Document:

<PAGE>

                                                                     EXHIBIT 4.3

                                  ROXIO, INC.

                                      and

                          MELLON INVESTOR SERVICES LLC

                                       as

                                  Rights Agent

                        PREFERRED STOCK RIGHTS AGREEMENT

                            Dated as of May 18, 2001

<PAGE>

                               TABLE OF CONTENTS
<TABLE>
                                                                                                                     Page
                                                                                                                     ----
<S>             <C>                                                                                                 <C>
Section 1.        Certain Definitions...............................................................................    1

Section 2.        Appointment of Rights Agent.......................................................................    7

Section 3.        Issuance of Rights Certificates...................................................................    7

Section 4.        Form of Rights Certificates.......................................................................    9

Section 5.        Countersignature and Registration.................................................................    9

Section 6.        Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost
                  or Stolen Rights Certificates.....................................................................   10

Section 7.        Exercise of Rights; Exercise Price; Expiration Date of Rights.....................................   11

Section 8.        Cancellation and Destruction of Rights Certificates...............................................   13

Section 9.        Reservation and Availability of Preferred Shares..................................................   13

Section 10.       Record Date.......................................................................................   15

Section 11.       Adjustment of Exercise Price, Number of Shares or Number of Rights................................   15

Section 12.       Certificate of Adjusted Exercise Price or Number of Shares........................................   22

Section 13.       Consolidation, Merger or Sale or Transfer of Assets or Earning Power..............................   22

Section 14.       Fractional Rights and Fractional Shares...........................................................   26

Section 15.       Rights of Action..................................................................................   27

Section 16.       Agreement of Rights Holders.......................................................................   27

Section 17.       Rights Certificate Holder Not Deemed a Stockholder................................................   28

Section 18.       Concerning the Rights Agent.......................................................................   28

Section 19.       Merger or Consolidation or Change of Name of Rights Agent.........................................   29

Section 20.       Duties of Rights Agent............................................................................   29

Section 21.       Change of Rights Agent............................................................................   31
</TABLE>
                                     -ii-
<PAGE>

                               TABLE OF CONTENTS
                                  (continued)

<TABLE>
                                                                                                                     Page
                                                                                                                     ----
<S>             <C>                                                                                                 <C>
Section 22.       Issuance of New Rights Certificates...............................................................   32

Section 23.       Redemption........................................................................................   33

Section 24.       Exchange..........................................................................................   33

Section 25.       Notice of Certain Events..........................................................................   35

Section 26.       Notices...........................................................................................   36

Section 27.       Supplements and Amendments........................................................................   37

Section 28.       Successors........................................................................................   37

Section 29.       Determinations and Actions by the Board of Directors, etc.........................................   37

Section 30.       Benefits of this Agreement........................................................................   38

Section 31.       Severability......................................................................................   38

Section 32.       Governing Law.....................................................................................   38

Section 33.       Counterparts......................................................................................   38

Section 34.       Descriptive Headings..............................................................................   38

EXHIBITS

Exhibit A         Form of Certificate of Designation

Exhibit B         Form of Rights Certificate

Exhibit C         Summary of Rights
</TABLE>

                                     -iii-
<PAGE>

                        PREFERRED STOCK RIGHTS AGREEMENT

     This Preferred Stock Rights Agreement is dated as of May 18, 2001, between
Roxio Inc., a Delaware corporation, and Mellon Investor Services LLC.

     On May 18, 2001 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend of one Preferred
Share Purchase Right (a "Right") for each Common Share (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on June 15, 2001 (the "Record Date"), each Right representing the right to
purchase one one-thousandth (0.001) of a share of Series A Participating
Preferred Stock (as such number may be adjusted pursuant to the provisions of
this Agreement), having the rights, preferences and privileges set forth in the
form of Certificate of Designations of Rights, Preferences and Privileges of
Series A Participating Preferred Stock attached hereto as Exhibit A, upon the
terms and subject to the conditions herein set forth, and further authorized and
directed the issuance of one Right (as such number may be adjusted pursuant to
the provisions of this Agreement) with respect to each Common Share that shall
become outstanding between the Record Date and the earlier of the Distribution
Date and the Expiration Date (as such terms are hereinafter defined), and in
certain circumstances after the Distribution Date.

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

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

          (a)  "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the Common Shares then outstanding, but shall not include the
Company, any Subsidiary of the Company or any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan.

          Notwithstanding the foregoing, no Person shall be deemed to be an
Acquiring Person as the result of an acquisition of Common Shares by the Company
which, by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15% or more of the Common
Shares of the Company then outstanding; provided, however, that if a Person
shall become the Beneficial Owner of 15% or more of the Common Shares of the
Company then outstanding by reason of share purchases by the Company and shall,
after such share purchases by the Company, become the Beneficial Owner of any
additional Common Shares of the Company (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the outstanding Common
Shares), then such Person shall be deemed to be an Acquiring Person unless upon
becoming the Beneficial Owner of such additional Common Shares of the Company
such Person does not beneficially own 15% or more of the Common Shares of the
Company then outstanding.
<PAGE>

Notwithstanding the foregoing, (i) if the Company's Board of Directors
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of the Common Shares
that would otherwise cause such Person to be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this paragraph (a), or (B) such Person
was aware of the extent of the Common Shares it beneficially owned but had no
actual knowledge of the consequences of such beneficial ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, and if such Person divested or 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
paragraph (a), then such Person shall not be deemed to be or to have become an
"Acquiring Person" for any purposes of this Agreement; and (ii) if, as of the
date hereof, any Person is the Beneficial Owner of 15% or more of the Common
Shares outstanding, such Person shall not be or become an "Acquiring Person," as
defined pursuant to the foregoing provisions of this paragraph (a), unless and
until such time as such Person shall become the Beneficial Owner of additional
Common Shares (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a
split or subdivision of the outstanding Common Shares), unless, upon becoming
the Beneficial Owner of such additional Common Shares, such Person is not then
the Beneficial Owner of 15% or more of the Common Shares then outstanding.

          (b)  "Adjustment Fraction" shall have the meaning set forth in Section
11(a)(i) hereof.

          (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 Exchange Act, as in effect on the date of this Agreement.

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

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

               (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 only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), 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 pursuant to this Section
1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (2) securities
which a Person or any of such Person's Affiliates or Associates may be

                                                                             -2-
<PAGE>

deemed to have the right to acquire pursuant to any merger or other acquisition
agreement between the Company and such Person (or one or more of its Affiliates
or Associates) if such agreement has been approved by the Board of Directors of
the Company prior to there being an Acquiring Person; or (B) the right to vote
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 under this Section 1(d)(ii)(B) if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then reportable on Schedule
13D under the Exchange Act (or any comparable or successor report); or

               (iii)  which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person's Affiliates or Associates has any agreement, arrangement
or understanding, whether or not in writing (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B))
or disposing of any securities of the Company; provided, however, that in no
case shall an officer or director of the Company be deemed (x) the Beneficial
Owner of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their capacity
as officers or directors of the Company or (y) the Beneficial Owner of
securities held of record by the trustee of any employee benefit plan of the
Company or any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director, by
reason of any influence that such officer or director may have over the voting
of the securities held in the plan.

          (e)  "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in New Jersey or California are
authorized or obligated by law or executive order to close.

          (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 Company shall
mean the shares of Common Stock of the Company, par value $0.001 per share.
Common Shares when used with reference to any Person other than the Company
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.

          (h)  "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.

          (i)  "Company" shall mean Roxio, Inc., a Delaware corporation, subject
to the terms of Section 13(a)(iii)(C) hereof.

                                                                             -3-
<PAGE>

          (j)  "Current Per Share Market Price" of any security (a "Security"
for purposes of this definition), for all computations other than those made
pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to but not including such date, and for purposes
of computations made pursuant to Section 11(a)(iii) hereof, the Current Per
Share Market Price of any Security on any date shall be deemed to be the average
of the daily closing prices per share of such Security for the ten (10)
consecutive Trading Days immediately prior to but not including 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 (i) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares or
(ii) any subdivision, combination or reclassification of such Security, and
prior to the expiration of the applicable thirty (30) Trading Day or ten (10)
Trading Day period, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the 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 sale price or,
if such last sale price is not reported, 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 Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in the Security, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company shall be used.
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 product of
(x) the Current Per Share Market Price of the Common Shares as determined
pursuant to this Section 1(j), as appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof,
multiplied by (y) 1000. If the Security is not 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 Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

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

          (l)  "Distribution Date" shall mean the earlier of (i) the Close of
Business on the tenth day (or such later date as may be determined by action of
the Company's Board of Directors) after the Shares Acquisition Date (or, if the
tenth day after the Shares Acquisition Date occurs before

                                                                             -4-
<PAGE>

the Record Date, the Close of Business on the Record Date) or (ii) the Close of
Business on the tenth Business Day (or such later date as may be determined by
action of the Company's Board of Directors) after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if, assuming the successful consummation
thereof, such Person would be an Acquiring Person.

          (m)  "Equivalent Shares" shall mean Preferred Shares and any other
class or series of capital stock of the Company which is entitled to the same
rights, privileges and preferences as the Preferred Shares.

          (n)  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

          (o)  "Exchange Ratio" shall have the meaning set forth in Section
24(a) hereof.

          (p)  "Exercise Price" shall have the meaning set forth in Section
4(a) hereof.

          (q)  "Expiration Date" shall mean the earliest to occur of: (i) the
Close of Business on the Final Expiration Date, (ii) the Redemption Date, or
(iii) the time at which the Board of Directors orders the exchange of the Rights
as provided in Section 24 hereof.

          (r)  "Final Expiration Date" shall mean June 15, 2011.

          (s)  "Nasdaq" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.

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

          (u)  "Post-Event Transferee" shall have the meaning set forth in
Section 7(e) hereof.

          (v)  "Preferred Shares" shall mean shares of Series A Participating
Preferred Stock, par value $0.001 per share, of the Company.

          (w)  "Pre-Event Transferee" shall have the meaning set forth in
Section 7(e) hereof.

          (x)  "Principal Party" shall have the meaning set forth in Section
13(b) hereof.

          (y)  "Record Date" shall have the meaning set forth in the recitals at
the beginning of this Agreement.

                                                                             -5-
<PAGE>

          (z)  "Redemption Date" shall have the meaning set forth in Section
23(a) hereof.

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

          (bb)  "Rights Agent" shall mean (i) Mellon Investor Services LLC, (ii)
its successor or replacement as provided in Sections 19 and 21 hereof or (iii)
any additional Person appointed pursuant to Section 2 hereof.

          (cc)  "Rights Certificate" shall mean a certificate substantially in
the form attached hereto as Exhibit B.

          (dd)  "Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals at the beginning of this Agreement.

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

          (ff)  "Section 13 Event" shall mean any event described in clause (i),
(ii) or (iii) of Section 13(a) hereof.

          (gg)  "Securities Act" shall mean the Securities Act of 1933, as
amended.

          (hh)  "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 Section 13(d) under the Exchange Act) by
the Company 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(a) hereof, then no Shares Acquisition Date shall be
deemed to have occurred.

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

          (jj)  "Subsidiary" of any Person shall mean any corporation or other
entity of which an amount of voting securities sufficient to elect a majority of
the directors or Persons having similar authority of such corporation or other
entity is beneficially owned, directly or indirectly, by such Person, or any
corporation or other entity otherwise controlled by such Person.

          (kk)  "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.

          (ll)  "Summary of Rights" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit C.

          (mm)  "Total Exercise Price" shall have the meaning set forth in
Section 4(a) hereof.

                                                                             -6-
<PAGE>

          (nn)  "Trading Day" shall mean a day on which the principal national
securities exchange on which a referenced security is listed or admitted to
trading is open for the transaction of business or, if a referenced security is
not listed or admitted to trading on any national securities exchange, a
Business Day.

          (oo)  A "Triggering Event" shall be deemed to have occurred upon any
Person becoming an Acquiring Person.

     Section 2.  Appointment of Rights Agent.  The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable, upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any co-Rights Agent.

     Section 3.  Issuance of Rights Certificates.

          (a)  Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates
for Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by separate
Rights Certificates and (ii) the right to receive Rights Certificates will be
transferable only in connection with the transfer of Common Shares.

          Until the earlier of the Distribution Date or the Expiration Date, the
surrender for transfer of certificates for Common Shares shall also constitute
the surrender for transfer of the Rights associated with the Common Shares
represented thereby. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested
and provided with all necessary information, send) 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 Company, a Rights Certificate evidencing one Right for each Common Share so
held, subject to adjustment as provided herein. In the event that an adjustment
in the number of Rights per Common Share has been made pursuant to Section 11
hereof, then at the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights. As of the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates and may be transferred by the transfer of the Rights
Certificates as permitted hereby, separately and apart from any transfer of
Common Shares, and the holders of such Rights Certificates as listed in the
records of the Company or any transfer agent or registrar for the Rights shall
be the record holders thereof.

