Delaware corporation (the “Company”), and American Stock
Transfer & Trust Company (the “Rights Agent”), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 p.m. (New York time) on
September 24, 2012, at the principal office of the Rights Agent, or its
successors as Rights Agent, designated for such purposes, one one-thousandth of
a fully paid and nonassessable share of Series RP Preferred Stock of the
Company (the “Preferred Stock”) at a purchase price of $14.00 per one
one-thousandth of a share, as the same may from time to time be adjusted in
accordance with the Rights Agreement (the “Purchase Price”), upon presentation
and surrender of this Right Certificate with the Form

 

 

 

B-1

 

 

of Election to Purchase
duly executed.  Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
such terms in the Rights Agreement.

 

As provided in the Rights
Agreement, the Purchase 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 and, upon the happening of certain events,
securities other than shares of Preferred Stock, or other property, may be
acquired upon exercise of the Rights evidenced by this Right Certificate, as
provided by the Rights Agreement.

 

Upon the occurrence of a
Flip-In Event, if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate
of any such Acquiring Person, (ii) a transferee of any such Acquiring
Person, Associate or Affiliate, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person who, after such
transfer, became an Acquiring Person, or any Affiliate or Associate of an
Acquiring Person, such Rights shall be null and void and will no longer be
transferable and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Flip-In Events.

 

This Right Certificate is
subject to all the terms, provisions and conditions of the Rights Agreement,
which terms, provisions and conditions are 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 of the Rights Agent, the Company and the holders of record of the
Right Certificates, which limitation 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

 

 

 

B-2

 

the principal executive
office of the Company and are available upon written request to the Company.

 

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

 

Subject to the provisions
of the Rights Agreement, at any time prior to the earlier of (i) the
occurrence of a Flip-In Event (as such term is defined in the Rights Agreement)
or (ii) the Expiration Date (as such term is defined in the Rights
Agreement), the Rights evidenced by this Certificate may be redeemed by the
Company at its option at a redemption price of $0.001 per Right.  Subject to the provisions of the Rights
Agreement, the Company may, at its option, at any time after a Flip-In Event,
exchange all or part of the Rights evidenced by this Certificate for shares of
the Company’s Common Stock or for Preferred Stock (or shares of a class or
series of the Company’s preferred stock having the same rights, privileges and
preferences as the Preferred Stock).

 

In the event (i) any
person or group becomes an Acquiring Person or (ii) any of the types of
transactions, acquisitions or other events described above as self-dealing
transactions occur, and prior to the acquisition by such person or group of 50%
or more of the outstanding shares of Common Stock, the Board may require all or
any portion of the outstanding Rights (other than

 

 

 

B-3

 

Rights owned by such
Acquiring Person which have become void) to be exchanged for Common Stock on a
pro rata basis, at an exchange ratio of one share of Common Stock or one
one-thousandth of a share of Preferred Stock (or of a share of a class or
series of the Company’s Preferred Stock having equivalent rights, preferences
and privileges), per Right (subject to adjustment).

 

No fractional shares of
Preferred Stock shall be issued upon the exercise of any Right or Rights
evidenced hereby (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock, which may, at the option of the
Company, be evidenced by depositary receipts), and no fractional shares of
Common Stock will be issued upon the exchange of any Right or Rights evidenced
hereby, and in lieu thereof, as provided in the Rights Agreement, fractions of
shares of Preferred Stock or Common Stock shall receive an amount in cash equal
to the same fraction of the then Current Market Price (as such term is defined
in the Rights Agreement) of a share of Preferred Stock or Common Stock, as the
case may be.

 

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 Common Stock or of any other securities of
the Company which may at any time be issuable on the exercise hereof, nor shall
anything contained in the Rights Agreement or herein be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote in 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 (other than certain actions specified 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 or exchanged as provided in the Rights Agreement.

 

 

 

B-4

 

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

 

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

 

 

 

	
  ATTEST:

  	
   

  	
  FINISAR CORPORATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
  Secretary

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COUNTERSIGNED:

  	
   

  	
  AMERICAN STOCK TRANSFER & TRUST

  COMPANY

  As Rights Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized
  Officer

  	
   

  

 

 

 

 

B-5

 

Form of Reverse Side of
Right Certificate

 

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder

desires to transfer any or all of the Rights

represented by this Right Certificate)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto

 

	
   

  
	
   

  
	
   

  

(Name,
address and social security or other

identifying number of transferee)

 

___________________________________ (_______________)
of the Rights represented by this Right Certificate, together with all right,
title and interest in and to said Rights, and hereby irrevocably constitutes
and appoints _________________________ attorney to transfer said Rights 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 sold, assigned and transferred by or on
behalf of a Person who is or was an Acquiring Person (as such capitalized terms
are defined in the Rights Agreement);

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

	
   

  	
  Dated:

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  (Signature)

  
	
   

  	
  Dated:

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  (Signature)

  

 

Signature Guaranteed:

 

 

B-6

 

Form of Reverse Side of Right Certificate

(continued)

NOTICE

The signatures to the foregoing Assignment and the
foregoing Certificate, if applicable, 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, and must be guaranteed by a
participant in a Securities Transfer Association (“STA”) recognized signature
program.

