Document:

EXHIBIT 4.2

 

THE SCO GROUP, INC.

CERTIFICATE OF CORRECTION FILED TO CORRECT

A CERTAIN ERROR IN THE CERTIFICATE OF

OF

DESIGNATION

OF SERIES A JUNIOR PARTICIPATING PREFERRED
STOCK

FILED IN THE OFFICE OF THE SECRETARY OF STATE

OF DELAWARE ON AUGUST 27, 2004

 

The SCO Group, Inc., a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware,

 

DOES HEREBY CERTIFY:

 

1.                                       That
the name of the corporation is The SCO Group, Inc. (the “Corporation”).

 

2.                                       That
a Certificate of Designation of Series A Junior Participating Preferred Stock
of The SCO Group, Inc. (the “Certificate”) was filed by the Secretary of
State of Delaware on August 27, 2004 and that said Certificate requires
correction as permitted by Section 103 of the General Corporation Law of the
State of Delaware.

 

3.                                       The
inaccuracy or defect of the Certificate to be corrected is to change the
reference to “at a meeting duly called and held on [date]” in the first
paragraph of the Certificate to refer to “by written consent on August 10,
2004”.

 

4.                                       The
first paragraph of the Certificate is replaced in its entirety to read as
follows:

 

“The SCO Group, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
“Corporation”), hereby certifies that the following resolution was adopted by
the board of directors of the Corporation as required by Section 151 of the
General Corporation Law by written consent on August 10, 2004;”

 

IN WITNESS WHEREOF, the Corporation has
caused this Certificate to be signed by Bert B. Young, its Chief Financial
Officer, this 31st day of August, 2004.

 

 

	
  By:

  	
   

  	
  /s/ Bert B.
  Young

  
	
   

  	
  Name:  Bert B. Young

  
	
   

  	
  Title:  Chief Financial OfficerEXHIBIT 4.3

 

RIGHTS AGREEMENT

 

 

by and between

 

 

THE SCO GROUP, INC.

 

 

and

 

 

COMPUTERSHARE TRUST
COMPANY, INC.,

 

 

as Rights Agent

 

 

Dated as of

 

 

August 10, 2004

 

 

TABLE OF CONTENTS

 

	
  Section 1.

  	
  Certain Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Appointment of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Issuance of Rights Certificates.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Form of Rights Certificates.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Countersignature and Registration.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 6.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 7.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Cancellation and Destruction of Rights
  Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 9.

  	
  Reservation and Availability of Preferred
  Stock.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.

  	
  Preferred
  Stock Record Date

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 11.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Certificate of Adjusted Purchase Price or
  Number of Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.

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

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Fractional Rights and Fractional Shares.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Rights of Action

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Agreement of Rights Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Rights Certificate Holder Not Deemed a
  Stockholder

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Concerning the Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 19.

  	
  Merger or Consolidation or Change of Name
  of Rights Agent.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Duties of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Change of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 22.

  	
  Issuance of New Rights Certificates

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 23.

  	
  Redemption and Termination.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  24.

  	
  Exchange.

  	
   

  

 

 

	
  Section 25.

  	
  Notice of Certain Events.

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 26.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 27.

  	
  Supplements and Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 29.

  	
  Determinations and Actions by the Board of
  Directors

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 30.

  	
  Benefits of This Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 31.

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 32.

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 33.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 34.

  	
  Descriptive Headings

  	
   

  

 

 

EXHIBITS

 

	
  Exhibit
  A

  	
  Form
  of Certificate of Designation of Series A Junior Participating Preferred
  Stock

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  B

  	
  Form
  of Rights Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  C

  	
  Summary
  of Rights to Purchase Shares of Series A Junior Participating Preferred Stock

  	
   

  

 

ii

 

RIGHTS AGREEMENT

 

THIS
RIGHTS AGREEMENT,dated as of August 10,
2004 (the “Agreement”), by and between The SCO Group, Inc., a Delaware
corporation (the “Company”), and Computershare Trust Company, Inc., a Colorado
trust company (the “Rights Agent”).

 

WHEREAS, effective August 10, 2004 (the “Rights
Dividend Declaration Date”), the board of directors of the Company authorized
and declared a distribution of one Right (each, a “Right”) for each share of
Common Stock (as hereinafter defined) of the Company outstanding as of the
Close of Business (as hereinafter defined) on August 30, 2004 (the “Record
Date”), each Right initially representing the right to purchase one
one-thousandth of a share (a “Unit”) of Preferred Stock (as hereinafter
defined) upon the terms and subject to the conditions of this Agreement, and
has further authorized and directed the issuance of one Right with respect to
each share of Common Stock of the Company that shall become outstanding between
the Record Date and the earliest of the Distribution Date, the Redemption Date
and the Final Expiration Date (as such terms are hereinafter defined).

 

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

 

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

 

“Acquiring Person” shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner
(as such term is hereinafter defined) of 15% or more of the shares of Common
Stock of the Company then outstanding, but shall not include (1) the Company,
(2) any Subsidiary (as such term is hereinafter defined) of the Company, (3)
any employee benefit plan of the Company or any Subsidiary of the Company, or
(4) any entity holding shares of Common Stock of the Company for or pursuant to
the terms of any such plan. Notwithstanding the foregoing:

 

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

 

(ii)           no
Person who, alone or together with all Affiliates and Associates of such
Person, was, at the time of the public announcement by the Company of the
declaration by its board of directors on August 10, 2004 of the dividend
distribution of the Rights, the Beneficial Owner of 15% or more of the Common
Stock of the Company then outstanding shall be deemed to have become an
Acquiring Person unless and until such time as such Person or any Affiliate or
Associate of such Person thereafter becomes the

 

 

Beneficial
Owner of any additional Common Stock of the Company (other than as a result of
a stock dividend, stock split or similar transaction effected by the Company in
which all holders of Common Stock of the Company are treated equally); and

 

(iii)          if
the board of directors of the Company determines in good faith that a Person
who would otherwise be an “Acquiring Person” as defined pursuant to the
provisions of subparagraph (i), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares of Common
Stock of the Company so that such Person would no longer be an “Acquiring
Person,” then such Person shall not be deemed to be an “Acquiring Person” for
any purpose of this Agreement.

 

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

 

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

 

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

 

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

 

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

 

(iii)          which are
beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s
Affiliates or Associates) has any agreement, arrangement or understanding
(whether or not in writing, other than customary agreements with and between
underwriters and

 

2

 

selling group
members with respect to a bona fide public offering of securities), for the
purpose of acquiring, holding, voting (except to the extent contemplated by the
proviso to clause (B) of subparagraph (ii) above) or disposing of any
securities of the Company; provided, however,
that in no case shall any officer or director of the Company be deemed (A) the
Beneficial Owner of any securities beneficially owned by another officer or
director of the Company solely by reason of actions undertaken by such persons
in their capacity as officers or directors of the Company or (B) the Beneficial
Owner of securities held of record by the trustee of any employee benefit plan
of the Company or any Subsidiary of the Company for the benefit of any employee
of the Company or any Subsidiary of the Company, other than such officer or
director, by reason of any influence that such officer or director may have
over the voting of the securities held in the plan;

 

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

 

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

 

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

 

“Common Stock” when used with reference to the Company shall mean the
shares of common stock, par value $0.001 per share, of the Company.  “Common Stock” when used with reference to
any Person other than the Company shall mean the capital stock (or other equity
interest) with the greatest voting power of such other Person or, if such other
Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

“Preferred Stock” shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.001 per share, of the Company,
having the rights and preferences set forth in the Form of Certificate of
Designation attached to this Agreement as Exhibit A.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Section 13 Event” shall have the meaning set forth in Section 13.

