Document:

EXHIBIT 10.119

                                 PROMISSORY NOTE

$100,000.00
AUGUST 28, 2004

ULTRASTRIP SYSTEMS, INC., a Florida corporation ("Maker") (Maker and each
endorser, surety or guarantor, are collectively herein called "Obligor"),
promises to pay to the order of VINCENT ZANFINI, ("Lender"; Lenders and each and
all subsequent holders of this note are included in the terms "Holder"), at 4701
Bimini Circle North, Palm City FL. 34990 (or at such other place as the Holder
hereof may designate), the sum of ONE HUNDRED THOUSAND AND 00/00 DOLLARS
($100,000.00) with interest at the Applicable Interest Rate, as defined below.
Interest on principal will accrue at the Applicable Interest Rate from August
28, 2004 at the rate of 1/360th of annual interest for each day that principal
is outstanding; provided, however, in no event shall interest be due at a rate
in excess of the maximum permissible legal rate.

Principal and interest shall be payable as follows:

        a.      The entire outstanding principal balance of the note and
                interest shall be due and payable in full on or before November
                28, 2004 (the "Maturity Date").

        b.      The "Applicable Interest Rate" shall be eighteen percent (18%)
                per annum.

        c.      This note may be prepaid at any time in whole or in part,
                without premium or penalty.

        d.      Lender and Holder may agree to extend Promissory Note an
                additional three (3)months.

As used in this instrument, the term "Obligations" shall refer to the
indebtedness represented by this note and all modifications, renewals and
substitutions hereof.

The happening of any of the following events shall constitute a default
hereunder: (1) failure of Obligor to pay in full when due any indebtedness,
obligation, or liability to the Holder whatsoever, or any installment thereof or
interest thereon; (2) failure of Obligor to perform any agreement hereunder; (3)
the Holder learns that any warranty, representation, certificate or statement of
Obligor (whether contained in this note or not) pertaining to or in connection
with this note or the loan or credit evidenced by this note, is not true; (4)
Obligor becomes insolvent or any insolvency proceedings (as said terms
"insolvent" and "insolvency proceedings" are defined in the Uniform Commercial
Code of Florida) are instituted or made by or against Obligor, or application is
made for the appointment of a receiver for Obligor or for any of the assets of
Obligor; (5) the entry of a judgment against Obligor; (6) the issuing of any
levy, attachment or garnishment, or the filing of any lien against any property
of Obligor; or (7) the dissolution, merger, consolidation, or reorganization of
Obligor.

 Upon the happening of any default as defined herein the entire amount of this
note remaining unpaid, shall, at the option of the Holder and without notice or
demand, become due and payable forthwith or thereafter. In the event of any
default hereunder, after deducting any paid and unaccrued or paid and unearned
interest from the principal balance then due, the then unpaid principal balance
hereof and any accrued and unpaid interest shall bear interest from the time of
such default at the maximum legal rate permissible (the "Default Rate"), and,

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regardless of the payment terms of the note, and all unpaid interest from the
time of such default may be compounded on a monthly basis, the first such
compounding to be made 30 days after the default and, thereafter, on the same
date of each subsequent month until all Obligations have been paid in full. In
no event and under no circumstances shall there be due hereunder, nor shall the
Holder be entitled hereunder to receive at any time, any charges not allowed or
permitted by law or any interest or interest rate in excess of the maximum
allowed by law. In the event that the amount of any charge or payment due
hereunder shall create or shall be deemed to create an interest charge in excess
of the maximum permissible legal rate, then the charge of any such excess amount
shall be deemed unenforceable and void and its collection shall be waived,
without affecting the remainder of the Obligations evidenced hereby, and any
such excess amount which may have been paid to the Holder shall be refunded.

In the event the Holder shall be required at any time to pay documentary stamp
tax, intangible tax, or other taxation with respect to all or part of the Loan
or any other transaction contemplated or evidenced by this note, the Obligor
shall reimburse the Holder immediately for all such costs, including any
interest and penalties with respect thereto.

With respect to any and all Obligations, the Obligor waives the following: (1)
demand, presentment, protest, notice of dishonor, suit against any party and all
other requirements necessary to charge or hold Obligor liable on any Obligation;
(2) any further receipt for or acknowledgment of the Collateral now or hereafter
deposited or statement of indebtedness; (3) the right to interpose any set-off
or counterclaim of any nature or description in any litigation in which the
Holder and Obligor shall be adverse parties. The Obligor agrees that any
Obligations of Obligor may, from time to time, in whole or in part, be renewed,
extended, modified, accelerated, compromised, discharged or released by the
Holder, all without notice to or further reservations of rights against Obligor
and all without in any way affecting or releasing the liability of Obligor. The
Obligor agrees to pay all taxes and assessments levied on or with respect to the
Obligations, this note, including but not limited to intangible and documentary
stamp taxes, and all filing fees and taxes and all costs of collecting or
securing or attempting to collect or secure any Obligations, including
attorneys' fees, whether or not involving litigation and/or appellate
proceedings.

The Holder shall not by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies, and no waiver of any kind shall be valid,
unless in writing and signed by the Holder. All rights and remedies of the
Holder under the terms of this note and under any statutes or rules of law shall
be cumulative and may be exercised successively or concurrently. The Obligor
agrees that the Holder shall be entitled to all the rights of a holder in due
course of a negotiable instrument. This note shall be governed by and construed
in accordance with the laws of the State of Florida. Any provision of this note,
which may be unenforceable or invalid under any law, shall be ineffective to the
extent of such unenforceability or invalidity without affecting the
enforceability or validity of any other provision hereof. Any notice required to
be given to any person shall be deemed sufficient if mailed, postage prepaid, to
such person's address as it appears on this note, or, if none appears, to any
address in the Holder's files. The Holder shall have the right unilaterally to
correct patent errors in this note and to fill in any blank spaces herein so as
to conform to the terms upon which the loan evidenced hereby is made.

The Obligor shall be liable for all indebtedness represented by this note and
have subscribed their names hereto without condition that anyone else should
sign or become bound hereon and without any other condition whatever being made.
The provisions of this note are binding on the heirs, executors, administrators,
assigns and successors of Obligor and shall inure to the benefit of the Holder,
its successors and assigns. This note is executed under the seal of the Obligor.

                                       2

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This promissory note constitutes and evidences the complete understanding
between the Holder and the Obligor. All prior and contemporaneous discussions
between the Holder and the Obligor, including all representations and promises
by the Holder, whether oral or written, concerning the Obligations, are included
in and merged in this note. Any modification thereof hereafter which is not in
writing and signed by the Holder and the Obligor shall be void, except that the
Holder may in its sole discretion extend the maturity of the loan evidenced by
this note for a term specified in a written notification mailed to the Obligor
at its address shown on the Holder's records. The Holder may rely on the
information, instructions, or other communications (including requests for and
directions concerning loan advances) given to the Holder by the Obligor.

Notwithstanding anything herein to the contrary, Holder agrees, by acceptance of
this note, to forbear acceleration of the unpaid principal balance hereof (a)
for a period of 10days for the failure of the Obligor to make a payment when due
hereunder. Such forbearance shall not deny or in any way mitigate the occurrence
of a default, unless the Obligor, within the applicable forbearance period,
cures such default to Holder's satisfaction, in which event the Loan shall
thereupon be reinstated and restored to good standing in all respects, including
the interest rate hereon, effective as of the date of the default.

 No invalid provision of this note shall affect or impair any other provision.
Maker and Obligor acknowledge receipt of a completed copy of this Note.

THE OBLIGOR AND, BY ITS ACCEPTANCE HEREOF, THE HOLDER, EACH HEREBY WAIVES (1)
ALL RIGHTS TO RELY ON OR ENFORCE ANY ORAL STATEMENTS MADE PRIOR TO,
CONTEMPORANEOUSLY WITH OR SUBSEQUENT TO THE SIGNING OF THIS PROMISSORY NOTE; AND
(2) THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS PROMISSORY NOTE, OR WITH
RESPECT TO DEALINGS BETWEEN THE HOLDER AND THE OBLIGOR CONCERNING ANY COURSE OF
CONDUCT, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER TO PROVIDE CREDIT TO THE
OBLIGOR.

Lender                                       UltraStrip Systems, Inc.

                                             By:
------------------------                     ----------------------------------
Vincent Zanfini                              Stephen R. Johnson, President

                                       3EXHIBIT 4.1

                                RIGHTS AGREEMENT

                          DATED AS OF NOVEMBER 17, 2004

                                     BETWEEN

                                    POINT.360

                                       AND

                     AMERICAN STOCK TRANSFER & TRUST COMPANY

                                 AS RIGHTS AGENT

<PAGE>

                       DEFINED TERM CROSS REFERENCE SHEET

Acquiring Person..................................................Section 1(a)
Act...............................................................Section 1(b)
Adjustment Shares............................................Section 11(a)(ii)
Adjusted Number of Shares...................................Section 11(a)(iii)
Adjusted Purchase Price.....................................Section 11(a)(iii)
Affiliate.........................................................Section 1(c)
Agreement..............................................................Preface
Appointment of Rights Agent..........................................Section 2
Associate.........................................................Section 1(c)
Beneficial Owner..................................................Section 1(d)
Beneficially Own..................................................Section 1(d)
Business Day......................................................Section 1(e)
Capital Stock Equivalent.....................................Section 11(a)(ii)
Close of Business.................................................Section 1(f)
Common Shares.....................................................Section 1(g)
Corporation............................................................Preface
Current Per Market Price.........................................Section 11(d)
Current Per Share Market Price................................Section 11(d)(i)
Distribution Date.................................................Section 3(a)
Equivalent Preferred Shares......................................Section 11(b)
Exchange Act......................................................Section 1(c)
Final Expiration Date.............................................Section 7(a)
Interested Shareholder............................................Section 1(j)
Permitted Offer...................................................Section 1(k)
Person............................................................Section 1(l)
Preferred Shares..................................................Section 1(m)
Principal Party..................................................Section 13(b)
Proration Factor............................................Section 11(a)(iii)
Purchase Price....................................................Section 4(a)
Record Date............................................................Preface
Redemption Date...................................................Section 7(a)
Redemption Price....................................................Section 23
Right..................................................................Preface
Right Certificate.................................................Section 3(a)
Rights Agent...........................................................Preface
Rights Agreement.....................................................Section 3
Section 11(a)(ii) Event......................................Section 11(a)(ii)
Section 13 Event.................................................Section 13(a)
Security......................................................Section 11(d)(i)
Shares Acquisition Date...........................................Section 1(q)
Subsidiary........................................................Section 1(r)
Summary of Rights.................................................Section 3(b)
Then Outstanding.............................................Section 1(d)(iii)
Trading Day...................................................Section 11(d)(i)
Triggering Event..................................................Section 1(s)
Voting Securities................................................Section 13(a)

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                                TABLE OF CONTENTS

Section 1.  Certain Definitions................................................1
Section 2.  Appointment of Rights Agent........................................4
Section 3.  Issuance of Right Certificates.....................................4
Section 4.  Form of Right Certificate..........................................6
Section 5.  Countersignature and Registration..................................6
Section 6.  Transfer, Split-Up, Combination and Exchange of
            Right Certificates; Mutilated, Destroyed, Lost or
            Stolen Right Certificate...........................................7
Section 7.  Exercise of Rights; Purchase Price; Expiration
            Date of Rights.....................................................8
Section 8.  Cancellation and Destruction of Right Certificates................10
Section 9.  Reservation and Availability of Preferred Shares..................10
Section 10. Preferred Shares Record Date......................................11
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
            or Number of Rights...............................................11
Section 12. Certificate of Adjusted Purchase Price or Number of Shares........18
Section 13. Consolidation, Merger or Sale or Transfer of Assets
            or Earning Power..................................................18
Section 14. Fractional Rights and Fractional Shares...........................20
Section 15. Rights of Action..................................................21
Section 16. Agreement of Right Holders........................................22
Section 17. Right Certificate Holder Not Deemed a Shareholder.................22
Section 18. Concerning the Rights Agent.......................................23
Section 19. Merger or Consolidation or Change of Name of Rights Agent.........23
Section 20. Duties of Rights Agent............................................24
Section 21. Change of Rights Agent............................................26
Section 22. Issuance of New Right Certificates................................26
Section 23. Redemption and Termination........................................27
Section 24. Exchange..........................................................28
Section 25. Notice of Certain Events..........................................29
Section 26. Notices...........................................................30
Section 27. Supplements and Amendments........................................30
Section 28. Determination and Actions by the Board of Directors, etc..........31
Section 29. Successors........................................................31
Section 30. Benefits of this Agreement........................................31
Section 31. Severability......................................................31
Section 32. Governing Law.....................................................32
Section 33. Counterparts......................................................32
Section 34. Descriptive Headings..............................................32

<PAGE>

                                RIGHTS AGREEMENT

        RIGHTS  AGREEMENT,  dated as of  November  17,  2004 (the  "Agreement"),
between Point.360,  a California  corporation (the "Corporation"),  and American
Stock Transfer & Trust Company (the "Rights Agent").

        The Board of Directors of the  Corporation has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as defined herein) of the Corporation  outstanding at the Close of Business (as
defined  herein)  on  November  17,  2004  (the  "Record   Date"),   each  Right
representing  the right to purchase one  one-hundredth  of a Preferred Share (as
defined herein),  upon the terms and subject to the conditions herein set forth,
and has further  authorized  and directed the issuance of one Right with respect
to each Common Share that shall become  outstanding  between the Record Date and
the  earliest  of the  Distribution  Date,  the  Redemption  Date  or the  Final
Expiration  Date (as such terms are defined  herein);  provided,  however,  that
Rights may be issued with respect to Common Shares that shall become outstanding
after the  Distribution  Date and before the earlier of the Redemption  Date and
the Final  Expiration  Date in accordance  with the  provisions of Section 22 of
this Agreement.

