Document:

Exhibit 4.1

 

 

TECHWELL, INC.

a Delaware corporation

 

and

 

COMPUTERSHARE TRUST COMPANY, N.A.

a  federally charted trust company

 

Rights Agent

 

 

Rights Agreement

 

Dated as of August 4, 2009

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Certain Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Appointment of Rights Agent

  	
  7

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Issue of Rights Certificates

  	
  8

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Form of Rights Certificates

  	
  10

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Countersignature and Registration

  	
  11

  
	
   

  	
   

  	
   

  
	
  6.

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

  	
  11

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Exercise of Rights; Purchase Price; Expiration Date of Rights

  	
  12

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Cancellation and Destruction of Rights Certificates

  	
  14

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Reservation and Availability of Preferred Stock

  	
  15

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Preferred Stock Record Date

  	
  16

  
	
   

  	
   

  	
   

  
	
  11.

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

  	
  16

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Certificate of Adjusted Purchase Price or Number of Shares

  	
  23

  
	
   

  	
   

  	
   

  
	
  13.

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

  	
  23

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Additional Covenants

  	
  26

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Fractional Rights and Fractional Shares

  	
  26

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Rights of Action

  	
  27

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Agreement of Rights Holders

  	
  28

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Rights Certificate Holder Not Deemed a Stockholder

  	
  28

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Concerning the Rights Agent

  	
  29

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Merger or Consolidation or Change of Name of Rights Agent

  	
  29

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Duties of Rights Agent

  	
  30

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Change of Rights Agent

  	
  32

  
	
   

  	
   

  	
   

  

 

i

 

	
  23.

  	
  Issuance of New Rights Certificates

  	
  33

  
	
   

  	
   

  	
   

  
	
  24.

  	
  Redemption, Termination and Exchange

  	
  33

  
	
   

  	
   

  	
   

  
	
  25.

  	
  Notice of Certain Events

  	
  36

  
	
   

  	
   

  	
   

  
	
  26.

  	
  Notices

  	
  37

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Supplements and Amendments

  	
  38

  
	
   

  	
   

  	
   

  
	
  28.

  	
  Determination and Actions by the Board

  	
  38

  
	
   

  	
   

  	
   

  
	
  29.

  	
  Successors

  	
  39

  
	
   

  	
   

  	
   

  
	
  30.

  	
  Benefits of This Agreement

  	
  39

  
	
   

  	
   

  	
   

  
	
  31.

  	
  Severability

  	
  39

  
	
   

  	
   

  	
   

  
	
  32.

  	
  Governing Law

  	
  39

  
	
   

  	
   

  	
   

  
	
  33.

  	
  Counterparts

  	
  39

  
	
   

  	
   

  	
   

  
	
  34.

  	
  Descriptive Headings

  	
  39

  
	
   

  	
   

  	
   

  
	
  35.

  	
  Force Majeure

  	
  39

  
	
   

  	
   

  	
   

  
	
  Exhibit A – Certificate of Designation of Series A Participating
  Preferred Stock

  	
  A-1

  
	
   

  	
   

  	
   

  
	
  Exhibit B – Form of Rights Certificate

  	
  B-1

  
	
   

  	
   

  	
   

  
	
  Exhibit
  C – Form of Summary of Rights

  	
  C-1

  

 

ii

 

RIGHTS AGREEMENT

 

THIS
RIGHTS AGREEMENT (this “Agreement”) is dated as of August 4, 2009,
between TECHWELL, INC.,
a Delaware corporation (the “Company”), and COMPUTERSHARE TRUST COMPANY, N.A., a federally charted trust company, as Rights Agent (the “Rights Agent”).

 

W I T N E S S E T H:

 

WHEREAS,
the Board of Directors of the Company (the “Board”) has authorized and
declared a dividend distribution of one Right (as hereinafter defined) for each
share of Common Stock, par value $0.001 per share, of the Company (the “Common
Stock”) outstanding as of the Close of Business (as hereinafter defined) on
August 18, 2009 (the “Record Date”), and contemplates the issuance
of one Right (subject to adjustment as provided herein) for each share of
Common Stock issued between the Record Date and the earlier of the Distribution
Date and the Expiration Date, as such terms are hereinafter defined (with
Rights also to be issued in connection with certain issuances of Common Stock
after the Distribution Date, as provided more fully herein), each Right
representing the right to purchase one one-thousandth of a share of Series A
Participating Preferred Stock, par value $0.001 per share, of the Company (the “Preferred
Stock”) having the rights, powers and preferences set forth in the form of
Certificate of Designation attached hereto as Exhibit A (the “Certificate
of Designation”), upon the terms and subject to the conditions hereinafter
set forth (the “Rights”).

 

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

 

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

 

(a)           “Acquiring Person”
shall mean any Person (as such term is hereinafter defined) who or which,
together with all Affiliates (as such term is hereinafter defined) and
Associates (as such term is hereinafter defined) of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of twenty percent (20%)
or more of the shares of Common Stock then outstanding or who was such a
Beneficial Owner at any time on or after the date hereof, whether or not such
Person continues to be the Beneficial Owner of twenty percent (20%) or more of
the outstanding shares of Common Stock. 
Notwithstanding the foregoing:

 

(i)            in no event shall a
Person who or which, together with all Affiliates and Associates of such
Person, is the Beneficial Owner of less than twenty percent (20%) of the
outstanding shares of Common Stock become an Acquiring Person solely as a
result of a reduction of the number of shares of outstanding Common Stock,
including repurchases of outstanding shares of Common Stock by the Company,
which reduction increases the percentage of outstanding shares of Common Stock
Beneficially Owned (as such term is hereinafter defined) by such Person; provided,
however, that any subsequent increase in the amount of Common Stock Beneficially
Owned by such Person, together with all Affiliates and Associates of such
Person, without the prior written approval of the Board shall cause such 

 

1

 

Person to be an Acquiring Person (unless, measured at such time, such
Person would not be an Acquiring Person);

 

(ii)           the term Acquiring
Person shall not mean:

 

(A)          the Company;

 

(B)           any Subsidiary (as
such term is hereinafter defined) of the Company;

 

(C)           any employee benefit
plan of the Company or any of its Subsidiaries;

 

(D)          any entity holding
securities of the Company organized, appointed or established by the Company or
any of its Subsidiaries for or pursuant to the terms of any such plan;

 

(E)           any underwriter
acting in good faith in a firm commitment underwriting of an offering of the
Company’s securities pursuant to arrangements with the Company that have been
approved by the Board (however, the exception provided by this clause
(E) shall no longer be available in the event that any such underwriter
is otherwise an Acquiring Person on or after the date which is forty (40) days
after the date of initial acquisition of the Company’s securities by such
underwriter in connection with such offering); or

 

(F)           TCV IV, L.P.
together with its Affiliates and Associates (referred to collectively as “TCV”),
so long as TCV does not increase (other than an increase resulting solely from
a reduction of the number of outstanding shares of Common Stock, including by
reason of repurchases of shares of Common Stock by the Company, or a dividend
or distribution paid or made by the Company on, or a split or subdivision of,
any shares of Common Stock) its Beneficial Ownership of Common Stock to a
percentage of the outstanding shares of Common Stock at any time that is
greater than the percentage of the outstanding shares of Common Stock
represented by the sum of (1) the shares of Common Stock as to which TCV
has Beneficial Ownership as of the close of business on the date hereof,
assuming, for purposes of this calculation, that all warrants and other
securities convertible into or exercisable for shares of Common Stock, or any
other rights to purchase shares of Common Stock, in all cases where held or
enjoyed by TCV, are immediately convertible or exercisable in full, plus
(2) ten percent (10%) of the outstanding shares of Common Stock as of the
close of business on the date hereof; provided, however, that any
shares of Common Stock Beneficially Owned by one or more officers or directors
of the Company where (x) such officers or directors are also included
within the term “TCV” and (y) such shares of Common Stock were distributed
directly by the Company to such officers or directors as equity-based
compensation, shall be excluded from the calculation of the Beneficial Ownership
of TCV for purposes of the definition of “Acquiring Person” if the inclusion of
such shares of Common Stock in such calculation, by itself, would otherwise
cause TCV to be an Acquiring Person; and provided, further, that
this clause (F) shall pertain only for so long as TCV continuously
maintains Beneficial Ownership, from and after the date hereof, of at least ten
percent (10%) of the outstanding shares of Common Stock; and

 

2

 

(iii)          no Person shall be
deemed to be an Acquiring Person if: (A)(1) any Schedule 13D under the
Exchange Act (as such term is hereinafter defined), or any comparable or
successor report, filed (or required to be filed) by such Person does not (or
would not) state any intention to or reserve the right to control or influence
the management or policies of the Company or engage in any of the actions
specified in Item 4 (or any comparable or successor Item) of such Schedule 13D
(other than the disposition of Common Stock), (2) either (x) within
two (2) Business Days (as such term is hereinafter defined) of being
requested by the Company to advise the Company regarding the same, such Person
certifies in writing to the Company that such Person acquired Beneficial
Ownership of twenty percent (20%) or more of the outstanding shares of Common
Stock inadvertently or without knowledge of the terms of the Rights, or (y) the
Board determines in good faith that such Person has become an Acquiring Person
inadvertently, (3) such Person divests as promptly as practicable (as
determined in good faith by the Board) a sufficient number of securities so
that such Person would not be deemed to be an Acquiring Person pursuant to the
first sentence of this Section 1(a) (or such other provisions
of this Section 1(a) as may be applicable), and (4) promptly
following such Person’s divestiture of such securities, such Person certifies
to the Board that such Person would no longer be deemed an Acquiring Person as
defined pursuant to the first sentence of this Section 1(a) (or
such other provisions of this Section 1(a) as may be
applicable); or (B) by reason of such Person’s Beneficial Ownership of
twenty percent (20%) or more of the outstanding shares of Common Stock on the
date hereof if prior to the Record Date such Person notifies the Board that
such Person is no longer the Beneficial Owner of twenty percent (20%) or more
of the then outstanding shares of Common Stock.

 

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

 

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

 

(i)            which such Person
or any of such Person’s Affiliates or Associates is deemed to beneficially own
(within the meaning of Rule 13d-3 of the General Rules and
Regulations under the Exchange Act as in effect on the date hereof);

 

(ii)           which such Person
or any of such Person’s Affiliates or Associates has (A) the right or
obligation to acquire (whether such right or obligation is exercisable or
effective immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a
Person shall not be deemed (under this clause (A)) the “Beneficial
Owner,” and shall not be deemed (under this clause (A)) to “Beneficially
Own” or have “Beneficial Ownership,” of 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 payment or exchange; or (B) the right to vote or dispose of
pursuant to any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed
the “Beneficial Owner,” and shall not be deemed to “Beneficially Own”
or have “Beneficial Ownership,” of any security under this clause (B) if
the agreement, arrangement or 

 

3

 

understanding to vote such security (1) 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 rules and
regulations of the Exchange Act and (2) is not also then reportable by
such Person on Schedule 13D under the Exchange Act (or any comparable or
successor report);

 

(iii)          which are
Beneficially Owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person or any of such Person’s
Affiliates or Associates has any agreement, arrangement or understanding
(whether or not in writing) (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or with which such Person or any of such Person’s
Affiliates or Associates have otherwise formed a group, for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described
in clause (B) of subparagraph (ii) of this paragraph (c)) or
disposing of any securities of the Company; or

 

(iv)          in respect of which such Person or any of
such Person’s Affiliates or Associates has a Synthetic Long Position (as such
term is hereinafter defined) (A) that has been disclosed in a filing by
such Person or any of such Person’s Affiliates or Associates with the
Securities and Exchange Commission pursuant to Regulations 13D-G or 14D under
the Exchange Act as in effect on the date hereof, and (B) in respect of
which shares of Common Stock are the “subject security” (as such term is used
in such Regulations).

 

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

 

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

 

(f)            “Common Stock”
shall mean the Common Stock, par value $0.001 per share, of the Company or any
other shares of capital stock of the Company into which such Common Stock may
be reclassified or exchanged, except that “Common Stock” when used with
reference to stock issued by any Person other than the Company shall mean the
capital stock with the greatest Voting Power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person or, if such Person is a Subsidiary of another Person, of the Person
which ultimately controls such first-mentioned Person and which has issued and
outstanding such capital stock, equity securities or equity interests.

 

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

 

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

 

(i)            “Final Expiration Date” shall mean
the Close of Business on August 3, 2019; provided, however,
that, if a Distribution Date has not occurred prior thereto, the Final
Expiration Date shall mean the earliest to occur of any of the following if and
to the extent such events occur: (i) the Close of Business on the date of
the Company’s annual stockholders’ 

 

4

 

meeting in 2010 in the event that this Agreement is
not ratified by the Company’s stockholders at or prior to such meeting; and (ii) the
Close of Business on the date of any Company annual stockholders’ meeting
following the meeting in 2010 in the event that at least three successive such
meetings shall have occurred at any time following the meeting in 2010 without
this Agreement being ratified at least once by the Company’s stockholders, as
well as the Board, during the three-year period represented by such meetings
(inclusive in such three-year period, for this purpose, of the date on which
the third such meeting takes place).

 

(j)            “Permitted Offer”
shall mean a tender or exchange offer for all outstanding shares of Common
Stock at a price and on terms determined, prior to the date of the first
acceptance of payment for any of such shares, to be fair to, and in the best
interests of, the Company and its stockholders (other than the offeror or any
Affiliate or Associate thereof) by at least a majority of the members of the
Board who are not (i) officers of the Company, (ii) the offeror, (iii) Acquiring
Persons or (iv) Affiliates or Associates of the offeror or any Acquiring
Person.

 

(k)           “Person”
shall mean any individual, firm, corporation, partnership, limited liability
company, joint venture, association, trust or other entity, and shall include
any successor (by merger or otherwise) thereof or thereto.

 

(l)            “Preferred Stock”
shall mean the Series A Participating Preferred Stock, par value $0.001
per share, of the Company.

 

(m)          “Qualified
Offer” shall mean an all-cash tender offer for all outstanding shares of
Common Stock commenced within the meaning of Rule 14d-2(a) under the
Exchange Act; provided, however, that the Person making the
tender offer must, prior to or upon commencing such offer, provide the Company
with firm written commitments from responsible financial institutions, which
have been accepted by such Person, to provide (subject only to customary terms
and conditions, which shall in no event include conditions requiring access by
such financial institutions to non-public information to be provided by the
Company, conditions based on the accuracy of any information concerning the
Company other than such as would be the subject of representations and
warranties in a public financing by the Company or conditions requiring the
Company to make any representations, warranties or covenants in connection with
such financing) funds for such offer which, when added to the amount of cash
and cash equivalents which such Person then has available and has irrevocably
committed in writing to the Company to utilize for purposes of the offer if
consummated, will be sufficient (i) to pay for all shares of Common Stock
then outstanding on a fully diluted basis, (ii) to pay or retire all debt
and other securities of the Company which is required to be repaid or retired,
including (at the option of the holder thereof) upon the consummation of such
transaction, and (iii) to pay all related expenses.  Such offer must also meet all of the
following additional conditions: (w) the offer must include a per share
offer price which is at least an amount equal to twenty-five percent (25%)
higher than the higher of (A) the “current market price” per share
of Common Stock (as determined pursuant to Section 11(d) hereof)
as of the date the offer is commenced or (B) such “current market price”
per share of Common Stock but, in each instance in Section 11(d) where
a period of thirty (30) Trading Days (as such term is defined in Section 11(d) hereof)
is used to calculate such price, a period of five (5) Trading Days is used
instead; (x) the offer must include a non-waivable condition that such
Person must own, after consummating the offer, at least fifty 

 

5

 

percent (50%) of the shares of Common Stock then outstanding (other than
shares already held by the Person making the offer, its Affiliates or
Associates or any director or officer of the Company); (y) the offer must
remain open for at least sixty (60) Business Days and at least ten (10) Business
Days after any Special Meeting, and must be extended for at least twenty (20)
Business Days after the last increase in the price offered and after any bona
fide higher alternative offer is made, and shall be subject only to customary
terms and conditions, which shall in no event include satisfaction of any
conditions relating to the business, financial condition, results of operations
or prospects of the Company other than such as are based on information
publicly disclosed by the Company or any conditions relating to approval of the
offeror’s stockholders; and (z) prior to or upon commencing the offer,
such Person must irrevocably commit in writing to the Company and in the offer
to purchase relating to the offer:  (I) to
consummate promptly upon completion of the offer a transaction whereby all
shares of Common Stock then outstanding and not tendered into the offer will be
acquired at the same price per share and for the same consideration paid
pursuant to the offer, and otherwise not to purchase any shares of Common Stock
following completion of the offer; (II) that such Person will not
materially amend such offer, except to increase the price offered; and (III) that
such Person will not make any offer for any equity securities of the Company
for six (6) months after commencement of the original offer if the
original offer does not result in the tender of the number of shares required
to be purchased pursuant to clause (x) above, unless another
Qualified Offer with a per share offer price at least ten percent (10%) higher
than the last price offered by the Person making the original offer is
commenced by another Person or Persons who are not Affiliates or Associates of,
acting in concert with, or instigated or financed by, the Person making the
original offer or with whom the Person making the original offer has any
agreement, arrangement or understanding relating to the Company or any assets
or securities of it or any of its Subsidiaries.

 

(n)           “Special Meeting” shall have the
meaning set forth in Section 24(b) hereof.

 

(o)           “Stock
Acquisition Date” shall mean the first date of public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such.