          (b)  On the Record Date or as soon as practicable thereafter, the
Company will send a copy of the Summary of Rights by first-class, postage-
prepaid mail, to each record holder of

                                                                             -7-
<PAGE>

Common Shares as of the Close of Business on the Record Date, at the address of
such holder shown on the records of the Company's transfer agent and registrar.

          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 the
Summary of Rights.

          (c)  Unless the Board of Directors by resolution adopted at or before
the time of the issuance of any Common Shares after the Record Date but prior to
the earlier of the Distribution Date or the Expiration Date (or, in certain
circumstances provided in Section 22 hereof, after the Distribution Date)
specifies to the contrary, Rights shall be issued in respect of all Common
Shares that are so issued, and Certificates representing such Common Shares
shall also be deemed to be certificates for Rights, and shall bear the following
legend:

     THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
     RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN ROXIO, INC. AND MELLON
     INVESTOR SERVICES LLC, AS THE RIGHTS AGENT, DATED AS OF MAY 18, 2001, (THE
     "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
     REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES
     OF ROXIO, INC. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
     AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL
     NO LONGER BE EVIDENCED BY THIS CERTIFICATE.  ROXIO, INC.  WILL MAIL TO THE
     HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE
     AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.  UNDER CERTAIN CIRCUMSTANCES
     SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON
     WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE
     THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER
     CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER,
     MAY BECOME NULL AND VOID.

With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration 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.

          (d)  In the event that the Company purchases or acquires any Common
Shares after the Record Date but prior to the Distribution Date, any Rights
associated with such Common Shares shall be deemed canceled and retired so that
the Company shall not be entitled to exercise any Rights associated with the
Common Shares which are no longer outstanding.

                                                                             -8-
<PAGE>

     Section 4.  Form of Rights Certificates.

          (a)  The Rights Certificates (and the forms of election to purchase
Common Shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate (but which do not affect the
rights, duties or responsibilities of the Rights Agent) and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or a national
market system, on which the Rights may from time to time be listed or included,
or to conform to usage.

          Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the Record Date
(or in the case of Rights issued with respect to Common Shares issued by the
Company after the Record Date, as of the date of issuance of such Common Shares)
and on their face shall entitle the holders thereof to purchase such number of
one-thousandths of a Preferred Share as shall be set forth therein at the price
set forth therein (such exercise price per one one-thousandth of a Preferred
Share being hereinafter referred to as the "Exercise Price" and the aggregate
Exercise Price of all Preferred Shares issuable upon exercise of one Right being
hereinafter referred to as the "Total Exercise Price"), but the number and type
of securities purchasable upon the exercise of each Right and the Exercise Price
shall be subject to adjustment as provided herein.

          (b)  Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a Post-Event
Transferee, (iii) a Pre-Event Transferee or (iv) any subsequent transferee
receiving transferred Rights from a Post-Event Transferee or a Pre-Event
Transferee, either directly or through one or more intermediate transferees, and
any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent the Rights Agent has
notice thereof and to the extent feasible) the following legend:

     THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
     OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
     ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
     AGREEMENT).  ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
     REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED
     IN SECTION 7(e) OF THE RIGHTS AGREEMENT.

     Section 5.  Countersignature and Registration.

          (a)  The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Financial Officer, its President or any

                                                                             -9-
<PAGE>

Vice President, either manually or by facsimile signature, and by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal (if any) or a
facsimile thereof.

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

          (b)  Following the Distribution Date, and receipt by the Rights Agent
of all necessary information, the Rights Agent will keep or cause to be kept, at
its office designated for such purposes, books for registration and transfer of
the Rights Certificates issued hereunder.

          Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.

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

          (a)  Subject to the provisions of Sections 7(e), 14 and 24 hereof, at
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the Expiration Date, any Rights Certificate or
Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of one-thousandths of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then
entitled such holder to purchase.

          Any registered holder desiring to transfer, split up, combine or
exchange any Rights Certificate or Rights Certificates shall make such request
in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent designated for such purpose. Neither
the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have properly completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.
Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and 24

                                                                            -10-
<PAGE>

hereof, countersign and deliver to the person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates. The Rights Agent shall have no
duty or obligation to take any action under any Section of this Agreement which
requires the payment by a Rights holder of applicable taxes and/or governmental
charges unless and until the Rights Agent is satisfied that all such taxes
and/or charges have been paid.

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

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

          (a)  Subject to Sections 7(e), 23(b) and 24(b) hereof, the registered
holder of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at any time after the
Distribution Date and prior to the Close of Business on the Expiration Date by
surrender of the Rights Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Rights Agent at the office of the
Rights Agent designated for such purpose, together with payment of the Exercise
Price for each one-thousandth of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets as the case may be) as to which
the Rights are exercised.

          (b)  The Exercise Price for each one-thousandth of a Preferred Share
issuable pursuant to the exercise of a Right shall initially be $77.00 Dollars,
shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof and shall be payable in lawful money of the United States of America
in accordance with paragraph (c) below.

          (c)  Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the number of one-thousandths of a Preferred
Share (or, following a Triggering Event, other securities, cash or other assets
as the case may be) to be purchased and an amount equal to any applicable tax or
governmental charge required to be paid by the holder of such Rights Certificate
in accordance with Section 9(e) hereof, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer
agent of the Preferred Shares (or make available, if the Rights Agent is the
transfer agent for the Preferred Shares) a certificate or certificates for the
number of one-thousandths of a Preferred Share (or, following a Triggering
Event, other

                                                                            -11-
<PAGE>

securities, cash or other assets as the case may be) to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests or (B) if the Company shall have elected to deposit the total number of
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one-thousandths of a
Preferred Share (or, following a Triggering Event, other securities, cash or
other assets as the case may be) as are to be purchased (in which case
certificates for the Preferred Shares (or, following a Triggering Event, other
securities, cash or other assets as the case may be) represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company hereby directs the depositary agent to comply with such request,
(ii) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt thereof, deliver such cash
to or upon the order of the registered holder of such Rights Certificate.

          The payment of the Exercise Price (as such amount may be reduced
(including to zero) pursuant to Section 11(a)(iii) hereof) and an amount equal
to any applicable tax or governmental charge required to be paid by the holder
of such Rights Certificate in accordance with Section 9(e) hereof, may be made
in cash or by certified bank check, cashier's check or bank draft payable to the
order of the Company. In the event that the Company is obligated to issue
securities of the Company other than Preferred Shares, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
necessary to comply with this Agreement.

          (d)  In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Rights Certificate or to
his or her duly authorized assigns, subject to the provisions of Section 6 and
Section 14 hereof.

          (e)  Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such (a
"Post-Event Transferee"), (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the
Company's Board of Directors has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e) (a "Pre-Event Transferee") or (iv) any subsequent transferee
receiving transferred Rights from a Post-Event Transferee or a Pre-Event
Transferee, either directly or through one or more intermediate transferees,
shall become null and void without any further

                                                                            -12-
<PAGE>

action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise.

          The Company shall notify the Rights Agent when this Section 7(e)
applies and should use all reasonable efforts to ensure that the provisions of
this Section 7(e) and Section 4(b) hereof are complied with, but neither the
Company nor the Rights Agent shall have any liability to any holder of Rights
Certificates or to any other Person as a result of the Company's failure to make
any determinations with respect to an Acquiring Person or any of such Acquiring
Person's Affiliates, Associates or transferees hereunder.

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

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

     Section 9.  Reservation and Availability of Preferred Shares.

          (a)  The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of its authorized and
unissued Preferred Shares not reserved for another purpose (and, following the
occurrence of a Triggering Event, out of its authorized and unissued Common
Shares and/or other securities), the number of Preferred Shares (and, following
the occurrence of the Triggering Event, Common Shares and/or other securities)
that will be sufficient to permit the exercise in full of all outstanding
Rights.

          (b)  If the Company shall hereafter list any of its Preferred Shares
on a national securities exchange, then so long as the Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on such exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (but only to the extent that
the Board of Directors

                                                                            -13-
<PAGE>

of the Company determines that it is reasonably likely that the Rights will be
exercised), all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.

          (c)  The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act with respect to
the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the date of expiration of the
Rights.

          The Company may temporarily suspend, for a period not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating, and promptly
notify in writing the Rights Agent, that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement and prompt written
notification to the Rights Agent at such time as the suspension is no longer in
effect. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction, unless the requisite qualification in such jurisdiction
shall have been obtained, or an exemption therefrom shall be available, and
until a registration statement has been declared and remains effective.

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

          (e)  The Company further covenants and agrees that it will pay when
due and payable any and all taxes and charges which may be payable in respect of
the original issuance or delivery of the Rights Certificates or of any Preferred
Shares (or other securities of the Company) upon the exercise of Rights.

          The Company shall not, however, be required to pay any tax or charge
which may be payable in respect of any transfer or delivery of Rights
Certificates to a person other than, or the issuance or delivery of certificates
or depositary receipts for the Preferred Shares (or other securities of the
Company) in a name other than that of, the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares (or other
securities of the Company) upon the exercise of any Rights

                                                                            -14-
<PAGE>

until any such tax or charge shall have been paid (any such tax or charge being
payable by the holder of such Rights Certificate at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax or
charge is due.

     Section 10.  Record Date.  Each Person in whose name any certificate for a
number of one-thousandths of a Preferred Share (or other securities of the
Company) is issued upon the exercise of Rights shall for all purposes be deemed
to have become the holder of record of Preferred Shares (or other securities of
the Company) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Total Exercise Price with respect to which the
Rights have been exercised (and any applicable taxes and charges) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the transfer books of the Company are closed, such Person shall be deemed
to have become the record holder of such shares on, and such certificate shall
be dated, the next succeeding Business Day on which the transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a holder
of Preferred Shares (or other securities of the Company) for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.

     Section 11.  Adjustment of Exercise Price, Number of Shares or Number of
Rights.  The Exercise Price, the number and kind of shares or other property
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)  Anything in this Agreement to the contrary notwithstanding, in
the event that the Company 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 (by reverse stock split or otherwise) 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 Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11 and Section 7(e) hereof: (1) the Exercise Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification shall be adjusted so that
the Exercise Price thereafter shall equal the result obtained by dividing the
Exercise Price in effect immediately prior to such time by a fraction (the
"Adjustment Fraction"), the numerator of which shall be the total number of
Preferred Shares (or shares of capital stock issued in such reclassification of
the Preferred Shares) outstanding immediately following such time and the
denominator of which shall be the total number of Preferred Shares outstanding
immediately prior to such time; 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 Company issuable upon
exercise of such Right; and (2) the number of one-thousandths of a Preferred
Share (or share of such other capital stock) issuable upon the exercise of each
Right shall equal the number of one-thousandths of a Preferred Share (or share

                                                                            -15-
<PAGE>

of such other capital stock) as was issuable upon exercise of a Right
immediately prior to the occurrence of the event described in clauses (A)-(D) of
this Section 11(a)(i), multiplied by the Adjustment Fraction; provided, however,
that, no such adjustment shall be made pursuant to this Section 11(a)(i) to the
extent that there shall have simultaneously occurred an event described in
clause (A), (B), (C) or (D) of Section 11(n) with a proportionate adjustment
being made thereunder. Each Common Share that shall become outstanding after an
adjustment has been made pursuant to this Section 11(a)(i) shall have associated
with it the number of Rights, exercisable at the Exercise Price and for the
number of one-thousandths of a Preferred Share (or shares of such other capital
stock) as one Common Share has associated with it immediately following the
adjustment made pursuant to this Section 11(a)(i).

               (i)  Subject to Section 24 of this Agreement, in the event that a
Triggering Event shall have occurred, then promptly following such Triggering
Event each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive for each Right, upon exercise thereof in
accordance with the terms of this Agreement and payment of the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event, in lieu of a
number of one-thousandths of a Preferred Share, such number of Common Shares of
the Company as shall equal the quotient obtained by dividing (A) the product
obtained by multiplying (1) the Exercise Price in effect immediately prior to
the occurrence of the Triggering Event by (2) the number of one-thousandths of a
Preferred Share for which a Right was exercisable (or would have been
exercisable if the Distribution Date had occurred) immediately prior to the
first occurrence of a Triggering Event, by (B) 50% of the Current Per Share
Market Price for Common Shares on the date of occurrence of the Triggering
Event; provided, however, that the Exercise Price and the number of Common
Shares of the Company so receivable upon exercise of a Right shall be subject to
further adjustment as appropriate in accordance with Section 11(e) hereof to
reflect any events occurring in respect of the Common Shares of the Company
after the occurrence of the Triggering Event.