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 3.               Issuance of Rights
Certificates.

 

(a)           Until
the earlier of (i) the Close of Business on the tenth day after the Stock
Acquisition Date and (ii) 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
prior to such time as any Person becomes an Acquiring Person and of which later
date the Company will give the Rights Agent prompt written notice) after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any Person holding shares of Common Stock for or
pursuant to the terms of any such plan) is commenced within the meaning of
Rule 14d-2(a) of the Exchange Act Regulations or of the first public
announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding shares of Common Stock for or
pursuant to the terms of any such plan) to commence a tender or exchange offer,
if upon consummation thereof such Person would be the Beneficial Owner of 15%
or more of the shares of Common Stock of the Company then outstanding (the
earlier of the events described in (i) and (ii) above being the “Distribution
Date”), (x) the Rights will be evidenced (subject to the provisions of
Section 3(b)) by the certificates for shares of Common Stock of the Company
registered in the names of the holders thereof (which certificates shall also
be deemed to be Rights Certificates) and not by separate Rights Certificates,
and (y) the right to receive Rights Certificates will be transferable only in
connection with the transfer of shares of Common Stock of the Company.  As soon as practicable after the Distribution
Date, the Company will notify the Rights Agent of the occurrence of the
Distribution Date and the Company will prepare and execute, the Rights Agent
will countersign, and the Company will send or cause to be sent (and the Rights
Agent will, if requested and provided with all necessary information, send) by
first-class, insured, postage-prepaid mail, to each record holder of shares of
Common Stock of the Company as of the Close of Business on the Distribution
Date, at the address of such holder shown on the records of the Company, a
Rights Certificate, in substantially the form of Exhibit B (a “Rights Certificate”), evidencing one Right for
each share of Common Stock so held.  From and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.  The Rights Agent shall have no duty or
obligation to take any action under any section of this

 

5

 

Agreement which requires the
payment by a Rights holder of applicable taxes and governmental charges unless
and until the Rights Agent is satisfied that all such taxes and/or charges have
been paid.

 

(b)           On
the Record Date, or as soon as practicable thereafter, the Company will send,
or cause to be sent, a copy of a Summary of Rights to Purchase Preferred Stock,
in substantially the form of Exhibit C
(the “Summary of Rights”), by first-class, postage-prepaid mail, to each record
holder of shares of Common Stock of the Company as of the Close of Business on
the Record Date, at the address of such holder shown on the records of the
Company.  Until the earlier of the
Distribution Date or the Expiration Date, the surrender for transfer of any
certificate for shares of Common Stock of the Company shall also constitute the
transfer of the Rights associated with the shares of Common Stock represented
thereby.

 

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

 

This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between The SCO Group, Inc.,
dated as of August 10, 2004 (the “Rights Agreement”), the terms of which are
hereby incorporated herein by reference and a copy of which is on file at the
principal executive offices of The SCO Group, 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. The SCO Group, Inc. will
mail to the holder of this certificate a copy of the Rights Agreement without
charge after receipt of a written request therefor.  Under certain
circumstances, as set forth in the Rights Agreement, Rights owned by or transferred
to any Person who is or becomes an Acquiring Person (as defined in the Rights
Agreement), and certain transferees thereof, whether currently held by or on
behalf of such person or by any subsequent holder, will become null and void
and will no longer be transferable.

 

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

 

Section 4.               Form of Rights Certificates.

 

(a)           The
Rights Certificates (and the forms of election to purchase Units of Preferred
Stock and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit B
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
(but which do not affect the rights, duties or immunities 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

 

6

 

exchange or transaction
reporting system on which the Rights may from time to time be listed or traded,
or to conform to usage.  Subject to the
provisions of Sections 11 and 22, the Rights Certificates shall entitle
the holders thereof to purchase the number of Units as shall be set forth
therein at the price per Unit set forth therein, but the number of such Units
and the Purchase Price shall be subject to adjustment as provided herein.

 

(b)           Any
Rights Certificate issued pursuant to this Agreement that represents Rights
beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person; (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such; or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) that becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
such Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the
board of directors of the Company has determined is part of a plan, arrangement
or understanding which has as a primary purpose or effect of the avoidance of
Section 7(e); shall in each case 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 by and between The SCO Group, Inc., and Computershare Trust
Company, Inc., as Rights Agent, dated as of August 10, 2004 (the “Rights
Agreement”)).  Accordingly, this Rights
Certificate and the Rights represented hereby will become null and void in the
circumstances specified in Section 7(e) of the Rights Agreement.

 

Section 5.               Countersignature and Registration.

 

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

 

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

 

7

 

number of Rights evidenced on
its face by each of the Rights Certificates and the date of each of the Rights
Certificates.

 

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

 

(a)           Subject
to the provisions of Sections 4(b), 7(e) and 14, at any time after the
Close of Business on the Distribution Date, and at or prior to the Close of
Business on the Expiration Date, any Rights Certificate or Rights Certificates
may be transferred, split-up, combined or exchanged for another Rights
Certificate or Rights Certificates evidencing exercisable Rights, entitling the
registered holder to purchase a like number of Units of Preferred Stock (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then
entitled such holder to purchase.  Any
registered holder desiring to transfer, split-up, combine or exchange any
Rights Certificate or Rights Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Rights Certificate or
Rights Certificates to be transferred, split-up, combined or exchanged at the
office of the Rights Agent designated for such purpose.  Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer
of any such surrendered Rights Certificate or Rights Certificates 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 or Rights Certificates 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 4(b), 7(e) and 14, countersign and deliver to
the Person entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested.  The
Company may require payment from holders of Rights Certificates 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
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 of indemnity or security reasonably satisfactory to them, and, at the
Company’s request, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights Agent
and cancellation of the Rights Certificate if mutilated, the Company will make
and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature
and delivery to the registered holder in lieu of the Rights Certificate so
lost, stolen, destroyed or mutilated.

 

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

 

(a)           The
registered holder of any Rights Certificate evidencing exercisable Rights may
exercise the Rights evidenced thereby (except as otherwise provided in this
Agreement) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the related certification properly completed and duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the Purchase Price for each Right being exercised (as such
amount may be reduced (including to zero) pursuant to Section 11(a)(iii)) and
an amount equal to any

 

8

 

applicable transfer tax or
charge required to be paid by the holder of such Rights Certificate in
accordance with Section 9 in cash, or by certified check, wire transfer or bank
draft payable to the order of the Company, at or prior to the earliest of
(i) the Close of Business on the tenth anniversary hereof (the “Final
Expiration Date”), (ii) the time at which the Rights are redeemed as
provided in Section 23 (the “Redemption Date”), and (iii) the time at
which such Rights are exchanged as provided in Section 24 (the earliest of (i),
(ii) and (iii) being the “Expiration Date”).