 

(p)           “Synthetic Long Position”
shall mean any option, warrant, convertible security, stock appreciation right
or other contractual right, whether or not presently exercisable, which has an
exercise or conversion privilege or a settlement payment or mechanism at a
price related to shares of Common Stock or a value determined in whole or part
with reference to, or derived in whole or in part from, the market price or
value of shares of Common Stock, whether or not such right is subject to
settlement in whole or in part in shares of Common Stock, and which increases in
value as the value of shares of Common Stock increases or which provides to the
holder of such right an opportunity, directly or indirectly, to profit or share
in any profit derived from any increase in the value of shares of Common Stock,
but shall not include:

 

(i)            rights of a pledgee under a bona
fide pledge of shares of Common Stock;

 

6

 

(ii)           rights of all holders
of shares of Common Stock to receive shares of Common Stock pro rata, or
obligations to dispose of shares of Common Stock, as a result of a merger,
exchange offer or consolidation involving the Company;

 

(iii)          rights or obligations to
surrender shares of Common Stock, or have shares of Common Stock withheld, upon
the receipt or exercise of a derivative security or the receipt or vesting of
equity securities, in order to satisfy the exercise price or the tax
withholding consequences of receipt, exercise or vesting;

 

(iv)          interests in broad-based
index options, broad-based index futures and broad-based publicly traded market
baskets of stocks approved for trading by the appropriate federal governmental
authority;

 

(v)           interests or rights to
participate in employee benefit plans of the Company held by employees or
former employees of the Company; or

 

(vi)          options granted to an
underwriter in a registered public offering for the purpose of satisfying
over-allotments in such offering.

 

The number of
shares of Common Stock in respect of which a Person has a Synthetic Long
Position shall be the notional or other number of shares of Common Stock
specified in a filing by such Person or any of such Person’s Affiliates or
Associates with the Securities and Exchange Commission pursuant to Regulations
13D-G or 14D under the Exchange Act in respect of which shares of Common Stock
are the “subject security” (as such term is defined in such Regulations) or in
the documentation evidencing the Synthetic Long Position as being subject to be
acquired upon the exercise or settlement of the applicable right or as the
basis upon which the value or settlement amount of such right, or the
opportunity of the holder of such right to profit or share in any profit, is to
be calculated in whole or in part or, if no such number of shares of Common
Stock is specified in such filing or documentation, as determined by the Board
in good faith to be the number of shares of Common Stock to which the Synthetic
Long Position relates.

 

(q)           A “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 voting interests is owned, directly or
indirectly, by such Person, or which is otherwise controlled by such Person.

 

(r)            “Triggering Event” shall mean a Section 11
Event (as defined in Section 11(a) hereof) or a Section 13
Event (as defined in Section 13(a) hereof).

 

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

 

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

 

7

 

appoints one or more co-rights agents, the respective duties of the
Rights Agents and any co-rights agents shall be as the Company shall determine
and the Company shall provide written notice thereof to the Rights Agent.

 

3.             Issue of Rights Certificates.

 

(a)           Until the earlier of (i) the Stock
Acquisition Date or (ii) the Close of Business on the tenth (10th) Business Day (or such later date as
may be determined by action of the Board) after the date of the commencement
(determined in accordance with Rule 14d-2 of the General Rules and
Regulations under the Exchange Act as in effect as the date hereof or, if no
longer applicable, the intent of such Rule 14d-2 as in effect on the date
hereof as determined in good faith by the Board) by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any of its Subsidiaries, or any entity organized, appointed or
established by the Company or any of its Subsidiaries for or pursuant to the
terms of any such plan) of a tender or exchange offer (other than a Permitted
Offer) the consummation of which would result in such Person becoming an
Acquiring Person (including any such date which is on or after the date of this
Agreement and prior to the issuance of the Rights) (the earlier of such dates
being herein referred to as the “Distribution Date”), (x) the
Rights shall be evidenced by the certificates for Common Stock registered in
the names of the holders of the Common Stock (which certificates for Common
Stock shall be deemed also to be certificates for Rights) and not by separate
certificates, except that the Rights associated with any uncertificated shares
of Common Stock shall be evidenced by the registration of shares of Common
Stock in the Company’s share register in the names of the holders thereof
(which registration shall also be deemed to be registration of ownership of the
associated Rights), and (y) the Rights (and the right to receive
certificates therefor) shall be transferable only in connection with the
transfer of the underlying shares of Common Stock.  As soon as practicable after the Distribution
Date, upon written request by the Company and receipt by the Rights Agent of
all necessary and relevant information, the Rights Agent shall send, by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a certificate for Rights, in
substantially the form of Exhibit B hereto (the “Rights
Certificates”), evidencing one Right for each share of Common Stock so held
(subject to adjustment as provided herein). 
As of and after the Distribution Date, the Rights shall be evidenced
solely by such Rights Certificates.

 

As
soon as practicable following the Record Date, the Company shall send a copy of
a Summary of Rights, in substantially the form attached hereto as Exhibit C
(the “Summary of Rights”), by first-class, postage prepaid mail, to each
record holder of the Common Stock as of the Close of Business on the Record
Date, at the address of such holder shown on the records of the Company.  With respect to certificates for the Common
Stock outstanding as of the Record Date, until the Distribution Date (or
earlier redemption, expiration or termination of the Rights), the Rights shall
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights.  With respect to
uncertificated shares of Common Stock outstanding as of the Record Date, until
the Distribution Date (or earlier redemption, expiration or termination of the
Rights), the Rights will be evidenced by the registration of the shares of
Common Stock in the Company’s share register in the names of the holders
thereof.  Until the Distribution Date (or
earlier redemption, expiration

 

8

 

or termination of the Rights), the surrender
for transfer of any of the certificates for the Common Stock outstanding on the
Record Date shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificate, and the registration of
transfer of ownership of any uncertificated shares of Common Stock outstanding
on the Record Date shall also constitute the transfer of the Rights associated
with such shares.

 

The
Company shall promptly notify the Rights Agent in writing upon the occurrence
of the Distribution Date and, if such notification is given orally, the Company
shall confirm same in writing on or prior to the Business Day next
following.  Until such notice is received
by the Rights Agent, the Rights Agent may presume conclusively for all purposes
that the Distribution Date has not occurred.

 

(b)           Certificates issued for Common Stock
(including, without limitation, certificates issued upon transfer or exchange
of Common Stock) after the Record Date, but prior to the earlier of the
Distribution Date or the Expiration Date, shall be deemed also to be
certificates for Rights, and shall have impressed, printed, stamped, written or
otherwise affixed onto them a legend in substantially the following form, or
such similar legend as the Company may deem appropriate and as is not
inconsistent with the provisions of this Rights Agreement, or as may be
required to comply with any applicable law or with any rule or regulation
or made pursuant thereto or with any rule or regulation of any stock
exchange or automated quotation system on which the shares of Common Stock may
from time to time be listed or quoted, or to conform to such usage:

 

This certificate also evidences and
entitles the holder hereof to certain “Rights” as set forth in a Rights
Agreement between TECHWELL, INC.
(the “Company”) and COMPUTERSHARE TRUST
COMPANY, N.A. (the “Rights Agent”), dated as of August 4, 2009 (the
“Rights Agreement”), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of the
Company.  Under certain circumstances, as
set forth in the Rights Agreement, such Rights may be redeemed, may expire, or
may be evidenced by separate certificates and will no longer be evidenced by
this certificate.  The Company 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, Rights “Beneficially Owned” by “Acquiring
Persons” (as such terms are defined in the Rights Agreement) or certain related
parties, as well as subsequent holders of such Rights, may become null and
void.

 

and, in the case of the
initial transaction statement or subsequent period statements with respect to
uncertificated shares of Common Stock, a legend in substantially the following
form:

 

The registration in the share register
of TECHWELL, INC. (the “Company”)
of the shares of common stock to which this initial transaction or subsequent
periodic statement relates also evidences and entitles the registered holder of
such shares to certain rights as set forth in a Rights Agreement between the
Company and COMPUTERSHARE TRUST
COMPANY, N.A. (the “Rights Agent”), dated as of August 4, 2009 (the
“Rights Agreement”), the terms of which are hereby

 

9

 

incorporated herein by reference and a
copy of which is on file at the principal executive offices of the
Company.  Under certain circumstances, as
set forth in the Rights Agreement, such Rights may be redeemed, may expire, or
may be evidenced by separate certificates and will no longer be evidenced by
such registration.  The Company will mail
to the holder of this statement a copy of the Rights Agreement without charge
after receipt of a written request therefor. 
Under certain circumstances, Rights “Beneficially Owned” by “Acquiring
Persons” (as such terms are defined in the Rights Agreement) or certain related
parties, as well as subsequent holders of such Rights, may become null and
void.

 

With respect to such
certificates containing substantially the foregoing legend, until the
Distribution Date (or earlier redemption, expiration or termination of the Rights),
the Rights associated with the Common Stock represented by such certificates
shall be evidenced by such certificates alone, and the surrender for transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.  With respect to such initial transaction
statements or subsequent periodic statements containing the foregoing legend,
until the Distribution Date (or earlier redemption, expiration or termination
of the Rights), the Rights associated with the shares of Common Stock with
respect to which such statements are issued shall be evidenced solely by the
registration of ownership of such shares of Common Stock in the share register
of the Company, and the registration of transfer of ownership in such share
register shall also constitute the transfer of the Rights associated with such
shares of Common Stock.

 

4.             Form of Rights Certificates.

 

(a)           The Rights Certificates (and the forms
of election to purchase shares and of assignment and certificates to be printed
on the reverse thereof) shall each be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate (but which do not affect the rights, duties or responsibilities of
the Rights Agent) and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
stock exchange or interdealer quotation system on which the Rights may from
time to time be listed or traded, or to conform to usage.  Subject to the provisions of Section 11
and Section 23 hereof, the Rights Certificates, whenever
distributed, shall be dated as of the Record Date, and on their face shall
entitle the holders thereof to purchase such number of one one-thousandths of a
share of Preferred Stock as shall be set forth therein at the price per one
one-thousandth of a share set forth therein (the “Purchase Price”), such
Purchase Price to be initially equal to the amount set forth in Section 7(b) below
but the number of one one-thousandths of a share and the Purchase Price shall
be subject to adjustment as provided herein.

 

(b)           Any Rights Certificate issued pursuant
to Section 3(a) hereof that represents Rights Beneficially
Owned by an Acquiring Person or any Associate or Affiliate thereof, any Rights
Certificate issued at any time upon the transfer of any Rights to such an
Acquiring Person or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate, and any Rights Certificate
issued pursuant to Section 6, Section

 

10

 

11 or Section 23
hereof upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain a legend in
substantially the following form:

 

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

 

The provisions of Section 7(e) hereof shall be
operative whether or not the foregoing legend is contained on any such Rights
Certificate.

 

5.             Countersignature and Registration.

 

(a)           The Rights Certificates shall be
executed on behalf of the Company by its Chief Executive Officer, its
President, its Chief Financial Officer or any Vice President, either manually
or by facsimile signature, and shall have affixed thereto the Company’s seal or
a facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature.  The Rights Certificates shall be
countersigned by the Rights Agent, either manually or by facsimile signature,
and shall not be valid for any purpose unless so countersigned.  In case any officer of the Company who shall
have signed any of the 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; and any Rights Certificates may be
signed on behalf of the Company by any Person who, at the actual date of the
execution of such Rights Certificate, shall be a proper officer of the Company
to sign such Rights Certificate, although at the date of the execution of this
Agreement any such Person was not such an officer.

 

(b)           Following the Distribution Date, receipt
by the Rights Agent of notice to that effect and all other relevant information
referred to in Section 3(a), 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 hereunder.  Such books shall show the names and addresses
of the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of each
of the Rights Certificates.

 

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

 

(a)           Subject to the provisions of Sections
7(e), 7(f) and 15 hereof, at any time after the Close of
Business on the Distribution Date, and at or prior to the Close of Business on
the Expiration Date, any Rights Certificate or Certificates may be transferred,
split up, combined or exchanged for another Rights Certificate or Rights
Certificates, entitling the registered holder to purchase a like number of one
one-thousandths of a share of Preferred Stock (or, after the occurrence of a
Triggering Event, shares of Common Stock or other securities and property, as
the case may be) as the Rights Certificate or Rights Certificates surrendered
then entitled such

 

11

 

holder (or former holder in the case of a transfer) to purchase.  Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate 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.  The Rights Certificates are
transferable only on the registry books of the Rights Agent. 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
Certificates until the registered holder thereof shall have (i) properly
completed and signed the certificate contained in the form of assignment set
forth on the reverse side of each such Rights Certificate, (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) thereof and of the Rights evidenced thereby and the
Affiliates and Associates of such Beneficial Owner (or former Beneficial Owner)
as the Company or the Rights Agent shall reasonably request, and (iii) paid
a sum sufficient to cover any tax or charge that may be imposed in connection
with any transfer, split up, combination or exchange of Rights Certificates as
required by Section 9(e) hereof.  Thereupon the Rights Agent shall countersign
and deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested, registered in such name or
names as may be designated by the surrendering registered holder.  The Rights Agent shall promptly forward any
such sum collected by it to the Company or to such Persons as the Company shall
specify by written notice.  The Rights
Agent shall have no duty or obligation under any Section of this Agreement
requiring the payment of taxes and charges unless and until it is satisfied
that all such taxes and charges have been paid.

 

(b)           Subject to the provisions of Sections
7(e), 7(f) and 15 hereof, upon receipt by the Company
and the Rights Agent of evidence satisfactory to them of the loss, theft,
destruction or mutilation of a Rights Certificate and such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request, and,
in case of loss, theft or destruction, of indemnity or security satisfactory to
them, and reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company shall execute and deliver a
new Rights Certificate of like tenor to the Rights Agent for countersignature
and delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.

 

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

 

(a)           Subject to the provisions of Sections
7(e) and 7(f) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon presentation of the Rights Certificate, with the appropriate form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the Purchase Price for each one one-thousandth of a share of
Preferred Stock (or such other securities or property as the case may be) as to
which the Rights are exercised, at or prior to the earliest of (i) the
Close of Business on the Final Expiration Date, (ii) the time at which the
Rights are redeemed as provided in Section 24 hereof, (iii) the
consummation of a transaction contemplated by Section 13(d) hereof
or (iv) the time at which the Rights are exchanged as provided in Section 24(d) hereof
(such earliest time being herein referred to as the “Expiration Date”).  Notwithstanding any other provision of this
Agreement,

 

12

 

any Person who prior to the Distribution Date becomes a record holder
of shares of Common Stock may exercise all of the rights of a registered holder
of a Rights Certificate with respect to the Rights associated with such shares
of Common Stock in accordance with and subject to the provisions of this
Agreement, including the provisions of Section 7(e) hereof, as
of the date such Person becomes a record holder of shares of Common Stock.

 

(b)           The Purchase Price for each one
one-thousandth of a share of Preferred Stock pursuant to the exercise of a
Right shall initially be Fifty Dollars ($50.00), shall be subject
to adjustment from time to time as provided in Sections 11 and 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) of this Section 7 below.

 

(c)           Upon receipt of a Rights Certificate
representing exercisable Rights, with the appropriate form of election to
purchase properly completed and duly executed, accompanied by payment of the
Purchase Price for the fractional interests in shares of Preferred Stock (or
other securities or property) to be purchased and an amount equal to any
applicable transfer tax in cash, or by certified check or bank draft payable to
the order of the Company, the Rights Agent shall, subject to Section 21(k) hereof,
thereupon promptly (i)(A) requisition from any transfer agent of the
shares of Preferred Stock (or make available, if the Rights Agent is the transfer
agent) certificates for the number of one one-thousandths of a share of
Preferred Stock to be purchased or, in the case of uncertificated shares of
Preferred Stock, requisition from any transfer agent therefor of a notice
setting forth such number of shares of Preferred Stock to be purchased for
which registration will be made in the Company’s share register, and the
Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company, in its sole discretion, shall have
elected to deposit the fractional interests in shares of Preferred Stock
issuable upon exercise of the Rights hereunder into a depositary, requisition
from the depositary agent depositary receipts representing such number of one
one-thousandths of a share of Preferred Stock as are to be purchased (in which
case certificates for the one one-thousandths of a share of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company shall direct the depositary agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash, if any, to be paid in lieu of issuance of fractional shares in
accordance with Section 15, (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 deliver such cash to or upon the order of the registered holder
of such Rights Certificate.  In the event
that the Company is obligated to issue other securities of the Company, or
distribute other property pursuant to Section 11(a), the Company
shall make all arrangements necessary so that such other securities or property
are available for distribution by the Rights Agent, if and when necessary to
comply with this Agreement.  In addition,
in the case of an exercise of the Rights by a holder pursuant to Section 11(a)(ii),
the Rights Agent shall return such Rights Certificate to the registered holder
thereof after imprinting, stamping or otherwise indicating thereon that the
rights represented by such Rights Certificate no longer include the rights
provided by Section 11(a)(ii) hereof; provided, however,
that if less than all the Rights represented by such Rights Certificate were so
exercised, the Rights Agent shall, upon written receipt of the necessary
information from the Company, indicate on the Rights Certificate the number of
Rights represented thereby which continue to include the rights provided by Section 11(a)(ii).

 

13

 

(d)           In case the registered holder of any
Rights Certificate shall exercise (except pursuant to Section 11(a)(ii))
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Rights Certificate
or to such registered holder’s duly authorized assigns, subject to the
provisions of Section 15 hereof.

 

(e)           Notwithstanding anything in this
Agreement to the contrary, if there occurs any Triggering Event, then any
Rights that are or were on or after the Distribution Date Beneficially Owned by
an Acquiring Person or any Associate or Affiliate of an Acquiring Person shall
become null and void, without any further action, and any holder of such Rights
shall thereafter have no rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise.  Without limiting the foregoing sentence,
Rights held by the following Persons shall be null and void without any further
action: (i) any direct or indirect transferee of any Rights that are or
were on or after the Distribution Date Beneficially Owned by an Acquiring
Person or any Associate or Affiliate of an Acquiring Person; (ii) any
direct or indirect transferee of any Rights that were on or before the
Distribution Date Beneficially Owned by an Acquiring Person or any Associate or
Affiliate of an Acquiring Person if the transferee received such Rights,
directly or indirectly, (A) from an Acquiring Person or any Associate or
Affiliate of an Acquiring Person (x) as a result of a distribution by such
Acquiring Person or any Associate or Affiliate of an Acquiring Person to
holders of its equity securities or similar interests (including, without
limitation, partnership interests) or (y) pursuant to any continuing
agreement, arrangement or understanding with respect to the Rights or (B) in
a transfer (or series of transfers) which the Board determines is part of a
plan, arrangement or understanding which has the purpose or effect of avoiding
the provisions of this Section 7(e); and (iii) subsequent
transferees of Persons referred to in the foregoing clauses (i) and (ii) as
well as this clause (iii).  The Company
shall use all reasonable efforts to ensure that the provisions of this Section 7(e) are
complied with, but shall have no liability to any holder of Rights or any
Rights Certificate or to any other Person as a result of the Company’s failure
to make any determination with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.

