Document:

Exhibit 4.1 

 

 

 

LOGICVISION, INC.

a Delaware corporation 

and 

MELLON INVESTOR SERVICES LLC

a
New Jersey limited liability
company

Rights Agent

____________

Rights Agreement 

Dated as of December 16, 2008

 

 

 

TABLE OF CONTENTS 

	 	      	  	Page
	1.		Certain Definitions	1
	2.		Appointment of
      Rights Agent	6
	3.		Issue of Rights Certificates	6 
	4.		Form of Rights
      Certificates	8 
	5.		Countersignature and Registration	9 
	6.		Transfer, Split
      Up, Combination and Exchange of Rights Certificates; Mutilated,
      Destroyed, Lost or Stolen Rights
Certificates	  10 
	7.		Exercise of Rights; Purchase Price; Expiration Date of
    Rights	10 
	8.		Cancellation and
      Destruction of Rights Certificates	13 
	9.		Reservation and Availability of Preferred Stock	13 
	10.		Preferred Stock
      Record Date	14 
	11.		Adjustment of Purchase Price, Number and Kind of Shares or Number
      of Rights	15 
	12.		Certificate of
      Adjusted Purchase Price or Number of Shares	21 
	13.		Consolidation, Merger or Sale or Transfer of Assets or Earning
      Power	22 
	14.		Additional
      Covenants	24 
	15.		Fractional Rights and Fractional Shares	24 
	16.		Rights of
      Action	26 
	17.		Agreement of Rights Holders	26 
	18.		Rights
      Certificate Holder Not Deemed a Stockholder	27 
	19.		Concerning the Rights Agent	27 
	20.		Merger or
      Consolidation or Change of Name of Rights Agent	28 
	21.		Duties of Rights Agent	28 
	22.		Change of Rights
      Agent	31
  

i

	23.  	      	Issuance of New Rights
      Certificates  	32 
	24.  	  	Redemption, Termination and Exchange 	32 
	25.  	  	Notice of Certain Events
    	35 
	26.  	  	Notices  	35 
	27.  	  	Supplements and
      Amendments  	36 
	28.  	  	Determination and Actions by the
      Board  	37 
	29.  	  	Successors  	37 
	30.  	 	Benefits of This Agreement  	37 
	31.  	  	Severability  	37 
	32.  	  	Governing Law  	37 
	33.  	  	Counterparts  	38 
	34.  	  	Descriptive Headings  	38 
	Exhibit A – Certificate of
      Designation of Series A Participating Preferred Stock  	A-1 
	Exhibit B – Form of Rights
      Certificate  	B-1 
	Exhibit C – Form of Summary of
      Rights  	C-1 

ii

RIGHTS AGREEMENT 

     THIS
RIGHTS AGREEMENT (this “Agreement”) is dated as of December
16, 2008 between LOGICVISION, INC., a Delaware corporation (the “Company”), and MELLON
INVESTOR SERVICES LLC, a New Jersey limited liability company, as Rights Agent
(the “Rights Agent”). 

W I T N E S S E T H: 

     WHEREAS,
on December 16, 2008, the Board of Directors of the Company (the
“Board”)
authorized and declared a dividend distribution of one Right (as hereinafter
defined) for each share of Common Stock, of the Company (the “Common Stock”) outstanding
as of the Close of Business (as hereinafter defined) on December 26, 2008 (the
“Record Date”), and contemplates the issuance of one Right (subject to adjustment as
provided herein) for each share of Common Stock issued between the Record Date
and the earlier of the Distribution Date and the Expiration Date, as such terms
are hereinafter defined (with Rights also to be issued in connection with
certain issuances of Common Stock after the Distribution Date, as provided more
fully herein), each Right representing the right to purchase one one-thousandth
of a share of Series A Participating Preferred Stock, par value $0.0001 per
share, of the Company (the “Preferred
Stock”) having the rights, powers and
preferences set forth in the form of Certificate of Designation attached hereto
as Exhibit A (the “Certificate of
Designation”), upon the terms and subject to
the conditions hereinafter set forth (the “Rights”). 

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

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

          (a) “Acquiring
Person” shall mean any Person (as such term
is hereinafter defined) who or which, together with all Affiliates (as such term
is hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, shall be the Beneficial Owner (as such term is hereinafter defined)
of fifteen percent (15%) or more of the shares of Common Stock then outstanding
or who was such a Beneficial Owner at any time on or after the date hereof,
whether or not such Person continues to be the Beneficial Owner of fifteen
percent (15%) or more of the outstanding shares of Common Stock. Notwithstanding
the foregoing: 

               (i) in no event shall a Person who or which, together with all
Affiliates and Associates of such Person, is the Beneficial Owner of less than
fifteen percent (15%) of the outstanding shares of Common Stock become an
Acquiring Person solely as a result of a reduction of the number of shares of
outstanding Common Stock, including repurchases of outstanding shares of Common
Stock by the Company, which reduction increases the percentage of outstanding
shares of Common Stock Beneficially Owned (as such term is hereinafter defined)
by such Person; provided, however, that any subsequent increase in the amount of Common Stock
Beneficially Owned by such Person, together with all Affiliates and Associates
of such Person, without the prior written approval of the Board shall cause such

1

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

               (ii) the term Acquiring Person
shall not mean: 

                    (A) the Company; 

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

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

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

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

               (iii) no Person shall be deemed to be an Acquiring Person if: (A)(1)
any Schedule 13D under the Exchange Act (as such term is hereinafter defined),
or any comparable or successor report, filed (or required to be filed) by such
Person does not (or would not) state any intention to or reserve the right to
control or influence the management or policies of the Company or engage in any
of the actions specified in Item 4 (or any comparable or successor Item) of such
Schedule 13D (other than the disposition of Common Stock), (2) either (x) within
two (2) Business Days (as such term is hereinafter defined) of being requested
by the Company to advise the Company regarding the same, such Person certifies
in writing to the Company that such Person acquired Beneficial Ownership of
fifteen percent (15%) or more of the outstanding shares of Common Stock
inadvertently or without knowledge of the terms of the Rights, or (y) the Board
determines in good faith that such Person has become an Acquiring Person
inadvertently, (3) such Person divests as promptly as practicable (as determined
in good faith by the Board) a sufficient number of securities so that such
Person would not be deemed to be an Acquiring Person pursuant to the first
sentence of this Section 1(a) (or such other provisions of this Section 1(a) as may be applicable),
and (4) promptly following such Person’s divestiture of such securities, such
Person certifies to the Board that such Person would no longer be deemed an
Acquiring Person as defined pursuant to the first sentence of this
Section 1(a) (or such other provisions of this Section 1(a) as may be applicable); or
(B) by reason of such Person’s Beneficial Ownership of fifteen percent (15%) or
more of the outstanding shares of Common Stock on the date hereof if prior to
the Record Date such Person notifies the Board that such Person is no longer the
Beneficial Owner of fifteen percent (15%) or more of the then outstanding shares
of Common Stock. 

2

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

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

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

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

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

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

3

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

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

          (f) “Common
Stock” shall mean the Common Stock, par value
$0.0001 per share, of the Company or any other shares of capital stock of the
Company into which such Common Stock may be reclassified or exchanged, except
that “Common Stock” when used with reference to stock issued by any Person other than the
Company shall mean the capital stock with the greatest Voting Power, or the
equity securities or other equity interest having power to control or direct the
management, of such Person or, if such Person is a Subsidiary of another Person,
of the Person which ultimately controls such first-mentioned Person and which
has issued and outstanding such capital stock, equity securities or equity
interests. 

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

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

          (i) “Final Expiration
Date” shall mean the Close of Business on
December 16, 2009; provided, however, that if a Distribution Date occurs on or before
such day, then such term shall mean the Close of Business on December 31, 2010.

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

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

          (l) “Preferred
Stock” shall mean the Series A Participating
Preferred Stock, par value $0.0001 per share, of the Company. 

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

          (n) “Synthetic Long
Position” shall mean any option, warrant,
convertible security, stock appreciation right or other contractual right,
whether or not presently exercisable, 

4

which has an exercise or conversion
privilege or a settlement payment or mechanism at a price related to shares of
Common Stock or a value determined in whole or part with reference to, or
derived in whole or in part from, the market price or value of shares of Common
Stock, whether or not such right is subject to settlement in whole or in part in
shares of Common Stock, and which increases in value as the value of shares of
Common Stock increases or which provides to the holder of such right an
opportunity, directly or indirectly, to profit or share in any profit derived
from any increase in the value of shares of Common Stock, but shall not include:

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

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

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

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

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

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

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

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

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

5

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

     2. Appointment of Rights Agent. The
Company hereby appoints the Rights Agent to act as agent for the Company in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
co-rights agents as it may deem necessary or desirable upon written notice to
the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in
no event be liable for, the acts or omissions of any such co-rights agent. In
the event the Company appoints one or more co-rights agents, the respective
duties of the Rights Agents and any co-rights agents shall be as the Company
shall determine and the Company shall provide written notice thereof to the
Rights Agent. 

     3. Issue of Rights
Certificates. 

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

     As soon
as practicable following the Record Date, the Company shall send a copy of a
Summary of Rights, in substantially the form attached hereto as Exhibit C (the
“Summary of

6

Rights”), by first-class, postage prepaid mail, to each record holder of the
Common Stock as of the Close of Business on the Record Date, at the address of
such holder shown on the records of the Company. With respect to certificates
for the Common Stock outstanding as of the Record Date, until the Distribution
Date (or earlier redemption, expiration or termination of the Rights), the
Rights shall be evidenced by such certificates for the Common Stock and the
registered holders of the Common Stock shall also be the registered holders of
the associated Rights. With respect to uncertificated shares of Common Stock
outstanding as of the Record Date, until the Distribution Date (or earlier
redemption, expiration or termination of the Rights), the Rights will be
evidenced by the registration of the shares of Common Stock in the Company’s
share register in the names of the holders thereof. Until the Distribution Date
(or earlier redemption, expiration or termination of the Rights), the surrender
for transfer of any of the certificates for the Common Stock outstanding on the
Record Date shall also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate, and the registration of transfer
of ownership of any uncertificated shares of Common Stock outstanding on the
Record Date shall also constitute the transfer of the Rights associated with
such shares.

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

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

This certificate also evidences and
entitles the holder hereof to certain “Rights” as set forth in a Rights
Agreement between LOGICVISION, INC. (the “Company”) and MELLON INVESTOR SERVICES
LLC (the “Rights Agent”), dated as of December 16, 2008 (the “Rights
Agreement”), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such Rights may be
redeemed, may expire, or may be evidenced by separate certificates and will no
longer be evidenced by this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circumstances, Rights “Beneficially
Owned” by “Acquiring Persons” (as such terms are defined in the Rights
Agreement) or certain related parties, as well as subsequent holders of such
Rights, may become null and void. 

