Document:

<PAGE>

                                                                    EXHIBIT 4.33

             CONFIDENTIAL TREATMENT REQUESTED PURSUANT TO RULE 24B-2

    CERTAIN PORTIONS, INDICATED BY [*****], OF THIS EXHIBIT HAVE BEEN OMITTED
   PURSUANT TO RULE 24b-2 OF THE SECURITIES ACT OF 1934. THE OMITTED MATERIALS
     HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

                         TECHNOLOGY PARTNERSHIPS CANADA

                   SOFTWARE DEFINED RADIO FOR DEFENCE PURPOSES

This Agreement made

Between:             HER MAJESTY THE QUEEN IN RIGHT OF CANADA as represented by
                     the Minister of Industry

                             (hereinafter referred to as "the MINISTER")

AND:                 SPECTRUM SIGNAL PROCESSING INC., a corporation duly
                     incorporated under the laws of British Columbia, having
                     its head office located at 200-2700 Production Way,
                     Burnaby, British Columbia, (hereinafter referred to as "the
                     PROPONENT")

WHEREAS in a context in which innovation is essential in an increasingly
knowledge-based economy, the minister is charged with the achievement of
Canada's objectives of increase economic growth, creating jobs and wealth, and
supporting sustainable development; and

WHEREAS the Technology Partnerships Canada ("TPC") Program is specifically
designed to promote the above objectives by means of strategically investing in
research, development and innovation in order to encourage private sector
investment, and so maintain and grow the technology base and technological
capabilities of Canadian industry throughout the country; and

WHEREAS the Minister agrees to make a TPC investment in the Proponent's project
described in this Agreement, considering that:

a)       The project will enhance Canadian technological capability in software
         defined radio;

b)       The new technologies and resulting products are expected to offer
         significant performance advantages over existing communications
         technologies;

c)       The resulting products are expected to contribute to meeting a growing
         demand for high performance military communications products; and

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d)       The project is expected to generate significant jobs and leverage
         additional R&D activity in Canada;

AND WHEREAS the entering into this Agreement is not contingent upon any export
performance on the part of the Proponent.

NOW, THEREFORE, in consideration of their respective obligations set out below,
the parties hereto agree as follows.

ARTICLE 1 - Deadline for receipt of signed agreement

1.1               This Agreement must be signed by the Proponent and received by
         the Minister within thirty (30) days of its signature on behalf of the
         Minister, failing which it will be null and void.

ARTICLE 2 - DOCUMENTS FORMING PART OF THIS AGREEMENT

2.1               The following documents form an integral part of this
         Agreement:

                  These Articles of Agreement
                  Schedule 1 - TPC General Conditions
                  Schedule 2 - The Project
                  Schedule 3 - Claims and TPC Project Cost Principles
                  Schedule 4 - Contractual Benefits
                  Schedule 5 - Reporting Requirements
                  Schedule 6 - Project Fact Sheet for News release

2.2               In the event of conflict or inconsistency, the order of
         precedence amongst the documents forming part of this Agreement shall
         be:

                  These Articles of Agreement,
                  Schedule 1 - General Conditions
                  Schedule 2 - The Project
                  Other Schedules

ARTICLE 3 - THE PROPONENT'S OBLIGATIONS

3.1               The Proponent will carry out the Software Defined Radio for
         Defense Purposes Project ("the "PROJECT") as described in Schedule 2,
         will make claims in accordance with Schedule 3, will provide the
         benefits mentioned in Schedule 4, will issue the reports required under
         Schedule 5 and will fulfil all of its other obligations hereunder, in a
         diligent and professional manner using qualified personnel.

3.2               The Proponent shall ensure that the Project is completed on or
         before December 31, 2006 ("PROJECT COMPLETION DATE"), unless otherwise
         agreed to in writing by the Minister.

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ARTICLE 4 - THE CONTRIBUTION

4.1               Subject to all the other provisions of this Agreement, the
         Minister will make a Contribution to the Proponent in respect of the
         Project, of the lesser of:

         (a)      25% of the Eligible Costs; and

         (b)      $8,299,616

4.2               The Minister will not contribute to any Eligible Costs
         incurred by the Proponent prior to June 19, 2003 nor after the Project
         Completion Date, unless otherwise agreed to in writing by the Minister.

ARTICLE 5 - ENVIRONMENTAL ASSESSMENT

5.1               The Minister has assessed the Project under Canadian
         Environmental Assessment Act and is satisfied that any potentially
         adverse environmental effects that may be caused by the Project are
         insignificant.

ARTICLE 6 - OTHER GOVERNMENT ASSISTANCE

6.1               The Proponent hereby acknowledges that, except for scientific
         research and experimental development tax credits, deductions or
         allowances, no other federal, provincial or municipal government
         financial assistance other than that described below has been requested
         or received by the Proponent for the Eligible Costs of the Project.

<TABLE>
<S>               <C>
Federal           $ 0.0
Provincial        $ 0.0
Municipal         $ 0.0
                  -----
Total             $ 0.0
</TABLE>

6.2               The Proponent will inform the Minister promptly in writing of
         any other federal, provincial or municipal government assistance
         (except for scientific research and experimental development tax
         credits, deductions or allowances) to be received for the Eligible
         Costs of the Project and the Minister will have the right to reduce the
         Contribution under this Agreement to the extent of any such assistance.

ARTICLE 7 - ADDRESSES

7.1               Any notice to the Minister will be addressed to:

                  Director, Aerospace & Defence Directorate
                  Technology Partnerships Canada

                                                             FILE NO. 710-487968

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                  10th Floor
                  300 Slater Street
                  Ottawa, Ontario K1A 0C8

                  Fax No: (613) 954-9117

7.2               Any notice to the Proponent will be addressed to:

                  Spectrum Signal Processing Inc.
                  200-2700 Production Way
                  Burnaby, British Columbia
                  V5A 4X1

                  Fax No: (604) 421-1764

ARTICLE 8 - SPECIAL CONDITIONS

8.1               ALTERNATE DISPUTE RESOLUTION

         If a dispute arises concerning the application or interpretation of
         this Agreement, the parties will attempt to resolve the matter through
         good faith negotiation, and may, if necessary and the parties consent
         in writing, resolve the matter through mediation by a mutually
         acceptable mediator or arbitration in accordance with the Commercial
         Arbitration Code set out in the schedule to the Commercial Arbitration
         Act (Canada), and all regulations made pursuant to that Act.

8.2               CONDITIONS PRECEDENT - EVIDENCE OF FINANCING

         Spectrum shall demonstrate, by 31 March 2004, that the company has
         maintained the financial means and intent to complete this project.
         Proof of access to a minimum of $5 million working capital or in the
         event of a change in control of the company an equivalent financial
         guarantee by the parent company, combined with a reaffirmation in
         writing of the intent to complete the project in accordance with the
         terms of the agreement shall constitute a satisfactory demonstration.
         In the event that satisfactory demonstration is not achieved, TPC will
         make payment on claims submitted by Spectrum for eligible costs
         incurred up to and including 31 March 2004 after which TPC's funding
         obligation will cease until such time as the company provides
         satisfactory evidence of financing. In the event that the company is
         unable to provide satisfactory evidence of financing before 30
         September 2004, the agreement will terminate on September 30, 2004 or
         earlier, upon the issuance of a letter, from the Minister, informing
         that in his or her sole opinion, Spectrum has not provided satisfactory
         evidence of financing.

8.3               REQUIRED GOVERNMENT APPROVALS

         All payments to be made by the Minister to the Proponent, pursuant to
         this Agreement, on or after December 31, 2005 are subject to the
         required

                                                             FILE NO. 710-487968

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         Governmental approvals, including Treasury Board. In the event that the
         Minister is prevented from disbursing the full amount of the
         Contribution, the Parties agree to review the effects of such a
         shortfall in the Contribution on the implementation of the Agreement
         and to adjust, as appropriate, the Contractual Benefits specified
         therein.

8.4               VISIBILITY PROTOCOL

         (a)      The following sub-articles concerning public announcements by
                  the Proponent as well as the obligations set-out in Article 10
                  of the General Terms and Conditions are Material Undertakings
                  under this Agreement:

                  (i)      The Proponent shall obtain the prior consent of the
                           Minister prior to mentioning TPC in any of its public
                           statements. The Proponent shall mention TPC (name and
                           logo) in its promotional activities, in its
                           publicities and in its public relations when it
                           mentions the Project. A qualifying statement shall be
                           added to underscore the importance of the TPC
                           contribution.

                  (ii)     The Proponent shall invite representatives of TPC to
                           be present at public activities involving the Project
                           and shall inform the public of TPC's collaboration in
                           the Project.

         (b)      For information purposes, the following Government of Canada
                  URL provides protocol guidelines for use when planning public
                  ceremonies related to the Project:

                <http://pch.gc.ca/progs/cpsc-ccsp/pe/index_e.cfm>

ARTICLE 9 - ENTIRE AGREEMENT

                                                             FILE NO. 710-487968

<PAGE>

IN WITNESS WHEREOF the parties hereto have executed this Agreement through duly
authorized representatives.

HER MAJESTY THE QUEEN IN RIGHT OF CANADA,
as represented by the Minister of Industry

Per:  /s/ Jeff Parker                                   16/03/04
    ------------------------------------------            Date
      Technology Partnerships Canada (TPC)

      Jeff Parker - Executive Director, TPC

SPECTRUM SIGNAL PROCESSING INC.

Per:  /s/ Brent Flichel                               March 16, 2004
    ------------------------------------------            Date
      BRENT FLICHEL
      Chief Financial Officer
      Name & Title

                                                             FILE NO. 710-487968

<PAGE>

                       SCHEDULE 1 - TPC GENERAL CONDITIONS

                                TABLE OF CONTENTS

1.       DEFINITIONS

Agreement
Background Intellectual Property
Contribution
Eligible Costs
Fiscal Year
Intellectual Property
Interest Rate
Project
Project Completion Date
Schedule
Statement of work

2.       MATERIAL CHANGES

3.       DISPOSAL OF ASSETS

4.       CLAIMS FOR PAYMENT

         4.1      Payment of Claims

         4.2      Hold-back Rights

         4.3      Overpayment by Minister

         4.4      Set-off Rights of Minister

5.       MONITORING

         5.1      Ministers Right to Audit Accounts and Records

         5.2      Access to Premises

         5.3      Access to Third-party Information

6.       REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS

         6.1      Power and Authority of Proponent

         6.2      Authorized Signatories

         6.3      Binding Obligations

         6.4      No Pending Suits or Actions

         6.5      No Gifts or Inducements

         6.6      Intellectual Property

         6.7      Compliance with Environmental Protection Requirements

         6.8      Other Agreements

         6.9      Dividend Restriction

         6.10     Other Financing

         6.11     Lobbyist Act

7.       TERM OF AGREEMENT

         7.1      Contractual Benefits

         7.2      Advance Payment

         7.3      Audit

8.       DEFAULT AND RECOVERY

         8.1      Events of Default

         8.2      Remedies on Default

         8.3      Remedies Fair and Reasonable

         8.4      No Waiver

9.       FORCE MAJEURE

         9.1      Event of Force Majeure

         9.2      Definition of Force Majeure

10.      ANNOUNCEMENTS

         10.1     Consent to Public Announcement

         10.2     Confidentiality Obligation

         10.3     Reporting under Security Laws

11.      NOTICE

         11.1     Form and Timing of Notice

         11.2     Change of Address

12.      COMPLIANCE WITH LAWS

13.      MEMBERS OF PARLIAMENT

14.      ANNUAL APPROPRIATIONS

         14.1     Parliamentary Allocation

         14.2     Lack of Appropriation

15.      CONFIDENTIALITY

         15.1     Consent Required

         15.2     International Dispute

         15.3     Financing and Licensing

16.      CONSENT OF THE MINISTER

17.      NO ASSIGNMENT OF AGREEMENT

18.      COMPLIANCE WITH POST-EMPLOYMENT PROVISIONS

19.      CONTRIBUTION AGREEMENT ONLY

20.      BINDING AGREEMENT

21.      SEVERABILITY

22.      APPLICABLE LAW

23.      SIGNATURE IN COUNTERPARTS

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                            SCHEDULE 2 - THE PROJECT

                             STATEMENT OF WORK (SOW)

1.01     DESCRIPTION OF THE WORK

      This project, Software Defined Radio for Defence Purposes, is focused on
      developing new technologies to enable the implementation of software
      definable reconfigurable RF signal processing platforms for use in
      aerospace and defence applications.

      The key enabler of 'software define-ability' in a Software Defined Radio
      (SDR) rests in the signal processing heart of the radio and it is the
      creative implementation of this processing heart that is the focus of this
      project. Making SDR a reality involves significant advances in
      communications signal processing, software algorithms, software tools,
      Field Programmable Gate Array (FPGA) software, communications fabrics and
      Digital Signal Processor (DSP) system design. Spectrum's R&D program
      pursues next generation advances in all of these disciplines which,
      combined, will allow us to produce the sophisticated technology necessary
      to implement SDR.