 

(b)           The
Purchase Price for each Unit pursuant to the exercise of a Right shall
initially be $60  and shall be
subject to adjustment from time to time as provided in Sections 11 and 13 and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below.

 

(c)           Upon
receipt of a Rights Certificate evidencing exercisable Rights (with the form of
election to purchase and certification properly completed and duly executed)
accompanied by payment as provided in Section 7(a), the Rights Agent shall,
subject to Section 20(k), thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Stock a certificate or certificates for the
number of Units to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests or (B) if the Company shall
have elected to deposit the total number of Units issuable upon exercise of the
Rights hereunder with a depositary agent, requisition from the depositary agent
of a depositary receipt or depositary receipts representing such number of
Units as are to be purchased (in which case certificates for the Units
represented by such receipt or receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such requests; (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14; (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder; and (iv) when appropriate, after receipt
thereof, deliver such cash to or upon the order of the registered holder of
such Rights Certificate. If the Company is obligated to issue other securities
of the Company, pay cash and/or distribute other property pursuant to Section
11(a), the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when necessary to comply with the terms of this Agreement.

 

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

 

(e)           Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Triggering Event, any Rights beneficially owned by (i) an Acquiring Person
or an Associate or Affiliate of an Acquiring Person; (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate thereof) who becomes a
transferee after the Acquiring Person becomes such; (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate thereof) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the board of directors of the Company has
determined is part of a plan, arrangement or understanding which has as a

 

9

 

primary purpose or effect the
avoidance of this Section 7(e); or (iv) any subsequent transferee shall not be
exercisable without any further action and no holder of such Rights shall have
any rights whatsoever with respect to such Rights or any Rights Certificate
which formerly evidenced such Rights, and neither the Company nor the Rights
Agent shall have any obligations whatsoever with respect to such Rights or any
Rights Certificate, whether under any provision of this Agreement or
otherwise.  The Company shall use
commercially reasonable efforts to ensure that the provisions of Section 4(b)
and this Section 7(e) 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 its making or failing to make any determinations
with respect to an Acquiring Person or any of such Acquiring Person’s
Affiliates, Associates or transferees or taking or failing to take any actions
with respect any Rights or Rights Certificates of any such Person.

 

(f)            Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth in this
Section 7 unless such registered holder shall have (i) properly completed and
duly executed 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 cancelled form, or, if surrendered to the Rights
Agent, shall be cancelled by it, and no Rights Certificates shall be issued in
lieu thereof except as expressly permitted by this Agreement.  The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof.  The
Rights Agent shall deliver all cancelled Rights Certificates to the Company, or
shall, at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.

 

Section 9.               Reservation and Availability
of Preferred Stock.

 

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

 

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

 

10

 

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

 

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

 

(e)           The
Company further covenants and agrees that it will pay when due and payable any
and all governmental transfer taxes and charges which may be payable in respect
of the issuance or delivery of the Rights Certificates or of any Units (and,
following the occurrence of a Triggering Event, any other securities that may
be delivered upon exercise of Rights) upon the exercise of Rights.  The Company shall not, however, be required
to pay any transfer 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 Units in a name
other than that of, the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or to issue or to deliver any certificates or
depositary receipts for Units (or other securities that may be delivered upon
the exercise of any Rights) until any such tax 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 or the
Rights Agent’s reasonable satisfaction that no such tax or charge is due.

 

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

 

11

 

such transfer books are open; provided further, however, that
if delivery of Units (or following the occurrence of a Triggering Event, other
securities that may be delivered upon the exercise of the Rights) is delayed
pursuant to Section 9(c), such Persons shall be deemed to have become the
record holders of such Units (or following the occurrence of a Triggering
Event, other securities that may be delivered upon the exercise of the Rights)
only when such Units first become deliverable. 
Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to securities for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as expressly
provided in this Agreement.

 

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

 

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

 

(ii)           Subject to Section 24, if:

 

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

 

(B)           any Acquiring Person
or any Associate or Affiliate of any Acquiring Person, at any time after the
date of this Agreement, directly or indirectly, shall (1) merge into the
Company or otherwise combine with the Company and the Company shall be the
continuing or surviving corporation of such merger or combination and shares of
Common Stock of the Company shall remain outstanding and unchanged, (2) in one
transaction or a series of  transactions,

 

12

 

transfer any
assets to the Company or any of its Subsidiaries in exchange (in whole or in
part) for shares of Common Stock of the Company, for other equity securities of
the Company or any of its Subsidiaries, or for securities exercisable for or
convertible into shares of equity securities of the Company or any of its
Subsidiaries (whether shares of Common Stock of the Company or otherwise) or
otherwise obtain from the Company or any of its Subsidiaries, with or without
consideration, any additional shares of such equity securities or securities
exercisable for or convertible into such equity securities (other than pursuant
to a pro rata distribution to all holders of shares of Common Stock of the Company),
(3) sell, purchase, lease, exchange, mortgage, pledge, transfer or otherwise
acquire or dispose of, in one transaction or a series of transactions, to, from
or with the Company or any of its Subsidiaries or any employee benefit plan
maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity, assets (including
securities) on terms and conditions less favorable to the Company or such
Subsidiary, plan, trustee or fiduciary than those that could have been obtained
in arm’s-length negotiations with an unaffiliated third party, other than
pursuant to a transaction set forth in Section 13(a), (4) sell, purchase,
lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose of,
in one transaction or a series of transactions, to, from or with the Company or
any of its Subsidiaries or any employee benefit plan maintained by the Company
or any of its Subsidiaries or any trustee or fiduciary with respect to such
plan acting in such capacity (other than transactions, if any, consistent with
those engaged in, as of the date hereof, by the Company and such Acquiring
Person or such Associate or Affiliate thereof), assets (including securities or
intangible assets) having an aggregate fair market value of more than
$5,000,000, other than pursuant to a transaction set forth in Section 13(a),
(5) receive, or any designee, agent or representative of such Acquiring
Person or any Affiliate or Associate of such Acquiring Person shall receive,
any compensation from the Company or any of its Subsidiaries other than
compensation for full-time employment as a regular employee at rates in
accordance with the Company’s (or its Subsidiaries’) past practices, or (6)
receive the benefit, directly or indirectly (except proportionately as a holder
of shares of Common Stock of the Company or as required by law or governmental
regulation), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the Company
or any of its Subsidiaries or any employee benefit plan maintained by the
Company or any of its Subsidiaries or any trustee or fiduciary with respect to
such plan acting in such capacity; or

 

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

 

13

 

then promptly following the occurrence of an
event described in Section 11(a)(ii)(A), (B) or (C) (each being a “Section
11(a)(ii) Event”), proper provision shall be made so that each holder of a
Right, except as otherwise provided in Section 7(e), shall thereafter have the
right to receive for each Right, upon exercise thereof in accordance with the
terms of this Agreement and payment of the then-current Purchase Price, in lieu
of the number of Units of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event,
such number of Units of Preferred Stock as shall equal the result obtained by
multiplying the then-current Purchase Price by the then number of Units of
Preferred Stock for which a Right was exercisable (or would have been
exercisable if the Distribution Date had occurred) immediately prior to the
first occurrence of a Triggering Event, and dividing that product by 50% of the
Current Per Share Market Price for shares of Common Stock on the date of
occurrence of the most recent Triggering Event (such number of Units of
Preferred Stock being hereinafter referred to as the “Adjustment Shares”).  Upon the occurrence of a Section 13 Event,
any Rights that shall not have been previously exercised pursuant to this
Section 11(a)(ii) shall thereafter be exercisable only pursuant to Section 13
and not pursuant to this Section 11(a)(ii). 
The Company shall notify the Rights Agent when this Section 11(a)(ii)
applies and shall use all commercially reasonable efforts to ensure that the
provisions of this Section 11(a)(ii) are complied with, but neither the Company
nor the Rights Agent shall have any liability to any holder of Rights
Certificates or other Person as a result of the Company’s failure to make any
determinations with respect to any Acquiring Person or its Affiliates,
Associates or transferees hereunder.