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

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

        (a) "Acquiring  Person" shall mean any Person (as defined herein) who or
which,  together with all Affiliates and Associates (as defined  herein) of such
Person,  shall be the Beneficial Owner (as defined herein) of 20% or more of the
then outstanding  Common Shares (other than as a result of a Permitted Offer (as
defined  herein))  or was such a  Beneficial  Owner at any time  after  the date
hereof,  whether or not such person  continues to be the Beneficial Owner of 20%
or more of the then outstanding  Common Shares.  Notwithstanding  the foregoing,
(A) the term "Acquiring Person" shall not include (i) the Corporation,  (ii) any
Subsidiary  of  the  Corporation,   (iii)  any  employee  benefit  plan  of  the
Corporation or of any Subsidiary of the Corporation,  (iv) any Person organized,
appointed or established by the  Corporation for or pursuant to the terms of any
such plan, (v) Haig S.  Bagerdjian  ("Bagerdjian"),  or (vi) any Person,  who or
which together with all  Affiliates  and Associates of such Person,  becomes the
Beneficial  Owner  of 20% or more of the then  outstanding  Common  Shares  as a
result of the  acquisition of Common Shares directly from the  Corporation,  and
(B) no Person shall be deemed to be an "Acquiring Person" either (X) as a result
of the  acquisition of Common Shares by the  Corporation  which, by reducing the
number of Common Shares outstanding, increases the proportional number of shares
beneficially  owned by such Person,  together with all Affiliates and Associates
of such Person;  except that if (i) a Person  would  become an Acquiring  Person
(but for the operation of this  subclause X) as a result of the  acquisition  of
Common Shares by the Corporation,  and (ii) after such share  acquisition by the
Corporation,  such Person, or an Affiliate or Associate of such Person,  becomes
the Beneficial Owner of any additional Common Shares,  then such Person shall be
deemed an Acquiring  Person, or (Y) if the Board of Directors of the Corporation
determines  in good  faith that a Person who would  otherwise  be an  "Acquiring
Person," as defined  pursuant to the foregoing  provisions of this Section 1(a),
has become such, and such Person divests as promptly as practicable a sufficient
number of Common  Shares so that  such  Person  would no longer be an  Acquiring
Person,  as defined  pursuant to the foregoing  provisions of this Section 1(a),
then such Person shall not be deemed as  "Acquiring  Person" for any purposes of
this Agreement.

<PAGE>

        (b) "Act" shall mean the  Securities  Act of 1933,  as amended and as in
effect on the date of this Agreement.

        (c)  "Affiliate"  and  "Associate"  shall have the  respective  meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations  under
the  Securities  Exchange  Act of 1934,  as amended and in effect on the date of
this Agreement (the "Exchange Act").

        (d) A Person  shall be  deemed  the  "Beneficial  Owner" of and shall be
deemed to "beneficially own" any securities:

            (i) of which  such  Person  or any of such  Person's  Affiliates  or
Associates directly or indirectly,  has "beneficial  ownership" as determined in
accordance  with  Rule  13d-3 of the  General  Rules and  Regulations  under the
Exchange Act;

            (ii)  which  such  Person  or any of  such  Person's  Affiliates  or
Associates  has (A) the right to  acquire  (whether  such  right is  exercisable
immediately or after the passage of time) pursuant to any agreement, arrangement
or understanding,  or upon the exercise of conversion  rights,  exchange rights,
rights (other than the Rights),  warrants or options,  or  otherwise;  provided,
however,  that a Person  shall  not be  deemed  the  Beneficial  Owner of, or to
beneficially  own,  securities  tendered  pursuant to a tender or exchange offer
made by or on  behalf  of such  Person  or any of such  Person's  Affiliates  or
Associates until such tendered securities are accepted for purchase or exchange;
or (B) the right to vote or dispose of pursuant to any agreement, arrangement or
understanding;  provided,  however,  that  a  Person  shall  not be  deemed  the
Beneficial  Owner of, or to  beneficially  own, any  security if the  agreement,
arrangement  or  understanding  to vote such  security (1) arises  solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent  solicitation  made pursuant to, and in accordance  with, the applicable
rules and  regulations  promulgated  under the  Exchange Act and (2) is not also
then  reportable  on Schedule 13D or Schedule 13G under the Exchange Act (or any
comparable or successor report); or

            (iii) which are beneficially owned,  directly or indirectly,  by any
other Person (or any Affiliate or Associate  thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities)
relating to the acquisition,  holding, voting (except to the extent contemplated
by the proviso to Section  1(d)(ii)(B))  or disposing of any  securities  of the
Corporation.

        Notwithstanding  anything in this definition of Beneficial  Ownership to
the contrary,  the phrase "then outstanding," when used herein with reference to
a Person's Beneficial Ownership of securities of the Corporation, shall mean the
number of such securities  then issued and outstanding  together with the number
of such securities not then actually  issued and  outstanding  which such Person
would be deemed to own beneficially hereunder.

        (e) "Business  Day" shall mean any day other than a Saturday,  Sunday or
U.S. federal holiday.

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

        (g) "Common  Shares" when used with reference to the  Corporation  shall
mean the shares of Common Stock,  without par value,  of the  Corporation or, in
the event of a subdivision,  combination or  consolidation  with respect to such
shares  of  Common  Stock,  the  shares  of  Common  Stock  resulting  from such
subdivision,  combination  or  consolidation.  "Common  Shares"  when  used with
reference to any Person other than the Corporation  shall mean the capital stock
(or equity  interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.

<PAGE>

        (h)  "Distribution  Date"  shall have the meaning set forth in Section 3
hereof.

        (i) "Final  Expiration Date" shall have the meaning set forth in Section
7 hereof.

        (j) "Interested  Shareholder"  shall mean any Acquiring  Person,  or any
Affiliate or Associate of an Acquiring  Person, or any other Person in which any
such  Acquiring  Person,  Affiliate or Associate  has an interest,  or any other
Person  acting  directly or  indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.

        (k) "Permitted Offer" shall mean a tender or exchange offer which is for
all  outstanding  Common Shares at a price and on terms  determined,  before the
purchase of shares under such tender or exchange  offer,  by at least a majority
of the members of the Board of Directors who are not officers of the Corporation
and who  are not  Acquiring  Persons  or  Affiliates,  Associates,  nominees  or
representatives  of an Acquiring Person, to be adequate (taking into account all
factors  that such members of the Board of Directors  deem  relevant  including,
without limitation,  prices that could reasonably be achieved if the Corporation
or its assets were sold on an orderly basis  designed to realize  maximum value)
and  otherwise in the best  interests of the  Corporation  and its  shareholders
(other than the Person or any Affiliate or Associate  thereof on whose basis the
offer is being made)  taking into account all factors  that such  directors  may
deem relevant.

        (l) "Person" shall mean any individual, firm, partnership,  corporation,
trust,  association,  joint  venture  or other  entity,  and shall  include  any
successor (by merger or otherwise) of such entity.

        (m)   "Preferred   Shares"   shall  mean   shares  of  Series  A  Junior
Participating  Preferred Stock, without par value, of the Corporation having the
relative  rights,   preferences  and  limitations  set  forth  in  the  Form  of
Certificate of Determination attached to this Agreement as Exhibit A.

        (n)  "Redemption  Date"  shall have the  meaning  set forth in Section 7
hereof.

        (o) "Section  11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.

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

        (q)  "Shares  Acquisition  Date"  shall  mean the  first  date of public
announcement  (which,  for purposes of this definition,  shall include,  without
limitation,  a report filed pursuant to the Exchange Act) by the  Corporation or
an Acquiring Person that an Acquiring Person has become such; provided, that, if
such Person is  determined  not to have become an Acquiring  Person  pursuant to
Section 1(b)(Y) hereof,  then no Shares Acquisition Date shall be deemed to have
occurred.

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

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

        Section 2. Appointment of Rights Agent. The Corporation  hereby appoints
the  Rights  Agent to act as agent for the  Corporation  and the  holders of the
Rights (who, in accordance with Section 3 hereof,  shall before the Distribution
Date also be the  holders  of Common  Shares) in  accordance  with the terms and
conditions  hereof,  and the Rights Agent hereby accepts such  appointment.  The
Corporation  may from time to time appoint such co-Rights  Agents as it may deem
necessary or desirable.

<PAGE>

        Section 3. Issuance of Right Certificates.

        (a) Until the earlier of (i) the tenth day after the Shares  Acquisition
Date or (ii) the Close of Business on the tenth Business Day (or such later date
as may be determined by action of the  Corporation's  Board of Directors)  after
the date on which any Person (other than the Corporation,  any Subsidiary of the
Corporation,  Bagerdjian, any employee benefit plan of the Corporation or of any
Subsidiary of the  Corporation or any Person or entity  organized,  appointed or
established  by the  Corporation  for or pursuant to the terms of any such plan)
commences or first publicly announces the intent to commence (which intention to
commence  remains in effect for five Business Days after such  announcement),  a
tender or exchange  offer the  consummation  of which would result in any Person
becoming an Acquiring Person  (including,  in the case of both (i) and (ii), any
such date which is after the date of this  Agreement  and before the issuance of
the  Rights),  the  earlier  of  such  dates  being  herein  referred  to as the
"Distribution  Date,"  (x) the  Rights  will be  evidenced  by  (subject  to the
provisions of Section 3(b) hereof) the certificates for Common Shares registered
in the names of the holders thereof (which  certificates shall also be deemed to
be Right Certificates) and not by separate Right Certificates, and (y) the right
to receive Right  Certificates  will be transferable only in connection with the
transfer  of  the  underlying   Common  Shares  (including  a  transfer  to  the
Corporation);  provided,  however, that if a tender offer is terminated before a
Distribution  Date occurs,  then no Distribution Date shall occur as a result of
such tender offer.  As soon as  practicable  after the  Distribution  Date,  the
Corporation will prepare and execute, the Rights Agent will countersign, and the
Corporation will send or cause to be sent by first-class,  postage-prepaid mail,
to each  record  holder of Common  Shares  as of the  Close of  Business  on the
Distribution  Date,  at the address of such  holder  shown on the records of the
Corporation, a Right Certificate,  substantially in the form of Exhibit B hereto
(a "Right Certificate"),  evidencing one Right for each Common Share so held. As
of and after the Distribution  Date, the Rights will be evidenced solely by such
Right Certificates.

        (b) As soon as practicable  following the Record Date,  the  Corporation
will  send a copy of a  Summary  of  Rights to  Purchase  Preferred  Shares,  in
substantially  the form of  Exhibit  C hereto  (the  "Summary  of  Rights"),  by
first-class,  postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Record Date, at the address of such holder shown on
the records of the  Corporation.  With respect to certificates for Common Shares
outstanding as of the Record Date, until the Distribution  Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together  with a copy of the  Summary  of  Rights  attached  thereto.  Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date),  the  surrender  for  transfer  of  any  certificate  for  Common  Shares
outstanding on the Record Date,  with or without a copy of the Summary of Rights
attached  thereto,  shall also constitute the transfer of the Rights  associated
with such Common Shares.

        (c) Certificates for Common Shares, which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this  paragraph  (c)) after the  Record  Date but  before  the  earliest  of the
Distribution  Date, the Redemption Date or the Final  Expiration  Date, shall be
deemed also to be certificates for Rights and shall bear the following legend:

        This  certificate  also  evidences  and  entities  the holder  hereof to
        certain rights as set forth in a Rights Agreement  between Point.360 and
        American Stock  Transfer & Trust Company,  dated as of November 17, 2004
        (the  "Rights  Agreement"),  the terms of which are hereby  incorporated
        herein  by  reference  and a copy of which  is on file at the  principal
        executive  offices of  Point.360.  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.
        Point.360  will  mail to the  holder of this  certificate  a copy of the
        Rights  Agreement  without  charge  after  receipt of a written  request
        therefor. Under certain circumstances set forth in the Rights Agreement,
        Rights  issued  to, or held by,  any  Person  who is,  was or becomes an
        Acquiring Person or an Affiliate or Associate thereof (as defined in the
        Rights Agreement) and certain related persons, whether currently held by
        or on behalf of such Person or by any subsequent holder, may become null
        and void.

<PAGE>

With respect to such  certificates  containing the foregoing  legend,  until the
Distribution  Date, the Rights associated with the Common Shares  represented by
such  certificates  shall  be  evidenced  by such  certificates  alone,  and the
surrender  for  transfer  of any such  certificate  shall  also  constitute  the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Corporation purchases or acquires any Common Shares after the
Record Date but before the  Distribution  Date, any Rights  associated with such
Common  Shares  shall be deemed  cancelled  and retired so that the  Corporation
shall not be entitled to exercise any Rights  associated  with the Common Shares
that are no longer outstanding.

        Section 4. Form of Right Certificate.

        (a) The Right Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse  thereof) shall be  substantially in the
form set forth in Exhibit A hereto and may have such marks of  identification or
designation and such legends,  summaries or endorsements  printed thereon as the
Corporation  may deem  appropriate  and as are consistent with the provisions of
this Agreement,  or as may-be required to comply with any applicable law or with
any rule or regulation  made pursuant  thereto or with any rule or regulation of
any stock  exchange  on which the Rights may from time to time be listed,  or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Right Certificates shall entitle the holders thereof to purchase such number
of one  one-hundredths of a Preferred Share as shall be set forth therein at the
price per Preferred  Share set forth  therein (the  "Purchase  Price"),  but the
amount and type of  securities  purchasable  upon the exercise of each Right and
the Purchase Price thereof shall be subject to adjustment as provided herein.

        (b) Any Right Certificate  issued pursuant to Section 3(a) or Section 22
hereof that  represents  Rights which are null and void pursuant to Section 7(e)
of this  Agreement  and any Right  Certificate  issued  pursuant to Section 6 or
Section 11 hereof upon  transfer,  exchange,  replacement  or  adjustment of any
other Right  Certificate  referred to in this  sentence,  shall  contain (to the
extent feasible) the following legend:

        The  Rights   represented  by  this  Right   Certificate   are  or  were
        beneficially  owned by a Person who was or became an Acquiring Person or
        an Affiliate  or  Associate  of an  Acquiring  Person (as such terms are
        defined in the Rights  Agreement).  Accordingly,  this Right Certificate
        and the Rights represented hereby are null and void.

Provisions of Section 7(e) of this Agreement  shall be operative  whether or not
the foregoing legend is contained on any such Right Certificate.

