Document:

Unassociated Document

    Exhibit
4.2

     

    RIGHTS
AGREEMENT

    

    I.D.
SYSTEMS, INC.

    

    and

    

    AMERICAN
STOCK TRANSFER & TRUST COMPANY, LLC,

    

    As Rights
Agent

    

    Dated as
of July 1, 2009

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    RIGHTS
AGREEMENT

     

    Rights
Agreement, dated as of July 1, 2009 (as amended, supplemented or otherwise
modified from time to time, the “Rights Agreement”)
between I.D. Systems, Inc., a Delaware corporation (the “Company”), and
American Stock Transfer & Trust Company, LLC (the “Rights
Agent”).

     

    WITNESSETH:

     

    WHEREAS,
the Board of Directors of the Company has on June 29, 2009, authorized and
declared a dividend of one preferred stock purchase right (a “Right”) for each
share of Common Stock (as defined below) of the Company outstanding as of the
close of business (as defined below) on July 13, 2009 (the “Record Date”), each
Right representing the right to purchase one one-thousandth (subject to
adjustment) of a share of Series A Preferred Stock (as defined below) (a “Preferred Stock
Unit”), upon the terms and subject to the conditions herein set forth,
and the Board of Directors has further authorized and directed the issuance of
one Right (subject to adjustment as provided herein) with respect to each share
of Common Stock that shall become outstanding between the Record Date and the
earlier of the Distribution Date and the Expiration Date (as such terms are
hereinafter defined); provided, however, that Rights
may be issued with respect to shares of Common Stock that shall become
outstanding after the Distribution Date and prior to the Expiration Date in
accordance with Section 22.

     

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

     

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

     

    “Acquiring Person”
shall mean any Person (as defined below) who or which shall be the Beneficial
Owner (as defined below) of 15% or more of the shares of Common Stock then
outstanding on or after the date hereof, but shall not include an Exempted
Entity (as defined below) or Grandfathered Stockholder (as defined below); provided, however, that if the
Board of Directors of the Company determines in good faith that a Person who
would otherwise be an “Acquiring Person” has become such inadvertently
(including, without limitation, because (A) such Person was unaware that it
beneficially owned a percentage of Common Stock that would otherwise cause such
Person to be an “Acquiring Person” or (B) such Person was aware of the extent of
its Beneficial Ownership of Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Rights Agreement) and
without any intention of changing or influencing control of the Company, then
such Person shall not be deemed to be or to have become an “Acquiring Person”
for any purposes of this Rights Agreement unless and until such Person shall
have failed to divest itself, as soon as practicable (as determined, in good
faith, by the Board of Directors of the Company), of Beneficial Ownership of a
sufficient number of shares of Common Stock so that such Person would no longer
otherwise qualify as an “Acquiring Person”.  Notwithstanding the
foregoing, no Person shall be deemed an “Acquiring Person” as the result of an
acquisition of shares of Common Stock by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the shares of Common Stock
then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding by reason of such share acquisitions by the Company and
thereafter becomes the Beneficial Owner of any additional shares of Common Stock
(other than pursuant to a dividend or distribution paid or made by the Company
on the outstanding Common Stock or pursuant to a split or subdivision of the
outstanding Common Stock), then such Person shall be deemed to be an “Acquiring
Person,” subject to the proviso set forth in the first sentence of this Section
1(a), unless upon the consummation of the acquisition of such additional shares
of Common Stock such Person does not Beneficially Own 15% or more of the shares
of Common Stock then outstanding.  For all purposes of this Rights
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 Common Stock 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 Securities
Exchange Act of 1934, as amended (the “Exchange Act”), as in
effect on the date of this Rights Agreement.

     

    
      
         

      

      
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    “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.

     

    “Authorized Officer”
has the meaning set forth in Section 20(b).

     

    “Beneficial Owner” has
the following meaning.  A Person shall be deemed the “Beneficial Owner” of
and shall be deemed to “Beneficially Own” any
securities:

     

    (i)           which
such Person or any of such Person’s Affiliates or Associates is deemed to
Beneficially Own, directly or indirectly (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement); or

     

    (ii)          the
Beneficial Ownership of which such Person or any of such Person’s Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities), or upon the exercise
of conversion rights, exchange rights, warrants, options or other rights;
or

     

    (ii)          which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has or shares the right to vote or dispose of, including pursuant to
any agreement, arrangement or understanding (whether or not in writing);
or

     

    (iii)         of
which any other Person is the Beneficial Owner, if 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) with such other Person (or any of such other
Person’s Affiliates or Associates) with respect to acquiring, holding, voting
(except to the extent contemplated by subsection (C) of the proviso below) or
disposing of any securities of the Company; or

     

    
      
         

      

      
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    (iv)        in
respect of which such Person or any of such Person’s Affiliates or Associates
has a Synthetic Long Position 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 Regulation 13D-G or Regulation 14D under the
Exchange Act in respect of which Common Shares are the “subject security” (as
such term is used in such Regulations);

     

    provided, however, that a
Person will not be deemed the Beneficial Owner of, or to Beneficially Own, any
security (A) that any Person has a right to acquire upon the exercise of Rights
prior to the time that any Person becomes an Acquiring Person, (B) 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 security is
accepted for purchase or exchange, (C) solely as a result of such Person having
the right to vote such security pursuant to an agreement, arrangement or
understanding (whether or not in writing) which (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report), (D)
if such Beneficial Ownership arises solely as a result of such Person’s status
as a “clearing agency,” as defined in Section 3(a)(23) of the Exchange Act or
(E) securities issuable upon the exercise of Rights from and after the time that
any Person becomes an Acquiring Person if such Rights were acquired by such
Person or any of such Person’s Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22 hereof (“Original Rights”) or
pursuant to Section 11(i) or Section 11(n) with respect to an adjustment to
Original Rights; provided further, however, that nothing
in this Section 1(c) will cause a Person engaged in business as an underwriter
of securities to be the Beneficial Owner of, or to Beneficially Own, any
securities acquired through such Person’s participation in good faith in an
underwriting syndicate until the expiration of 40 calendar days after the date
of such acquisition, or such later date as the Board of Directors of the Company
may determine in any specific case; provided, however, that no
Person who is an officer, director or employee of an Exempted Entity shall be
deemed, solely by reason of such Person’s status or authority as such, to be the
“Beneficial Owner” of, to have “Beneficial Ownership” of or to “beneficially
own” any securities that are “beneficially owned” (as defined in this Section
l), including, without limitation, in a fiduciary capacity, by an Exempted
Entity or by any other such officer, director or employee of an Exempted
Entity.

     

    “Business Day” shall
mean any day other than a Saturday, a Sunday, or a day on which banking
institutions in the State of New York, or the State in which the principal
office of the Rights Agent is located, are authorized or obligated by law or
executive order to close.

     

    “Common Stock” when
used with reference to the Company shall mean the Common Stock, par value $0.01
per share, of the Company.  “Common Stock” when
used with reference to any Person other than the Company shall mean the capital
stock (or, in the case of an unincorporated entity, the equivalent equity
interest) with the greatest voting power of such other Person or, if such other
Person is a subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.

     

    
      
         

      

      
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    “Common Stock
equivalents” has the meaning set forth in Section 11(a)(iii)
hereof.

     

    “Company” has the
meaning set forth in the introductory paragraph of this Agreement.

     

    “close of business” on
any given date shall mean 5:00 P.M., New York, 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, New York time, on
the next succeeding Business Day.

     

    “current per share market
price” has the meaning set forth in Section 11(d)(ii)
hereof.

     

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

     

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

     

    “equivalent preferred
shares” has the meaning set forth in Section 11(b) hereof.

     

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

     

    “Exempted Entity”
shall mean (1) the Company, or (2) any Subsidiary (as defined below) of the
Company (in the case of subclauses (1) and (2) including, without limitation, in
its fiduciary capacity), or (3) any employee benefit plan of the Company or of
any Subsidiary of the Company or (4) any entity or trustee holding Common Stock
for or pursuant to the terms of any such plan or for the purpose of funding any
such plan or funding other employee benefits for employees of the Company or of
any Subsidiary of the Company.

     

    “Expiration Date”
shall mean the earliest to occur of (i) the close of business on the Sunset
Date, (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the “Redemption Date”) or
(iii) the time at which such Rights are exchanged as provided in Section 24
hereof.

     

    “Grandfathered
Stockholder” shall mean any Person that, as of the date hereof or prior
to the first public announcement of this Rights Agreement, is or becomes the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding;
provided, however, that, at any
time, any Grandfathered Stockholder may be deemed an “Acquiring Person” by the
affirmative vote of a simple majority of the Board of Directors of the Company
plus one.

     

    “invalidation time”
has the meaning set forth in Section 11(a)(ii) hereof.

     

    “NASDAQ” shall mean
The NASDAQ Stock Market’s Global Select Market or Global Market, as
applicable.

     

    “NYSE” shall mean the
New York Stock Exchange, Inc.

     

    
      
         

      

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

     

    “Preferred Stock Unit”
has the meaning set forth in the introductory paragraph of this
Agreement.

     

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

     

    “Purchase Price” has
the meaning set forth in Section 7(b) hereof.

     

    “Record Date” has the
meaning set forth in the Recitals.

     

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

     

    “Right” has the
meaning set forth in the Recitals to this Agreement.

     

    “Rights Agent” has the
meaning set forth in the introductory paragraph to this Agreement.

     

    “Rights Agreement” has
the meaning set forth in the introductory paragraph to this
Agreement.

     

    “Rights Certificate”
has the meaning set forth in Section 3(b) hereof.

     

    “Section 11(a)(ii) Trigger
Date” has the meaning set forth in Section 11(a)(iii)
hereof.

     

    “Securities Act” shall
mean the Securities Act of 1933, as amended.

     

    “Security” has the
meaning set forth in Section 11(d)(i) hereof.

     

    “Series A Preferred
Stock” shall mean the Series A Junior Participating Preferred Stock, par
value $1.00 per share, of the Company having the rights and preferences set
forth in the Certificate of Designations attached to this Rights Agreement as
Exhibit A and, to the
extent that there are not a sufficient number of shares of Series A Junior
Participating Preferred Stock authorized to permit the full exercise of the
Rights, any other series of preferred stock of the Company designated for such
purpose containing terms substantially similar to the terms of the Series A
Junior Participating Preferred Stock.

     

    “Spread” has the
meaning set forth in Section 11(a)(iii) hereof.

     

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

     

    
      
         

      

      
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    “Subsidiary” of any
Person shall mean any corporation or other entity of which securities or other
ownership interests having ordinary voting power sufficient to elect a majority
of the board of directors or other persons performing similar functions are
beneficially owned, directly or indirectly, by such Person, and any corporation
or other entity that is otherwise controlled by such Person.

     

    “Substitution Period”
has the meaning set forth in Section 11(a)(iii) hereof.

     

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

     

    “Sunset Date” shall
mean July 1, 2012, unless the Board determines, within twelve months prior to
such date, that July 1, 2012 shall not be the Sunset Date.  If the
Board so determines that July 1, 2012 shall not be the Sunset Date, then “Sunset
Date” shall mean July 1, 2015, unless the Board determines, within twelve months
prior to July 1, 2015, that July 1, 2015 shall not be the Sunset
Date.  If the Board so determines that July 1, 2015 shall not be the
Sunset Date, then “Sunset Date” shall mean July 1, 2018, unless the Board
determines, within twelve months prior to July 1, 2018, that July 1, 2018 shall
not be the Sunset Date.  If the Board so determines that July 1, 2012,
July 1, 2015 and July 1, 2018 shall not be the Sunset Date, then “Sunset Date”
shall mean the close of business on the tenth anniversary of the Record
Date.