7

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

	     	
      The registration in the share
      register of LOGICVISION, INC. (the “Company”) of the shares of common
      stock to which this initial transaction or subsequent periodic statement
      relates also evidences and entitles the registered holder of such shares
      to certain rights as set forth in a Rights Agreement between the Company
      and MELLON INVESTOR SERVICES LLC (the “Rights Agent”), dated as of
      December 16, 2008 (the “Rights Agreement”), the terms of which are hereby
      incorporated herein by reference and a copy of which is on file at the
      principal executive offices of the Company. Under certain circumstances,
      as set forth in the Rights Agreement, such Rights may be redeemed, may
      expire, or may be evidenced by separate certificates and will no longer be
      evidenced by such registration. The Company will mail to the holder of
      this statement a copy of the Rights Agreement without charge after receipt
      of a written request therefor. Under certain circumstances, Rights
      “Beneficially Owned” by “Acquiring Persons” (as such terms are defined in
      the Rights Agreement) or certain related parties, as well as subsequent
      holders of such Rights, may become null and void.
	     

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

     4. Form of Rights Certificates.

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

8

therein at the price per one
one-thousandth of a share set forth therein (the “Purchase Price”), such Purchase Price
to be initially equal to the amount set forth in Section 7(b) below but the number of
one one-thousandths of a share and the Purchase Price shall be subject to
adjustment as provided herein. 

          (b) Any Rights Certificate issued pursuant to Section 3(a) hereof that
represents Rights Beneficially Owned by an Acquiring Person or any Associate or
Affiliate thereof, any Rights Certificate issued at any time upon the transfer
of any Rights to such an Acquiring Person or any Associate or Affiliate thereof
or to any nominee of such Acquiring Person, Associate or Affiliate, and any
Rights Certificate issued pursuant to Section
6, Section
11 or
Section 23
hereof upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain a legend in
substantially the following form: 

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

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

     5. Countersignature and Registration.

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

          (b) Following the Distribution Date, receipt by the Rights Agent
of notice to that effect and all other relevant information referred to in
Section 3(a), the Rights Agent will keep or cause to be kept, at its
office designated for such purpose, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates and the date of
each of the Rights Certificates. 

9

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

          (a) Subject to the provisions of Sections 7(e), 7(f) and 15 hereof, at any time
after the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the Expiration Date, any Rights Certificate or Certificates
may be transferred, split up, combined or exchanged for another Rights
Certificate or Rights Certificates, entitling the registered holder to purchase
a like number of one one-thousandths of a share of Preferred Stock (or, after
the occurrence of a Triggering Event, shares of Common Stock or other securities
and property, as the case may be) as the Rights Certificate or Rights
Certificates surrendered then entitled such holder (or former holder in the case
of a transfer) to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Rights Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent designated for such purpose. The
Rights Certificates are transferable only on the registry books of the Rights
Agent. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Rights
Certificate or Certificates until the registered holder thereof shall have (i)
properly completed and signed the Certificate contained in the form of
assignment set forth on the reverse side of each such Rights Certificate, (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) thereof and of the Rights evidenced thereby and the
Affiliates and Associates of such Beneficial Owner (or former Beneficial Owner)
as the Company or the Rights Agent shall reasonably request, and (iii) paid a
sum sufficient to cover any tax or charge that may be imposed in connection with
any transfer, split up, combination or exchange of Rights Certificates as
required by Section 9(e) hereof. Thereupon the Rights Agent shall countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested, registered in such name or
names as may be designated by the surrendering registered holder. The Rights
Agent shall promptly forward any such sum collected by it to the Company or to
such Persons as the Company shall specify by written notice. The Rights Agent
shall have no duty or obligation under any Section of this Agreement requiring
the payment of taxes and charges unless and until it is satisfied that all such
taxes and charges have been paid. 

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

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

          (a) Subject to the provisions
of Sections 7(e) and 7(f) hereof, the registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise 

10

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

          (b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be Six
Dollars ($6.00), shall be subject to adjustment from time to time as provided in
Sections 11
and 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) of this Section 7 below. 

          (c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the appropriate form of election to purchase properly completed and
duly executed, accompanied by payment of the Purchase Price for the fractional
interests in shares of Preferred Stock (or other securities or property) to be
purchased and an amount equal to any applicable transfer tax (as determined by
the Rights Agent) in cash, or by certified check or bank draft payable to the
order of the Company, the Rights Agent shall, subject to Section 21(k) hereof,
thereupon promptly (i)(A) requisition from any transfer agent of the shares of
Preferred Stock (or make available, if the Rights Agent is the transfer agent)
certificates for the number of one one-thousandths of a share of Preferred Stock
to be purchased or, in the case of uncertificated shares of Preferred Stock,
requisition from any transfer agent therefor of a notice setting forth such
number of shares of Preferred Stock to be purchased for which registration will
be made in the Company’s share register, and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Company, in its sole discretion, shall have elected to deposit the fractional
interests in shares of Preferred Stock issuable upon exercise of the Rights
hereunder into a depositary, requisition from the depositary agent depositary
receipts representing such number of one one-thousandths of a share of Preferred
Stock as are to be purchased (in which case certificates for the one
one-thousandths of a share of Preferred Stock represented by such receipts shall
be deposited by the transfer agent with the depositary agent) and the Company
shall direct the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash, if any, to be paid
in lieu of issuance of fractional shares in accordance with Section 15, (iii) after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder and, (iv) when appropriate, after receipt deliver such cash to or upon
the order of the registered holder of such Rights Certificate. In the event that
the Company is obligated to issue 

11

other securities of the Company, or
distribute other property pursuant to Section
11(a), the Company shall make all
arrangements necessary so that such other securities or property are available
for distribution by the Rights Agent, if and when necessary to comply with this
Agreement. In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii), the Rights Agent
shall return such Rights Certificate to the registered holder thereof after
imprinting, stamping or otherwise indicating thereon that the rights represented
by such Rights Certificate no longer include the rights provided by
Section 11(a)(ii) hereof; provided, however, that if less than all the Rights represented by such Rights
Certificate were so exercised, the Rights Agent shall, upon written receipt of
the necessary information from the Company, indicate on the Rights Certificate
the number of Rights represented thereby which continue to include the rights
provided by Section 11(a)(ii). 

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

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

         
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless the Certificate contained in the appropriate form of
Election to Purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise shall have been properly

12

completed and duly executed by the
registered holder thereof and the Company shall have been provided with such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company or Rights
Agent shall reasonably request. 

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

     9. Reservation and Availability of
Preferred Stock. 

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

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

          (c) If then required by applicable law, the Company shall use its
best efforts to (i) file, as soon as practicable following the earliest date
after the occurrence of a Triggering Event as to which the consideration to be
delivered by the Company upon exercise of the Rights has been determined
pursuant to this Agreement, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act of 1933, as amended (the “Act”), with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, (B) the Expiration Date or (C) the date the Company receives an
opinion of counsel to the effect that the maintenance of such registration
statement in effect is no longer necessary. If then required by applicable law,
the Company will also take such action as may be appropriate under the
securities or “blue sky” laws 

13

of the various states. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days after
the date set forth in clause (i) of this Section 9(c), the exercisability of
the Rights in order to prepare and file such registration statement or to comply
with such blue sky laws. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended. The Company shall notify the Rights Agent in writing
whenever it makes a public announcement temporarily suspending the
exercisability of the Rights. Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained.

          (d) The Company covenants and agrees that it shall take all such
action as may be necessary to ensure that all one one-thousandths of a share of
Preferred Stock or other securities delivered upon exercise of Rights shall, at
the time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price and compliance with all other
applicable provisions of this Agreement), be duly and validly authorized and
issued and fully paid and nonassessable shares or securities. 

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

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

14

preemptive rights, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein. 

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

          (a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section
11(a) and in Section 7(e) hereof, the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock and other securities which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Stock transfer
books of the Company were open, such holder would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs which would require an
adjustment under both this Section
11(a)(i) and Section 11(a)(ii) hereof the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof. 

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

15

any court or other governmental agency
or body. The Rights Agent shall not be deemed to have any knowledge of the
identity of any such Acquiring Person, or its Associates or Affiliates or the
nominee of any of the foregoing, unless and until the Rights Agent has received
notice of the identity of such Person.

               (iii) In lieu of issuing shares of Common Stock in accordance
with Section 11(a)(ii) hereof, the Company may, if a majority of the Board then in
office determines that such action is necessary or appropriate and not contrary
to the interests of holders of Rights, elect to (and, in the event that the
Board has not exercised the exchange right contained in Section 24(c) hereof and
there are not sufficient treasury shares and authorized but unissued shares of
Common Stock to permit the exercise in full of the Rights in accordance with
Section 11(a)(ii) hereof, the Company shall)
take all such action as may be necessary to authorize, issue or pay, upon the
exercise of the Rights, cash (including by way of a reduction of the Purchase
Price), property, shares of Common Stock, other securities (whether equity or
debt securities of the Company, any Subsidiary of the Company, or otherwise) or
any combination thereof having an aggregate value equal to the value of the
shares of Common Stock which otherwise would have been issuable pursuant to
Section 11(a)(ii) hereof, which aggregate value shall be determined by a nationally
recognized investment banking firm selected by a majority of the Board. For
purposes of the preceding sentence, the value of the Common Stock shall be
determined pursuant to Section
11(d) hereof and the value of any fractional
interests in preferred stock or preference stock which a majority of the Board
determines to be a “common stock
equivalent” shall be deemed to have the same value as the Common Stock. Any such
election by the Board must be made and publicly announced within sixty (60) days
following the date on which the Section 11 Event at issue shall have occurred.
Following the occurrence of such Section 11 Event, a majority of the Board then
in office may suspend the exercisability of the Rights for a period of up to
sixty (60) days following the date on which such Section 11 Event shall have
occurred to the extent that such Directors have not determined whether to
exercise their rights of election under this Section 11(a)(iii). If the Board shall
determine in good faith that it is likely that sufficient additional shares of
Common Stock or common stock equivalents could be authorized for issuance upon
exercise in full of the Rights, the sixty (60) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days following
the occurrence of the Section 11 Event at issue, in order that the Company may
seek stockholder approval for the authorization of such additional shares. In
the event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended.
The Company shall notify the Rights Agent in writing whenever it makes such a
public announcement temporarily suspending the exercisability of the Rights.

          (b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of any interests in Preferred Stock
entitling them (for a period expiring within forty-five (45) calendar days after
such record date) to subscribe for or purchase any interests in Preferred Stock
(or securities having the same or more favorable rights, privileges and
preferences as the Preferred Stock (“equivalent preferred stock”)) or
securities convertible into Preferred Stock or equivalent preferred stock at a
price per share of Preferred Stock or per share of equivalent preferred stock
(or having a conversion price per share, if a security convertible into
Preferred Stock or equivalent preferred stock) less than the current market
price (as defined in Section
11(d)) per share of Preferred Stock on such
record date, the Purchase Price 

16

to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of shares of Preferred Stock which the aggregate offering price of the
total number of shares of Preferred Stock or equivalent preferred stock to be
offered (or the aggregate initial conversion price of the convertible securities
so to be offered) would purchase at such current market price and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares of
Preferred Stock or equivalent preferred stock to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined reasonably and with good faith to
the holders of Rights by the Board, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and conclusive for all purposes. Shares of Preferred Stock owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.