                  THE OBJECTIVES OF THE PROJECT ARE TO DEVELOP:

         -        SDR hardware with enhanced scalability, modularity and
                  heterogeneity (supporting additional processor types);

         -        Broad analog and digital input/output capability for SDR

         -        Application support, including signal processing algorithms
                  and tools, libraries, tools, operating systems, the Software
                  Communications Architecture (SCA), communications fabrics,
                  development of front/back-end interfaces; and,

         -        [*****]

      THE ULTIMATE GOAL OF THIS PROJECT IS TO DEVELOP A PORTFOLIO OF HARDWARE
      AND SOFTWARE BUILDING BLOCKS FOR SOFTWARE DEFINED RADIO, WHICH IS OPTIMAL
      FOR THE DEFENCE MARKET AND CAN BE LEVERAGED INTO COMMERCIAL APPLICATIONS
      AS THAT MARKET MATURES.

2.0      DESCRIPTION OF MAJOR ACTIVITIES AND MILESTONES

      The major activities, which constitute this project, are research and
      development of:

         -        PERFORMANCE. This includes:

                  -        New and more powerful processors including FPGAs;

                  -        Adding further configurability such as more choice of
                           processor types;

                  -        Reduced electrical power needs; and,

                  -        Reduced cost for a given performance.

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         -        I/O. This includes:

                  -        Faster analog I/O;

                  -        Adding digital I/O interfaces such as Fibrechannel;
                           and,

                  -        Enabling our customers to create their own I/O.

         -        APPLICATION SUPPORT. This includes:

                  -        Signal processing algorithms and tools;

                  -        Hardware abstraction tools (quicComm);

                  -        Real-time operating system (RTOS) independence;

                  -        Application abstraction tools (e.g., SCA); and,

                  -        Demonstrating and benchmarking the SDR design for
                           defence applications.

         -        [*****]

         Spectrum subscribes to a diligent R&D approval process that is aimed at
         prioritizing and committing to R&D activities in a timeframe that
         minimizes market risk. In order to consider an R&D activity, there must
         be strategic fit, economic opportunity and validation of market demand.
         [*****]

         [*****]

         All R&D activities will be conducted at the company's facility in
         Burnaby, British Columbia, with the exception that some subcontracting
         work may be done at the subcontractor's premises. All subcontracting
         work will be performed by Canadian companies unless suitable domestic
         capability does not exist.

1.1      MAJOR ACTIVITY 1: PERFORMANCE

         [*****]

         -        Channelization

                           Synchronizing multiple channels of data within one
                           physical stream, and multiple streams across multiple
                           boards is a very difficult task. This must be solved
                           by using common clock sources, time-stamping data,
                           the provision of packet numbering, and using error
                           checking.

                           There are generally no standardized requirements
                           across our customer base. [*****]

         -        Higher speed processors on cPCI

                           The defence community has asked for an upgrade in the
                           FPGA type, from Xilinx Virtex E to Virtex II, and to
                           support the Texas Instruments C6416 processor.
                           Carrier boards always implement multiple processors,
                           or the same type or a heterogeneous mix. An example
                           is our Mosport board that implements 8 C6203
                           processors. Mezzanine module cards may have one or
                           more processors. Two projects in progress are a
                           module with one Xilinx Virtex II, and a module with
                           two C6416 processors.

1.01     Research Rapid I/O to a mezzanine

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         Spectrum wishes to increase the data throughput between a carrier card
         and a mezzanine module, and to further drive this as an industry
         standard. Much of this involves simulation and then empirical testing
         to prove the throughputs can be achieved and a design can be
         manufactured.

         [*****]

         -        First VxS bus boards

                           The VME bus backplane standard, which we currently
                           use, is evolving to support Serial Rapid I/O fabric
                           over the backplane, supporting considerably faster
                           data rate necessary for supporting the new DOD
                           wideband protocols. This new technology standard is
                           called VxS, recently ratified by the VITA standards
                           body. In designing new boards to support this, the
                           latest processors will be incorporated. The Xilinx
                           Virtex II Pro supports PowerPC processors on the same
                           chip as the FPGA. The latest PowerPC processor (7457)
                           provides a performance upgrade from the current
                           7410s.

         -        Higher speed processors on cPCI

         -        Continuing development with the latest FPGAs and processors.
                  Research SoC semiconductors.

                           Semiconductor vendors are attempting to place more
                           communications functions on one chip. FPGA vendors
                           are putting processors such as PowerPCs on their
                           chips (for example, the Xilinx Virtex-II Pro series
                           support embedded PowerPCs). DSP vendors such as Texas
                           Instruments are putting special function blocks on
                           their DSP chips such as Turbo Decoders. Yet other
                           companies are designing massively parallel computing
                           engines for wireless communications.

                           We are attempting to determine the direction of
                           semiconductor development in our area of expertise:
                           high-performance, software-reconfigurable,
                           heterogeneous processing platforms. There are
                           representations made regularly that SoC architectures
                           will come to market that will supercede more generic
                           processors such as DSPs and FPGAs. Spectrum must
                           continue to validate these claims and be prepared to
                           utilize them in a timely manner to maintain its
                           technological lead over competitors.

         -        Design in SoC technology

                           This project involves implementing the SOC technology
                           or technologies chosen in the earlier research phase.
                           Although Spectrum has designed its own custom ASICs
                           in the past, it has no desire to create custom
                           semiconductors going forward. Our direction will be
                           to utilize SoC semiconductors that others have
                           developed within our boards and with additional
                           intellectual property added through software and
                           application development.

1.06     Research next-gen backplane standards

                           Standards bodies are considering the next leap in
                           backplane standards, such as PICMG AdvancedTCA, and
                           VITA 34. Spectrum believes that it must research and
                           select the appropriate standards that SDR must
                           migrate to,

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                           including performing any prototyping to verify
                           performance and operability.

                           Whereas the VxS standard, mentioned above, is stable
                           enough to develop product on, this task and the next
                           involve research and development in backplanes that
                           are not fully specified and are months to years away
                           from becoming ratified. The companies defining these
                           specifications, including ours, must still prove the
                           technical feasibility. For example, today we can
                           achieve 1.25 gigabits-per-second from chips across
                           boards and backplanes to other chips. The new
                           possible standards mentioned are attempting to
                           achieve 10 Gbps over a single differential line.

         -        Design in next-generation backplane

                           This project involves implementing the backplane
                           technology or technologies chosen in the earlier
                           research phase.

2.2      MAJOR ACTIVITY 2: I/O

         [*****]

         -        High-speed mass storage

                           The Signals Intelligence (SIGINT) community must deal
                           with an ever-increasing number of RF channels. An
                           upcoming requirement is to buffer a wide swath of RF
                           data onto extremely high-speed disk arrays, and then
                           after deciding what signals are of interest, to
                           retrieve the buffered data and process only the
                           channels of interest. [*****]

1.09     Transition Module reference design kit

                           Our experience with previous products and again with
                           our first implementation of SDR shows that a signal
                           processing solution can be developed that meets the
                           needs of many customers. However, the input/output
                           section, whether analog or digital, may need to be
                           different for each customer. We have partially
                           ameliorated the need to change our products for each
                           customer by separating the processing function from
                           the I/O, with a novel communications bus that
                           functions at very high-speed and supports packetizing
                           and time-stamping of the data (to enable
                           channelization).

                           [*****]

         [*****]

         -        [*****]I/O module

                           Spectrum's current SDR-3000 subsystem supports I/O
                           streams from the RF transceiver of 80 mega-samples
                           per second (MSPS). [*****]This technology is
                           important to the SIGINT community, but is of special
                           interest to Military Satellite Communications
                           programs wishing to implement new very high-speed
                           waveforms. There is both research and development in
                           achieving this module. Other public companies have
                           recently proven 1 gigabit receive technology, but not
                           transceive. It is unknown today if we can
                           sufficiently reduce clock jitter

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                           and break the data into parallel, slower data-rate,
                           streams that can be supported by today's FPGAs. We
                           will need to propose solutions, prototype and test
                           them before proceeding with the development of the
                           module.

         -        [*****]

         -        Fibrechannel connectivity

                           Spectrum expects to use the Fibrechannel
                           communications standard to allow connectivity to
                           external high-speed RF transceivers, and for
                           connecting to back-end processing systems.

1.3      MAJOR ACTIVITY 3: APPLICATION SUPPORT

         [*****]

         -        FPGA core support

                           Developing VHDL code for FPGAs is still in very early
                           stages, much like software a few decades ago.
                           Currently what we offer are the "copper" connections
                           between an FPGA and the outside world, and the
                           beginnings of coding support. Our customers must then
                           spend a great deal of time learning our architecture,
                           writing and debugging the FPGA code.

                           Our goal, exactly as we have done with traditional
                           processors, is to abstract the hardware details and
                           greatly reduce the development time for our
                           customers, allowing them to concentrate on their
                           application instead of being forced to become experts
                           on Spectrum's hardware design.

                           Some interesting points: FPGAs today must interface
                           to other FPGAs, communications fabrics, processors,
                           high-speed memory, etc. These interfaces can be
                           parallel, serial, and/or packetized. FPGAs now have
                           over 1000 pin connections. If the designer
                           accidentally drives both ends of a circuit board
                           connection through incorrect programming, he can
                           destroy a $40,000 board.

                           [*****]

         -        SCA Beta test

                           The SCA standard driven by the defence community is
                           still being modified and discussed. Spectrum expects
                           to be the first company to offer a COTS SDR
                           supporting SCA. Customers want to begin testing our
                           SDR platform for compliance as soon as possible.

                           Spectrum must develop a board support package
                           necessary to install an SCA core framework on our SDR
                           products. This is several man-years of work,
                           involving the definition of our hardware resources
                           and providing device drivers that represent them.

                           Spectrum must then port an SCA core framework on the
                           SDR platform. This work is under way. We are
                           currently working with Harris Corporation to use
                           their dmTK product, the only publicly available
                           supported framework. All of our work is completely
                           applicable to other frameworks developed, such as the
                           SCARI product developed in Canada by DRDC.

                           The SCA standard is still very new and there has been
                           no certification

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                           process established. We anticipate that it will take
                           many man-months of work to test, debug and certify
                           our platform.

         [*****]

         -        RTOS Independence

                           Customers demand different RTOS', often dictated
                           within a defence program. Spectrum expects that it
                           must support a second operating system, with two
                           possible choices being Linux or Greenhills Integrity
                           OS. The selection criteria is primarily business
                           based. We must verify an OS technically meets
                           real-time performance requirements and supports all
                           the features needed, but after that our customer or
                           the end program may dictate the OS.

                           An important direction we see is the use of Linux
                           within the military and government community. Linux
                           was not developed initially to support real-time
                           systems and there are tentative solutions that we
                           must evaluate. We are planning a research project on
                           this.

         -        System examples for target applications

                           There are several defence applications that require
                           unique data flows between the different processing
                           elements within a SDR. These include: RADAR,
                           Direction Finding, and Beamforming. Spectrum must
                           demonstrate, and benchmark, these data flows to its
                           customers.

                           Our platform supports a number of heterogeneous
                           processors (DSPs, PowerPCs, FPGAs) that are
                           interconnected by multiple data paths. Some
                           applications require a serialized approach, such as
                           I/O to FPGA to PowerPC to back-end processing. Some
                           require a parallel approach, such as a
                           direction-finding system having four antennas, each
                           going to an FPGA, with a certain amount of data
                           needing to be transferred between the FPGAs, and then
                           processed data from the FPGAs proceeding to DSP
                           processors. Each application specifies the processing
                           power at each step and the amount of data that must
                           flow continuously through each path.

                           An example of performance characteristics are:
                           multi-channel direction finding, RF being monitored
                           is 70 MHz wide with a sampling rate of 93
                           megasamples/second, the data rate for each channel
                           (antenna) is 186 megabytes/second, the mass storage
                           required is 5 terabytes, the FPGAs must do 16,000
                           point FFTs, the FPGA to processor bandwidth is 151
                           megabytes/second, and the data out of the processor
                           is 1 megabyte/second. Spectrum must empirically
                           determine, and often prove to customers, that these
                           data rates are achievable.

1.4      [*****]

         [*****]

         -        [*****]

         [*****]

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<PAGE>

                  [*****]

                  -        [*****]

                           [*****]

                           [*****]

         -        [*****]

         -        [*****]

                                                             FILE NO. 710-487968

<PAGE>

                                     ANNEX A

                               FORM B: MILESTONES

PROPONENT NAME: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

[*****]

                                                             FILE NO. 710-487968

<PAGE>

        FORM C - CURRENT FISCAL YEAR COST BREAKDOWN BY MAJOR ACTIVITIES

   PROPONENT NAME: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

                     FOR FISCAL YEAR ENDING MARCH 31, 2004

[*****]

1. TITLE OF KEY PROJECT TASKS ENUMERATED AND DESCRIBED IN THE SOW.

                                                             FILE NO. 710-487968

<PAGE>

                                     ANNEX A

                     FORM D - COST BREAKDOWN BY FISCAL YEAR

   PROPONENT NAME: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

[*****]

                                                             FILE NO. 710-487968

<PAGE>

                                     ANNEX A

                      FORM E-1 - PROJECT LOCATION AND COSTS

   PROPONENT NAME: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

<TABLE>
<CAPTION>
                                      START PERIOD
                                    (FISCAL YEAR AND                                                 COSTS
     PROJECT LOCATION                   QUARTER)                    WORK PERFORMED                    ($)
-------------------------------------------------------------------------------------------------------------
<S>                                 <C>                      <C>                                    <C>
BURNABY, BRITISH COLUMBIA             2002/2003 Q1           ALL OF THE WORK IN THIS                [*****]
                                                             INVESTMENT PROPOSAL WILL BE
                                                             PERFORMED BY SPECTRUM
                                                             SIGNAL PROCESSING INC. AND
                                                             ITS SUBCONTRACTORS
-------------------------------------------------------------------------------------------------------------
TOTAL                                                                                               [*****]
-------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE: GOVERNMENT FISCAL YEAR RUNS APRIL 1 - MARCH 31.