     

    “Synthetic Long
Position” shall mean any option, warrant, convertible security, stock
appreciation right or other contractual right, whether or not presently
exercisable, which has an exercise or conversion privilege or a settlement
payment or mechanism at a price related to 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 Common Stock, whether or not such right is subject to
settlement in whole or in part in Common Stock, and which increases in value as
the value 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 Common Stock, but shall not
include:

     

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

     

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

     

    (iii)         rights
or obligations to surrender Common Stock, or have 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.

     

    
      
         

      

      
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    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
required to be specified (or, if greater, the number actually specified) in a
filing by such Person or any of such Person’s Affiliates or Associates with the
Securities and Exchange Commission pursuant to Regulation 13D-G or Regulation
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 Common Shares is specified in such
filing or documentation, as determined by the Board of Directors of the Company
in good faith to be the number of shares of Common Stock to which the Synthetic
Long Position relates.

     

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

     

    Section
2.              Appointment of Rights
Agent.  The Company hereby appoints the Rights Agent to act as
agent for the Company and the holders of the Rights (who, in accordance with
Section 3 hereof, shall, prior to the Distribution Date, be the holders of
Common Stock) in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment.  The Company may from time to
time appoint such co-Rights Agents as it may deem necessary or desirable upon
ten (10) days’ prior 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.

     

    Section
3.              Issuance of Right
Certificates.  (a)  Until the close of business on
the earlier of (i) the tenth day after the Stock Acquisition Date or (ii) the
tenth Business Day (or such later date as may be determined by action of the
Board of Directors prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement by any Person (other than an Exempted Entity)
of, or of the first public announcement of the intention of such Person (other
than an Exempted Entity) to commence, a tender or exchange offer the
consummation of which would result in any Person (other than an Exempted Entity)
becoming an Acquiring Person (including, in the case of both clause (i) and
(ii), any such date which is after the date of this Rights Agreement and prior
to the issuance of the Rights) (the earlier of such dates being herein referred
to as the “Distribution Date”;
provided, however, that if
either of such dates occurs after the date of this Rights Agreement and on or
prior to the Record Date, then the Distribution Date shall be the Record Date),
(x) the Rights will be evidenced (subject to the provisions of Section 3(b)
hereof) by the certificates for Common Stock registered in the names of the
holders thereof and not by separate Right Certificates (as defined below), and
(y) the Rights will be transferable only in connection with the transfer of
Common Stock.  As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send) by first-class, insured, postage-prepaid mail, to each record holder of
Common Stock as of the close of business on the Distribution Date (other than
any Acquiring Person or any Associate or Affiliate of an Acquiring Person), at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B hereto (a “Right Certificate”),
evidencing one Right (subject to adjustment as provided herein) for each share
of Common Stock so held.  As of and after the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.

     

    
      
         

      

      
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    (b)           On
the Record Date or as promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Shares of Series A
Preferred Stock, in substantially the form of Exhibit C hereto (the “Summary of Rights”),
by first-class, postage-prepaid mail to each record holder of Common Stock as of
the close of business on the Record Date (other than any Acquiring Person or any
Associate or Affiliate of any Acquiring Person), at the address of such holder
shown on the records of the Company.  With respect to shares of Common
Stock outstanding as of the Record Date, until the Distribution Date, the Rights
associated with such shares will be evidenced by the share certificate for such
shares of Common Stock registered in the names of the holders thereof together
with the Summary of Rights.  Until the Distribution Date (or, if
earlier, the Expiration Date), the surrender for transfer of any certificate for
Common Stock outstanding on the Record Date, with or without a copy of the
Summary of Rights, shall also constitute the transfer of the Rights associated
with the Common Stock represented thereby.

     

    (c)           Rights
shall be issued in respect of all shares of Common Stock issued or disposed of
(including, without limitation, upon disposition of Common Stock out of treasury
stock or issuance or reissuance of Common Stock out of authorized but unissued
shares) after the Record Date but prior to the earlier of the Distribution Date
and the Expiration Date, or in certain circumstances provided in Section 22
hereof, after the Distribution Date.  Certificates issued for Common
Stock (including, without limitation, upon transfer of outstanding Common Stock,
disposition of Common Stock out of treasury stock or issuance or reissuance of
Common Stock out of authorized but unissued shares) after the Record Date but
prior to the earlier of the Distribution Date and the Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:

     

    “This
certificate also evidences and entitles the holder hereof to certain Rights as
set forth in a Rights Agreement between I.D. Systems, Inc. and American Stock
Transfer & Trust Company, LLC, as Rights Agent, dated as of July 1, 2009, as
the same may be amended, supplemented or otherwise modified from time to time
(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
I.D. Systems, Inc.  Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate.  I.D. Systems, Inc.
will mail to the holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefor.  Under
certain circumstances, as set forth in the Rights Agreement, Rights owned by or
transferred to any Person who is or becomes an Acquiring Person (as defined in
the Rights Agreement) and certain transferees thereof will become null and void
and will no longer be transferable.”

     

    
      
        
        

      

      
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    With
respect to such certificates containing the foregoing legend, until the
Distribution Date, 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 such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the
Common Stock represented thereby.  In the event that the Company
purchases or otherwise acquires any Common Stock after the Record Date but prior
to the Distribution Date, any Rights associated with such Common Stock shall be
deemed cancelled and retired so that the Company shall not be entitled to
exercise any Rights associated with the shares of Common Stock which are no
longer outstanding.  Notwithstanding this paragraph (c), the omission
of a legend shall not affect the enforceability of any part of this Rights
Agreement or the rights of any holder of the Rights.

     

    Section 
4.              Form of Right
Certificates.  The Right Certificates (and the forms of
election to purchase shares and of assignment to be printed on the reverse
thereof) shall 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 and as are 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 made pursuant
thereto or with any rule or regulation of the NASDAQ or of any other stock
exchange or automated quotation system on which the Rights may from time to time
be listed or quoted, or to conform to usage.  Subject to the
provisions of Sections 11 and 22 hereof, the Right Certificates shall entitle
the holders thereof to purchase such number of Preferred Stock Units as shall be
set forth therein at the Purchase Price (as determined pursuant to Section 7),
but the number of such Preferred Stock Units and the Purchase Price thereof
shall be subject to adjustment as provided herein.

     

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

     

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

     

    
      
         

      

      
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    Section
6.              Transfer, Split Up,
Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates.  (a)  Subject to the
provisions of this Rights Agreement, at any time after the close of business on
the Distribution Date, and prior to the close of business on the Expiration
Date, any Right Certificate or Right Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of Preferred Stock
Units (or, following such time, other securities, cash or assets as the case may
be) as the Right Certificate or Right Certificates surrendered then entitled
such holder to purchase.  Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the office or agency of the Rights Agent designated for
such purpose.  Thereupon the Rights Agent, subject to the provisions
of this Rights Agreement, shall countersign and deliver to the Person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested.  The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.

     

    (b)           Subject
to the provisions of this Rights Agreement, at any time after the Distribution
Date and prior to the Expiration Date, upon receipt by the Company and the
Rights Agent of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and, at
the Company’s request, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights Agent
and cancellation of the Right Certificate if mutilated, the Company will make
and deliver a new Right Certificate of like tenor to the Rights Agent for
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.

     

    Section  
7.            Exercise of Rights, Purchase
Price; Expiration Date of Rights.  (a)  Except as
otherwise provided herein, the Rights shall become exercisable on the
Distribution Date, and thereafter the registered holder of any Right Certificate
may, subject to Section 11(a)(ii) hereof and except as otherwise provided
herein, exercise the Rights evidenced thereby in whole or in part upon surrender
of the Right Certificate, with the form of election to purchase on the reverse
side thereof duly executed, to the Rights Agent at the office or agency of the
Rights Agent designated for such purpose, together with payment of the Purchase
Price for each Preferred Stock Unit (or other securities, cash or assets, as the
case may be) as to which the Rights are exercised, at any time which is both
after the Distribution Date and prior to the Expiration Date.

     

    (b)           The
purchase price (the “Purchase Price”)
shall be initially $19.47 for each Preferred Stock Unit purchasable upon the
exercise of a Right.  The Purchase Price and the number of Preferred
Stock Units or other securities or property to be acquired upon exercise of a
Right 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.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    (c)           Except
as otherwise provided herein, upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the aggregate Purchase Price for the number of shares
of Series A Preferred Stock to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, in cash or by certified check,
cashier’s check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Series A Preferred Stock or make available if the Rights Agent is the
transfer agent for the Series A Preferred Stock certificates for the number of
shares of Series A Preferred Stock to be purchased (and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests), or
(B) requisition from the depositary agent appointed by the Company depositary
receipts representing interests in such number of Preferred Stock Units as are
to be purchased, in which case certificates for the Series A Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent (and the Company hereby directs the depositary agent to comply
with such request), (ii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) promptly after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder and (iv) when appropriate, after receipt,
promptly deliver such cash to or upon the order of the registered holder of such
Right Certificate.

     

    (d)           Except
as otherwise provided herein, in case the registered holder of any Right
Certificate shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the exercisable Rights
remaining unexercised shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14 hereof.

     

    (e)           Notwithstanding
anything in this Rights Agreement to the contrary, neither the Rights Agent nor
the Company shall be obligated to undertake any action with respect to a
registered holder of Rights upon the occurrence of any purported transfer or
exercise of Rights pursuant to Section 6 hereof or this Section 7 unless such
registered holder shall have (i) completed and signed the certificate contained
in the form of assignment or form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such transfer or exercise
and (ii) provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) thereof as the Company shall reasonably
request.

     

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

     

    Section
9.              Availability
of Shares of Series A Preferred Stock.  (a)  The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Series A Preferred Stock
or any shares of Series A Preferred Stock held in its treasury, the number of
shares of Series A Preferred Stock that will be sufficient to permit the
exercise in full of all outstanding Rights.

      

        
          
             

          

          
            -11-

            
              

            

          

          
             

          

        

      

       

    

    (b)           So
long as the shares of Series A Preferred Stock (and, following the time that a
Person becomes an Acquiring Person, shares of Common Stock and other securities)
issuable upon the exercise of Rights may be listed or admitted to trading on the
NASDAQ or listed on any other national securities exchange or quotation system,
the Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed or
admitted to trading on the NASDAQ or listed on any other exchange or quotation
system upon official notice of issuance upon such exercise.

     

    (c)           From
and after such time as the Rights become exercisable, the Company shall use its
best efforts, if then necessary to permit the issuance of shares of Series A
Preferred Stock (and following the time that a Person first becomes an Acquiring
Person, shares of Common Stock and other securities) upon the exercise of
Rights, to register and qualify such shares of Series A Preferred Stock (and
following the time that a Person first becomes an Acquiring Person, shares of
Common Stock and other securities) under the Securities Act and any applicable
state securities or “Blue Sky” laws (to the extent exemptions therefrom are not
available), cause such registration statement and qualifications to become
effective as soon as possible after such filing and keep such registration and
qualifications effective (with a prospectus at all times meeting the
requirements of the Securities Act of 1933, as amended) until the earlier of (x)
the date as of which the Rights are no longer exercisable for such securities
and (y) the Expiration Date.  The Company may temporarily suspend, for
a period of time not to exceed ninety (90) days, the exercisability of the
Rights in order to prepare and file a registration statement under the
Securities Act and permit it to become effective.  Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in
effect.  Notwithstanding any provision of this Rights Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification or exemption in such jurisdiction shall have been
obtained and until a registration statement under the Securities Act (if
required) shall have been declared effective.