In the event that the foregoing Certificate is not
duly executed, with signature guaranteed, the Company may deem the Rights
represented by this Right Certificate to be Beneficially Owned by an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such capitalized
terms are defined in the Rights Agreement), and not issue any Right Certificate
or Right Certificates in exchange for this Right Certificate.

 

 

 

B-7

 

Form of Reverse of Right
Certificate

(continued)

FORM OF ELECTION TO
PURCHASE

(To be executed by the registered holder if such holder

desires to exercise any or all of the Rights

represented by this Right Certificate)

To Finisar Corporation:

The undersigned hereby irrevocably elects to exercise
_______________ (__________) of the Rights represented by this Right
Certificate to purchase the shares of the Common Stock of the Company, or other
securities or property issuable upon the exercise of said number of Rights
pursuant to the Rights Agreement.

The undersigned hereby requests that a certificate for
any such securities and any such property be issued in the name of and
delivered to:

	
   

  
	
   

  
	
   

  

(Name,
address and social security or other

identifying number of transferee)

 

The undersigned hereby further requests that if said
number of Rights shall not be all the Rights represented by this Right
Certificate, a new Right Certificate for the remaining balance of such Rights
be issued in the name of and delivered to:

	
   

  
	
   

  
	
   

  

(Name,
address and social security or other

identifying number of transferee)

 

	
   

  	
  Dated:

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  (Signature)

  

 

Signature Guaranteed:

 

B-8

 

Form of Reverse Side of Right Certificate

(continued)

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 Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);

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

	
   

  	
  Dated:

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  (Signature)

  

 

Signature Guaranteed:

 

 

NOTICE

The signature to the foregoing Election to Purchase
and the foregoing Certificate, if applicable, must correspond to the name as written
upon the face of the this Right Certificate in every particular, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc., or a commercial bank or trust
company having an office or correspondent in the United States.

In the event that the foregoing Certificate is not
executed, with signature guaranteed, the Company may deem the Rights
represented by this Right Certificate to be Beneficially Owned by an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such capitalized
terms are defined in the Rights Agreement), and not issue any Right Certificate
or Right Certificates in exchange for this Right Certificate.

 

 

B-9

 

Exhibit C

UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN
THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, BENEFICIALLY OWNED BY OR TRANSFERRED TO
ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS
AGREEMENT) OR AN ASSOCIATE OR AFFILIATE (AS DEFINED IN THE RIGHTS AGREEMENT)
THEREOF AND CERTAIN TRANSFEREES THEREOF WILL BE NULL AND VOID AND WILL NO
LONGER BE TRANSFERABLE.

 

Finisar
Corporation

 

Summary of Terms of

Rights Agreement

 

 

	
  Nature of
  Right:

  	
   

  	
  When exercisable, each
  Right (a “Right”) will initially entitle the holder to purchase one
  one-thousandth of a share of Series RP Preferred Stock (“Preferred Stock”) of
  Finisar Corporation (the “Company”).

  
	
   

  	
   

  	
   

  
	
  Means of
  Distribution:

  	
   

  	
  The Rights will be
  distributed to holders of the Company’s outstanding Common Stock as a
  dividend of one Right for each share of Common Stock.  The Rights will also be attached to all
  future issuances of Common Stock prior to the Distribution Date (as defined
  below).

  
	
   

  	
   

  	
   

  
	
  Exercisability:

  	
   

  	
  Rights become exercisable
  on the earlier of:  (i) the date
  of public announcement by the Company or by any person or group (an
  “Acquiring Person”) that such person or group has acquired beneficial ownership
  of 20% or more of the Company’s outstanding Common Stock, or (ii) the
  tenth business day (unless extended by the Board prior to the time a person
  becomes an Acquiring Person) following the commencement, or announcement of
  an intention to commence, by any person or group of a tender or exchange
  offer which would result in such person owning 20% or more of the outstanding
  Common Stock of the Company (the earlier of such dates being referred to as
  the “Distribution Date”), provided that an Acquiring Person does not include
  an Exempt Person or Grandfathered Person (as such terms are defined in the
  Rights Agreement).  Rights will trade
  separately from the Common Stock once the Rights become exercisable.