 

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

 

14

 

(x) occurrence of a Section 11(a)(ii) Event, and (y) the date
on which the Company’s right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the “Section 11(a)(iii)
Trigger Date”), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the Purchase
Price, Units of Preferred Stock (to the extent available), except to the extent
that the Company has not obtained any necessary regulatory approval for such
issuance, and then, if necessary, cash, having an aggregate value equal to the
Spread.

 

(b)           If
the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Stock entitling them (for a period
expiring within forty five calendar days after such record date) to subscribe
for or purchase Preferred Stock (or shares having the same rights, privileges
and preferences as the Preferred Stock (“Equivalent Preferred Stock”)) or
securities convertible into Preferred Stock or Equivalent Preferred Stock at a
price per Unit of Preferred Stock or Equivalent Preferred Stock (or having a
conversion price per Unit, if a security convertible into Units of Preferred
Stock or Equivalent Preferred Stock) less than the then Current Per Share
Market Price (as determined pursuant to Section 11(d)) of a Unit of Preferred
Stock on such record date, the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the sum of the number of Units outstanding on such record date plus
the number of Units which the aggregate offering price of the total number of
Units and/or Equivalent Preferred Stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Per Share Market Price and the denominator of which
shall be the sum of the number of Units outstanding on such record date plus
the number of additional Units and/or Equivalent Preferred Stock to be offered
for subscription or purchase (or into which the convertible securities so to be
offered are initially convertible).  If
such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive and binding on the Rights Agent and the holders of the Rights.  Units owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such
computation.  Such adjustment shall be made successively whenever such a
record date is fixed; and if such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.

 

(c)           If
the Company shall fix a record date for a distribution to all holders of Units
of Preferred Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend), assets (other than a dividend payable in Units or Equivalent
Preferred Stock but including any dividend payable in equity securities other
than Preferred Stock or Equivalent Preferred Stock) or subscription rights or
warrants (excluding those referred to in Section 11(d)), the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the then Current Per Share Market Price (as
determined pursuant to Section 11(d)) of the Preferred Stock on such
record date, less the fair market value (as determined in good faith by the
board of directors of

 

15

 

the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive
and binding on the Rights Agent and the holders of the Rights) of the cash,
assets or evidences of indebtedness to be distributed or of such subscription
rights or warrants distributable in respect of a share of Preferred Stock, and
the denominator of which shall be such Current Per Share Market Price of a
share of Preferred Stock.  Such
adjustments shall be made successively whenever such a record date is fixed
and, in the event that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.

 

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

 

(ii)           For
the purpose of any computation hereunder, the Current Per Share Market Price of
the Preferred Stock shall be determined in accordance with the method set forth
in Section 11(d)(i).  If the Current Per
Share Market

 

16

 

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

 

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

 

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

 

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

 

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

 

17

 

(x) the number of Units of Preferred Stock covered by a Right
immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, by (ii) the
Purchase Price in effect immediately after such adjustment of the Purchase
Price.

 

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

 

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

 

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

 

(l)            In
any case in which this Section 11 shall require that an adjustment in the
Purchase Price be made effective as of a record date for a specified event, the
Company may elect to defer, until the occurrence of such event, the issuing to
the holder of any Rights exercised after such record date of that number of
Units and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above

 

18

 

the Units and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder’s
right to receive such additional shares (fractional or otherwise) upon the
occurrence of the event requiring such adjustment.  The Company shall give the Rights Agent
notice of its election under this Section 11(e).

 

(m)          Anything
in this Section 11 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, to the extent that it, in
its sole discretion, shall determine to be advisable in order that any (i) consolidation
or subdivision of the Preferred Stock, (ii) issuance wholly for cash of
any Unit at less than the Current Per Share Market Price, (iii) issuance
wholly for cash of Preferred Stock or securities which by their terms are
convertible into or exchangeable for Preferred Stock, (iv) dividends on
Preferred Stock payable in Preferred Stock, or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of Units of its Preferred Stock shall not be taxable to such
stockholders.

 

(n)           The
Company shall not, at any time after the Distribution Date (i) consolidate
with any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o)), (ii) merge with or into any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o)), or (iii) sell or transfer (or permit any Subsidiary
to sell or transfer), in one transaction, or a series of transactions, assets
or earning power aggregating more than 50% of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with
or immediately after such consolidation, merger or sale, the Person which
constitutes, or would constitute, the Principal Party (as defined in Section
13(b)) shall have distributed or otherwise transferred to its stockholders or
other persons holding an equity interest in such Person, Rights previously
owned by such Person or any of its Affiliates and Associates; provided, however,
this Section 11(n) shall not affect the ability of any Subsidiary of the
Company to consolidate with, merge with or into, or sell or transfer assets or
earning power to, any other Subsidiary of the Company.

 

(o)           After
the Distribution Date, the Company shall not, except as permitted by
Section 23 or Section 27, take (or permit any of its Subsidiaries to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.

 

(p)           If,
at any time after the date of this Agreement and prior to the Distribution
Date, the Company shall (i) declare or pay any dividend on outstanding shares
of Common Stock of the Company payable in shares of Common Stock of the Company
or (ii) effect a subdivision, combination or consolidation of the Common Stock
of the Company (by reclassification or otherwise than by payment of dividends
in shares of Common Stock of the Company) into a greater or lesser number of
shares of Common Stock of the Company, then in any such case the number of
Units purchasable after

 

19

 

such event upon proper exercise of each Right shall be determined by
multiplying the number of Units so purchasable immediately prior to such event
by a fraction, the numerator of which shall be the number of shares of Common
Stock of the Company outstanding immediately before such event and the
denominator of which shall be the number of shares of Common Stock of the
Company outstanding immediately after such event.  The adjustments provided for in this Section
11(p) shall be made successively whenever such a dividend is declared or paid
or such a subdivision, combination or consolidation is effected.