     

    (d)           The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all shares of Series A Preferred Stock (and, following
the time that a Person becomes an Acquiring Person, shares of Common Stock and
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates therefor (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.

     

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

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    Section
10.           Series A Preferred Stock
Record Date.  Each Person in whose name any certificate for
Series A Preferred Stock is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the shares of Series A
Preferred Stock represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer taxes
or charges) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Series A Preferred
Stock 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 such transfer books are
open.  Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Series A Preferred Stock for which the Rights shall be exercisable, including,
without limitation, the right to vote or to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.

     

    Section
11.           Adjustment of Purchase
Price, Number and Kind of Shares and Number of Rights.  The
Purchase Price, the number of shares of Series A Preferred Stock or other
securities or property purchasable upon exercise of 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 and pay a dividend on the Series A Preferred Stock payable in shares of
Series A Preferred Stock, (B) subdivide the outstanding shares of Series A
Preferred Stock, (C) combine the outstanding shares of Series A Preferred Stock
into a smaller number of shares of Series A Preferred Stock or (D) issue any
shares of its capital stock in a reclassification of the shares of Series A
Preferred Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, as the case
may be, 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 which, if such Right had been exercised
immediately prior to such date and at a time when the Series A Preferred Stock
transfer books of the Company were open, the holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

    (ii)          Subject
to Section 24 of this Rights Agreement and except as otherwise provided in this
Section 11(a)(ii) and Section 11(a)(iii), in the event that any Person becomes
an Acquiring Person, each holder of a Right shall thereafter have the right to
receive, upon exercise thereof at a price equal to the then-current Purchase
Price, in accordance with the terms of this Rights Agreement and in lieu of
shares of Series A Preferred Stock, such number of shares of Common Stock (or at
the option of the Company, such number of Preferred Stock Units) as shall equal
the result obtained by (x) multiplying the then-current Purchase Price by the
number of Preferred Stock Units for which a Right was exercisable immediately
prior to such event, whether or not such Right was then exercisable, and
dividing that product by (y) 50% of the then-current per share market price of
the Common Stock (determined pursuant to Section 11(d) hereof) on the date of
the occurrence of such event; provided, however, that the
Purchase Price (as so adjusted) and the number of shares of Common Stock so
receivable upon exercise of a Right shall thereafter be subject to further
adjustment as appropriate in accordance with Section 11(f)
hereof.  Notwithstanding anything in this Rights Agreement to the
contrary, however, from and after the time (the “invalidation time”)
when any Person first becomes an Acquiring Person, any Rights that are
Beneficially Owned by (x) any Acquiring Person (or any Affiliate or Associate of
any Acquiring Person), (y) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who becomes a transferee after the invalidation time or
(z) a transferee of any Acquiring Person (or any such Affiliate or Associate)
who became a transferee prior to or concurrently with the invalidation time
pursuant to either (I) a transfer from the Acquiring Person to holders of its
equity securities or to any Person with whom it has any continuing agreement,
arrangement or understanding, written or otherwise, regarding the transferred
Rights or (II) a transfer that the Board of Directors has determined is part of
a plan, arrangement or understanding, written or otherwise, which has the
purpose or effect of avoiding the provisions of this paragraph, and subsequent
transferees of such Persons, shall be void without any further action and any
holder of such Rights shall thereafter have no rights whatsoever with respect to
such Rights under any provision of this Rights Agreement.  The Company
shall use all reasonable efforts to ensure that the provisions of this Section
11(a)(ii) are complied with, but shall have no liability to any holder of Right
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.  From and after the invalidation time, no
Right Certificate shall be issued pursuant to Section 3 or Section 6 hereof that
represents Rights that are or have become void pursuant to the provisions of
this paragraph, and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the provisions of
this paragraph shall be cancelled.  From and after the occurrence of
an event specified in Section 13(a) hereof, any Rights that theretofore have not
been exercised pursuant to this Section 11(a)(ii) shall thereafter be
exercisable only in accordance with Section 13 and not pursuant to this Section
11(a)(ii).

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    (iii)           The
Company may at its option substitute for a share of Common Stock issuable upon
the exercise of Rights in accordance with the foregoing subparagraph (ii) such
number or fractions of shares of Series A Preferred Stock having an aggregate
current market value equal to the current per share market price of one share of
Common Stock.  In the event that there shall be an insufficient number
of shares of Common Stock authorized but unissued (and unreserved) to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Board of Directors shall, with respect to such deficiency, to the
extent permitted by applicable law and any material agreements then in effect to
which the Company is a party (A) determine the excess of (x) the value of the
shares of Common Stock issuable upon the exercise of a Right in accordance with
the foregoing subparagraph (ii) (the “Current Value”) over
(y) the then-current Purchase Price multiplied by the number of Preferred Stock
Units for which a Right was exercisable immediately prior to the time that the
Acquiring Person became such (such excess, the “Spread”), and (B)
with respect to each Right (other than Rights which have become void pursuant to
Section 11(a)(ii)), make adequate provision to substitute for the shares of
Common Stock issuable in accordance with foregoing subparagraph (ii) upon
exercise of the Right and payment of the applicable Purchase Price, (1) cash,
(2) a reduction in such Purchase Price, (3) shares of Series A Preferred Stock
or other equity securities of the Company (including, without limitation, shares
or fractions of shares of preferred stock which, by virtue of having dividend,
voting and liquidation rights substantially comparable to those of the shares of
Common Stock, are deemed in good faith by the Board of Directors to have
substantially the same value as the shares of Common Stock (such shares of
preferred stock and shares or fractions of shares of preferred stock are
hereinafter referred to as “Common Stock
equivalents”), (4) debt securities of the Company, (5) other assets or
(6) any combination of the foregoing, having a value which, when added to the
value of the shares of Common Stock actually issued upon exercise of such Right,
shall have an aggregate value equal to the Current Value (less the amount of any
reduction in such Purchase Price), where such aggregate value has been
determined by the Board of Directors upon the advice of a nationally recognized
investment banking firm selected in good faith by the Board of Directors; provided, however, if the
Company shall not make adequate provision to deliver value pursuant to clause
(B) above within thirty (30) days following the date that the Acquiring Person
became such (the “Section 11(a)(ii) Trigger
Date”), then the Company shall be obligated to deliver, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the extent
available), and then, if necessary, such number or fractions of shares of Series
A Preferred Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread.  If
within the thirty (30) day period referred to above the Board of Directors shall
determine in good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of the
Rights, then, if the Board of Directors so elects, such thirty (30) day period
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares (such
thirty (30) day period, as it may be extended, is hereinafter called the “Substitution
Period”).  To the extent that the Company determines that some
action need be taken pursuant to the second and/or third sentence of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii)
hereof and the last sentence of this Section 11(a)(iii) hereof, that such action
shall apply uniformly to all outstanding Rights and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such second sentence and
to determine the value thereof.  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, as well as a public announcement at
such time as the suspension is no longer in effect.  For purposes of
this Section 11(a)(iii), the value of the shares of Common Stock shall be the
current per share market price (as determined pursuant to Section 11(d)(i)) on
the Section 11(a)(ii) Trigger Date and the per share or fractional value of any
Common Stock equivalent shall be deemed to equal the current per share market
price of the Common Stock.  The Board of Directors of the Company may,
but shall not be required to, establish procedures to allocate the right to
receive shares of Common Stock upon the exercise of the Rights among holders of
Rights pursuant to this Section 11(a)(iii).

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

    (b)           In
case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Series A Preferred Stock entitling them (for a period
expiring within 45 calendar days after such record date) to subscribe for or
purchase Series A Preferred Stock (or shares having the same rights, privileges
and preferences as the Series A Preferred Stock (“equivalent preferred
shares”)) or securities convertible into Series A Preferred Stock or
equivalent preferred shares at a price per share of Series A Preferred Stock or
equivalent preferred shares (or having a conversion price per share, if a
security convertible into shares of Series A Preferred Stock or equivalent
preferred shares) less than the then-current per share market price of the
Series A Preferred Stock (determined pursuant to Section 11(d) hereof) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Series A Preferred Stock and equivalent preferred shares outstanding on such
record date plus the number of shares of Series A Preferred Stock and equivalent
preferred shares which the aggregate offering price of the total number of
shares of Series A Preferred Stock and/or equivalent preferred shares so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Series A Preferred
Stock and equivalent preferred shares outstanding on such record date plus the
number of additional shares of Series A Preferred Stock and/or equivalent
preferred shares to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible); provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.  In case such subscription price
may be paid in a consideration part or all of which shall be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and which shall be binding on the
Rights Agent.  Shares of Series A Preferred Stock and equivalent
preferred shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation.  Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.

     

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

     

    
      
         

      

      
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    (d)           (i)  Except
as otherwise provided herein, for the purpose of any computation hereunder, the
“current per share market price” of any security (a “Security” for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the average
of the daily closing prices per share of such Security for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided,
however, that
in the event that the current per share market price of the Security is
determined during a period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in shares of
such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security, and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security.  The closing price per share of any
Securities on any date shall be the last reported sale price, regular way, or,
in case no such sale takes place or is quoted on such date, the average of the
closing bid and asked prices, regular way, for each share of such Securities, in
either case in the principal consolidated transaction reporting system with
respect to Securities listed on the principal national securities exchange on
which the Securities are listed or admitted to trading, or as reported in the
principal consolidated transaction reporting system with respect to Securities
listed or admitted to trading on the NYSE or, if the Securities are not listed
or admitted to trading on any national securities exchange or on the NYSE, as
reported by the NASDAQ or such other system then in use, or, if on any such date
the Securities are not listed or admitted to trading on any national securities
exchange or 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
Securities selected by the Board of Directors of the Company; provided, however, that if on
any such date the Securities are not listed or admitted to trading on a national
securities exchange or traded in the over-the-counter market, the closing price
per share of such Securities on such date shall mean the fair value per share of
such Securities on such date as determined in good faith by the Board of
Directors of the Company, after consultation with a nationally recognized
investment banking firm, and set forth in a certificate delivered to the Rights
Agent.  The term “Trading Day” shall
mean a day on which the principal national securities exchange on which the
Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.

     

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

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

     

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

     

    (f)           If
as a result of an adjustment made pursuant to Section 11(a) hereof, the holder
of any Right thereafter exercised shall become entitled to receive any shares of
capital stock of the Company other than the Series A Preferred Stock, thereafter
the Purchase Price and the number of such other shares so receivable upon
exercise of a 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 Series A Preferred Stock contained in Sections 11(a), 11(b), 11(c),
11(e), 11(h), 11(i) and 11(m) hereof, as applicable, and the provisions of
Sections 7, 9, 10, 13 and 14 hereof with respect to the Series A 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 Preferred Stock Units 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), upon
each adjustment of the Purchase Price as a result of the calculations made in
Section 11(b) and (c), each Right outstanding immediately prior to the making of
such adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of Preferred Stock Units (calculated to the nearest
one ten-thousandth of a share of Series A Preferred Stock) obtained by (i)
multiplying (x) the number of Preferred Stock Units purchasable upon the
exercise of a Right immediately prior to such 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.

     

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    (m)           Notwithstanding
anything in this Section 11 to the contrary, the Company shall be entitled to
make such adjustments 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 Series A Preferred Stock, issuance (wholly for cash) of any
shares of Series A Preferred Stock at less than the current market price,
issuance (wholly for cash) of Series A Preferred Stock or securities which by
their terms are convertible into or exchangeable for Series A Preferred Stock,
dividends on Series A Preferred Stock payable in shares of Series A Preferred
Stock or issuance of rights, options or warrants referred to hereinabove in
Section 11(b), hereafter made by the Company to holders of its Series A
Preferred Stock shall not be taxable to such stockholders.