               (ii)  In lieu of issuing Common Shares in accordance with Section
11(a)(ii) hereof, the Company may, if the Company's Board of Directors
determines that such action is necessary or appropriate and not contrary to the
interest of holders of Rights and, in the event that the number of Common Shares
which are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights, or
if any necessary regulatory approval for such issuance has not been obtained by
the Company, the Company shall: (A) determine the excess of (1) the value of the
Common Shares issuable upon the exercise of a Right (the "Current Value") over
(2) the Exercise Price (such excess, the "Spread") and (B) with respect to each
Right, make adequate provision to substitute for such Common Shares, upon
exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price, (3)
other equity securities of the Company (including, without limitation, shares or
units of shares of any series of preferred stock which the Company's Board of
Directors has deemed to have the same value as Common Shares (such shares or
units of shares of preferred stock are herein called "Common Stock
Equivalents")), except to the extent that the Company has not obtained any
necessary stockholder or regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance, (5)
other assets or (6) any

                                                                            -16-
<PAGE>

combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Company's Board of
Directors based upon the advice of a nationally recognized investment banking
firm selected by the Company's Board of Directors; provided, however, that if
the Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within thirty (30) days following the later of (x) the first
occurrence of a Triggering Event and (y) the date on which the Company's right
of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company
shall be obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Exercise Price, Common Shares (to the extent
available), except to the extent that the Company has not obtained any necessary
stockholder or regulatory approval for such issuance, and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread. If
the Company's Board of Directors shall determine in good faith that it is likely
that sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights or that any necessary regulatory approval for
such issuance will be obtained, the thirty (30) day period set forth above may
be extended to the extent necessary, but not more than ninety (90) days after
the Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares or take
action to obtain such regulatory approval (such period, as it may be extended,
the "Substitution Period"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights and (y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares, to
take any action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall promptly notify the Rights Agent in writing thereof and shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement (with prompt written
notice thereof to the Rights Agent) at such time as the suspension is no longer
in effect. For purposes of this Section 11(a)(iii), the value of the Common
Shares shall be the Current Per Share Market Price of the Common Shares on the
Section 11(a)(ii) Trigger Date and the value of any Common Stock Equivalent
shall be deemed to have the same value as the Common Shares on such date.

          (b)  In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Preferred Shares entitling such holders (for a period expiring
within forty-five (45) calendar days after such record date) to subscribe for or
purchase Preferred Shares or Equivalent Shares or securities convertible into
Preferred Shares or Equivalent Shares at a price per share (or having a
conversion price per share, if a security convertible into Preferred Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the
Preferred Shares or Equivalent Shares on such record date, then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record date,
plus the number of Preferred Shares or Equivalent Shares, as the case may be,
which the

                                                                            -17-
<PAGE>

aggregate offering price of the total number of Preferred Shares or Equivalent
Shares, as the case may be, to be offered or issued (and/or the aggregate
initial conversion price of the convertible securities to be offered or issued)
would purchase at such current market price, and the denominator of which shall
be the number of Preferred Shares and Equivalent Shares (if any) outstanding on
such record date, plus the number of additional Preferred Shares or Equivalent
Shares, as the case may be, 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 Company 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 as determined in good faith by the Company's Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Preferred
Shares and Equivalent Shares owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights, options or warrants are not so issued, the
Exercise Price shall be adjusted to be the Exercise Price which would then be in
effect if such record date had not been fixed.

          (c)  In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Preferred Shares or of any class or series of Equivalent Shares (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend, if any, or
a dividend payable in Preferred Shares) or subscription rights, options or
warrants (excluding those referred to in Section 11(b)), then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Per Share
Market Price of a Preferred Share or an Equivalent Share on such record date,
less the fair market value per Preferred Share or Equivalent Share (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a Preferred
Share or Equivalent Share, as the case may be, and the denominator of which
shall be such Current Per Share Market Price of a Preferred Share or Equivalent
Share on such record date; 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 Company issuable upon
exercise of one Right. Such adjustments shall be made successively whenever such
a record date is fixed, and in the event that such distribution is not so made,
the Exercise Price shall be adjusted to be the Exercise Price which would have
been in effect if such record date had not been fixed.

          (d)  Anything herein to the contrary notwithstanding, no adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1.0%) of the Exercise Price;
provided, however, that any adjustments which by

                                                                            -18-
<PAGE>

reason of this Section 11(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest ten-
thousandth of a Common Share or other share or one hundred-thousandth of a
Preferred Share, as the case may be. Notwithstanding the first sentence of this
Section 11(d), 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
requires such adjustment or (ii) the Expiration Date.

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

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

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

          (h)  The Company may elect on or after the date of any adjustment of
the Exercise Price as a result of the calculations made in Section 11(b) or (c)
to adjust the number of Rights, in substitution for any adjustment in the number
of Preferred Shares 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-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one hundred-thousandth) obtained by dividing
the Exercise Price in effect immediately prior to adjustment of the Exercise
Price by the Exercise Price in effect immediately after adjustment of the
Exercise Price. The Company shall make a public announcement (with prompt
written notice thereof to the Rights Agent) 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

                                                                            -19-
<PAGE>

date may be the date on which the Exercise Price is adjusted or any day
thereafter, but, if any Rights Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(h), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Exercise Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.

          (i)  Irrespective of any adjustment or change in the Exercise Price or
the number of Preferred Shares issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Exercise Price per one one-thousandth of a Preferred Share and the number of
one-thousandths of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.

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

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

          (l)  Anything in this Section 11 to the contrary notwithstanding,
prior to the Distribution Date, the Company shall be entitled to make such
reductions in the Exercise Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred or Common Shares, (ii) issuance wholly for cash of
any Preferred or Common Shares

                                                                            -20-
<PAGE>

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

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

          (n)  In the event that the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding
Common Shares (by reverse stock split or otherwise) into a smaller number of
Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11(a) and Section 7(e) hereof: (1) each Common Share
(or shares of capital stock issued in such reclassification of the Common
Shares) outstanding immediately following such time shall have associated with
it the number of Rights as were associated with one Common Share immediately
prior to the occurrence of the event described in clauses (A)-(D) above; (2) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by multiplying the Exercise Price in effect immediately prior to such time by a
fraction, the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the event described in clauses (A)-(D) above,
and the denominator of which shall be the total number of Common Shares
outstanding immediately after such event; 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 Company issuable
upon exercise of such Right; and (3) the number of one-thousandths of a
Preferred Share (or shares of such other capital stock) issuable upon the
exercise of each Right outstanding after such event shall equal the number of
one-thousandths of a Preferred Share (or shares of such other capital stock) as
were issuable with respect to one Right immediately prior to such event.

          Each Common Share that shall become outstanding after an adjustment
has been made pursuant to this Section 11(n) shall have associated with it the
number of Rights, exercisable at the Exercise Price and for the number of one-
thousandths of a Preferred Share (or shares of such other capital stock) as one
Common Share has associated with it immediately following the adjustment made
pursuant to this Section 11(n).  If an event occurs which would require an
adjustment under both this Section 11(n) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(n) shall be in addition to, and shall
be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

                                                                            -21-
<PAGE>

     Section 12.  Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts and computations accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Rights Certificate in accordance with Section 26 hereof.
Notwithstanding the foregoing sentence, the failure of the Company to make such
certification or give such notice shall not affect the validity of such
adjustment or the force or effect of the requirement for such adjustment.  The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment contained therein and shall have no duty with respect to and
shall not be deemed to have knowledge of such adjustment unless and until it
shall have received such certificate.

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

          (a)  In the event that, following a Triggering Event, directly or
indirectly:

               (i)  the Company shall consolidate with, or merge with and into,
any other Person (other than a wholly-owned Subsidiary of the Company in a
transaction the principal purpose of which is to change the state of
incorporation of the Company and which complies with Section 11(m) hereof);

               (ii)  any Person shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such merger,
all or part of the Common Shares shall be changed into or exchanged for stock or
other securities of any other person (or the Company); or

               (iii)  the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more of its wholly
owned Subsidiaries in one or more transactions, each of which individually (and
together) complies with Section 11(m) hereof),

                    then, concurrent with and in each such case,

                    (A)  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 Total Exercise Price applicable immediately
prior to the occurrence of the Section 13 Event in accordance with the terms of
this Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of the Principal Party (as
hereinafter defined), free of any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by dividing
such Total Exercise Price by an amount equal to fifty percent (50%) of the
Current Per Share Market Price of the Common Shares of such Principal Party on
the date of consummation of such Section 13 Event, provided, however, that the
Exercise Price and the

                                                                            -22-
<PAGE>

number of Common Shares of such Principal Party so receivable upon exercise of a
Right shall be subject to further adjustment as appropriate in accordance with
Section 11(e) hereof;

                    (B)  such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, all the obligations and
duties of the Company pursuant to this Agreement;

                    (C)  the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event;

                    (D)  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 ensure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to its Common Shares thereafter deliverable
upon the exercise of the Rights; and

                    (E)  upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary transaction in respect
of such Principal Party, each holder of a Right shall thereupon be entitled to
receive, upon exercise of a Right and payment of the Total Exercise Price as
provided in this Section 13(a), such cash, shares, rights, warrants and other
property which such holder would have been entitled to receive had such holder,
at the time of such transaction, owned the Common Shares of the Principal Party
receivable upon the exercise of such Right pursuant to this Section 13(a), and
such Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.

                    (F)  For purposes hereof, the "earning power" of the Company
and its Subsidiaries shall be determined in good faith by the Company's Board of
Directors on the basis of the operating income of each business operated by the
Company and its Subsidiaries during the three fiscal years preceding the date of
such determination (or, in the case of any business not operated by the Company
or any Subsidiary during three full fiscal years preceding such date, during the
period such business was operated by the Company or any Subsidiary).

          (b)  For purposes of this Agreement, the term "Principal Party" shall
mean:

               (i)  in the case of any transaction described in clause (i) or
(ii) of Section 13(a) hereof: (A) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the Common
Shares of which have the greatest aggregate market value of shares outstanding,
or (B) if no securities are so issued, (x) the Person that is the other party to
the merger, if such Person survives said merger, or, if there is more than one
such Person, the Person the Common Shares of which have the greatest aggregate
market value of shares outstanding or (y) if the Person

                                                                            -23-
<PAGE>

that is the other party to the merger does not survive the merger, the Person
that does survive the merger (including the Company if it survives) or (z) the
Person resulting from the consolidation; and

               (ii)  in the case of any transaction described in clause (iii) of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if more than one Person that is a party to such transaction
or transactions receives the same portion of the assets or earning power so
transferred and each such portion would, were it not for the other equal
portions, constitute the greatest portion of the assets or earning power so
transferred, or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time or
have not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of which are and have been so registered, the term "Principal
Party" shall refer to whichever of such Persons is the issuer of Common Shares
having the greatest aggregate market value of shares outstanding, or (3) if such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly by the same Person, the
rules set forth in clauses (1) and (2) above shall apply to each of the owners
having an interest in the venture as if the Person owned by the joint venture
was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.

          (c)  The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized Common Shares that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal Party upon
exercise of outstanding Rights have been waived, that there are no rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement, and further providing that, as soon as practicable
after the date of such Section 13 Event, such Principal Party will:

               (i)  prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain

                                                                            -24-
<PAGE>

effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date, and similarly comply with applicable
state securities laws;

               (ii)  use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on Nasdaq and list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on Nasdaq; and

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

     In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).

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

          (e)  The Company covenants and agrees that it shall not, at any time
after the Distribution Date, effect or permit to occur any Section 13 Event, if
(i) at the time or immediately after such Section 13 Event there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights, (ii) prior to, simultaneously with or immediately
after such Section 13 Event, the stockholders of the Person who constitutes, or
would constitute, the "Principal Party" for purposes of Section 13(b) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates or (iii) the form or nature of organization
of the Principal Party would preclude or limit the exercisability of the Rights.

                                                                            -25-
<PAGE>

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

     Section 14.  Fractional Rights and Fractional Shares.

          (a)  The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable, as determined pursuant to the second sentence of
Section 1(j) hereof.