 

Section 12.             Certificate of Adjusted Purchase
Price or Number of Shares.  Whenever an adjustment is made as provided in
Section 11 or 13, the Company shall promptly (a) prepare a certificate
setting forth such adjustment, and a brief statement of the computations and
facts accounting for such adjustment, (b) file with the Rights Agent and with
each transfer agent for the shares of Common Stock of the Company or Units a
copy of such certificate and (c) mail a brief summary thereof to each holder of
a Rights Certificate in accordance with Section 25 hereof.  Notwithstanding the foregoing sentence, the
failure by the Company to make such certification or give such notice shall not
affect the validity of or the force or effect of the requirement for such
adjustment.  The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment or
statement contained therein and shall have no duty or liability with respect
to, shall not be deemed to have knowledge of, and adjustment or any such event
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 Stock Acquisition Date, directly or indirectly,
(x) the Company shall consolidate with, or merge with and into, any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o)), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, (y) any Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o)) shall consolidate with the Company, or merge with and into
the Company and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the shares of Common Stock of the Company shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (z) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer) to any
Person or Persons (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o)), in one or more transactions, directly
or indirectly, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole), (any such
event being a “Section 13 Event”), then, and in each such case, proper
provision shall be made so that: 
(i) each holder of a Right, except as provided in
Section 7(e), shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price, such number of validly
authorized and issued, fully paid and nonassessable shares of Common Stock of
the Principal Party, which shares shall not be subject to any liens,
encumbrances, rights of first refusal, transfer restrictions or other adverse
claims, as shall be equal to the product obtained by (1) multiplying the
then current Purchase Price by the number of Units of Preferred Stock for which
a Right is exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior
to the first occurrence of a Section 13 Event, multiplying the number of
such Units of Preferred Stock for which a Right would be exercisable hereunder
but for the occurrence of such Section 11(a)(ii) Event by the Purchase
Price which would be in effect hereunder but for such first occurrence) and
(2) dividing that product (which, following the first occurrence of a
Section 13 Event, shall be the “Purchase Price” for all

 

20

 

purposes of this Agreement) by
50% of the Current Per Share Market Price of the shares of Common Stock of such
Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term “Company” shall,
for all purposes of this Agreement, thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 11 shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall
take such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock) in connection with the consummation of
any such transaction as may be necessary to ensure that the provisions of this
Agreement shall thereafter be applicable to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) shall be of no further effect following
the first occurrence of any Section 13 Event.

 

(b)           “Principal
Party” shall mean:

 

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

 

(ii)           in
the case of any transaction described in clause (z) of the first sentence
of Section 13(a), the Person that is the party receiving the largest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power
transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be determined,
whichever Person whose outstanding shares of Common Stock have the greatest
aggregate Current Per Share Market Price; provided, however, that in any such case, (1) if the Common Stock
of such Person is not at such time and has not been continuously over the
preceding twelve-month period registered under Section 12 of the Exchange
Act (“Registered Common Stock”), or such Person is not a corporation, and such
Person is a direct or indirect Subsidiary of another Person that has Registered
Common Stock outstanding, “Principal Party” shall refer to such other Person;
(2) if the Common Stock of such Person is not Registered Common Stock or
such Person is not a corporation, and such Person is a direct or indirect
Subsidiary of another Person but is not a direct or indirect Subsidiary of
another Person which has Registered Common Stock outstanding, “Principal Party”
shall refer to the ultimate parent entity of such first-mentioned Person; (3)
if the Common Stock of such Person is not Registered Common Stock or such
Person is not a corporation, and such Person is directly or indirectly
controlled by more than one Person, and one or more of such other Persons has
Registered Common Stock outstanding, “Principal Party” shall refer to whichever
of such other Persons is the issuer of the Registered Common Stock having the
highest aggregate Current Per Share Market Price; and (4) if the Common
Stock of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and none of such other

 

21

 

Persons has Registered Common Stock outstanding, “Principal Party”
shall refer to whichever ultimate parent entity is the corporation having the
greatest stockholders’ equity or, if no such ultimate parent entity is a
corporation, shall refer to whichever ultimate parent entity is the entity
having the greatest net assets.

 

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

 

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

 

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

 

(d)           In
case the Principal Party which is to be a party to a transaction referred to in
this Section 13 has a provision in any of its authorized securities or in
its certificate of incorporation, bylaws or other instrument governing its
corporate affairs, which provision would have the effect of (i) causing such
Principal Party to issue, in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than in the Current Per Share
Market Price or securities exercisable for, or convertible into, shares of
Common Stock of such Principal Party at less than in the Current Per Share
Market Price (other than to holders of Rights pursuant to this Section 13)
or (ii) providing for any special payment, tax or similar provisions in
connection with the issuance of the shares of Common Stock of such Principal
Party pursuant to the provisions of this Section 13, then, in such event,
the Company shall not consummate any such transaction unless prior thereto the
Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been cancelled, waived or amended, or that
the authorized securities shall be redeemed, so that the applicable provision
will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.

 

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

 

22

 

Section 14.             Fractional Rights and Fractional
Shares.

 

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

 

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

 

(c)           The
holder of a Right by the acceptance of the Right expressly waives such holder’s
right to receive any fractional Rights or any fractional shares upon exercise
of a Right (except as provided above).

 

(d)           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 under Section 18, are vested in the respective
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the registered holders of certificates representing shares of Common
Stock of the Company); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, a certificate representing shares of Common
Stock of the Company), without the consent of the Rights Agent or of the holder
of any other Rights Certificate (or, prior to the Distribution Date, of a
certificate representing shares of Common Stock of the Company), may, in such
holder’s own behalf and for such holder’s own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, such holder’s right to exercise the
Rights evidenced by such Rights Certificate or, prior to the Distribution Date,
in the manner provided in such Rights Certificate and in this Agreement.

 

23

 

Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at
law for any breach of this Agreement and will be entitled to specific
performance of the obligations hereunder, and injunctive relief against actual
or threatened violations of the obligations of any Person subject to this
Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

24

 

receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with this Agreement.

 

Section 18.             Concerning the Rights Agent.  The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it under this Agreement and, from time to time, on demand
of the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the preparation, negotiation, 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, damage, judgment, fine, penalty, claim, demand, settlement, cost, liability
or expense (including, without limitation, the reasonable fees and
disbursements of counsel), incurred without gross negligence or willful
misconduct on the part of the Rights Agent, for any action taken, suffered or
omitted by the Rights Agent in connection with the execution, acceptance and
administration of this Agreement and the exercise and performance of its
duties, including, without limitation, the costs and expenses of defending
against and appealing any claim of liability arising therefrom, directly or
indirectly.  This indemnity shall survive
the termination of this Agreement and the expiration of the Rights.  The costs and expenses incurred in enforcing
this right of indemnification shall be paid by the Company.

 

In the absence of gross negligence
or willful misconduct, the Rights Agent is authorized and shall be protected
and shall incur no liability for, or in respect of any action taken, suffered
or omitted by it in connection with, its administration of this Agreement and
the exercise and performance of its duties hereunder, in reliance upon any
Rights Certificate or certificate for Units or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of counsel as set forth in Section 20.