     

    (n)           Notwithstanding
anything in this Rights Agreement to the contrary, in the event that at any time
after the date of this Rights Agreement and prior to the Distribution Date, the
Company shall (i) declare and pay any dividend on the Common Stock payable in
Common Stock or (ii) effect a subdivision, combination or consolidation of the
Common Stock (by reclassification or otherwise than by payment of a dividend
payable in Common Stock) into a greater or lesser number of shares of Common
Stock, then in any such case, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter, 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
Company agrees that, after the earlier of the Distribution Date or the Stock
Acquisition Date, it will not, except as permitted by Sections 23, 24 or 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or eliminate the benefits intended to be afforded by the
Rights.

     

    
      Section
12.            Certificate of Adjusted
Purchase Price or Number of Shares.  Whenever an adjustment is
made as provided in Section 11 or 13 hereof, the Company shall promptly (a)
prepare a certificate setting forth such adjustment, and a brief statement of
the facts accounting for such adjustment, (b) file with the Rights Agent and
with each transfer agent for the Common Stock and the Series A Preferred Stock a
copy of such certificate and (c) mail a brief summary thereof to each holder of
a Right Certificate in accordance with Section 25 hereof (if so required under
Section 25 hereof).  The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of any such adjustment unless and until it
shall have received such certificate.

    

     

    Section
13.            Consolidation, Merger or
Sale or Transfer of Assets or Earnings
Power.  (a)  In the event, directly or indirectly, at
any time after any Person has become an Acquiring Person, (i) the Company shall
consolidate with or merge with and into any other Person (other than one or more
of its wholly-owned Subsidiaries), (ii) any Person (other than one or more of
its wholly-owned Subsidiaries), shall consolidate with the Company, or any
Person (other than one or more of its wholly-owned Subsidiaries), shall merge
with and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or of the Company) or cash or any other
property, or (iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating to 50% or more of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more of its wholly-owned
Subsidiaries), then, upon the first occurrence of such event, proper provision
shall be made so that:

    
      
        
           

        

         

      

      
        -20-

        
          

        

      

      
         

      

    

    (A)           each
holder of record of a Right (other than Rights which have become void pursuant
to Section 11(a)(ii)) shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then-current Purchase Price multiplied
by the number of Preferred Stock Units for which a Right was exercisable
(whether or not such Right was then exercisable) immediately prior to the time
that any Person first became an Acquiring Person (each as subsequently adjusted
thereafter pursuant to Sections 11(a)(i), 11(b), 11(c), 11(f), 11(h), 11(i) and
11(m)), in accordance with the terms of this Rights Agreement and in lieu of
Series A Preferred Stock or Common Stock of the Company, such number of validly
issued, fully paid and non-assessable and freely tradeable shares of Common
Stock of the Principal Party (as defined below) not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then-current Purchase Price by the
number of Preferred Stock Units for which a Right was exercisable immediately
prior to the time that any Person first became an Acquiring Person (as
subsequently adjusted thereafter pursuant to Section 11(a)(i), 11(b), 11(c),
11(f), 11(h), 11(i) and 11(m)) and (2) dividing that product by 50% of the
then-current per share market price of the Common Stock of such Principal Party
(determined pursuant to Section 11(d)(i) hereof) on the date of consummation of
such consolidation, merger, sale or transfer; provided, however, that the
Purchase Price and the number of shares of Common Stock of such Principal Party
issuable upon exercise of each Right shall be further adjusted as provided in
Section 11(f) of this Rights Agreement to reflect any events occurring in
respect of such Principal Party after the date of such consolidation, merger,
sale or transfer;

     

    (B)           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 Rights Agreement;

     

    (C)           the
term “Company” as used herein shall thereafter be deemed to refer to such
Principal Party; and

     

    (D)           such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its shares of its Common Stock in
accordance with Section 9 hereof) in connection with such consummation of any
such transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable upon the exercise of the
Rights; provided that, upon
the subsequent occurrence of any consolidation, merger, sale or transfer of
assets or other extraordinary transaction in respect of such Principal Party,
each holder of a Right shall thereupon be entitled to receive, upon exercise of
a Right and payment of the Purchase Price as provided in this Section 13(a),
such cash, shares, rights, warrants and other property which such holder would
have been entitled to receive had such holder, at the time of such transaction,
owned the Common Stock of the Principal Party receivable upon the exercise of a
Right pursuant to this Section 13(a), and such Principal Party shall take such
steps (including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other
property.

    
      
         

      

      
        -21-

        
          

        

      

      
         

      

    

    (b)           “Principal Party”
shall mean:

     

    (i)           in
the case of any transaction described in clauses (i) or (ii) of the first
sentence of Section 13(a) hereof:  (A) the Person that is the issuer
of the securities into which the shares of Common Stock are converted in such
merger or consolidation, or, if there is more than one such issuer, the issuer
of the shares of Common Stock of which have the greatest aggregate market value
of shares outstanding, or (B) if no securities are so issued, (x) the Person
that is the other party to the merger, if such Person survives said merger, or,
if there is more than one such Person, the Person the shares of Common Stock of
which have the greatest aggregate market value ofshares outstanding or (y) if
the Person that is the other party to the merger does not survive the merger,
the Person that does survive the merger (including the Company if it survives)
or (z) the Person resulting from the consolidation; and

     

    (ii)           in
the case of any transaction described in clause (iii) of the first sentence in
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power so
transferred or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Stock having the greatest aggregate market value of shares
outstanding;

     

     

    provided, however, that in any
such case described in the foregoing clause (b)(i) or (b)(ii), if the Common
Stock of such Person is not at such time or has not been continuously over the
preceding 12-month period registered under Section 12 of the Exchange Act, then
(1) if such Person is a direct or indirect Subsidiary of another Person the
Common Stock of which is and has been so registered, the term “Principal Party”
shall refer to such other Person, or (2) if such Person is a Subsidiary,
directly or indirectly, of more than one Person, and the Common Stock of all of
such persons have been so registered, the term “Principal Party” shall refer to
whichever of such Persons is the issuer of Common Stock having the greatest
aggregate market value of shares outstanding, or (3) if such Person is owned,
directly or indirectly, by a joint venture formed by two or more Persons that
are not owned, directly or indirectly, by the same Person, the rules set forth
in clauses (1) and (2) above shall apply to each of the owners having an
interest in the venture as if the Person owned by the joint venture was a
Subsidiary of both or all of such joint venturers, and the Principal Party in
each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such
interests.

     

    (c)           The
Company shall not consummate any consolidation, merger, sale or transfer
referred to in Section 13(a) hereof unless prior thereto the Company and the
Principal Party involved therein shall have executed and delivered to the Rights
Agent an agreement confirming that the requirements of Sections 13(a) and (b)
hereof shall promptly be performed in accordance with their terms and that such
consolidation, merger, sale or transfer of assets shall not result in a default
by the Principal Party under this Rights Agreement as the same shall have been
assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof and
providing that, as soon as practicable after executing such agreement pursuant
to this Section 13, the Principal Party will:

    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    

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

     

    (ii)           use
its best efforts, if the Common Stock of the Principal Party shall be listed or
admitted to trading on the NASDAQ or on another national securities exchange, to
list or admit to trading (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on the NASDAQ or such
securities exchange, or, if the Common Stock of the Principal Party shall not be
listed or admitted to trading on the NASDAQ or a national securities exchange,
to cause the Rights and the securities receivable upon exercise of the Rights to
be reported by such other system then in use;

     

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

     

    (iv)           obtain
waivers of any rights of first refusal or preemptive rights in respect of the
Common Stock of the Principal Party subject to purchase upon exercise of
outstanding Rights.

     

    (d)           In
case the Principal Party has a provision in any of its authorized securities or
in its certificate of incorporation or by-laws or other instrument governing its
affairs, which provision would have the effect of (i) causing such Principal
Party to issue (other than to holders of Rights pursuant to this Section 13), in
connection with, or as a consequence of, the consummation of a transaction
referred to in this Section 13, shares of Common Stock or Common Stock
equivalents of such Principal Party at less than the then-current market price
per share thereof (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock or Common Stock equivalents
of such Principal Party at less than such then-current market price, or (ii)
providing for any special payment, tax or similar provision in connection with
the issuance of the Common Stock of such Principal Party pursuant to the
provisions of Section 13, then, in such event, the Company hereby agrees with
each holder of Rights that it shall not consummate any such transaction unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing that the
provision in question of such Principal Party shall have been canceled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as a consequence
of, the consummation of the proposed transaction.

     

    (e)           The
Company covenants and agrees that it shall not, at any time after a Person first
becomes an Acquiring Person enter into any transaction of the type contemplated
by Sections 13(a)(i)-(iii) hereof if (x) at the time of or immediately after
such consolidation, merger, sale, transfer or other transaction there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights, (y) prior to, simultaneously with or
immediately after such consolidation, merger, sale, transfer or other
transaction, the stockholders of the Person who constitutes, or would
constitute, the Principal Party for purposes of Section 13(b) hereof shall have
received a distribution of Rights previously owned by such Person or any of its
Affiliates or Associates or (z) the form or nature of organization of the
Principal Party would preclude or limit the exercisability of the
Rights.

    
      
         

      

      
        -23-

        
          

        

      

      
         

      

    

    Section
14.            Fractional Rights and
Fractional Shares.  (a)  The Company shall not be
required to issue fractions of Rights (except prior to the Distribution Date in
accordance with Section 11(n) hereof) or to distribute Right Certificates which
evidence fractional Rights.  In lieu of such fractional Rights, there
shall be paid to the registered holders of the Right Certificates with regard to
which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole
Right.  For the purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable.  The closing price for any day shall be the
last reported sale price, regular way, or, in case no such sale takes place or
is quoted on such date, the average of the closing bid and asked prices, regular
way, in either case in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading, or as reported in the
principal consolidated transaction reporting system of the NYSE or, if the
Rights are not listed or admitted to trading on any national securities exchange
or on the NYSE, as reported by the NASDAQ or such other system then in use, or,
if on any such date the Rights are not listed or admitted to trading on any
national securities exchange or quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Rights selected by the Board of Directors of the Company;
provided, however, that if on
any such date the Rights are not listed or admitted to trading on a national
securities exchange or traded in the over-the-counter market, the closing price
per share of such Rights on such date shall mean the fair value per share of
such Rights on such date as determined in good faith by the Board of Directors
of the Company, after consultation with a nationally recognized investment
banking firm, and set forth in a certificate delivered to the Rights
Agent.

     

    (b)           The
Company shall not be required to issue fractions of shares of Series A Preferred
Stock (other than fractions which are integral multiples of one one-thousandth
of a share of Series A Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Series A Preferred
Stock (other than fractions which are integral multiples of one one-thousandth
of a share of Series A Preferred Stock).  Interests in fractions of
Series A Preferred Stock in integral multiples of one one-thousandth of a share
of Series A 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 Series A Preferred Stock represented by such depositary
receipts.  In lieu of fractional shares of Series A Preferred Stock
that are not integral multiples of one one-thousandth of a share of Series A
Preferred Stock, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised for shares of Series A
Preferred Stock as herein provided an amount in cash equal to the same fraction
of the current market value of one share of Series A Preferred
Stock.  For the purposes of this Section 14(b), the current market
value of a share of Series A Preferred Stock shall be the closing price of a
share of Series A Preferred Stock (as determined pursuant to Section 14(a)
hereof) for the Trading Day immediately prior to the date of such
exercise.