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

          (d) (i) For the purpose of
any computation hereunder, other than as provided in Section 11(a)(iii) hereof, the
“current market price” per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to but not including such date; provided, however, that in the event that the
current per share market price of the Common Stock is determined in whole or in
part during a 

17

period following the announcement by
the issuer of such Common Stock of (A) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities convertible into
shares of such Common Stock or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of thirty
(30) Trading Days after but not including the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the “current market
price” shall be properly adjusted to take
into account ex-dividend trading. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the shares of Common Stock are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange but are listed or quoted on the
Nasdaq Global Market, the last reported sale price, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices as
reported by Nasdaq, or, if the shares of Common Stock are not listed or quoted
on the Nasdaq Global Market, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the OTC Bulletin Board or such other system then in use, or, if on
any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined reasonably and
with good faith by the Board shall be used and shall be binding on the Rights
Agent and conclusive for all purposes. The term “Trading Day” shall mean a day on which
the principal national securities exchange or the Nasdaq Global Market, as the
case may be, on which the shares of Common Stock are principally listed or
admitted to trading or quoted is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading or quoted on any
national securities exchange or the Nasdaq Global Market, a Business Day. If the
Common Stock is not publicly held or not so listed or traded, “current market price” per
share shall mean the fair value per share determined reasonably and with good
faith to the holders of Rights by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and conclusive for all purposes. 

               (ii) For the purpose of any computation hereunder, the
“current market price” per share (or one
one-thousandth of a share) of Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in Section 11(d)(i) (other than the last
sentence thereof). If the current market price per share (or one one-thousandth
of a share) of Preferred Stock cannot be determined in the manner provided above
or if the Preferred Stock is not publicly held or listed or traded in a manner
described in Section 11(d)(i), the “current
market price” per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 1,000 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalization with respect to the
Common Stock occurring after the date of this Agreement) multiplied by the
current market price per share of the Common Stock and the “current market price” per
one one-thousandth of a share of Preferred Stock shall be equal to the

18

current market price per share of the
Common Stock (as appropriately adjusted). If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded, “current market price” per share shall mean the fair
value per share as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes. 

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

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

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

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

          (i) The Company may elect on
or after the date of any adjustment of the Purchase Price to adjust the number
of Rights, in substitution for any adjustment in the number of one
one-thousandths of a share of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of one one-thousandths of a share of
Preferred Stock for which a Right was 

19

exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one
millionth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement (with prompt written notice thereof to the Rights Agent) of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be at
least ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 15 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and delivered by the Company, and
countersigned and delivered by the Rights Agent, in the manner provided for
herein (and may bear, at the option of the Company, the adjusted Purchase Price)
and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.

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

          (k) Before taking any action
that would cause an adjustment reducing the Purchase Price below the then par
value, if any, of the number of one one-thousandths of a share of Preferred
Stock or shares of Common Stock or other securities issuable upon exercise of
the Rights (aggregating, for this purpose, an appropriate amount of the Purchase
Price for fractional shares to compare such aggregated amount to the par value
for a whole share), the Company shall take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable one one-thousandths of a share of
Preferred Stock or shares of Common Stock or other securities at such adjusted
Purchase Price. If upon any exercise of the Rights, a holder is to receive a
combination of Common Stock and common stock equivalents, or Preferred Stock and
preferred stock equivalents, a portion of the consideration paid upon such
exercise, equal to at least the then par value, if any, of a share of Common
Stock or Preferred Stock of the Company, as the case may be, shall be allocated
as the payment for each share of Common Stock or Preferred Stock of the Company,
as the case may be, so received. 

          (l) In any case in which this
Section 11
shall require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer (with prompt
written notice thereof to the Rights Agent) until the occurrence of 

20

such event the issuing to the holder of
any Right exercised after such record date the shares of Preferred Stock and
other capital stock or securities of the Company, if any, issuable upon such
exercise over and above the shares of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder’s right to receive such additional shares upon the
occurrence of the event requiring such adjustment. 

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

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

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

     12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made or any
event affecting the Rights or their exercisability (including, without
limitation, an event which causes the Rights to become null and void) occurs as
provided in Sections 11 or 13 hereof, the Company shall (a) promptly prepare a certificate
setting forth such adjustment or describing such event and a brief, reasonably
detailed statement of the facts accounting for such adjustment or describing
such event, (b) promptly file with the Rights Agent and with each transfer agent
for the Preferred Stock and the Common Stock a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Rights Certificate in
accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying
on any 

21

such certificate and on any adjustment
or statement therein contained and shall have no duty or liability with respect
to, and shall not be obligated or responsible for calculating any adjustment nor
shall it be deemed to have knowledge of such adjustment or any such event unless
and until it shall have received such certificate. Notwithstanding the foregoing
provisions of this Section 12, the failure of the
Company to make such certification or give such notice shall not affect the
validity, or the force or effect, of the requirement for such adjustment.

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

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

22

          (b) “Principal Party” shall
mean: 

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

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

provided, however, that in any such case, (A) if the Common Stock of such Person is not at
such time and has not been continuously over the preceding twelve (12) month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary or Affiliate of another Person the Common Stock of
which is and has been so registered, “Principal Party” shall refer to such
other Person; (B) in case such Person is a Subsidiary, directly or indirectly,
or Affiliate of more than one Person, the Common Stock of two or more of which
are and have been so registered, “Principal
Party” shall refer to whichever of such
Persons is the issuer of the Common Stock having the greatest aggregate market
value; and (C) in case such Person is owned, directly or indirectly, by a joint
venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in clauses (A) and (B) above
shall apply to each of the chains of ownership having an interest in such joint
venture as if such joint venture were a Subsidiary of each such joint venturer
and the Principal Parties in each such chain shall bear the obligations set
forth in this Section 13 in the same ratio as their direct or indirect interests in
such Person bear to the total of such interests. 

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

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

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

23

exercise of the Rights to be listed on
any national securities exchange or national quotation system upon which its
Common Stock is listed, traded or quoted; and 

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

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

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

     14. Additional Covenants. 

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

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

     15. Fractional Rights and Fractional Shares. 

          (a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(n) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current

24

market value of a whole Right. For the
purposes of this Section 15(a), the current market value of a whole Right shall be (except
as otherwise provided in the last sentence of this Section 15(a)) the closing price of
the Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price of the
Rights for any day shall be the last sale price, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the OTC Bulletin Board or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board.
If on any such date no such market maker is making a market in the Rights, the
fair value of the Rights on such date as determined reasonably and with good
faith to the holders of Rights by the Board shall be used and shall be binding
on the Rights Agent and conclusive for all purposes. 

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

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

          (d) Except as otherwise expressly provided herein, the holder of a Right by
the acceptance of the Right expressly waives such holder’s right to receive any
fractional Rights or any fractional shares (other than, in the case of Preferred
Stock, fractions which are integral multiples of one one-thousandth of a share
of Preferred Stock) upon exercise of a Right. 

          (e) Whenever a payment for fractional Rights or fractional shares is to be
made by the Rights Agent, the Company shall (i) promptly prepare and deliver to
the Rights 

25

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

     16. Rights
of Action. All rights of action in respect of
this Agreement, except those rights of action vested in the Rights Agent
pursuant to Section 21, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered holders
of the Common Stock); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in such holder’s own behalf and
for such holder’s own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder’s right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach by the Company of this
Agreement and shall be entitled to specific performance of the obligations
hereunder and injunctive relief against actual or threatened violations of the
obligations hereunder of the Company. Holders of Rights shall be entitled to
recover the reasonable costs and expenses, including attorneys’ fees, incurred
by them in any action to enforce the provisions of this Agreement. 

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

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

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

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

26

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

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

     19.
Concerning the Rights Agent. 

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

          (b) The Rights Agent shall be authorized and protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its acceptance and administration of this Agreement and the
exercise and performance of its duties hereunder, in reliance upon any Rights
Certificate or certificate for Common Stock or for other 

27

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, guaranteed or acknowledged by the proper Person or Persons, or
otherwise upon advice of counsel as set forth in Section 21 below, in the absence of
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent (which gross negligence, bad faith or willful misconduct must be
determined by a final, non-appealable judgment of a court of competent
jurisdiction). The Rights Agent shall not be deemed to have knowledge of any
event of which it was supposed to received notice thereof hereunder, and the
Rights Agent shall be fully protected and shall incur no liability for failing
to take action in connection therewith, unless and until it has received such
notice in writing.

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

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

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

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

          (a) The Rights Agent may consult with legal counsel selected by it (who may
be legal counsel for the Company or an employee of the Rights Agent), and the
advice or opinion of such counsel shall be full and complete authorization and
protection to the Rights Agent and 

28

the Rights Agent shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
accordance with such advice or opinion. 

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

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

          (d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except as to the fact that it has countersigned the Rights
Certificates) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only. The
Rights Agent makes no representation as to the validity or sufficiency of this
Agreement or of the Rights Certificates.

          (e) The Rights Agent shall not have any liability for or be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any change in the
exercisability of Rights (including Rights becoming null and void pursuant to
Section 7(e) hereof) except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of such change; nor shall it be
responsible for any breach by the Company of any covenant or condition contained
in this Agreement or in any Rights Certificate; nor shall it be responsible for
any adjustment required under the provisions of Section 11 or 13 hereof or responsible
for the manner, method or amount of any such adjustment or the 

29

ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after receipt of a certificate pursuant
to Section 12 describing any such adjustment, upon which the Rights Agent may rely);
nor shall it be responsible for any determination by the Board of the current
market value of the Rights or Preferred Stock or Common Stock pursuant to the
provisions of Section 15 hereof; nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
shares of Preferred Stock or other securities to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares of Preferred
Stock or other securities will, when so issued, be validly authorized and
issued, fully paid and nonassessable. 

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

          (g) The Rights Agent is hereby authorized and directed to accept instructions
with respect to the performance of its duties hereunder and certificates
delivered pursuant to any provision hereof from the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and is authorized to apply to such officers for advice or instructions in
connection with its duties, and such instructions shall provide full
authorization and protection to the Rights Agent and the Rights Agent shall not
be liable for or in respect of any action taken, suffered or omitted in
accordance with written instructions of any such officer or for any delay in
acting while waiting for those instructions. The Rights Agent shall be fully
authorized and protected in relying upon the most recent instructions received
by any such officer. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken, suffered or omitted by the Rights
Agent with respect to its duties or obligations under this Agreement and the
date on or after which such action shall be taken or suffered or such omission
shall be effective. The Rights Agent shall not be liable for any action taken,
suffered or omitted in accordance with a proposal included in any such
application on or after the date specified therein (which date shall not be less
than three (3) Business Days after the date any such officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking, suffering or omitting to
take any such action (or the effective date in the case of an omission), the
Rights Agent has received written instructions in response to such application
specifying the action to be taken, suffered or omitted. 