 

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

 

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

 

(b)           In
case at any time the name of the Rights Agent shall be changed and at such time
any of the Rights Certificates shall have been countersigned but not delivered,
the Rights Agent may adopt the countersignature under its prior name and
deliver Rights Certificates so

 

25

 

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 to perform only the duties and obligations expressly
imposed by this Agreement upon the following terms and conditions, all of which
the Company and the holders of Rights Certificates, by their acceptance
thereof, shall be bound, and no implied duties or obligations shall be read
into this Agreement against the Rights Agent:

 

(a)           Before
the Rights Agent acts or refrains from acting, it may consult with legal
counsel of its choice (who may be legal counsel for the Company), and the
advice or opinion of such counsel shall be full and complete authorization and
protection to the Rights Agent, and the Rights Agent shall incur no liability
for or in respect of, as to any action taken, suffered or omitted by it in good
faith and in accordance with such advice or opinion.

 

(b)           Whenever
in the administration, exercise and performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking, suffering or
omitting 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 officer
of the Company and delivered to the Rights Agent; and such certificate shall be
full and complete authorization and protection to the Rights Agent for or in
respect of any action taken, suffered or omitted in good faith by it under the
provisions of this Agreement in reliance upon such certificate.

 

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

 

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

 

(e)           The
Rights Agent shall not be under any responsibility or have any liability in
respect of the legality, validity or enforceability of this Agreement or the
execution and delivery hereof (except the due execution by the Rights Agent) or
in respect of the legality, validity or enforceability or the execution of any
Rights Certificate (except its countersignature); nor shall it be liable or
responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii)) or any change or adjustment
in the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Rights Certificates after
receipt of the certificate described in Section 12, upon which the Rights Agent
may rely); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Units

 

26

 

of Preferred
Stock or other securities to be issued upon the exercise of any Rights or as to
whether any such security will, when issued, be validly authorized and issued,
fully paid and nonassessable.

 

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

 

(g)           The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the administration, exercise and performance of its duties hereunder
from any one officer of the Company, and to apply to such officers for advice
or instructions in connection with its duties under this Agreement, and such
instructions shall be full authorization and protection to the Rights Agent and
the Rights Agent shall not be responsible or liable for, or in respect of, any
action taken, suffered or omitted to be taken by it in good faith in accordance
with instructions of any such officer or for any delay in acting while waiting
for those instructions.  The Rights Agent
shall be fully authorized and protected in relying upon the most recent
instructions received from such officers. 
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, suffered or omitted by the Rights Agent under this
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective.  The Rights
Agent shall not be liable for any action taken or suffered by, or omission of,
the Rights Agent in accordance with a proposal included in any such application
on or after the date specified in such application (which date shall not be
less than five Business Days after the date any officer of the Company actually
received such application, unless any such officer shall have consented in
writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application specifying the
action to be taken, suffered 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 peculiarly 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, or any such stockholder, affiliate, director, officer or
employee 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 vested in it
or perform any duty under this Agreement either itself (through its directors,
officers and employees) or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act, omission,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, omission, default, neglect or
misconduct, provided reasonable
care was exercised in the selection and continued employment thereof.

 

(j)            No
provision of this Agreement shall require the Rights Agent to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of

 

27

 

its duties hereunder or in the exercise of
its rights if the Rights Agent in good faith believes that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.

 

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

 

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

 

Section 22.             Issuance of New Rights
Certificates.  Notwithstanding any of the provisions of this
Agreement or of the Rights to the contrary, the Company may, at its option,
issue new Rights Certificates evidencing Rights in such form as may be approved
by its board of directors to reflect any adjustment or change in the Purchase
Price and the number or kind or

 

28

 

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

 

Section 23.             Redemption and Termination.

 

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

 

(b)           Immediately
upon the effectiveness of the redemption of the Rights pursuant to Section
23(a), and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price.  The Company shall promptly give public notice
of any such redemption (with a copy to the Rights Agent); provided,
however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such
redemption.  Within 10 days after the
effectiveness of the redemption of the Rights, the Company shall give notice of
such redemption to the Rights Agent and shall mail a notice of redemption to
all the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock.  Any notice which is mailed in
such manner shall be deemed given, whether or not the holder receives the
notice.  Each notice of redemption will
state the method by which the payment of the Redemption Price will be
made.  Neither the Company nor any of its
Affiliates or

 

29

 

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 or other than in
connection with the purchase of shares of Common Stock prior to the
Distribution Date.

 

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

 

Section 24.             Exchange.

 

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

 

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

 

(c)           In
the event that the number of shares of Preferred Stock authorized by the
Company’s certificate of incorporation but not outstanding or reserved for
issuance for purposes

 

30

 

other than upon exercise of the
Rights is not sufficient to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall take all such action as
may be necessary to authorize additional shares of Preferred Stock for issuance
upon exchange of the Rights or make adequate provision to substitute (1) cash,
(2) Common Stock of the Company or other equity securities of the Company,
(3) debt securities of the Company, (4) other assets, or (5) any combination of
the foregoing, having an aggregate value equal to the aggregate Current Per
Share Market Price of the Units of Preferred Stock that would otherwise be
issuable in such exchange, all as determined by the board of directors of the
Company (which determination shall be described in a statement filed with the
Rights Agent and shall be conclusive and binding on the Rights Agent, the
holders of the Rights and all other Persons). 
To the extent that the Company determines that some action need be taken
pursuant to Section 24(a), the board of directors of the Company may
temporarily suspend the exercisability of the Rights for a period of up to
sixty days following the date on which the event described in Section 24(a)
shall have occurred, in order to seek any authorization of additional shares of
Preferred Stock and/or to decide the appropriate form of distribution to be
made pursuant to the above provision and to determine the value thereof.  Upon any such suspension, the Company shall
notify the Rights Agent thereof and issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect (a
copy of which shall be provided to the Rights Agent).

 

Section 25.             Notice of Certain Events.

 

(a)           In
case the Company shall propose (i) to pay any dividend payable in stock of
any class to the holders of its Preferred Stock or to make any other
distribution to the holders of its Preferred Stock (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred
Stock rights or warrants to subscribe for or to purchase any additional Units
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding Preferred Stock), (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one or more transactions, of 50% or more of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person, (v) to effect the liquidation, dissolution or winding up of
the Company or (vi) to declare or pay any dividend on the Common Stock of the
Company payable in shares of Common Stock of the Company or to effect a
subdivision, combination or consolidation of the shares of Common Stock of the
Company (by reclassification or otherwise than by payment of dividends in
shares of Common Stock), then, in each such case, the Company shall give to the
Rights Agent and each holder of a Rights Certificate, in accordance with
Section 26, a notice of such proposed action, which shall specify the record
date for the purposes of such stock dividend, or distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and
the date of participation therein by the holders of the shares of Common Stock
of the Company and/or shares of Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least ten days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least ten days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the shares of Common Stock of the Company and/or
shares of Preferred Stock, whichever shall be the earlier.

 

31

 

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

 

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

 

The SCO Group, Inc.

355 South 520 West

Suite 100

Lindon, UT 84042

Attention:  Corporate Secretary

 

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

 

Computershare Trust Company, Inc.

350 Indiana Ste. 800

Golden, CO 80401

Attention:  Kellie Gwinn

 

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

 

32

 

does not adversely affect the
interests of the holders of Rights, the Rights Agent shall execute such
supplement or amendment.