  
	
   

  	
   

  	
   

  
	
  Purchase
  Price:

  	
   

  	
  $14.00 per one
  one-thousandth of a share of Preferred Stock, which is the amount that in the
  judgment of the Board of Directors represents the long-term value of the
  Common Stock over the term of the Rights Agreement (the “Purchase Price”).

  
	
   

  	
   

  	
   

  
	
  Term:

  	
   

  	
  The Rights will expire
  upon the earlier of (i) ten years after the date of issuance, or
  September 24, 2012 or (ii) redemption or exchange by the Company as
  described below.

  
	
   

  	
   

  	
   

  
	
  Redemption
  of Rights:

  	
   

  	
  Rights are redeemable at a
  price of $0.001 per Right, by the vote of the Company’s Board of Directors,
  at any time until the occurrence of a Flip-In Event (defined below).

  
	
   

  	
   

  	
   

  
	
  Preferred
  Stock:

  	
   

  	
  The Preferred Stock
  purchasable upon exercise of the Rights will be nonredeemable and junior to
  any other series of preferred stock the Company may issue (unless otherwise
  provided in the terms of such other series). 
  Each share of Preferred Stock will have a preferential cumulative
  quarterly dividend in an amount equal to the greater of (a) $350.00 or
  (b) 1,000 times the dividend declared on each share of Common
  Stock.  In the event of liquidation,
  the holders of Preferred Stock will receive a preferred liquidation payment
  equal to the greater of (a) $14,000.00 per share, plus accrued dividends
  to the date of distribution whether or not earned or declared, or (b) an
  amount per share equal to 1,000 times the aggregate payment to be distributed
  per share of

  

 

 

 

C-1

 

 

	
   

  	
   

  	
  Common Stock.  Each share of Preferred Stock will have
  1,000 votes, voting together with the shares of Common Stock.  In the event of any merger, consolidation
  or other transaction in which shares of Common Stock are exchanged for or
  changed into other securities, cash and/or other property, each share of
  Preferred Stock will be entitled to receive 1,000 times the amount and type
  of consideration received per share of Common Stock.  The rights of the Preferred Stock as to
  dividends, liquidation and voting, and in the event of mergers and
  consolidations, are protected by customary anti-dilution provisions.  Fractional shares (in integral multiples
  of one one-thousandth) of Preferred Stock will be issuable; however, the
  Company may elect to distribute depositary receipts in lieu of such
  fractional shares.  In lieu of
  fractional shares other than fractions that are multiples of one
  one-thousandth of a share, an adjustment in cash will be made based on the
  market price of the Preferred Stock on the last trading date prior to the
  date of exercise.  Because of the
  nature of the Preferred Stock’s dividend, liquidation and voting rights, the
  value of one one-thousandth of a share of Preferred Stock purchasable upon
  exercise of each Right should approximate the value of one share of Common
  Stock.

  
	
   

  	
   

  	
   

  
	
  Rights in
  Event of Self-Dealing Transaction or Acquisition of Substantial Amount of
  Common Stock:

  	
   

  	
  In the event that an
  Acquiring Person engages in certain self-dealing transactions or becomes a
  beneficial owner of 20% or more of the outstanding Common Stock (“Flip-In
  Events”), a holder of a Right thereafter has the right to purchase, upon
  payment of the then current Purchase Price, in lieu of one one-thousandth of
  a share of Preferred Stock per outstanding Right, such number of shares of
  Common Stock having a market value at the time of the transaction equal to the
  Purchase Price divided by one-half the Current Market Price (as defined in
  the Rights Agreement) of the Common Stock. 
  Notwithstanding the foregoing, Rights held by the Acquiring Person or
  any Associate or Affiliate thereof or certain transferees will be null and
  void and no longer be transferable.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Self-dealing transactions
  are defined to include a consolidation, merger or other combination of an
  Acquiring Person with the Company in which the Company is the surviving
  corporation, the transfer of assets to the Company in exchange for securities
  of the Company, the acquisition of securities of the Company (other than in a
  pro rata distribution to all stockholders), the sale, purchase, transfer,
  distribution, lease, mortgage, pledge or acquisition of assets by the
  Acquiring Person to, from or with the Company on other than an arm’s length
  basis, compensation to an Acquiring Person for services (other than for
  employment as a regular or part-time employee or director on a basis
  consistent with the Company’s past practice), a loan or provision of other
  financial assistance (except proportionately as a stockholder) to an
  Acquiring Person or the licensing, sale or other transfer of proprietary
  technology or know-how from the Company to the Acquiring Person on terms not
  approved by the Board of Directors or a reclassification, recapitalization or
  other transaction with the effect of increasing by more than 1% the Acquiring
  Person’s proportionate share of any class of securities of the Company.