        Section 5.  Countersignature  and Registration.  The Right  Certificates
shall be executed on behalf of the Corporation by its Chairman of the Board, its
Chief  Executive  Officer,  its President,  any of its Vice  Presidents,  or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the  Corporation's  seal or a  facsimile  thereof,  and shall be attested by the
Secretary or an Assistant  Secretary of the  Corporation,  either manually or by
facsimile signature. The Right Certificates shall be countersigned by the Rights
Agent and shall be valid for any purpose unless so  countersigned.  In the event
that any  officer  of the  Corporation  who signs any of the Right  Certificates
ceases to be such officer of the Corporation before such countersignature by the
Rights  Agent  and  issuance  and  delivery  by  the  Corporation,   such  Right
Certificates  may  nevertheless be  countersigned by the Rights Agent and issued
and  delivered by the  Corporation  with the same force and effect as though the
person who signed such Right  Certificates  had not ceased to be such officer of
the  Corporation;  and any  Right  Certificate  may be  signed  on behalf of the
Corporation by any person who, at the actual date of the execution of such Right
Certificate,  shall be a proper  officer of the  Corporation  to sign such Right
Certificate,  although at the date of the  execution of this  Agreement any such
person was not such an officer.

        Following the Distribution  Date, the Rights Agent will keep or cause to
be kept, at its principal office or offices  designated as the appropriate place
for surrender or transfer of such Right Certificate,  books for registration and
transfer of the Right Certificates  issued hereunder.  Such books shall show the
names and addresses of the  respective  holders of the Right  Certificates,  the
number of Rights evidenced on its face by each of the Right Certificates and the
certificate number and the date of each of the Right Certificates.

<PAGE>

        Section  6.  Transfer,  Split-Up,  Combination  and  Exchange  of  Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificate. Subject to
the provisions of Section 4(b),  Section 7(e) and Section 14 hereof, at any time
after the Close of Business on the Distribution Date, and at or before the Close
of Business on the earlier of the Redemption Date or the Final  Expiration Date,
any  Right  Certificate  or Right  Certificates  may be  transferred,  split up,
combined or  exchanged  for another  Right  Certificate  or Right  Certificates,
entitling the registered holder to purchase a like number of one  one-hundredths
of a Preferred Share (or, following a Triggering Event, other securities, as the
case may be) as the Right  Certificate or Right  Certificates  surrendered  then
entitled  such holder (or former  holder in the case of a transfer) to purchase.
Any registered  holder  desiring to transfer,  split up, combine or exchange any
Right  Certificate  or Right  Certificates  shall  make such  request in writing
delivered to the Rights Agent and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the principal
office or offices of the Rights Agent  designated for such purpose.  Neither the
Rights  Agent  nor  the  Corporation  shall  be  obligated  to take  any  action
whatsoever  with  respect  to  the  transfer  of  any  such  surrendered   Right
Certificate until the registered holder has completed and signed the certificate
contained  in the  form  of  assignment  on  the  reverse  side  of  such  Right
Certificate and shall have provided such additional  evidence of the identity of
the Beneficial Owner (or former  Beneficial  Owner), or Affiliates or Associates
thereof, as the Corporation shall reasonably  request.  Subject to Section 4(b),
Section 7(e) and Section 14 hereof, the Rights Agent shall thereupon countersign
and  deliver  to the  Person  entitled  thereto  a Right  Certificate  or  Right
Certificates,  as the case may be, as so requested.  The Corporation 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.

        Upon  receipt  by the  Corporation  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, at the  Corporation's  request,
reimbursement  to the  Corporation  and  the  Rights  Agent  of all  reason-able
expenses  incidental  thereto,  and  upon  surrender  to the  Rights  Agent  and
cancellation of the Right  Certificate if mutilated,  the Corporation  will make
and  deliver a new  Right  Certificate  of like  tenor to the  Rights  Agent for
countersignature  and  delivery  to the  registered  holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.

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

        (a) Subject to Section 7(e) hereof,  the registered  holder of any Right
Certificate  may  exercise  the Rights  evidenced  thereby  (except as otherwise
provided  herein)  in whole or in part at any time after the  Distribution  Date
upon surrender of the Right  Certificate,  with the form of election to purchase
and the  certificate  on the reverse side thereof duly  executed,  to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose,  together  with payment of the aggregate  Purchase  Price for the total
number of one  one-hundredths of a Preferred Share (or other securities,  as the
case may be) as to which such surrendered Rights are exercised, at or before the
earliest  of (i) the  Close  of  Business  on  November  16,  2014  (the  "Final
Expiration Date"), (ii) the date on which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date"), or (iii) the date on which the Rights
are exchanged pursuant to Section 24 hereof.

        (b) The Purchase Price for each one  one-hundredth  of a Preferred Share
pursuant  to the  exercise  of a  Right  shall  initially  be  $10,  subject  to
adjustment from time to time as provided in the next sentence and in Sections 11
and 13(a) hereof,  and shall be payable in accordance  with paragraph (c) below.
Notwithstanding anything in this Agreement to the contrary, in the event that at
any time after the date of this Agreement and before the Distribution  Date, the
Corporation  shall (i) declare or pay any dividend on the Common Shares  payable
in Common Shares or (ii) effect a subdivision,  combination or  consolidation of
the Common Shares (by reclassification or otherwise than by payment of dividends
in Common Shares) into a greater or lesser number of Common Shares,  then in any
such case, each Common Share outstanding following such subdivision, combination
or consolidation  shall continue to have a Right associated  therewith,  and the
Purchase  Price  following any such event shall be  proportionately  adjusted to
equal the result obtained by multiplying the Purchase Price  immediately  before
such event by a fraction  the  numerator  of which shall be the total  number of
Common  Shares   outstanding   immediately  before  the  event  occurs  and  the
denominator  of which  shall be the total  number of Common  Shares  outstanding
immediately  after  such  event  occurs.  The  adjustment  provided  for  in the
preceding  sentence  shall be made  successively  whenever  such a  dividend  is
declared  or  paid  or  such a  subdivision,  combination  or  consolidation  is
effected.

<PAGE>

        (c) Upon receiving a Right Certificate  representing exercisable Rights,
with the  form of  election  to  purchase  and the  certificate  duly  executed,
accompanied by payment of the Purchase Price for the Preferred  Shares (or other
securities,  as the case may be) to be  purchased,  and an  amount  equal to any
applicable  transfer  tax  required  to be paid  by the  holder  of  such  Right
Certificate in accordance with Section 6 hereof,  by certified check,  cashier's
check or money order payable to the order of the  Corporation,  the Rights Agent
shall  thereupon  promptly  (i)(A)  requisition  from any transfer  agent of the
Preferred  Shares  certificates  for  the  number  of  Preferred  Shares  to  be
purchased,  and the Corporation hereby irrevocably authorizes its transfer agent
to  comply  with  all  such  requests,  or (B) if the  Corporation,  in its sole
discretion,  shall have elected to deposit the  Preferred  Shares  issuable upon
exercise  of the  Rights  hereunder  into a  depositary,  requisition  from  the
depositary  agent   depositary   receipts   representing   such  number  of  one
one-hundredths  of a  Preferred  Share as are to be  purchased  (in  which  case
certificates  for the Preferred  Shares  represented  by such receipts  shall be
deposited by the transfer agent with the depositary  agent), and the Corporation
will  direct  the  depositary  agent to  comply  with such  requests,  (ii) when
appropriate,  requisition  from the Corporation the amount of cash to be paid in
lieu of issuance of fractional shares, in accordance with Section 14 hereof, and
(iii) after receipt of such certificates or depositary receipts, cause the same,
together with any cash to be paid in lieu of fractional  shares, to be delivered
to,  or upon the  order of the  registered  holder  of such  Right  Certificate,
registered  in such name or names as may be designated  by, such holder.  In the
event that the  Corporation  is obligated to issue other  securities  (including
Common  Shares)  of the  Corporation  pursuant  to  Section  11(a)  hereof,  the
Corporation will make all  arrangements  necessary so that such other securities
are available for distribution by the Rights Agent, if and when appropriate.

        In  addition,  in the  case of an  exercise  of the  Rights  by a holder
pursuant to Section 11(a)(ii)  hereof,  the Rights Agent shall return such Right
Certificate  to the  registered  holder  thereof after  imprinting,  stamping or
otherwise   indicating  thereon  that  the  rights  represented  by  such  Right
Certificate  no longer include the rights  provided by Section  11(a)(ii) of the
Rights  Agreement,  and if less than all the  Rights  represented  by such Right
Certificate  were so  exercised,  the Rights  Agent shall  indicate on the Right
Certificate the number of Rights  represented  thereby which continue to include
the rights provided by Section 11(a)(ii).

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

        (e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an  Acquiring  Person or an  Affiliate or Associate of an Acquiring
Person,  (ii) a  transferee  of an  Acquiring  Person  (or of any  Affiliate  or
Associate  thereof) who becomes a transferee  after the Acquiring Person becomes
such,  or (iii) a  transferee  of an  Acquiring  Person (or of any  Affiliate or
Associate  thereof) who becomes a  transferee  before or  concurrently  with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity  interests  in such  Acquiring  Person or to any Person  with whom the
Acquiring  Person  has a  continuing  agreement,  arrangement  or  understanding
regarding the transferred  Rights or (B) a transfer which the Board of Directors
of the Corporation,  in its sole  discretion,  has determined is part of a plan,
arrangement  or  understanding  that has as a  primary  purpose  or  effect  the
avoidance  of this  Section  7(e) shall become null and void without any further
action,  and no holder of such  Rights  shall  have any rights  whatsoever  with
respect  to such  Rights,  whether  under any  provision  of this  Agreement  or
otherwise.  The Corporation shall use all reasonable  efforts to insure that the
provisions  of this Section  7(e) and Section 4(b) hereof are complied  with but
shall have no liability to any holder of 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.

        (f) Notwithstanding anything in this Agreement to the contrary,  neither
the Rights Agent nor the Corporation  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 Corporation shall reasonably request.

<PAGE>

        Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates  surrendered  for the  purpose  of  exercise,  transfer,  split up,
combination or exchange  shall,  if surrendered to the  Corporation or to any of
its agents,  be delivered to the Rights Agent for  cancellation  or in cancelled
form, or, if  surrendered to the Rights Agent,  shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Agreement. The Corporation shall deliver to the
Rights  Agent for  cancellation  and  retirement,  and the Rights Agent shall so
cancel and retire,  any other  Right  Certificate  purchased  or acquired by the
Corporation  otherwise  than upon the exercise  thereof.  The Rights Agent shall
deliver all cancelled Right  Certificates to the  Corporation,  or shall, at the
written request of the  Corporation,  destroy such cancelled Right  Certificates
and in such case,  shall deliver a  certificate  of  destruction  thereof to the
Corporation.

        Section  9.  Reservation  and  Availability  of  Preferred  Shares.  The
Corporation  covenants  and agrees that at all times before a Section  11(a)(ii)
Event  occurs  it will  cause  to be  reserved  and  kept  available  out of its
authorized and unissued Preferred Shares, or any authorized and issued Preferred
Shares  held in its  treasury,  the  number  of  Preferred  Shares  that will be
sufficient to permit the exercise in full of all outstanding  Rights and after a
Section 11(a)(ii) Event occurs, shall, to the extent reasonably practicable,  so
reserve and keep  available a sufficient  number of Common Shares  (and/or other
securities)  which may be required to permit the  exercise in full of the Rights
pursuant to this Agreement.

        So long as the Preferred  Shares (and,  after a Section  11(a)(ii) Event
occurs, Common Shares or any other securities) issuable upon the exercise of the
Rights may be listed on any national securities exchange,  the Corporation shall
use its best  efforts to cause,  from and after  such time as the Rights  become
exercisable, all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.

        The  Corporation  covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or Common Shares and/or
other  securities,  as the case may be) delivered upon exercise of Rights shall,
at the time of delivery of the  certificates for such shares or other securities
(subject to payment of the Purchase Price),  be duly and validly  authorized and
issued and fully paid and non-assessable shares or securities.

        The Corporation  further  covenants and agrees that it will pay when due
and payable any and all U.S.  federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right  Certificates
or of any Preferred  Shares (or Common Shares  and/or other  securities,  as the
case may be) upon the exercise of Rights. The Corporation 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  or depository  receipts for the Preferred  Shares (or
Common Shares and/or other securities,  as the case may be) in a name other than
that of,  the  registered  holder of the  Right  Certificate  evidencing  Rights
surrendered  for  exercise,  or to  issue  or to  deliver  any  certificates  or
depositary  receipts  for  Preferred  Shares  (or  Common  Shares  and/or  other
securities,  as the case may be) upon the exercise of any Rights, 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
Corporation's reasonable satisfaction that no such tax is due.

        The  Corporation  shall use its best  efforts  to (i)  file,  as soon as
practicable  following the Shares  Acquisition  Date, a  registration  statement
under the Act on an appropriate form, with respect to the securities purchasable
upon exercise of the Rights,  (ii) cause such  registration  statement to become
effective  as soon as  practicable  after  such  filing,  and (iii)  cause  such
registration  statement  to remain  effective  (with a  prospectus  at all times
meeting the  requirements of the Act and the rules and  regulations  thereunder)
until the date of the  expiration of the rights  provided by Section  11(a)(ii).
The  Corporation  will also take such action as may be  appropriate  or required
under the blue sky laws of the various states.

        Section 10.  Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares (or Common Shares and/or other  securities,  as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have  become the holder of record of the  Preferred  Shares (or Common
Shares and/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;  provided,  however,  that, if the
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Corporation  are closed,  such person  shall be deemed to have become the record
holder  of such  shares  on,  and  such  certificate  shall be  dated,  the next
succeeding  Business Day on which the Preferred  Shares (or Common Shares and/or
other  securities,  as the case may be) transfer  books of the  Corporation  are
open.