    
      
         

      

      
        -24-

        
          

        

      

      
         

      

    

    (c)           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 upon
the exercise or exchange of Rights.  In lieu of such fractional shares
of Common Stock, the Company shall pay to the registered holders of the Right
Certificates at the time such Rights are exercised or exchanged for shares of
Common Stock as herein provided an amount in cash equal to the same fraction of
the current market value of a whole share of Common Stock (as determined in
accordance with Section 14(a) hereof) for the Trading Day immediately prior to
the date of such exercise or exchange.

     

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

     

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

     

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

     

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

     

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

     

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

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

    
      
         

      

      
        -26-

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

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

     

    (e)           The
Rights Agent shall not be under any responsibility in respect of the validity of
this Rights Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the validity or execution
of any Right Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition contained
in this Rights Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Sections 3, 11, 13, 23 and 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after receipt
of a certificate furnished pursuant to Section 12, describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Series A Preferred Stock or other securities to be issued pursuant to this
Rights Agreement or any Right Certificate or as to whether any shares of Series
A Preferred Stock or other securities will, when issued, be validly authorized
and issued, fully paid and nonassessable.

    
      
         

      

      
        -27-

        
          

        

      

      
         

      

    

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

     

    (g)           The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any person reasonably
believed by the Rights Agent to be one of the Authorized Officers, and to apply
to such Authorized Officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered by it in
good faith in accordance with instructions of any such Authorized Officer or for
any delay in acting while waiting for those instructions.  Any
application by the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent, set forth in writing any action proposed to
be taken or omitted by the Rights Agent under this Rights Agreement and the date
on and/or after which such action shall be taken or such omission shall be
effective.  The Rights Agent shall not be liable for any action taken
by, or omission of, the Rights Agent in accordance with a proposal included in
any such application on or after the date specified in such application (which
date shall not be less than five Business Days after the date any Authorized
Officer of the Company actually receives such application, unless any such
Authorized Officer shall have consented in writing to an earlier date) unless,
prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.

     

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

     

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

     

    (j)           If,
with respect to any Right Certificate surrendered to the Rights Agent for
exercise or transfer, the certificate contained in the form of assignment or the
form of election to purchase set forth on the reverse thereof, as the case may
be, has not been completed to certify the holder is not an Acquiring Person (or
an Affiliate or Associate thereof) or a transferee thereof, the Rights Agent
shall not take any further action with respect to such requested exercise or
transfer without first consulting with the Company.

    
      
         

      

      
        -28-

        
          

        

      

      
         

      

    

    Section
21.            Change of Rights
Agent.  The Rights Agent or any successor Rights Agent may
resign and be discharged from its duties under this Rights Agreement upon 30
days’ notice in writing mailed to the Company and to each transfer agent of the
Common Stock or the Series A Preferred Stock by registered or certified mail,
and, following the Distribution Date, to the holders of the Right Certificates
by first-class mail.  In the event the transfer agency relationship in
effect between the Company and the Rights Agent terminates, the Rights Agent
will be deemed to resign automatically on the effective date of such
termination; and any required notice will be sent by the Company.  The
Company may remove the Rights Agent or any successor Rights Agent upon 30 days’
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock or the Series A
Preferred Stock by registered or certified mail, and, following the Distribution
Date, to the holders of the Right Certificates by first-class
mail.  If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent.  If the Company shall fail to make such appointment
within a period of 30 days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent.  Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (A) a corporation organized and in good standing, and doing business
under the laws of the United States or any State thereof, which is authorized
under such laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million or (B) an affiliate of a corporation 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 file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock or the
Series A Preferred Stock, and, following the Distribution Date, mail a notice
thereof in writing to the registered holders of the Right
Certificates.  Failure to give any notice provided for in this Section
21, however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.

     

    Section
22.            Issuance of New Right
Certificates.  Notwithstanding any of the provisions of this
Rights Agreement or of the Rights to the contrary, the Company may, at its
option, issue new Right Certificates evidencing Rights in such forms as may be
approved by its Board of Directors to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Right Certificates made in accordance with the
provisions of this Rights Agreement.  In addition, in connection with
the issuance or sale of Common Stock following the Distribution Date and prior
to the Expiration Date, the Company may with respect to shares of Common Stock
so issued or sold pursuant to (i) the exercise of stock options, (ii) under any
employee plan or arrangement, (iii) the exercise, conversion or exchange of
securities, notes or debentures issued by the Company or (iv) a contractual
obligation of the Company, in each case existing prior to the Distribution Date,
issue Right Certificates representing the appropriate number of Rights in
connection with such issuance or sale.

    
      
         

      

      
        -29-

        
          

        

      

      
         

      

    

    Section
23.            Redemption.  (a)  The
Board of Directors of the Company may, at any time prior to such time as any
Person first becomes an Acquiring Person, redeem all but not less than all the
then-outstanding Rights at a redemption price of $0.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring in respect of the Common Stock after the date hereof (the redemption
price being hereinafter referred to as the “Redemption
Price”).  The redemption of the Rights may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish.  The Company may, at its option,
pay the Redemption Price in cash, shares of Common Stock (based on the current
market price of the Common Stock at the time of redemption as determined
pursuant to Section 11(d)(i) hereof) or any other form of consideration deemed
appropriate by the Board of Directors.

     

    (b)           Immediately
upon the action of the Board of Directors ordering the redemption of the Rights
pursuant to paragraph (a) of this Section 23 (or at such later time as the Board
of Directors may establish for the effectiveness of such redemption), and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price.  The Company shall promptly
give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption.  Within 10 days after such action of the Board of
Directors ordering the redemption of the Rights (or such later time as the Board
of Directors may establish for the effectiveness of such redemption), the
Company shall mail a notice of redemption to all the holders of the
then-outstanding Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock.  Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.  Each such notice of redemption shall
state the method by which the payment of the Redemption Price will be
made.

     

    Section
24.            Exchange.  (a)  The
Board of Directors of the Company may, at its option, at any time after any
Person first becomes an Acquiring Person, exchange all or part of the
then-outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 11(a)(ii) hereof) for
shares of Common Stock at an exchange ratio of one share of Common Stock (or
Preferred Stock Unit) per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the close of
business on the date of this Rights Agreement (such amount per Right being
hereinafter referred to as the “Exchange
Ratio”).  Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effectuate such exchange at any time after an
Acquiring Person becomes the Beneficial Owner of shares of Common Stock
aggregating 50% or more of the shares of Common Stock then
outstanding.  From and after the occurrence of an event specified in
Section 13(a) hereof, any Rights that theretofore have not been exchanged
pursuant to this Section 24(a) shall thereafter be exercisable only in
accordance with Section 13 and may not be exchanged pursuant to this Section
24(a).  The exchange of the Rights by the Board of Directors may be
made effective at such time, on such basis and with such conditions as the Board
of Directors in its sole discretion may establish.  Prior to effecting
an exchange pursuant to this Section 24, the Board of Directors may direct the
Company to enter into a Trust Agreement in such form and with such terms as the
Board of Directors shall then approve (the “Trust
Agreement”).  If the Board of Directors so directs, the Company
shall enter into the Trust Agreement and shall issue to the trust created by
such agreement (the “Trust”) all of the
shares of Common Stock issuable pursuant to the exchange (other than any such
shares previously issued to any stockholder entitled thereto pursuant to the
exchange), and all stockholders entitled to receive shares pursuant to the
exchange (other than any stockholder who has previously received the shares to
which such stockholder is entitled pursuant to the exchange) shall be entitled
to receive such shares (and any dividends or distributions made thereon after
the date on which such shares are deposited in the Trust) only from the Trust
and solely upon compliance with the relevant terms and provisions of the Trust
Agreement.

    
      
         

      

      
        -30-

        
          

        

      

      
         

      

    

    (b)           Immediately
upon the effectiveness of the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by the Exchange
Ratio.  The Company shall promptly give public notice of any such
exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange.  The Company shall promptly mail a notice of any such
exchange to all of the holders of the Rights so exchanged at their last
addresses as they appear on the books and records of the Company.  Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice.  Each such notice of
exchange will state the method by which the exchange of the shares of Common
Stock for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged.  Any partial exchange shall
be effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each
holder of Rights.

     

    (c)           The
Company may at its option substitute and, in the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued (and unreserved) to permit an exchange of Rights as contemplated in
accordance with this Section 24, the Company shall substitute to the extent of
such insufficiency, for each share of Common Stock that would otherwise be
issuable upon exchange of a Right, a number of shares of Series A Preferred
Stock or fraction thereof (or equivalent preferred shares as such term is
defined in Section 11(b)) such that the current per share market price
(determined pursuant to Section 11(d) hereof) of one share of Series A Preferred
Stock (or equivalent preferred share) multiplied by such number or fraction is
equal to the current per share market price of one share of Common Stock
(determined pursuant to Section 11(d) hereof) as of the date of such
exchange.

    
      
         

      

      
        -31-

        
          

        

      

      
         

      

    

    Section
25.            Notice of Certain
Events.  (a)  In case the Company shall at any time
after the earlier of the Distribution Date or the Stock Acquisition Date propose
(i) to pay any dividend payable in stock of any class to the holders of its
Series A Preferred Stock or to make any other distribution to the holders of its
Series A Preferred Stock (other than a regular quarterly cash dividend), (ii) to
offer to the holders of its Series A Preferred Stock rights or warrants to
subscribe for or to purchase any additional shares of Series A Preferred Stock
or shares of stock of any class or any other securities, rights or options,
(iii) to effect any reclassification of its Series A Preferred Stock (other than
a reclassification involving only the subdivision or combination of outstanding
Series A Preferred Stock), (iv) to effect the liquidation, dissolution or
winding up of the Company, or (v) to declare or pay any dividend on the Common
Stock payable in Common Stock or to effect a subdivision, combination or
consolidation of the Common Stock (by reclassification or otherwise than by
payment of dividends in Common Stock), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such dividend, or distribution or offering of rights or
warrants, or the date on which such liquidation, dissolution, reclassification,
subdivision, combination, consolidation or winding up is to take place and the
date of participation therein by the holders of the Common Stock and/or Series A
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 10
days prior to the record date for determining holders of the Series A Preferred
Stock for purposes of such action, and in the case of any such other action, at
least 10 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Stock and/or Series A
Preferred Stock, whichever shall be the earlier.

     

    (b)           In
case any event described in Section 11(a)(ii) or Section 13 shall occur then the
Company shall as soon as practicable thereafter give to each holder of a Right
Certificate (or if occurring prior to the Distribution Date, the holders of the
outstanding Common Stock) in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) and
Section 13 hereof.

     

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

     

    I.D.
Systems, Inc.