 

(f)            Notwithstanding anything in this
Agreement to the contrary, neither the Rights Agent nor the 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 the Certificate contained in the appropriate form of Election to
Purchase set forth on the reverse side of the Rights Certificate surrendered
for such exercise shall have been properly completed and duly executed by the
registered holder thereof and the Company shall have been provided with such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company or Rights
Agent shall reasonably request.

 

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 any of its agents, be delivered to the Rights
Agent for cancellation or in canceled form, or, if surrendered to the Rights
Agent, shall be canceled by it, and no Rights Certificates shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Agreement.  The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights

 

14

 

Certificate purchased or acquired by the Company otherwise than upon
the exercise thereof.  The Rights Agent
shall deliver all canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.

 

9.             Reservation and Availability of
Preferred Stock.

 

(a)           The Company covenants and agrees that it
shall cause to be reserved and kept available out of its authorized and
unissued shares of Preferred Stock, or any authorized and issued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, shares of
Common Stock and other securities) held in its treasury, the number of shares
of Preferred Stock (and, following the occurrence of a Triggering Event, shares
of Common Stock and other securities) that will be sufficient (in accordance
with the provisions of this Agreement, including Section 11(a)(iii) hereof)
to permit the exercise in full of all outstanding Rights.

 

(b)           So long as the shares of Preferred Stock
(and, following the occurrence of a Triggering Event, shares of Common Stock
and other securities) issuable upon the exercise of the Rights may be listed on
any national securities exchange or quoted on any national quotation system,
the Company shall use its best efforts to cause, from and after such time as
the Rights become exercisable, all shares (or other securities) reserved for
such issuance to be listed on such exchange or quoted on such system upon
official notice of issuance upon such exercise.

 

(c)           If then required by applicable law, the
Company shall use its best efforts to (i) file, as soon as practicable
following the earliest date after the occurrence of a Triggering Event as to
which the consideration to be delivered by the Company upon exercise of the
Rights has been determined pursuant to this Agreement, or as soon as is
required by law following the Distribution Date, as the case may be, a
registration statement under the Securities Act of 1933, as amended (the “Act”),
with respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities, (B) the
Expiration Date or (C) the date the Company receives an opinion of counsel
to the effect that the maintenance of such registration statement in effect is
no longer necessary.  If then required by
applicable law, the Company will also take such action as may be appropriate
under the securities or “blue sky” laws of the various states.  The Company may temporarily suspend, for a
period of time not to exceed ninety (90) days after the date set forth in
clause (i) of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement or to comply
with such blue sky laws.  Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended.  The Company shall notify the Rights Agent in
writing whenever it makes a public announcement temporarily suspending the
exercisability of the Rights. 
Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction unless the requisite
qualification in such jurisdiction shall have been obtained.

 

(d)           The Company covenants and agrees that it
shall take all such action as may be necessary to ensure that all one
one-thousandths of a share of Preferred Stock or other

 

15

 

securities delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares or other securities (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares or securities.

 

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

 

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

 

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

 

(a)           (i)            In the event the Company shall at any
time after the date of this Agreement (A) declare a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding Preferred Stock
into a smaller number of shares 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) and in Section 7(e) hereof,
the Purchase Price in effect at the time of the

 

16

 

 

record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock issuable
on such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and
kind of shares of capital stock and other securities which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Stock transfer books of the Company were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. 
If an event occurs which would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) hereof the adjustment provided for in this Section 11(a)(i) shall
be in addition to, and shall be made prior to, any adjustment required pursuant
to Section 11(a)(ii) hereof.

 

(ii)           Subject to Section 24(d) hereof,
in the event any Person, alone or together with its Affiliates and Associates,
shall become an Acquiring Person other than pursuant to a Permitted Offer (such
an event being a “Section 11 Event”), then, promptly following the
first occurrence of such a Section 11 Event, proper provision shall be
made so that each holder of a Right, except as provided in Section 7(e) hereof,
shall, for a period of sixty (60) days after the later of the occurrence of any
such Section 11 Event and the effective date of an appropriate registration
statement pursuant to Section 9 hereof, have a right to receive,
upon exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of fractional interests in shares of Preferred
Stock, such number of shares of Common Stock of the Company as shall equal the
result obtained by (x) multiplying the then current Purchase Price by the
number of one one-thousandths of a share of Preferred Stock for which a Right
was exercisable immediately prior to the Section 11 Event at issue and (y) dividing
that product by fifty percent (50%) of the current market price per one share
of Common Stock (determined pursuant to Section 11(d) hereof)
on the date of the occurrence of the Section 11 Event at issue (such
number of shares being referred to as the “number of Adjustment Shares”);
provided, however, that if the transaction that would otherwise
give rise to the foregoing adjustment is also subject to the provisions of Section 13
hereof, then only the provisions of Section 13 hereof shall apply
and no adjustment shall be made pursuant to this Section 11(a)(ii);
and provided, further, that such sixty (60) day period shall not
be deemed to run during any period in which the exercise of the Rights or the
fulfillment by the Company or the Rights Agent of its or their obligations
under this Agreement shall be enjoined or otherwise prohibited in full or in
part by any court or other governmental agency or body.

 

(iii)          In lieu of issuing shares of Common Stock in accordance with Section 11(a)(ii) hereof,
the Company may, if a majority of the Board then in office determines that such
action is necessary or appropriate and not contrary to the interests of holders
of Rights, elect to (and, in the event that the Board has not exercised the
exchange right contained in Section 24(d) hereof and there are
not sufficient treasury shares and authorized but unissued shares of Common
Stock to permit the exercise in full of the Rights in accordance with Section 11(a)(ii) hereof,
the Company shall) take all such action as may be necessary to authorize, issue
or pay, upon the exercise of the Rights, cash (including by way of a reduction
of the Purchase Price), property, shares of Common Stock, other securities
(whether equity or debt securities of the Company, any Subsidiary of the
Company, or otherwise) or any combination thereof having an aggregate value
equal to the value of the shares of Common Stock which otherwise would have
been issuable pursuant to Section 11(a)(ii) hereof, which
aggregate value shall be

 

17

 

determined by a nationally recognized investment banking firm selected
by a majority of the Board.  For purposes
of the preceding sentence, the value of the Common Stock shall be determined
pursuant to Section 11(d) hereof and the value of any
fractional interests in preferred stock or preference stock which a majority of
the Board determines to be a “common stock equivalent” shall be deemed
to have the same value as the Common Stock. 
Any such election by the Board must be made and publicly announced
within sixty (60) days following the date on which the Section 11 Event at
issue shall have occurred.  Following the
occurrence of such Section 11 Event, a majority of the Board then in
office may suspend the exercisability of the Rights for a period of up to sixty
(60) days following the date on which such Section 11 Event shall have
occurred to the extent that such Directors have not determined whether to
exercise their rights of election under this Section 11(a)(iii).  If the Board shall determine in good faith
that it is likely that sufficient additional shares of Common Stock or common
stock equivalents could be authorized for issuance upon exercise in full of the
Rights, the sixty (60) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days following the occurrence of the Section 11
Event at issue, in order that the Company may seek stockholder approval for the
authorization of such additional shares. 
In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended.  The Company shall notify the
Rights Agent in writing whenever it makes such a public announcement
temporarily suspending the exercisability of the Rights.

 

(b)           If the Company shall fix a record date
for the issuance of rights, options or warrants to all holders of any interests
in Preferred Stock entitling them (for a period expiring within forty-five (45)
calendar days after such record date) to subscribe for or purchase any
interests in Preferred Stock (or securities having the same or more favorable
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 share of Preferred Stock or per share
of equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the current market price (as defined in Section 11(d)) per
share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock or
equivalent preferred stock to be offered (or the aggregate initial conversion
price of the convertible securities so to be offered) would purchase at such
current market price and the denominator of which shall be the number of shares
of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock or equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). 
In case such subscription price may be paid 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 reasonably and with good faith to the
holders of Rights by the Board, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and conclusive for all purposes.  Shares
of Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation.  Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such rights,
options or warrants are not so issued, the Purchase Price shall

 

18

 

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 the making of a distribution to all holders of interests in Preferred Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other than a dividend
payable in Preferred Stock, but including any dividend payable in stock other
than Preferred Stock) or subscription rights, options or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase Price
to be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the then current market price (as defined in Section 11(d) hereof)
per share of Preferred Stock on such record date, less the fair market value
(as determined reasonably and with good faith to the holders of Rights by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and conclusive for all
purposes) of the portion of the cash, assets or evidences of indebtedness so to
be distributed or of such subscription rights, options or warrants
distributable in respect of one share of Preferred Stock and the denominator of
which shall be the then current market price (as defined in Section 11(d) hereof)
per share of the 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 be in effect if
such record date had not been fixed.

 

(d)           (i)            For the purpose of any computation
hereunder, other than as provided in Section 11(a)(iii) hereof,
the “current market price” per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices per share of such
Common Stock for the thirty (30) consecutive Trading Days (as such term is hereinafter
defined) immediately prior to but not including such date; provided, however,
that in the event that the current per share market price of the Common Stock
is determined in whole or in part during a period following the announcement by
the issuer of such Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or securities convertible
into shares of such Common Stock or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of thirty
(30) Trading Days after but 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 market price”
shall be properly adjusted to take into account ex-dividend trading.  The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange but are
listed or quoted on the Nasdaq Global Market, the last reported sale price, or,
in case no such sale takes place on such day, the average of the closing bid
and asked

 

19

 

prices as reported by Nasdaq, or, if the shares of Common Stock are not
listed or quoted on the Nasdaq Global Market, 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 OTC Bulletin Board or such other
system then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Common Stock selected by the Board.  If
on any such date no market maker is making a market in the Common Stock, the
fair value of such shares on such date as determined reasonably and with good
faith by the Board shall be used and shall be binding on the Rights Agent and
conclusive for all purposes.  The term “Trading
Day” shall mean a day on which the principal national securities exchange
or the Nasdaq Global Market, as the case may be, on which the shares of Common
Stock are principally listed or admitted to trading or quoted is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading or quoted on any national securities exchange or the Nasdaq
Global Market, a Business Day.  If the
Common Stock is not publicly held or not so listed or traded, “current
market price” per share shall mean the fair value per share determined
reasonably and with good faith to the holders of Rights by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and conclusive for all purposes.

 

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

 

(e)           Anything herein to the contrary
notwithstanding, no adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in the Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.  All calculations
under this Section 11 shall be made to the nearest cent or to the
nearest thousandth of a share of Common Stock or other share or one-millionth
of a share of Preferred Stock, as the case may be.  Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later
than the earlier of (i) three (3) years from the date of the
transaction which mandates such adjustment or (ii) the Expiration Date.

 

20

 

(f)            If as a result of any provision of this Section 11,
the holder of any Right shall become entitled to receive any shares of capital
stock of the Company other than Preferred Stock, thereafter the number of such
other shares so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares (and the related
Purchase Price) contained in this Section 11, and the provisions of
Sections 7, 9, 10, 13 and 15 hereof with
respect to the Preferred Stock shall apply on like terms to any such other
shares.

 

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

 

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

 

(i)            The Company may elect on or after the
date of any adjustment of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of one one-thousandths of a share
of Preferred Stock purchasable upon the exercise of a Right.  Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. 
Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one
millionth) obtained by dividing the 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 (with prompt written notice
thereof to the Rights Agent) of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. 
This record 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 (10) days later than the date of the public
announcement.  If Rights Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(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 15 hereof,
the additional Rights to which such

 

21

 

holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause
to be distributed to such holders of record in substitution and replacement for
the Rights Certificates held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment.  Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

 

(j)            Irrespective of any adjustment or change
in the Purchase Price or the number of one one-thousandths of a share of
Preferred Stock issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-thousandths of a share and the number of one
one-thousandths of a share 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, if
any, of the number of one one-thousandths of a share of Preferred Stock or
shares of Common Stock or other securities issuable upon exercise of the Rights
(aggregating, for this purpose, an appropriate amount of the Purchase Price for
fractional shares to compare such aggregated amount to the par value for a
whole share), 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 one one-thousandths of a share of
Preferred Stock or shares of Common Stock or other securities at such adjusted
Purchase Price.  If upon any exercise of
the Rights, a holder is to receive a combination of Common Stock and common
stock equivalents, or Preferred Stock and preferred stock equivalents, a
portion of the consideration paid upon such exercise, equal to at least the
then par value, if any, of a share of Common Stock or Preferred Stock of the
Company, as the case may be, shall be allocated as the payment for each share
of Common Stock or Preferred Stock of the Company, as the case may be, so
received.

 

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

 

(m)          Anything to the contrary in this Section 11
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,
as and to the extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the Preferred
Stock, issuance wholly for cash of any shares of Preferred Stock at less than
the current market price, issuance wholly for cash of shares of Preferred Stock
or securities which by their terms are convertible into or exchangeable for
shares of Preferred Stock, stock dividends or issuance of rights, options or
warrants referred to hereinabove in this Section 11, hereafter made
by the Company to holders of Preferred Stock shall not be taxable to such
stockholders.

 

22

 

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

 

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

 

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

 

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

 

(a)           In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall
consolidate with, or merge with and into, any other Person, (y) any Person
shall consolidate with the Company, or merge with and into the Company and the
Company shall be the continuing or surviving corporation of such merger (other
than, in the case of any transaction described in (x) or (y), a merger or
consolidation which would result in all of the Voting Power represented by the
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
securities of the surviving entity) all of the Voting Power represented by the
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation and the holders of such securities not
having changed as a result of such merger or consolidation), or (z) the
Company shall sell, mortgage or otherwise transfer (or one or more of its
Subsidiaries shall sell, mortgage or otherwise transfer), in one or more
transactions, assets or

 

23

 

earning power
aggregating more than fifty percent (50%) of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person (any of the
events described in the foregoing clauses (x), (y) or (z) being
herein referred to as a “Section 13 Event”), then, and in each such
case, proper provision shall be made so that (i) each holder of a Right
(other than as provided in Section 7(e) hereof) shall have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of shares of freely
tradable Common Stock of the Principal Party (as hereinafter defined), free and
clear of liens, rights of call or first refusal, encumbrances or other adverse
claims, as shall be equal to the result obtained by (x) multiplying the
then current Purchase Price by the number of one one-thousandths of a share of
Preferred Stock for which a Right is then exercisable (without taking into
account any adjustment previously made pursuant to Section 11(a)(ii) hereof)
and (y) dividing that product by fifty percent (50%) of the current market
price per share of the Common Stock of such Principal Party (determined
pursuant to Section 11(d) hereof) on the date of consummation
of such consolidation, merger, sale or transfer; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term “Company” shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply to
such Principal Party; and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to ensure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights.

 

(b)           “Principal Party” shall mean:

 

(i)            in the case of any transaction described
in clauses (x) or (y) of the first sentence of this Section 13,
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, and if no
securities are so issued, the Person that is the other party to the merger or
consolidation (including, if applicable, the Company, if it is the surviving
corporation); and

 

(ii)           in the case of any transaction described
in clause (z) of the first sentence in this Section 13, the
Person that is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or transactions;

 

provided, however, that in any such case, (A) if the Common Stock
of such Person is not at such time and has not been continuously over the
preceding twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary or Affiliate
of another Person the Common Stock of which is and has been so registered, “Principal
Party” shall refer to such other Person; (B) in case such Person is a
Subsidiary, directly or indirectly, or Affiliate of more than one Person, the
Common Stock of two or more of which are and have been so registered, “Principal
Party” shall refer to whichever of such Persons is the issuer of the Common
Stock having the greatest aggregate market value; and (C) in case such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly, by the same Person,
the rules set forth in clauses (A) and (B) above shall apply to
each of the chains of ownership having an interest in such joint venture as if
such

 

24

 

joint venture were a Subsidiary of each such joint venturer and the
Principal Parties in each such chain shall bear the obligations set forth in
this Section 13 in the same ratio as their direct or indirect
interests in such Person bear to the total of such interests.

 

(c)           The Company shall not consummate any Section 13
Event unless the Principal Party shall have a sufficient number of authorized
shares of its Common Stock that have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with this Section 13
and unless prior thereto the Company and each Principal Party and each other
Person who may become a Principal Party as a result of such Section 13
Event shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of
this Section 13 and further providing that, as soon as practicable
after the date of such Section 13 Event, the Principal Party at its own
expense shall:

 

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

 

(ii)           use its best efforts to (x) qualify
or register the Rights and the securities purchasable upon exercise of the
Rights under the blue sky laws of such jurisdictions as may be necessary or
appropriate and (y) cause the Rights and the securities purchasable upon
exercise of the Rights to be listed on any national securities exchange or
national quotation system upon which its Common Stock is listed, traded or
quoted; and

 

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

 

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

 

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

 

25

 

 

14.           Additional
Covenants.

 

(a)           The
Company covenants and agrees that after the Stock Acquisition Date it shall not
(i) consolidate with, (ii) merge with or into or (iii) sell or
transfer to any other Person, in one or more transactions, assets or earning power
aggregating more than fifty percent (50%) of the assets or earning power of the
Company and its Subsidiaries taken as a whole, if at the time of or after such
consolidation, merger or sale there are any charter or by-law provisions or any
rights, warrants or other instruments outstanding or any other action taken
which would diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.  The Company
shall not consummate any such consolidation, merger or sale unless prior
thereto the Company and such other Person shall have executed and delivered to
the Rights Agent a supplemental agreement evidencing compliance with this subsection
(a).