                                                             FILE NO. 710-487968

<PAGE>

                                     ANNEX A

                       FORM E-2 - EQUIPMENT COST BREAKDOWN

   PROPONENT NAME: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

<TABLE>
<CAPTION>
                                                                                     PLANNED
                                                                                   ACQUISITION
                                                                                      PERIOD            ESTIMATED
                                                                                 (FISCAL YEAR AND         COSTS
                            EQUIPMENT DESCRIPTION                                    QUARTER)              ($)
-----------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                    <C>
1. NO INDIVIDUAL EQUIPMENT COSTING MORE THAN $250K WILL BE PURCHASED.
2.
3.
4.
5.
6.
-----------------------------------------------------------------------------------------------------------------
TOTAL
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Notes:

1) [*****]

2) Government fiscal year rues April 1 - March 31.

                                                             FILE NO. 710-487968

<PAGE>

                       FORM E-3 - MATERIALS COST BREAKDOWN

   PROPONENT NAME: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

<TABLE>
<CAPTION>
                                                                         PLANNED ACQUISITION
                                                                               PERIOD             ESTIMATED
                                                                          (FISCAL YEAR AND          COSTS
                       MATERIALS DESCRIPTION                                  QUARTER)               ($)
-----------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                      <C>
1. COMPONENTS                                                                   2004               [*****]
2. COMPONENTS                                                                   2005               [*****]
3. COMPONENTS                                                                   2006               [*****]
4. COMPONENTS                                                                   2007               [*****]
-----------------------------------------------------------------------------------------------------------
TOTAL:                                                                                             [*****]
-----------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:

GOVERNMENT FISCAL YEAR RUNS APRIL 1 - MARCH 31

                                                             FILE NO. 710-487968

<PAGE>

                                     ANNEX A

                     FORM E-4 - SUB-CONTRACT COST BREAKDOWN

PROPONENT NAME; SPECTRUM SIGNAL PROCESSING INC.      PROJECT NUMBER: 710-487968

[*****]

                                                            FILE NO. 710-487968

<PAGE>

                                     ANNEX A

                        FORM E-5 - OTHER COSTS BREAKDOWN

   PROPONENT NAME: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

[*****]

NOTES:

GOVERNMENT FISCAL YEAR RUNS APRIL 1 - MARCH 31.

                                                             FILE NO. 710-487968

<PAGE>

              SCHEDULE 3 - CLAIMS AND TPC PROJECT COSTS PRINCIPLES

A - CLAIMS

1.       The Minister will pay the Contribution to the Proponent, in respect of
         Eligible Costs incurred, on the basis of claims which will:

                  (a)      be submitted on a quarterly basis ("CLAIM PERIOD"),
                  except for the first claim which will cover a longer period
                  going back to June 19, 2003;

                  (b)      be submitted on TPC claim forms, within forty-five
                  (45) days of the end of each Claim Period;

                  (c)      be accompanied with details of all costs being
                  claimed, which will be substantiated by such

                  (d)      documents as may be required by the Minister and
                  presented in accordance with the structure and the milestones
                  contained in the Statement of Work in Schedule 2.

                  (e)      be certified by the chief financial officer of the
                  Proponent or other person satisfactory to the Minister;

                  (f)      be accompanied by a report on the progress made in
                  carrying out the Project during the Claim Period, containing
                  such information as mentioned in the section of Schedule 5
                  (Reporting Requirements) entitled Claim Reports.

                  (g)      include a deduction for Eligible Costs included in a
                  previous claim but which have not been paid by the proponent
                  within ninety (90 days) of such claim.

2.       In regard to paragraph 1(f) above, the minister may request at any time
         that the Proponent provide satisfactory evidence to demonstrate that
         Eligible Costs have been paid.

3.       Within one hundred and twenty (120) days of the submission of the final
         claim, the Proponent shall submit an itemized statement certified by
         the Proponent's chief financial officer attesting to the Eligible Costs
         for the entire Project having been incurred and paid.

                                                             FILE NO. 710-487968

<PAGE>

B - TPC PROJECT COST PRINCIPLES

1.       GENERAL PRINCIPLE

The total Eligible Costs of the Project shall be the sum of the applicable
direct and indirect costs which are, or are to be reasonably and properly
incurred and/or allocated, in the performance of the Project, less any
applicable credits. These costs shall be determined in accordance with the
Proponent's cost accounting system as accepted by the Minister and applied
consistently over time.

2.       DEFINITION OF REASONABLE COST

(1)      A cost is reasonable if, in nature and amount, it does not exceed that
which would be incurred by an ordinary prudent person in the conduct of a
competitive business.

(2)      In determining the reasonableness of a particular cost, consideration
shall be given to:

         (a)      whether the cost is of a type generally recognized as normal
                  and necessary for the conduct of the Proponent's business or
                  performance of the Project;

         (b)      the restraints and requirements by such factors as generally
                  accepted sound business practices, arm's length bargaining,
                  federal, provincial and local laws and regulations, and
                  Agreement terms;

         (c)      the action that prudent business persons would take in the
                  circumstances, considering their responsibilities to the
                  owners of the business, their employees, customers, the
                  Government and public at large;

         (d)      significant deviations from the established practices of the
                  Proponent which may unjustifiably increase the Eligible Costs;
                  and

         (e)      the specifications, delivery schedule and quality requirements
                  of the particular Project as they affect costs.

3.       DIRECT COSTS

There are three categories of direct costs:

         (a)      Direct Material Cost meaning the cost of materials which can
                  be specifically identified and measured as having been used or
                  to be used for the performance of the Project and which are so
                  identified and measured consistently by the Proponent's cost
                  accounting system as accepted by the Minister.

                  (i)      These materials may include, in addition to materials
                           purchased solely for the Project and processed by the
                           Proponent, or obtained from

                                                             FILE NO. 710-487968

<PAGE>

                           subcontractors, any other materials issued from the
                           Proponent's general stocks.

                  (ii)     Materials purchased solely for the Project or
                           subcontracts shall be charged to the Project at the
                           net laid down cost to the Proponent before cash
                           discounts for prompt payment.

                  (iii)    Materials issued from the Proponent's general stocks
                           shall be charged to the Project in accordance with
                           the method as used consistently by the Proponent in
                           pricing material inventories.

         (b)      Direct Labour Cost meaning that portion of gross wages or
                  salaries incurred for activities which can be specifically
                  identified and measured as having been performed or to be
                  performed on the Project and which is so identified and
                  measured consistently by the Proponent's cost accounting
                  system as accepted by the Minister.

         (c)      Other Direct Costs meaning those applicable costs, not falling
                  within the categories of direct material or direct labour, but
                  which can be specifically identified and measured as having
                  been incurred or to be incurred in performance of Project
                  activities and which are so identified and measured
                  consistently by the Proponent's costing system as accepted by
                  the Minister.

4.       INDIRECT COSTS

Indirect Costs (overhead) meaning those costs which, though necessarily having
been incurred during the period of the performance of the Project activities for
the conduct of the Proponent's business in general, cannot be identified and
measured as directly applicable to the Project.

         (1)      The Indirect Costs may include, but are not necessarily
                  restricted to, such items as:

                  (a)      indirect materials and supplies (*);

                  (b)      indirect labour;

                  (c)      fringe benefits (the Proponent's contribution only);

                  (d)      service expenses: expenses of a general nature such
                           as power, heat, light, operation and maintenance of
                           general assets and facilities;

                  (e)      fixed/period charges: recurring charges such as
                           property taxes, rentals and reasonable provision for
                           depreciation;

                  (f)      general and administrative expenses: including
                           remuneration of executive and corporate officers,
                           office wages and salaries and expenses such as

                                                             FILE NO. 710-487968

<PAGE>

                           stationery, office supplies, postage and other
                           necessary administration and management expenses;

                  (g)      selling and marketing expenses associated with the
                           products or services being acquired under the
                           Agreement;

                  (h)      general research and development expenses as
                           considered applicable by the Minister.

*        For supplies of similar low-value, high-usage items the costs of which
         meet the above definition of Direct Material Costs but for which it is
         economically expensive to account for these costs in the manner
         prescribed for direct costs, then they may be deemed to be indirect
         costs for the purposes of the Project.

5.       ALLOCATION OF INDIRECT COSTS

Indirect costs shall be accumulated in appropriate indirect cost pools,
reflecting the Proponent's organizational or operational lines and these pools
subsequently allocated to the Project or contracts, in accordance with the
following two principles:

         (a)      the costs included in a particular indirect cost pool should
                  have a similarity of relationship with the Project or
                  contracts, as applicable, to which that indirect cost pool is
                  subsequently distributed; further, the costs included in an
                  indirect cost pool should be similar enough in their
                  relationship to each other that the allocation of the total
                  costs in the pool provides a result which would be similar to
                  that achieved if each cost within that pool were separately
                  distributed;

         (b)      the allocation basis for each indirect cost pool should
                  reflect, as far as possible, the casual relationship of the
                  pooled costs to the Project to which these costs are
                  distributed.

6.       CREDITS

The applicable portion of any income, rebate, allowance, or any other credit
relating to any applicable direct or indirect costs, received by or accruing to
the Proponent, shall be credited to the Eligible Costs.

7.       NON-APPLICABLE COSTS

Notwithstanding that the following costs may have been or may be reasonably and
properly incurred by the Proponent during the performance of the Project
activities, they are considered non-applicable costs to the Project:

         (a)      allowance for interest on invested capital, bonds, debentures,
                  bank or other loans together with related bond discounts and
                  finance charges;

                                                             FILE NO. 710-487968

<PAGE>

         (b)      legal, accounting and consulting fees in connection with
                  financial reorganization, security issues, capital stock
                  issues, obtaining of patents and licenses and prosecution of
                  claims against the Minister;

         (c)      losses on investments, bad debts and expenses for the
                  collection thereof;

         (d)      losses on other projects or contracts;

         (e)      federal and provincial income taxes, excess profit taxes or
                  surtaxes and/or special expenses in connection therewith;

         (f)      provisions for contingencies;

         (g)      premiums for life insurance on the lives of officers and/or
                  directors where proceeds accrue to the Proponent;

         (h)      amortization of unrealized appreciation of assets;

         (i)      depreciation of assets paid for by the Minister;

         (j)      fines and penalties;

         (k)      expenses and depreciation of excess facilities;

         (l)      unreasonable compensation for officers and employees;

         (m)      product development or improvement expenses not associated
                  with the product being acquired under the Project;

         (n)      advertising, except reasonable advertising of an industrial or
                  institutional character placed in trade, technical or
                  professional journals for the dissemination of information for
                  the industry or institution;

         (o)      entertainment expenses;

         (p)      donations except those to charities registered under the
                  Income Tax Act;

         (q)      dues and other memberships other than regular trade and
                  professional associations;

         (r)      fees, extraordinary or abnormal for professional advice in
                  regard to technical, administrative or accounting matters,
                  unless approval from the Minister is obtained.

                                                             FILE NO. 710-487968

<PAGE>

                     ADDENDUM TO TPC PROJECT COST PRINCIPLES

A.       INTELLECTUAL PROPERTY PROTECTION

         Notwithstanding section 7(b) above, legal, accounting and consulting
         fees in connection with the obtaining of patents and statutory
         protection of other elements of the Intellectual Property are Eligible
         Costs.

B.       SR&ED METHOD OF CALCULATING LABOUR AND OVERHEAD ALLOWANCE (IF
         APPLICABLE)

         Notwithstanding the provisions on Direct Labour Costs and Indirect
         Costs contained above, in the event that it is mentioned in the
         Statement of Work that the Canada Customs and Revenue Agency policy on
         Scientific Research and Experimental Development has been chosen by the
         Proponent as a proxy for Overhead calculations for this Project, please
         see the attached guide, TPC Overhead Proxy.

                                                             FILE NO. 710-487968

<PAGE>

                               TPC OVERHEAD PROXY

         Calculating the Prescribed Proxy Amount for Eligible Overhead
Expenditures, A Summary of CCRA T4088(E) Rev.03 Guide to Form T661 - Claiming
Scientific Research and Experimental Development Expenditures
http://www.ccra-adrc.gc.ca/E/pub/tg/t4088eq/ README.html. This summary has been
prepared to outline the major elements of calculating the prescribed proxy
amount (PPA). In case of disagreement between this summary and the SR&ED rules,
SR&ED will apply.

         In lieu of standard PWGSC direct labour and overhead negotiations, TPC
clients may choose to follow the SR&ED rules. Under this method, rather than
specifically identifying and allocating incremental overhead expenditures to the
Project, a PPA for eligible overhead costs may be calculated based on a fixed
percentage of the salaries or wages, or portion thereof, of the employees
directly engaged in the Project. The base will include wages/salaries as well as
normal sick and vacation leave and statutory holidays. It will not include
expenditures for taxable benefits, as well as remuneration based on profits and
bonuses, or related benefits (the employer's share of EI, CPP or QPP, WCB or
CSST, employee pension and medical plans).