    One
University Plaza

    Hackensack,
New Jersey 07601

    Attention:  Jeffrey
M. Jagid

    

    with a
copy (which shall not constitute notice) to:

    

    Lowenstein
Sandler PC

    1251
Avenue of the Americas

    New York,
New York 10020

    Attention:
Steven E. Siesser

     

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

    
      
         

      

      
        -32-

        
          

        

      

      
         

      

    

    American
Stock Transfer & Trust Company, LLC

    59 Maiden
Lane

    Plaza
Level

    New York,
New York  10038

    Attention:  Shareholder
Services

     

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

     

    Section
27.            Supplements and
Amendments.  Except as otherwise provided in this Section 27,
for so long as the Rights are then redeemable, the Company may in its sole and
absolute discretion, and the Rights Agent shall if the Company so directs,
supplement or amend any provision of this Rights Agreement in any respect
without the approval of any holders of the Rights.  At any time when
the Rights are no longer redeemable, except as otherwise provided in this
Section 27, the Company may, and the Rights Agent shall, if the Company so
directs, supplement or amend this Rights Agreement without the approval of any
holders of Rights in order to (i) cure any ambiguity, (ii) correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) shorten or lengthen any time period hereunder, or
(iv) change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable; provided, however, that no such
supplement or amendment shall adversely affect the interests of the holders of
Rights as such (other than an Acquiring Person or an Affiliate or Associate of
an Acquiring Person), and no such amendment may cause the Rights again to become
redeemable or cause this Rights Agreement again to become amendable other than
in accordance with this sentence.  Notwithstanding anything contained
in this Rights Agreement to the contrary, no supplement or amendment shall be
made which changes the Redemption Price.  Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
supplement or amendment is in compliance with the terms of this Section 27, the
Rights Agent shall execute such supplement or amendment provided that any such
supplement or amendment that does not amend Sections 18, 19, 20 or 21 hereof or
this Section 27 in a manner adverse to the Rights Agent shall become effective
immediately upon execution by the Company, whether or not also executed by the
Rights Agent.

     

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

     

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

    
      
         

      

      
        -33-

        
          

        

      

      
         

      

    

    Section
30.            Determinations and Actions
by the Board of Directors.  The Board of Directors of the
Company shall have the exclusive power and authority to administer this Rights
Agreement and to exercise the rights and powers specifically granted to the
Board of Directors of the Company or to the Company, or as may be necessary or
advisable in the administration of this Rights Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this Rights
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Rights Agreement (including, without limitation, a
determination to redeem or not redeem the Rights or to amend or not amend this
Rights Agreement).  All such actions, calculations, interpretations
and determinations that are done or made by the Board of Directors of the
Company in good faith, shall be final, conclusive and binding on the Company,
the Rights Agent, the holders of the Rights, as such, and all other
parties.

     

    Section
31.            Severability.  If
any term, provision, covenant or restriction of this Rights Agreement or
applicable to this Rights Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Rights Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Rights Agreement would adversely affect the purpose or effect of this
Rights Agreement, the right of redemption set forth in Section 23 hereof shall
be reinstated (with prompt notice to the Rights Agent) and shall not expire
until the close of business on the tenth Business Day following the date of such
determination by the Board of Directors.  Without limiting the
foregoing, if any provision requiring a specific group of Directors of the
Company to act is held to by any court of competent jurisdiction or other
authority to be invalid, void or unenforceable, such determination shall then be
made by the Board of Directors of the Company in accordance with applicable law
and the Company’s certificate of incorporation and bylaws (in each case, as
amended, restated or otherwise modified from time to time).

     

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

     

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

     

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

     

    Section
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 malfunction 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.

    
      
         

      

      
        -34-

        
          

        

      

      
         

      

    

     

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

     

    

    
      
        
          
            
              
                
                  
                    
                      	
                              Attest:  _________________________________________

                            	I.D.
      SYSTEMS, INC.
	 
      	 
      	 
      
	 
      	By:	
                              /s/ Jeffrey M.
      Jagid

                            
	 
      	Name:	
                              Jeffrey M.
    Jagid

                            
	 
      	Title:	
                              Chief Executive
      Officer

                            
	 
      	 
      	 
      
	
                              Attest:  _________________________________________

                            	AMERICAN
      STOCK TRANSFER & TRUST
	 
      	COMPANY,
      LLC
	 
      	 
      	 
      
	 
      	By:	
                              /s/ Herbert J.
      Lemmer

                            
	 
      	Name:	
                              Herbert J.
    Lemmer

                            
	 
      	Title:	
                              Vice
  President

                            

                    

                  

                

              

            

          

        

      

    

    

    [Signature
Page to Rights Agreement]

    
      
         

      

      
        -35-

        
          

        

      

      
         

      

    

    

    EXHIBIT
A

     

    FORM
OF

    

    CERTIFICATE
OF DESIGNATION OF

    

    SERIES
A JUNIOR PARTICIPATING PREFERRED STOCK OF

    

    I.D.
SYSTEMS, INC.

    

    (Pursuant
to Section 151 of the

    General
Corporation Law of the State of Delaware)

     

    I.D.
Systems, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the “Company”), in
accordance with the provisions of Section 103 thereof, does hereby certify that
the following resolution was duly adopted by the Board of Directors of the
Company as required by Section 151 of the General Corporation Law of the State
of Delaware on June 29, 2009:

     

    RESOLVED,
that pursuant to the authority vested in the Board of Directors of the Company
(hereinafter being referred to as the “Board of Directors”
or the “Board”)
in accordance with the provisions of the Company’s Amended and Restated
Certificate of Incorporation, as amended as of July 7, 2009 (hereinafter being
referred to as the “Certificate of
Incorporation”), the Board of Directors hereby creates a series of
preferred stock, par value $1.00 per share, of the Company, to be designated the
“Series A Junior Participating Preferred Stock” and hereby adopts the resolution
establishing the designations, number of shares, preferences, powers, voting
powers and relative, participating, optional or other rights and the
qualifications, restrictions and limitations thereof, of the shares of such
series as set forth below:

    
      
        
        

         

      

      
        A-1

        
          

        

      

      
         

      

    

    Section
1.              Designation and
Amount.  The shares of such series of preferred stock shall be
designated as “Series A Junior Participating Preferred Stock” (the “Series A Preferred
Stock”) and the number of shares constituting the Series A Preferred
Stock shall be 100,000.  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 Preferred Stock to a
number less than the number of shares then issued outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Company convertible into Series A Preferred Stock.

     

    Section
2.              Dividends and
Distributions

     

    (a)           Subject
to the prior or superior rights of the holders of any shares of any class or
series of preferred stock of the Company (the “Preferred Stock”) (or
any similar stock) ranking prior and superior to the Series A Preferred Stock
with respect to dividends, the holders of shares of Series A Preferred Stock, in
preference to the holders of Common Stock, par value $0.01 per share (the “Common Stock”) and of
any other stock of the Company ranking junior to the Series A Preferred Stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on the last day of January, April, July, and October in each year (each
such date being referred to herein as a “Dividend Payment
Date”), commencing on the first Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Stock (the
“Issue Date”),
in an amount per share (rounded to the nearest cent) equal to the greater of (a)
$1.00 or (b) subject to the provision for adjustment hereinafter set forth,
1,000 times the aggregate per share amount of all cash dividends, and 1,000
times the 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
Dividend Payment Date or, with respect to the first Dividend Payment Date, since
the first issuance of any share or fraction of a share of Series A Preferred
Stock.  In the event the Company shall at any time after the Issue
Date declare and pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under clause (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.

    
      
         

      

      
        A-2

        
          

        

      

      
         

      

    

    (b)           The
Company shall declare a dividend or distribution on the Series A Preferred Stock
as provided in paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Dividend Payment Date and the next subsequent
Dividend Payment Date, a dividend of $1 per share on the Series A Preferred
Stock shall nevertheless be payable, when, as and if declared, on such
subsequent Dividend Payment Date.

     

    (c)           Dividends
shall begin to accrue and be cumulative, whether or not earned or declared, on
outstanding shares of Series A Preferred Stock from the Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue of
such shares is prior to the record date for the first 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 Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive a quarterly dividend and before such
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Dividend Payment Date.  Accrued but
unpaid dividends shall not bear interest.  Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding.  The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.

    
      
         

      

      
        A-3

        
          

        

      

      
         

      

    

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

     

    (a)           Subject
to the provision for adjustment hereinafter set forth and except as otherwise
provided in the Certificate of Incorporation or required by law, each share of
Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on all
matters upon which the holders of the Common Stock of the Company are entitled
to vote.  In the event the Company shall at any time after the Issue
Date declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the number of votes per share
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.

     

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

    
      
         

      

      
        A-4

        
          

        

      

      
         

      

    

     

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

     

    (d)           If,
at the time of any annual meeting of stockholders for the election of directors,
the equivalent of six quarterly dividends (whether or not consecutive) payable
on any share or shares of Series A Preferred Stock are in default, the number of
directors constituting the Board of Directors shall be increased by
two.  In addition to voting together with the holders of Common Stock
for the election of other directors of the Company, the holders of record of the
Series A Preferred Stock, voting separately as a class to the exclusion of the
holders of Common Stock, shall be entitled at said meeting of stockholders (and
at each subsequent annual meeting of stockholders), unless all dividends in
arrears on the Series A Preferred Stock have been paid or declared and set apart
for payment prior thereto, to vote for the election of two directors of the
Company, the holders of any Series A Preferred Stock being entitled to cast a
number of votes per share of Series A Preferred Stock as is specified in
paragraph (a) of this Section 3.  Until the default in payments of all
dividends which permitted the election of said directors shall cease to exist,
any director who shall have been so elected pursuant to the provisions of this
Section 3(d) may be removed at any time, without cause, only by the affirmative
vote of the holders of the shares of Series A Preferred Stock at the time
entitled to cast a majority of the votes entitled to be cast for the election of
any such director at a special meeting of such holders called for that purpose,
and any vacancy thereby created may be filled by the vote of such
holders.  If and when such default shall cease to exist, the holders
of the Series A Preferred Stock shall be divested of the foregoing special
voting rights, subject to re-vesting in the event of each and every subsequent
like default in payments of dividends.  Upon the termination of the
foregoing special voting rights, the terms of office of all persons who may have
been elected directors pursuant to said special voting rights shall forthwith
terminate, and the number of directors constituting the Board of Directors shall
be reduced by two.  The voting rights granted by this Section 3(d)
shall be in addition to any other voting rights granted to the holders of the
Series A Preferred Stock in this Section 3.

     

    
      
        
        

      

      
        A-5

        
          

        

      

      
        
        

      

    

     

    Section
4.              Certain
Restrictions.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        A-6

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    Section
5.              Reacquired
Shares.  Any shares of Series A Preferred Stock purchased or
otherwise acquired by the Company in any manner whatsoever shall be retired
promptly after the acquisition thereof.  All such shares shall upon
their retirement 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 any conditions
and restrictions on issuance set forth herein.

     

    
      
        
        

      

      
        A-7

        
          

        

      

      
        
        

      

    

     

    Section
6.              Liquidation, Dissolution or
Winding Up.  Upon any liquidation, dissolution or winding up of
the Company, voluntary or otherwise, no distribution shall be made (A) to the
holders of the Common Stock or of shares of any other stock of the Company
ranking junior, upon liquidation, dissolution or winding up, to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount per share equal to the greater of
(i) $1,000 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not earned or declared, to the date of such
payment; or (ii) 1,000 times the per share amount of all cash or other property
to be distributed to holders of shares of Common Stock upon such liquidation,
dissolution or winding up of the Company, or (B) to the holders of shares of
stock ranking on a parity upon liquidation, dissolution or winding up with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.  In the event, however, that there are not
sufficient assets available to permit payment in full of the Series A Preferred
Stock liquidation preference and the liquidation preferences of all other
classes and series of stock of the Company, if any, that rank on a parity with
the Series A Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of the Series A
Preferred Stock and the holders of such parity shares in the proportion to their
respective liquidation preferences.  In the event the Company shall at
any time after the Issue Date declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (A) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.

     

    Neither
the merger or consolidation of the Company into or with another entity nor the
merger or consolidation of any other entity into or with the Company (nor the
sale of all or substantially all of the assets of the Company) shall be deemed
to be a liquidation, dissolution or winding up of the Company within the meaning
of this Section 6.