<PAGE>

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

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

            (ii) In the event any Person,  alone or together with its Affiliates
and Associates, shall become an Acquiring Person, each holder of a Right (except
as provided  below and in Section  7(e) hereof)  shall,  for a period of 60 days
after the later of the  occurrence of any such event or the effective date of an
appropriate  registration  statement under the Act pursuant to Section 9 hereof,
have a right to  receive,  upon  exercise  thereof at a price  equal to the then
current  Purchase Price,  in accordance  with the terms of this Agreement,  such
number of Common Shares (or, in the  discretion  of the Board of Directors,  one
one-hundredth  of a Preferred  Share) as shall equal the result  obtained by (x)
multiplying  the  then  current  Purchase  Price  by  the  then  number  of  one
one-hundredths   of  a  Preferred  Share  for  which  a  Right  was  exercisable
immediately  before  the first  occurrence  of a Section  11(a)(ii)  Event,  and
dividing  that  product by (y) 50% of the then current per share market price of
the Corporation's Common Shares (determined pursuant to Section 11(d) hereof) on
the date of such first  occurrence  (such number of shares being  referred to as
the "Adjustment Shares");  provided, however, that if the transaction that would
otherwise  give  rise  to  the  foregoing  adjustment  is  also  subject  to the
provisions of Section 13 hereof,  then only the  provisions of Section 13 hereof
shall apply, and no adjustment shall be made pursuant to this Section 11(a)(ii);

            (iii) In the  event  that  there  shall not be  sufficient  treasury
shares or authorized but unissued (and  unreserved)  Common Shares to permit the
exercise in full of the Rights in  accordance  with the  foregoing  subparagraph
(ii) and the Rights become so exercisable  (and the Board has determined to make
the Rights exercisable into fractions of a Preferred Share), notwithstanding any
other  provision of this  Agreement,  to the extent  necessary  and permitted by
applicable law, each Right shall thereafter represent the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the terms
of this  Agreement,  (x) a number of (or  fractions of) Common Shares (up to the
maximum  number of Common  Shares which may  permissibly  be issued) and (y) one
one-hundredth  of a Preferred Share or a number of, or fractions of other equity
securities of the Corporation  (or, in the discretion of the Board of Directors,
debt) which the Board of Directors of the Corporation has determined to have the
same aggregate current market value (determined pursuant to Section 11(d)(i) and
(ii) hereof, to the extent  applicable,) as one Common Share (such number of, or
fractions of, Preferred Shares,  debt, or other equity securities or debt of the
Corporation)  being referred to as a "capital stock  equivalent"),  equal in the
aggregate to the number of Adjustment Shares;  provided,  however, if sufficient
Common  Shares  and/or  capital  stock  equivalents  are  unavailable,  then the
Corporation  shall,  to the extent  permitted by  applicable  law, take all such
action as may be  necessary  to authorize  additional  Common  Shares or capital
stock  equivalents  for  issuance  upon  exercise of the Rights,  including,  if
necessary, the calling of a meeting of shareholders; and provided, further, that
if the  Corporation is unable to cause  sufficient  Common Shares and/or capital
stock  equivalents  to be available  for issuance  upon  exercise in full of the
Rights,  then each Right  shall  thereafter  represent  the right to receive the
Adjusted Number of Shares upon exercise at the Adjusted  Purchase Price (as such
terms are hereinafter  defined).  As used herein,  the term "Adjusted  Number of
Shares" shall be equal to that number of (or fractions of) Common Shares (and/or
capital stock  equivalents) equal to the product of (x) the number of Adjustment
Shares and (y) a fraction, the numerator of which is the number of Common Shares
(and/or capital stock  equivalents)  available for issuance upon exercise of the
Rights and the denominator of which is the aggregate number of Adjustment Shares
otherwise  issuable upon exercise in full of all Rights  (assuming  there were a
sufficient  number of Common Shares  available) (such fraction being referred to
as the "Proration Factor"). The "Adjusted Purchase Price" shall mean the product
of the Purchase Price and the Proration Factor.  The Board of Directors may, but
shall not be required to, establish  procedures to allocate the right to receive
Common  Shares and capital stock  equivalents  upon exercise of the Rights among
holders of Rights.

<PAGE>

        (b) In case the Corporation  shall fix a record date for the issuance of
rights (other than the Rights),  options or warrants to all holders of Preferred
Shares  entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Preferred Shares (or shares having the
same rights,  privileges and  preferences as the Preferred  Shares  ("equivalent
preferred   shares"))  or  securities   convertible  into  Preferred  Shares  or
equivalent  preferred  shares  at a price  per  Preferred  Share  or  equivalent
preferred  share  (or  having  a  conversion  price  per  share,  if a  security
convertible into Preferred Shares or equivalent  preferred shares) less than the
then  current per share  market  price of the  Preferred  Shares (as  determined
pursuant to Section 11(d) hereof) 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 before such record date by a fraction, the numerator
of which shall be the number of Preferred Shares outstanding on such record date
plus the number of Preferred  Shares which the aggregate  offering  price of the
total number of Preferred  Shares and/or  equivalent  preferred  shares so to be
offered  (and/or  the  aggregate  initial  conversion  price of the  convertible
securities  so to be offered)  would  purchase at such  current per share market
price,  and the  denominator  of which shall be the number of  Preferred  Shares
outstanding on such record date plus the number of additional  Preferred  Shares
and/or  equivalent  preferred  shares to be offered for subscription or purchase
(or into  which  the  convertible  securities  so to be  offered  are  initially
convertible);  provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the  aggregate par value of the
shares of capital stock of the Corporation  issuable upon exercise of one Right.
In case such  subscription  price may be paid in a consideration  part or all of
which shall be in a form other than cash, the value of such consideration  shall
be determined in good faith by the Board of Directors of the Corporation,  whose
determination  shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent.  Preferred Shares owned by or held for the
account of the  Corporation  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, options or warrants are
not so issued,  the Purchase  Price shall be adjusted to be the  Purchase  Price
which would then be in effect if such record date had not been fixed.

        (c) In case the Corporation  shall fix a record date for the making of a
distribution  to all  holders  of  the  Preferred  Shares  (including  any  such
distribution  made in  connection  with a  consolidation  or merger in which the
Corporation  is  the  continuing  or  surviving  corporation)  of  evidences  of
indebtedness  or assets  (other  than a regular  quarterly  cash  dividend  or a
dividend  payable  in  Preferred  Shares)  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 before such record date by a fraction, the numerator
of which  shall be the then  current  per  share  market  price  (as  determined
pursuant to Section 11(d)  hereof) of the Preferred  Shares on such record date,
less the  fair  market  value  (as  determined  in good  faith  by the  Board of
Directors  of the  Corporation,  whose  determination  shall be  described  in a
statement  filed with the Rights Agent and shall be binding on the Rights Agent)
of the portion of the assets or evidences of  indebtedness  so to be distributed
or of such subscription rights or warrants applicable to one Preferred Share and
the  denominator  of which shall be such  current per share  market price of the
Preferred Shares; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the  aggregate  par value of
the shares of capital stock of the Corporation to be issued upon exercise of one
Right. Such adjustments  shall be made successively  whenever such a record date
is fixed;  and in the event that such  distribution is not so made, the Purchase
Price shall again be  adjusted to be the  Purchase  Price which would then be in
effect if such record date had not been fixed.

        (d) (i) For the purpose of any computation  hereunder,  the "current per
share  market  price" of any  security  (a  "Security"  for the  purpose of this
Section  11(d)(i))  on any date  shall be deemed to be the  average of the daily
closing  prices  per share of such  Security  for the  thirty  (30)  consecutive
Trading Days (as such term is hereinafter defined) immediately before such date;
provided,  however, that in the event that the current per share market price of
the Security is determined  during a period  following the  announcement  by the
issuer of such  Security  of (A) a dividend  or  distribution  on such  Security
payable in shares of such Security or securities  convertible  into such shares,
or (B) any  subdivision,  combination or  reclassification  of such Security and
before the expiration of thirty (30) Trading Days after the ex-dividend date for
such  dividend  or  distribution,  or the  record  date  for  such  subdivision,
combination  or  reclassification,  then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share  equivalent  of such  Security.  The closing  price for each day
shall be the last sale price,  regular way, or, in case no such sale takes place
on such day,  the average of the closing bid and asked  prices,  regular way, in
either case as  reported in the  principal  consolidated  transaction  reporting
system with respect to securities  listed or admitted to trading on the New York
Stock  Exchange  or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal  consolidated  transaction
reporting  system with respect to securities  listed on the  principal  national
securities  exchange on which the  Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national  securities
exchange,  the last quoted  price or, if not so quoted,  the average of the high
bid and low asked  prices in the  over-the-counter  market,  as  reported by the
National  Association of Securities  Dealers,  Inc. Automated  Quotations System
("NASDAQ")  or such  other  system  then in use,  or,  if on any  such  date the
Security is not quoted by any such organization,  the average of the closing bid
and asked prices as furnished by a professional  market maker making a market in
the Security  selected by the Board of Directors of the  Corporation.  If on any
such date no such market maker is making market in the Security,  the fair value
of the  Security  on such  date as  determined  in good  faith  by the  Board of
Directors of the Corporation  shall be used. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or, if the
Security  is not  listed or  admitted  to  trading  on any  national  securities
exchange, a Business Day.

<PAGE>

            (ii) For the purpose of any computation hereunder,  the "current per
share market  price" of the  Preferred  Shares shall be determined in accordance
with the method set forth in Section  11(d)(i).  If the Preferred Shares are not
publicly  traded,  the "current per share market price" of the Preferred  Shares
shall be  conclusively  deemed to be the current per share  market  price of the
Common  Shares  as  determined  pursuant  to  Section  11(d)(i),  (appropriately
adjusted  to reflect any stock  split,  stock  dividend  or similar  transaction
occurring  after the date  hereof),  multiplied  by one hundred.  If neither the
Common Shares nor the Preferred Shares are publicly held or so listed or traded,
"current  per  share  market  price"  shall  mean the fair  value  per  share as
determined  in good faith by the Board of  Directors of the  Corporation,  whose
determination  shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent.

        (e)  Notwithstanding  anything herein to the contrary,  no adjustment in
the Purchase  Price shall be required  unless such  adjustment  would require an
increase or decrease of at least 1% in the Purchase  Price;  provided,  however,
that any  adjustments  which by reason of this Section 11(e) are not required to
be made  shall be carried  forward  and taken  into  account  in any  subsequent
adjustment.  All calculations under this Section 11 shall be made to the nearest
cent  or  to  the  nearest  one  one-hundredth  of  a  Preferred  Share  or  one
ten-thousandth   of  any  other   share  or   security   as  the  case  may  be.
Notwithstanding  the  first  sentence  of this  Section  11(e),  any  adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the  transaction  which  mandates such  adjustment or
(ii) the Final 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 of the Corporation  other
than Preferred Shares,  thereafter the number of other shares so receivable upon
exercise  of any Right  shall be  subject to  adjustment  from time to time in a
manner and on terms as nearly  equivalent as practicable to the provisions  with
respect  to the  Preferred  Shares  contained  in  Section  11(a)  through  (c),
inclusive,  and the  provisions  of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Shares shall apply on like terms to any such other shares.

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

        (h) Unless the Corporation shall have exercised its election as provided
in Section 11(i) hereof upon each  adjustment of the Purchase  Price as a result
of  the  calculations  made  in  Sections  11(b)  and  (c)  hereof,  each  Right
outstanding  immediately  before the making of such adjustment  shall thereafter
evidence the right to purchase,  at the adjusted  Purchase Price, that number of
one  one-hundredths  of  a  Preferred  Share  (calculated  to  the  nearest  one
one-hundredth  of a Preferred  Share) obtained by (i) multiplying (x) the number
of one  one-hundredths  of a share  covered by a Right  immediately  before this
adjustment  by  (y)  the  Purchase  Price  in  effect  immediately  before  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  Corporation may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights,  in lieu of any adjustment in
the number of one  one-hundredths  of a  Preferred  Share  purchasable  upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of one  one-hundredths of a
Preferred  Share for  which a Right  was  exercisable  immediately  before  such
adjustment.  Each Right held of record  before such  adjustment of the number of
Rights  shall  become  that  number of Rights  (calculated  to the  nearest  one
ten-thousandth)  obtained by dividing the Purchase  Price in effect  immediately
before  the  Purchase  Price  is  adjusted  by  the  Purchase  Price  in  effect
immediately  after  such  adjustment.   The  Corporation  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 ten (10) days later than the date of the public
announcement.  If Right  Certificates have been issued,  upon each adjustment of
the number of Rights pursuant to this Section 11(i),  the Corporation  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  Corporation,  shall
cause  to  be  distributed  to  such  holders  of  record  in  substitution  and
replacement for the Right  Certificates  held by such holders before the date of
adjustment,  and upon surrender  thereof,  if required by the  Corporation,  new
Right  Certificates  evidencing  all the Rights to which such  holders  shall be
entitled after such adjustment. Right Certificates so to be distributed shall be
issued,  executed and  countersigned in the manner provided for herein and shall
be registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.

<PAGE>

        (j)  Irrespective  of any  adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights,  the Right  Certificates  theretofore  and thereafter  issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred  Share which were expressed in the initial Right  Certificates  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  number  of one
one-hundredths  of a Preferred Share or other securities  issuable upon exercise
of the Rights, the Corporation shall take any corporate action which may, in the
opinion of its counsel,  be necessary in order that the  Corporation may validly
and   legally   issue  such  number  of  fully  paid  and   non-assessable   one
one-hundredths  of a  Preferred  Share  or  other  securities  at such  adjusted
Purchase Price.

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

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

        (n) The Corporation  covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the  Corporation  in a transaction  that does not violate  Section
11(n) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Corporation in a transaction  that does not violate Section 11(n) hereof)
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 Corporation and
its  Subsidiaries  (taken as a whole) to any other Person or Persons (other than
the Corporation  and/or any of its Subsidiaries in one or more transactions each
of which  does  not  violate  Section  11(n)  hereof),  if (x) at the time of or
immediately  after such  consolidation,  merger,  sale or transfer there are any
charter or by-law  provisions or any rights,  warrants or other  instruments  or
securities  outstanding  or agreements in effect or other actions  taken,  which
would  materially  diminish or otherwise  eliminate the benefits  intended to be
afforded by the Rights or (y) before,  simultaneously  with or immediately after
such  consolidation,  merger  or  sale,  the  shareholders  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 Corporation  shall not
consummate any such consolidation, merger, sale or transfer unless prior thereto
the  Corporation  and such other Person shall have executed and delivered to the
Rights Agent a supplemental  agreement  evidencing  compliance with this Section
11(n).