 

(b)           The
Company covenants and agrees that, after the Stock Acquisition Date, it will
not, except as permitted by Section 24 hereof, take any action the
purpose or effect of which is to diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.

 

15.           Fractional
Rights and Fractional Shares.

 

(a)           The
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(n) hereof, or to
distribute Rights Certificates which evidence fractional Rights.  In lieu of such fractional Rights, there
shall be paid to the registered holders of the Rights Certificates with regard
to which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Right.  For the purposes of this Section 15(a),
the current market value of a whole Right shall be (except as otherwise
provided in the last sentence of this Section 15(a)) the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable.  The closing price of the Rights for any day
shall be the last sale price, 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 OTC Bulletin Board or such other system then in use or, if on
any such date the Rights are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in the Rights selected by the Board.  If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined reasonably and with good faith to the holders of Rights by the Board
shall be used and shall be binding on the Rights Agent and conclusive for all
purposes.

 

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

 

26

 

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 may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
one-thousandth of a share of Preferred Stock. 
For purposes of this Section 15(b), the current market value
of one one-thousandth of a share of Preferred Stock shall be determined in the
manner set forth in Section 11(d) hereof for the Trading Day
immediately prior to the date of such exercise.

 

(c)           Following
the occurrence of a Triggering Event, the Company shall not be required to
issue fractions of shares of Common Stock upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Common Stock.  In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of a share of Common Stock.  For purposes of this Section 15(c),
the current market value shall be determined in the manner set forth in Section 11(d) hereof
for the Trading Day immediately prior to the date of such exercise.

 

(d)           Except as
otherwise expressly provided herein, 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 (other than, in the case of Preferred Stock, fractions
which are integral multiples of one one-thousandth of a share of Preferred
Stock) upon exercise of a Right.

 

(e)           Whenever a payment for fractional Rights or fractional
shares is to be made by the Rights Agent, the Company shall (i) promptly
prepare and deliver to the Rights Agent a certificate setting forth in
reasonable detail the facts related to such payments and the prices and
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.

 

16.           Rights of
Action.  All rights of action in
respect of this Agreement, except those rights of action vested in the Rights
Agent pursuant to Section 21, are vested in the respective registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), 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 in the manner provided in such
Rights Certificate and in this Agreement. 
Without limiting the foregoing or any remedies available to the holders
of Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement and shall be
entitled to specific performance of the obligations hereunder and injunctive
relief against actual or threatened violations of the obligations hereunder of
any

 

27

 

Person subject to this Agreement (including, without limitation, the
Company).  Holders of Rights shall be
entitled to recover the reasonable costs and expenses, including attorneys’
fees, incurred by them in any action to enforce the provisions of this
Agreement.

 

17.           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 Common Stock;

 

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

 

(c)           the
Company and the Rights Agent may deem and treat the Person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate or uncertificated shares of Common Stock) 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, if any, 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;
and

 

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

 

18.           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 shares of Preferred Stock, Common Stock or any other securities
of the Company which may at any time be issuable upon exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate,
as such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting stockholders (except
as provided in Section 25 hereof), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such Rights
Certificate shall have been exercised in accordance with the provisions
thereof.

 

28

 

19.           Concerning the Rights Agent.

 

(a)           The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the preparation, delivery, amendment,
administration and execution of this Agreement and the exercise and performance
of its duties hereunder.  The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, damage, judgment, fine, penalty, claim, demand,
settlement, cost or expense (including, without limitation, the reasonable fees
and expenses of legal counsel) incurred without gross negligence, bad faith 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, administration, exercise and performance of its duties under this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly.  The provisions provided for under this Section 19
and Section 21 below shall survive the expiration of the Rights and
the termination of this Agreement and the resignation, replacement or removal
of the Rights Agent.  The costs and
expenses incurred in enforcing this right of indemnification shall be paid by
the Company.

 

(b)           The Rights
Agent shall be authorized and protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
acceptance and administration of this Agreement and the exercise and
performance of its duties hereunder, in reliance upon any Rights Certificate or
certificate for Common Stock 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 21 hereof. 
The Rights Agent shall not be deemed to have knowledge of any event of
which it was supposed to received notice thereof hereunder, and the Rights
Agent shall be fully protected and shall incur no liability for failing to take
action in connection therewith, unless and until it has received such notice in
writing.

 

20.           Merger or Consolidation or Change of Name of Rights
Agent.

 

(a)           Any Person
into which the Rights Agent or any successor Rights Agent may be merged or with
which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be
a party, or any Person succeeding to the corporate trust or stockholder
services business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, provided that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 22
hereof.  In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the

 

29

 

name of the predecessor
or in the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

 

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

 

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

 

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

 

(b)           Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the determination of
current market price) be proved or established by the Company prior to taking,
suffering or omitting to take any action hereunder, such fact or matter (unless
other evidence in respect thereof shall be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full and complete authorization and protection to the
Rights Agent and the Rights Agent shall incur no liability for or in respect of
any action taken, suffered or omitted by it under the provisions of this
Agreement in reliance upon such certificate.

 

(c)           The Rights
Agent shall be liable hereunder to the Company and any other Person only for
its own gross negligence, bad faith or willful misconduct.  Anything in this Agreement to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
punitive, indirect, incidental or consequential loss or damages of any kind
whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the possibility or likelihood of such loss or
damages.  Any liability of the Rights
Agent under this Agreement will be limited to the amount of annual fees paid by
the Company to the Rights Agent.  Anything to the contrary notwithstanding,
in no event will the Rights Agent be liable for special, punitive, indirect,
incidental or consequential loss or damages of any kind whatsoever (including,
without limitation, lost profits), even if the Rights Agent has been advised of
the likelihood of such loss or damages.

 

30

 

(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 as
to the fact that it has countersigned the Rights Certificates) or be required
to verify the same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.

 

(e)           The Rights
Agent shall not have any liability for or be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any change in the exercisability of
Rights (including Rights becoming null and void pursuant to Section 7(e) hereof)
except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of such change; nor shall it be responsible for any breach
by the Company of any covenant or condition contained in this Agreement or in
any Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or 13 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after receipt of a certificate pursuant to Section 12 describing
any such adjustment, upon which the Rights Agent may rely); nor shall it be
responsible for any determination by the Board of the current market value of
the Rights or Preferred Stock or Common Stock pursuant to the provisions of Section 15
hereof; nor shall it by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any shares of Preferred
Stock or other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock or other securities
will, when so issued, be validly authorized and issued, fully paid and
nonassessable.

 

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

 

(g)           The Rights
Agent is hereby authorized and directed to accept instructions with respect to
the performance of its duties hereunder and certificates delivered pursuant to
any provision hereof from the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Secretary, any Assistant Secretary,
the Treasurer or any Assistant Treasurer of the Company, and is authorized to
apply to such officers for advice or instructions in connection with its duties
under this Agreement, and it shall not be liable for any action taken or
suffered to be taken by it in accordance with written 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 by any such
officer.  Any application by the Rights
Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken, suffered or
omitted by the Rights Agent with respect to its duties or obligations under
this Agreement and the date on or after which such action shall be taken,
suffered or omitted and the Rights Agent shall not be liable for any action
taken, suffered or omitted in accordance with a proposal included in any such
application on or after the date specified therein (which date shall not be
less than three (3) Business Days after the date any such officer actually
receives such application, unless any such

 

31

 

officer shall have
consented in writing to an earlier date) unless, prior to taking, suffering or
omitting to take any such action, the Rights Agent has received written
instructions in response to such application specifying the action to be taken,
suffered or omitted.

 

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

 

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

 

(j)            No
provision of this Agreement shall require the Rights Agent to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder or in the exercise of its rights if it 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
or transfer, the certificate attached to the form of assignment or form of
election to purchase, as the case may be, has either not been properly
completed or indicates an affirmative response to clause l or 2 thereof, the
Rights Agent shall not take any further action with respect to such requested
exercise or transfer without first consulting with the Company.

 

22.           Change of
Rights Agent.  The
Rights Agent or any successor Rights Agent may resign and be discharged from
its duties under this Agreement upon thirty (30) days’ notice in writing mailed
to the Company and to each transfer agent of the Common Stock and Preferred
Stock by registered or certified mail. 
In the event the transfer agency relationship in effect between the
Company and the Rights Agent terminates, the Rights Agent will be deemed to
have resigned automatically and be discharged from its duties under this
Agreement as of the effective date of such termination, and the Company shall be
responsible for sending any required notice. 
The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days’ notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail.  If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. 
If the Company shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit 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

 

32

 

Agent.  Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) a
Person organized and doing business under the laws of the United States or any
state of the United States, in good standing, which is authorized under such
laws to exercise corporate trust or stockholder services powers and is subject
to supervision or examination by federal or state authority and which has at
the time of its appointment as Rights Agent a combined capital and surplus of
at least $50,000,000.00 or (b) an Affiliate of a Person described in
clause (a) of this sentence.  After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment the Company shall mail notice thereof in writing to the predecessor
Rights Agent and each transfer agent of the Common Stock and 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 22, 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.

 

23.           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 the Board to reflect any adjustment or change in the Purchase Price per
share and the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement.  In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration of
the Rights, the Company (a) shall, with respect to shares of Common Stock
so issued or sold pursuant to the exercise of stock options or otherwise under
any employee plan or arrangement, which plan or arrangement is existing as of
the Distribution Date, or upon the exercise, conversion or exchange of any
other securities issued by the Company on or prior to the Distribution Date,
and (b) may, in any other case, if deemed necessary or appropriate by the
Board, issue Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) no
such Rights Certificates shall be issued if, and to the extent that, the
Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificates would be issued, and (ii) no such
Rights Certificates shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.

 

24.           Redemption,
Termination and Exchange.

 

(a)           (i)            The Board
may, at its option, at any time prior to the earlier of (x) the Stock
Acquisition Date or (y) the Close of Business on 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
hereof (such redemption price being hereinafter referred to as the “Redemption
Price”).  The Company may, at its
option, pay the Redemption Price in any form of consideration deemed
appropriate by the Board.

 

33

 

 

(ii)           In
addition, and notwithstanding the provisions of Section 24(a)(i) hereof,
the Board may redeem all but not less than all of the then outstanding Rights
at the Redemption Price on or after the Stock Acquisition Date but prior to any
Section 13 Event either (x) in connection with any Section 13
Event in which all holders of Common Stock are treated alike and not involving
(other than as a holder of Common Stock being treated like all other such
holders) an Acquiring Person or an Affiliate or Associate thereof or any other
Person in which such Acquiring Person or Affiliate or Associate thereof has any
interest, or any other Person acting directly or indirectly on behalf of or in
association with any such Acquiring Person or Affiliate or Associate thereof,
or (y) following the occurrence of a Section 11 Event, and the
expiration of any period during which the holder of Rights may exercise the
rights under Section 11(a)(ii) hereof as a result thereof, if
and for as long as any Acquiring Person having triggered the Section 11
Event at issue is not thereafter the Beneficial Owner of twenty percent (20%)  or more of the outstanding shares of Common Stock, and at
the time of redemption there are no other Persons who are Acquiring Persons.

 

(b)           In the event that the Company has received a Qualified
Offer which has not been terminated or withdrawn, following such receipt for a
period of at least ninety (90) days the Board does not redeem the outstanding
Rights (or otherwise take other action as determined by the Board so that the
existence of the Rights does not interfere with the consummation of a Qualified
Offer  — in either event “Redeem the
Rights”) and, following such ninetieth (90th) day, the Company receives a request from the holders
(other than any Person making such Qualified Offer, such Person’s Affiliates or
Associates or any officer or director of the Company) of at least ten percent
(10%) of the then outstanding shares of Common Stock (a “Request”) for
the calling of a special meeting of the stockholders (a “Special Meeting”)
in order to consider and vote on whether to require the Company to Redeem the
Rights, then a Special Meeting shall be held on a date selected by the Board,
which date shall be not more than sixty (60) days after the date the related Request
is received by the Company.  If, at the
Special Meeting, holders of more than fifty percent (50%) of the then
outstanding shares of Common Stock (other than shares held by any Person making
such Qualified Offer, such Person’s Affiliates or Associates or any officer or
director of the Company) shall vote to Redeem the Rights, then the Company
shall thereafter Redeem the Rights as promptly as practicable.  In the event that a Special Meeting is not
held on or prior to the sixtieth (60th) day after such a Request is received by the Company
(unless the Company is exercising reasonable efforts to hold such a meeting and
has been prevented by circumstances reasonably beyond its control — in which
event such sixty (60) day period shall be extended by one (1) day for each
one (1) day the Company is so prevented), the Company shall promptly
thereafter Redeem the Rights. 
Notwithstanding the foregoing: (i) the Company shall not be
required to hold a Special Meeting unless at such time any applicable Qualified
Offer (A) has an expiration date which is at least ten (10) Business
Days after the Special Meeting and (B) has not been terminated or
withdrawn; and (ii) any obligations of the Company under this Section 24(b) shall
terminate immediately upon any Stock Acquisition Date which occurs prior to
such time as the Company Redeems the Rights as contemplated by this Section 24(b).

 

(c)           (i)            In the
case of a redemption permitted under Section 24(a)(i) hereof
or required under Section 24(b) hereof, immediately upon the
action of the Board ordering the redemption of the Rights, evidence of which
shall have been filed with the Rights Agent and without any further action and
without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price.  In

 

34

 

the case of a
redemption permitted only under Section 24(a)(ii) hereof,
evidence of which shall have been filed with the Rights Agent, the right to
exercise the Rights will terminate and represent only the right to receive the
Redemption Price only after ten (10) Business Days following the giving of
notice of such redemption to the holders of such Rights if no Section 11
Event shall have occurred, and, if a Section 11 Event shall have occurred,
upon the later of ten (10) Business Days following the giving of such
notice or the expiration of any period during which the rights under Section 11(a)(ii) hereof
may be exercised as a result thereof. 
Within ten (10) days after the action of the Board ordering any
such redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to the Rights Agent and to all such holders at their last addresses
as they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock.  Any notice that is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.

 

(ii)           In the
case of a redemption permitted under Section 24(a)(i) or (ii) or
required under Section 24(b) hereof, the Company may, at its
option, discharge all of its obligations with respect to the Rights by (i) issuing
a press release announcing the manner of redemption of the Rights and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at
their last addresses as they appear on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
of the Common Stock, and upon such action, all outstanding Rights Certificates
shall be null and void without any further action by the Company.

 

(d)           (i)            Subject to
the limitations of applicable laws, the Board may, at its option and at any
time after any Person becomes an Acquiring Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become null and void pursuant to the provisions of Section 7(e) hereof)
for (A) shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (the “Exchange
Shares”), or (B) Substitute Consideration (as that term is defined
below).  The Board may determine, in its
sole discretion, whether to deliver Exchange Shares or Substitute
Consideration.  Notwithstanding the
foregoing, the Board shall not be empowered to effect such exchange at any time
after any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Stock for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of fifty percent (50%) or more of the Common Stock then outstanding.

 

(ii)           In the
event the Board shall determine to deliver Substitute Consideration in exchange
for Rights, the Company shall (1) determine the value of the Exchange
Shares (the “Exchange Value”), and (2) with respect to each Right
to be exchanged, make adequate provision to substitute for Exchange Shares the
following (the “Substitute Consideration”): (v) cash, (w) Common
Stock or common stock equivalents (as that term is defined in Section 11(a)(iii) hereof)
or Preferred Stock or equivalent preferred stock (as that term is defined in Section 11(b) hereof),
(x) debt securities of the Company, (y) other assets, or (z)

 

35

 

any combination of the foregoing, having an aggregate value equal to
the Exchange Value, where such aggregate value has been determined by the Board
based upon the advice of a nationally recognized investment banking firm
selected by the Board.  For purposes of
this Section 24(d), the value of a share of Common Stock shall be
the current market price (as determined pursuant to Section 11(d) hereof)
per share of Common Stock on the day that is the later of (A) the first
occurrence of a Section 11 Event or (B) the date on which the Company’s
right of redemption pursuant to Section 24(a)(i) hereof
expires; and the value of any common stock equivalent shall be deemed to have
the same value as the Common Stock on such date.

 

(iii)          Immediately upon the
action of the Board ordering the exchange of any Rights pursuant to this Section 24(d),
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 Exchange Shares or Substitute Consideration for each
Right exchanged by such holder.  The
Company shall promptly give public notice of any such exchange (with prompt
written notice thereof 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 that is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
exchange will state the method by which the exchange of Common Stock (or
Substitute Consideration) for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged.  Any partial exchange shall be effected pro
rata based on the number of Rights (other than Rights which have become null
and void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.

 

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

 

(v)           The
Company shall not be required to issue fractions of shares of Common Stock or
to distribute certificates which evidence fractional shares of Common
Stock.  In lieu of such fractional shares
of Common Stock, the Company shall pay to the registered holders of the Rights Certificates
with regard to which such fractional shares of Common Stock would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole share of Common Stock. 
For the purposes of this Section 24(d)(v), the current
market value of a whole share of Common Stock shall be determined in the manner
set forth in Section 11(d) hereof for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24(d).

 

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 Preferred Stock or to make any other distribution to
the holders of Preferred Stock (other than a regular quarterly cash dividend
out of earnings or retained earnings of the Company), (ii) to offer to the
holders of Preferred Stock rights or

 

36

 

warrants to subscribe
for or to purchase any additional shares of Preferred Stock or shares of stock
of any class or any other securities, rights or options, (iii) to effect
any reclassification of Preferred Stock (other than a reclassification
involving only the subdivision of outstanding shares of Preferred Stock), (iv) to
effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than fifty percent (50%)
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person or (v) to effect the liquidation, dissolution
or winding up of the Company, 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 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution
of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up
is to take place and the date of participation therein by the holders of the
shares of Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i) or (ii) above
at least twenty (20) days prior to the record date for determining holders of
the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the shares of Preferred Stock, whichever shall be the earlier.