     

    
      
        
        

      

      
        A-8

        
          

        

      

      
        
        

      

    

     

    Section
7.              Consolidation, Merger,
etc.  In case the Company shall enter into any consolidation,
merger, combination or other transaction in which the outstanding shares of
Common Stock are converted into, exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly converted into,
exchanged for or changed into an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is converted,
exchanged or changed.  In the event the Company shall at any time
after the Issue Date declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth in
the preceding sentence with respect to the conversion, exchange or change of
shares of Series A Preferred Stock shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

     

    Section
8.              No
Redemption.  The shares of Series A Preferred Stock shall not
be subject to redemption by the Company.

     

    Section
9.              Rank.  The
Series A Preferred Stock shall rank, with respect to the payment of dividends
and the distribution of assets upon liquidation, dissolution or winding up of
the Company, junior to all other series of Preferred Stock and senior to the
Common Stock.

     

    Section
10.            Amendment.  If
at any time that any shares of Series A Preferred Stock are outstanding, any
proposed amendment to the Certificate of Incorporation (including this
Certificate of Designations) would alter, change or repeal any of the
preferences, powers or special rights given to the Series A Preferred Stock so
as to affect the Series A Preferred Stock adversely, then the holders of the
Series A Preferred Stock shall be entitled to vote separately as a class upon
such amendment, and the affirmative vote of the holders of two-thirds of the
outstanding shares of the Series A Preferred Stock, voting separately as a
class, shall be necessary for the adoption thereof, in addition to such other
vote as may be required by the General Corporation Law of the State of
Delaware.

     

    
      
        
        

      

      
        A-9

        
          

        

      

      
        
        

      

    

     

    Section
11.            Fractional
Shares.  Series A Preferred Stock may not be issued in
fractions of a share, other than fractions which are integral multiples of one
one-thousandth of a share of Series A Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts, and that 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 Preferred
Stock.

    
      
         

      

      
        A-10

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the
Company by Jeffrey M. Jagid, Chief Executive Officer of the Company
on  July 7, 2009.

    

    
      
        	
                    

              
	
                Name:  Jeffrey
      M. Jagid

              
	
                Title:  Chief
      Executive Officer

              

      

    

    
      
         

      

      
        A-11

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    FORM
OF RIGHT CERTIFICATE

     

    
      	
              Certificate
      No. R-___

            	
              ___
      Rights

            

    

    

    NOT
EXERCISABLE AFTER _________________, 200_ OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.01 PER RIGHT AND
TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN
THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID
AND WILL NO LONGER BE TRANSFERABLE.

     

    Right
Certificate

    I.D.
SYSTEMS, 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 July 1, 2009, as the same may be amended from time to time (the “Rights Agreement”),
between I.D. Systems, Inc., a Delaware corporation (the “Company”), and
American Stock Transfer & Trust Company, LLC (the “Rights Agent”), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time,
on the Expiration Date (as such term is defined in the Rights Agreement) at the
office or agency of the Rights Agent designated for such purpose, or of its
successor as Rights Agent, one one-thousandth (each a “Preferred Stock
Unit”) of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $1.00 per share (the “Series A Preferred
Stock”), of the Company, at a purchase price of $19.47 per Preferred
Stock Unit (the “Purchase Price”),
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed.  The number of Rights evidenced by
this Right Certificate (and the number of Preferred Stock Units which may be
purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of July 1, 2009, based on the
Series A Preferred Stock as constituted at such date.  As provided in
the Rights Agreement, the Purchase Price, the number of Preferred Stock Units
(or other securities or property) which may be purchased upon the exercise of
the Rights and the number of Rights evidenced by this Right Certificate are
subject to modification and adjustment upon the happening of certain
events.

     

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

     

    This
Right 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 Right
Certificates.  Copies of the Rights Agreement are on file at the
principal executive offices of the Company and the above-mentioned office or
agency of the Rights Agent.  The Company will mail to the holder of
this Right Certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor.

     

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

     

    
      
        
        

      

      
        B-2

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    No holder
of this Right Certificate, as such, shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Series A Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise or exchange 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 Right
Certificate shall have been exercised or exchanged as provided in the Rights
Agreement.

     

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

    
      
         

      

      
        B-3

        
          

        

      

      
         

      

    

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

    

    
      
        
          
            	
                    ATTEST:

                  	 	
                    I.D.
      SYSTEMS, INC.

                  
	 
      	 	 
      
	
                    By:

                  	
                       

                  	 	
                    By:

                  	
                       

                  

          

        

      

    

    

    Countersigned:

    
       

      AMERICAN
STOCK TRANSFER & TRUST COMPANY, LLC, as Rights Agent

    

    
      
        
          
            	 
      
	
                    By:

                  	 
      
	 
      	
                    Authorized
      Signatory

                  

          

        

      

    

    
      
         

      

      
        B-4

        
          

        

      

      
         

      

    

    Form
of Reverse Side of Right Certificate

    

    FORM OF
ASSIGNMENT

    

    (To
be executed by the registered holder if such

    Holder
desires to transfer the Right Certificate)

     

    FOR VALUE
RECEIVED ___________________________ hereby sells, assigns and transfers unto
__________________________________________________________________.

     

    _____________________________

    

    (Please
print name and address of

    transferee)

    _____________________________

     

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

     

    Dated:
________________, ____

    

    
      
        	
                   

              
	
                Signature

              

      

    

     

    Signature
Guaranteed:

     

    Signatures
must be guaranteed by a bank, trust company, broker, dealer or other eligible
institution participating in a recognized signature guarantee medallion
program.

     

    The
undersigned hereby certifies that the Rights evidenced by this Right Certificate
are not beneficially owned by, were not acquired by the undersigned from, and
are not being sold, assigned or transferred to, an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights
Agreement).

     

    
      
        	
                   

              
	
                Signature

              

      

    

    
      
         

      

      
        B-5

        
          

        

      

      
         

      

    

    Form
of Reverse Side of Right Certificate - continued

     

    FORM OF ELECTION TO
PURCHASE

    (To
be executed if holder desires to exercise

    Rights
represented by the Rights Certificate)

     

    To the
Rights Agent:

     

    The
undersigned hereby irrevocably elects to exercise _________ Rights represented
by this Right Certificate to purchase the shares of Series A Junior
Participating Preferred Stock (or other securities or property) issuable upon
the exercise of such Rights and requests that certificates for such shares of
Series A Junior Participating Preferred Stock (or such other securities) be
issued in the name of:

    

    
      
        	
                   

              
	
                (Please
      print name and address)

              

      

    

    

    
      
        	
                    

              

      

    

     

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

     

    
      
        
          
            
              
                	
                        Please
      insert social security

                        or
      other identifying number:

                      	 
      
	 
      	 
      
	 
      
	 
      	 
      
	
                        (Please
      print name and address)

                      
	 
      	 
      
	
                            

                      

              

            

          

        

      

    

    Dated:
_____________ __, ____

    

    

    
      
        	
                    

              
	
                Signature

              
	
                (Signature must conform to
      holder specified on Right
Certificate)

              

      

    

     

    
      
        
        

      

      
        B-6

        
          

        

      

      
        
        

      

    

     

    Signature
Guaranteed:

     

    Signatures
must be guaranteed by a bank, trust company, broker, dealer or other eligible
institution participating in a recognized signature guarantee medallion
program.

     

    The
undersigned hereby certifies that the Rights evidenced by this Right Certificate
are not beneficially owned by, were not acquired by the undersigned from, and
are not being sold, assigned or transferred to, an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights
Agreement).

    

    
      
        	
                   

              
	
                Signature

              

      

    

    
      
         

      

      
        B-7

        
          

        

      

      
         

      

    

    Form
of Reverse Side of Right Certificate - continued

     

    NOTICE

     

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

     

    In the
event the certification set forth above in the Form of Assignment or the Form of
Election to Purchase, as the case may be, is not completed, such Assignment or
Election to Purchase will not be honored.

    
      
         

      

      
        B-8

        
          

        

      

      
         

      

    

    EXHIBIT
C

     

    UNDER
CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN
THE RIGHTS AGREEMENT) OR ANY ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON (AS
DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME
NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

     

    SUMMARY
OF RIGHTS TO PURCHASE

    Shares
of Series A Junior Participating Preferred Stock of I.D. Systems,
Inc.

     

    On June
29, 2009, the Board of Directors of I.D. Systems, Inc., a Delaware corporation
(the “Company”), declared a
dividend of one preferred stock purchase right (a “Right”) for each
outstanding share of common stock, par value $0.01 per share, of the Company
(the “Common
Stock”). The dividend is payable on July 13, 2009, to the stockholders of
record as of the close of business on July 13, 2009 (the “Record Date”). Each
Right entitles the registered holder to purchase from the Company one
one-thousandth (each a “Preferred Stock
Unit”) of a share of Series A Junior Participating Preferred Stock, par
value $1.00 per share (the “Series A Preferred
Stock”), of the Company at a price of $19.47 per Preferred Stock Unit (as
the same may be adjusted, the “Purchase Price”). The
description and terms of the Rights are set forth in a Rights Agreement, dated
as of July 1, 2009 (as the same may be amended from time to time, the “Rights Agreement”),
between the Company and American Stock Transfer & Trust Company, LLC, as
Rights Agent (the “Rights
Agent”).

     

    
      
        
        

      

      
        C-1

        
          

        

      

      
        
        

      

    

     

    Until the
close of business on the earlier of (i) the tenth day after the first date of a
public announcement that a person (other than an Exempted Entity (as defined
below) or Grandfathered Stockholder (as defined below)) or group of affiliated
or associated persons becomes an Acquiring Person (as defined below) or (ii) the
tenth business day (or such later date as may be determined by action of the
Board of Directors prior to such time as any person or group of affiliated or
associated persons becomes an Acquiring Person) after the date of commencement
of, or the first public announcement of an intention to commence, a tender offer
or exchange offer the consummation of which would result in a person (other than
an Exempted Entity) or group of affiliated or associated persons becoming an
Acquiring Person (the earlier of such dates being herein referred to as the
“Distribution
Date”), the Rights will be evidenced by the shares of Common Stock
represented by certificates for Common Stock outstanding as of the Record Date,
together with a copy of the summary of rights disseminated in connection with
the original dividend of Rights. Except in certain situations, a person or group
of affiliated or associated persons becomes an “Acquiring Person” upon acquiring
beneficial ownership of 15% or more of the shares of Common Stock then
outstanding.

     

    “Exempted Entity”
shall mean (1) the Company, or (2) any Subsidiary (as defined below) of the
Company (in the case of subclauses (1) and (2) including, without limitation, in
its fiduciary capacity), or (3) any employee benefit plan of the Company or of
any Subsidiary of the Company or (4) any entity or trustee holding Common Stock
for or pursuant to the terms of any such plan or for the purpose of funding any
such plan or funding other employee benefits for employees of the Company or of
any Subsidiary of the Company.

     

    “Grandfathered
Stockholder” shall mean any Person that, as of the date hereof or prior
to the first public announcement of the Rights Agreement, is or becomes the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding;
provided, however, that, at any time, any Grandfathered Stockholder may be
deemed an "Acquiring Person" by the affirmative vote of a simple majority of the
Board of Directors of the Company plus one.

     

    
      
        
        

      

      
        C-2

        
          

        

      

      
        
        

      

    

     

    The
Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferable only in
connection with the transfer of Common Stock. Until the Distribution Date (or
earlier expiration of the Rights), new Common Stock certificates issued after
the Record Date upon transfer or new issuances of Common Stock will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for shares of Common Stock outstanding as of the
Record Date, even without a notation incorporating the Rights Agreement by
reference or a copy of this Summary of Rights, will also constitute the transfer
of the Rights associated with the shares of Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (“Right Certificates”)
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights.