  
	
   

  	
   

  	
   

  
	
  Rights in
  Event of Business Combination:

  	
   

  	
  If, following the
  occurrence of a Flip-In Event, the Company is acquired by any person in a
  merger or other business combination transaction in which the Common Stock is
  exchanged or converted or in which the Company is not the surviving
  corporation, or 50% or more of its assets or earnings power are sold to any
  person (“Flip-Over Events”), each holder of a Right (other than an Acquiring
  Person, or Affiliates or Associates thereof) shall thereafter have the right
  to purchase, upon payment of the then current Purchase Price, such number of
  shares of common stock of the acquiring company having a current market value
  equal to the Purchase Price divided by one-half the Current Market Price of
  such common stock.

  
	
   

  	
   

  	
   

  
	
  Exchange
  Option:

  	
   

  	
  In the event (i) any
  person or group becomes an Acquiring Person or (ii) any of the types of
  transactions, acquisitions or other events described above as self-dealing
  transactions occur, and prior to the acquisition by such person or group of 50%
  or more of the

  

 

 

 

 

C-2

 

 

	
   

  	
   

  	
  outstanding shares of
  Common Stock, the Board may require all or any portion of the outstanding
  Rights (other than Rights owned by such Acquiring Person which have become
  void) to be exchanged for Common Stock on a pro rata basis, at an exchange
  ratio of one share of Common Stock or one one-thousandth of a share of
  Preferred Stock (or of a share of a class or series of the Company’s
  Preferred Stock having equivalent rights, preferences and privileges), per
  Right (subject to adjustment).

  
	
   

  	
   

  	
   

  
	
  Fractional
  Shares:

  	
   

  	
  No fractional shares of
  Common Stock will be issued upon exercise of the Rights and, in lieu thereof,
  a payment in cash will be made to the holder of such Rights equal to the same
  fraction of the current market value of a share of Common Stock.

  
	
   

  	
   

  	
   

  
	
  Adjustment:

  	
   

  	
  The Purchase Price
  payable, and the number of shares of Preferred Stock or other securities or
  property issuable, upon exercise of the Rights are subject to adjustment from
  time to time to prevent dilution (i) in the event of a stock dividend
  on, or a subdivision, combination or reclassification of the Preferred Stock,
  (ii) upon the grant to holders of the Preferred Stock of certain rights
  or warrants to subscribe for Preferred Stock or convertible securities at
  less than the current market price of the Preferred Stock or (iii) upon
  the distribution to holders of the Preferred Stock of evidences of
  indebtedness or assets (excluding dividends payable in Preferred Stock) or of
  subscription rights or warrants (other than those referred to above).  The number of Rights associated with each
  share of Common Stock is also subject to adjustment in the event of a stock
  split of the Common Stock or a stock dividend on the Common Stock payable in
  Common Stock or subdivisions, consolidations or combinations of the Common
  Stock occurring, in any such case, prior to the Distribution Date.

  
	
   

  	
   

  	
   

  
	
  Rights as
  Stockholder:

  	
   

  	
  The Rights themselves do
  not entitle the holder thereof to any rights as a stockholder, including,
  without limitation, voting rights or to receive dividends.

  
	
   

  	
   

  	
   

  
	
  Amendment
  of Rights:

  	
   

  	
  Until the Rights become
  nonredeemable, the Company may, except with respect to the redemption price,
  amend the Agreement in any manner. 
  After the Rights become nonredeemable, the Company may amend the
  Agreement to cure any ambiguity, to correct or supplement any provision which
  may be defective or inconsistent with any other provisions, to shorten or
  lengthen any time period under the Rights Agreement, or to change or
  supplement any provision in any manner the Company may deem necessary or
  desirable, provided that no such amendment may adversely affect the interests
  of the holders of the Rights (other than the Acquiring Person or its
  Affiliates or Associates) or cause the Rights to again be redeemable or the
  Agreement to again be freely amendable.

  

 

 

A copy of the Rights Agreement is available, free of charge, from the
Company, Finisar Corporation, 1308 Moffett Park Drive, Sunnyvale, CA  94089; Attention:  Corporate Secretary.  This
summary description of the Rights Agreement does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, as amended
from time to time, which is incorporated in this summary description by
reference.

 

 

C-3

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