         The current SR&ED PPA rate is 65% of the base.

         The PPA will cover overhead expenditures such as:

-    the related benefits (employer's share) of the approved wages/salaries

-    office supplies

-    general purpose office equipment

-    heat, water, electricity and telephones

-    support staff salaries or wages

-    travel and training

-    property taxes

-    maintenance and upkeep of Project premises, facilities or equipment

-    any other eligible expenditures, not specifically identified in the
     Statement of Work, that are incremental costs as a result of the
     approved Project activity.

         Note, there are rules that limit the amount of wage/salary costs of
specified employees that can be included in the base. For year 2002, the maximum
amount is $97,750 per specified employee. Specified employees are those
employees who do not deal at arm's length with the employer or who own directly
or indirectly, at any time during the year, 10% or more of the issued shares of
any capital stock of the employer or of any corporation related to the employer.

         The following table highlights the types of activity that should be
included in calculating the base as well as applicable limits.

                  CALCULATING THE PRESCRIBED PROXY AMOUNT BASE

                                                             FILE NO. 710-487968

<PAGE>

<TABLE>
<CAPTION>
   INCLUDE THE PORTION OF WAGES/SALARIES FOR TIME SPENT ON
                       THE PROJECT OF:                                                 DO NOT INCLUDE:
------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>
Employees directly engaged in the Project, based on such             Employees providing a service to the Project staff
tasks as:                                                            including clerks, secretaries and receptionists
                                                                     are engaged in activities in such areas as
-        preparing equipment and materials for experiments,          accounting, payroll, finance, legal, shipping,
         tests and analyses (but not for maintaining                 inventory control, maintenance and word
         equipment);                                                 processing.

-        experimenting, testing and analyzing;                       Time managers and supervisors spend on the
                                                                     non-technical management aspects of activities
-        collecting data for experimentation and analysis;           such as long-term decision-making, contract
         and,                                                        administration and other decision-making functions
                                                                     that do not directly influence the Project
-        directing the course of the ongoing Project                 activities.
         activities being claimed for the year.
                                                                     Usually, do not include work performed beyond the
Other employees' time is also considered to be directly              first-line supervision level.
engaged in the Project to the extent the following tasks are
required as part of the SOW:                                         For a specified employee, the maximum amount of
                                                                     salary that can be included in the base is limited
-        recording measurements, making calculations and             to 75% of salary/wage costs, regardless of the
         preparing charts and graphs;                                share of time working on the Project exceeds this
                                                                     amount. This amount is further restricted, to be
-        conducting statistical surveys and interviews;              the lessor of the prior calculation or the
                                                                     following formula:
-        preparing computer programs; and,
                                                                     2.5 times the Maximum Pensionable Earnings (for
-        working in areas of engineering or design,                  CPP purposes, $39,100 for year 2002) times the
         operations research, mathematical analysis and              number of days in the taxation year that the
         psychological research.                                     person is employed by the client divided by 365.

Supervisors' or managers' time spent directly involved in
the technical aspects of the Project.

Note: employees who spend all or substantially all of their
time (90%) on SOW activities are considered to spend all of
their time on the Project.
------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                             FILE NO. 710-487968

<PAGE>

                        SCHEDULE 4 - CONTRACTUAL BENEFITS

                            A - PAYMENTS TO MINISTER

1.       DEFINITIONS

         "GROSS BUSINESS REVENUES" means all revenues, receipts, monies and
         other considerations of whatever nature in excess of $22,368,421 per
         annum received by the Wireless Systems Group of the Proponent, whether
         in cash, or by way of benefit, advantage, or concession, and without
         deductions of any nature, but net of any returns or discounts actually
         credited and any sales, excise, ad valorem or similar taxes paid but
         without deduction for bad debts or doubtful accounts, as determined in
         accordance with generally accepted accounting principles, applied on a
         consistent basis.

         "ROYALTY PERIOD" means the period during which royalties will accrue,
         as specified in paragraph 2.2 below.

2.       ROYALTY PAYMENTS

         2.1      ROYALTY RATE AND ROYALTY BASIS

                  The Proponent will pay the Minister a royalty of 1.75% of the
                  annual Gross Business Revenues during the Royalty Period.

         2.2      ROYALTY PERIOD

                  The Royalty Period will begin on January 1, 2004 and will on
                  December 31, 2010. If, however, cumulative royalties are less
                  than $10,500,484 by December 31, 2010, then the royalty period
                  will continue until the earlier of December 31, 2013 or until
                  a cumulative royalty ceiling of 10,500,484 is reached.

         2.3      ROYALTY STATEMENTS AND PAYMENTS

                  The Proponent will provide to the Minister an annual statement
                  of the Gross Business Revenues, certified by the Proponent's
                  Chief Financial Officer, within four (4) months of the end of
                  each company fiscal year December, together with the related
                  royalty payment. The first statement and related royalty
                  payment must be provided to the Minister by May 1, 2005 in
                  respect of the fiscal year ending December 31, 2004 and by
                  each year thereafter in regard to the previous fiscal year.
                  Payments shall be made by cheque to the order of the Receiver
                  General and sent to the Minister.

         2.4      LATE PAYMENTS

                  The Proponent will pay interest on overdue royalty payments,
                  at the Interest Rate, from the date on which the royalty
                  payment is due, until payment in full is

                                       31
<PAGE>

                  received by the Minister. Such interest is payable without
                  notice to the Proponent, and in addition to any remedies of
                  the Minister for default by the Proponent.

3.       CHANGES IN REGARD TO COMPANY'S BUSINESS

         3.1      The Proponent shall notify the Minister should the business
                  carried out by the Proponent be split so as to be carried out
                  in part by other persons.

         3.2      In the event that part of the Proponent's business is carried
                  out by related persons (subsidiaries or otherwise affiliated),
                  the same royalty base shall continue to apply and the
                  Proponent shall have the related persons involved report their
                  gross revenues to the Minister and the Proponent shall make,
                  or continue to make, as the case may be, payments to the
                  Minister as if the Proponent's business had not been split.
                  The audit rights of the Minister as mentioned in Section 5 of
                  the General Corporations shall extend to these related persons
                  and Proponent shall ensure that such audit rights may be
                  exercised by the Minister.

         3.3      In the event that part of the Proponent's business is carried
                  out by an unrelated person, the royalty rate shall be
                  increased so that the Minister is receiving comparable
                  royalties as if that part of the Proponent's business had
                  remained with the Proponent. After due consultation with the
                  Proponent, the Minister shall make a determination as to the
                  increased royalty rate. In the event that the Proponent
                  disagrees with such increased rate, the Proponent may refer
                  the matter to arbitration under the federal Commercial
                  Arbitration Act, within 45 days of being notified of the new
                  rate by the Minister.

B - CONTRACTUAL BENEFITS TO CANADA

1.       WORK IN CANADA

         (a)      Unless otherwise agreed to in writing by the Minister, the
                  Proponent will ensure that the Intellectual Property is
                  exploited through the production in Canada of resulting
                  products until the end of the Royalty Period as set out in
                  section 2.2 of this schedule.

         (b)      The Proponent will not, without the prior written consent of
                  the Minister, grant any right to the production of resulting
                  products or transfer title to any of the Intellectual Property
                  outside of Canada, except the license or sublicense in
                  conjunction with the sale of resulting products, and will
                  impose the same restriction on all licensees and transferees.

         (c)      The expression "resulting products" as used in paragraph (a)
                  and (b) above means products, including services, resulting
                  from use of the Intellectual Property.

                                       32
<PAGE>

                       SCHEDULE 5 - REPORTING REQUIREMENTS

1.       CLAIM REPORTS

         Whenever the Proponent submits a claim, it shall attach to the claim a
         progress report containing:

         (a)      a description of the progress made in the fulfilment of the
                  Statement of Work during the Claim Period, detailed by
                  Activity as defined in the Statement of Work;

         (b)      a statement of milestones achieved, if any, during the Claim
                  Period;

         (c)      an assessment of any significant delay in completing the
                  Project or the attainment of any milestone identified in the
                  Statement of Work, the reasons for such delay, and mitigation
                  measures being taken;

         (d)      a Proponent's revised projections of Project cash flows for
                  the current Fiscal Year, except that in cases where the Claim
                  Period is monthly, this information is to be provided on March
                  31st, July 31st and November 30th of each year.

         No claim for the Contribution will be processed unless and until such
         report is provided to the Minister.

2.       ANNUAL REVIEW

         Unless otherwise agreed to, the parties shall meet at least once
         annually during the Project period, at a mutually agreeable time, to
         review the Project.

3.       PROJECT PROGRESS REPORTS

         At least one (1) month prior to the date set for the Annual Review
         meeting mentioned in section 2 above, the Proponent shall provide the
         Minister with a written progress report containing:

         (a)      a description of the progress in completion of the Project
                  activities, in comparison with the schedule and milestones
                  contained in the Statement of Work and the related Project
                  expenditures for that segment of Project activities;

         (b)      the Proponent's revised cost breakdown for the Project,
                  including an estimated cost breakdown by major activity and by
                  Fiscal Year; and

         (c)      an indication of any delay in completing the Project and the
                  reasons for such delay, together with the Proponents revised
                  schedule and any proposed revisions to the Statement of Work.

                                       33
<PAGE>

4.       ANNUAL INFORMATION UPDATES

         By February 15, 2004, and by the same date each year thereafter until
         this Agreement ends in accordance with section 7 of the General
         Conditions, the Proponent shall provide the following information
         updates to the Minister:

         (a)      an update of the projected and actual repayments to the
                  Minister, as set out in Form TPC-1 (Reports on Estimated &
                  Actual Repayments to the Minister) attached hereto, together
                  with an explanation of any significant changes from the last
                  update;

                  (Note: Once the repayment period starts, this update shall be
                  provided annually at the time of making repayment, in
                  accordance with the provisions entitled "Payments to Minister"
                  in Schedule 4)

         (b)      an update of projected and actual person years (PYs), as set
                  out on Form TPC-2 (Report on Job Creation and Maintenance)
                  attached hereto, together with an explanation of any
                  significant changes from the last update;

         (c)      an update of other representations and expected results as set
                  out in Form TPC-3 (Report on Other Representations & Expected
                  Results) attached hereto, together with an explanation of any
                  significant changes from the last update;

         (d)      an update of investment leverage, as set out in Form TPC-4
                  (Report on Investment Leverage) attached hereto, together with
                  an explanation of any significant changes from the last
                  update;

         (e)      an update on sustainable development impacts, as set out in
                  Form TPC-5 (Report on Sustainable Development Impacts)
                  attached hereto, together with an explanation of any
                  significant changes from the last update;

         (f)      a summary of the progress made in the fulfillment of specific
                  commitments in regard to contractual benefits to Canada
                  identified in Schedule 4.

5.       ANNUAL FINANCIAL STATEMENTS

         The Proponent shall provide the Minister with a copy of its annual
         audited financial statements within four (4) months of the end of each
         of the Proponent's fiscal years.

                                       34
<PAGE>

                                  FORM TPC - 1

             REPORT ON ESTIMATED & ACTUAL REPAYMENTS TO THE MINISTER

      PROPONENT: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

<TABLE>
<CAPTION>
     1                      2                       3                  4
--------------------------------------------------------------------------------
   YEAR                                                               DUE
  ENDING            ESTIMATED PAYMENT         ACTUAL PAYMENT          DATE
(MM/DD/YY)                (IN $)                   (IN $)          (MM/DD/YY)
--------------------------------------------------------------------------------
<S>                 <C>                       <C>                  <C>
 12/31/04                [*****]                                     5/1/05
--------------------------------------------------------------------------------
 12/31/05                [*****]                                     5/1/06
--------------------------------------------------------------------------------
 12/31/06                [*****]                                     5/1/07
--------------------------------------------------------------------------------
 12/31/07                [*****]                                     5/1/08
--------------------------------------------------------------------------------
 12/31/08                [*****]                                     5/1/09
--------------------------------------------------------------------------------
 12/31/09                [*****]                                     5/1/10
--------------------------------------------------------------------------------
 12/31/10                [*****]                                     5/1/11
--------------------------------------------------------------------------------
 12/31/11                                                            5/1/12
--------------------------------------------------------------------------------
 12/31/12                                                            5/1/13
--------------------------------------------------------------------------------
 12/31/13                                                            5/1/14
--------------------------------------------------------------------------------
 TOTAL                 10,500,484
--------------------------------------------------------------------------------
</TABLE>

SIGNATURE OF AUTHORIZED OFFICER:____________________________________________

REPORT DATE:____________________________

The Proponent certifies that the initial repayment projections provided at the
time of the Agreement, and as may be revised from time to time per the
requirements of Schedule 5, represent reasonable estimates of the repayments
that the Minister can expect from this Project, as they could be determined at
any particular time. The Minister recognizes that those estimates may vary
through time, due to factors over which the Proponent has little or no control.

                                       35
<PAGE>

                                  FORM TPC - 2

                     REPORT ON JOB CREATION AND MAINTENANCE

      PROPONENT: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

GENERAL INSTRUCTIONS

The intent of this schedule is to Identify the number of PYs expended on Project
related activities during any one year of the duration of the Agreement,
according to category of employment. Both part-time and full-time employees
should be claimed, as employment of all types represents a Protect benefit.
Part-time work should be converted into PY units on the basis normally used by
the Proponent provided it is between 1800 and 2000 hours of work paid in a given
year.