<PAGE>

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

        (p) The exercise of Rights under Section  11(a)(ii) shall only result in
the loss of rights under Section  11(a)(ii) to the extent so exercised and shall
not otherwise affect the rights  represented by the Rights under this Agreement,
including the rights represented by Section 13 hereof.

        Section 12.  Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an  adjustment  is made as  provided  in Sections 11 or 13 hereof,  the
Corporation  shall  promptly  (a)  prepare  a  certificate  setting  forth  such
adjustment,  and a brief statement of the facts  accounting for such adjustment,
(b) file  with the  Rights  Agent and with each  transfer  agent for the  Common
Shares a copy of such  certificate  and (c) mail a brief summary thereof to each
holder of a Right  Certificate in accordance with Section 26 hereof.  The Rights
Agent shall be fully  protected  in relying on any such  certificate  and on any
adjustment  therein  contained and shall not be deemed to have knowledge of such
adjustment unless and until it shall have received such certificate.

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

        (a) In the event that,  on or  following  the Shares  Acquisition  Date,
directly or indirectly,  (x) the Corporation  shall  consolidate  with, or merge
with and into, any Interested Shareholder or, if in such merger or consolidation
all holders of Common Shares are not treated alike,  (y) the  Corporation  shall
consolidate  with,  or merge with,  any  Interested  Shareholder  or, if in such
merger or consolidation  all holders of Common Shares are not treated alike, and
the  Corporation  shall  be the  continuing  or  surviving  corporation  of such
consolidation  or merger (other than, in a case of any transaction  described in
(x)  or  (y),  a  merger  or  consolidation  which  would  result  in all of the
securities  generally  entitled to vote in the  election of  directors  ("voting
securities") of the Corporation 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  securities  of the
Corporation 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 merger or  consolidation),  or (z) the Corporation  shall sell or
otherwise  transfer (or one or more of its Subsidiaries  shall sell or otherwise
transfer),  in one  transaction or a series of related  transactions,  assets or
earning  power  aggregating  more than 50% of the assets or earning power of the
Corporation  and  its  Subsidiaries   (taken  as  a  whole)  to  any  Interested
Shareholder or  Shareholders  or, if in such  transaction  all holders of Common
Stock are not treated alike,  then, and in each such case (except as provided in
Section 13(d) hereof), proper provision shall be made so that (i) each holder of
a Right,  except as provided in Section 7(e) hereof,  shall  thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase  Price,  in accordance  with the terms of this Agreement and in lieu of
Preferred Shares, such number of freely tradeable Common Shares of the Principal
Party (as hereinafter defined), not subject to any liens,  encumbrances,  rights
of first refusal or other adverse claims,  as shall equal the result obtained by
(A)  multiplying  the  then  current   Purchase  Price  by  the  number  of  one
one-hundredths  of a  Preferred  Share  for  which a Right  is then  exercisable
(without taking into account any adjustment  previously made pursuant to Section
11(a)(ii))  and  dividing  that product by (B) 50% of the then current per share
market price of the Common Shares of such Principal Party  (determined  pursuant
to Section 11(d) hereof) on the date of  consummation  of such Section 13 Event;
(ii) such Principal Party shall  thereafter be liable for, and shall assume,  by
virtue  of  such  Section  13  Event,  all the  obligations  and  duties  of the
Corporation  pursuant  to this  Agreement;  (iii) the term  "Corporation"  shall
thereafter be deemed to refer to such  Principal  Party,  it being  specifically
intended  that the  provisions  of  Section 11 hereof  shall  apply only to such
Principal Party following the first  occurrence of a Section 13 Event;  and (iv)
such Principal Party shall take such steps  (including,  but not limited to, the
reservation of a sufficient  number of its Common Shares) 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 the Common Shares thereafter deliverable upon the exercise of
the Rights.

<PAGE>

        (b)  "Principal  Party"  shall  mean  in the  case  of  any  transaction
described  in clause  (x) or (y) of the first  sentence  of Section  13(a),  the
Person  that is the issuer of any  securities  into which  Common  Shares of the
Corporation are converted in such merger or consolidation,  and if no securities
are  so  issued,  the  Person  that  is  the  other  party  to  such  merger  or
consolidation (including, if applicable,  the Corporation if it is the surviving
corporation); and (ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a),  the Person that is the party receiving the
greatest  portion of the assets or earning  power  transferred  pursuant to such
transaction  or  transactions  provided,  however,  that in any of the foregoing
cases, (1) if the Common Shares of such Person are not at such time and have not
been  continuously  over the preceding twelve (12) month period registered under
Section  12 of the  Exchange  Act,  and  such  Person  is a direct  or  indirect
Subsidiary  of another  Person  the Common  Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (2) in case such
Person is a Subsidiary,  directly or  indirectly,  of more than one Person,  the
Common  Shares  of two or  more  of  which  are and  have  been  so  registered,
"Principal  Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest  aggregate  market value; and (3) in case 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 (1) and (2)  above  shall  apply to each of the  chains  of
ownership  having an  interest  in such  joint  venture  as if such party were a
"Subsidiary" of both or all of such joint venturers,  and the Principal  Parties
in each such chain shall bear the  obligations  set forth in this  Section 13 in
the same ratio as their direct or indirect  interests in such Person bear to the
total of such interests.

        (c) The Corporation shall not consummate any such consolidation, merger,
sale or transfer  unless the Principal  Party shall have a sufficient  number of
its authorized Common Shares which have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with this Section 13,
and unless prior thereto the  Corporation  and such  Principal  Party shall have
executed and delivered to the Rights Agent a  supplemental  agreement  providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing  that,  as soon as  practicable  after the date of any  consolidation,
merger,  sale or transfer  mentioned  in  paragraph  (a) of this Section 13, the
Principal Party at its own expense shall:

            (i) prepare  and file a  registration  statement  under the Act with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an  appropriate  form,  and use its best  efforts to cause such  registration
statement to (A) become  effective as soon as practicable  after such filing and
(B) remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Final Expiration Date;

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

            (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 under the Exchange Act.

        The  provisions of this Section 13 shall  similarly  apply to successive
mergers or  consolidations  or sales or other  transfers.  The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.

        (d)  Notwithstanding  anything in this  Agreement to the contrary,  this
Section 13 shall not be applicable to a transaction  described in  subparagraphs
(x) and (y) of Section  13(a) if: (i) such  transaction  is  consummated  with a
Person or Persons who acquired Common Shares pursuant to a Permitted Offer (or a
wholly  owned  Subsidiary  of any such  Person or  Persons);  (ii) the price per
Common Share offered in such  transaction  is not less than the price per Common
Share paid to all holders of Common Shares whose shares were purchased  pursuant
to such Permitted  Offer;  and (iii) the form of  consideration  offered in such
transaction  is the  same as the form of  consideration  paid  pursuant  to such
Permitted Offer. Upon consummation of any such transaction  contemplated by this
Section 13(d), all Rights hereunder shall expire.

<PAGE>

        Section 14. Fractional Rights and Fractional Shares.

        (a) The  Corporation  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 registered  holders of the
Right  Certificates  with regard to which such fractional Rights would otherwise
be issuable,  an amount in cash equal to the same fraction of the current market
value of a whole  Right.  For the purposes of this  Section  14(a),  the current
market  value of a whole Right shall be the closing  price of the Rights for the
Trading Day immediately  before the date on which such  fractional  Rights would
have been  otherwise  issuable.  The closing price for any day shall be the last
sale price,  regular  way, or, in case no such sale takes place on such day, the
average of the  closing  bid and asked  prices,  regular  way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities  listed or admitted to trading on the New York Stock  Exchange or,
if the  Rights  are not  listed or  admitted  to  trading  on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national  securities exchange
on which the Rights are listed or  admitted to trading or, if the Rights are not
listed or  admitted to trading on any  national  securities  exchange,  the last
quoted  price or, if not so  quoted,  the  average of the high bid and low asked
prices in the  over-the-counter  market,  as  reported  by NASDAQ or such  other
system then in use or, if on any such date the Rights are not quoted by any such
organization,  the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Corporation. If on any such date no such market maker is making
a market in the Rights,  the fair value of the Rights on such date as determined
in good faith by the Board of Directors of the Corporation shall be used.

        (b)  The  Corporation  shall  not be  required  to  issue  fractions  of
Preferred  Shares (other than fractions which are one  one-hundredth or integral
multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights
or to distribute  certificates which evidence fractional Preferred Shares (other
than  fractions  which  are  one  one-hundredth  or  integral  multiples  of one
one-hundredth of a Preferred  Share).  Fractions of Preferred Shares in integral
multiples of one  one-hundredth of a Preferred Share may, at the election of the
Corporation,  be evidenced by depositary  receipts,  pursuant to an  appropriate
agreement between the Corporation and a depositary selected by it; provided that
such agreement shall provide that the holders of such depositary  receipts shall
have the  rights,  privileges  and  preferences  to which they are  entitled  as
beneficial  owners  of the  Preferred  Shares  represented  by  such  depositary
receipts.  In lieu of fractional Preferred Shares that are not one one-hundredth
or integral multiples of one one-hundredth of a Preferred Share, the Corporation
shall  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 one Preferred Share. For the purposes of
this Section 14(b),  the current market value of a Preferred  Share shall be the
closing price of a Preferred Share (as determined  pursuant to Section 11(d)(ii)
hereof) for the Trading Day immediately before the date of such exercise.

        (c)  Following  the  occurrence  of one of the  transactions  or  events
specified  in Section  11 giving  rise to the right to  receive  Common  Shares,
capital stock equivalents (other than Preferred Shares) or other securities upon
the  exercise  of a  Right,  the  Corporation  shall  not be  required  to issue
fractions of shares or units of such Common Shares, capital stock equivalents or
other securities upon exercise of the Rights or to distribute certificates which
evidence  fractions of such Common  Shares,  capital stock  equivalents or other
securities. In lieu of fractional shares or units of such Common Shares, capital
stock equivalents or other securities, the Corporation 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  Shares,  capital stock  equivalents  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  before the date of such  exercise and, if such capital
stock  equivalent is not traded,  each such capital stock  equivalent shall have
the value of one one-hundredth of a Preferred Share.

<PAGE>

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

        Section  15.  Rights of Action.  All rights of action in respect of this
Agreement,  excepting  the  rights of action  given to the  Rights  Agent  under
Section 18 hereof, are vested in the respective  registered holders of the Right
Certificates  (and, before the Distribution  Date, the registered holders of the
Common Shares);  and any registered  holder of any Right Certificate (or, before
the Distribution Date, of the Common Shares),  without the consent of the Rights
Agent  or of  the  holder  of  any  other  Right  Certificate  (or,  before  the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit,  enforce, and may institute and maintain any suit, action or proceeding
against the Corporation 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 Agreement.  Without limiting the foregoing
or  any  remedies  available  to  the  holders  of  Rights,  it is  specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the  obligations  under,  and  injunctive  relief  against  actual or threatened
violations of the obligations of any Person subject to, this Agreement.

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

        (a) before the Distribution  Date, the Rights will be transferable  only
in connection with the transfer of the Common Shares;

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

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

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

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

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

<PAGE>

        The Rights Agent shall be protected and shall incur no liability for, or
in respect of, any action taken,  suffered or omitted by it in connection  with,
its  administration  of this Agreement in reliance upon any Right Certificate or
certificate  for  Common  Shares or for  other  securities  of the  Corporation,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction,  consent,  certificate,  statement, or other paper or
document  believed by it to be genuine  and to be signed,  executed  and,  where
necessary,  verified or acknowledged,  by the proper Person or Persons.  Section
19. Merger or  Consolidation  or Change of Name of Rights Agent. Any corporation
into which the Rights Agent or any successor  Rights Agent may be merged or with
which it may be  consolidated,  or any corporation  resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party,  or  any  corporation   succeeding  to  the  stock  transfer  or  all  or
substantially  all of the  corporate  trust  business of the Rights Agent or any
successor  Rights  Agent,  shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the  parties  hereto,  provided  that such  corporation  would be
eligible for  appointment  as a successor  Rights Agent under the  provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this  Agreement,  any of the Right  Certificates  shall
have been  countersigned but not delivered,  any such successor Rights Agent may
adopt the  countersignature of a predecessor Rights Agent and deliver such Right
Certificates  so  counter-signed;  and in  case at that  time  any of the  Right
Certificates shall not have been  countersigned,  any successor Rights Agent may
countersign such Right Certificates  either in the name of the predecessor or in
the name of the  successor  Rights  Agent;  and in all  such  cases  such  Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.

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

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

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

        (b) Whenever in the  performance  of its duties under this Agreement the
Rights  Agent  shall  deem it  necessary  or  desirable  that any fact or matter
(including,  without  limitation,  the identity of an  Acquiring  Person and the
determination  of the  current  market  price  of any  Security)  be  proved  or
established by the Corporation  before taking or suffering any action hereunder,
such  fact or  matter  (unless  other  evidence  in  respect  thereof  be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a  certificate  signed by any one of the  Chairman  of the  Board,  the Chief
Executive  Officer,  the  President,  any Vice  President,  the Treasurer or the
Secretary  of the  Corporation  and  delivered  to the  Rights  Agent;  and such
certificate shall be full authorization to the Rights Agent for any action taken
or  suffered  in good  faith by it under the  provisions  of this  Agreement  in
reliance upon such certificate.

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

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

        (e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery  hereof (except the
due  execution  hereof by the Rights  Agent) or in respect  of the  validity  or
execution of any Right Certificate (except its  countersignature  thereof),  nor
shall it be  responsible  for any breach by the  Corporation  of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof) or any adjustment required
under the provisions of Section 11 or Section 13 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 the
certificate  described in Section 12 hereof);  nor shall it by any act hereunder
be deemed to make any  representation  or  warranty as to the  authorization  or
reservation  of any Preferred  Shares or Common Shares to be issued  pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares or
Common Shares will, when issued,  be validly  authorized and issued,  fully paid
and non-assessable.