          (b)  The Company shall not be required to issue fractions of Preferred
Shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions that are
integral multiples of one one-thousandth of a Preferred Share) Interests in
fractions of Preferred Shares in integral multiples of one one-thousandth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-thousandth of a Preferred
Share, the Company shall pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of a Preferred Share. For purposes
of this Section 14(b), the current market value of a Preferred Share shall be
the product equal to (x) one thousandth multiplied by (y) the closing price of a
Common Share (as determined pursuant to the second sentence of Section 1(j)
hereof) for the Trading Day immediately prior to the date of such exercise.

          (c)  The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares
upon the exercise or exchange of Rights.

          In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a Common Share.  For purposes of this Section 14(c), the current
market value of a Common Share shall be the closing price of a Common Share (as
determined pursuant to the second sentence of Section 1(j) hereof) for the
Trading Day immediately prior to the date of such exercise.

          (d)  The holder of a Right by the acceptance of the Right expressly
waives his or her right to receive any fractional Rights or any fractional
shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of a Right.

                                                                            -26-
<PAGE>

          (e)  Whenever a payment for fractional Rights or fractional shares is
to be made by the Rights Agent, the Company shall (i) promptly prepare and
deliver to the Rights Agent a certificate setting forth in reasonable detail the
facts related to such payment and the prices and/or formulas utilized in
calculating such payments, and (ii) provide sufficient monies to the Rights
Agent in the form of fully collected funds to make such payments. The Rights
Agent shall be fully protected in relying upon such a certificate and shall have
no duty with respect to, and shall not be deemed to have knowledge of any
payment for fractional Rights or fractional shares under any Section of this
Agreement relating to the payment of fractional Rights or fractional shares
unless and until the Rights Agent shall have received such a certificate and
sufficient monies.

     Section 15.  Rights of Action.  All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent pursuant to
Section 18 and Section 20 hereof, are vested in the respective registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of the Common Shares); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common Shares), may, in
his or her own behalf and for his or her own benefit, enforce, and may institute
and maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his or her right to exercise the Rights evidenced
by such Rights Certificate in the manner provided in such Rights Certificate and
in this Agreement. Without limiting the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.

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

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

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

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

                                                                            -27-
<PAGE>

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

     Section 18.  Concerning the Rights Agent.

          (a)  The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the preparation, execution, delivery, amendment
and administration of this Agreement and the exercise and performance of its
duties hereunder.

     The Company also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability, damage, judgment, fine, penalty, claim,
demand, settlement, cost or expense, incurred without gross negligence, bad
faith or willful misconduct on the part of the Rights Agent (each as determined
by a final non-appealable order, judgment, decree or ruling of a court of
competent jurisdiction) for any action taken, suffered or omitted by the Rights
Agent in connection with the acceptance and administration of this Agreement,
including, without limitation, the costs and expenses of defending against any
claim of liability in the premises. The costs and expenses incurred in enforcing
this right of indemnification shall be paid by the Company. The provisions of
this Section 18 and Section 20 below shall survive the termination of this
Agreement, the exercise or expiration of the Rights and the resignation or
removal of the Rights Agent.

          (b)  The Rights Agent shall be authorized and protected and shall
incur no liability for, or in respect of any action taken, suffered or omitted
by it in connection with, its acceptance and administration of this Agreement in
reliance upon any Rights Certificate or certificate for the Preferred Shares or
Common Shares or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement or other paper or document reasonably
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons, or otherwise upon the
advice of counsel as set forth in Section 20 hereof The Rights Agent shall not
be deemed to have knowledge of any event of which it was supposed to receive
notice thereof hereunder, and the Rights Agent shall be fully protected and
shall incur no liability for failing to take any action in connection therewith
unless and until it has received such notice.

                                                                            -28-
<PAGE>

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

          (a)  Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any succeeding to the 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, however,
that such Person 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 Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.

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

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

          (a)  The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent, and the
Rights Agent shall incur no liability for or in respect of, any action taken,
suffered or omitted by it in accordance with such advice or opinion.

          (b)  Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Per Share Market Price) be proved or established by the
Company prior to taking, suffering or omitting to take 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 Chief Financial
Officer, the Secretary or any Assistant Secretary of the Company and delivered
to

                                                                            -29-
<PAGE>

the Rights Agent; and such certificate shall be full authorization and
protection to the Rights Agent, and the Rights Agent shall incur no liability
for or in respect of, any action taken, suffered or omitted to be taken by it
under the provisions of this Agreement in reliance upon such certificate.

          (c)  The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful misconduct
(each as determined by a final non-appealable order, judgment, decree or ruling
of a court of competent jurisdiction). In no event will the Rights Agent be
liable for special, indirect, incidental, punitive or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Rights Agent has been advised of the possibility of such loss or damage.
Any liability of the Rights Agent under this Rights Agreement will be limited to
the amount of fees paid hereunder by the Company to the Rights Agent.

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

          (e)  The Rights Agent shall not be under any responsibility or have
any liability 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 Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections 3, 11,
13, 23 or 24, or the ascertaining of the existence of facts that would require
any such change or adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt by the Rights Agent of a
certificate furnished pursuant to Section 12 describing such change or
adjustment); 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 to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.

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

          (g)  The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and such instructions shall be full
authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability in respect of any action taken, suffered or

                                                                            -30-
<PAGE>

omitted to be taken by it in accordance with instructions of any such officer or
for any delay in acting while waiting for those instructions.

          Any application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Rights Agreement
and the date on and/or after which such action shall be taken or such omission
shall be effective. The Rights Agent shall not be liable for any action taken
by, or omission of, the Rights Agent in accordance with a proposal included in
any such application on or after the date specified in such application (which
date shall not be less than five (5) Business Days after the date on which any
officer of the Company actually receives such application, unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.

          (h)  The Rights Agent and any stockholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement.

          Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other Person.

          (i)  The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, absent gross negligence, bad faith or willful misconduct
(each as determined by a final non-appealable order, judgment, decree or ruling
of a court of competent jurisdiction) 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 it
believes that repayment of such funds or adequate indemnification against such
risk or liability is not 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 either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

     Section 21.  Change of Rights Agent.  The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in

                                                                            -31-
<PAGE>

writing mailed to the Company and to each transfer agent of the Preferred Shares
and the Common Shares by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon thirty (30) days' notice in writing, mailed
to the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall, with such
notice, submit his or her Rights Certificate for inspection by the Company),
then the registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (i)
a Person organized and doing business under the laws of the United States or of
any state of the United States, in good standing, which is authorized under such
laws to exercise corporate trust or stockholder services powers and which has at
the time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million or (ii) an affiliate of such Person. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Preferred Shares and the Common Shares, and mail
a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.

     Section 22.  Issuance of New Rights Certificates.  Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Exercise Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (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 other securities of the Company outstanding at the
date hereof or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued and this sentence shall be null and void ab initio if, and to
the extent that, such issuance or this sentence would create a significant

                                                                            -32-
<PAGE>

risk of or result in material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued or would create a
significant risk of or result in such options' or employee plans' or
arrangements' failing to qualify for otherwise available special tax treatment
and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.

     Section 23.  Redemption.

          (a)  The Company may, at its option and with the approval of the Board
of Directors, at any time prior to the Close of Business on the earlier of (i)
the fifth day following the Shares Acquisition Date (or such later date as may
be determined by action of the Company's Board of Directors and publicly
announced by the Company) and (ii) the Final Expiration Date, redeem all but not
less than all the then outstanding Rights at a redemption price of $0.001 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
herein referred to as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the Current
Per Share Market Price thereof at the time of redemption) or cash. Such
redemption of the Rights by the Company may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. The date on which the Board of Directors elects to
make the redemption effective shall be referred to as the "Redemption Date."

          (b)  Immediately upon the action of the Board of Directors of the
Company 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.

          The Company shall promptly give public notice of any such redemption;
provided, however, that the failure to give, or any defect in, any such notice
shall not affect the validity of such redemption. Within ten (10) days after the
action of the Board of Directors ordering the redemption of the Rights, the
Company shall give written notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common 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 Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or in Section 24 hereof, and other than in connection with the purchase of
Common Shares prior to the Distribution Date.

     Section 24.  Exchange.

          (a)  Subject to applicable laws, rules and regulations, and subject to
subsection 24(c) below, the Company may, at its option, by action of the Board
of Directors, at any time after

                                                                            -33-
<PAGE>

the occurrence of a Triggering Event, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become null and void pursuant to the provisions of Section 7(e) hereof) for
Common Shares 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 Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Shares for or pursuant to the terms of any such 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 ordering
the exchange of any Rights pursuant to subsection 24(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 Company shall give public notice of any such exchange (as well as
prompt written notice thereof to the Rights Agreement); provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company shall mail a notice of any such exchange to all of
the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the 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 null and void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.

          (c)  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 Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.

                                                                            -34-
<PAGE>

          For purposes of this Section 24(c) only, the Current Value shall mean
the product of the Current Per Share Market Price of Common Shares on the date
of the occurrence of the event described above in subparagraph (a), multiplied
by the number of Common Shares for which the Right otherwise would be
exchangeable if there were sufficient shares available. To the extent that the
Company determines that some action need be taken pursuant to clauses (i), (ii)
or (iii) of this Section 24(c), the Board of Directors may temporarily suspend
the exercisability of the Rights for a period of up to sixty (60) days following
the date on which the event described in Section 24(a) shall have occurred, in
order to seek any authorization of additional Common Shares and/or to decide the
appropriate form of distribution to be made pursuant to the above provision and
to determine the value thereof. In the event of any such suspension, the Company
shall notify the Rights Agent in writing and shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended.

          (d)  The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.

          In lieu of such fractional Common Shares, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Common Share (as
determined pursuant to the second sentence of Section 1(j) hereof).

          (e)  The Company may, at its option, by majority vote of the Board of
Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors based upon the advice of one or more nationally recognized investment
banking firms.

          (f)  Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection 24(e) 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 rights in exchange therefor as has been
determined by the Board of Directors in accordance with subsection 24(e) above
The Company shall notify the Rights Agent in writing thereof and shall give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company shall mail a notice of any such exchange to the Rights Agent and to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the transfer agent for the Common Shares of the Company.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Rights will be effected.

     Section 25.  Notice of Certain Events.

          (a)  In case the Company shall propose to effect or permit to occur
any Triggering Event or Section 13 Event, the Company shall give notice thereof
to each holder of Rights in

                                                                            -35-
<PAGE>

accordance with Section 26 hereof at least twenty (20) days prior to occurrence
of such Triggering Event or such Section 13 Event.

          (b)  In case any Triggering Event or Section 13 Event shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Sections 11(a)(ii) and 13
hereof.

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

                    Roxio, Inc.
                    461 South Milpitas Road
                    Milpitas, California 95035
                    Facsimile No.: (408) 259-7694

                    with a copy to:
                    Wilson Sonsini Goodrich & Rosati
                    Professional Corporation
                    650 Page Mill Road
                    Palo Alto, California 94304-1050
                    Attention: David J. Berger
                    Facsimile No.: (650) 493-6811

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

                    Mellon Investor Services LLC
                    235 Montgomery Street, 23rd Floor
                    San Francisco, California 94104
                    Attention: Relationship Manager
                    Facsimile No.: (415) 989-5241

                    with a copy to:
                    Mellon Investor Services LLC
                    85 Challenger Road
                    Ridgefield Park, NJ 07660
                    Attention: General Counsel

                                                                            -36-
<PAGE>

                    Facsimile No.: (201) 296-4004

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

     Section 27.  Supplements and Amendments.  Prior to the occurrence of a
Distribution Date, the Company may supplement or amend this Agreement in any
respect without the approval of any holders of Rights and the Rights Agent
shall, if the Company so directs but subject to the other provisions of this
Section, execute such supplement or amendment. From and after the occurrence of
a Distribution Date, the Company and the Rights Agent may from time to time
supplement or amend this Agreement without the approval of any holders of Rights
in order to (i) cure any ambiguity, (ii) correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) shorten or lengthen any time period hereunder or (iv)
to change or supplement the provisions hereunder in any manner that the Company
may deem necessary or desirable and that shall not adversely affect the
interests of the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); provided, 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 (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the
delivery of a certificate from an appropriate officer of the Company that states
that the proposed supplement or amendment is in compliance with the terms of
this Section 27, and provided such supplement or amendment does not change or
increase the Rights Agent's rights, duties liabilities or obligations, the
Rights Agent shall execute such supplement or amendment. Prior to 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.  Successors.  All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

     Section 29.  Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares 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.
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company, or as may be necessary or
advisable in the administration of this

                                                                            -37-
<PAGE>

Agreement, including, without limitation, the right and power (i) to interpret
the provisions of this Agreement and (ii) to make all determinations or
calculations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights Certificates and all other Persons and (y) not subject the
Board to any liability to the holders of the Rights. The Rights Agent shall be
entitled to assume that the Board of Directors of the Company acted in good
faith and shall be fully protected and incur no liability in reliance thereon.