 

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

 

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

 

26.           Notices.  Notices or demands authorized by this
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 sent by nationwide overnight
delivery, postage prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:

 

Techwell, Inc.

408 E. Plumeria Drive

San Jose, CA 95134 

Attention: Chief Financial Officer

 

Subject
to the provisions of Section 22, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, or sent by nationwide
overnight delivery, postage prepaid, addressed (until another address is filed
in writing with the Company) as follows:

 

37

 

Computershare Trust Company, N.A.

1745 Gardena Avenue

Glendale, CA 91204

Attention: Client Services

 

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, or sent by
nationwide overnight delivery, postage prepaid, addressed to such holder at the
address of such holder as shown on the registry books of the Company.

 

27.           Supplements
and Amendments.  The
Company and the Rights Agent may from time to time supplement or amend this
Agreement without approval of any holders of Rights or shares of Common Stock
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) prior to the Distribution Date, to change
or supplement any provision hereunder in any manner which the Company may deem
necessary or desirable, or (iv) on or following the Distribution Date, to
change or supplement any provision 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.  Upon
the delivery of a certificate from an appropriate officer of the Company and,
if requested by the Rights Agent, an opinion of counsel which states that the
proposed supplement or amendment is in compliance with the terms of this Section 27,
the Rights Agent shall execute such supplement or amendment, provided that such
supplement or amendment does not adversely affect the rights, duties or
obligations of the Rights Agent under this Agreement.  Prior to the Distribution Date, the interests
of the holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock.

 

28.           Determination
and Actions by the Board. 
For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock or any other securities of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of
the General Rules and Regulations under the Exchange Act as in effect on
the date of this Agreement.  Except as
otherwise provided herein, the Board shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable
for the administration of this Agreement (including a determination to redeem
or not redeem the Rights or to amend this Agreement).  All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the
Board in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights Certificates and all other
parties and (y) not subject the Board to any liability to the holders of
the Rights Certificates.  The Rights
Agent is entitled always to assume the Company’s Board of Directors acted in
good faith and shall be fully protected and incur no liability in reliance
thereon.

 

38

 

29.           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.

 

30.           Benefits
of This Agreement. 
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Stock) 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, the Common Stock).

 

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, null and 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.

 

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

 

33.           Counterparts.  This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.  A signature to
this Agreement transmitted electronically shall have the same authority, effect,
and enforceability as an original signature.

 

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

 

35.           Force
Majeure.  Notwithstanding anything to the contrary contained
herein, the Rights Agent shall not be liable for any delays or failures in
performance resulting from acts beyond its reasonable control including,
without limitation, acts of God, terrorist acts, shortage of supply, breakdowns
or malfunctions, interruptions or malfunctions of computer facilities, or loss
of data due to power failures or mechanical difficulties with information
storage or retrieval systems, labor difficulties, war or civil unrest.

 

39

 

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

 

	
   

  	
  TECHWELL, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Hiro Kozato

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPUTERSHARE TRUST COMPANY, N.A.,

  as Rights Agent 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Kellie Gwinn

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  
				

 

40

 

 

EXHIBIT A

 

CERTIFICATE OF DESIGNATION 

OF SERIES A PARTICIPATING PREFERRED STOCK

 

OF

 

TECHWELL, INC.

 

We, Hiro Kozato, the
Chief Executive Officer, and Mark Voll,
the Secretary, of Techwell, Inc.,
a corporation organized and existing under the General Corporation Law of the
State of Delaware, DO HEREBY CERTIFY:

 

That pursuant to the
authority conferred upon the Board of Directors by the Certificate of
Incorporation of the Corporation, the Board of Directors has adopted the
following resolution creating a series of Three Hundred Thousand
(300,000) shares of Preferred Stock, par value $0.001 per share,
designated as Series A Participating Preferred Stock:

 

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

 

1.             Designation and
Amount.  The shares of such series
shall be designated as “Series A Participating Preferred Stock,” par value
$0.001 per share, and the number of shares constituting such series shall be Three Hundred Thousand (300,000).  Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided,  however,
that no decrease shall reduce the number of shares of Series A
Participating Preferred Stock to a number less than that of the shares then
outstanding plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding securities issued
by the Corporation.

 

2.             Dividends and
Distributions.

 

(A)          Subject to the prior
and superior rights of the holders of any shares of any series of Preferred
Stock ranking prior and superior to the shares of Series A Participating
Preferred Stock with respect to dividends, the holders of shares of Series A
Participating 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 any other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being
referred to herein as a “Quarterly Dividend Payment Date”), commencing
on the first Quarterly Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Participating Preferred Stock in
an amount per share (rounded to the nearest cent) equal to the greater of (a) $25.00
or, (b) 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 

 

A-1

 

aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock, since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Participating Preferred Stock.  In the event the Corporation shall at any
time after the close of business on August 18, 2009 (the “Rights
Declaration Date”) (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine
the outstanding Common Stock into a smaller number of shares, by
reclassification or otherwise, then in each such case the amount to which
holders of shares of Series A Participating Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

 

(B)           The Corporation
shall declare a dividend or distribution on the Series A Participating
Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided,  however, that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $25.00 per share on
the Series A Participating Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.

 

(C)           Dividends shall
begin to accrue and be cumulative on outstanding shares of Series A
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Participating
Preferred Stock unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of Series A
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date.  Accrued but unpaid
dividends shall not bear interest. 
Dividends paid on the shares of Series A Participating Preferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.  The Board of Directors may fix a record date
for the determination of holders of shares of Series A Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.

 

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

 

(A)          Subject to the
provision for adjustment hereinafter set forth, each share of Series A
Participating Preferred Stock shall entitle the holder thereof to 1,000 votes
on all matters 

 

A-2

 

submitted to a vote of the stockholders of the Corporation.  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock into a greater number of shares or (iii) combine the
outstanding Common Stock into a smaller number of shares, by reclassification
or otherwise, then in each such case the number of votes per share to which
holders of shares of Series A Participating 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 outstanding immediately prior to such event.

 

(B)           Except as otherwise
provided herein, in the Certificate of Incorporation or by law, the holders of
shares of Series A Participating 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)           (i)            If at any time dividends on any Series A
Participating Preferred Stock shall be in arrears in an amount equal to six
quarterly dividends thereon, the holders of the Series A Participating
Preferred Stock, voting as a separate series from all other series of Preferred
Stock and classes of capital stock, shall be entitled to elect two members of
the Board of Directors in addition to any Directors elected by any other
series, class or classes of securities and the authorized number of Directors
will automatically be increased by two. 
Promptly thereafter, the Board of Directors of this Corporation shall,
as soon as may be practicable, call a special meeting of holders of Series A
Participating Preferred Stock for the purpose of electing such members of the
Board of Directors.  Said special meeting
shall in any event be held within 45 days of the occurrence of such arrearage.

 

(ii)           During any period
when the holders of Series A Participating Preferred Stock, voting as a
separate series, shall be entitled and shall have exercised their right to
elect two Directors, then and during such time as such right continues (a) the
then authorized number of Directors shall remain increased by two, and the
holders of Series A Participating Preferred Stock, voting as a separate
series, shall remain entitled to elect the additional Directors so provided
for, and (b) each such additional Director shall not be a member of any
existing class of the Board of Directors, but shall serve until the next annual
meeting of stockholders for the election of Directors, or until his or her
successor shall be elected and shall qualify, or until his or her right to hold
such office terminates pursuant to the provisions of this Section 3(C).

 

(iii)          A Director elected
pursuant to the terms hereof may be removed with or without cause by the
holders of Series A Participating Preferred Stock entitled to vote in an
election of such Director.

 

(iv)          If, during any
interval between annual meetings of stockholders for the election of Directors
and while the holders of Series A Participating Preferred Stock shall be
entitled to elect two Directors, there are fewer than two such Directors in
office by reason of resignation, death or removal, then, promptly thereafter,
the Board of Directors shall call a special meeting of the holders of Series A
Participating Preferred Stock for the purpose of filling

 

A-3

 

such vacancy(ies) and such vacancy(ies) shall be filled at such special
meeting.  Such special meeting shall in
any event be held within 45 days of the occurrence of any such vacancy(ies).

 

(v)           At such time as the
arrearage is fully cured, and all dividends accumulated and unpaid on any
shares of Series A Participating Preferred Stock outstanding are paid,
and, in addition thereto, at least one regular dividend has been paid
subsequent to curing such arrearage, the term of office of any Director elected
pursuant to this Section 3(C), or his or her successor, shall
automatically terminate, and the authorized number of Directors shall
automatically decrease by two, and the rights of the holders of the shares of
the Series A Participating Preferred Stock to vote as provided in this Section 3(C) shall
cease, subject to renewal from time to time upon the same terms and conditions.

 

(D)          Except as set forth
herein or as otherwise provided by law, holders of Series A Participating
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 and any other capital stock of the Corporation having general
voting rights as set forth herein) for taking any corporate action.

 

4.             Certain
Restrictions.

 

(A)          Whenever quarterly
dividends or other dividends or distributions payable on the Series A Participating
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 Participating Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:

 

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

 

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

 

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

 

(iv)          purchase or
otherwise acquire for consideration any shares of Series A Participating
Preferred Stock or any shares of stock ranking on a parity with the Series A
Participating Preferred Stock except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such

 

A-4

 

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

 

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

 

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

 

6.             Liquidation,
Dissolution or Winding Up.

 

(A)          Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the Series A
Participating Preferred Stock unless, prior thereto, the holders of shares of Series A
Participating Preferred Stock shall have received per share, the greater of $1,000.00
or 1,000 times the payment made per share of Common Stock, plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the “Series A Liquidation
Preference”).  Following the payment
of the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the “Common Adjustment”)
equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set
forth in subparagraph (C) below to reflect such events as stock splits,
stock dividends and recapitalization with respect to the Common Stock) (such
number in clause (ii), the “Adjustment Number”).  Following the payment of the full amount of
the Series A Liquidation Preference and the Common Adjustment in respect
of all outstanding shares of Series A Participating Preferred Stock and
Common Stock, respectively, holders of Series A Participating Preferred
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.

 

(B)           In the event 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
Participating Preferred Stock, then such remaining assets shall be distributed
ratably to the holders of such parity shares in proportion to their respective
liquidation preferences.  In the event,
following payment in full of all liquidation preferences of all shares senior
to Common Stock (including the Series A Participating Preferred Stock),
there are not sufficient assets available to permit payment in full 

 

A-5

 

of the Common Adjustment, then the remaining assets shall be
distributed ratably to the holders of Common Stock.

 

(C)           In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, by reclassification or otherwise, then
in each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment 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.

 

7.             Consolidation,
Merger, etc.  In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash or any other property, then in any such case the shares of Series A
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged.  In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of
shares of Series A Participating 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 are
outstanding immediately prior to such event.

 

8.             Redemption.  The shares of Series A Participating
Preferred Stock shall not be redeemable.

 

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

 

10.           Amendment. 
The Certificate of Incorporation and the Bylaws of the Corporation shall
not be further amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Participating
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least 66-2/3% of the outstanding shares of Series A
Participating Preferred Stock voting separately as a class.

 

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

 

A-6

 

IN
WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm
the foregoing as true under the penalties of perjury as of the 4th day of August, 2009.

 

	
   

  	
   

  
	
   

  	
  Hiro Kozato

  
	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
  Attest:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Mark Voll

  
	
   

  	
  Secretary

  

 

A-7

 

EXHIBIT B

 

Form of Rights Certificate

 

Certificate No. R                                                          
Rights

 

NOT EXERCISABLE AFTER AUGUST 3, 2019 OR EARLIER IF NOTICE OF
EXPIRATION, REDEMPTION OR EXCHANGE IS GIVEN. 
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT.  [THE RIGHTS REPRESENTED BY
THIS RIGHTS CERTIFICATE WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING PERSON OR
AN ASSOCIATE OR AN AFFILIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT).  THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID UNDER THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS
AGREEMENT.]*

 

Rights Certificate

 

TECHWELL, 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 4,
2009 (the “Rights Agreement”) between TECHWELL, INC., a Delaware corporation (the “Company”), and
COMPUTERSHARE TRUST COMPANY, N.A., a
federally charted trust company (the “Rights Agent”), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 p.m. (Eastern time) on August 3, 2019, unless earlier redeemed or
exchanged by the Company as set forth in the Rights Agreement, at the office of
the Rights Agent designated for such purpose, one one-thousandth of a fully
paid, nonassessable share of Series A Participating Preferred Stock (the “Preferred
Stock”) of the Company, at a purchase price of Fifty Dollars ($50.00)
per one one-thousandth of a share (the “Purchase Price”), upon
presentation and surrender of this Rights Certificate with the appropriate Form of
Election to Purchase and Certificate duly executed.

 

The number of Rights
evidenced by this Rights Certificate (and the number of one one-thousandths of
a share which may be purchased upon exercise thereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of the
close of business on the record date relating to the initial distribution of
the Rights, based on the Preferred Stock as constituted at such date.

 

Upon the occurrence of
a Triggering Event (as such term is defined in the Rights Agreement), if the
Rights evidenced by this Rights Certificate are Beneficially Owned (as such
term is defined in the Rights Agreement) by (i) an Acquiring Person (as
such term is defined in 

 

*              The portion of the
legend in brackets shall be inserted only if applicable.

 

B-1

 

the Rights Agreement) or an Associate or Affiliate thereof (as such
terms are defined in the Rights Agreement) or, (ii) under certain
circumstances specified in the Rights Agreement, a transferee of an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, such Rights shall
become null and void and no holder hereof shall have any rights with respect to
such Rights from and after the occurrence of any such Triggering Event.

 

As provided in the
Rights Agreement, the Purchase Price and the number of one one-thousandths of a
share of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.

 

This Rights Certificate
is subject to all of the terms, provisions and conditions of the Rights
Agreement, which terms, provisions and conditions are hereby incorporated
herein by reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Rights Certificates.  Copies of the Rights Agreement are on file at
the principal office of the Company and are also available upon written request
to 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
one one-thousandths of a share 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 (other than pursuant to Section 11(a)(ii) of
the Rights Agreement) in part, the holder shall be entitled to receive upon
surrender hereof another Rights Certificate or Rights Certificates for the number
of whole Rights not exercised.  If this
Rights Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii) of
the Rights Agreement, the holder shall be entitled to receive this Rights
Certificate duly marked to indicate that such exercise has occurred as set
forth in the Rights Agreement.

 

Subject to the
provisions of the Rights Agreement, the Rights evidenced by this Certificate
may, in certain instances, be (i) redeemed by the Company at its option at
a redemption price of $0.001 per Right or (ii) exchanged in whole or in
part for shares of the Company’s Common Stock or substitute consideration.  Subject to the provisions of the Rights
Agreement, the Company, at its option, may elect to mail payment of the
redemption price to the registered holder of the Rights at the time of
redemption, in which event this Certificate may become void without any further
action by the Company.

 

The Company may elect
not to issue fractional shares of Preferred Stock or other securities upon the
exercise of any Right or Rights evidenced hereby (other than fractions, in the
instance of Preferred Stock, 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), in which event a cash payment will be made,
in lieu thereof, as provided in the Rights Agreement.

 

B-2

 

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

 

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

 

WITNESS the facsimile
signature of the proper officers of the Company and its corporate seal.

 

Dated:                ,
20   .

 

	
  Attest: 

  	
   

  	
  TECHWELL, INC.  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Title: 

  	
  Secretary 

  	
  Title:

  	
   

  
	
  Countersigned:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  COMPUTERSHARE TRUST 

  COMPANY, N.A., as Rights Agent 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
   

  	
   

  
						

 

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,                                                           
hereby sells, assigns and transfers unto                                   
                                                                                                                                                                                                                        

(please print name, address and social security or other identifying
number of transferee)

 

                                                                                                                                                                                                                        

 

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

 

	
  Dated:                    ,
  20    .

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
  Signature Medallion Guaranteed:

  	
   

  

 

 

Signatures must be
guaranteed by an “eligible guarantor institution” as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended.

 

B-4

 

CERTIFICATE

 

The undersigned hereby
certifies by checking the appropriate boxes that:

 

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

 

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

 

	
  Dated:           ,
  20    .

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature

  	
   

  

 

 

NOTICE

 

The signature to the
foregoing Assignment must correspond 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 Certificate set forth above is not completed, the Company will deem
the beneficial owner of the Rights evidenced by this Rights Certificate to be
an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement) and will affix a legend to that effect on any Rights
Certificate issued in exchange for this Rights Certificate.

 

B-5

 

FORM OF ELECTION TO PURCHASE

 

(To be executed if holder desires to

exercise the Rights Certificate pursuant to

Section 11(a)(ii) of the Rights Agreement.)

 

To: 
TECHWELL, INC.

 

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

 

                                                                                                                                                                                                                        

(Please insert social
security or other identifying number)

 

                                                                                                                                                                                                                        

(Please print name and
address)

 

The Rights Certificate
indicating the balance, if any, of such Rights which may still be exercised
pursuant to Section 11(a)(ii) of the Rights Agreement shall be
returned to the undersigned unless the undersigned requests that the Rights
Certificate be registered in the name of and delivered to:

 

                                                                                                                                                                                                                        

Please insert social
security or other identifying number (complete only if Rights Certificate is to
be registered in a name other than the undersigned)

                                                                                                                                                                                                                        

(Please print name and
address)

 

                                                                                                                                                                                                                        

 

	
  Dated:                    ,
  20    .

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
  Signature Medallion Guaranteed:

  	
   

  

 

 

Signatures must be
guaranteed by an “eligible guarantor institution” as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended.

 

B-6

 

CERTIFICATE

 

The undersigned hereby
certifies by checking the appropriate boxes that:

 

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

 

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

 

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

 

	
  Dated:                     ,
  20   .

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature

  	
   

  

 

 

NOTICE

 

The signature to the
foregoing Election to Purchase must correspond 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
Certificate set forth above is not completed, the Company will deem the
beneficial owner of the Rights evidenced by this Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement).