<PAGE>

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

        (g) The  Rights  Agent is  hereby  authorized  and  directed  to  accept
instructions  with respect to the  performance of its duties  hereunder from any
one of the Chairman of the Board,  the Chief Executive  Officer,  the President,
any Vice President,  the Treasurer or the Secretary of the  Corporation,  and to
apply to such officers for advice or instructions in connection with its duties,
and shall not be liable for any action  taken or suffered by it in good faith or
lack of action in accordance  with  instructions  of any such officer or for any
delay in acting while waiting for those  instructions.  Any  application  by the
Rights Agent for written instructions from the Corporation may, at the option of
the Rights  Agent,  set forth in  writing  any  action  proposed  to be taken or
omitted by the Rights Agent under this  Agreement and the date on or after which
such action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in 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  Corporation  actually  receives  such
application,  unless  any such  officer  shall have  consented  in writing to an
earlier  date) unless,  before taking any such action (or the effective  date in
the  case  of an  omission),  the  Rights  Agent  shall  have  received  written
instruction in response to such application specifying the action to be taken or
omitted.

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

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

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

        (k) If, with respect to any Rights Certificate surrendered to the Rights
Agent  for  exercise  or  transfer,  the  certificate  attached  to the  form of
assignment  or form of  election to  purchase,  as the case may be, has not been
completed,  the Rights  Agent shall not take any further  action with respect to
such  requested   exercise  of  transfer   without  first  consulting  with  the
Corporation.

        Section 21.  Change of Rights  Agent.  The Rights Agent or any successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon thirty (30) days' notice in writing mailed to the  Corporation  and to each
transfer  agent of the  Common  Shares  or  Preferred  Shares by  registered  or
certified  mail,  and to the holders of the Right  Certificates  by  first-class
mail. The Corporation may remove the Rights Agent or any successor  Rights Agent
upon sixty (60) days' notice in writing, mailed to the Rights Agent or successor
Rights  Agent,  as the case may be,  and to each  transfer  agent of the  Common
Shares or Preferred  Shares by registered or certified  mail,  and to 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 Corporation shall
appoint a successor to the Rights Agent. If the  Corporation  shall fail to make
such appointment  within a period of sixty (60) days after giving notice of such
removal  or  after  it has been  notified  in  writing  of such  resignation  or
incapacity by the resigning or incapacitated  Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection  by the  Corporation),  then  the  registered  holder  of  any  Right
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent.  Any successor  Rights  Agent,  whether  appointed by the
Corporation  or by such a court,  shall be a  corporation  organized  and  doing
business  under the laws of the United  States or any state of the United States
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 $10  million.  After
appointment,  the  successor  Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent  without  further  act or deed;  but the  predecessor  Rights  Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance,  conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment  the  Corporation  shall file  notice  thereof  in writing  with the
predecessor  Rights  Agent  and each  transfer  agent of the  Common  Shares  or
Preferred Shares, 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.

<PAGE>

        Section 22. Issuance of New Right  Certificates.  Notwithstanding any of
the  provisions  of  this  Agreement  or of  the  Rights  to the  contrary,  the
Corporation 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 and the number or kind or class of
shares or other securities or property  purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.

        In addition,  in  connection  with the issuance or sale of Common Shares
following the  Distribution  Date and before the earlier of the Redemption  Date
and the Final  Expiration Date, the Corporation (a) shall with respect to Common
Shares 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,  notes or debentures issued by the Corporation,  and (b) may, in any
other case, if deemed  necessary or appropriate by the Board of Directors of the
Corporation,  issue Right  Certificates  representing the appropriate  number of
Rights in connection with such issuance or sale; provided, however, that (i) the
Corporation shall not be obligated to issue any such Right  Certificates if, and
to the extent  that,  the  Corporation  shall be  advised  by counsel  that such
issuance would create a significant risk of material adverse tax consequences to
the  Corporation or the Person to whom such Right  Certificate  would be issued,
and (ii) no Right  Certificate  shall be  issued  if,  and to the  extent  that,
appropriate  adjustment  shall  otherwise have been made in lieu of the issuance
thereof.

        Section 23. Redemption and Termination.

        (a) (i) The Board of  Directors of the  Corporation  may, at its option,
redeem  all but not less than all the then  outstanding  Rights at a  redemption
price of $.0001  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"),  at any time before the earlier of (x) the occurrence of a
Section  11(a)(ii) Event, (y) or the Final Expiration Date. The Corporation may,
at its option,  pay the  Redemption  Price either in Common Shares (based on the
"current per share market price," as defined in Section 11 hereof, of the Common
Shares at the time of  redemption)  or cash;  provided  that if the  Corporation
elects to pay the Redemption Price in Common Shares,  the Corporation  shall not
be  required  to issue any  fractional  Common  Shares  and the number of Common
Shares issuable to each holder of Rights shall be rounded down to the next whole
share.

            (ii) In addition,  the Board of Directors of the Corporation may, at
its option,  at any time following the occurrence of a Section  11(a)(ii)  Event
and the  expiration of any period during which the holder of Rights may exercise
the rights under Section  11(a)(ii) but before any Section 13 Event,  redeem all
but not less than all of the then outstanding  Rights at the Redemption Price in
connection  with any merger,  consolidation  or sale or other  transfer  (in one
transaction or in a series of related  transactions)  of assets or earning power
aggregating  50% or  more  of the  earning  power  of the  Corporation  and  its
subsidiaries  (taken as a whole)  in which all  holders  of  Common  Shares  are
treated alike and not  involving  (other than as a holder of Common Shares being
treated like all other such holders) an Interested Shareholder or (x) if and for
so long as the Acquiring Person is not thereafter the Beneficial Owner of 20% of
the  Common  Shares,  and (y) at the time of  redemption  no other  Persons  are
Acquiring Persons.

        (b) In the  case  of a  redemption  permitted  under  Section  23(a)(i),
immediately  upon the date for redemption set forth (or determined in the manner
specified  in) in a  resolution  of the Board of  Directors  of the  Corporation
ordering the  redemption of the Rights,  evidence of which shall have been filed
with the Rights  Agent,  and without any further  action and without any notice,
the right to exercise the Rights will terminate,  and the only right  thereafter
of the holders of Rights shall be to receive the Redemption Price for each Right
so held. In the case of a redemption  permitted  only under  Section  23(a)(ii),
evidence  of which  shall have been filed  with the Rights  Agent,  the right to
exercise the Rights will  terminate and represent  only the right to receive the
Redemption  Price upon the later of ten (10) Business Days  following the giving
of such notice or the  expiration  of any period  during  which the rights under
Section  11(a)(ii) may be exercised.  The Corporation 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 ten (10) days after such date for redemption set forth in a resolution of
the Board of Directors  ordering the redemption of the Rights,  the  Corporation
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,  before the  Distribution  Date,  on the registry  books of the
transfer agent for the Common  Shares.  Any notice which is mailed in the manner
herein  provided shall be deemed given,  whether or not the holder  receives the
notice.  Each  such  notice of  redemption  will  state the  method by which the
payment of the Redemption Price will be made. Neither the Corporation nor any of
its  Affiliates  or  Associates  may redeem,  acquire or purchase  for value any
Rights at any time in any manner other than that  specifically set forth in this
Section 23 and other  than in  connection  with the  purchase  of Common  Shares
before the Distribution Date.

<PAGE>

        (c) The Corporation 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 in accordance  with this  Agreement 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,
before the Distribution Date, on the registry books of the Transfer Agent of the
Common  Shares,   and  upon  such  action,  all  outstanding  Rights  and  Right
Certificates  shall  be  null  and  void  without  any  further  action  by  the
Corporation.

        Section 24. Exchange.

        (a) The Board of Directors of the Corporation may, at its option, at any
time after any Person becomes an Acquiring  Person,  exchange all or part of the
then  outstanding  and  exercisable  Rights (which shall not include Rights that
have become void  pursuant to the  provisions of Section  11(a)(ii)  hereof) for
Common Shares of the  Corporation  at an exchange  ratio of one Common Share per
Right,  appropriately  adjusted to reflect any stock  split,  stock  dividend or
similar  transaction  occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors  shall not be  empowered  to effect such  exchange at any
time  after any  Person  (other  than the  Corporation,  any  Subsidiary  of the
Corporation,  Bagerdjian,  any employee  benefit plan of the  Corporation or any
such  Subsidiary,  any entity holding Common Shares for or pursuant to the terms
of any such a plan), together with all Affiliates and Associates of such Person,
becomes  the  Beneficial  Owner  of  50%  or  more  of the  Common  Shares  then
outstanding.

        (b)  Immediately  upon  the  action  of the  Board of  Directors  of the
Corporation  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 Common  Shares equal to
the number of such Rights held by such holder  multiplied by the Exchange Ratio.
The  Corporation  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 Corporation shall promptly mail a
notice of any such  exchange  to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given,  whether or
not the holder receives the notice.  Each such notice of exchange will state the
method by which the  exchange  of the Common  Shares 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 Corporation, at its
option, may substitute Preferred Shares (or equivalent preferred shares, as such
term is defined in Section  11(b)  hereof) for some or all of the Common  Shares
exchangeable for Rights, at the initial rate of one one-hundredth of a Preferred
Share (or equivalent  preferred  share) for each Common Share, as  appropriately
adjusted to reflect  adjustments  in the voting rights of the  Preferred  Shares
pursuant  to the  terms  thereof,  so that the  fraction  of a  Preferred  Share
delivered in lieu of each Common Share shall have the same voting  rights as one
Common Share.

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

        Section 25. Notice of Certain Events.

        (a) In case  the  Corporation  shall  propose  (i) to pay  any  dividend
payable in stock of any class to the holders of its Preferred  Shares or to make
any other  distribution  to the holders of its  Preferred  Shares  (other than a
regularly  quarterly  cash  dividend),  (ii)  to  offer  to the  holders  of its
Preferred  Shares  rights  or  warrants  to  subscribe  for or to  purchase  any
additional  Preferred  Shares  or  shares  of  stock of any  class or any  other
securities,  rights or  options,  (iii) to effect  any  reclassification  of its
Preferred Shares (other than a  reclassification  involving only the subdivision
of outstanding  Preferred  Shares),  (iv) to effect any  consolidation or merger
into or with any other Person (other than a Subsidiary of the  Corporation  in a
transaction which does not violate Section 11(n) hereof), or to effect any sale,
or other  transfer (or to permit one or more of its  Subsidiaries  to effect any
sale  or  other  transfer)  in one or more  transactions,  of 50% or more of the
assets or earning  power of the  Corporation  and its  Subsidiaries  (taken as a
whole) to any other Person or Persons (other than the Corporation  and/or any of
its  Subsidiaries  in one or more  transactions  each of which does not  violate
Section 11(n) hereof), or (v) to effect the liquidation,  dissolution or winding
up of the  Corporation,  then, in each such case, the Corporation  shall give to
each holder of a Right  Certificate,  in  accordance  with Section 26 hereof,  a
notice of such  proposed  action to the extent  feasible and file a  certificate
with the Rights  Agent to that effect,  which shall  specify the record date for
the purposes of such stock dividend,  or distribution of rights or warrants,  or
the date on which such reclassification,  consolidation, merger, sale, transfer,
liquidation,  dissolution,  or  winding  up is to take  place  and  the  date of
participation  therein by the holders of the Preferred  Shares, if any such date
is to be  fixed,  and such  notice  shall be so given in the case of any  action
covered by clause (i) or (ii) above at least  twenty (20) days before the record
date for  determining  holders  of the  Preferred  Shares for  purposes  of such
action,  and in the case of any such other  action,  at least  twenty  (20) days
before  the  date  of  the  taking  of  such  proposed  action  or the  date  of
participation therein by the holders of the Preferred Shares, whichever shall be
the earlier.

        (b) In case of a Section 11(a)(ii) Event, then (i) the Corporation shall
as soon as practicable thereafter give to each holder of a Right Certificate, in
accordance  with Section 26 hereof,  a notice of the  occurrence  of such event,
which notice shall  describe  such event and the  consequences  of such event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the
preceding paragraph to Preferred Shares shall be deemed thereafter to refer also
to Common Shares and/or, if appropriate, other securities of the Corporation.

<PAGE>

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

         POINT.360
         2777 Ontario Street
         Burbank, CA 91504
         Attention: Alan R. Steel

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

         American Stock Transfer & Trust Company
         59 Maiden Lane
         New York, New York  10038
         Attention: Corporate Trust Department

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

        Section 27.  Supplements and Amendments.  Before the Distribution  Date,
the  Corporation  and the Rights Agent  shall,  if the  Corporation  so directs,
supplement or amend any provision of this Agreement  without the approval of any
holders  of  certificates   representing  Common  Shares.  From  and  after  the
Distribution   Date,  the  Corporation  and  the  Rights  Agent  shall,  if  the
Corporation so directs,  supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision  contained  herein which may be defective or
inconsistent with any other provisions herein,  (iii) to shorten or lengthen any
time period  hereunder or (iv) to change or supplement the provisions  hereunder
in any manner which the  Corporation  may deem  necessary or desirable and which
shall not adversely  affect the  interests of the holders of Right  Certificates
(other than an  Acquiring  Person or an  Affiliate  or Associate of an Acquiring
Person);  provided,  however,  that this  Agreement may not be  supplemented  or
amended to  lengthen,  pursuant  to clause  (iii) of this  sentence,  (A) a time
period  relating  to when the Rights may be  redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights.  Upon the delivery of a certificate  from an
appropriate officer of the Corporation which states that the proposed supplement
or  amendment  is in  compliance  with the terms of this  Section 27, the Rights
Agent shall execute such supplement or amendment,  provided that such supplement
or amendment  does not adversely  affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement.  Before the Distribution
Date, the interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Shares.