 

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

 

Section 29.             Determinations and Actions by
the Board of Directors.  For all purposes of this Agreement, any calculation
of the number of shares of Common Stock of the Company outstanding at any
particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of the Company of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the Exchange Act Regulations.  The board of directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the board of directors,
or the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to
(i) interpret the provisions of this Agreement and (ii) make all
determinations 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 of directors of the Company in
good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights Certificates and all other Persons and
(y) not subject the board of directors of the Company to any liability to
the holders of the Rights.  The Rights
Agent shall be entitled to assume that the board of directors 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, shares of Common Stock of
the Company) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, shares of Common Stock of
the Company).

 

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

 

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

 

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

 

33

 

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 of this Agreement.

 

34

 

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

 

	
   

  	
  THE SCO GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darl C. McBride

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Darl C. McBride

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
   

  	
  COMPUTERSHARE TRUST COMPANY,

  INC., as Rights
  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John M. Wahl

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  John M. Wahl

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Corporate Trust Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kellie Gwinn

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Kellie Gwinn

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  
											

 

35

 

Exhibit A

 

FORM

 

of

 

CERTIFICATE OF DESIGNATION

 

of

 

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

 

of

 

THE SCO GROUP, INC.

 

(Pursuant to Section 151 of the

Delaware General Corporation Law)

 

The SCO Group, Inc., a
corporation organized and existing under the General Corporation Law of the
State of Delaware (hereinafter called the “Corporation”), hereby certifies that
the following resolution was adopted by the board of directors of the
Corporation as required by Section 151 of the General Corporation Law by
written consent on August 10, 2004;

 

RESOLVED, that pursuant to the authority granted to
and vested in the board of directors of the Corporation (hereinafter the
“Board”) in accordance with the provisions of the certificate of incorporation
of the Corporation, as currently in effect, the Board hereby creates a series
of Preferred Stock, par value $0.001 per share (the “Preferred Stock”), of the
Corporation and hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations thereof as follows:

 

Series A Junior
Participating Preferred Stock:

 

Section 1.               Designation
and Amount.  The shares of such series shall be
designated as “Series A Junior Participating Preferred Stock” (the “Series
A Preferred Stock”) and the number of shares constituting the Series A
Preferred Stock shall be Thirty Thousand (30,000).  Such number of shares may be increased or
decreased by resolution of the board of directors; provided,
that no decrease shall reduce the number of shares of Series A Preferred Stock
to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights
or warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.

 

Section 2.               Dividends
and Distributions.

 

(a)           Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, each holder of a share
of Series A Preferred Stock, in preference to the holders of shares of common
stock, par value $0.001 per share (the “Common Stock”), of the Corporation, and
of any other junior stock, shall be entitled to receive, when declared by the
Board out of

 

A-1

 

funds legally available for the
purpose, dividends in an amount per share (rounded to the nearest cent) equal
to, subject to the provision for adjustment hereinafter set forth, 1,000 times
the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock. 
In the event the Corporation shall, at any time after August 10, 2004
(the “Rights Dividend Declaration Date”), declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock (and an
equivalent dividend is not declared on the Series A Preferred Stock or the
Series A Preferred Stock is not similarly subdivided or combined), then in each
such case the amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

 

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

 

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

 

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

 

(a)           Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the stockholders of the
Corporation.  In the event the
Corporation shall, at any time after the Rights Dividend Declaration Date,
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock (and an equivalent dividend is not declared on
the Series A Preferred Stock or the Series A Preferred Stock is not similarly
subdivided or combined), then in each such case the number of votes per share
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

 

A-2

 

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

 

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

 

Section 4.               Certain
Restrictions.

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 5.               Reacquired Shares.  Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof.  All such shares shall upon their cancellation

 

A-3

 

become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of Preferred
Stock subject to the conditions and restrictions on issuance set forth herein,
in the certificate of incorporation, or in any other certificate of designation
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.

 

Section 6.               Liquidation,
Dissolution or Winding Up.

 

(a)           Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred Stock unless, prior thereto, the
holders of shares of Series A Preferred Stock shall have received the greater
of (x) $1,000 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon to the date of such payment (the “Series A
Liquidation Preference”) and (y) an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to the product of 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (ii) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.  In the event
the Corporation shall, at any time after the Rights Dividend Declaration Date
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock (and an equivalent dividend is not declared on
the Series A Preferred Stock or the Series A Preferred Stock is not similarly
subdivided or combined), then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior
to such event under the proviso in clause (i) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

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

 

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

 

A-4

 

equivalent dividend is not
declared on the Series A Preferred Stock or the Series A Preferred Stock is not
similarly subdivided or combined), then in each such case the amount set forth
in the preceding sentence with respect to the conversion, exchange or change of
shares of Series A Preferred Stock shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.

 

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

 

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

 

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

 

A-5

 

IN
WITNESS WHEREOF,
this Certificate of Designation is executed on behalf of the Corporation as of
August 10, 2004.

 

	
   

  	
  THE SCO GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  

 

A-6

 

Exhibit B

 

FORM OF RIGHTS CERTIFICATE

 

	
  Certificate No. R-

  	
             

  	
  Rights

  

 

NOT
EXERCISABLE AFTER TEN YEAR ANNIVERSARY OF RECORD DATE OR EARLIER IF NOTICE OF
REDEMPTION OR EXCHANGE IS GIVEN.  THE
RIGHTS ARE SUBJECT TO REDEMPTION OR EXCHANGE AT THE OPTION OF THE COMPANY ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. 
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE
OF AN ACQUIRING PERSON AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS WILL BECOME
NULL AND VOID.

 

RIGHTS CERTIFICATE

 

THE SCO GROUP, 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 August 10, 2004
(the “Rights Agreement”), between The SCO Group, Inc., a Delaware corporation
(the “Company”), and Computershare Trust Company, Inc., a Colorado trust
company, as Rights Agent (the “Rights Agent”), to purchase from the Company at
any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 p.m., Mountain Time, on the ten year anniversary
of Record Date at the office of the Rights Agent designated for such purpose,
or at the office of its successor as Rights Agent, one one-thousandth (a
“Unit”) of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $0.001 per share (the “Preferred
Stock”) of the Company, at a purchase price of $60  per Unit of Preferred Stock (the “Purchase Price”), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase duly executed.  As provided
in the Rights Agreement, the Purchase Price and the number of Units of
Preferred Stock which may be purchased upon the exercise of the Rights evidenced
by this Rights Certificate are subject to modification and adjustment upon the
happening of certain events set forth in the Rights Agreement.

 

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

 

This Rights Certificate, with or
without other Rights Certificates, upon surrender at the office of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of Units of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase.  If this Rights Certificate shall be exercised
in part, the holder shall be entitled to receive upon

 

B-1

 

surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not
exercised.

 

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

 

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

 

No holder of this Rights
Certificate, as such, shall be entitled to vote or to receive dividends on, or
shall be deemed for any purpose the holder of, Units of Preferred Stock or 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 this
Rights Certificate be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company, including, without limitation,
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until and only to the extent
the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.

 

B-2

 

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

 

WITNESS
the signature of
the proper officers of the Company and its corporate seal.  Dated as of                 ,
20    .