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

          (i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself (through its
directors, officers and 

30

employees) or by or through its
attorneys or agents, and the Rights Agent shall not be answerable or accountable
for any act, omission, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company, to the holders of the Rights or any other
Person resulting from any such act, omission, default, neglect or misconduct,
absent gross negligence or bad faith in the selection and continued employment
thereof (which gross negligence, bad faith or willful misconduct must be
determined by a final, non-appealable order, judgment, decree or ruling of a
court of competent jurisdiction). 

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

          (k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been properly completed or indicates an affirmative response to clause l or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

     22. Change
of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days’ notice in writing mailed to the Company and to
each transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days’ notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit such holder’s Rights
Certificate for inspection by the Company), then the registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a Person organized and doing
business under the laws of the United States or any state of the United States,
in good standing, which is authorized under such laws to exercise corporate
trust or stockholder services powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000.00 or (b) an Affiliate of a Person described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall mail notice thereof in writing to
the predecessor Rights Agent and each transfer agent of the Common Stock and
Preferred Stock, and 

31

mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section
22, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

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

     24.
Redemption, Termination and
Exchange. 

          (a) (i) The Board may, at its option, at any time prior to the earlier of (x)
the Stock Acquisition Date or (y) the Close of Business on the Final Expiration
Date, redeem all but not less than all of the then outstanding Rights at a
redemption price of $0.001 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the
“Redemption Price”). The Company may, at its
option, pay the Redemption Price in any form of consideration deemed appropriate
by the Board. 

                (ii) In addition, and notwithstanding the provisions of
Section 24(a)(i) hereof, the Board may redeem all but not less than all of the then
outstanding Rights at the Redemption Price on or after the Stock Acquisition
Date but prior to any Section 13 Event either (x) in connection with any Section
13 Event in which all holders of Common Stock are treated alike and not
involving (other than as a holder of Common Stock being treated like all other
such holders) an Acquiring Person or an Affiliate or Associate thereof or any
other Person in which such Acquiring Person or Affiliate or Associate thereof
has any interest, or any other Person acting directly or indirectly on behalf of
or in association with any such Acquiring Person or Affiliate or Associate
thereof, or (y) following the occurrence of a Section 11 Event, and the
expiration of any period during which the holder of Rights may exercise the
rights under Section 11(a)(ii) hereof as a
result thereof, if and for as long as any Acquiring Person having triggered the
Section 11 Event at issue is not thereafter the Beneficial Owner of fifteen
percent (15%) or 

32

more of the outstanding shares of
Common Stock, and at the time of redemption there are no other Persons who are
Acquiring Persons. 

          (b) (i) In the case of a redemption permitted under Section 24(a)(i) hereof,
immediately upon the action of the Board ordering the redemption of the Rights,
written evidence of which shall have been promptly filed with the Rights Agent
and without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. In the case of a redemption permitted
only under Section 24(a)(ii) hereof, evidence of which shall have been filed with the
Rights Agent, the right to exercise the Rights will terminate and represent only
the right to receive the Redemption Price only after ten (10) Business Days
following the giving of notice of such redemption to the holders of such Rights
if no Section 11 Event shall have occurred, and, if a Section 11 Event shall
have occurred, upon the later of ten (10) Business Days following the giving of
such notice or the expiration of any period during which the rights under
Section 11(a)(ii) hereof may be exercised as a result thereof. Within ten (10) days after
the action of the Board ordering any such redemption of the Rights, the Company
shall give notice of such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to the Rights Agent and to all
such holders at their last addresses as they appear upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for the Common Stock. Any notice that is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. 

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

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

33

               (ii) In the event the Board shall determine to deliver
Substitute Consideration in exchange for Rights, the Company shall (1) determine
the value of the Exchange Shares (the “Exchange Value”), and (2) with respect
to each Right to be exchanged, make adequate provision to substitute for
Exchange Shares the following (the “Substitute
Consideration”): (v) cash, (w) Common Stock or common stock equivalents (as that term
is defined in Section
11(a)(iii) hereof) or Preferred Stock or
equivalent preferred stock (as that term is defined in Section 11(b) hereof), (x)
debt securities of the Company, (y) other assets, or (z) any combination of the
foregoing, having an aggregate value equal to the Exchange Value, where such
aggregate value has been determined by the Board based upon the advice of a
nationally recognized investment banking firm selected by the Board. For
purposes of this Section 24(c), the value of a share of Common Stock shall be the current
market price (as determined pursuant to Section 11(d) hereof) per share of
Common Stock on the day that is the later of (A) the first occurrence of a
Section 11 Event or (B) the date on which the Company’s right of redemption
pursuant to Section 24(a)(i) hereof expires; and the value of any common stock equivalent
shall be deemed to have the same value as the Common Stock on such date.

                (iii) Immediately upon the action of the Board ordering the
exchange of any Rights pursuant to this Section 24(c), and without any further
action and without any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of such Rights shall be to receive
Exchange Shares or Substitute Consideration for each Right exchanged by such
holder. The Company shall promptly give public notice of any such exchange (with
prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or
any defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books of
the Rights Agent (with a copy thereof to the Rights Agent). Any notice that is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the method
by which the exchange of Common Stock (or Substitute Consideration) for Rights
will be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become null and void
pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.

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

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

34

Section 11(d) hereof for the Trading Day immediately prior to the date of
exchange pursuant to this Section
24(c). 

     25.
Notice of Certain Events. 

          (a) In case the Company shall propose (i) to pay any dividend payable in
stock of any class to the holders of Preferred Stock or to make any other
distribution to the holders of Preferred Stock (other than a regular quarterly
cash dividend out of earnings or retained earnings of the Company), (ii) to
offer to the holders of Preferred Stock rights or warrants to subscribe for or
to purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, (iii) to effect any
reclassification of Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), (iv) to effect
any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than fifty percent (50%)
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person or (v) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
the Rights Agent and each holder of a Rights Certificate, in accordance with
Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier. 

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

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

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

     LogicVision, Inc. 

35

     25 Metro Drive, Third
Floor 
     San Jose,
California 95110 
     Attention: Chief Financial
Officer

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

     Mellon Investor Services
LLC 
     BNY Mellon
Shareowner Services 
     520 Pike Street Suite
1220 
     Seattle WA
98101 
     Attention:
Relationship

     with a copy to: 

     Mellon Investor Services
LLC 
     BNY Mellon
Shareowner Services 
     480 Washington Blvd. 
     Jersey City, NJ 07310 
     Attention: General
Counsel

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

     27. Supplements and Amendments. The
Company and the Rights Agent may from time to time supplement or amend this
Agreement without approval of any holders of Rights or shares of Common Stock in
order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) prior to the Distribution Date, to change or supplement
any provision hereunder in any manner which the Company may deem necessary or
desirable, any such supplement or amendment to be evidenced by a writing signed
by the Company and the Rights Agent, or (iv) on or following the Distribution
Date, to change or supplement any provision hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company and, if requested by the Rights Agent, an
opinion of counsel which states that the proposed supplement or amendment is in
compliance with the terms of this Section
27, the Rights Agent shall execute such
supplement or amendment unless the Rights Agent shall have determined that such
supplement or amendment would affect its own rights, duties, obligations or
immunities under this Agreement. The Rights Agent shall not be bound by any such
supplement or amendment not executed by it. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock. 

36

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

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

     30. Benefits of This Agreement. Nothing in
this Agreement shall be construed to give to any Person other than the Company,
the Rights Agent and the registered holders of the Rights Certificates (and,
prior to the Distribution Date, the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
Common Stock). 

     31. Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, null and void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated; provided, however, that if such excluded provision
shall affect the rights, immunities, duties or obligations of the Rights Agent,
the Rights Agent shall be entitled to resign immediately upon written notice to
the Company. 

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

37

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

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

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

38

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

		LOGICVISION, INC.  
				 
		By:  		/s/ James T. Healy  
				 
	 	Title: 	 	President and Chief Executive
      Officer  
				 
		MELLON
      INVESTOR SERVICES LLC, as  
		Rights
      Agent  
				 
		By: 		/s/ Maria G. Cooper 

				 
		Title: 		Relationship Manager 
  

39

EXHIBIT A 

CERTIFICATE OF
DESIGNATION
OF SERIES A PARTICIPATING
PREFERRED STOCK 

OF 

LOGICVISION, INC. 

     We, James
T. Healy, the Chief Executive Officer, and
Mei Song, the Secretary, of LogicVision,
Inc., a corporation organized and existing under the General Corporation Law of
the State of Delaware, DO HEREBY CERTIFY: 

     That
pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), the
Board of Directors on December 16, 2008, adopted the following resolution
creating a series of 250,000 shares of Preferred Stock, par value $0.0001 per
share, designated as Series A Participating Preferred Stock: 

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

     1.
Designation and Amount. The shares of such series shall be designated as “Series
A Participating Preferred Stock,” par value
$0.0001 per share, and the number of shares constituting such series shall be
250,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors; provided,
however, that no decrease shall reduce the
number of shares of Series A Participating Preferred Stock to a number less than
that of the shares then outstanding plus the number of shares issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation. 

     2.
Dividends and Distributions. 

     (A) Subject
to the prior and superior rights of the holders of any shares of any series of
Preferred Stock ranking prior and superior to the shares of Series A
Participating Preferred Stock with respect to dividends, the holders of shares
of Series A Participating Preferred Stock in preference to the holders of shares
of Common Stock, par value $0.0001 per share (the “Common Stock”), of the Corporation and
any other junior stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March, June, September
and December in each year (each such date being referred to herein as a
“Quarterly Dividend Payment
Date”), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a share
of Series A Participating Preferred Stock in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $25.00 or, (b) subject to the
provision for adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 

A-1

times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Participating Preferred
Stock. In the event the Corporation shall at any time after the close of
business on December 16, 2008 (the “Rights Declaration Date”) (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock or (iii) combine the outstanding Common Stock into
a smaller number of shares, by reclassification or otherwise, then in each such
case the amount to which holders of shares of Series A Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

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

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

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

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

A-2

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

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

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

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

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

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

A-3

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

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

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

     4.
Certain Restrictions.

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

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

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

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

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

A-4

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

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

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

     6.
Liquidation, Dissolution or Winding
Up.

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

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

A-5

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

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

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

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

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

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

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

A-6

     IN
WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm
the foregoing as true under the penalties of perjury as of the 16th day of
December, 2008.

	 
	James T. Healy  
	Chief Executive Officer 
  
	  
	Attest:  
	  
	  
	Mei Song  
	Secretary 

A-7

EXHIBIT B

Form of Rights
Certificate

Certificate No.
R-_____________         
_____________ Rights

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

Rights Certificate

LOGICVISION, INC.