        Section 28.  Determination  and Actions by the Board of Directors,  etc.
The Board of Directors of the  Corporation  shall have the  exclusive  power and
authority to  administer  this  Agreement  and to exercise all rights and powers
specifically granted to the Board, or the Corporation, or as may be necessary or
advisable  in  the   administration  of  this  Agreement,   including,   without
limitation,  the  right  and  power  to (i)  interpret  the  provisions  of this
Agreement,  and (ii) make all  determinations  deemed necessary or advisable for
the  administration  of  this  Agreement  (including,   without  limitation,   a
determination  to redeem or not redeem the Rights or to amend the  Agreement and
whether any proposed amendment adversely affects the interests of the holders of
Right Certificates).  For all purposes of this Agreement, any calculation of the
number of Common Shares or other securities  outstanding at any particular time,
including  for  purposes  of  determining  the  particular  percentage  of  such
outstanding  Common  Shares or any other  securities  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  of  this  Agreement.  All  such  actions,   calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith,  shall (x) be final,  conclusive and binding on the  Corporation,
the Rights Agent,  the holders of the Right  Certificates and all other parties,
and (y) not  subject  the Board to any  liability  to the  holders  of the Right
Certificates.

<PAGE>

        Section  29.  Successors.  All  the  covenants  and  provisions  of this
Agreement  by or for the benefit of the  Corporation  or the Rights  Agent shall
bind and  inure  to the  benefit  of their  respective  successors  and  assigns
hereunder.

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

        Section  31.  Severability.   If  any  term,   provision,   covenant  or
restriction  of this Agreement is held by a court of competent  jurisdiction  or
other  authority  to be invalid,  void or  unenforceable,  the  remainder of the
terms, provisions,  covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

        Section 32.  Governing  Law. This  Agreement,  each Right and each Right
Certificate  issued  hereunder  shall be deemed to be a contract  made under the
laws of the State of  California  and for all purposes  shall be governed by and
construed in accordance  with the laws of such State  applicable to contracts to
be made and performed entirely within such State.

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

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

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

                                         POINT.360
Attest:

                                         By: /s/ Alan R. Steel
                                             -----------------------------------
By:  /s/    Yolanda A. Perez             Name:   Alan R. Steel
     ----------------------------        Title:  Chief Financial Officer
     Name:  Yolanda A. Perez
     Title: Executive Assistant

                                         AMERICAN STOCK TRANSFER & TRUST COMPANY
Attest:

                                         By: /s/ Herbert Lemmer
                                             -----------------------------------
By:  /s/     Susan Silber                Name:   Herbert Lemmer
     ----------------------------        Title:  Vice President, General Counsel
     Name:   Susan Silber
     Title:  Assistant Secretary

<PAGE>

                                      A - 8

EXHIBIT A

                                     FORM OF

                          CERTIFICATE OF DETERMINATION

                                       OF

                                    POINT.360

        Haig S. Bagerdjian and Alan R. Steel hereby certify that:

        1. They are the duly elected and acting  President  and Chief  Financial
Officer,   respectively,   of   Point.360,   a   California   corporation   (the
"Corporation").

        2. The number of shares of Series A Junior Participating Preferred Stock
of the Corporation is 400,000, none of which has been issued.

        3. The  Board of  Directors  of the  Corporation  has duly  adopted  the
following recitals and resolutions.

        WHEREAS,  the  Restated  Articles of  Incorporation  of the  Corporation
authorize  the  Preferred  Stock of the  Corporation  to be issued in series and
authorize  the Board of Directors of the  Corporation  to determine  the rights,
preferences,  privileges and restrictions  granted to or imposed upon any wholly
unissued  series  of  Preferred  Stock  and to fix  the  number  of  shares  and
designation of any such series; and

        WHEREAS, the Board of Directors of the Corporation desires,  pursuant to
its  authority  as  aforesaid,  to  determine  and fix the rights,  preferences,
privileges   and   restrictions   relating  to  a  series  of  Series  A  Junior
Participating  Preferred  Stock and the  number of shares  constituting  and the
designation of said series;

        NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes
and determines the  designation of, the number of shares  constituting,  and the
rights,  preferences,  privileges and  restrictions  relating to, said series of
Series A Junior Participating Preferred Stock as follows:

        SERIES A JUNIOR PARTICIPATING PREFERRED STOCK.

        SECTION 1. DESIGNATION,  PAR VALUE AND AMOUNT. The shares of such series
shall  be  designated  as  "Series  A  Junior  Participating   Preferred  Stock"
(hereinafter referred to as "Series A Preferred Stock") and shall be without par
value, and the number of shares constituting such series shall be 400,000.

        SECTION 2. DIVIDENDS AND DISTRIBUTIONS.

        (a)  Subject  to the prior and  superior  rights of the  holders  of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Preferred Stock with respect to dividends,  the holders of shares of
Series A Preferred Stock shall be entitled to receive,  when, as and if declared
by the Board of  Directors  out of assets  legally  available  for the  purpose,
quarterly  dividends  payable  in cash on the first  business  day of  November,
February,  May and August in each year (each such date being  referred to herein
as a "Quarterly  Dividend  Payment  Date"),  commencing  on the first  Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a share
of Series A  Preferred  Stock,  in an amount per share  (rounded  to the nearest
cent)  equal to the  greater of (a) $1.00 or (b)  subject to the  provision  for
adjustment  hereinafter  set forth,  100 times the aggregate per share amount of
all cash  dividends,  and 100 times the aggregate  per share amount  (payable in
kind) of all non-cash  dividends or other  distributions,  other than a dividend
payable in shares of Common  Stock,  without  par value,  Common  Stock,  of the
Corporation  (the "Common Stock") or a subdivision of the outstanding  shares of
Common Stock (by  reclassification  or otherwise),  declared on the Common Stock
since the  immediately  preceding  Quarterly  Dividend  Payment  Date,  or, with
respect to the first Quarterly  Dividend  Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock.

<PAGE>

        (b) The  Corporation  shall  declare a dividend or  distribution  on the
Series A Preferred Stock as provided in paragraph (a) above immediately after it
declares a dividend or  distribution  on the Common Stock (other than a dividend
payable in shares of Common  Stock);  provided that, in the event no dividend or
distribution  shall have been  declared  on the Common  Stock  during the period
between any Quarterly  Dividend  Payment Date and the next subsequent  Quarterly
Dividend  Payment Date, a dividend of $1.00 per share on the Series -A Preferred
Stock  shall  nevertheless  be payable  on such  subsequent  Quarterly  Dividend
Payment Date.

        (c) Dividends  shall begin to accrue and be  cumulative  on  outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred  Stock,  unless
the date of  issue of such  shares  is  before  the  record  date for the  first
Quarterly  Dividend  Payment Date, in which case  dividends on such shares shall
begin to accrue  from the date of issue of such  shares,  or unless  the date of
issue is a Quarterly  Dividend  Payment  Date or is a date after the record date
for the  determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly  Dividend  Payment Date.  Accrued but unpaid dividends shall
not bear interest.  Dividends paid on the shares of Series A Preferred  Stock in
an amount less than the total  amount of such  dividends at the time accrued and
payable on such shares shall be  allocated  pro rata on a  share-by-share  basis
among all such shares at the time outstanding.  The Board of Directors may fix a
record  date for the  determination  of holders of shares of Series A  Preferred
Stock  entitled  to  receive  payment  of a dividend  or  distribution  declared
thereon,  which record date shall be not more than 60 days before the date fixed
for the payment thereof.

        SECTION 3.  VOTING  RIGHTS.  The holders of shares of Series A Preferred
Stock shall have the following voting rights:

        (a) Except as provided in  paragraph C of this  Section 3 and subject to
the  provision  for  adjustment  hereinafter  set forth,  each share of Series A
Preferred  Stock shall  entitle  the holder  thereof to 100 votes on all matters
submitted to a vote of the shareholders of the Corporation.

        (b) Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters  submitted to a vote of shareholders of the
Corporation.

        (c) (i) If, on the date used to determine shareholders of record for any
meeting of shareholders  for the election of directors,  a default in preference
dividends (as defined in subparagraph (v) below) on the Series A Preferred Stock
shall exist,  the holders of the Series A Preferred  Stock shall have the right,
voting  as a class as  described  in  subparagraph  (ii)  below,  to  elect  two
directors,  and the  holders of shares of Common  Stock  shall have the right to
elect the  remaining  directors.  Such right may be  exercised at any meeting of
shareholders  for the election of directors until all such cumulative  dividends
(referred  to  above)  shall  have  been  paid in full or  until  non-cumulative
dividends have been paid regularly for at least one year.

            (ii) The right of the holders of Series A  Preferred  Stock to elect
two directors,  as described above,  shall be exercised as a class  concurrently
with the  rights of holders of any other  series of  Preferred  Stock upon which
voting  rights  to  elect  such  directors  have  been  conferred  and are  then
exercisable. The Series A Preferred Stock and any additional series of Preferred
Stock  which the  Corporation  may issue and which may  provide for the right to
vote with the foregoing series of Preferred Stock are  collectively  referred to
herein as "Voting Preferred Stock."

            (iii)  Each  director  elected  by the  holders  of shares of Voting
Preferred  Stock  shall be  referred  to herein  as a  "Preferred  Director."  A
Preferred  Director so elected  shall  continue to serve as such  director for a
term of one year,  except that upon any  termination of the right of all of such
holders to vote as a class for Preferred  Directors,  the term of office of such
directors shall terminate.  Any Preferred  Director may be removed by, and shall
not be  removed  except  by,  the  approval  the  outstanding  shares  of Voting
Preferred Stock then entitled to vote for the election of directors,  subject to
Section 303 of the General Corporation Law of the State of California.

<PAGE>

            (iv) So long as a default in any preference  dividends on the Series
A  Preferred  Stock  shall  exist or the  holders of any other  series of Voting
Preferred Stock shall be entitled to elect Preferred Directors,  (a) any vacancy
in the office of a Preferred  Director may be filled  (except as provided in the
following  clause  (b)) by an  instrument  in  writing  signed by the  remaining
Preferred  Director  and filed with the  Corporation  and (b) in the case of the
removal of any  Preferred  Director,  the  vacancy  may be filled by the vote or
written consent of the holders of a majority of the outstanding shares of Voting
Preferred Stock then entitled to vote for the election of directors, present (in
person or by proxy) and voting  together as a single class,  at such time as the
removal shall be effected. Each director appointed as aforesaid by the remaining
Preferred  Director shall be deemed,  for all purposes hereof, to be a Preferred
Director.

            (v) For purposes hereof, a "default in preference  dividends" on the
Series A Preferred Stock shall be deemed to have occurred whenever the amount of
cumulative  and  unpaid  dividends  on the  Series A  Preferred  Stock  shall be
equivalent to six full quarterly dividends or more (whether or not consecutive),
and, having so occurred, such default shall be deemed to exist thereafter until,
but only until, all cumulative dividends on all shares of the Series A Preferred
Stock then outstanding shall have been paid through the last Quarterly  Dividend
Payment Date or until, but only until,  non-cumulative  dividends have been paid
regularly for at least one year.

        SECTION 4. CERTAIN RESTRICTIONS.

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

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

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

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

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

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

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

<PAGE>

        SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.

        (a) Subject to the prior and superior rights of holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of Series
A  Preferred  Stock with  respect to rights  upon  liquidation,  dissolution  or
winding  up  (voluntary  or  otherwise),  no  distribution  shall be made to the
holders  of shares of stock  ranking  junior  (either  as to  dividends  or upon
liquidation,  dissolution or winding up) to the Series A Preferred Stock unless,
prior  thereto,  the  holders of shares of Series A  Preferred  Stock shall have
received  $100 per share,  plus an amount equal to accrued and unpaid  dividends
and distributions thereon,  whether or not declared, to the date of such payment
(the  "Series A  Liquidation  Preference").  Following  the  payment of the full
amount of the Series A Liquidation Preference, no additional distributions shall
be made to the  holders  of shares of Series A  Preferred  Stock  unless,  prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Capital  Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 100 (such number in clause (ii), the
"Adjustment  Number").  Following the payment of the full amount of the Series A
Liquidation  Preference and the Capital Adjustment in respect of all outstanding
shares of Series A Preferred  Stock and Common Stock,  respectively,  holders of
Series A Preferred Stock and holders of Common Stock shall receive their ratable
and  proportionate  share of the remaining assets to be distributed in the ratio
of the Adjustment  Number to 1 with respect to such  Preferred  Stock and Common
Stock, on a per share basis, respectively.

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

        SECTION 7.  CONSOLIDATION,  MERGER,  ETC. In case the Corporation  shall
enter into any consolidation,  merger, combination or other transaction in which
the shares of Common  Stock are  exchanged  for or changed  into other  stock or
securities,  cash and/or any other property, then in any such case the shares of
Series A  Preferred  Stock  shall at the same  time be  similarly  exchanged  or
changed  in an  amount  per  share  (subject  to the  provision  for  adjustment
hereinafter  set  forth)  equal to 100  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.

        SECTION 8. NO REDEMPTION.  The shares of Series A Preferred  Stock shall
not be redeemable.

        SECTION 9.  RANKING.  The Series A Preferred  Stock shall rank junior to
all other  series of the  Corporation's  Preferred  Stock as to the  payment  of
dividends and the  distribution  of assets,  unless the terms of any such series
shall provide otherwise.

        SECTION 10. AMENDMENT.  The Articles of Incorporation of the Corporation
shall not be further  amended  in any manner  which  would  materially  alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely  without the affirmative vote of the holders of a
majority or more of the outstanding  shares of Series A Preferred Stock,  voting
separately as a class.

                  (Remainder of page left blank intentionally.)

<PAGE>

        We further  declare under penalty of perjury under the laws of the State
of  California  that the  matters  set  forth in this  certificate  are true and
correct of our own knowledge.

Dated:  November 17, 2004
                                               ---------------------------------
                                                   Haig S. Bagerdjian, President

        We further  declare under penalty of perjury under the laws of the State
of  California  that the  matters  set  forth in this  certificate  are true and
correct of our own knowledge.