 

	
   

  	
  THE SCO GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
  Computershare Trust Company, Inc.,

  as Rights Agent

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
								

 

B-3

 

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
the undersigned                            
hereby sells, assigns and transfers unto                                                                                                                          

	
  (Name and address of
  transferee)

  	
   

  

 

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

 

	
  DATED:

  	
   

  	
  , 20

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
								

 

Signature
Guaranteed:

 

Signatures must be guaranteed by
an eligible guarantor institution with membership in a recognized signature
guarantee medallion program as approved by the Stock Transfer Association.

 

B-4

 

CERTIFICATE

 

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

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

	
   

  	
   

  	
   

  
	
   

  	
  NOTICE

  	
   

  

 

 

 

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

 

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

 

B-5

 

FORM OF ELECTION TO PURCHASE

 

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

 

To: The SCO Group, Inc.

 

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

 

	
   

  	
   

  
	
  (Name)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Address)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Social security or other identifying number)

  	
   

  

 

A new Rights Certificate
evidencing the remaining balance, if any, of such Rights not hereby exercised
shall be mailed to and registered in the name of the undersigned unless such
person requests that such Rights Certificate be registered in the name of and
mailed to (complete only if a Rights Certificate evidencing any remaining
balance of Rights is to be registered in a name other than the undersigned):

 

	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Social security or other identifying number)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DATED:

  	
   

  	
  , 20

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  
	
   

  	
  Signature

  
								

 

Signature
Guaranteed:

 

Signatures must be guaranteed by
an eligible guarantor institution with membership in a recognized signature
guarantee medallion program as approved by the Stock Transfer Association.

 

B-6

 

CERTIFICATE

 

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

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

	
   

  	
   

  	
   

  
	
   

  	
  NOTICE

  	
   

  

 

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

 

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

 

B-7

 

Exhibit C

 

UNDER CERTAIN CIRCUMSTANCES, AS
SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS WILL BECOME NULL AND VOID.

 

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED STOCK

 

All capitalized terms not
otherwise defined herein shall have the meanings assigned thereto in the Rights
Agreement (the “Rights Agreement”) dated as of August 10, 2004,  by and between The SCO Group, Inc. (the
“Company”) and Computershare Trust Company, Inc. (the “Rights Agent”).

 

Adoption of Rights Plan

 

On August 10, 2004, the
Company’s board of directors authorized and declared a distribution of one
Right for each outstanding share of Common Stock of the Company.  The distribution is payable to stockholders
of record at the close of business on August 30, 2004 (the “Record Date”), and
is likewise payable with respect to each share of Common Stock of the Company
that shall become outstanding between the Record Date and the earliest of the
Distribution Date, the Redemption Date and the Final Expiration Date.  Each Right entitles the registered holder to
purchase from the Company one one-thousandth of a share (a “Unit”) of Preferred
Stock at a Purchase Price of $60  per
Unit, subject to adjustment.

 

Rights Attach to Common Shares until a
Distribution Date

 

Initially, and until the
occurrence of a Distribution Date (as defined below), the Rights shall attach
to the stock certificates of all outstanding shares of Common Stock and no
separate Rights Certificate will be issued. 
Until the occurrence of a Distribution Date, the Rights are non-exercisable
and nontransferable; the Rights may not be transferred separately from the
Common Stock and any transfer of Common Stock will also constitute a transfer
of the Rights.  Until a Right is
exercised, the holder of a Right shall not have the right to vote or to receive
dividends.

 

Distribution of Rights

 

Shortly following the
Distribution Date, each stockholder of record will receive by mail a separate
certificate evidencing the Rights of the respective stockholder.  The Distribution Date will occur on the
earlier of two events: ten days following (i) a public announcement that a
person or group of affiliated or associated persons (an “Acquiring Person”)
has, subject to certain exceptions, acquired or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of the Common
Stock of the Company (the “Stock Acquisition Date”), other than as a result of
repurchases of stock by the Company, or (ii) the commencement of, or public
announcement of an intention to make, a tender offer or exchange offer that would
result in a person or group beneficially owning 15% or more of the outstanding
shares of Common Stock.

 

C-1

 

Right to Purchase Stock

 

If a person or group acquires,
or obtains the right to acquire, 15% or more of the outstanding Common Stock of
the Company (and thereby becomes an Acquiring Person), each holder of a Right
(except those held by the Acquiring Person and its Affiliates and Associates)
will have the right to purchase, upon exercise, Preferred Stock of the Company
having a value equal to two times the exercise price of the Right.

 

If, at any time after the Stock
Acquisition Date, the Company is involved in a merger or other business
combination in which (i) the Company is not the surviving corporation (except
for a merger that results from an offer for all the outstanding Common Stock of
the Company, which offer the Company’s board of directors deems fair and in the
best interest of the Company and its stockholders), or (ii) 50% or more of the
Company’s assets, cash flow or earning power is sold or transferred, then each
holder of a Right (except holders of Rights which have previously been voided)
will have the right to receive, after the exercise of the Right, common stock
of the acquiring company having a value equal to two times the exercise price
of the Right.

 

Exchange and Redemption

 

The Rights cannot be exercised
until the Distribution Date and will expire at the Close of Business on August
10, 2014 unless earlier redeemed
or exchanged by the Company as described below.

 

At any time after an individual
or group becomes an Acquiring Person and before the Acquiring Person, alone or
with its Affiliates and Associates, obtains 50% or more of the outstanding
Common Stock of the Company, the board of directors may exchange the Rights
(other than Rights owned by the Acquiring Person), in whole or in part, at an
exchange ratio (subject to adjustment) equal to that number obtained by
dividing the Purchase Price by the then Current Per Share Market Price per Unit
of Preferred Stock on the earlier of (i) the date on which any Person becomes
an Acquiring Person and (ii) the date on which a tender or exchange offer has
been made by any Person (subject to the exceptions provided for in the Rights
Agreement).

 

At any time until 10 days
following the Stock Acquisition Date, the board of directors may redeem the
Rights in whole, but not in part, at a price of $0.001 per Right (payable in
cash, Common Stock or other consideration deemed appropriate by the
board).  The Rights will terminate
immediately upon an action of the board ordering redemption of the Rights, and
the only right remaining available to the holder will be to receive the $0.001
redemption price.

 

Amendments

 

Prior to the Stock Acquisition
Date, the board of directors, without the approval of any holders of Rights,
may supplement or amend any of the provisions of the Rights Agreement.  After the Stock Acquisition Date, however,
the board of directors may only amend the Rights Agreement (as long as the Rights
are redeemable) in order to (i) cure any ambiguity, (ii) correct or supplement
any defective or inconsistent provision, (iii) shorten or lengthen any time
period under the Rights Agreement, or (iv) to change or supplement any
provision under the Rights Agreement so long as it does not adversely affect
the interests of the Rights holders.

 

C-2

 

Summary of Rights Agreement

 

A copy of the Rights Agreement has been filed
with the Securities and Exchange Commission as an exhibit to a Current Report
on Form 8-K.  A copy of the Rights
Agreement is available free of charge from the Company.  This Summary of Rights to Purchase Preferred
Stock does not purport to be a complete description of the Rights and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.

 

C-3

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