     Section 30.  Benefits of this Agreement.  Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim pursuant to this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, 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;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Board of Directors.

     Section 32.  Governing Law.  This Agreement and each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State; provided, however, that all
provisions regarding the rights, duties and obligations of the Rights Agent
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
State.

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

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

                                                                            -38-
<PAGE>

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

"COMPANY"                           ROXIO, INC.

                                    By:  /s/ William E. Growney, Jr.
                                        ----------------------------

                                    Name:  William E. Growney, Jr.
                                          --------------------------

                                    Title:  Secretary
                                           -------------------------

"RIGHTS AGENT"                      MELLON INVESTOR SERVICES LLC

                                    By:
                                        ----------------------------

                                    Name:
                                          --------------------------

                                    Title:
                                           -------------------------

                                                                            -39-
<PAGE>

                                   EXHIBIT A

               CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
                               AND PRIVILEGES OF
                    SERIES A PARTICIPATING PREFERRED STOCK
                                OF ROXIO, INC.

     The undersigned, William E. Growney, Jr., does hereby certify:

     1.  That he is the duly elected and acting Secretary of Roxio, Inc., a
Delaware corporation (the "Corporation").

     2.  That pursuant to the authority conferred upon the Board of Directors by
the Amended and Restated Certificate of Incorporation of the said Corporation,
the said Board of Directors on May 18, 2001 adopted the following resolution
creating a series of 100,000 shares of Preferred Stock designated as Series A
Participating Preferred Stock:

     "RESOLVED, that pursuant to the authority vested in the Board of Directors
of the corporation by the Restated Certificate of Incorporation, the Board of
Directors does hereby provide for the issue of a series of Preferred Stock of
the Corporation and does hereby fix and herein state and express the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of such series of Preferred Stock
as follows:

     Section 1.  Designation and Amount.  The shares of such series shall be
designated as "Series A Participating Preferred Stock." The Series A
Participating Preferred Stock shall have a par value of $0.001 per share, and
the number of shares constituting such series shall be 100,000.

     Section 2.  Proportional Adjustment.  In the event that the Corporation
shall at any time after the issuance of any share or shares of Series A
Participating Preferred Stock (i) declare any dividend on Common Stock of the
Corporation ("Common Stock") payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the Corporation shall
simultaneously effect a proportional adjustment to the number of outstanding
shares of Series A Participating Preferred Stock.

     Section 3.  Dividends and Distributions.

          (a)  Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to dividends, the holders
of shares of Series A Participating Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of February, May, August and November in each year (each such date being
referred to herein as a "Quarterly
<PAGE>

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
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to 1,000 times the aggregate per share amount of all cash dividends,
and 1,000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock 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 Participating Preferred Stock.

          (b)  The Corporation shall declare a dividend or distribution on the
Series A Participating 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).

          (c)  Dividends shall begin to accrue on outstanding shares of Series A
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A Participating
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 from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Participating 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 Participating Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.

     Section 4.  Voting Rights.  The holders of shares of Series A Participating
Preferred Stock shall have the following voting rights:

          (a)  Each share of Series A Participating Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders of the Corporation.

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

          (c)  Except as required by law, the holders of Series A Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent

                                                                             -2-
<PAGE>

that they are entitled to vote with holders of Common Stock as set forth herein)
for taking any corporate action.

     Section 5.  Certain Restrictions.

          (a)  The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 3 hereof.

          (b)  Whenever quarterly dividends or other dividends or distributions
payable on the Series A Participating Preferred Stock as provided in Section 3
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not

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

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

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

               (iv)  purchase or otherwise acquire for consideration any shares
of Series A Participating Preferred Stock, or any shares of stock ranking on a
parity with the Series A Participating 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.

          (c)  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

                                                                             -3-
<PAGE>

Corporation could, under paragraph (a) of this Section 5, purchase or otherwise
acquire such shares at such time and in such manner.

     Section 6.  Reacquired Shares.  Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and in the Restated Certificate of Incorporation, as then amended.

     Section 7.  Liquidation, Dissolution or Winding Up.  Upon any liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Participating Preferred Stock shall be entitled to receive an aggregate amount
per share equal to 1,000 times the aggregate amount to be distributed per share
to holders of shares of Common Stock plus an amount equal to any accrued and
unpaid dividends on such shares of Series A Participating Preferred Stock.

     Section 8.  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 Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to 1,000 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged.

     Section 9.  No Redemption.  The shares of Series A Participating Preferred
Stock shall not be redeemable.

     Section 10.  Ranking.  The Series A Participating 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 11.  Amendment.  The Restated Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the Series A
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding shares of
Series A Participating Preferred Stock, voting separately as a series.

     Section 12.  Fractional Shares.  Series A Participating Preferred Stock may
be issued in fractions of a share which shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Participating Preferred Stock.

                                                                             -4-
<PAGE>

     RESOLVED FURTHER, that any Vice President or Secretary or any Assistant
Secretary of this corporation be, and they hereby are, authorized and directed
to prepare and file a Certificate of Designation of Rights, Preferences and
Privileges in accordance with the foregoing resolution and the provisions of
Delaware law and to take such actions as they may deem necessary or appropriate
to carry out the intent of the foregoing resolution."

     I further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Designation are true and correct of my own
knowledge.

     Executed at Milpitas, California on ______, 2001.

                                    --------------------------------------------
                                    William E. Growney, Jr.
                                    Secretary

                                                                             -5-
<PAGE>

                                   EXHIBIT B

                           FORM OF RIGHTS CERTIFICATE

Certificate No. R-                                              _________ Rights

     NOT EXERCISABLE AFTER THE EARLIER OF (i) JUNE 15, 2011, (ii) THE DATE
     TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE
     RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO
     REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE TERMS
     SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
     BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF
     AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND
     ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
     REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
     PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE
     OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
     ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
     BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
     RIGHTS AGREEMENT.]*

                               RIGHTS CERTIFICATE

                                  ROXIO, INC.

     This certifies that ______________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of May 18, 2001, (the "Rights Agreement"), between
Roxio, Inc., a Delaware corporation (the "Company"), and Mellon Investor
Services LLC (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M., New York time, on June 15, 2011 at the office of the
Rights Agent designated for such purpose, or at the office of its successor as
Rights Agent, one one-thousandth (1/1,000) of a fully paid and non-

---------------------------
*  The portion of the legend in bracket shall be inserted only if applicable and
   shall replace the preceding sentence.
<PAGE>

assessable share of Series A Participating Preferred Stock, par value $0.001 per
share (the "Preferred Shares"), of the Company, at an Exercise Price of $77.00
per one-thousandth of a Preferred Share (the "Exercise Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of one-thousandths of a
Preferred Share which may be purchased upon exercise hereof) set forth above are
the number and Exercise Price as of June 15, 2001 based on the Preferred Shares
as constituted at such date. As provided in the Rights Agreement, the Exercise
Price and the number and kind of Preferred Shares or other securities which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.

          This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, 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 Company and the above-mentioned office of the Rights Agent.

          Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed by the Company, at its
option, at a redemption price of $0.001 per Right or (ii) may be exchanged by
the Company in whole or in part for Common Shares, substantially equivalent
rights or other consideration as determined by the Company.

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

          No fractional portion of less than one one-thousandth of a Preferred
Share will be issued upon the exercise of any Right or Rights evidenced hereby
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.

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

                                                                             -2-
<PAGE>

until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.

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

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

ATTEST:                                 ROXIO, INC.

                                        By:
------------------------------------        -----------------------------------
Secretary

                                        Its:
                                            -----------------------------------

Countersigned:

Mellon Investor Services LLC
as Rights Agent

By:
   --------------------------------

Its:
    -------------------------------

                                                                             -3-
<PAGE>

                   Form of Reverse Side of Rights Certificate

                               FORM OF ASSIGNMENT

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

          FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers
unto____________________________________________________________________________
                 (Please print name and address of transferee)

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

Dated: _______________, ____

                                            ____________________________________
                                            Signature

Signature Guaranteed:

     Signatures must be guaranteed by an "Eligible Guarantor Institution" (with
membership in an approved signature guarantee medallian program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.

<PAGE>

                                  CERTIFICATE

     The undersigned hereby certifies by checking the appropriate boxes that:

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

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

Dated: _______________, ____

                                            ____________________________________
                                            Signature

Signature Guaranteed:

     Signatures must be guaranteed by an "Eligible Guarantor Institution" (with
membership in an approved signature guarantee medallian program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.

<PAGE>

            Form of Reverse Side of Rights Certificate -- continued

                          FORM OF ELECTION TO PURCHASE

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

To:___________________________

          The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise of such Rights and requests that certificates for such number of one-
thousandths of a Preferred Share issued in the name of:

Please insert social security
or other identifying number

________________________________________________________________________________
                        (Please print name and address)

________________________________________________________________________________

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

Please insert social security
or other identifying number

________________________________________________________________________________
                        (Please print name and address)

________________________________________________________________________________

Dated: _______________, ____

                                            ____________________________________
                                            Signature

Signature Guaranteed:

     Signatures must be guaranteed by an "Eligible Guarantor Institution" (with
membership in an approved signature guarantee medallian program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.

<PAGE>

                                  CERTIFICATE

     The undersigned hereby certifies by checking the appropriate boxes that:

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

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

Dated: _______________, ____

                                            ____________________________________
                                            Signature

Signature Guaranteed:

     Signatures must be guaranteed by an "Eligible Guarantor Institution" (with
membership in an approved signature guarantee medallian program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.

<PAGE>

            Form of Reverse Side of Rights Certificate -- continued

                                     NOTICE

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

<PAGE>

                                   EXHIBIT C

                            STOCKHOLDER RIGHTS PLAN
                                  ROXIO, INC.

                               Summary of Rights

<TABLE>
<S>                                      <C>
Distribution and Transfer of Rights;     The Board of Directors has declared a dividend of one Right for each share
Rights Certificate:                      of Common Stock of Roxio, Inc. (the "Company") outstanding.  Prior to the
                                         Distribution Date referred to below, the Rights will be evidenced by and
                                         trade with the certificates for the Common Stock.  After the Distribution
                                         Date, the Company will mail Rights certificates to the Company's
                                         stockholders and the Rights will become transferable apart from the Common
                                         Stock.

Distribution Date:                       Rights will separate from the Common Stock and become exercisable following
                                         (a) the tenth day (or such later date as may be determined by the Company's
                                         Board of Directors) after a person or group acquires beneficial ownership of
                                         15% or more of the Company's Common Stock or (b) the tenth business day (or
                                         such later date as may be determined by the Company's Board of Directors)
                                         after a person or group announces a tender or exchange offer, the
                                         consummation of which would result in ownership by a person or group of 15%
                                         or more of the Company's Common Stock.

Preferred Stock Purchasable Upon         After the Distribution Date, each Right will entitle the holder to purchase
Exercise of Rights:                      for $ 77.00 (the "Exercise Price"), a fraction of a share of the Company's
                                         Preferred Stock with economic terms similar to that of one share of the
                                         Company's Common Stock.

Flip-In:                                 If an acquiror (an "Acquiring Person") obtains 15% or more of the Company's
                                         Common Stock, then each Right (other than Rights owned by an Acquiring
                                         Person or its affiliates) will entitle the holder thereof to purchase, for
                                         the Exercise Price, a number of shares of the Company's Common Stock having
                                         a then-current market value of twice the Exercise Price.

Flip-Over:                               If, after an Acquiring Person obtains 15% or more of the Company's Common
                                         Stock, (a) the Company merges into another entity, (b) an acquiring entity
                                         merges into the Company or (c) the Company sells more than 50% of the
                                         Company's assets or earning power, then each Right (other than Rights owned
                                         by an Acquiring Person or its affiliates) will entitle the holder thereof to
                                         purchase, for the Exercise Price, a number of shares of Common Stock of the
                                         person engaging in the transaction having a then current market value of
                                         twice the Exercise Price.