 

B-7

 

FORM OF ELECTION TO PURCHASE

 

(To be executed if holder desires to exercise

the Rights Certificate other than pursuant to

Section 11(a)(ii) of the Rights Agreement.)

 

To: 
TECHWELL, INC.

 

The undersigned hereby
irrevocably elects to exercise              
Rights represented by this Rights Certificate to purchase the one
one-thousandths of a share of Preferred Stock (or such other securities of the
Company or any other Person) issuable upon the exercise of the Rights and
requests that certificates for such shares be issued in the name of:

 

                                                                                                                                                                                                                        

(Please insert social security or other identifying number)

 

                                                                                                                                                                                                                        

(Please print name and address)

 

                                                                                                                                                                                                                        

 

If applicable, the
Rights Certificate indicating the balance, if any, of such Rights which may
still be exercised pursuant to Section 11(a)(ii) of the Rights
Agreement shall be returned to the undersigned unless such Person requests that
the Rights Certificate be registered in the name of and delivered to:

 

                                                                                                                                                                                                                        

Please insert social security or other identifying number (complete
only if Rights Certificate is to be registered in a name other than the
undersigned)

 

                                                                                                                                                                                                                        

(Please print name and
address)

 

	
  Dated:                  ,
  20   .

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
  Signature Medallion Guaranteed:

  	
   

  

 

 

Signatures must be
guaranteed by an “eligible guarantor institution” as defined in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended.

 

B-8

 

CERTIFICATE

 

The undersigned hereby
certifies by checking the appropriate boxes that:

 

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

 

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

 

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

 

	
  Dated:                        ,
  20   .

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature

  	
   

  

 

NOTICE

 

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

 

In the event the
Certificate set forth above is not completed, the Company will deem the
beneficial owner of the Rights evidenced by this Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement).

 

B-9

 

EXHIBIT C

 

SUMMARY OF RIGHTS

 

The Board of Directors
of Techwell, Inc. (the “Company”)
has declared a dividend distribution of one “Right” for each outstanding
share of common stock (the “Common Stock”) of the Company to
stockholders of record at the close of business on August 18, 2009 (the “Record Date”).  Except as set forth below, each Right, when
exercisable, entitles the registered holder to purchase from the Company one
one-thousandth of a share of a new series of preferred stock, designated as Series A
Participating Preferred Stock (the “Preferred Stock”), at a price of Fifty
Dollars ($50.00) per one one-thousandth of a share (the “Purchase
Price”), subject to adjustment.  The
description and terms of the Rights are set forth in a Rights Agreement dated
as of August 4, 2009 (the “Rights Agreement”) between the Company
and  Computershare Trust Company, N.A. (as “Rights Agent”).

 

Initially, the Rights
will be attached to all outstanding Common Stock and no separate Rights
certificates or stock statements will be distributed or provided.  The Rights will separate from the Common
Stock and a “Distribution Date” will occur upon the earliest of the
following: (i) a public announcement that a person, entity or group of
affiliated or associated persons or entities (an “Acquiring Person”) has
acquired, or obtained the right to acquire, beneficial ownership of twenty percent (20%) or more of the
outstanding shares of Common Stock (other than (A) as a result of
repurchases of stock by the Company or certain inadvertent actions by
institutional or certain other stockholders, (B) the Company, any
subsidiary of the Company or any employee benefit plan of the Company or any
subsidiary, (C) TCV IV, L.P. together with its affiliated
or associated persons and/or entities (collectively, “TCV”), for so long
as TCV beneficially owns more than ten percent (10%) of the outstanding shares
of Common Stock but does not increase its beneficial ownership (with certain
exceptions) by more than ten percent (10%) of the outstanding shares of Common
Stock above the percentage held by TCV as of the date of the Rights Agreement, and (D) certain other instances set
forth in the Rights Agreement); or (ii) ten (10) business days
(unless such date is extended by the Board of Directors) following the
commencement of a tender offer or exchange offer which would result in any
person, entity or group of affiliated or associated persons or entities
becoming an Acquiring Person (unless such tender offer or exchange offer is a
Permitted Offer (defined below)).  The term “beneficial
ownership” is defined in the Rights Agreement and includes, among other
things, certain derivative or synthetic arrangements having characteristics of
a long position in shares of Common Stock.

 

Until the Distribution
Date (or earlier redemption or expiration of the Rights, if applicable), (i) the
Rights will be evidenced (x) with respect to any uncertificated shares of
Common Stock outstanding as of or after the Record Date, by the registration of
the shares of Common Stock in the Company’s share register in the names of the
holders thereof, and (y) with respect to any certificates for Common Stock
outstanding as of or after the Record Date, by such Common Stock certificates,
and (ii) the surrender for transfer of any certificates for outstanding
Common Stock will also constitute the transfer of the Rights associated with
such Common Stock, and the registration of transfer of ownership of any
uncertificated shares of Common Stock will also constitute the transfer of the
Rights associated with such shares of Common Stock.  As soon as practicable following the
Distribution Date, separate certificates evidencing 

 

C-1

 

the Rights (“Rights Certificates”) will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution
Date, and the separate Rights Certificates alone will evidence the Rights.

 

The Rights are not
exercisable unless and until a Distribution Date occurs.  The Rights will expire on the earliest of (i) consummation
of a merger transaction with a person, entity or group who (x) acquired
Common Stock pursuant to a Permitted Offer and (y) is offering in the
merger the same price per share and form of consideration paid in the Permitted
Offer, (ii) redemption or exchange of the Rights by the Company as
described below or (iii) August 3,
2019, provided, however, that, if a
Distribution Date has not occurred prior thereto, the Rights will expire on the
earliest to occur of the following: (a) the date of the Company’s annual
stockholders’ meeting in 2010 in the event that the Rights Agreement is not
ratified by the Company’s stockholders at or prior to such meeting or (b) the
date of any Company annual stockholders’ meeting following the meeting in 2010
in the event that at least three successive such meetings shall have occurred
at any time following the meeting in 2010 without the Rights Agreement being
ratified at least once by the Company’s stockholders, as well as the Board of
Directors, during the three-year period represented by such meetings (inclusive
in such three-year period, for this purpose, of the date on which the third
such meeting takes place).

 

The number of Rights
associated with each share of Common Stock shall be proportionately adjusted in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Common Stock. 
The Purchase Price payable, and the number of one one-thousandths of a
share of Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to time (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of the Preferred Stock, (ii) upon the grant to holders of
the Preferred Stock of certain rights, options or warrants to subscribe for
Preferred Stock, certain convertible securities or securities having the same
or more favorable rights, privileges and preferences as the Preferred Stock at
less than the current market price of the Preferred Stock or (iii) upon
the distribution to holders of the Preferred Stock of evidences of indebtedness
or assets (excluding regular quarterly cash dividends out of earnings or
retained earnings) or of subscription rights, options or warrants (other than
those referred to above).  With certain
exceptions, no adjustments in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least one percent (1%) in
such Purchase Price.

 

In the event that,
after the first date of public announcement by the Company or an Acquiring
Person that an Acquiring Person has become such, the Company is involved in a
merger or other business combination transaction (whether or not the Company is
the surviving corporation) or fifty percent (50%) or more of the Company’s
assets or earning power are sold (in one transaction or a series of
transactions), proper provision shall be made so that each holder of a Right
(other than an Acquiring Person) shall thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price, that number of
shares of common stock of either the Company, in the event that it is the
surviving corporation of a merger or consolidation, or the acquiring company
(or, in the event there is more than one acquiring company, the acquiring
company receiving the greatest portion of the assets or earning power
transferred) which at the time of such transaction would have a market value of
two (2) times the Purchase Price (such right being called the “Merger
Right”).  In the event that a person,
entity or group becomes an Acquiring Person (unless pursuant to a tender offer
or exchange offer for all 

 

C-2

 

outstanding shares of Common Stock at a price and on terms determined
prior to the date of the first acceptance of payment for any of such shares by
at least a majority of the members of the Board of Directors who are not
officers of the Company and are not Acquiring Persons (or affiliated or
associated persons or entities thereof) to be fair to, and in the best
interests of, the Company and its stockholders (a “Permitted Offer”)),
then proper provision shall be made so that each holder of a Right will, for a
sixty (60) day period (subject to extension under certain circumstances)
thereafter, have the right to receive upon exercise that number of shares of
Common Stock (or, at the election of the Company, which election may be
obligatory if sufficient authorized shares of Common Stock are not available, a
combination of Common Stock, property, other securities (e.g., Preferred
Stock) or cash (including by way of a reduction in the Purchase Price)) having
a market value of two (2) times the Purchase Price (such right being
called the “Subscription Right”). 
The holder of a Right will continue to have the Merger Right whether or
not such holder exercises the Subscription Right.  Notwithstanding the foregoing, upon the
occurrence of any of the events giving rise to the exercisability of the Merger
Right or the Subscription Right, any Rights that are or were at any time after
the Distribution Date owned by an Acquiring Person (or affiliated or associated
persons or entities thereof) shall immediately become null and void.

 

At any time prior to
the earlier to occur of (i) a person, entity or group becoming an
Acquiring Person or (ii) the expiration of the Rights, the Company may
redeem the Rights in whole, but not in part, at a price of $0.001 per Right
(the “Redemption Price”), which redemption shall be effective upon the
action of the Board of Directors. 
Additionally, the Company may, following a person, entity or group
becoming an Acquiring Person, redeem the then outstanding Rights in whole, but
not in part, at the Redemption Price (i) if such redemption is incidental
to a merger or other business combination transaction or series of transactions
involving the Company but not involving an Acquiring Person (or certain related
persons or entities) or (ii) following an event giving rise to, and the
expiration of the exercise period for, the Subscription Right if and for as
long as the Acquiring Person triggering the Subscription Right beneficially
owns securities representing less than twenty
percent (20%)  of the
outstanding shares of Common Stock and at the time of redemption there are no
other Acquiring Persons.  The redemption
of Rights described in the preceding sentence shall be effective only as of
such time when the Subscription Right is not exercisable.

 

In the event the Company receives a “Qualified Offer” (meaning a tender
offer which, among other things, (a) is an all-cash offer for all
outstanding shares of Common Stock at a price per share which is at least an amount equal to twenty-five percent (25%) higher than the higher of (i) the
average closing price for shares over the period of thirty (30) trading days
immediately preceding commencement of the offer or (ii) the average
closing price for shares over the period of five (5) trading days
immediately preceding commencement of the offer, (b) includes a firm
financing commitment which, when added to the offeror’s cash, will be
sufficient, (c) has a non-waivable condition that the offeror must own,
after consummating the offer, at least fifty percent (50%) of the shares of
Common Stock then outstanding (other than shares already held by such offeror
and its affiliates or associates or any director or officer of the Company), (d) stays
open for at least sixty (60) business days (extended for any increase in price)
and (e) commits the offeror to buy all other shares of Common Stock at the
same price paid pursuant to the offer), and,
following a ninety (90) day period thereafter during which the Company does not
redeem the Rights, the Company receives a request from holders (other than the
offeror and its affiliates 

 

C-3

 

or associates or any officer or director
of the Company) of at least ten percent (10%) of the outstanding shares of
Common Stock for the calling of a special stockholders’ meeting in order to
consider whether to require the Company to redeem the outstanding Rights (or
take similar action to nullify the Rights), then a special meeting will be held
within sixty (60) days after receipt of such a request.  If, at such meeting, holders of more than
fifty percent (50%) of the outstanding shares of Common Stock (other than
shares of the offeror or its affiliates or associates or any officer or
director of the Company) vote for redemption of the Rights, then the Company
will thereafter redeem the Rights (or take similar action) as promptly as
practicable.  If such a meeting is not
held on or prior to the sixtieth (60th) day after a qualifying request is received (which
period shall be extended if the Company is exercising reasonable efforts to
hold such a meeting and has been prevented by circumstances reasonably beyond
its control), the Company shall promptly thereafter redeem the Rights (or take
similar action).  However, the Company is
not required to hold such a meeting unless the Qualified Offer at issue has an
expiration date which is at least ten (10) business days after such
meeting, and any obligations of the Company to hold such a meeting or to redeem
the Rights in connection therewith are null and void in the event any person, entity or group becomes an Acquiring Person. 
In any event, upon
the effective date of any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.

 

Subject to applicable
law, the Board of Directors, at its option, may at any time after a person,
group or entity becomes an Acquiring Person (but not after the acquisition by
such Acquiring Person of fifty percent (50%) or more of the outstanding shares
of Common Stock), exchange all or part of the then outstanding and exercisable
Rights (except for Rights which have become null and void) for shares of Common
Stock at a rate of one share of Common Stock per Right (subject to adjustment)
or, alternatively, for substitute consideration consisting of cash, securities
of the Company or other assets (or any combination thereof).

 

The Preferred Stock
purchasable upon exercise of the Rights will be nonredeemable and junior to any
other series of preferred stock the Company may issue (unless otherwise provided
in the terms of such stock).  Each share
of Preferred Stock will have a preferential quarterly dividend in an amount
equal to 1,000 times the dividend declared on each share of Common Stock, but
in no event less than $25.00.  In the
event of liquidation, the holders of shares of Preferred Stock will receive a
preferred liquidation payment equal, per share, to the greater of $1,000.00 or
1,000 times the payment made per share of Common Stock.  Each share of Preferred Stock will have 1,000
votes, voting together with the shares of Common Stock.  In the event of any merger, consolidation or
other transaction in which shares of Common Stock are exchanged, each share of
Preferred Stock will be entitled to receive 1,000 times the amount and type of
consideration received per share of Common Stock.  The rights of the Preferred Stock as to
dividends, liquidation and voting, and in the event of mergers and
consolidations, are protected by customary antidilution provisions.  Fractional shares of Preferred Stock will be
issuable; however, the Company may elect to (i) distribute
depositary receipts in lieu of such fractional shares and (ii) make an
adjustment in cash, in lieu of fractional shares other than fractions that are
multiples of one one-thousandth of a share, based on the market price of the
Preferred Stock prior to the date of exercise.

 

Until a Right is
exercised, the holder thereof, as such, will have no rights as a stockholder of
the Company, including, without limitation, the right to vote or to receive
dividends.  While 

 

C-4

 

the distribution of the Rights should not be taxable to stockholders or
to the Company, holders of Rights may, depending upon the circumstances,
recognize taxable income in the event (i) that the Rights become
exercisable for (x) Common Stock or Preferred Stock (or other
consideration) or (y) common stock of an acquiring company in the instance
of the Merger Right as set forth above or (ii) of any redemption or
exchange of the Rights as set forth above.

 

The Company and the
Rights Agent retain broad authority to amend the Rights Agreement; however,
following any Distribution Date any amendment may not adversely affect the
interests of holders of Rights.

 

A copy of the Rights
Agreement has been filed with the Securities and Exchange Commission as an Exhibit to
a Registration Statement on Form 8-A. 
A copy of the Rights Agreement is available free of charge from the
Company.  THIS SUMMARY DESCRIPTION OF THE
RIGHTS DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE RIGHTS AGREEMENT, WHICH IS INCORPORATED HEREIN BY REFERENCE.

 

C-5Exhibit 4.1

 

ALIGN TECHNOLOGY, INC.

 

Amended 2005 INCENTIVE PLAN

 

(amended March 2007)

 

1.                                       Purposes of the Plan. 
The purposes of this Plan are:

 

·                  to attract and retain the best available
personnel for positions of substantial responsibility,

 

·                  to provide incentives to individuals who
perform services to the Company, and

 

·                  to promote the success of the Company’s
business.

 

The Plan permits the grant of Incentive Stock Options, Nonstatutory
Stock Options, Restricted Stock, SARs, Performance Units, Performance Shares
and other stock or cash awards as the Administrator may determine.

 

2.                                       Definitions. 
As used herein, the following definitions will apply:

 

(a)                                  “Administrator” means the Board or
any of its Committees as will be administering the Plan, in accordance with Section 4
of the Plan.

 

(b)                                 “Affiliate” means any corporation
or any other entity (including, but not limited to, partnerships and joint
ventures) controlling, controlled by, or under common control with the Company.

 

(c)                                  “Applicable Laws” means the
requirements relating to the administration of equity-based awards under U.S.
state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or
quoted and the applicable laws of any foreign country or jurisdiction where
Awards are, or will be, granted under the Plan.

 

(d)                                 “Award” means, individually or
collectively, a grant under the Plan of Options, Restricted Stock, SARs,
Performance Units, Performance Shares and other stock or cash awards as the
Administrator may determine.

 

(e)                                  “Award Agreement” means the
written or electronic agreement setting forth the terms and provisions
applicable to each Award granted under the Plan.  The Award Agreement is subject to the terms
and conditions of the Plan.

 

(f)                                    “Board” means the Board of
Directors of the Company.

 

(g)                                 “Change in Control” means the
occurrence of any of the following events:

 

 

(i)                                     Any “person” (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company’s then outstanding
voting securities; or

 

(ii)                                  The consummation of the sale or
disposition by the Company of all or substantially all of the Company’s assets;

 

(iii)                               A change in the composition of the Board
occurring within a two-year period, as a result of which fewer than a majority
of the directors are Incumbent Directors. 
“Incumbent Directors” means directors who either (A) are Directors
as of the effective date of the Plan, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but will not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or

 

(iv)                              The consummation of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or its parent) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or
consolidation.

 

(h)                                 “Code” means the Internal Revenue
Code of 1986, as amended.  Any reference
to a section of the Code herein will be a reference to any successor or amended
section of the Code.

 

(i)                                     “Committee” means a
committee of Directors or of other individuals satisfying Applicable Laws
appointed by the Board in accordance with Section 4 hereof.

 

(j)                                     “Common Stock” means the common
stock of the Company.

 

(k)                                  “Company” means Align Technology, Inc.,
a Delaware corporation, or any successor thereto.

 

(l)                                     “Consultant” means any person,
including an advisor, engaged by the Company or its Affiliate to render
services to such entity.

 

(m)                               “Determination Date” means the
latest possible date that will not jeopardize the qualification of an Award
granted under the Plan as “performance-based compensation” under Section 162(m) of
the Code.