     This
certifies that ____________________, or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights Agreement
dated as of December 16, 2008 (the “Rights
Agreement”) between LOGICVISION, INC., a
Delaware corporation (the “Company”), and MELLON INVESTOR
SERVICES LLC, a New Jersey limited liability company (the “Rights Agent”), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 p.m. New York time on the
Final Expiration Date (as such term is defined in the Rights Agreement), unless
earlier redeemed or exchanged by the Company as set forth in the Rights
Agreement, at the office of the Rights Agent designated for such purpose, one
one-thousandth of a fully paid, nonassessable share of Series A Participating
Preferred Stock (the “Preferred
Stock”) of the Company, at a purchase price
of $6.00 per one one-thousandth of a share (the “Purchase Price”), upon presentation
and surrender of this Rights Certificate with the appropriate Form of Election
to Purchase and Certificate duly executed.

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

B-1

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

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

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

     This
Rights Certificate, with or without other Rights Certificates, upon surrender at
the office of the Rights Agent designated for such purpose, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
one one-thousandths of a share of Preferred Stock as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised (other than
pursuant to Section 11(a)(ii) of the Rights Agreement) in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised. If this Rights
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii) of the Rights
Agreement, the holder shall be entitled to receive this Rights Certificate duly
marked to indicate that such exercise has occurred as set forth in the Rights
Agreement.

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

     The
Company may elect not to issue fractional shares of Preferred Stock or other
securities upon the exercise of any Right or Rights evidenced hereby (other than
fractions, in the instance of Preferred Stock, which are integral multiples of
one one-thousandth of a share of Preferred Stock, which may, at the election of
the Company, be evidenced by depositary

B-2

receipts), in which event a cash
payment will be made, in lieu thereof, as provided in the Rights
Agreement.

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

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

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

     Dated: ____________,
20__.

	   	Attest:  	          
    	LOGICVISION,
      INC.  
		  	 	 	
		  	 	By:  	 
		Title: 
      Secretary  		Title:  	 
		Countersigned:  		  	
		  	
		MELLON INVESTOR
      SERVICES LLC,  		  	
		as Rights
      Agent  		  	
		  	
		  	
		By:  	 		  	

B-3

[Form of Reverse Side of Rights
Certificate]

FORM OF ASSIGNMENT

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

     FOR VALUE
RECEIVED, ___________________________________________________ hereby sells,
assigns and transfers unto
________________________________________________________________________

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

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

     Dated: ____________,
20___.

		 
	     	Signature 

     Signature Medallion
Guaranteed:

 

Signatures must be guaranteed by a
member or participant in the Securities Transfer Agent Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program.

B-4

CERTIFICATE

     The undersigned hereby certifies by
checking the appropriate boxes that:

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

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

     Dated: ____________,
20__.

	     	 
	 	Signature 

NOTICE

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

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

B-5

FORM OF ELECTION TO
PURCHASE

(To be executed if holder desires
to
exercise the Rights Certificate pursuant to
Section 11(a)(ii) of the Rights
Agreement.)

To: LOGICVISION, INC.

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

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

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

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

     Dated: ____________,
20__.

	     	 
	 	Signature 

     Signature Medallion
Guaranteed:

 

Signatures must be guaranteed by a
member or participant in the Securities Transfer Agent Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program.

B-6

CERTIFICATE

     The undersigned hereby certifies by
checking the appropriate boxes that:

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

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

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

     Dated: ____________,
20__.

	     	 
		Signature 

NOTICE

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

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

B-7

FORM OF ELECTION TO
PURCHASE

(To be executed if holder desires to
exercise
the Rights Certificate other than pursuant to
Section 11(a)(ii) of the
Rights Agreement.)

To: LOGICVISION, INC.

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

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

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

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

     Dated: ____________,
20__.

	     	 
		Signature 

     Signature Medallion
Guaranteed:

 

Signatures must be guaranteed by a
member or participant in the Securities Transfer Agent Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program.

B-8

CERTIFICATE

     The undersigned hereby certifies by
checking the appropriate boxes that:

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

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

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

     Dated: ____________,
20__.

	     	 
		Signature 

NOTICE

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

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

B-9

EXHIBIT C

SUMMARY OF RIGHTS

     On
December 16, 2008, the Board of Directors of LOGICVISION, INC. (the
“Company”)
declared a dividend distribution of one “Right” for each outstanding share of
common stock (the “Common
Stock”) of the Company to stockholders of
record at the close of business on December 26, 2008 (the “Record Date”). Except as
set forth below, each Right, when exercisable, entitles the registered holder to
purchase from the Company one one-thousandth of a share of a new series of
preferred stock, designated as Series A Participating Preferred Stock (the
“Preferred Stock”), at a price of $6.00 per one one-thousandth of a share (the
“Purchase Price”), subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement (the “Rights
Agreement”) between the Company and MELLON
INVESTOR SERVICES LLC (as “Rights
Agent”).

     Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights certificates will
be distributed. The Rights will separate from the Common Stock and a
“Distribution Date” will occur upon the earliest of the following: (i) a public
announcement that a person, entity or group of affiliated or associated persons
or entities (an “Acquiring
Person”) has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock (other than (A) as a result of repurchases of stock by the Company
or certain inadvertent actions by institutional or certain other stockholders,
(B) the Company, any subsidiary of the Company or any employee benefit plan of
the Company or any subsidiary, and (C) certain other instances set forth in the
Rights Agreement); or (ii) ten business days (unless such date is extended by
the Board of Directors) following the commencement of a tender offer or exchange
offer which would result in any person, entity or group of affiliated or
associated persons or entities becoming an Acquiring Person (unless such tender
offer or exchange offer is a Permitted Offer (defined below)). The term
“beneficial ownership” is defined in the Rights Agreement and includes, among other
things, certain derivative or synthetic arrangements having characteristics of a
long position in shares of Common Stock.

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

C-1

     The
Rights are not exercisable unless and until a Distribution Date occurs. The
Rights will expire on the earliest of (i) consummation of a merger transaction
with a person, entity or group who (x) acquired Common Stock pursuant to a
Permitted Offer and (y) is offering in the merger the same price per share and
form of consideration paid in the Permitted Offer, (ii) redemption or exchange
of the Rights by the Company as described below or (iii) December 16, 2009,
unless a Distribution Date has occurred, in which event such date shall be
extended to December 31, 2010.

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

     In the
event that, after the first date of public announcement by the Company or an
Acquiring Person that an Acquiring Person has become such, the Company is
involved in a merger or other business combination transaction (whether or not
the Company is the surviving corporation) or 50% or more of the Company’s assets
or earning power are sold (in one transaction or a series of transactions),
proper provision shall be made so that each holder of a Right (other than an
Acquiring Person) shall thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price, that number of shares of common
stock of either the Company, in the event that it is the surviving corporation
of a merger or consolidation, or the acquiring company (or, in the event there
is more than one acquiring company, the acquiring company receiving the greatest
portion of the assets or earning power transferred) which at the time of such
transaction would have a market value of two times the Purchase Price (such
right being called the “Merger
Right”). In the event that a person, entity
or group becomes an Acquiring Person (unless pursuant to a tender offer or
exchange offer for all outstanding shares of Common Stock at a price and on
terms determined prior to the date of the first acceptance of payment for any of
such shares by at least a majority of the members of the Board of Directors who
are not officers of the Company and are not Acquiring Persons (or affiliated or
associated persons or entities thereof) to be fair to, and in the best interests
of, the Company and its stockholders (a “Permitted Offer”)), then proper
provision shall be made so that each holder of a Right will, for a sixty day
period (subject to extension under certain circumstances) thereafter, have the
right to receive upon exercise that number of shares of Common Stock (or, at the
election of the Company, which election may be obligatory if sufficient
authorized shares of Common Stock are not available, a combination of Common
Stock, property, other securities (e.g., Preferred Stock) or cash
(including by way of a reduction in the Purchase Price)) having a market value
of two times the Purchase Price (such right being called the “Subscription Right”).

C-2

The holder of a Right will continue to
have the Merger Right whether or not such holder exercises the Subscription
Right. Notwithstanding the foregoing, upon the occurrence of any of the events
giving rise to the exercisability of the Merger Right or the Subscription Right,
any Rights that are or were at any time after the Distribution Date owned by an
Acquiring Person (or affiliated or associated persons or entities thereof) shall
immediately become null and void.

     At any
time prior to the earlier to occur of (i) a person, entity or group becoming an
Acquiring Person or (ii) the expiration of the Rights, the Company may redeem
the Rights in whole, but not in part, at a price of $0.001 per Right (the
“Redemption Price”), which redemption shall be effective upon the action of the Board of
Directors. Additionally, the Company may, following a person, entity or group
becoming an Acquiring Person, redeem the then outstanding Rights in whole, but
not in part, at the Redemption Price (i) if such redemption is incidental to a
merger or other business combination transaction or series of transactions
involving the Company but not involving an Acquiring Person (or certain related
persons or entities) or (ii) following an event giving rise to, and the
expiration of the exercise period for, the Subscription Right if and for as long
as the Acquiring Person triggering the Subscription Right beneficially owns
securities representing less than 15% of the outstanding shares of Common Stock
and at the time of redemption there are no other Acquiring Persons. The
redemption of Rights described in the preceding sentence shall be effective only
as of such time when the Subscription Right is not exercisable.

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

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

C-3

     Until a
Right is exercised, the holder thereof, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends. While the distribution of the Rights should not be taxable
to stockholders or to the Company, holders of Rights may, depending upon the
circumstances, recognize taxable income in the event (i) that the Rights become
exercisable for (x) Common Stock or Preferred Stock (or other consideration) or
(y) common stock of an acquiring company in the instance of the Merger Right as
set forth above or (ii) of any redemption or exchange of the Rights as set forth
above.

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

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

C-4Exhibit 10.1

AMENDED AND RESTATED EMPLOYMENT AND
NONCOMPETITION AGREEMENT 

          This
AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is an amendment and complete
restatement of the Employment and Noncompetition Agreement made and entered into
as of the 31st day of December, 2006,
by and between SHOE CARNIVAL,
INC., an Indiana corporation with its
principal offices located at 7500 East Columbia Street, Evansville, Indiana (the
"Company"), and MARK L. LEMOND, an individual residing at 2477 Hidden Oak Ct., Newburgh,
Indiana (the "Employee"). This restatement is intended to conform the Agreement
to the applicable provisions of the final regulations interpreting Section 409A
of the Internal Revenue Code of 1986, as amended ("Code") and Revenue Ruling
2008-13. 