1.       Data is to be provided based on a 32 week calendar year and should be
         expressed in PY units.

2.       Direct PYs are to be counted. The term "direct PY" relates to the work
         performed in Canada by employees of the proponent. Only those direct
         PYs which result from the project are to be counted. Work performed
         outside of Canada by Canadian employees is not to be included except
         for eligible activities performed as part of the Statement of Work
         during the Work Phase. Reported PYs may be performed by existing staff
         or by new hires. These PYs are normally located in the Proponent's
         facility and involve an eligible operation or activity supported by the
         industrial assistance program. During the Benefits Phase, these PYs
         normally pertain to production/distribution activities associated with
         the supported facility, product or processes of the proponent

3.       Indirect PYs refer to work performed in Canada as a result of the
         project by employees who are not employed by the Proponent, and
         normally at a location other than the Proponent's facility. Apart from
         the following two exceptions, indirect PYs are never to be included in
         the PY count:

         1)       Sub-contracted PYs in the Work phase of R&D/innovation
                  projects are included in the PY count, provided that the
                  related activity is explicitly set out in the Statement of
                  Work in the Contribution Agreement.

         2)       Benefit phase production PYs of related entities to the
                  Proponent are included in the PY count, provided that the
                  Contribution Agreement explicitly includes PY reporting
                  requirements on the parties concerned and provides the
                  Minister access to the related facilities for monitoring
                  purposes.

4.       Reporting during the Work phase requires a yearly breakdown by category
         of employment. Reporting during the Benefits phase requires the average
         number of PYs during this phase by category of employment.

                                       36
<PAGE>

PART 1 : WORK PHASE - DATA COMPILED AS OF DECEMBER 31,

<TABLE>
<CAPTION>
                                                                 TOTAL NUMBER OF PERSON YEARS
                                                                 ----------------------------
                  CATEGORY OF EMPLOYMENT                         ESTIMATE              ACTUAL
---------------------------------------------------------------------------------------------
<S>                                  <C>                         <C>                   <C>
 A)   KNOWLEDGE-BASED                YR 1 ENDING 12/31/03        [*****]
      (SCIENCE, ENGINEERING &        YR 2 ENDING 12/31/04
      TECHNICAL)                     YR 3 ENDING 12/31/05
                                     YR 4 ENDING 12/31/06
---------------------------------------------------------------------------------------------
 B)  MANAGEMENT & ADMINISTRATION     YR 1 ENDING 12/31/03        [*****]
                                     YR 2 ENDING 12/31/04
                                     YR 3 ENDING 12/31/05
                                     YR 4 ENDING 12/31/06
---------------------------------------------------------------------------------------------
 C)  SUB-CONTRACTED WORK             YR 1 ENDING 12/31/03        [*****]
                                     YR 2 ENDING 12/31/04
                                     YR 3 ENDING 12/31/05
                                     YR 4 ENDING 12/31/06
---------------------------------------------------------------------------------------------
     TOTAL                           YR 1 ENDING 12/31/03        [*****]
                                     YR 2 ENDING 12/31/04
                                     YR 3 ENDING 12/31/05
                                     YR 4 ENDING 12/31/06
---------------------------------------------------------------------------------------------
</TABLE>

PART 2 - BENEFIT PHASE - DATA COMPILED AS OF DECEMBER 31,

<TABLE>
<CAPTION>
                                                              TOTAL NUMBER OF PERSON YEARS
                                                         ---------------------------------------
                                                          ESTIMATED AVERAGE
                                                           NUMBER OF PERSON      ACTUAL PERSON
                                                         YEARS FOR DURATION        YEARS FOR
              CATEGORY OF EMPLOYMENT                      OF BENEFIT PHASE      REPORTING PERIOD
------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
A)  KNOWLEDGE-BASED
    (SCIENCE, ENGINEERING &TECHNICAL)                         [*****]
------------------------------------------------------------------------------------------------
B)  GENERAL PRODUCTION                                        [*****]
------------------------------------------------------------------------------------------------
C)  MANAGEMENT. ADMINISTRATION, MARKETING,  SALES &
    SUPPORT                                                   [*****]
------------------------------------------------------------------------------------------------
                                                              [*****]
    TOTAL
------------------------------------------------------------------------------------------------
</TABLE>

SIGNATURE OF AUTHORIZED OFFICER:______________________________________________

REPORT DATE:______________________________

The Proponent certifies that the initial repayment projections provided at the
time of the Agreement, and as may be revised from time to time per the
requirements of Schedule 5, represent reasonable estimates of the employment
benefits that the Minister can expect from this Project, as they could be
determined at any particular time. The Minister recognizes that those estimates
may vary through time, due to factors over which the Proponent has little or no
control.

                                       37
<PAGE>

                                  FORM TPC - 3

               REPORT ON OTHER REPRESENTATIONS & EXPECTED RESULTS

      PROPONENT: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

OTHER REPRESENTATIONS AND EXPECTED RESULTS INCLUDE:

         1.       PATENTS: [are there any patents that arc expected to result
                  from the development work of the Project]

         2.       ACQUISITION OF TECHNOLOGY: [is the Proponent planning to
                  acquire intellectual property rights, technology, or know-how
                  essential to the success of the Project]

         3.       CORPORATE MANDATES: [specify any new or enhanced mandates
                  expected)

         4.       OTHER SIGNIFICANT REPRESENTATIONS/EXPECTED RESULTS: [strategic
                  alliances or partnerships, new applications of technology,
                  technology diffusion, etc.]

<TABLE>
<CAPTION>
                                                                     PLANNED/REVISED           STATUS/ACTUAL
    DESCRIPTION OF EXPECTED RESULT/ REPRESENTATION                        DATE                     DATE
------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                          <C>
1. Patent applications to be filed in each of calendar            December 31, 2004 -2
   years                                                          Apps

                                                                  December 31, 2005 -2
                                                                  Apps

                                                                  December 31, 2006 -2
                                                                  Apps
------------------------------------------------------------------------------------------------------------
</TABLE>

SIGNATURE OF AUTHORIZED OFFICER:______________________________________________

REPORT DATE:______________________________

The Proponent certifies that the initial repayment projections provided at the
time of the Agreement, and as may be revised from time to time per the
requirements of Schedule 5, represent reasonable estimates of the benefits that
the Minister can expect from this Project, as they could be determined at any
particular time. The Minister recognizes that those estimates may vary through
time, due to factors over which the Proponent has little or no control.

                                       38
<PAGE>

                                  FORM TPC - 4

                          REPORT ON INVESTMENT LEVERAGE

      PROPONENT: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

         This form estimates all costs incurred in Canada and investment that
may be leveraged by TPC funds. These include:

-        ELIGIBLE SUPPORTED COSTS: Those costs incurred by the Proponent and
         towards which TPC provides financial support.

-        OTHER PROJECT RELATED COSTS (INCLUDING POST WORK PHASE INVESTMENT):
         Other non-recurring costs incurred in Canada that are directly related
         to the project. This would include items such as cost overruns but
         would not include coats prior to the date indicated in Article 4.2. For
         example, a project may include capital costs (for land and building)
         that are not eligible for TPC support, but which the company will incur
         directly related to the project.

         Post work phase investment refers to any additional non-recurring, post
         work phase, project related investment in Canada by the Proponent (e.g.
         non-recurring related to production facilities, marketing and
         distribution activities, etc.). For example, a company may have to
         build new production lines, or create a new marketing team, or
         establish a new distribution line/network for the resulting
         product/technology.

-        OTHER INVESTMENT: Other investment unrelated to the specific project
         but included in the contractual commitments made by the Proponent. For
         example, a company may commit to construction of a building as a
         condition of receiving a TPC investment, although the building is not
         directly part of the project.

<TABLE>
<CAPTION>
                   ESTIMATES ($ 000)                                      ACTUAL ($ 000)
--------------------------------------------------------    --------------------------------------------
                                  (3)                                             (2)
   (1)                           OTHER                                           OTHER
  YEAR            (2)           PROJECT          (4)             (1)            PROJECT           (3)
(ENDING         ELIGIBLE        RELATED         OTHER          ELIGIBLE         RELATED          OTHER
DEC. 31)    SUPPORTED COSTS      COSTS        INVESTMENT    SUPPORTED COSTS      COSTS        INVESTMENT
--------------------------------------------------------------------------------------------------------
<S>         <C>                 <C>           <C>           <C>                 <C>           <C>
 2003           [*****]
--------------------------------------------------------------------------------------------------------
 2004           [*****]
--------------------------------------------------------------------------------------------------------
 2005           [*****]
--------------------------------------------------------------------------------------------------------
 2006           [*****]
--------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------
</TABLE>

SIGNATURE OF AUTHORIZED OFFICER:__________________________________________

REPORT DATE:__________________________

         The Proponent certifies that the initial repayment projections provided
         at the time of the Agreement, and as may be revised from time to time
         per the requirements of Schedule 5, represent reasonable estimates of
         the benefits that the Minister can expect from this Project, as they
         could be determined at any particular time. The Minister recognizes
         that those estimates may vary through time, due to factors over which
         the Proponent has little or no control.

                                       39
<PAGE>

                                  FORM TPC - 5

                   REPORT ON SUSTAINABLE DEVELOPMENT BENEFITS

      PROPONENT: SPECTRUM SIGNAL PROCESSING INC. PROJECT NUMBER: 710-487968

On a full life cycle basis (from design through manufacture/operation and
decommissioning or disposal/recycling), the technologies that are to be
developed during the course of this R&D project are expected to provide the
following downstream Sustainable Development benefits (over existing industrial
practices) as they are incorporated into the commercial activities of the firm.

<TABLE>
<CAPTION>
                       BENEFITS                               SIGNIFICANT         MODERATE           MINOR/NONE
---------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                 <C>                <C>
Reduced energy consumption (i.e. efficiency of use) or
increased energy production through sustainable means
(i.e. efficiency of generation)                                                                           x
---------------------------------------------------------------------------------------------------------------
Increased supply of energy from renewable sources                                                         x
---------------------------------------------------------------------------------------------------------------
Reduced water consumption or increased supply of clean                                                    x
water
---------------------------------------------------------------------------------------------------------------
Reduced consumption of raw materials or manufactured
materials (reduced material intensity)                                                x
---------------------------------------------------------------------------------------------------------------
Reduced production and/or release of pollutant species of                                                 x
any kind to the atmosphere
---------------------------------------------------------------------------------------------------------------
Reduced production and/or release of pollutant species of                                                 x
any kind to receiving waters
---------------------------------------------------------------------------------------------------------------
Reduced production and/or disposal of solid wastes to the                             x
land
---------------------------------------------------------------------------------------------------------------
Reduced usage and/or production and/or disposal of                                    x
hazardous/toxic substances
---------------------------------------------------------------------------------------------------------------
Remediation or rehabilitation of contaminated land or water                                               x
---------------------------------------------------------------------------------------------------------------
</TABLE>

                                       40
<PAGE>

                SCHEDULE 6 - PROJECT FACT SHEET FOR NEWS RELEASE

PROGRAM: TECHNOLOGY PARTNERSHIPS CANADA         PROJECT NO.: 710-487968

NAME & ADDRESS OF PROPONENT:                    PROPONENT CONTACT:
SPECTRUM SIGNAL PROCESSING INC.                 NAME: NAME: DAN SIMARD
200-2700 PRODUCTION WAY                         TELEPHONE: (604) 421-5422
BURNABY, BRITISH COLUMBIA                       FAX: (604) 421-1764
V5A 4X1

PROJECT LOCATION: BURNABY, BRITISH COLUMBIA     PROJECT TYPE: PRE-COMPETITIVE
                                                DEVELOPMENT

INDUSTRIAL SECTOR: DEFENCE ELECTRONICS          PROJECT PURPOSE: SOFTWARE
                                                DEFINED RADIO FOR DEFENCE
                                                PURPOSES

AUTHORIZED ASSISTANCE:  $8,299,616

PROJECT DESCRIPTION AND ANTICIPATED RESULTS: TO COME

SPECTRUM WILL USE TPC'S INVESTMENT TO BROADEN ITS EXISTING SOFTWARE
RECONFIGURABLE PROCESSING PLATFORM PORTFOLIO. SPECTRUM'S SOFTWARE RECONFIGURABLE
PLATFORMS ENABLE SOFTWARE DEFINED RADIOS (SDRS). SDRS ARC
SOFTWARE-RECONFIGURABLE, WHICH MEANS THAT THEY CAN CHANGE MODE OF OPERATION AND
BE UPGRADED VIA SOFTWARE WITHOUT ANY HARDWARE CHANGES. THIS FLEXIBILITY PERMITS
SDRS TO BE REPROGRAMMED 'ON THE FLY' TO INTEROPERATE WITH OTHER RADIOS.
SPECTRUM'S PRIMARY TARGET MARKETS FOR SDR ARE MILITARY COMMUNICATIONS, SIGNALS
INTELLIGENCE AND RADAR AND SONAR.