Exchange Provision:                      At any time after the date on which an Acquiring Person obtains 15% or  more
                                         of the Company's Common Stock and prior to the acquisition by the Acquiring
                                         Person of 50% of the outstanding Common Stock, a majority of the Board of
                                         Directors and the Board of Directors of the Company may exchange the Rights
                                         (other than Rights owned by the Acquiring Person or its affiliates), in
                                         whole or in part, for shares of Common Stock of the Company at an exchange
                                         ratio of one share of Common Stock per Right (subject to adjustment).
</TABLE>

<PAGE>

<TABLE>
<S>                                      <C>
Redemption of the Rights:                Rights will be redeemable at the Company's option for $0.001 per Right at
                                         any time on or prior to the fifth day (or such later date as may be
                                         determined by the Company's Board of Directors) after public announcement
                                         that a Person has acquired beneficial ownership of 15% or more of the
                                         Company's Common Stock (the  "Shares Acquisition Date").

Expiration of the Rights:                The Rights expire on the earliest of (a) June 15, 2011 or (b) exchange or
                                         redemption of the Rights as described above.

Amendment of Terms of Rights:            The terms of the Rights and the Rights Agreement may be amended in any
                                         respect without the consent of the Rights holders on or prior to the
                                         Distribution Date; thereafter, the terms of the Rights and the Rights
                                         Agreement may be amended without the consent of the Rights holders in order
                                         to cure any ambiguities or to make changes which do not adversely affect the
                                         interests of Rights holders (other than the Acquiring Person).

Voting Rights:                           Rights will not have any voting rights.

Anti-Dilution Provisions:                Rights will have the benefit of certain customary anti-dilution provisions.

Taxes:                                   The Rights distribution should not be taxable for federal income tax
                                         purposes.  However, following an event which renders the Rights exercisable
                                         or upon redemption of the Rights, stockholders may recognize taxable income.
</TABLE>

The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan.  It may be amended from time to time.  A copy of the Rights Agreement will
be filed with the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A dated June 5, 2001.  A copy of the Rights
Agreement is available free of charge from the Company.

                                                                             -2-SHARP HOLDING CORPORATION
                        2001 STOCK AND STOCK OPTION PLAN

1.        PURPOSE.  The  purpose  of  the  Sharp  Holding Corporation 2001 Stock
          -------
     Option  Plan  ("the  Plan")  is  to  promote the financial interests of the
     Company,  its  subsidiaries and its shareholders by providing incentives in
     the  form  of  stock  and  stock  options  to  key employees, directors and
     consultants  who  contribute materially to the success and profitability of
     the  Company.  The  grants will recognize and reward outstanding individual
     performances  and  contributions  and  will give such persons a proprietary
     interest  in  the  Company,  thus  enhancing their personal interest in the
     Company's  continued  success  and progress. This Plan will also assist the
     Company  and  its  subsidiaries in attracting, retaining and motivating key
     employees  and  directors.  Stock and options may be issued under the Plan.
     The  options granted under this Plan may be either Incentive Stock Options,
     as  that  term  is  defined  in Section 422 of the Internal Revenue Code of
     1986,  as  amended,  or  Nonqualified options taxed under Section 83 of the
     Internal  Revenue  Code  of  1986,  as  amended.

          RULE  16B-3 PLAN. The Company is subject to the reporting requirements
          ----------------
     of  the  Securities  Exchange Act of 1934, as amended (the "Exchange Act"),
     and therefore the Plan is intended to comply with all applicable conditions
     of  Rule 16b-3 (and all subsequent revisions thereof) promulgated under the
     Exchange  Act.  To  the  extent  any provision of the Plan or action by the
     Committee  or  the  Board  of Directors or Committee fails to so comply, it
     shall  be  deemed  null and void, to the extent permitted by law and deemed
     advisable  by  the  Committee.  In  addition, the Committee or the Board of
     Directors  may  amend  the  Plan from time to time as it deems necessary in
     order  to meet the requirements of any amendments to Rule 16b-3 without the
     consent  of  the  shareholders  of  the  Company.

          EFFECTIVE  DATE  OF PLAN. The effective date of this Plan shall be May
          ------------------------
     25,  2001, (the "Effective Date"). The Board of Directors shall, within one
     year  of  the  Effective  Date,  submit  the  Plan  for  approval  to  the
     shareholders  of  the  Company.  The  plan  shall be approved by at least a
     majority  of  shareholders  voting  in  person  or  by proxy at a duly held
     shareholders'  meeting,  or  if  the  provisions  of the corporate charter,
     by-laws  or applicable state law prescribes a greater degree of shareholder
     approval  for  this action, the approval by the holders of that percentage,
     at a duly held meeting of shareholders. No Incentive Option or Nonqualified
     Stock  Option  shall  be  granted  pursuant to the Plan ten years after the
     Effective  Date.  In  the  event  that  the  Plan  is  not  approved by the
     shareholders of the Company, the Plan shall be deemed to be a non-qualified
     stock  option  plan.

2.        DEFINITIONS.  The following definitions shall apply to this Plan:
          -----------

     (a)  "Affiliate"  means  any  parent  corporation  and  any  subsidiary
          corporation.  The  term  "parent  corporation"  means  any corporation
          (other  than  the Company) in an unbroken chain of corporations ending
          with the Company if, at the time of the action or transaction, each of
          the  corporations  other than the Company owns stock possessing 50% or

<PAGE>
          more of the total combined voting power of all classes of stock in one
          of  the  other  corporations  in  the  chain.  The  term  "subsidiary
          corporation"  means  any  corporation  (other  than the Company) in an
          unbroken  chain  of corporations beginning with the Company if, at the
          time of the action or transaction, each of the corporations other than
          the  last  corporation in the unbroken chain owns stock possessing 50%
          or  more of the total combined voting power of all classes of stock in
          one  of  the  other  corporations  in  the  chain.

     (b)  "Agreement" means, individually or collectively, any agreement entered
          into  pursuant  to the Plan pursuant to which Options are granted to a
          participant.

     (c)  "Award"  means  each  of the following granted under this Plan: Stock,
          Incentive  Stock  Options  or  Nonqualified  Stock  Options.

     (d)  "Board"  means  the  board  of  directors  of  the  Company.

     (e)  "Cause" shall mean, for purposes of whether and when a participant has
          incurred  a  Termination  of  Employment  for  Cause:  (i)  any act or
          omission  which permits the Company to terminate the written agreement
          or arrangement between the participant and the Company or a Subsidiary
          or  Parent  for  Cause as defined in such agreement or arrangement; or
          (ii)  in  the  event  there is no such agreement or arrangement or the
          agreement  or arrangement does not define the term "cause," then Cause
          shall  mean  an act or acts of dishonesty by the participant resulting
          or  intending  to result directly or indirectly in gain to or personal
          enrichment  of  the  participant at the Company's expense and/or gross
          negligence  or  willful  misconduct  on  the  part of the participant.

     (f)  "Change  in  Control"  means,  for  purposes  of  this  Plans

          i.        there  shall  be consummated (i) any consolidation or merger
                    of the Company in which the Company is not the continuing or
                    surviving  corporation  or  pursuant  to which shares of the
                    Company's  common  stock  would  be  converted  into  cash,
                    securities  or  other  property,  other than a merger of the
                    Company  in  which the holders of the Company's common stock
                    immediately  prior to the merger have substantially the same
                    proportionate  ownership  of  common  stock of the surviving
                    corporation immediately  after the merger; or (ii) any sale,
                    lease,  exchange  or other transfer (in one transaction or a
                    series  of related transactions) of all or substantially all
                    of  the  assets  of  the  Company;  or

          ii.       the  shareholders  of  the Company shall approve any plan or
                    proposal  for the liquidation or dissolution of the Company;
                    or

     (g)  "Code"  means  the  Internal  Revenue  Code of 1986, as amended, final
          Treasury  Regulations  thereunder  and any subsequent Internal Revenue
          Code.

<PAGE>
     (h)  "Committee" means the Compensation Committee of the Board of Directors
          or  such  other  committee  designated  by  the  Board  of  Directors.

     (i)  "Common  Stock"  means  the  Common  Stock, par value per share of the
          Company  whether presently or hereafter issued, or such other class of
          shares  or securities as to which the Plan may be applicable, pursuant
          to  Section  11  herein.

     (j)  "Company"  means Sharp Holding Corporation, a Delaware corporation and
          includes any successor or assignee company corporations into which the
          Company  may be merged, changed or consolidated; any company for whose
          securities  the  securities of the Company shall be exchanged; and any
          assignee  of  or  successor  to substantially all of the assets of the
          Company.

     (k)  "Continuous  Service"  means  the  absence  of  any  interruption  or
          termination of employment with or service to the Company or any Parent
          or Subsidiary of the Company that now exists or hereafter is organized
          or  acquired  by or acquires the Company. Continuous Service shall not
          be  considered  interrupted in the case of sick leave, military leave,
          or  any other bona fide leave of absence of less than ninety (90) days
          (unless  the  participants  right  to  reemployment  is  guaranteed by
          statute  or by contract) or in the case of transfers between locations
          of the Company or between the Company, its Parent, its Subsidiaries or
          its  successors

     (l)  "Date  of  Grant"  means  the  date  on  which the Committee grants an
          Option.

     (m)  "Director"  means  any member of the Board of Directors of the Company
          or  any  Parent  or  subsidiary  of  the  Company  that  now exists or
          hereafter  is  organized  or  acquired  by  or  acquires  the Company.

     (n)  "Non  Employee  Director" means a "Non Employee Director" as that term
          is  defined  in  Rule  16b-3  under  the  Exchange  Act.

     (o)  "Eligible Persons" shall mean, with respect to the Plan, those persons
          who,  at the time that an Award is granted, are (i)officers, directors
          or  employees  of  the  Company  or  Affiliate  or (ii) consultants or
          subcontractors  of  the  Company  or  affiliate.

     (p)  "Employee" means any person employed on an hourly or salaried basis by
          the Company or any Parent or Subsidiary of the Company that now exists
          or  hereafter  is  organized  or  acquired by or acquires the Company.

     (q)  "Consultant  "  means  any  natural  person  who  is  engaged  on  an
          independent  contractor  basis,  such  as  attorneys, experts or other
          consultants,  who  provide services to the Company that are consistent
          with  the conditions that would allow the Stock related to their Award
          to  be  registered  on  Form  S-8.

<PAGE>
     (r)  "Exchange  Act"  means the Securities Exchange Act of 1934, as amended
          and  the  rules  and  regulations  promulgated  thereunder.

     (s)  "Fair  Market  Value"  means  (i) if the Common Stock is not listed or
          admitted to trade on a national securities exchange and if bid and ask
          prices  for  the  Common Stock are not furnished through NASDAQ or the
          OTCBB,  or  a  similar  organization,  the  value  established  by the
          Committee,  in  its sole discretion, for purposes of the Plan; (ii) if
          the  Common  Stock  is  listed  or  admitted  to  trade  on a national
          securities  exchange,  the  national  market  system or the OTCBB, the
          closing  price  of  the  Common Stock, as published in the Wall Street
                                                                     -----------
          Journal,  so  listed or admitted to trade on such date or, if there is
          -------
          no trading of the Common Stock on such date, then the closing price of
          the  Common Stock on the next preceding day on which there was trading
          in such shares; or (iii) if the Common Stock is not listed or admitted
          to  trade  on a national securities exchange, a national market system
          or  the  OTCBB,  the mean between the bid and ask price for the Common
          Stock  on  such  date,  as  furnished  by  the National Association of
          Securities  Dealers,  Inc.  through  NASDAQ,  the  OTCBB  or a similar
          organization  if  NASDAQ  or  the  OTCBB  is  no longer reporting such
          information.  If  trading  in  the stock or a price quotation does not
          occur on the Date of Grant, the next preceding date on which the stock
          was traded or a price was quoted will determine the fair market value.

     (t)  "Incentive  Stock  Option"  means  a stock option, granted pursuant to
          either  this Plan or any other plan of the Company, that satisfies the
          requirements of Section 422 of the Code and that entitles the Optionee
          to  purchase stock of the Company or in a corporation that at the time
          of  grant of the option was a Parent or subsidiary of the Company or a
          predecessor  company  of  any  such  company.

     (u)  "Nonqualified  Stock  Option" means an Option to purchase Common Stock
          in  the  Company  granted under the Plan other than an Incentive Stock
          Option  within  the  meaning  of  Section  422  of  the  Code.

     (v)  "Option"  means  a  stock  option  granted  pursuant  to  the  Plan.

     (w)  "Option  Period"  means  the period beginning on the Date of Grant and
          ending  on the day prior to the tenth anniversary of the Date of Grant
          or  such  shorter  termination  date  as  set  by  the  Committee.

     (x)  "Optionee"  means  an  Employee  (or  Director  or  subcontractor) who
          receives  an  Option.

     (y)  "Recipient"  means  an  Employee  (or  Director  or subcontractor) who
          receives  Stock.