 

(n)                                 “Director” means a member of the
Board.

 

(o)                                 “Disability” means total and
permanent disability as defined in Section 22(e)(3) of the Code, provided that
in the case of Awards other than Incentive Stock Options, the Administrator in
its discretion may determine whether a permanent and total disability 

 

2

 

exists
in accordance with uniform and non-discriminatory standards adopted by the
Administrator from time to time.

 

(p)                                 “Employee” means any person,
including Officers and Directors, employed by the Company or its
Affiliates.  Neither service as a
Director nor payment of a director’s fee by the Company will be sufficient to
constitute “employment” by the Company.

 

(q)                                 “Exchange Act” means the
Securities Exchange Act of 1934, as amended.

 

(r)                                    “Fair Market Value” means, as of
any date, the value of Common Stock as the Administrator may determine in good
faith by reference to the price of such stock on any established stock
exchange or a national market system on the day of determination if the Common
Stock is so listed on any established stock exchange or a national market
system.  If the Common Stock is not
listed on any established stock exchange or a national market system, the value
of the Common Stock as
the Administrator may determine in good faith.

 

(s)                                  “Fiscal Year”
means the fiscal year of the Company.

 

(t)                                    “Incentive Stock Option” means an
Option that by its terms qualifies and is otherwise intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.

 

(u)                                 “Inside
Director” means a Director who is an Employee.

 

(v)                                 “Misconduct” means the commission
of any act of fraud, embezzlement or dishonesty by the Participant, any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Company or its Affiliates, or any other intentional
misconduct by such person adversely affecting the business or affairs of the
Company or its Affiliates in a material manner. 
The foregoing definition will not in any way preclude or restrict the right
of the Company or its Affiliates to discharge or dismiss any Participant for
any other acts or omissions, but such other acts or omissions will not be
deemed, for purposes of the Plan, to constitute grounds for termination for
Misconduct.

 

(w)                               “Nonstatutory Stock Option” means
an Option that by its terms does not qualify or is not intended to qualify as
an Incentive Stock Option.

 

(x)                                   “Officer” means a person who is an
officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.

 

(y)                                 “Option” means a stock option
granted pursuant to the Plan.

 

(z)                                   “Outside Director” means a
Director who is not an Employee.

 

(aa)                            “Parent” means a “parent
corporation,” whether now or hereafter existing, as defined in Section 424(e) of
the Code.

 

(bb)                          “Participant”
means the holder of an outstanding Award.

 

3

 

(cc)                            “Performance Period” means any
Fiscal Year of the Company or such other period as determined by the
Administrator in its sole discretion.

 

(dd)                          “Performance Share” means an Award
denominated in Shares which may be earned in whole or in part upon attainment
of “Performance Goals” (as defined in Section 11) or other vesting
criteria as the Administrator may determine pursuant to Section 9.

 

(ee)                            “Performance Unit” means an Award
which may be earned in whole or in part upon attainment of Performance Goals or
other vesting criteria as the Administrator may determine and which may be
settled for cash, Shares or other securities or a combination of the foregoing
pursuant to Section 9.

 

(ff)                                “Period of Restriction” means the
period during which the transfer of Shares of Restricted Stock are subject to
restrictions and therefore, the Shares are subject to a substantial risk of
forfeiture.  Such restrictions may be
based on the passage of time, the achievement of target levels of performance,
or the occurrence of other events as determined by the Administrator.

 

(gg)                          “Plan” means this 2005 Incentive
Plan.

 

(hh)                          “Restricted Stock” means Shares
issued pursuant to a Restricted Stock award under Section 7 of the Plan,
or issued pursuant to the early exercise of an Option.

 

(ii)                                  “Rule 16b-3” means Rule 16b-3
of the Exchange Act or any successor to Rule 16b-3, as in effect when
discretion is being exercised with respect to the Plan.

 

(jj)                                  “Section 16(b)”  means Section 16(b) of the Exchange
Act.

 

(kk)                            “Service Provider” means an
Employee, Director or Consultant.

 

(ll)                                  “Share” means a share of the
Common Stock, as adjusted in accordance with Section 16 of the Plan.

 

(mm)                      “Stock Appreciation Right” or “SAR”
means an Award, granted alone or in connection with an Option, that pursuant to
Section 8 is designated as a SAR.

 

(nn)                          “Subsidiary” means a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f) of
the Code.

 

3.                                       Stock Subject to the Plan.

 

(a)                                  Stock Subject to the Plan. 
Subject to the provisions of Section 16 of the Plan, the maximum aggregate number of Shares that may be
awarded and sold under the Plan is 9,983,379 Shares (the number of
Shares which have been reserved but not issued under the Company’s 2001 Stock
Incentive Plan (the “2001 Plan”) as of March 28, 2005), plus up to an
aggregate of 5,000,000 Shares that are or would have been returned to the 2001
Plan as a result of termination of options or repurchase of Shares on or after March 28,
2005.  The Shares may be authorized, but unissued, or
reacquired Common Stock.

 

4

 

(b)                                 Full Value Awards. 
Any Shares subject to Options or SARs will be counted against the
numerical limits of this Section 3 as one Share for every Share subject
thereto.  Any Shares subject to
Restricted Stock or Performance Shares with a per share or unit purchase price
lower than 100% of Fair Market Value on the date of grant will be counted
against the numerical limits of this Section 3 as two Shares for every one
Share subject thereto.  To the extent
that a Share that was subject to an Award that counted as two Shares against
the Plan reserve pursuant to the preceding sentence is recycled back into the
Plan under the next paragraph of this Section 3, the Plan will be credited
with two Shares.

 

(c)                                  Lapsed Awards. 
If an Award expires or becomes unexercisable without having been
exercised in full, or, with respect to Restricted Stock, Performance Shares or
Performance Units, is forfeited to or repurchased by the Company, the
unpurchased Shares (or for Awards other than Options and SARs, the forfeited or
repurchased shares) which were subject thereto will become available for future
grant or sale under the Plan (unless the Plan has terminated).  With respect to SARs, Shares actually issued
pursuant to a SAR as well as the Shares that represent payment of the exercise
price will cease to be available under the Plan.  Shares that have actually been issued under
the Plan under any Award will not be returned to the Plan and will not become
available for future distribution under the Plan; provided, however, that if
Shares of Restricted Stock, Performance Shares or Performance Units are
repurchased by the Company or are forfeited to the Company, such Shares will
become available for future grant under the Plan.  Shares used to pay the exercise price of an
Option will not become available for future grant or sale under the Plan.  Shares used to satisfy tax withholding
obligations will not become available for future grant or sale under the
Plan.  To the extent an Award under the
Plan is paid out in cash rather than Shares, such cash payment will not reduce
the number of Shares available for issuance under the Plan.  Notwithstanding the foregoing and, subject to
adjustment provided in Section 16, the maximum number of Shares that may
be issued upon the exercise of Incentive Stock Options will equal the aggregate
Share number stated in Section 3(a), plus, to the extent allowable under Section 422
of the Code, any Shares that become available for issuance under the Plan under
this Section 3(c).

 

(d)                                 Share Reserve. 
The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as will be sufficient to satisfy the
requirements of the Plan.

 

4.                                       Administration of the Plan.

 

(a)                                  Procedure.

 

(i)                                     Multiple Administrative Bodies. 
Different Committees with respect to different groups of Service
Providers may administer the Plan.

 

(ii)                                  Section 162(m). 
To the extent that the Administrator determines it to be desirable to
qualify Awards granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan will be administered
by a Committee of two or more “outside directors” within the meaning of Section 162(m) of
the Code.

 

5

 

(iii)                               Rule 16b-3. 
To the extent desirable to qualify transactions hereunder as exempt
under Rule 16b-3, the transactions contemplated hereunder will be
structured to satisfy the requirements for exemption under Rule 16b-3.

 

(iv)                              Other Administration. 
Other than as provided above, the Plan will be administered by (A) the
Board or (B) a Committee, which committee will be constituted to satisfy
Applicable Laws.

 

(b)                                 Powers of the Administrator. 
Subject to the provisions of the Plan, and in the case of a Committee,
subject to the specific duties delegated by the Board to such Committee, the
Administrator will have the authority, in its discretion:

 

(i)                                     to determine the Fair Market Value;

 

(ii)                                  to select the Service Providers to whom
Awards may be granted hereunder;

 

(iii)                               to determine the terms and conditions,
not inconsistent with the terms of the Plan, of any Award granted hereunder;

 

(iv)                              to construe and interpret the terms of
the Plan and Awards granted pursuant to the Plan;

 

(v)                                 to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating
to sub-plans established for the purpose of satisfying applicable foreign laws;

 

(vi)                              to modify or amend each Award (subject to
Section 21(c) of the
Plan) including, without limitation, the discretionary authority to extend the
post-termination exercisability period of Awards longer than is otherwise
provided for in the Plan. 
Notwithstanding the previous sentence, the Administrator may not modify
or amend an Option or SAR to reduce the exercise price of such Option or SAR
after it has been granted (except for adjustments made pursuant to Section 16)
nor may the Administrator cancel any outstanding Option or SAR and replace it
with a new Option or SAR with a lower exercise price, unless, in either case,
such action is approved by the Company’s stockholders;

 

(vii)                           to authorize any person to execute on
behalf of the Company any instrument required to effect the grant of an Award
previously granted by the Administrator;

 

(viii)                        to allow a Participant to defer the
receipt of the payment of cash or the delivery of Shares that would otherwise
be due to such Participant under an Award pursuant to such procedures as the
Administrator may determine;

 

(ix)                                to grant in addition to the incentives
described in Sections 6, 7, 8 and 9 below, other incentives payable in cash or
Shares under the Plan as determined by the Administrator to be in the best
interests of the Company and subject to any terms and conditions the
Administrator deems advisable; and

 

6

 

(x)                                   to make all other determinations deemed
necessary or advisable for administering the Plan.

 

(c)                                  Effect of Administrator’s Decision. 
The Administrator’s decisions, determinations and interpretations will
be final and binding on all Participants and any other holders of Awards.

 

5.                                       Eligibility. 
Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights,
Performance Units, Performance Shares and such other cash or stock awards as
the Administrator determines may be granted to Service Providers.  Incentive Stock Options may be granted only
to Employees of the Company or any Parent or Subsidiary of the Company.

 

6.                                       Stock Options.

 

(a)                                  Limitations.

 

(i)                                     Each Option will be designated in the
Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option.  However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Incentive Stock Options are exercisable for the first time
by the Participant during any calendar year (under all plans of the Company and
any Parent or Subsidiary) exceeds $100,000, such Options will be treated as
Nonstatutory Stock Options.  For purposes
of this Section 6(a), Incentive Stock Options will be taken into account
in the order in which they were granted. 
The Fair Market Value of the Shares will be determined as of the time
the Option with respect to such Shares is granted.

 

(ii)                                  The following limitations will apply to
grants of Options:

 

(1)                                  No Service Provider will be granted, in
any Fiscal Year, Options or SARs to purchase more than 1,000,000 Shares.

 

(2)                                  In connection with his or her initial
service, a Service Provider may be granted Options or SARs to purchase up to an
additional 1,000,000 Shares, which will not count against the limit set forth
in Section 6(a)(2)(ii)(1) above.

 

(3)                                  The foregoing limitations will be
adjusted proportionately in connection with any change in the Company’s
capitalization as described in Section 16.

 

(4)                                  If an Option or SAR is cancelled in the
same Fiscal Year in which it was granted (other than in connection with a
transaction described in Section 16), the cancelled Option or SAR, as
applicable, will be counted against the limits set forth in subsections (1) and
(2) above.  For this purpose, if the
exercise price of an Option or SAR is reduced, the transaction will be treated
as a cancellation of the Option or SAR, as applicable, and the grant of a new
Option or SAR, as applicable.

 

(b)                                 Term of Option. 
The Administrator will determine the term of each Option in its sole
discretion.  In the case of an Incentive
Stock Option, the term will be ten (10) years from the date of grant or
such shorter term as may be provided in the Award Agreement.  Moreover, in the case of an Incentive Stock
Option granted to a Participant who, at the time the Incentive Stock 

 

7

 

Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option will be five (5) years from the date of
grant or such shorter term as may be provided in the Award Agreement.

 

(c)                                  Option Exercise Price and Consideration.

 

(i)                                     Exercise Price. 
The per share exercise price for the Shares to be issued pursuant to
exercise of an Option will be determined by the Administrator, subject to the
following:

 

(1)                                  In the case of an Incentive Stock Option

 

a)                                      granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price will be no less than 110% of
the Fair Market Value per Share on the date of grant.

 

b)                                     granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share
exercise price will be no less than 100% of the Fair Market Value per Share on
the date of grant.

 

(2)                                  In the case of
a Nonstatutory Stock Option, the per Share exercise price will be determined by
the Administrator, but will be no less than 100% of the Fair Market Value per
Share on the date of grant.

 

(3)                                  Notwithstanding
the foregoing, Options may be granted with a per Share exercise price of less
than 100% of the Fair Market Value per Share on the date of grant pursuant to a
transaction described in, and in a manner consistent with, Section 424(a) of
the Code.

 

(ii)                                  Waiting Period and Exercise Dates. 
At the time an Option is granted, the Administrator will fix the period
within which the Option may be exercised and will determine any conditions that
must be satisfied before the Option may be exercised.

 

(iii)                               Form of Consideration. 
The Administrator will determine the acceptable form(s) of
consideration for exercising an Option, including the method of payment, to the
extent permitted by Applicable Laws.

 

(d)                                 Exercise of Option.

 

(i)                                     Procedure for Exercise; Rights as a
Stockholder.  Any Option granted hereunder will be
exercisable according to the terms of the Plan and at such times and under such
conditions as determined by the Administrator and set forth in the Award
Agreement.  An Option may not be
exercised for a fraction of a Share.

 

An Option will be
deemed exercised when the Company receives: (i) notice of exercise (in
such form as the Administrator specify from time to time) from the person
entitled to exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised (together with an applicable withholding
taxes).  No adjustment will be made for a

 

8

 

dividend or other
right for which the record date is prior to the date the Shares are issued,
except as provided in Section 16 of the Plan.

 

(ii)                                  Termination of Relationship as a Service
Provider.  If a Participant ceases to be a Service
Provider, other than upon the Participant’s death, Disability or Misconduct,
the Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Award Agreement).  In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for three (3) months
following the Participant’s termination. 
Unless otherwise provided by the Administrator, if on the date of
termination the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will revert to the
Plan.  If after termination the
Participant does not exercise his or her Option within the time specified by
the Administrator, the Option will terminate, and the Shares covered by such
Option will revert to the Plan.

 

(iii)                               Disability of Participant. 
If a Participant ceases to be a Service Provider as a result of the
Participant’s Disability, the Participant may exercise his or her Option within
such period of time as is specified in the Award Agreement to the extent the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award
Agreement).  In the absence of a
specified time in the Award Agreement, the Option will remain exercisable for
twelve (12) months following the Participant’s termination.  Unless otherwise provided by the
Administrator, if on the date of termination the Participant is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option will revert to the Plan.  If after
termination the Participant does not exercise his or her Option within the time
specified herein, the Option will terminate, and the Shares covered by such Option
will revert to the Plan.

 

(iv)                              Death of Participant. 
If a Participant dies while a Service Provider, the Option may be
exercised following the Participant’s death within such period of time as is
specified in the Award Agreement to the extent that the Option is vested on the
date of death (but in no event may the option be exercised later than the
expiration of the term of such Option as set forth in the Award Agreement), by
the Participant’s designated beneficiary, provided such beneficiary has been
designated prior to Participant’s death in a form acceptable to the
Administrator.  If no such beneficiary
has been designated by the Participant, then such Option may be exercised by
the personal representative of the Participant’s estate or by the person(s) to
whom the Option is transferred pursuant to the Participant’s will or in
accordance with the laws of descent and distribution.  In the absence of a specified time in the
Award Agreement, the Option will remain exercisable for twelve (12) months
following Participant’s death.  Unless
otherwise provided by the Administrator, if at the time of death Participant is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will immediately revert to the Plan.  If the Option is not so exercised within the
time specified herein, the Option will terminate, and the Shares covered by
such Option will revert to the Plan.

 

9

 

7.             Restricted Stock.

 

(a)           Grant of Restricted Stock.  Subject to the terms and provisions of the
Plan, the Administrator, at any time and from time to time, may grant Shares of
Restricted Stock to Service Providers in such amounts as the Administrator, in
its sole discretion, will determine.

 

(b)           Restricted Stock Agreement.  Each Award of Restricted Stock will be
evidenced by an Award Agreement that will specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.  Notwithstanding the foregoing, during any
Fiscal Year no Participant will receive more than an aggregate of 500,000
Shares of Restricted Stock; provided, however, that in connection with a Participant’s
initial service as an Employee, an Employee may be granted an aggregate of up
to an additional 500,000 Shares of Restricted Stock.  Unless the Administrator determines
otherwise, Shares of Restricted Stock will be held by the Company as escrow
agent until the restrictions on such Shares have lapsed.

 

(c)           Transferability.  Except as provided in this Section 7,
Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.

 

(d)           Other Restrictions.  The Administrator, in its sole discretion,
may impose such other restrictions on Shares of Restricted Stock as it may deem
advisable or appropriate.

 

(e)           Removal of Restrictions.  Except as otherwise provided in this Section 7,
Shares of Restricted Stock covered by each Restricted Stock grant made under
the Plan will be released from escrow as soon as practicable after the last day
of the Period of Restriction.  The
restrictions will lapse at a rate determined by the Administrator; provided,
however, that Shares of Restricted Stock will vest no earlier than one-third
(1/3rd) of the total
number Shares of Restricted Stock subject to an Award each year from the date
of grant, unless the Administrator determines that the Award is to vest upon
the achievement of a performance objective, provided the period for measuring
performance will be at least twelve months.  After the
grant of Restricted Stock, the Administrator, in its sole discretion, may
reduce or waive any restrictions for such Restricted Stock upon or in
connection with a Change in Control or upon or in connection with a Participant’s
termination of service, including, without limitation, due to death or
Disability.