SDR IS THE TERM USED TO DESCRIBE A RADIO THAT PROVIDES SOFTWARE CONTROL OF A
VARIETY OF MODULATION TECHNIQUES AND WAVEFORM REQUIREMENTS, OF CURRENT AND
EVOLVING STANDARDS, OVER A BROAD FREQUENCY RANGE. THIS TECHNOLOGY USES A COMMON
HARDWARE PLATFORM TO ACCOMMODATE DIFFERENT COMMUNICATIONS STANDARDS AND
TECHNOLOGIES, VIA SOFTWARE MODULES AND FIRMWARE. SPECTRUM'S SDR RESEARCH AND
DEVELOPMENT IS AT THE FOREFRONT OF EFFORTS TO IMPROVE CANADIAN AND WORLDWIDE
MILITARY COMMUNICATIONS INTEROPERABILITY.

SPECTRUM'S CURRENT SOFTWARE RECONFIGURABLE PROCESSING PLATFORM, THE SDR-3000,
HAS BEEN ADOPTED AS ONE OF THE PLATFORMS USED BY JOINT TACTICAL RADIO SYSTEM
TECHNOLOGY LABORATORY (JTEL) TO SUPPORT THE TEST AND ACCEPTANCE OF PROGRAM
DELIVERABLES. THE JOINT TACTICAL RADIO SYSTEM (JTRS) IS A MULTI BILLION DOLLAR
US PROGRAM THAT WILL PROVIDE A FAMILY OF SOFTWARE PROGRAMMABLE RADIOS, TO ENSURE
INTEROPERABILITY AND PORTABILITY ACROSS DISPARATE RADIO NETWORKS. JOINT TACTICAL
RADIOS WILL BE MULTI-MODE AND MULTI-BAND ALLOWING ONE RADIO TO COMMUNICATE WITH
ALL OTHER RADIOS. JTRS WILL CARRY INFORMATION IN REAL-TIME TO THE WARFIGHTER IN
THE FIELD, WHETHER IT BE GROUND-BASED, SHIPBORNE, OR AIRBORNE. ONCE IMPLEMENTED,
JTRS WILL ENABLE THE INFORMATION SUPERIORITY NECESSARY FOR EFFICIENT MILITARY
ENGAGEMENTS. OTHER COUNTRIES WORLDWIDE HAVE THEIR OWN MILITARY SDR PROGRAMS THAT
ARE EXPECTED TO INTEROPERATE WITH JTRS RADIOS.

SPECTRUM SIGNAL PROCESSING DESIGNS, DEVELOPS, AND MARKETS HIGH PERFORMANCE
SIGNAL PROCESSING AND PACKET VOICE PROCESSING PLATFORMS FOR USE IN DEFENCE AND
COMMUNICATIONS INFRASTRUCTURE EQUIPMENT. SPECTRUM'S OPTIMIZED HARDWARE, SOFTWARE
AND CHIP TECHNOLOGY WORK TOGETHER TO COLLECT, COMPRESS AND CONVERT VOICE AND
DATA SIGNALS. LEVERAGING ITS 17 YEARS OF DESIGN EXPERTISE, SPECTRUM PROVIDES ITS
CUSTOMERS WITH FASTER TIME TO MARKET AND LOWER COSTS BY DELIVERING HIGHLY
FLEXIBLE, RELIABLE AND HIGH- DENSITY SOLUTIONS. SPECTRUM SUBSYSTEMS ARE TARGETED
FOR USE IN GOVERNMENT INTELLIGENCE, SURVEILLANCE AND COMMUNICATIONS SYSTEMS,
SATELLITE HUBS, CELLULAR BASE STATIONS, MEDIA GATEWAYS AND NEXT-GENERATION VOICE
AND DATA SWITCHES. MORE INFORMATION ON SPECTRUM AND ITS FLEXCOMM(TM) AND AXS(TM)
PRODUCT LINES IS AVAILABLE AT WWW.SPECTRUMSIGNAL.COM.

                                       41FORM OF PREFERRED SHARE PURCHASE RIGHTS AGREEMENT

 

Exhibit 4.2

MONEYGRAM

INTERNATIONAL, INC.

and

WELLS FARGO BANK, N.A.

Rights Agreement

Dated as of __________, 2004

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	 	 	 	 	Number

	Section 1.	 	Definitions
	 	 	1	 
	Section 2.	 	Appointment of Rights Agent
	 	 	6	 
	Section 3.	 	Issue of Right Certificates
	 	 	6	 
	Section 4.	 	Form of Right Certificates
	 	 	9	 
	Section 5.	 	Countersignature and Registration
	 	 	9	 
	Section 6.	 	Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates
	 	 	10	 
	Section 7.	 	Exercise of Rights; Purchase Price; Expiration Date of Rights
	 	 	11	 
	Section 8.	 	Cancellation and Destruction of Right Certificates
	 	 	13	 
	Section 9.	 	Availability of Preferred Shares
	 	 	14	 
	Section 10.	 	Preferred Shares Record Date
	 	 	14	 
	Section 11.	 	Adjustment of Purchase Price, Number of Shares or Number of Rights
	 	 	15	 
	Section 12.	 	Certificate of Adjusted Purchase Price or Number of Shares
	 	 	26	 
	Section 13.	 	Consolidation, Merger or Sale or Transfer of Assets or Earning Power
	 	 	26	 
	Section 14.	 	Fractional Rights and Fractional Shares
	 	 	28	 
	Section 15.	 	Rights of Action
	 	 	30	 
	Section 16.	 	Agreement of Right Holders
	 	 	30	 
	Section 17.	 	Right Certificate Holder Not Deemed a Stockholder
	 	 	31	 
	Section 18.	 	Concerning the Rights Agent
	 	 	32	 
	Section 19.	 	Merger or Consolidation or Change of Name of Rights Agent
	 	 	32	 

-i-

 

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	 	 	 	 	Number

	Section 20.	 	Duties of Rights Agent
	 	 	33	 
	Section 21.	 	Change of Rights Agent
	 	 	36	 
	Section 22.	 	Issuance of New Right Certificates
	 	 	38	 
	Section 23.	 	Redemption
	 	 	38	 
	Section 24.	 	Exchange
	 	 	39	 
	Section 25.	 	Notice of Certain Events
	 	 	41	 
	Section 26.	 	Notices
	 	 	42	 
	Section 27.	 	Supplements and Amendments
	 	 	43	 
	Section 28.	 	Successors
	 	 	44	 
	Section 29.	 	Benefits of this Agreement
	 	 	44	 
	Section 30.	 	Severability
	 	 	44	 
	Section 31.	 	Governing Law
	 	 	45	 
	Section 32.	 	Counterparts
	 	 	45	 
	Section 33.	 	Descriptive Headings
	 	 	45	 
	Signatures
	 	 	47	 
	Exhibit A	 	- Form of Certificate of Designations
	 	 	 	 
	Exhibit B	 	- Form of Right Certificate
	 	 	 	 
	Exhibit C	 	- Summary of Rights to Purchase Preferred Shares
	 	 	 	 

-ii-

 

 

     Agreement,
dated as of         , 2004, between MoneyGram
International, Inc., a Delaware corporation (the
“Company”), and Wells Fargo
Bank, N.A., as rights agent (the “Rights Agent”).

     The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a
“Right”) for each Common
Share (as hereinafter defined) of the Company outstanding on      ,
2004 (the “Record Date”), each Right representing the right to purchase one
one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined).

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

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

     (a) “Acquiring
Person” shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the Common Shares of the Company then outstanding, but shall not
include the Company, any Subsidiary of the Company, any employee benefit plan
of the Company or any Subsidiary of the Company, or any entity holding Common
Shares for or pursuant to the terms of any such plan. Notwithstanding the
foregoing, no Person shall become an “Acquiring Person” as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
Common

 

 

Shares of the Company outstanding, increases the proportionate number of
Common Shares of the Company beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding;
provided, however, that,
if a Person shall become the Beneficial Owner of 15% or more of the Common
Shares of the Company then outstanding by reason of share purchases by the
Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Company, then such
Person shall be deemed to be an “Acquiring Person.” Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an “Acquiring Person,” as defined pursuant
to the foregoing provisions of this paragraph (a), has become such
inadvertently, and such Person divests as promptly as practicable a sufficient
number of Common Shares so that such Person would no longer be an “Acquiring
Person,” as defined pursuant to the foregoing provisions of this paragraph (a),
then such Person shall not be deemed to be an “Acquiring Person” for any
purposes of this Agreement.

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

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

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

-2-

 

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

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

     (iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person’s Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities)

-3-

 

for the purpose of acquiring, holding, voting (except to
the extent contemplated by the proviso to Section 1(d)(ii)(B) hereof) or
disposing of any securities of the Company.

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

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

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

     (g) “Common Shares” when used with reference to the Company shall mean the
shares of common stock, par value $0.01 per share, of the Company. “Common
Shares” when used with reference to any Person other than the Company shall
mean the capital stock (or equity interest) with the greatest voting power of
such other Person or, if such other Person is a Subsidiary of another Person,
the Person or Persons which ultimately control such first-mentioned Person.

-4-

 

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

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

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

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

     (l) “NASDAQ” shall mean the National Association of Securities Dealers,
Inc. Automated Quotation System.

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

     (n) “Preferred Shares” shall mean shares of Series A Junior Participating
Preferred Stock, par value $0.01 per share, of the Company having the rights
and preferences set forth in the Form of Certificate of Designations attached
to this Agreement as Exhibit A.

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

     (p) “Record Date” shall have the meaning set forth in the second paragraph
hereof.

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

-5-

 

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

     (s) “Right” shall have the meaning set forth in the second paragraph
hereof.

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

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

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

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

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

     Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall, prior to the Distribution
Date, also be the holders of the Common Shares of 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.

     Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the
tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (or
such later date as may be determined

-6-

 

by action of the Board of Directors of the
Company prior to such time as any Person becomes an Acquiring Person) after the
date of the commencement by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary
of the Company or any entity holding Common Shares of the Company for or
pursuant to the terms of any such plan) of a tender or exchange offer the
consummation of which would result in any Person becoming the Beneficial Owner
of Common Shares of the Company aggregating 15% or more of the then outstanding
Common Shares of the Company (including any such date which is 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 will
be evidenced (subject to the provisions of Section 3(b) hereof) by the
certificates for Common Shares of the Company registered in the names of the
holders thereof (which certificates shall also be deemed to be Right
Certificates) and not by separate Right Certificates, and (y) the right to
receive Right Certificates will be transferable only in connection with the
transfer of Common Shares of the Company. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights
Agent will, if requested, send) by first-class, insured, postage-prepaid mail,
to each record holder of Common Shares of the Company as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the form of
Exhibit B hereto (a “Right Certificate”), evidencing one Right for each Common
Share so held. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.

     (b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of

-7-

 

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

     (c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence
of this paragraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:

This certificate also evidences and entitles the holder hereof to certain
rights as set forth in an Agreement between MoneyGram International, Inc.
and Wells Fargo Bank, N.A., dated as of      , 2004, as it may be
amended from time to time (the “Agreement”), the
terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of MoneyGram
International, Inc. Under certain circumstances, as set forth in the
Agreement, such Rights (as defined in the Agreement) will be evidenced by
separate certificates and will no longer be evidenced by this
certificate. MoneyGram International, Inc. will mail to the holder of
this certificate a copy of the Agreement without charge after receipt of
a written request therefor. As set forth in the Agreement, Rights
beneficially owned by any Person (as defined in the Agreement) who
becomes an Acquiring Person (as defined in the Agreement) become null and
void.

With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares of the Company
represented by such certificates

-8-

 

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

     Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto,
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any applicable rule or
regulation made pursuant thereto or with any applicable rule or regulation of
any stock exchange or the National Association of Securities Dealers, Inc., or
to conform to usage. Subject to the provisions of Section 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of one
one-hundredths of a Preferred Share as shall be set forth therein at the price per one
one-hundredth of a Preferred Share set forth therein (the “Purchase Price”),
but the number of such one one-hundredths of a Preferred Share and the Purchase
Price shall be subject to adjustment as provided herein.

     Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents or its
Treasurer, either manually or by facsimile signature,

-9-

 

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

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

     Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have

-10-

 

become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient
to cover any tax or governmental charge that may be imposed in connection with
any transfer, split up, combination or exchange of Right Certificates.

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

     Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein), in whole or in part,
at any time after the Distribution Date, upon

-11-

 

surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the Close of Business on
                   , 2014 (the “Final
Expiration Date”), (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the “Redemption Date”), or (iii) the time at which such
Rights are exchanged as provided in Section 24 hereof.

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

     (c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the shares to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier’s
check or money order payable to the order of the Company, the Rights Agent
shall thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes any such transfer agent
to comply with all such requests, or (B) requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the
transfer agent of the Preferred Shares with such depositary agent) and the
Company hereby directs such depositary agent to comply with such

-12-

 

request; (ii)
when appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section 14 hereof;
(iii) promptly 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
Right Certificate, registered in such name or names as may be designated by
such holder; and (iv) when appropriate, after receipt, promptly deliver such
cash to or upon the order of the registered holder of such Right Certificate.

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

     Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
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 Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Company, or shall, at the
written request of the Company, and in accordance with any required holding
period, destroy such cancelled Right Certificates, and, in such case, shall
deliver a certificate of destruction thereof to the Company.

-13-

 

     Section 9. Availability of Preferred Shares. The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with Section 7 hereof.
The Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Preferred Shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.