RECITALS 

          WHEREAS, the Company is one
of the leading retailers of family shoes in the United States;

          WHEREAS, the Company
desires to retain the services of the Employee upon the terms and conditions set
forth herein; and

          WHEREAS, the Employee
desires to be so employed by the Company, to be eligible for potential
compensation increases and the potential payments provided for herein;
and

          WHEREAS, the Company and
the Employee desire to enter into this Agreement to set forth the terms and
conditions of the employment relationship between the Company and the Employee;
and

          WHEREAS, in connection with
its business, the Company has expended a substantial amount of time, money, and
effort to develop and maintain its confidential, proprietary and trade secret
information, and that this information, if misused or disclosed, could be very
harmful to the Company’s business and its competitive position in the
marketplace. 

AGREEMENT 

          1. Term of
Employment. The Company hereby agrees to
employ Employee and Employee hereby agrees to be
employed by the Company, in accordance with the terms and conditions of this
Agreement. This Agreement shall become effective on December 31, 2006, and shall end on January 31, 2011. The term shall be
extended automatically for one (1) year on each February 1 ("Anniversary Date")
beginning February 1, 2009, unless either party hereto gives written notice to
the other party not more than ninety (90) days and not less than thirty (30)
days prior to an Anniversary Date, in which case no further automatic extension
shall occur and the term of this Agreement shall end three (3) years

subsequent to the Anniversary Date
immediately following such written notice (such term, including any extension is
referred to as the "Term"). Notwithstanding the foregoing, the Term shall end on
the date of Employee's voluntary retirement from the Company as provided for in
Section 5.5.

          2. Duties. The Employee is engaged by
the Company as its President and Chief
Executive Officer. Unless otherwise consented to by the Employee, the Employee's
positions with the Company shall be as its President and Chief Executive
Officer. The Employee shall have all the powers and agrees to perform all of the
duties associated with those positions, subject to the direction of the Chairman
of the Board and the Board of Directors of the Company, and to the provisions of
the Articles of Incorporation and Bylaws of the Company. The Employee shall have general executive charge of the Company
with all such powers as may be reasonably incident to such responsibilities; and
he shall have such other powers and duties as designated in accordance with the
Company's Bylaws and as may be assigned to him from time to time by the Chairman
of the Board and the Board of Directors. The Employee shall report directly to
the Company's Chairman of the Board and the Board of Directors and any executive
committee of the Board. The Company agrees to provide the Employee with such
accommodations as are suitable to the character of his positions with the
Company and adequate for the performance of his duties. 

          During his employment under this Agreement, the Employee
agrees to devote substantially his full time, attention and energies to the
Company's business. This Agreement shall not be construed as preventing the
Employee from investing assets in such form or manner as will not require his
services in the daily operations of the affairs of the companies in which such
investments are made. This Agreement shall also not be construed as preventing
the Employee from serving as an outside director of up to two other for-profit
companies (and such additional companies as the Board of Directors may hereafter
approve) or from participating in charitable or other not-for-profit activities
as long as such activities do not materially interfere with his work for the
Company. 

          3. Compensation of Employee. For all services rendered by the Employee under this Agreement, the
Company shall compensate the Employee as follows: 

          3.1 Base Salary. The base
salary payable to the Employee under this Agreement shall be that amount set
forth in the minutes of the Compensation Committee of the Company’s Board of
Directors dated March 13, 2006 for the period beginning January 29, 2006 and
ending February 3, 2007 ("Base Salary"), payable in accordance with the
Company's usual payroll procedures, and subject to all taxes, withholdings and
deductions as required by law and as the Employee may authorize. The
Compensation Committee of the Company’s Board of Directors will review the Base
Salary on an annual basis during the Term to determine whether the Base Salary
should be adjusted upward. Any such upward adjustment shall take effect at the
beginning of each fiscal year. The Employee’s Base Salary may not be adjusted
downward at any time during the Term. 

          3.2 Incentive Bonus. The
Employee is entitled to participate in the Company’s 2006 Executive Incentive
Compensation Plan in accordance with the terms contained therein, and in any
successor plan adopted by the Company from time to time. 

- 2 - 

However,
Employee agrees that the failure of the Company to award any such bonus and/or
other incentive compensation shall not give rise to any claim against the
Company. 

          4. Additional Compensation, Benefits, and
Obligations. During his employment under
this Agreement, Employee is entitled to participate in any and all employee
welfare and health benefit plans (including, but not limited to, life insurance,
health and medical, dental and disability plans, and executive supplemental
medical coverage) and other employee benefit plans, including but not limited
to, qualified pension plans, stock purchase plans, and nonqualified deferred
compensation plans, established by the Company from time to time; provided,
however, the Employee's participation in such plans is subject to the
eligibility requirements and other terms of such plans. The Company may change,
amend or discontinue any of its employee welfare and health benefit plans at any
time during the Term, and nothing in this Agreement shall obligate the Company
to institute, maintain or refrain from changing, amending or discontinuing any
such plans or programs. 

          5. Termination of
Employment. Employee’s employment may be
terminated as follows: 

          5.1 Termination Due
to Death. If the Employee dies during the Term, this Agreement shall terminate as
of the date of the Employee's death and the Employee's benefits shall be
determined in accordance with the survivor's benefits, insurance and other
applicable programs of the Company then in effect. Within fifteen (15) business
days of the Employee's death, the Company shall pay the Employee's designee or
his estate (a) that portion of his then Base Salary which shall have been earned
through the termination date and (b) a lump sum payment in an amount determined
by multiplying seventy percent (70%) of his Base Salary for the fiscal year in
which the death occurs by a fraction, the numerator of which is the number of
days elapsed in such fiscal year through the termination date and the
denominator of which is 365. 

          5.2 Termination Due
to Disability. If the Employee suffers a Disability (as defined in Section
6.2) during the Term, the Company shall have the right to terminate this
Agreement by giving the Employee a Notice of Termination (as defined in Section
6.5), which has attached to it a copy of the medical opinion that forms the
basis of the determination of Disability. The Employee's employment shall
terminate at the close of business on the last day of the Notice Period (as
defined in Section 6.6). 

          Upon the termination of this Agreement because of Disability,
the Company shall pay the Employee within fifteen (15) business days of the
termination date (a) that portion of his then Base Salary which shall have been
earned through the termination date and (b) a lump sum payment in an amount
determined by multiplying seventy percent (70%) of his Base Salary for the
fiscal year in which the termination occurs by a fraction, the numerator of
which is the number of days elapsed in such fiscal year through the termination
date and the denominator of which is 365. The Employee shall also be entitled to
receive any applicable disability insurance benefits resulting from any
insurance or other employee benefit programs of the Company. 

- 3 - 

          5.3 Termination by
the Company for Cause or by the Employee
Without Good Reason. At any time during the
Term, the Company may terminate this Agreement for Cause (as defined in Section
6.1) by giving the Employee a Notice of Termination, which has attached to it
copies of the Board determination that forms the basis of the Company's action.
The Employee's employment shall terminate at the close of business on the last
day of the Notice Period.

          At any time during the Term, the Employee may terminate this
Agreement without Good Reason (as defined in Section 6.3 hereof) by giving the
Board of Directors of the Company a Notice of Termination. The Employee's
employment by the Company shall terminate at the close of business on the last
day of the Notice Period.

          Within fifteen (15) business days after such termination date,
the Company shall pay the Employee that portion of his then Base Salary which
shall have been earned through the termination date.

          5.4 Termination by
the Company Without Cause or by the
Employee for Good
Reason. At any time during the Term, the Board of Directors of the Company may
terminate this Agreement without Cause by giving the Employee a Notice of
Termination, and the Employee's employment by the Company shall terminate at the
close of business on the last day of the Notice Period.

          At any time during the Term, the Employee may terminate this
Agreement with Good Reason if all of the following conditions are satisfied: (a)
Employee gives the Company a Notice of Termination that describes the condition
claimed to constitute Good Reason within ninety (90) calendar days of the
initial existence of the condition; (b) the Company does not remedy the
condition within thirty (30) calendar days of the Company's receipt of the
Notice of Termination; and (c) Employee gives the Company another Notice of
Termination during the six (6) month period following the end of the cure period
described in clause (b). The Employee's employment shall terminate at the close
of business on the last day of the Notice Period of the second Notice of
Termination.

          Within fifteen (15) business days after such termination date,
the Company shall pay to the Employee (a) that portion of his then Base Salary
which shall have been earned through the termination date; (b) a lump sum
payment in an amount equal to seventy percent (70%) of the product of (i) times
(ii), where (i) is his Base Salary for the fiscal year in which the termination
occurs, and (ii) is a fraction, the numerator of which is the number of days
elapsed in such fiscal year through the termination date and the denominator of
which is 365; and (c) an additional lump sum payment in an amount equal to three
times one hundred seventy percent (170%) of the Employee's Base Salary for the
fiscal year in which the termination occurs. The Company shall also provide the
Employee with the Medical and Dental 

- 4 -

Benefits (as
defined in Section 6.4) for a period of thirty-six (36) calendar months after
the calendar month in which the termination date occurs or until the earlier
date on which the obligation to provide Medical and Dental Benefits ends
pursuant to Section 6.4. All of Employee's stock options granted after the date
of this Agreement shall contain provisions requiring that such options shall
automatically vest upon the termination of Employee under this Section 5.4 and
all of such options shall be exercisable by Employee during the remainder of
their respective terms. In the event of termination of this Agreement without
Cause or for Good Reason, such termination shall not be deemed to be a voluntary
termination by Employee for purposes of any stock option or equity incentive
plans of the Company, and any outstanding stock options may be exercised at any
time during the remainder of the term of the option. In addition, all shares of
restricted stock granted to the Employee after the date of this Agreement, which
are not intended to qualify as “performance based compensation” under Section
162(m) of the Code shall contain provisions which shall provide for immediate
vesting upon Termination without Cause or for Good Reason.

          5.5 Termination by the Employee Upon
Retirement. At any time during the Term, the Employee may terminate this
Agreement by giving the Company a Notice of Termination advising the Company
that he intends to voluntarily retire in accordance with the Company's
retirement policies on a date specified in the Notice of Termination. The
Employee's employment shall terminate on the date specified in the Notice of
Termination. 

          Subject to Section 5.12, within fifteen (15) business days
after such termination date, the Company shall pay the Employee (a) that portion
of his then Base Salary which shall have been earned through the termination
date; and (b) a lump sum payment in an amount equal to seventy percent (70%) of
the product of (i) times (ii), where (i) is Employee's Base Salary for the
fiscal year in which the termination occurs, and (ii) is a fraction, the
numerator of which is the number of days elapsed in such fiscal year through the
termination date and the denominator of which is 365.

          5.6 Accrued
Compensation and Benefits.
Notwithstanding any other provision of this
Agreement, upon termination of Employee's employment for any reason, Employee
shall be entitled to receive all accrued but unpaid compensation, bonuses and
benefits under all of the Company's compensation, bonus and benefit plans in
which employee is a participant, all in accordance with the terms of such plans.
These plans include, without limitation, the Company's 401(k) plan, deferred
compensation plan and bonus plans which are earned in a fiscal year, but paid in
the following year.