Dated:  November 17, 2004
                                               ---------------------------------
                                                   Alan R. Steel,
                                                   Chief Financial Officer

<PAGE>

                                      B - 6

EXHIBIT B

                            FORM OF RIGHT CERTIFICATE

No. R                                                         ___________ Rights

         NOT EXERCISABLE AFTER NOVEMBER __, 2014 OR EARLIER IF REDEEMED
                  BY THE CORPORATION. THE RIGHTS ARE SUBJECT TO
                   REDEMPTION AT $.0001 PER RIGHT ON THE TERMS
                        SET FORTH IN THE RIGHTS AGREEMENT

                                Right Certificate
                                    Point.360

        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 that certain Rights
Agreement,  dated as of November  __,  2004 (the  "Rights  Agreement"),  between
Point.360,  a California  corporation  (the  "Corporation"),  and American Stock
Transfer & Trust Company (the "Rights Agent"),  to purchase from the Corporation
at any time after the  Distribution  Date (as such term is defined in the Rights
Agreement)  and before 5:00 P.M.,  California  time, on November __, 2014 unless
the  Rights  evidenced  hereby  shall  have  been  previously  redeemed  by  the
Corporation,  at the principal  office or offices of the Rights Agent designated
for such  purpose,  or at the  office  of its  successor  as Rights  Agent,  one
one-hundredth  of  a  fully  paid  non-assessable   share  of  Series  A  Junior
Participating  Preferred Stock, without par value (the "Preferred  Shares"),  of
the Corporation,  at a purchase price of $10 per one  one-hundredth of Preferred
Share (the  "Purchase  Price"),  upon  presentation  and surrender of this Right
Certificate  with the Form of Election to Purchase duly executed.  The number of
Rights evidenced by this Right Certificate (and the number of one one-hundredths
of a Preferred  Share which may be  purchased  upon  exercise  hereof) set forth
above, and the Purchase Price set forth above, are the number and Purchase Price
as of __________, based on the Preferred Shares as constituted at such date.

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

        As provided in the Rights  Agreement,  the Purchase Price and the number
of one  one-hundredths  of a Preferred  Share 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,
including Triggering Events (as such term is defined in the Rights Agreement).

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

        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 to purchase a like aggregate  number of
Preferred  Shares  or other  securities  as the  Rights  evidenced  by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right  Certificate or Right
Certificates for the number of whole Rights not exercised.

        Subject to the provisions of the Rights Agreement,  the Rights evidenced
by this  Certificate may be redeemed by the Corporation at a redemption price of
$.0001 per Right  (subject to  adjustment  as provided in the Rights  Agreement)
payable in cash.

        No fractional  Preferred  Shares will be issued upon the exercise of any
Right  or  Rights   evidenced   hereby  (other  than  fractions  which  are  one
one-hundredth or integral  multiples of one  one-hundredth of a Preferred Share,
which may, at the  election  of the  Corporation,  be  evidenced  by  depositary
receipts),  but in lieu thereof a cash payment will be made,  as provided in the
Rights Agreement.

        No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred  Shares or of
any other securities of the Corporation 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  Corporation  or any  right  to  vote  for the  election  of
directors or upon any matter  submitted to stockholders at any meeting  thereof,
or to give or withhold consent to any corporate  action, or to receive notice of
meetings  or other  actions  affecting  stockholders  (except as provided in the
Rights Agreement), or to receive dividends or other distributions or to exercise
any preemptive or subscription  rights, or otherwise,  until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in the
Rights Agreement.

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

WITNESS the facsimile signature of the proper officers of the Corporation. Dated
as of ___________.

                                        POINT.360
Attest:

                                        By:
                                             -----------------------------------
By:                                          Name:
   --------------------------
   Name:                                     Title:
   Title:

Countersigned:

By:
   --------------------------
   Name:
   Title:

<PAGE>

                    Form of Reverse Side of Right Certificate

                               FORM OF ASSIGNMENT

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

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

Dated:

                                                 ------------------------------
                                                 Signature

Signature Guaranteed:

        Signatures  must be guaranteed by an eligible  guarantor  institution (a
bank, stockbroker,  savings and loan association or credit union with membership
in an approved signature  guarantee  medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934.

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

                                                 ------------------------------
                                                 Signature

<PAGE>

              Form of Reverse Side of Right Certificate - continued

                          FORM OF ELECTION TO PURCHASE

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

To: The Rights Agent:

        The undersigned hereby irrevocably elects to exercise __________________
Rights  represented by this Right  Certificate to purchase the Preferred Shares,
Common Shares or other securities  issuable upon the exercise of such Rights and
requests that  certificates  for such Preferred  Shares,  Common Shares or other
securities to be issued in the name of:

Please insert social security
or other identifying number
                             ---------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                         (Please print name and address)

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

Please insert social security
or other identifying number
                             ---------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                         (Please print name and address)

Dated:
      ------------------------

                                                 ------------------------------
                                                 Signature

<PAGE>

              Form of Reverse Side of Right Certificate - continued

Signature Guaranteed:

        Signatures  must be guaranteed by an eligible  guarantor  institution (a
bank, stockbroker,  savings and loan association or credit union with membership
in an approved signature  guarantee  medallion program) pursuant to Rule 17Ad-15
of the Securities Exchange Act of 1934.

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

                                                 ------------------------------
                                                 Signature

                                     NOTICE

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

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

<PAGE>

                                      C - 4
EXHIBIT C

                 SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES

        On  _____________,  2004,  the  Board of  Directors  of  Point.360  (the
"Corporation")  declared a dividend distribution of one preferred share purchase
right (a "Right") for each outstanding share of Common Stock,  without par value
(the  "Common  Shares"),  of the  Corporation.  The  dividend  is payable to the
shareholders  of  record on  ___________,  2004 (the  "Record  Date"),  and with
respect to Common  Shares  issued  thereafter  until the  Distribution  Date (as
defined  below)  and, in certain  circumstances,  with  respect to Common  Stock
issued after the Distribution  Date. Except as set forth below, each Right, when
it becomes  exercisable,  entitles the  registered  holder to purchase  from the
Corporation  one  one-hundredth  of a share of  Series  A  Junior  Participating
Preferred Stock, without par value (the "Preferred Shares"),  of the Corporation
at a price of $10 per one  one-hundredth  of a  Preferred  Share (the  "Purchase
Price"), subject to adjustment.  The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Corporation and
American Stock Transfer & Trust  Company,  as Rights Agent (the "Rights  Agent")
dated as of November __, 2004.

        Initially, the Rights will be attached to all certificates  representing
Common  Shares then  outstanding,  and no separate  Right  Certificates  will be
distributed.  The Rights will  separate from the Common Shares upon the earliest
to occur of (i) ten days  after a person or group of  affiliated  or  associated
persons has  acquired  beneficial  ownership  of 20% or more of the  outstanding
Common Shares (except pursuant to a Permitted Offer, as hereinafter defined); or
(ii) 10 Business Days (as defined in the Rights  Agreement)  (or such later date
as the Board may determine) following the commencement of, or announcement of an
intention to make, a tender offer or exchange  offer the  consummation  of which
would result in a person or group becoming an Acquiring  Person (as  hereinafter
defined) (the earliest of such dates being called the  "Distribution  Date").  A
person or group whose  acquisition of Common Shares causes a  Distribution  Date
pursuant to clause (i) above is an "Acquiring Person." The date that a person or
group becomes an Acquiring Person is the "Shares Acquisition Date."

        The Rights Agreement  provides that,  until the  Distribution  Date, the
Rights will be transferred solely with the Common Shares. Until the Distribution
Date (or earlier  redemption  or  expiration  of the  Rights),  new Common Share
certificates  issued  after the Record Date upon  transfer or new  issuances  of
Common  Shares will  contain a notation  incorporating  the Rights  Agreement by
reference.  Until the Distribution Date (or earlier  redemption or expiration of
the Rights),  the surrender for transfer of any  certificates  for Common Shares
outstanding  as of the  Record  Date,  even if such  notation  or a copy of this
Summary of Rights is not attached thereto,  will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate. As
soon as  practicable  following the  Distribution  Date,  separate  certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the Common Shares as of the close of business on the  Distribution  Date (and
to each  initial  record  holder  of  certain  Common  Shares  issued  after the
Distribution Date), and such separate Right Certificates alone will evidence the
Rights.

        The  Rights are not  exercisable  until the  Distribution  Date and will
expire at the close of business on November __, 2014, unless earlier redeemed by
the Corporation as described below.

        In the  event  that any  person  becomes  an  Acquiring  Person  (except
pursuant  to a tender or  exchange  offer  which is for all  outstanding  Common
Shares at a price  and on terms  which a  majority  of  members  of the Board of
Directors (who are not also officers of the  Corporation or an Acquiring  Person
or  affiliate or associate  thereof)  determines  to be adequate and in the best
interests of the  Corporation  and its  shareholders,  other than such Acquiring
Person, its affiliates and associates (a "Permitted  Offer")),  each holder of a
Right will  thereafter  have the right  (the  "Flip-In  Right") to receive  upon
exercise  the  number  of Common  Shares  (or,  in  certain  circumstances,  one
one-hundredths  of a share  of  Preferred  Shares  or  other  securities  of the
Corporation)  having a market value  (immediately  before such triggering event)
equal to two times the  exercise  price of the Right.  At such time,  all Rights
that are beneficially owned by the Acquiring Person or any affiliate,  associate
or transferee thereof will be null and void.

        In the event that, at any time  following the Shares  Acquisition  Date,
(i) the  Corporation  is  acquired  in a merger  or other  business  combination
transaction  in  which  the  holders  of all of the  outstanding  Common  Shares
immediately  before the  consummation  of the transaction are not the holders of
all of the surviving  corporation's  voting power,  or (ii) more than 50% of the
Corporation's  assets or earning power are sold or  transferred,  in either case
with or to an Acquiring Person or any affiliate or associate or any other person
in which such  Acquiring  Person,  affiliate or associate has an interest or any
person acting on behalf of or in concert with such Acquiring  Person,  affiliate
or associate,  or, if in such  transaction  all holders of Common Shares are not
treated alike,  then each holder of a Right (except Rights which previously have
been voided as set forth above) shall  thereafter have the right (the "Flip-Over
Right") to receive, upon exercise, common shares of the acquiring company having
a value  equal to two times the  exercise  price of the  Right.  The holder of a
Right will  continue  to have the  Flip-Over  Right only to the extent  that the
Flip-In Right has not previously been exercised.

        The Purchase  Price payable and the number of Preferred  Shares,  Common
Shares or other  securities  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
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or  warrants  to  subscribe  for or  purchase  Preferred  Shares  at a price (or
conversion price as the case may be), less than the then current market price of
the Preferred  Shares or (iii) upon the distribution to holders of the Preferred
Shares of evidences of indebtedness or assets (excluding  regular quarterly cash
dividends) or of  subscription  rights or warrants (other than those referred to
above).

        The number of outstanding Rights and the number of one one-hundredths of
a Preferred  Share  issuable  upon  exercise  of each Right are also  subject to
adjustment  in the  event  of a stock  split  of the  Common  Shares  or a stock
dividend  on the  Common  Shares  payable  in  Common  Shares  or  subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
before the Distribution Date.

        Preferred  Shares  purchasable  upon  exercise of the Rights will not be
redeemable.  Each  Preferred  Share will be entitled  to a minimum  preferential
quarterly dividend payment of $1.00 per share but, if greater,  will be entitled
to an aggregate dividend per share of 100 times the dividend declared per Common
Share. In the event of liquidation,  the holders of the Preferred Shares will be
entitled  to a  minimum  preferential  liquidation  payment  of $100 per  share;
thereafter,  and after the holders of the Common  Shares  receive a  liquidation
payment of $1.00 per share,  the holders of the Preferred Shares and the holders
of the Common Shares will share the remaining  assets in the ratio of 1 to 1 (as
adjusted)  for each  Preferred  Share and Capital  Share so held,  respectively.
Finally, in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged,  each  Preferred  Share will be entitled to receive
100 times the amount  received per Common  Share.  These rights are protected by
customary antidilution  provisions.  In the event that the amount of accrued and
unpaid  dividends on the Preferred  Shares is  equivalent to six full  quarterly
dividends or more  (whether or not  consecutive),  the holders of the  Preferred
Shares  shall  have the  right,  voting as a class,  to elect two  directors  in
addition to the directors  elected by the holders of the Common Shares until all
cumulative  dividends  on the  Preferred  Shares have been paid through the last
quarterly dividend payment date or until non-cumulative dividends have been paid
regularly for at least one year.

        With certain  exceptions,  no adjustment  to the Purchase  Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
such Purchase Price. No fractional  Preferred  Shares will be issued (other than
fractions which are one one-hundredth or integral multiples of one one-hundredth
of a  Preferred  Share,  which  may,  at the  election  of the  Corporation,  be
evidenced by depositary receipts) and in lieu thereof, a payment in cash will be
made based on the market price of the  Preferred  Shares on the last Trading Day
(as defined in the Rights Agreement) before the date of exercise.

        At any time  before  the  earlier to occur of (i) a person  becoming  an
Acquiring  Person,  (ii) the  expiration  of the  Rights,  or  (iii) in  certain
circumstances, after the Shares Acquisition Date, the Corporation may redeem all
but not less  than  all of the  Rights  at a price  of  $.0001  per  Right  (the
"Redemption  Price") which  redemption shall be effective upon the action of the
Board of Directors.

        All of the  provisions  of the  Rights  Agreement  may be amended by the
Board of Directors of the Corporation  before the  Distribution  Date. After the
Distribution  Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity,  defect or inconsistency,  to make changes
which do not adversely affect the interests of holders of Rights  (excluding the
interests of any  Acquiring  Person),  or,  subject to certain  limitations,  to
shorten or lengthen any time period under the Rights Agreement.

        Until a Right is exercised,  the holder  thereof,  as such, will have no
rights as a shareholder of the Corporation,  including,  without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders of the Corporation,  shareholders may,  depending
upon the  circumstances,  recognize  taxable  income  should the  Rights  become
exercisable or upon the occurrence of certain events thereafter.

        A copy of the Rights  Agreement has been filed with the  Securities  and
Exchange Commission as an Exhibit to a Registration  Statement on Form 8-A dated
__________.  A copy of the Rights Agreement is available free of charge from the
Corporation.  This  summary  description  of the Rights  does not  purport to be
complete and is qualified in its entirety by reference to the Rights  Agreement,
which is hereby incorporated herein by reference.

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