     The Company further covenants and agrees that it will 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 Right Certificates or of any Preferred Shares
upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer or
delivery of Right Certificates to a Person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares in a
name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or to deliver any
certificates or depositary receipts for Preferred Shares upon the exercise of
any Rights until any such tax shall have been paid (any such tax being payable
by the holder of such Right Certificate at the time of surrender) or until it
has been established to the Company’s reasonable satisfaction that no such tax
is due.

     Section 10. Preferred Shares Record Date. Each Person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights

-14-

 

was duly surrendered
and payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that, if the date of such surrender and payment is a date
upon which the Preferred Shares 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 Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred 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.

     Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred 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 Shares payable in Preferred
Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the
outstanding Preferred Shares into a smaller number of Preferred Shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, and the number and
kind of shares of capital stock issuable on such date, shall be proportionately

-15-

 

adjusted so that the holder of any Right exercised after such time shall be
entitled to receive the aggregate number and kind of shares of capital stock
which, if such Right had been exercised immediately prior to such date and at a
time when the Preferred Shares 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;
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.

     (ii) Subject to Section 24 hereof, in the event any Person becomes an
Acquiring Person, each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of the
Company as shall equal the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable and dividing that product by (B) 50% of the
then current per share market price of the Common Shares of the Company
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any Person shall become an Acquiring Person and
the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights.

     From and after the occurrence of such event, any Rights that are or were
acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be void, and any holder of such
Rights shall thereafter have no right to exercise

-16-

 

such Rights under any
provision of this Agreement. No Right Certificate shall be issued pursuant to
Section 3 hereof that represents Rights beneficially owned by an Acquiring
Person whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof; no Right Certificate shall be issued at any
time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof or to any nominee of such Acquiring Person,
Associate or Affiliate; and any Right Certificate delivered to the Rights Agent
for transfer to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence shall be cancelled.

     (iii) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit the exercise in full
of the Rights in accordance with subparagraph (ii) above, the Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exercise of the Rights. In the event the Company shall,
after good faith effort, be unable to take all such action as may be necessary
to authorize such additional Common Shares, the Company shall substitute, for
each Common Share that would otherwise be issuable upon exercise of a Right, a
number of Preferred Shares or fraction thereof such that the current per share
market price of one Preferred Share multiplied by such number or fraction is
equal to the current per share market price of one Common Share as of the date
of issuance of such Preferred Shares or fraction thereof.

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

-17-

 

per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d)) 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 Preferred Shares
outstanding on such record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number
of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares to be offered
for subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and holders of the Rights. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and, in the event that such rights, options or warrants are not
so issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.

-18-

 

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

     (d) (i) For the purpose of any computation hereunder, the “current per
share market price” of any security (a “Security” for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
immediately prior to such date; provided, however, that, in the event

-19-

 

that the
current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or Securities
convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the current per share market price shall be appropriately
adjusted to reflect the current market price per share equivalent of such
Security. The closing price for each day shall be the last sale price, regular
way, reported at or prior to 4:00 P.M. New York City time or, in case no such
sale takes place on such day, the average of the bid and asked prices, regular
way, reported as of 4:00 P.M. New York City time, in either case, as reported
in the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or, if
the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Security is listed or admitted to trading or, if the
Security is not listed or admitted to trading on any national securities
exchange, the last quoted price reported at or prior to 4:00 P.M. New York City
time or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported as of 4:00 P.M. New York City time by
NASDAQ or such other system then in use, or, if on any such date the Security
is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Security selected by the Board of Directors of the Company. The term
“Trading
Day” shall mean a day on which the principal national securities exchange on
which the Security is listed or admitted to trading is open for the

-20-

 

transaction
of business, or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.

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

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

-21-

 

     (f) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
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
Preferred Shares contained in Section 11(a) through (c) hereof, inclusive, and
the provisions of Sections 7, 9, 10 and 13 hereof with respect to the Preferred
Shares 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-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

     (h) Unless the 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 Sections 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-hundredths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share) obtained by (A) multiplying (x) the number
of one one-hundredths of a share 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 (B) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.

-22-

 

     (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-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately 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 ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Right Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date
Right Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed

-23-

 

and countersigned in the manner provided for herein, and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.

     (j) Irrespective of any adjustment or change in the Purchase Price or in
the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-hundredths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder.

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

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

-24-

 

     (m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, 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 Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to in Section 11(b) hereof, hereafter made by the Company to
holders of the Preferred Shares shall not be taxable to such stockholders.

     (n) In the event that, at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares, or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then, in any such case, (A)
the number of one one-hundredths of a Preferred Share purchasable after such
event upon proper exercise of each Right shall be determined by multiplying the
number of one one-hundredths of a Preferred Share so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
Common Shares outstanding immediately before such event and the denominator of
which is the number of Common Shares outstanding immediately after such event,
and (B) each Common Share outstanding immediately after such event shall have
issued with respect to it that number of Rights which each Common Share
outstanding immediately prior to such event had issued with respect to it. The
adjustments provided for in this Section 11(n) shall

-25-

 

be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.

     Section 12.
Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file
with the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares and the Securities and Exchange Commission a copy of such
certificate and (c) if such adjustment occurs at any time after the
Distribution Date, mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 25 hereof.

     Section 13.
Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. In the event, directly or indirectly, at any time after a Person has
become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) 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 and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then,
and in each such case, proper provision shall be made so that (i) each
holder of a Right (except as otherwise provided herein) shall thereafter have
the right to receive, upon the exercise thereof at a

-26-

 

price equal to the then
current Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable, in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of Common
Shares of such other Person (including the Company as successor thereto or as
the surviving corporation) as shall equal the result obtained by (A)
multiplying the then current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right is then exercisable and dividing that
product by (B) 50% of the then current per share market price of the Common
Shares of such other Person (determined pursuant to Section 11(d) hereof) on
the date of consummation of such consolidation, merger, sale or transfer; (ii)
the issuer of such Common Shares 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 issuer; and (iv)
such issuer shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
Section 9 hereof) in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the Common Shares of the Company thereafter
deliverable upon the exercise of the Rights. The Company shall not consummate
any such consolidation, merger, sale or transfer unless, prior thereto, the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. The Company shall not enter into any
transaction of the kind referred to in this Section 13 if at the time of such
transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially
diminish the benefits

-27-

 

intended to be afforded by the Rights. The provisions of
this Section 13 shall similarly apply to successive mergers or consolidations
or sales or other transfers.

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

-28-

 

a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.

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

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

-29-

 

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

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

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

-30-

 

     (b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper
instrument of transfer; and

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

     Section 17.
Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote 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
Right Certificate shall have been exercised in accordance with the provisions
hereof.

-31-

 

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

     The Rights Agent shall be protected and shall incur no liability for, or
in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.

     Section 19.
Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the

-32-

 

execution or filing of any paper or any further act on the part of
any of the parties hereto; provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and, in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and, in all such
cases, such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.

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

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

-33-

 

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

     (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Treasurer
or the Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this 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 negligence, bad faith or willful misconduct.

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

     (e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its

-34-

 

countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including
the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Section 3, 11, 13, 23 or 24 hereof, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or adjustment is required);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Shares to be
issued pursuant to this Agreement or any Right Certificate or as to whether any
Preferred Shares will, when issued, be validly authorized and issued, fully
paid and nonassessable.

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

     (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in acting while waiting for
those instructions.

-35-

 

     (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 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 legal entity.

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

     Section 21.
Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days’ notice in writing mailed to the Company and to each transfer
agent of the Common Shares or Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates by first-class mail. The Company
may
remove the Rights Agent or any successor Rights Agent upon 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 Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified

-36-

 

in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (which
holder shall, with such notice, submit such holder’s Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or
by such a court, shall be a corporation organized and doing business under the
laws of the United States or of the State of Minnesota (or of any other state
of the United States so long as such corporation is authorized to do business
as a banking institution in the State of Minnesota), in good standing, having
an office in the State of Minnesota, which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject to supervision
or examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Shares or Preferred Shares, and
mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.

-37-

 

     Section 22.
Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by the Board of Directors of the Company to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.

     Section 23.
Redemption. (a) The Board of Directors of the Company may,
at its option, at any time prior to such time as any Person becomes an
Acquiring Person, redeem all but not less than all the then outstanding Rights
at a redemption price of $.01 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 redemption of the Rights by the Board of Directors of the Company
may be made effective at such time, on such basis and with such conditions as
the Board of Directors of the Company, in its sole discretion, may establish.

     (b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided,
however, that the failure
to give, or any defect in, any such notice shall not affect the validity of
such redemption. Within 10 days after such action of the Board of Directors of
the Company ordering the redemption of the Rights, the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights

-38-

 

Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each
such notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates
or Associates may redeem, acquire or purchase for value any Rights at any time
in any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.

     Section 24.
Exchange. (a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share
per Right, appropriately adjusted to reflect any adjustment in the number of
Rights pursuant to Section 11(i) (such exchange ratio being hereinafter referred to as the “Exchange Ratio”).
Notwithstanding the foregoing, the Board of Directors of the Company shall not
be empowered to effect such exchange at any time after any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any such Subsidiary, or any entity holding Common Shares for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares then outstanding.

     (b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the

-39-

 

only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange;
provided, however, that
the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall mail a notice of any
such exchange to all of the holders of such Rights at their last addresses as
they appear upon the registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the method
by which the exchange of the Common Shares for Rights will be effected, and, in
the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro
rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 11(a)(ii) hereof) held by each holder of Rights.

     (c) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights. In the event the Company shall, after
good faith effort, be unable to take all such action as may be necessary to
authorize such additional Common Shares, the Company shall substitute, for each
Common Share that would otherwise be issuable upon exchange of a Right, a
number of Preferred Shares or fraction thereof such that the current per share
market price of one Preferred Share multiplied by such number or fraction is
equal to the current per share market price of one Common Share as of the date
of issuance of such Preferred Shares or fraction thereof.

-40-

 

     (d) The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (d), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date
of exchange pursuant to this Section 24.

     Section 25.
Notice of Certain Events. (a) In case the Company shall, at
any time after the Distribution Date, propose (i) to pay any dividend payable
in stock of any class to the holders of the Preferred Shares or to make any
other distribution to the holders of the Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of the
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of the
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (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 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or
pay any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in

-41-

 

Common Shares),
then, in each such case, the Company shall give to each holder of a Right
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, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 10 days prior to the record
date for determining holders of the Preferred Shares for purposes of such
action, and, in the case of any such other action, at least 10 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, whichever
shall be the earlier.

     (b) In case the event set forth in Section 11(a)(ii) hereof shall occur,
then the Company shall, as soon as practicable thereafter, give to each holder
of a Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.

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

MoneyGram International, Inc.

1550 Utica Avenue South

Minneapolis, Minnesota 55416

Attention: Corporate Secretary

-42-

 

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

Wells Fargo Bank, N.A.

P.O. Box 64854

St. Paul, Minnesota 55164

Attention: Account Manager

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

     Section 27. Supplements and Amendments. The Company may from time to time
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein, or to make any other provisions with respect to the
Rights which the Company may deem necessary or desirable, any such supplement
or amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that, from and after such time as any Person becomes
an Acquiring Person, this Agreement shall not be amended in any manner which
would adversely affect the interests of the holders of Rights. Without
limiting the foregoing, the Company may at any time prior to such time as any
Person becomes an Acquiring Person amend this Agreement to lower the thresholds
set forth in 
Section 1(a) and 3(a) hereof to not less than 10% (the “Reduced
Threshold”); provided, however, that no Person who beneficially owns a number
of

-43-

 

Common Shares equal to or greater than the Reduced Threshold shall become an
Acquiring Person unless such Person shall, after the public announcement of the
Reduced Threshold, increase its beneficial ownership of the then outstanding
Common Shares (other than as a result of an acquisition of Common Shares by the
Company) to an amount equal to or greater than the greater of (x) the Reduced
Threshold or (y) the sum of (i) the lowest beneficial ownership of such Person
as a percentage of the outstanding Common Shares as of any date on or after the
date of the public announcement of such Reduced Threshold plus (ii) .001%.

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

     Section 29. 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 Right Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders
of the Right Certificates (and, prior to the Distribution Date, the Common
Shares).

     Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

-44-

 

     Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and
performed entirely within such state.

     Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

     Section 33. 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.

-45-

 

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

	 	 	 	 	 	 	 
	Attest:	 	MONEYGRAM INTERNATIONAL, INC.
	 
	 	 	 	 	 	 
	By

	 	 	 	By	 	 
	

	 	
 
	 	 	 	
 
	

	 	Name:
	 	 	 	Name:
	

	 	Title:
	 	 	 	Title
	 
	 	 	 	 	 	 
	Attest:	 	WELLS FARGO BANK, N.A.
	 
	 	 	 	 	 	 
	By

	 	 	 	By	 	 
	

	 	
 
	 	 	 	
 
	

	 	Name:
	 	 	 	Name:
	

	 	Title:
	 	 	 	Title

-46-

 

Exhibit A

FORM OF

CERTIFICATE OF DESIGNATIONS, PREFERENCES

AND RIGHTS OF

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF

MONEYGRAM INTERNATIONAL, INC.