          5.7 Internal Revenue Code Limits. Should any payments by the Company
to or for the benefit of Employee under this Agreement constitute an "excess
parachute payment" within the meaning of Section 280G of the Code, then the
Company shall pay Employee an additional amount of money (the "Gross-Up
Payment") that will equal the sum of (a) all excise or other taxes imposed upon
Employee by Section 4999 of the Code (excluding any penalties or interest) and
(b) all additional state and federal taxes, interest and/or penalties
attributable to the additional payments made to Employee pursuant to this
Section 5.7. If an excise tax is imposed pursuant to Section 4999 of the Code,
Employee agrees to immediately notify the Company within ten (10) days of the
event, in writing, and Employee hereby gives the Company the right to challenge
said

- 5 - 

imposition. Any Gross-Up
Payment due under this Section 5.7 shall be paid in a lump sum as soon as it can
be calculated, but in no event later than 30 days after the date the Employee
remits the related taxes.

          5.8 Payroll Withholdings. The Company may withhold from any
compensation or benefits payable under this Agreement all federal, state, city,
or other taxes or deductions as may be required pursuant to any law or
governmental regulation or ruling.

          5.9 Compliance With Post-Employment
Restrictions. If Employee breaches any of
the covenants or provisions set forth in Sections 7 and 8 of this Agreement,
then in such event the Company shall have the right immediately and permanently
to discontinue payment and provision of any of the severance compensation and
benefits payable under this Agreement. The Employee and the Company acknowledge
and agree that such remedy is in addition to, and not in lieu of, any and all
other legal and/or equitable remedies that may be available to the Company in
connection with the Employee's breach or threatened breach of any of the
covenants or provisions of this Agreement.

          5.10 Mitigation or
Reduction of Benefits.
Employee shall not be required to mitigate
the amount of any payments provided for in this Section 5 by seeking other
employment or otherwise. Except as specifically set forth herein, the amount of
any payment for benefits provided in this Section 5 shall not be reduced by any
compensation or benefits or the amount paid to or earned by the Employee as a
result of employment by another employer after the Employee's termination date
or otherwise.

          5.11 Release
Agreement. As a condition of receiving
the severance benefits described in Section 5, Employee will be required to sign
a standard release agreement acceptable to the Company in which he releases and
waives all claims which he may have against the Company or any affiliate,
employee, shareholder, officer, director, agent or representative of the Company
(except for his rights under this Agreement or any other vested rights Employee
may have under any insurance, pension, employee stock ownership or stock option
or equity incentive plans sponsored or made available by the Company). The
Company will provide such release agreement to Employee at the termination of
Employee's employment with the Company. As part of the release agreement,
Employee will be required (a) to agree to cooperate with the Company with
respect to any business matters about which he has knowledge, including any
litigation or threatened litigation, (b) agree not to cooperate with any
claimants against the Company unless required by law to do so, (c) agree not to
make any negative or derogatory comments about the Company or its executives and
(d) affirm his post-termination obligations under this Agreement, including
without limitation the obligations set forth in Sections 7 and 8.

          5.12
Delay of Separation Payments
to Specified Employee. Notwithstanding any other provisions of this Agreement, if any
amount payable to Employee under this Agreement on account of Employee's
separation from service with

- 6 - 

the Company constitutes deferred
compensation within the meaning of Code Section 409A, and Employee is a
Specified Employee on the date of his separation from service, payment of the
amount shall be delayed until the first business day that is at least six (6)
months after the date on which Employee's separation from service
occurred.

          6.
Definitions. 

          6.1 "Cause" means the
occurrence of any one or more of the following events: (a) Employee's conviction
for a felony or other crime involving moral turpitude; (b) Employee's willful
engaging in illegal conduct or gross misconduct which is injurious to the
Company; (c) Employee's willful engaging in any fraudulent or dishonest conduct
in his dealings with, or on behalf of, the Company; (d) Employee's willful
failure or refusal to follow the lawful and reasonable instructions of the
Company's Chairman of the Board or the Board of Directors if such failure or
refusal continues for a period of ten (10) days after the Company delivers to
Employee a written notice stating the instructions which Employee has failed or
refused to follow; (e) Employee's willful material breach of any of his
obligations under this Agreement; (f) Employee's material breach of the
Company's policies; (g) Employee's use of alcohol or drugs which substantially
interferes with the performance of his duties for the Company or which
compromises the integrity or reputation of the Company; or (h) Employee's
willful engaging in any conduct, which as a result of such conduct, the
Company’s integrity or reputation is substantially compromised. No act or
omission on the part of the Employee shall be considered "willful" unless it is
done or omitted in bad faith or without reasonable belief that the action or
omission was in the best interests of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been terminated for Cause
without (i) reasonable notice to the Employee setting forth the reasons for the
Company's intention to terminate for Cause, (ii) an opportunity for the
Employee, together with his counsel, to be heard before the Board of Directors,
and (iii) delivery to the Employee of a Notice of Termination from the Board of
Directors finding that in the good faith opinion of a majority of the Board of
Directors the Employee was guilty of conduct set forth in one or more of the
clauses above and specifying the particulars thereof in detail.

          6.2 "Disability" means the
inability, in the written opinion of a licensed physician chosen by the Board of
Directors, of the Employee, because of injury, illness, disease or bodily or
mental infirmity to perform a substantial portion of his ordinary duties and
that this condition has existed for a least six months and will more probably
than not extend for an additional six months into the future.

          6.3 "Good Reason" means one
or more of the following conditions, arising without Employee's consent:

     (a) a material diminution in Employee's base compensation;

     (b) a material diminution in the
Employee's authority, duties, or responsibilities;

     (c) a material diminution in the budget over which Employee
retains authority;

- 7 - 

     (d) a material change in the geographic location at which
Employee must perform services; or 

     (e) any other action or inaction
that constitutes a material breach by the Company of this Agreement. 

          6.4 "Medical and Dental
Benefits" refers to the coverage for the Employee and his spouse and dependants
described in this Section 6.4 to be provided by the Company pursuant to and in
accordance with Section 5.4. The Company shall arrange to provide the Employee
and his spouse and dependants with insured medical and dental coverage that is
substantially similar to the coverage they were receiving under the Company’s
group medical and dental plan immediately prior to the date of Employee’s
termination, such benefits to be provided at the Company's expense by means of
purchasing individual insurance policies. If at any time after termination of
his employment, the Employee accepts employment with another employer and if the
Employee becomes covered under that employer's medical benefit plan, then
effective on the date that such coverage commences, the obligation of the
Company to provide any Medical and Dental benefits to the Employee and his
spouse and dependants, shall terminate. If Employee becomes covered under
another employer's medical benefit plan while he is receiving Medical and Dental
Benefits under this Agreement, Employee agrees to immediately notify the Company
in writing within ten (10) calendar days of the commencement of the other
coverage. The Medical and Dental benefits provided to the Employee and his
spouse and dependants after the date of the Employee's termination of employment
are intended by the parties to be in lieu of the rights of the Employee to
continuation coverage (commonly known as "COBRA") under Section 601 et seq. of
the Employee Retirement Income Security Act of 1974 (ERISA), and Section 4908B
of the Internal Revenue Code of 1986, as amended (the "Code"), as either of the
foregoing statutes may be amended.

          6.5 "Notice of Termination"
means a written notice delivered by one party notifying the other party of the
notifying party's intention to terminate the Employee's employment pursuant to
this Agreement. A Notice of Termination shall not be effective unless (a) it
specifies the specific provision of Section 5 which forms the basis of the
proposed termination, (b) sets forth a proposed termination date not less than
fifteen (15) calendar days from the sending of the Notice of Termination, and
(c) otherwise complies with the requirements of this Agreement.

          6.6 "Notice Period" means
the period between the sending of the Notice of Termination and the proposed
termination date set forth in such Notice.

          6.7 "Specified Employee"
has the meaning given to that term in Code Section 409A(a)(2)(B)(i) and
interpretive regulations. 

          7. Non-competition. 

- 8 - 

          7.1 General. Employee
acknowledges that his position with the Company is special, unique and
intellectual in character and his position in the Company places him in a
position of confidence and trust with employees and customers of the Company.
Employee further acknowledges, recognizes, and represents receipt of sufficient
consideration for these restraints in the form of the Base Salary and other
valuable consideration contained herein. The restrictions and obligations
contained in this Section 7 shall survive the term of this
Agreement. 

          7.2 Non-competition.
Employee agrees that during his employment with the Company and for a period of
two (2) years immediately after the termination of Employee’s employment with the
Company (if but only if this Agreement was in effect at the time of such
termination), thereafter Employee shall not: 

          7.2.1 Either alone or in
concert with others, whether as director, officer, consultant, principal,
employee, agent or otherwise, engage in or contribute Employee’s knowledge and
abilities to any business or entity in competition with the Company ("Competing
Business");

          7.2.2 Be employed by, work
for, consult with, or act in any other capacity for, any person or entity that
is engaged in any Competing Business if in such employment, work or capacity
Employee likely would, because of the nature of his position with, or work for,
the competitor and his knowledge of the Company's Confidential Information,
inevitably use and/or disclose any of the Company's Confidential Information in
his work for or with such competitor;

          7.2.3 Solicit, recruit,
hire, employ or attempt to hire or employ any person who is then or within the
preceding thirty (30) day period was, an employee of the Company, or otherwise
urge, induce or seek to induce any person to terminate his/her employment with
the Company;

          7.2.4 Solicit, urge, induce or seek to induce any of the
Company's independent contractors,
subcontractors, vendors, suppliers, customers or consultants to terminate their
relationship with, or representation of, the Company or to cancel, withdraw,
reduce, limit or in any manner modify any such person's or entity's business
with or representation of, the Company for whatever purpose or
reason;

          7.2.5 Take any action
intended to harm the Company or its reputation, which the Company reasonably
concludes could lead to unwanted or unfavorable publicity to the
Company;

          7.2.6 The restrictive time
periods set forth in this Section 7.2 shall not expire during any period in
which Employee is in violation of any of the restrictive covenants set forth in
this Section 7.2, and all restrictions shall automatically be extended by the
period Employee was in violation of any such restrictions;

- 9 - 

          7.2.7 The restrictive
covenants contained in this Section 7.2 prohibit Employee from engaging in
certain activities directly or indirectly, whether on his own behalf or on
behalf of any other person or entity.

          7.2.8 The covenants and
restrictions in this Section 7.2 are separate and divisible, and to the extent
any covenant, provision or portion of Section 7.2 is determined to be
unenforceable or invalid for any reason, such unenforceability or invalidity
shall not affect the enforceability or validity of the remainder of the
Agreement. Should any particular covenant, restriction, provision or portion of
Section 7.2 be held unreasonable or unenforceable for any reason, including,
without limitation, the time period, geographical area, and/or scope of activity
covered by any restrictive covenant, provision or clause, such covenant,
provision or clause shall automatically be deemed reformed such that the
contested covenant, provision or portion will have the closest effect permitted
by applicable law to the original form and shall be given effect and enforced as
so reformed to the extent reasonable and enforceable under applicable
law.