<PAGE>
     (z)  "Parent"  means  any  corporation which owns 50% or more of the voting
          securities  of  the  Company.

     (aa) "Plan"  means  this  Stock  Option Plan as may be amended from time to
          time.

     (bb) "Share"  means  the  Common  Stock,  as  adjusted  in  accordance with
          Paragraph 11 of the Plan, and/or shares of common stock issuable under
          the  Plan,  as  applicable.

     (cc) "Ten  Percent  Shareholder"  means  an individual who, at the time the
          Option  is  granted,  owns Stock possessing more than 10% of the total
          combined voting power of all classes of stock of the Company or of any
          Affiliate.  An  individual  shall  be  considered  as owning the Stock
          owned,  directly  or  indirectly,  by  or for his brothers and sisters
          (whether  by  the  whole or half blood), spouse, ancestors, and lineal
          descendants;  and  Stock  owned,  directly  or indirectly, by or for a
          corporation,  partnership,  estate,  or  trust, shall be considered as
          being  owned  proportionately by or for its shareholders, partners, or
          beneficiaries.

     (dd) "Termination"  or  "Termination of Employment" means the occurrence of
          any  act  or  event  whether  pursuant  to  an employment agreement or
          otherwise  that  actually  or  effectively  causes  or  results in the
          person's ceasing, for whatever reason, to be an officer or employee of
          the  Company  or  of  any  Subsidiary  or  Parent  including,  without
          limitation, death, disability, dismissal, severance at the election of
          the  participant,  retirement,  or  severance  as  a  result  of  the
          discontinuance,  liquidation,  sale  or transfer by the Company or its
          Subsidiaries  or  Parent  of  all  businesses owned or operated by the
          Company  or  its Subsidiaries. A Termination of Employment shall occur
          to  an  employee  who  is  employed by an Subsidiary if the Subsidiary
          shall  cease  to  be  a  Subsidiary  and  the  participant  shall  not
          immediately  thereafter  become  an  employee  of  the  Company  or  a
          Subsidiary.

     (ee) "Subsidiary"  means  any  corporation  50%  or  more  of  the  voting
          securities of which are owned directly or indirectly by the Company at
          any  time  during  the  existence  of  this  Plan.

               In addition, certain other terms used in this Plan shall have the
          definitions  given  to them in the first place in which they are used.

3.        ADMINISTRATION.
          --------------

     a.        This  Plan  will  be administered by the Committee. A majority of
               the  full  Committee  constitutes  a  quorum  for  purposes  of
               administering  the  Plan, and all determinations of the Committee
               shall  be  made by a majority of the members present at a meeting
               at  which a quorum is present or by the unanimous written consent
               of  the  Committee.

<PAGE>
     b.        If no Committee has been appointed, members of the Board may vote
               on  any  matters  affecting the administration of the Plan or the
               grant  of  any  Option  pursuant to the Plan, except that no such
               member  shall  act  on  the granting of an Option to himself, but
               such  member  may  be  counted  in determining the existence of a
               quorum  at  any meeting of the Board during which action is taken
               with  respect  to  the  granting  of  Options  to  him.

     c.        Subject to the terms of this Plan, the Committee has the sole and
               exclusive  power  to:

          i.        select  the  participants  in  this  Plan;

          ii.       establish  the  terms  of  the  Options  granted  to  each
                    participant  which  may  not  be  the  same  in  each  case;

          iii.      determine  the  total number of stock or options to grant to
                    an  Optionee or Recipient, which may not be the same in each
                    case;

          iv.       fix  the  Option period for any Option granted which may not
                    be  the  same  in  each  case;  and

          v.        make  all  other determinations necessary or advisable under
                    the  Plan.

          vi.       determine the minimum number of shares with respect to which
                    Options  may  be  exercised  in  part  at  any  time.

          vii.      The  Committee  has  the  sole  and  absolute  discretion to
                    determine  whether  the  performance of an eligible Employee
                    warrants  an  award  under  this  Plan, and to determine the
                    amount  of  the  award.

          viii.     The  Committee  has full and exclusive power to construe and
                    interpret  this  Plan,  to  prescribe  and rescind rules and
                    regulations  relating  to  this  Plan,  and take all actions
                    necessary  or  advisable  for the Plan's administration. Any
                    such  determination  made by the Committee will be final and
                    binding  on  all  persons.

     d.        A  member  of the Committee will not be liable for performing any
               act  or  making  any  determination  in  good  faith.

4.        SHARES;  SHARES  SUBJECT  TO  OPTION.  Subject  to  the  provisions of
          ------------------------------------
     Paragraph  11  of the Plan, the maximum aggregate number of Shares that may
     be  issued and/or optioned and sold under the Plan shall be 900,000 Shares.
     Such  shares  may be authorized but unissued, or may be treasury shares. If
     an  Option  shall  expire  or  become  unexercisable for any reason without
     having  been exercised in full, the unpurchased Shares that were subject to
     the  Option  shall,  unless  the Plan has then terminated, be available for
     other  Options  under  the  Plan.

<PAGE>
     a.        Eligible Persons.  Every Eligible Person, as the Committee in its
               ----------------
               sole  discretion  designates,  is eligible to participate in this
               Plan.  Directors  who  are  not  employees  of the Company or any
               subsidiary  or Parent shall only be eligible to receive Incentive
               Stock  Options  if  and  as  permitted  be  applicable  law  and
               regulations.  The Committee's award of an Option to a participant
               in  any year does not require the Committee to award an Option to
               that  participant  in  any other year. Furthermore, the Committee
               may  award  different  Options  to  different  participants.  The
               Committee  may  consider  such  factors  as it deems pertinent in
               selecting  participants  and  in  determining the amount of their
               Option,  including,  without  limitation;

          (i)  the  financial  condition  of  the  Company  or its Subsidiaries;

          (ii) expected  profits  for  the  current  or  future  years;

          (iii)the  contributions  of  a  prospective  participant  to  the
               profitability and success of the Company or its Subsidiaries; and

          (iv) the adequacy of the prospective participant's other compensation.

          Participants  may  include  persons  to  whom stock, stock options, or
          other  benefits  previously were granted under this or another plan of
          the  Company  or any Subsidiary, whether or not the previously granted
          benefits  have  been  fully  exercised.

     b.        No  Right  of  Employment. An Optionee's or Recipient's right, if
               -------------------------
               any,  to continue to serve the Company and its Subsidiaries as an
               Employee  will  not  be  enlarged  or  otherwise  affected by his
               designation  as  a  participant  under  this  Plan,  and  such
               designation will not in any way restrict the right of the Company
               or  any  Subsidiary, as the case may be, to terminate at any time
               the  employment  of  any

5.        REQUIREMENTS  OF  OPTION  GRANTS.  Each Option granted under this Plan
          --------------------------------
     shall  satisfy  the  following  requirements.

     a.        Written  Option.  An  Option  shall  be  evidenced  by  a written
               ---------------
               Agreement  specifying  (i)  the  number  of  Shares  that  may be
               purchased by its exercise, (ii) the intent of the Committee as to
               whether  the  Option  is  be  an  Incentive  Stock  Option  or  a
               Non-qualified  Stock  Option,  (iii)  the  Option  period for any
               Option granted and (iv) such terms and conditions consistent with
               the  Plan  as  the  Committee  shall  determine, all of which may
               differ  between  various  Optionees  and  various  Agreements.

<PAGE>
     b.        Duration  of Option. Each Option may be exercised only during the
               -------------------
               Option  Period designated for the Option by the Committee. At the
               end  of  the  Option  Period  the  Option  shall  expire.

     c.        Option  Exercisability. The Committee, on the grant of an Option,
               ----------------------
               each  Option  shall  be  exercisable  only in accordance with its
               terms.

     d.        Acceleration  of  Vesting.  Subject  to the provisions of Section
               -------------------------
               5(b),  the Committee may, it its sole discretion, provide for the
               exercise  of  Options  either  as  to  an increased percentage of
               shares  per year or as to all remaining shares. Such acceleration
               of  vesting  may  be declared by the Committee at any time before
               the  end  of  the  Option Period, including, if applicable, after
               termination  of  the  Optionee's  Continuous Service by reason of
               death,  disability,  retirement  or  termination  of  employment.

     e.        Option Price. Except as provided in Section 6(a) the Option price
               ------------
               of  each  Share subject to the Option shall equal the Fair Market
               Value  of  the  Share  on  the  Option's  Date  of  Grant.

     f.        Termination  of Employment Any Option which has not vested at the
               --------------------------
               time  the Optionee ceases Continuous Service for any reason other
               than  death,  disability  or  retirement shall terminate upon the
               last  day that the Optionee is employed by the Company. Incentive
               Stock  Options must be exercised within three months of cessation
               of  Continuous  Service  for  reasons  other death, disability or
               retirement  in  order  to  qualify for Incentive Stock Option tax
               treatment.  Nonqualified Options may be exercised any time during
               the  Option  Period  regardless  of  employment  status.

     g.        Death.  In  the  case of death of the Optionee, the beneficiaries
               -----
               designated  by  the  Optionee  shall  have  one  year  from  the
               Optionee's  demise  or to the end of the Option Period, whichever
               is earlier, to exercise the Option, provided, however, the Option
               may be exercised only for the number of Shares for which it could
               have been exercised at the time the Optionee died, subject to any
               adjustment  under  Sections  5(d)  and  11.

     h.        Retirement.  Any  Option  which  has  not  vested at the time the
               ----------
               Optionee  ceases  Continuous  Service  due  to  retirement  shall
               terminate  upon the last day that the Optionee is employed by the
               Company.  Upon  retirement  Incentive  Stock  Options  must  be
               exercised  within three months of cessation of Continuous Service
               in  order  to  qualify  for Incentive Stock Option tax treatment.
               Nonqualified  Options may be exercised any time during the Option
               Period  regardless  of  employment  status

<PAGE>
     i.        Disability. In the event of termination of Continuous Service due
               ----------
               to  total and permanent disability (within the meaning of Section
               422  of  the  Code), the Option shall lapse at the earlier of the
               end  of the Option Period or twelve months after the date of such
               termination,  provided,  however,  the Option can be exercised at
               the  time the Optionee became disabled, subject to any adjustment
               under  Sections  5(d)  and  11.

6.        INCENTIVE  STOCK  OPTIONS.  Any  Options  intended  to  qualify  as an
          -------------------------
     Incentive Stock Option shall satisfy the following requirements in addition
     to  the  other  requirements  of  the  Plan:

     a.        Ten  Percent  Shareholders.  An  Option intended to qualify as an
               --------------------------
               Incentive  Stock Option granted to an individual who, on the Date
               of Grant, owns stock possessing more than ten (10) percent of the
               total combined voting power of all classes of stock of either the
               Company  or any Parent or Subsidiary, shall be granted at a price
               of  110  percent  of  Fair  Market Value on the Date of Grant and
               shall  be  exercised only during the five-year period immediately
               following  the  Date  of Grant. In calculating stock ownership of
               any  person,  the attribution rules of Section 425(d) of the Code
               will  apply.  Furthermore,  in  calculating  stock ownership, any
               stock  that the individual may purchase under outstanding options
               will  not  be  considered.

     b.        Limitation  on  Incentive Stock Options The aggregate Fair Market
               ---------------------------------------
               Value,  determined  on the date of Grant, of stock in the Company
               exercisable  for  the  first  time  by  any  Optionee  during any
               calendar  year, under the Plan and all other plans of the Company
               or  its  Parent or Subsidiaries (within the meaning of Subsection
               (d)  of  Section  422 of the Code) in any calendar year shall not
               exceed  $100,000.00.

     c.        Exercise of Incentive Stock Options. No disposition of the shares
               ------------------------------------
               underlying an Incentive Stock Option may be made within two years
               from  the Date of Grant nor within one year after the exercise of
               such  incentive  Stock  Option.

     d.        Approval  of  Plan. No Option shall qualify as an Incentive Stock
               ------------------
               Option  unless  this  Plan is approved by the shareholders within
               one  year  of  the  Plan's  adoption  by  the  Board.

7.        NONQUALIFIED  AND  INCENTIVE STOCK OPTIONS. Any Option not intended to
          ------------------------------------------
     qualify  as an Incentive Stock Option shall be a Nonqualified Stock Option.
     Nonqualified  Stock  Options  shall  satisfy  each  of  the requirements of
     Section  5 of the Plan. An Option intended to qualify as an Incentive Stock
     Option,  but which does not meet all the requirements of an Incentive Stock
     Option  shall  be  treated  as  a  Nonqualified  Stock  Option.