 

(f)            Voting Rights.  During the Period of Restriction, Service
Providers holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares, unless the Administrator
determines otherwise.

 

(g)           Dividends and Other Distributions.  During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the Award Agreement. 
If any such dividends or distributions are paid in Shares, the Shares
will be subject to the same restrictions on transferability and forfeitability
as the Shares of Restricted Stock with respect to which they were paid.

 

10

 

(h)           Return of Restricted Stock to
Company.  On the date set forth in
the Award Agreement, the Restricted Stock for which restrictions have not
lapsed will revert to the Company and again will become available for grant
under the Plan.

 

8.             Stock Appreciation Rights.

 

(a)           Grant of SARs.  Subject to the terms and conditions of the
Plan, a SAR may be granted to Service Providers at any time and from time to
time as will be determined by the Administrator, in its sole discretion.

 

(b)           Number of Shares.  The Administrator will have complete
discretion to determine the number of SARs granted to any Participant, provided
that during any Fiscal Year, no Participant will be granted SARs or Options
covering more than 1,000,000 Shares. 
Notwithstanding the foregoing limitation, in connection with a
Participant’s initial service as an Employee, an Employee may be granted SARs
or Options covering up to an additional 1,000,000 Shares.

 

(c)           Exercise Price and Other Terms.  The Administrator, subject to the provisions
of the Plan, will have complete discretion to determine the terms and
conditions of SARs granted under the Plan, provided, however, that the exercise
price will be not less than one hundred percent (100%) of the Fair Market Value
of a Share on the date of grant.

 

(d)           SAR Agreement.  Each SAR grant will be evidenced by an Award
Agreement that will specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.

 

(e)           Expiration of SARs.  A SAR granted under the Plan will expire upon
the date determined by the Administrator, in its sole discretion, and set forth
in the Award Agreement.  Notwithstanding
the foregoing, the rules of Section 6(d) also will apply to
SARs.

 

(f)            Payment of SAR Amount.  Upon exercise of a SAR, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:

 

(i)            The difference between the Fair
Market Value of a Share on the date of exercise over the exercise price; times

 

(ii)           The number of Shares with respect to
which the SAR is exercised.

 

At the discretion
of the Administrator, the payment upon SAR exercise may be in cash, in Shares
of equivalent value, or in some combination thereof.

 

9.             Performance Units and Performance Shares.

 

(a)           Grant of Performance Units/Shares.  Performance Units and Performance Shares may
be granted to Service Providers at any time and from time to time, as will be
determined by the Administrator, in its sole discretion.  The Administrator will have complete
discretion in determining the number of Performance Units/Shares granted to
each Participant provided that during any Fiscal Year, (a) no Participant
will receive Performance Units having an initial value greater than $5,000,000,
and (b) no Participant will receive more than 500,000 Performance
Shares.  

 

11

 

Notwithstanding the
foregoing limitation, in connection with a Participant’s initial service as an
Employee, an Employee may be granted up to an additional 500,000 Performance
Shares.

 

(b)           Value of Performance Units/Shares.  Each Performance Unit will have an initial
value that is established by the Administrator on or before the date of
grant.  Each Performance Share will have
an initial value equal to the Fair Market Value of a Share on the date of
grant.

 

(c)           Performance Objectives and Other
Terms.  The Administrator will set
performance objectives or other vesting provisions (including, without
limitation, continued status as a Service Provider) in its discretion which,
depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be paid out to the Participant
..  Each Award of Performance Units/Shares
will be evidenced by an Award Agreement that will specify the Performance
Period, and such other terms and conditions as the Administrator, in its sole
discretion, will determine; provided, however, that Awards of
Performance Units/Shares will vest no earlier than one-third (1/3) of the total
number units or Shares subject to such Award each year from the date of grant,
unless the Administrator determines that the Award is to vest upon the
achievement of a performance objective, provided the period for measuring
performance will be at least twelve months.

 

(d)           Earning of Performance
Units/Shares.  After the applicable
Performance Period has ended, the holder of Performance Units/Shares will be
entitled to receive a payout of the number of Performance Units/Shares earned by
the Participant over the Performance Period, to be determined as a function of
the extent to which the corresponding performance objectives or other vesting
provisions have been achieved.  After the
grant of a Performance Unit/Share, the Administrator, in its sole discretion,
may reduce or waive any performance objectives or other vesting provisions for
such Performance Unit/Share upon or in connection with a Change in Control or
upon or in connection with a Participant’s termination of service, including,
without limitation, due to death or Disability.

 

(e)           Form and Timing of Payment of
Performance Units/Shares.  Payment of
earned Performance Units/Shares will be made as soon as practicable after the
expiration of the applicable Performance Period.  The Administrator, in its sole discretion,
may pay earned Performance Units/Shares in the form of cash, in Shares (which
have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period) or
in a combination thereof.

 

(f)            Cancellation of Performance
Units/Shares.  On the date set forth
in the Award Agreement, all unearned or unvested Performance Units/Shares will
be forfeited to the Company, and again will be available for grant under the
Plan.

 

10.           Other Cash or Stock Awards.  In addition to the incentives described in
Sections 6 through 9 above, the Administrator may grant other incentives
payable in cash or Shares under the Plan as it determines to be in the best
interests of the Company and subject to such other terms and conditions as it
deems appropriate, provided that in any Fiscal Year, a Participant will not
receive a cash Award under this Section in excess of $5,000,000.

 

12

 

11.           Performance Goals.  Awards of Restricted Stock, Performance
Shares and Performance Units and other incentives under the Plan may be made
subject to the attainment of performance goals relating to one or more business
criteria within the meaning of Section 162(m) of the Code and may
provide for a targeted level or levels of achievement (“Performance Goals”)
including cash flow; cash position; earnings before interest and taxes;
earnings before interest, taxes, depreciation and amortization; earnings per
Share; economic profit; economic value added; equity or stockholder’s equity;
market share; net income; net profit; net sales; operating earnings; operating
income; profit before tax; ratio of debt to debt plus equity; ratio of
operating earnings to capital spending; sales growth; return on net assets; or
total return to stockholders.  Any
Performance Goals may be used to measure the performance of the Company as a
whole or a business unit of the Company and may be measured relative to a peer
group or index.  The Performance Goals for
a Participant will be determined by the Administrator based on the Company’s
tactical and strategic business objectives, which may differ from Participant
to Participant and from Award to Award. 
Prior to the Determination Date, the Administrator will determine
whether to make any adjustments to the calculation of any Performance Goal with
respect to any Participant for any significant or extraordinary events
affecting the Company.  In all other
respects, Performance Goals will be calculated in accordance with the Company’s
financial statements, generally accepted accounting principles, or under a
methodology established by the Administrator prior to the issuance of an Award,
which is consistently applied and identified in the financial statements,
including footnotes, or the management discussion and analysis section of the
Company’s annual report.

 

12.           Leaves of Absence.  Unless the Administrator provides otherwise,
vesting of Awards granted hereunder will be suspended during any unpaid leave
of absence.  A Service Provider will not
cease to be an Employee in the case of (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, or any Subsidiary.  For purposes of Incentive Stock Options, no
such leave may exceed ninety (90) days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract.  If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, then three (3) months
following the 91st day of such leave any Incentive Stock Option held by the
Participant will cease to be treated as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option.

 

13.           Transferability of Awards.  Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Participant, only by the Participant.  If
the Administrator makes an Award transferable, such Award will contain such
additional terms and conditions as the Administrator deems appropriate.

 

14.           Termination of Relationship as a
Service Provider due to Misconduct. 
If a Participant ceases to be a Service Provider due to his or her
Misconduct or should a Participant engage in Misconduct while holding an
outstanding Award, then all Awards that the Participant then holds will immediately
terminate and the Participant will have no further rights with respect to such
Awards.  Upon such a termination, the
Shares covered by the Awards that so terminate will revert to the Plan.

 

13

 

15.           Awards to Outside Directors.

 

(a)           General.  Outside Directors will be entitled to receive
all types of Awards under this Plan, including discretionary Awards not covered
under this Section 15.  All grants
of Options and Restricted Stock Units to Outside Directors pursuant to this Section will
be automatic and nondiscretionary, except as otherwise provided herein, and
will be made in accordance with the following provisions:

 

(b)           Options.

 

(i)            First Option.  Each Outside Director who becomes an Outside
Director after March 7, 2007 will be automatically granted a Nonstatutory
Stock Option to purchase 30,000 Shares (the “First Option”) on the date on
which such person first becomes an Outside Director, whether through election
by the stockholders of the Company or appointment by the Board to fill a
vacancy; provided, however, that an Inside Director who ceases to be an Inside
Director but who remains a Director will not receive a First Option.

 

(ii)           Subsequent Option.  Each Outside Director will be automatically
granted a Nonstatutory Stock Option to purchase 10,000 Shares (a “Subsequent
Option”) on the date of each annual meeting of the Company’s stockholders
following March 7, 2007; provided that he or she is then an Outside
Director and, provided  further, that as of such date, he or she
will have served on the Board for at least the preceding six (6) months.

 

(iii)          Terms of Options. The terms of
First Options and Subsequent Options granted hereunder will be as follows:

 

(1)           the term of each Option will be ten (10) years.

 

(2)           the exercise price per Share will be
100% of the Fair Market Value per Share on the date of grant.

 

(3)           twenty-five percent (25%) of the
Shares subject to each First Option will vest on each anniversary of the date
of grant of such Option, so that 100% of the Shares subject to such Option will
be vested four (4) years from the grant date, subject to Optionee
continuing to be a Director through such dates. 
One hundred percent (100%) of the Shares subject to each Subsequent
Option will vest on the earlier of (i) the one-year anniversary of the
date of grant and (ii) the date of the next annual meeting of the Company’s
stockholders following the date of grant, subject to the Optionee continuing to
be a Director through such date.

 

(4)           each Option granted under this Section 15
will have such other terms and conditions as the Administrator determines.

 

(c)           Restricted Stock Units.

 

(i)            Annual Restricted Stock Units.  Each Outside Director will be automatically
granted an Award of 3,000 Restricted Stock Units (“Annual Restricted Stock
Units”) on the date of each annual meeting of the Company’s stockholders
following March 7, 2007; 

 

14

 

provided that he or she is then an Outside
Director and, provided  further, that as of such date, he or she
will have served on the Board for at least the preceding six (6) months.

 

(ii)           Terms of Restricted Stock Units.
The terms of Annual Restricted Stock Units granted hereunder will be as
follows:

 

(1)           one hundred percent (100%) of the Annual
Restricted Stock Units will vest on the earlier of (i) the one-year
anniversary of the date of grant and (ii) the date of the next annual
meeting of the Company’s stockholders following the date of grant, subject to
the Optionee continuing to be a Director through such date.

 

(2)           each Restricted Stock Unit will
represent the right to receive a Share and will be settled in Common Stock upon
vesting.

 

(3)           Awards of Restricted Stock Units
granted under this Section 15 will have such other terms and conditions as
the Administrator determines.

 

(d)           Adjustments.  The Administrator in its discretion may
change and otherwise revise the terms of Awards granted under this Section 15,
including, without limitation, the number of Shares, exercise prices and other
terms thereof, for Awards granted on or after the date the Administrator
determines to make any such change or revision.

 

16.           Adjustments; Dissolution or
Liquidation; Merger or Change in Control.

 

(a)           Adjustments.  In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares occurs, the Administrator, in
order to prevent diminution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, may (in its sole
discretion) adjust the number and class of Shares that may be delivered under
the Plan and/or the number, class, and price of Shares covered by each
outstanding Award, and the numerical Share and unit limits set forth in Sections 3,
6, 7, 8, 9 and 15.

 

(b)           Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as
soon as practicable prior to the effective date of such proposed transaction.  To the extent it has not been previously
exercised, an Award will terminate immediately prior to the consummation of
such proposed action.

 

(c)           Change in Control.  In the event of a Change in Control, each
outstanding Award will be assumed or an equivalent option or right substituted
by the successor corporation or a Parent or Subsidiary of the successor
corporation.  In the event that the
successor corporation refuses to assume or substitute for the Award, the Participant
will fully vest in and have the right to exercise all of his or her outstanding
Options and Stock Appreciation Rights, including Shares as to which such Awards
would not otherwise be vested or exercisable, all restrictions on Restricted
Stock will lapse, and, with respect to Performance Shares and Performance
Units, all Performance Goals or other vesting criteria will be deemed achieved
at target levels and all other terms and conditions met.  In addition, if an Option or Stock
Appreciation Right becomes fully vested and exercisable in lieu of 

 

15

 

assumption or
substitution in the event of a Change in Control, the Administrator will notify
the Participant in writing or electronically that the Option or Stock
Appreciation Right will be fully vested and exercisable for a period of time
determined by the Administrator in its sole discretion, and the Option or Stock
Appreciation Right will terminate upon the expiration of such period.

 

With respect to Awards granted to Outside Directors that are assumed or
substituted for, if on the date of or following such assumption or substitution
the Participant’s status as a Director or a director of the successor
corporation, as applicable, is terminated other than upon a voluntary
resignation by the Participant, then the Participant will fully vest in and
have the right to exercise Options and/or Stock Appreciation Rights as to all
of the Shares subject thereto, including Shares as to which such Awards would
not otherwise be vested or exercisable, all restrictions on Restricted Stock
will lapse, and, with respect to Performance Shares and Performance Units, all
Performance Goals or other vesting criteria will be deemed achieved at target
levels and all other terms and conditions met.

 

For the purposes
of this subsection (c), an Award will be considered assumed if, following the
Change in Control, the Award confers the right to purchase or receive, for each
Share subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, or other securities or property) or, in the
case of a Stock Appreciation Right upon the exercise of which the Administrator
determines to pay cash or a Performance Share or Performance Unit which the
Administrator can determine to pay in cash, the fair market value of the
consideration received in the merger or Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however,
that if such consideration received in the Change in Control is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of an Option or Stock Appreciation Right or upon
the payout of a Performance Share or Performance Unit, for each Share subject
to such Award (or in the case of Performance Units, the number of implied
shares determined by dividing the value of the Performance Units by the per
share consideration received by holders of Common Stock in the Change in
Control), to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders
of Common Stock in the Change in Control.

 

Notwithstanding
anything in this Section 16(c) to the contrary, an Award that vests,
is earned or paid-out upon the satisfaction of one or more Performance Goals
will not be considered assumed if the Company or its successor modifies any of
such Performance Goals without the Participant’s consent; provided, however, a
modification to such Performance Goals only to reflect the successor
corporation’s post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.

 

17.           Tax Withholding

 

(a)           Withholding Requirements.  Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, 

 

16

 

state, local, foreign or
other taxes (including the Participant’s FICA obligation) required to be
withheld with respect to such Award (or exercise thereof).

 

(b)           Withholding Arrangements.  The Administrator, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part by (a) paying
cash, (b) electing to have the Company withhold otherwise deliverable cash
or Shares having a Fair Market Value equal to the amount required to be
withheld, (c) delivering to the Company already-owned Shares having a Fair
Market Value equal to the amount required to be withheld, or (d) selling
a sufficient number of Shares otherwise deliverable to the Participant through
such means as the Administrator may determine in its sole discretion (whether
through a broker or otherwise) equal to the amount required to be withheld. 
The amount of the withholding requirement will be deemed to include any
amount which the Administrator agrees may be withheld at the time the election
is made, not to exceed the amount determined by using the maximum federal,
state or local marginal income tax rates applicable to the Participant with
respect to the Award on the date that the amount of tax to be withheld is to be
determined.  The Fair Market Value of the
Shares to be withheld or delivered will be determined as of the date that the
taxes are required to be withheld.

 

18.           No Effect on Employment or Service.  Neither the Plan nor any Award will confer
upon a Participant any right with respect to continuing the Participant’s
relationship as a Service Provider with the Company, nor will they interfere in
any way with the Participant’s right or the Company’s right to terminate such
relationship at any time, with or without cause, to the extent permitted by
Applicable Laws.

 

19.           Date of Grant.  The date of grant of an Award will be, for
all purposes, the date on which the Administrator makes the determination
granting such Award, or such other later date as is determined by the
Administrator.  Notice of the
determination will be provided to each Participant within a reasonable time
after the date of such grant.

 

20.           Term of Plan.  Subject to Section 24  of the Plan, the Plan will become effective upon its
adoption by the Board.  It will continue
in effect for a term ending on December 31, 2010 unless terminated earlier
under Section 21  of the Plan.

 

21.           Amendment and Termination of the
Plan.

 

(a)           Amendment and Termination.  The Administrator may at any time amend, alter,
suspend or terminate the Plan.

 

(b)           Stockholder Approval.  The Company will obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.  Without limiting the
foregoing sentence, the number of Shares available under the Plan pursuant to Section 3
herein may not be increased without approval of the Company’s stockholders,
except as provided in Section 3.

 

(c)           Effect of Amendment or Termination.  No amendment, alteration, suspension or
termination of the Plan will impair the rights of any Participant, unless
mutually agreed otherwise between the Participant and the Administrator, which
agreement must be in writing and signed by the Participant and the
Company.  Termination of the Plan will
not affect the Administrator’s ability 

 

17

 

to exercise the powers
granted to it hereunder with respect to Awards granted under the Plan prior to
the date of such termination.

 

22.           Conditions Upon Issuance of Shares.

 

(a)           Legal Compliance.  Shares will not be issued pursuant to the
exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Shares will comply with Applicable Laws and will be further
subject to the approval of counsel for the Company with respect to such
compliance.

 

(b)           Investment Representations.  As a condition to the exercise of an Award,
the Company may require the person exercising such Award to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute
such Shares if, in the opinion of counsel for the Company, such a
representation is required.

 

23.           Inability to Obtain Authority.  The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, will relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.

 

24.           Stockholder Approval.  The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan
is adopted.  Such stockholder approval
will be obtained in the manner and to the degree required under Applicable
Laws.

 

18

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