          7.3 Definition of "Competing Business": The term "Competing
Business" shall mean: 

          7.3.1 The retail footwear
business of Collective Brands, Inc.; Brown Shoe Company, Inc.; Designer Shoe
Warehouse; Rack Room (dba); Kohls Corporation; Shoe Station (dba); Shoe City
(dba); Shoe Pavilion, Inc., Shoe Department (dba); Finish Line, Inc.; Foot
Locker, Inc.; Dick’s Sporting Goods, Inc.; The Sports Authority, Inc.; Off
Broadway Shoe Warehouse; and any other company which sells footwear at retail to
consumers within 25 miles of any Company store at price points competitive, or
likely to be competitive, with the Company, where the footwear sales of such
other company constitute at least fifteen percent (15%) of such company's annual
revenues. 

          7.3.2 Ownership of an
investment of less than 5% of any class of equity or debt security of a
publicly-held Competing Business shall not constitute ownership or participation
in violation of the above. 

          7.4 Acknowledgment Regarding Restrictions. Employee acknowledges and agrees that he understands the
restrictions in Section 7; that they are reasonable and enforceable, in view of,
among other things, the Employee’s position within the Company, the highly
competitive nature of the Company's business, and the confidential nature of the
information the Employee has been provided. Employee further agrees that the
Company would not have adequate protection if Employee were permitted to work
for its competitors in violation of the terms of this Agreement since the
Company would be unable to verify whether its Confidential Information was being
disclosed and/ or misused, and whether Employee was involved in diverting the
Company’s customers and/or its customer goodwill. 

- 10 - 

          7.5 Disclosures Concerning New Employment. Employee agrees that he (a) will immediately, within ten
(10) days, notify the Company in writing of his employment, engagement or other
affiliation with any other business or entity during the two (2) years
immediately following the termination of Employee's employment with the Company
and (b) will provide a copy of Section 6 and 7 of this Agreement to any
prospective employer before accepting employment or other work engagement with
any such employer. 

          8.
Confidential or Proprietary
Information 

          8.1 Confidentiality. As
used in this Agreement, the term "Confidential Information" means any and all of
the Company's trade secrets, confidential and proprietary information and all
other information and data of the Company that is not generally known to third
persons who could derive economic value from its use or disclosure, including,
without limitation, the Company's profile of prospective or current vendors or
customers, business methods and structure, details of the Company's contracts
and business matters, employee compensation, personnel information, marketing
strategies and plans, business plans, pricing information and strategies, costs
information, and financial data, whether or not reduced to writing or other
tangible medium of expression, including work product created by Employee in
rendering services to the Company. During his employment with the Company and
thereafter, Employee will not use or disclose to others any of the Confidential
Information except as authorized in writing by the Company or in the performance
of work assigned Employee by the Company. Employee also will abide by the
Company's policies protecting the Confidential Information. Employee's
confidentiality obligations shall continue as long as the Confidential
Information remains confidential, and shall not apply to information which
becomes generally known to the public through no fault or action of Employee.
Employee agrees that the Company owns the Confidential Information and Employee has no rights, title or interest in any of the
Confidential Information. At the Company's request or upon termination of
Employee's employment with the Company for any reason, Employee will immediately
deliver to the Company all materials (including all copies and electronically
stored data) containing any Confidential Information in Employee's possession,
custody or control.

          8.2 Trade Secrets-Developments. All improvements, developments, concepts, and ideas ("Developments")
relating to the Company's business, or capable of beneficial use by the Company,
including, but not limited to, marketing, confidential and trade secret
information, techniques, discoveries, slogans, designs, artwork, and writings,
which the Employee has made or will make during his employment with the Company
are the sole and exclusive property of the Company without charge to the Company
other than the Employee's compensation.

          8.3 Acknowledgement.
Employee agrees that the restrictions set forth in Sections 8.1 and 8.2 are
reasonable and necessary to protect the trade secrets, confidential information,
intellectual property rights and goodwill of the Company. The restrictions and
obligations contained in this Section 8 shall survive the term of this
Agreement. 

- 11 - 

          9. Remedies. In the event
of a breach or threatened breach by the Employee of any of the provisions of
Sections 7 or 8, the Company shall be entitled to an injunction restraining
Employee from such breach, in addition to all other remedies which the Company
shall be entitled to pursue. The Company also shall be entitled to recover from
Employee all litigation costs and attorneys' fees incurred by the Company in any
action or proceeding relating to enforcement of the provisions of Sections 7 or
8 this Agreement in which the Company prevails. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
for such breach, threatened breach, or any breach of this Agreement. 

          10. Survival of Post-Termination Obligations. Employee acknowledges and agrees that his post-termination
obligations under this Agreement, including without limitation Employee's
non-competition and confidentiality obligations set forth in Sections 7 and 8 of
this Agreement, shall survive the termination of Employee's employment with the
Company, regardless whether such termination is voluntary or involuntary, or is
with or without cause. 

          11. Notices. All notices,
requests, consents, and other communications under this Agreement shall be in
writing and shall be deemed to have been delivered on the date personally
delivered or the dated mailed, postage prepaid, by certified mail, return
receipt requested, or telegraphed and confirmed, or faxed and confirmed, if
addressed to the respective parties as follows; 

	          	To Employee:  	     	Mark L. Lemond 
				2477 Hidden Oak Ct. 
				Newburgh, Indiana 47630 
	 	 		 
		To Company: 		Chairman  
				Shoe Carnival, Inc. 
				7500 East Columbia
    Street  
				Evansville, Indiana
  47715 

 Either party hereto may designate a different address by providing
written notice of such new address to the other party hereto. 

          12. Waiver. The failure or
delay of any party at any time or times to require performance of, or to
exercise any of its powers, rights or remedies with respect to, any term or
provision of this Agreement shall not affect such party's right to later enforce
any such term or provision. 

          13. Entire Agreement. This
Agreement cancels and supersedes all prior negotiations, discussions,
commitments and understandings between the parties relating hereto, whether oral
or written. This Agreement embodies the entire agreement and understanding
between such parties with respect to the matters covered hereby. Neither party
shall be bound by any term or condition other than as is expressly set forth
herein. This Agreement may not be amended, supplemented or modified except by a
written document signed by both Employee and a duly authorized officer of the
Company. 

- 12 - 

          14.
Assignment. 

          14.1 Assignment by
Company. The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
capital stock, business and/or assets of the Company, by agreement in form and
substance satisfactory to the Employee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Employee to
terminate this Agreement for Good Reason pursuant to Section 5.4. In addition,
if the Company fails to obtain, prior to the effective date of any such
succession, the successor's express agreement to assume and perform this
Agreement, and the succession constitutes a change in the ownership or effective
control of the Company within the meaning of Code Section 409A(a)(2)(A)(v), then
Employee shall receive compensation from the Company in the same amount and on
the same terms that to which the Employee would be entitled hereunder if the
Employee terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the termination date. As used in this Agreement,
"Company" shall mean the Company and any successor to its business and/or assets
which executes and delivers the agreement provided for in this Section 14.1 or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law.

          14.2 Assignment by
Employee. The services to be provided by the Employee to the Company hereunder are
personal to the Employee, and the Employee's duties may not be assigned by the
Employee; provided, however that this Agreement shall inure to the benefit of
and be enforceable by the Employee's personal or legal representatives,
executors, and administrators, successors, heirs, distributees, devisees and
legatees. If the Employee dies while any amounts payable to the Employee
hereunder remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Employee's devisee, legatee, or other designee or, in the absence of such
designee, to the Employee's estate. 

          15. Code Section 409A
Standards. This Agreement, and all other nonqualified deferred compensation plans in
which the Employee participates, are intended to comply with the standards for
nonqualified deferred compensation plans established by Code Section 409A and
its interpretive regulations and other regulatory guidance (the "Section 409A
Standards"), to the extent applicable, and this Agreement shall be construed
accordingly. In construing or interpreting any vague or ambiguous provision of
this Agreement, the interpretation that will prevail is the interpretation that
will cause this Agreement to comply with the Section 409A Standards. Any
provision of this Agreement, or any deferred compensation provided under it,
that would fail to satisfy the Section 409A Standards shall not have any force
or effect until it is amended to comply with the applicable Section 409A
Standards, which amendment may be retroactive to the extent permissible under
the Section 409A Standards. 

- 13 - 

          16. Dispute
Resolution. Except as otherwise contemplated by Section 9, the Employee
agrees that any dispute or controversy arising under or in connection with this
Agreement shall be submitted to binding arbitration. 

          Such arbitration proceeding shall be conducted before an
arbitrator selected by mutual agreement of the Employee and the Company and
shall be governed by the Employment Dispute Resolution Rules of the American
Arbitration Association then in effect. If the parties are unable to select an
arbitrator by mutual agreement within thirty (30) days, the arbitrator shall be
selected in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association then in effect. Such arbitration shall take
place in Evansville, Indiana. Judgment may be entered on the award of the
arbitrator in any court having competent jurisdiction; provided, however, that
the Employee shall be entitled to seek specific performance of his right to any
payments or benefits to be provided until the date of termination of his
employment during the pendency of any dispute or controversy arising under or in
connection with this Agreement. All of the Employee's costs and expenses of
arbitration, including attorney's fees, shall be borne by the Company and paid
as incurred, whether or not the Employee prevails in the arbitration. Payment of
those costs and expenses will be made within fifteen (15) business days after
the Company's receipt of the Employee's written request for payment, accompanied
by such evidence of the fees and expenses incurred as the Company may reasonably
require. 

          17. Governing Law: Forum Selection. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Indiana, without regard to the conflicts of
law rules thereof. Any legal action relating to this Agreement shall be
commenced and maintained exclusively before any appropriate state court of
record in Vanderburgh County, Indiana, or, if necessary because of a federal
question mandating jurisdiction in the federal courts is involved, the United
States District Court for the Southern District of Indiana, Evansville Division,
and the parties hereby submit to the jurisdiction of such courts and waive any
right to challenge or otherwise raise questions of personal jurisdiction or
venue in any action commenced or maintained in such courts. 

          18. Severability. The
parties intend that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the applicable law. Should any provision of
this Agreement be unenforceable or invalid for any reason, such unenforceability
or invalidity shall not affect the enforceability or validity of the remainder
of the Agreement. 

          IN WITNESS WHEREOF, the parties hereto have executed this
Amended and Restated Employment and Noncompetition Agreement on this 11th. day
of December 2008. 

	SHOE
      CARNIVAL, INC.: "Company"  	 	MARK
      L. LEMOND: "Employee"  
	 			
	By:  	  /s/ J. Wayne Weaver 
    		 
      /s/  Mark L.
      Lemond  
	 			
	Its:  	  Chairman 
    		Date:    	  December 11, 2008 
    
	 				
	Date:    	  December 11, 2008 
    		  	 

- 14 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}]]