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware

          The undersigned, pursuant to the provisions of Sections 103 and 151 of the
General Corporation Law of the State of Delaware, do hereby certify that,
pursuant to the authority expressly vested in the Board of Directors of
MoneyGram International, Inc., a Delaware corporation (the “Corporation”), by
the Corporation’s Certificate of Incorporation, the Board of Directors has duly
provided for the issuance of and created a series of Preferred Stock of the
Corporation, par value $0.01 per share (the “Preferred Stock”), and in order to
fix the designation and amount and the voting powers, designations, preferences
and relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions, of a series of Preferred Stock,
has duly adopted this Certificate of Designations, Preferences and Rights of
Preferred Stock (this “Certificate”).

          Each share of such series of Preferred Stock shall rank equally in all
respects and shall be subject to the following provisions:

     (A) Series A Junior Participating Preferred Stock. The qualifications,
limitation and restrictions of the Preferred Stock shall be as follows:

     (i) Designation and Amount. The shares of such series shall be
designated as “Series A Junior Participating Preferred Stock” and the number
of shares constituting the Series A Preferred Stock shall be two million
(2,000,000) (such shares the “Series A Preferred
Stock”). Such number of shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of shares of
Series A Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise
of outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.

     (ii) Dividends and Distributions.

     (a) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends,
the holders of shares of Series A Preferred Stock, in preference to
the holders of Common Stock and of 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

A-1

 

year (each such date being referred to herein as a “Quarterly
Dividend Payment Date”), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (1) $1.00 or (2)
subject to the provision for adjustment hereinafter set forth, one
hundred (100) times the aggregate per share amount of all cash
dividends, and one hundred (100) times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or,
with respect to the first Quarterly Dividend Payment Date, since
the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (2) 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 Preferred Stock as provided in paragraph (C)(ii)(A)
of this Certificate immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Series A Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.

     (c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares, 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 Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total amount of such

A-2

 

dividends at the time accrued and payable on such shares shall
be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more
than sixty (60) days prior to the date fixed for the payment
thereof.

     (iii) Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:

     (a) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the
holder thereof to one hundred (100) votes on all matters submitted
to a vote of the stockholders of the Corporation. In the event the
Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall
be adjusted by multiplying such number by a fraction, the numerator
of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.

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

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

     (iv) Certain Restrictions.

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

A-3

 

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

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

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

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

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

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

     (vi) Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made
(a) to the holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred
Stock unless, prior thereto, the holders of shares of

A-4

 

Series A Preferred Stock shall have received $100.00 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided that the
holders of shares of Series A Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to one hundred (100) times the aggregate amount
to be distributed per share to holders of shares of Common Stock, or (b) to
the holders of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock and
all such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to such
event under the proviso in clause (a) 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.

     (vii) Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share
of Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to one hundred (100) times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares
of Common Stock, 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
Preferred Stock shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such event.

     (viii) No Redemption. The shares of Series A Preferred Stock shall not
be redeemable.

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

A-5

 

     
(x) Amendment. The Certificate of Incorporation of the Corporation
shall not be amended in any manner that would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as
to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock,
voting together as a single class.

A-6

 

     IN WITNESS WHEREOF, said MoneyGram International, Inc. has caused this
Certificate of Designations to be signed by its Chief Executive Officer and has
caused its corporate seal to be affixed, this
[   ] day of
[                    ], 2004.

	 	 	 	 	 
	 	 	MONEYGRAM INTERNATIONAL, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	
 
	

	 	 	 	Name: Philip W. Mile
	

	 	 	 	Title: Chief Executive Officer

A-7

 

Exhibit B

Form of Right Certificate

      

			
	Certificate No. R-
	 	Rights

NOT
EXERCISABLE
AFTER                    , 2014 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE AGREEMENT.

Right Certificate

MONEYGRAM INTERNATIONAL, 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 Agreement, dated as of                    , 2004 (the “Agreement”), between
MoneyGram International, Inc., a Delaware corporation (the “Company”), and
Wells Fargo Bank, N.A. (the “Rights Agent”), to purchase from the Company at
any time after the Distribution Date (as such term is defined in the Agreement)
and prior to 5:00 P.M., Minneapolis, Minnesota time, on                    , 2014 at the
principal office of the Rights Agent, or at the office of its successor as
Rights Agent, one one-hundredth of a fully paid non-assessable share of Series
A Junior Participating Preferred Stock, par value
$          per share, of the
Company (the “Preferred Shares”), at a purchase price of
$          per one
one-hundredth of a Preferred Share (the “Purchase Price”), upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
duly executed. The number of Rights evidenced by this Right Certificate (and
the number of one one-hundredths of a Preferred Share which may be purchased
upon exercise hereof) set forth above, and the Purchase Price set forth above,
are the number and Purchase Price as of                    , 2004, based on the
Preferred Shares as constituted at such date. As provided in the Agreement,
the Purchase Price and the number of one one-hundredths of a Preferred Share
which may be purchased upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events.

     This Right Certificate is subject to all of the terms, provisions and
conditions of the Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which 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 Right Certificates. Copies of the Agreement are
on file at the principal executive offices of the Company and the offices of
the Rights Agent.

     This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or
Right Cer-

B-1

 

tificates surrendered shall have entitled such holder to purchase. If
this Right Certificate shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.

     Subject to the provisions of the Agreement, the Rights evidenced by this
Right Certificate (i) may be redeemed by the Company at a redemption price of
$0.01 per Right or (ii) may be exchanged in whole or in part for Preferred
Shares or shares of the Company’s Common Stock, par value $0.01 per share.

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

     No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the 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
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Agreement.

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

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

	 	 	 	 	 
	ATTEST:	 	MONEYGRAM INTERNATIONAL, INC.
	 
	 	 	 	 
	

	 	By	 	 
	
 

	 	 	 	
 
	Name:

	 	 	 	Name:
	Title:

	 	 	 	Title:
	 
	Countersigned:
	 	 	 	 

	 	 	 	 	 
	WELLS FARGO BANK, N.A.	 	 
	 
	 	 	 	 
	By
	 	 	 	 
	

	 	
 	 	 
	

	 	Name:	 	 
	

	 	Title:	 	 

Form of Reverse Side of Right Certificate

B-2

 

FORM OF ASSIGNMENT

(To be executed by the registered holder if such

holder desires to transfer the Right Certificate.)

     FOR
VALUE
RECEIVED
                 
hereby
sells, assigns and transfers unto                                                                                             

(Please print name and address of transferee)

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

	 	 	 	 	 	 	 	 	 
	Dated:
	
	 	 	 	 
	

	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	
 
	

	 	 	 	 	 	 	 	Signature

Signature Medallion Guaranteed:

     All Guarantees must be made by a financial institution (such as a bank or
broker) which is a participant in the Securities Transfer Agents Medallion
Program (“STAMP”), the New York Stock Exchange, Inc. Medallion Signature
Program (“MSP”), or the Stock Exchanges Medallion Program (“SEMP”) and must not
be dated. Guarantees by a notary public are not acceptable.

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

	 	 	 
	

	 	
 
	

	 	Signature

Form of Reverse Side of Right Certificate – Continued

B-3

 

FORM OF ELECTION TO
PURCHASE

(To be executed if holder desires to exercise

Rights represented by the Right Certificate.)

To: MONEYGRAM INTERNATIONAL, INC.

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

Please insert social security

or other identifying number

(Please print name and address)

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

Please insert social security

or other identifying number

(Please print name and address)

Dated: __________________

	 	 	 
	

	 	
 
	

	 	Signature

Signature Medallion Guaranteed:

     All Guarantees must be made by a financial institution (such as a bank or
broker) which is a participant in the Securities Transfer Agents Medallion
Program (“STAMP”), the New York Stock Exchange, Inc. Medallion Signature
Program (“MSP”), or the Stock Exchanges Medallion Program (“SEMP”) and must not
be dated. Guarantees by a notary public are not acceptable.

B-4

 

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

	 	 	 
	

	 	
 
	

	 	Signature

NOTICE

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

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

B-5

 

Exhibit C

SUMMARY OF RIGHTS TO PURCHASE

PREFERRED SHARES

Introduction

          On
                   , 2004, the Board of Directors of our Company, MoneyGram
International, Inc., a Delaware corporation, declared a dividend of one
preferred share purchase right (a “Right”) for each outstanding share of common
stock, par value $0.01 per share. The dividend is payable on                 ,
2004 to the stockholders of record on                 , 2004.

          Our Board has adopted this Rights Agreement to protect stockholders from
coercive or otherwise unfair takeover tactics. In general terms, it works by
imposing a significant penalty upon any person or group which acquires 15% or
more of our outstanding common stock without the approval of our Board. The
Rights Agreement should not interfere with any merger or other business
combination approved by our Board.

          For those interested in the specific terms of the Rights Agreement as made
between our Company and Wells Fargo Bank, N.A., as the Rights Agent, on    
   , 2004, we provide the following summary description. Please note, however,
that this description is only a summary, and is not complete, and should be
read together with the entire Rights Agreement, which has been filed with the
Securities and Exchange Commission as an exhibit to a Registration Statement on
Form 8-A dated                 , 2004. A copy of the agreement is available free
of charge from our Company.

The Rights. Our Board authorized the issuance of a Right with respect to each
outstanding share of common stock on                 , 2004. The Rights will
initially trade with, and will be inseparable from, the common stock. The
Rights are evidenced only by certificates that represent shares of common
stock. New Rights will accompany any new shares of common stock we issue after
                , 2004 until the Distribution Date described below.

Exercise Price. Each Right will allow its holder to purchase from our Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock
(“Preferred Share”) for
$                , once the Rights become exercisable. This portion
of a Preferred Share will give the stockholder approximately the same dividend,
voting, and liquidation rights as would one share of common stock. Prior to
exercise, the Right does not give its holder any dividend, voting, or
liquidation rights.

Exercisability. The Rights will not be exercisable until

	•	 	10 days after the public announcement that a person or group has become
an “Acquiring Person” by obtaining beneficial ownership of 15% or more of
our outstanding common stock, or, if earlier,
	 
	•	 	10 business days (or a later date determined by our Board before any
person or group becomes an Acquiring Person) after a person or group
begins a tender or exchange offer which, if completed, would result in
that person or group becoming an Acquiring Person.

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          We refer to the date when the Rights become exercisable as the
“Distribution Date.” Until that date, the common stock certificates will also
evidence the Rights, and any transfer of shares of common stock will constitute
a transfer of Rights. After that date, the Rights will separate from the
common stock and be evidenced by book-entry credits or by Rights certificates
that we will mail to all eligible holders of common stock. Any Rights held by
an Acquiring Person are void and may not be exercised.

          Our Board may reduce the threshold at which a person or group becomes an
Acquiring Person from 15% to not less than 10% of the outstanding common stock.

Consequences of a Person or Group Becoming an Acquiring Person.

	•	 	Flip In. If a person or group becomes an Acquiring Person, all holders of Rights except the
Acquiring Person may, for
$               , purchase shares of our common stock with a market value of
$               , based on the market price of the common stock prior to such acquisition.
	 
	•	 	Flip Over. If our Company is later acquired in a merger or similar transaction after the
Rights Distribution Date, all holders of Rights except the Acquiring
Person may, for $               ,
purchase shares of the acquiring corporation with a market value of
$               based on the market
price of the acquiring corporation’s stock, prior to such merger.

Preferred Share Provisions.

Each one one-hundredth of a Preferred Share, if issued:

	•	 	will not be redeemable.
	 
	•	 	will entitle holders to quarterly dividend payments of $.01 per share, or an amount equal to
the dividend paid on one share of common stock, whichever is greater.
	 
	•	 	will entitle holders upon liquidation either to receive $1 per share or an amount equal to the
payment made on one share of common stock, whichever is greater.
	 
	•	 	will have the same voting power as one share of common stock.
	 
	•	 	if shares of our common stock are exchanged via merger, consolidation, or a similar
transaction, will entitle holders to a per share payment equal to the payment made on one
share of common stock.

The value of one one-hundredth interest in a Preferred Share should approximate
the value of one share of common stock.

Expiration. The Rights
will expire on
                , 2014.

Redemption. Our Board may redeem the Rights for $.01 per Right at any time
before any person or group becomes an Acquiring Person. If our Board redeems
any Rights, it must redeem all of the Rights. Once the Rights are redeemed,
the only right of the holders of Rights will be to

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receive the redemption price of $.01 per Right. The redemption price will be
adjusted if we have a stock split or stock dividends of our common stock.

Exchange. After a person or group becomes an Acquiring Person, but before an
Acquiring Person owns 50% or more of our outstanding common stock, our Board
may extinguish the Rights by exchanging one share of common stock or an
equivalent security for each Right, other than Rights held by the Acquiring
Person.

Anti-Dilution Provisions. Our Board may adjust the purchase price of the
Preferred Shares, the number of Preferred Shares issuable and the number of
outstanding Rights to prevent dilution that may occur from a stock dividend, a
stock split, a reclassification of the Preferred Shares or common stock. No
adjustments to the Exercise Price of less than 1% will be made.

Amendments. The terms of the Rights Agreement may be amended by our Board
without the consent of the holders of the Rights. However, our Board may not
amend the Rights Agreement to lower the threshold at which a person or group
becomes an Acquiring Person to below 10% of our outstanding common stock. In
addition, the Board may not cause a person or group to become an Acquiring
Person by lowering this threshold below the percentage interest that such
person or group already owns. After a person or group becomes an Acquiring
Person, our Board may not amend the agreement in a way that adversely affects
holders of the Rights.

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