<PAGE>
8.        METHOD  OF EXERCISE. An Option granted under this Plan shall be deemed
          -------------------
     exercised  when  the  person  entitled  to exercise the Option (i) delivers
     written notice to the President of the Company of the decision to exercise,
     (ii)  concurrently tenders to the Company full payment for the Shares to be
     purchased  pursuant  to  the  exercise,  and (iii) complies with such other
     reasonable  requirements as the Committee establishes pursuant to Section 3
     of  the  Plan.  During  the  lifetime  of the Employee to whom an Option is
     granted,  such Option may be exercised only by him. Payment for Shares with
     respect  to  which  an  Option is exercised may be in cash, or by certified
     check,  or  wholly  or partially in the form of Common Stock of the Company
     having  a  fair market value equal to the Option Price. No person will have
     the  rights  of  a  shareholder with respect to Shares subject to an Option
     granted  under this Plan until a certificate or certificates for the Shares
     have  been  delivered  to  him.

          An  Option  granted  under this Plan may be exercised in increments of
     not  less  than  10%  of  the  full  number of Shares as to which it can be
     exercised.  A  partial  exercise  of an Option will not effect the holder's
     right to exercise the Option from time to time in accordance with this Plan
     as  to  the  remaining  Shares  subject  to  the  Option.

9.        TAXES.  COMPLIANCE  WITH  LAW:  APPROVAL  OF  REGULATORY  BODIES.  The
          ----------------------------------------------------------------
     Company,  if  necessary or desirable, may pay or withhold the amount of any
     tax  attributable  to  any Shares deliverable or amounts payable under this
     Plan,  and  the  Company  may  defer making delivery or payment until it is
     indemnified  to  its satisfaction for the tax. Options are exercisable, and
     Shares  can  be  delivered  and  payments  made  under  this  Plan, only in
     compliance  with  all  applicable  federal  and state laws and regulations,
     including,  without  limitation, state and federal securities laws, and the
     rules  of all stock exchanges on which the Company's stock is listed at any
     time.  An Option is exercisable only if either (i) a registration statement
     pertaining  to the Shares to be issued upon exercise of the Option has been
     flied with and declared effective by the Securities and Exchange Commission
     and  remains  effective  on the date of exercise, or (ii) an exemption from
     the  registration  requirements of applicable securities laws is available.
     This  plan does not require the Company, however, to file such registration
     statement or to assure the availability of such exemptions. Any certificate
     issued  to  evidence Shares issued under the Plan may bear such legends and
     statements,  and  shall  be  subject  to such transfer restrictions, as the
     Committee  deems advisable to assure compliance with federal and state laws
     and regulations and with the requirements of this Section 9 of the Plan. No
     Option may be exercised, and no Shares may be issued under this Plan, until
     the  Company has obtained the consent or approval of every regulatory body,
     federal  or  state,  having  jurisdiction over such matter as the Committee
     deems  advisable.

          Each Person who acquires the right to exercise an Option by bequest or
     inheritance may be required by the Committee to furnish reasonable evidence
     of ownership of the Option as a condition to his exercise of the Option. In
     addition,  the  Committee  may  require such consents and release of taxing
     authorities  as  the  Committee  deems  advisable.

<PAGE>
10.       ASSIGNABILITY.  An  Option granted under this Plan is not transferable
          -------------
     except  by  will or the laws of descent and distribution. The Option may be
     exercised  only  by  the  Optionee  during  the  life of the Optionee. More
     particularly,  but  without  limitation of the foregoing, the Option may be
     not  be  assigned  or transferred except as provided above and shall not be
     assignable  by  operation  of  law  and  shall not be subject to execution,
     attachment  or  similar  process.  Any  attempted  assignment,  transfer or
     distribution  contrary  to the provisions hereof shall be null and void and
     without  effect.

11.       ADJUSTMENT  UPON  CHANGE  OF  SHARES.  If  a  reorganization,  merger,
          ------------------------------------
     consolidation,  reclassification, recapitalization, combination or exchange
     of shares, stock split, stock dividend, rights offering, or other expansion
     or  contraction  of  the Common Stock of the Company occurs, the number and
     class  of  Shares for which Options are authorized to be granted under this
     Plan,  the  number  and  class of Shares then subject to Options previously
     granted  under  this Plan, and the price per Share payable upon exercise of
     each  Option outstanding under this Plan shall be equitably adjusted by the
     Committee  to  reflect  such  changes.  To  the extent deemed equitable and
     appropriate  by  the Committee or the Board, subject to any required action
     by  shareholders, in any merger, consolidation, reorganization, liquidation
     or  dissolution,  any  Option  granted  under the Plan shall pertain to the
     securities  and other property to which a holder of the number of Shares of
     stock  covered  by  the  Option  would  have  been  entitled  to receive in
     connection  with  such  event.

12.       ACCELERATIONS  OF  OPTIONS UPON CHANGE IN CONTROL. In the event that a
          -------------------------------------------------
     Change  of  Control  has  occurred with respect to the Company, any and all
     Options  will  become  fully  vested  and immediately exercisable with such
     acceleration  to occur without the requirement of any further act by either
     the  Company  or  the  participant,  subject  to  Section  9  hereof.

13.       LIABILITY  OF  THE COMPANY. The Company, its Parent and any Subsidiary
          --------------------------
     that  is in existence or hereafter comes into existence shall not be liable
     to  any  person  for  any  tax consequences expected but not realized by an
     Optionee  or  Recipient  or  other person due to the exercise of an Option.

14.       EXPENSES OF PLAN. The Company shall bear the expenses of administering
          ----------------
     the  Plan.

15.       DURATION  OF  PLAN. Options may be granted under this Plan only within
          ------------------
     10  years  from  the  effective  date  of  the  Plan.

16.       AMENDMENT,  SUSPENSION  OR TERMINATION OF PLAN. The Board of Directors
          ----------------------------------------------
     of  the  Company  may amend, terminate or suspend this Plan at any time, in
     its  sole  and  absolute  discretion; provided, however, that to the extent
     required to qualify this Plan under Rule 16b_3 promulgated under Section 16
     of  the  Exchange  Act, no amendment that would (a) materially increase the
     number  of  shares  of  Stock  that  may  be  issued  under  this Plan, (b)
     materially  modify  the requirements as to eligibility for participation in
     this  Plan,  or  (c) otherwise materially increase the benefits accruing to
     participants  under  this  Plan,  shall be made without the approval of the
     Company's  shareholders;  provided  further,  however,  that  to the extent
     required  to maintain the status of any Incentive Option under the Code, no
     amendment  that  would  (a)  change the aggregate number of shares of Stock

<PAGE>
     which  may  be  issued  under  Incentive  Options,  (b) change the class of
     employees eligible to receive Incentive Options, or (c) decrease the Option
     price for Incentive Options below the Fair Market Value of the Stock at the
     time  it  is  granted,  shall be made without the approval of the Company's
     shareholders.  Subject  to  the  preceding sentence, the Board of Directors
     shall have the power to make any changes in the Plan and in the regulations
     and  administrative  provisions  under  it  or in any outstanding Incentive
     Option  as  in  the  opinion of counsel for the Company may be necessary or
     appropriate  from time to time to enable any Incentive Option granted under
     this Plan to continue to qualify as an incentive stock option or such other
     stock option as may be defined under the Code so as to receive preferential
     federal  income tax treatment. Notwithstanding the foregoing, no amendment,
     suspension  or  termination  of  the Plan shall act to impair or extinguish
     rights in Options already granted at the date of such amendment, suspension
     or  termination.

17.       FORFEITURE.  Notwithstanding any other provisions of this Plan, if the
          ----------
     Committee  finds  by  a majority vote after full consideration of the facts
     that an Eligible Person, before or after termination of his employment with
     the  Company  or  an  Affiliate  for any reason (a) committed or engaged in
     fraud, embezzlement, theft, commission of a felony, or proven dishonesty in
     the  course of his employment by the Company or an Affiliate, which conduct
     damaged the Company or Affiliate, or disclosed trade secrets of the Company
     or  an  Affiliate,  or  (b)  participated,  engaged  in  or had a material,
     financial  or  other  interest,  whether as an employee, officer, director,
     consultant, contractor, shareholder, owner, or otherwise, in any commercial
     endeavor  anywhere which is competitive with the business of the Company or
     an  Affiliate  without the written consent of the Company or Affiliate, the
     Eligible  Person  shall  forfeit  all  unissued Shares, and all outstanding
     Options,  including  all exercised Options and other situations pursuant to
     which  the  Company  has  not yet delivered a stock certificate. Clause (b)
     shall  not be deemed to have been violated solely by reason of the Eligible
     Person's  ownership  of  stock  or  securities  of  any  publicly  owned
     corporation,  if that ownership does not result in effective control of the
     corporation.

          The  decision  of  the  Committee  as  to  the  cause of an Employee's
     discharge,  the  damage done to the Company or an Affiliate, and the extent
     of an Eligible Person's competitive activity shall be final. No decision of
     the  Committee,  however, shall affect the finality of the discharge of the
     Employee  by  the  Company  or  an  Affiliate  in  any  manner.

18.       INDEMNIFICATION  OF  THE  COMMITTEE  AND  THE BOARD OF DIRECTORS. With
          ----------------------------------------------------------------
     respect  to  administration  of this Plan, the Company shall indemnify each
     present  and  future  member  of  the  Committee and the Board of Directors
     against,  and each member of the Committee and the Board of Directors shall
     be  entitled  without further act on his part to indemnity from the Company
     for,  all  expenses (including attorney's fees, the amount of judgments and
     the  amount  of approved settlements made with a view to the curtailment of
     costs  of  litigation,  other  than  amounts  paid  to  the Company itself)

<PAGE>
     reasonably incurred by him in connection with or arising out of any action,
     suit,  or  proceeding in which he may be involved by reason of his being or
     having  been  a  member  of  the  Committee  and/or the Board of Directors,
     whether  or  not  he  continues  to be a member of the Committee and/or the
     Board  of  Directors  at  the  time  of  incurring the expenses, including,
     without limitation, matters as to which he shall be finally adjudged in any
     action, suit or proceeding to have been found to have been negligent in the
     performance  of  his  duty  as  a  member  of the Committee or the Board of
     Directors.  However, this indemnity shall not include any expenses incurred
     by  any member of the Committee and/or the Board of Directors in respect of
     matters  as  to  which  he shall be finally adjudged in any action, suit or
     proceeding to have been guilty of gross negligence or willful misconduct in
     the  performance  of his duty as a member of the Committee and the Board of
     Directors.  In  addition, no right of indemnification under this Plan shall
     be available to or enforceable by any member of the Committee and the Board
     of  Directors  unless, within 60 days after institution of any action, suit
     or  proceeding, he shall have offered the Company the opportunity to handle
     and  defend  same  at  its  own  expense. The failure to notify the Company
     within  60 days shall only affect a Director or committee member's right to
     indemnification  if  said failure to notify results in an impairment of the
     Company's  rights  or  is  detrimental  to  the  Company.  This  right  of
     indemnification  shall  inure  to  the  benefit  of the heirs, executors or
     administrators  of  each member of the Committee and the Board of Directors
     and  shall  be  in  addition  to  all other rights to which a member of the
     Committee  and  the  Board of Directors may be entitled as a matter of law,
     contract,  or  otherwise.

19.       GENDER. If the context requires, words of one gender when used in this
          ------
     Plan  shall  include  the  others  and words used in the singular or plural
     shall  include  the  other.

20.       HEADINGS.  Headings  of  Articles  and  Sections  are  included  for
          --------
     convenience  of  reference  only and do not constitute part of the Plan and
     shall  not  be  used  in  construing  the  terms  of  the  Plan.

21.       OTHER  COMPENSATION  PLANS. The adoption of this Plan shall not affect
          --------------------------
     any other stock option, incentive or other compensation or benefit plans in
     effect  for  the  Company or any Affiliate, nor shall the Plan preclude the
     Company  from  establishing  any  other  forms  of  incentive  or  other
     compensation  for  employees  of  the  Company  or  any  Affiliate.

22.       OTHER  OPTIONS  OR  AWARDS. The grant of an Option or Awards shall not
          --------------------------
     confer  upon  the  Eligible Person the right to receive any future or other
     Options  or Awards under this Plan, whether or not Options or Awards may be
     granted  to  similarly  situated  Eligible Persons, or the right to receive
     future  Options  or  Awards upon the same terms or conditions as previously
     granted.

23        GOVERNING  LAW.  The  provisions  of  this  Plan  shall  be construed,
          --------------
     administered,  and  governed  under  the  laws  of  the  State  of  Texas.

<PAGE>

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