     

    The
Rights are not exercisable until the Distribution Date. Thereafter, a registered
holder of any Right Certificate may, subject to the terms of the Rights
Agreement, exercise the Rights evidenced thereby in whole or in part upon
surrender of the Right Certificate to the Rights Agent, together with payment of
the Purchase Price for each Preferred Stock Unit (or other securities, cash or
assets, as the case may be) as to which the Rights are exercised, at any time
which is both after the Distribution Date and prior to the earliest to occur of
(i) the close of business on the Sunset Date (as defined in the Rights
Agreement); (ii) the time at which the Rights are redeemed as provided in the
Rights Agreement; or (iii) the time at which such Rights are exchanged as
provided in the Rights Agreement (such date, the “Expiration
Date”).

     

    
      
        
        

      

      
        C-3

        
          

        

      

      
        
        

      

    

     

    The
Purchase Price payable, and the number of shares of Series A Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Series A
Preferred Stock, (ii) upon the grant to holders of the Series A Preferred Stock
of certain rights or warrants to subscribe for or purchase Series A Preferred
Stock at a price, or securities convertible into Series A Preferred Stock with a
conversion price, less than the then-current market price of the Series A
Preferred Stock or (iii) upon the distribution to holders of the Series A
Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends or dividends payable in Series A Preferred Stock) or of
subscription rights or warrants (other than those referred to
above).

     

    The
Rights are also subject to adjustment in the event of a stock dividend on the
Common Stock payable in shares of Common Stock or subdivisions, consolidations
or combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.

     

    Shares of
Series A Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Series A Preferred Stock will be entitled, when, as
and if declared, to a minimum preferential quarterly dividend payment of the
greater of (a) $1.00 per share and (b) an amount equal to 1,000 times the
dividend declared per share of Common Stock. In the event of liquidation,
dissolution or winding up of the Company, the holders of the Series A Preferred
Stock will be entitled to a minimum preferential liquidation payment of the
greater of (a) $1,000 per share (plus any accrued but unpaid dividends), and (b)
an amount equal to 1,000 times the payment made per share of Common Stock. Each
share of Series A Preferred Stock will have 1,000 votes, voting together with
the Common Stock. Finally, in the event of any merger, consolidation or other
transaction in which outstanding shares of Common Stock are converted or
exchanged, each share of Series A Preferred Stock will be entitled to receive
1,000 times the amount received per share of Common Stock. These rights are
protected by customary antidilution provisions.

     

    
      
        
        

      

      
        C-4

        
          

        

      

      
        
        

      

    

     

    Because
of the nature of the Series A Preferred Stock’s dividend, liquidation and voting
rights, the value of the Preferred Stock Unit purchasable upon exercise of each
Right should approximate the value of one share of Common Stock.

     

    In the
event that any person or group of affiliated or associated persons becomes an
Acquiring Person, each holder of a Right, other than Rights beneficially owned
by the Acquiring Person (which will thereupon become void), will thereafter have
the right to receive upon exercise of a Right and payment of the Purchase Price,
that number of shares of Common Stock having a market value of two times the
Purchase Price.

     

    In the
event that, after a person or group has become an Acquiring Person, the Company
is acquired in a merger or other business combination transaction or 50% or more
of its consolidated assets or earning power are sold, proper provision will be
made so that each holder of a Right (other than Rights beneficially owned by an
Acquiring Person which will have become void) will thereafter have the right to
receive, upon the exercise thereof at the then-current exercise price of the
Right, that number of shares of common stock of the person with whom the Company
has engaged in the foregoing transaction (or its parent), which number of shares
at the time of such transaction will have a market value of two times the
Purchase Price.

     

    At any
time after any person or group becomes an Acquiring Person and prior to the
earlier of the acquisition by such Acquiring Person of 50% or more of the
outstanding shares of Common Stock or the occurrence of one of the events
described in the prior paragraphs, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such Acquiring Person which will
have become void), in whole or in part, at an exchange ratio of one share of
Common Stock, or a fractional share of Series A Preferred Stock (or of a share
of a similar class or series of the Company’s preferred stock having equivalent
rights, preferences and privileges) of equivalent value, per Right (subject to
adjustment).

     

    
      
        
        

      

      
        C-5

        
          

        

      

      
        
        

      

    

     

    With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Purchase
Price. No fractional shares of Series A Preferred Stock or Common Stock will be
issued (other than fractions which are integral multiples of one one-thousandth
of a share of Series A Preferred Stock, which may, at the election of the
Company, be evidenced by depositary receipts) and in lieu thereof, an adjustment
in cash will be made based on the market price of the Series A Preferred Stock
or Common Stock on the last trading day prior to the date of
exercise.

     

    At any
time prior to the time an Acquiring Person becomes such, the Board of Directors
of the Company may redeem the Rights in whole, but not in part, at a price of
$0.01 per Right (the “Redemption Price”)
payable, at the option of the Company, in cash, shares of Common Stock or such
other form of consideration as the Board of Directors shall determine. The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.

     

    For so
long as the Rights are then redeemable, the Company may, except with respect to
the Redemption Price, amend the Rights Agreement in any manner. After the Rights
are no longer redeemable, the Company may, except with respect to the Redemption
Price, amend the Rights Agreement in any manner that does not adversely affect
the interests of holders of the Rights.

     

    Until a
Right is exercised or exchanged, 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.

     

    A copy of
the Rights Agreement has been filed with the Securities and Exchange Commission
as an Exhibit to a Current Report on Form 8-K dated July 1, 2009. 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, as the same may
be amended from time to time, which is hereby incorporated herein by
reference.

    
      
         

      

      
        C-6EXHIBIT
10.1

      

      PROMISSORY
NOTE

      

      
        
          
            
              	
                      Borrower:   

                    	
                      ART’S-WAY
      MANUFACTURING COMPANY, INC.

                    	
                      Lender:  

                    	
                      WEST
      BANK

                    
	 
      	
                      (TIN:  ____________)

                    	 
      	
                      MAIN
      BANK

                    
	 
      	
                      5556
      HIGHWAY 9 WEST, BOX 288

                    	 
      	
                      1601
      22ND STREET

                    
	 
      	
                      ARMSTRONG,
      IA 50514

                    	 
      	
                      WEST
      DES MOINES, IA 50266

                    
	 
      	 
      	 
      	
                      (515)
      222-2300

                    

            

          

        

      

       

        
          

        

      

      
         

        
          	

                  Principal
      Amount:  $4,500,000.00 

                	
                   Date of Note:  April
      30, 2009

                

        

      

      

      PROMISE
TO PAY.  ART’S-WAY MANUFACTURING COMPANY, INC.  (“Borrower”)
promises to pay to WEST BANK (“Lender”), or order, in lawful money of the United
States of America, the principal amount of Four Million Five Hundred Thousand
& 00/100 Dollars ($4,500,000.00) or so much as may be outstanding, together
with interest on the unpaid outstanding principal balance of each
advance.  Interest shall be calculated from the date of each advance
until repayment of each advance.

      

      PAYMENT.  Borrower
will pay this loan in one payment of all outstanding principal plus all accrued
unpaid interest on June 30, 2009.  Unless otherwise agreed or required
by applicable law, payments will be applied first to any accrued unpaid
interest; then to principal; then to any unpaid collection costs; and then to
any late charges.  Borrower will pay Lender at Lender’s address shown
above or at such other place as Lender may designate in writing.

      

      VARIABLE INTEREST
RATE.  The interest rate on this Note is subject to change from
time to time based on changes in an index which is Lender’s Prime Rate (the
“Index”).  This is the rate Lender charges, or would charge, on 90-day
unsecured loans to the most creditworthy corporate customers.  This
rate may or may not be the lowest rate available from Lender at any given
time.  Lender will tell Borrower the current Index rate upon
Borrower’s request.  The interest rate change will not occur more
often than each DAY.  Borrower understands that Lender may make loans
based on other rates as well.  The Index currently is 3.250% per
annum.  The interest rate to be applied to the unpaid principal
balance of this Note will be calculated as described in the “INTEREST
CALCULATION METHOD” paragraph using a rate equal to the Index, adjusted if
necessary for any minimum and maximum rate limitations described below,
resulting in an initial rate of 4.000% per annum based on a year of 360
days.  NOTICE:  Under no circumstances will the interest
rate on this Note be less than 4.000% per annum or more than the maximum rate
allowed by applicable law.

      

      INTEREST
CALCULATION METHOD.  Interest on this Note is computed on a 365/360
basis; that is, by applying the ratio of the interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding.  All interest
payable under this Note is computed using this method.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      
        
          	 
      	
                  PROMISSORY
      NOTE

                	 
      
	
                  Loan
      No: ____________

                	
                  (Continued)

                	
                  Page
      2

                

        

      

       

        
          

        

      

       

      PREPAYMENT; MINIMUM INTEREST
CHARGE.  In any event, even upon full prepayment of this Note,
Borrower understands that Lender is entitled to a minimum interest charge of
$7.50.  Other than Borrower’s obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due.  Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower’s obligation to continue
to make payments.  Rather, early payments will reduce the principal
balance due.  Borrower agrees not to send Lender payments marked “paid
in full”, “without recourse”, or similar language.  If Borrower sends
such a payment, Lender may accept it without losing any of Lender’s rights under
this Note, and Borrower will remain obligated to pay any further amount owed to
Lender.  All written communications concerning disputed amounts,
including any check or other payment instrument that indicates that the payment
constitutes “payment in full” of the amount owed or that is tendered with other
conditions or limitations or as full satisfaction of a disputed amount must be
mailed or delivered to:  WEST BANK, MAIN BANK, 1601 22ND STREET, WEST
DES MOINES, IA 50266.

      

      LATE CHARGE.  If a
payment is 11 days or more late, Borrower will be charged $15.00.

      

      INTEREST AFTER
DEFAULT.  Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased by adding a 2.000
percentage point margin (“Default Rate Margin”).  The Default Rate
Margin shall also apply to each succeeding interest rate change that would have
applied had there been no default.  However, in no event will the
interest rate exceed the maximum interest rate limitations under applicable
law.

      

      DEFAULT.  Each of
the following shall constitute an event of default (“Event of Default”) under
this Note:

      

      Payment
Default.  Borrower fails to make any payment when due under
this Note.

      

      Other
Defaults.  Borrower fails to comply with or to perform any
other term, obligation, covenant or condition contained in this Note or in any
of the related documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.

      

      Default in Favor of Third
Parties.  Borrower or any Grantor defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Borrower’s property or Borrower’s ability to repay this Note or
perform Borrower’s obligations under this Note or any of the related
documents.

      

      False
Statements.  Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower’s behalf under this Note or the
related documents is false or misleading in any material respect, either now or
at the time made or furnished or becomes false or misleading at any time
thereafter.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      
        
          	 
      	
                  PROMISSORY
      NOTE

                	 
      
	
                  Loan
      No: ____________

                	
                  (Continued)

                	
                  Page
      3

                

        

      

      
         

        
          

        

      Insolvency.  The
dissolution or termination of Borrower’s existence as a going business, the
insolvency of Borrower, the appointment of a receiver for any part of Borrower’s
property, any assignment for the benefit of creditors, any type of creditor
workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.

      

      Creditor or Forfeiture
Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the loan.  This includes a garnishment of any
of Borrower’s accounts, including deposit accounts, with
Lender.  However, this Event of Default shall not apply if there is a
good faith dispute by Borrower as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding and if Borrower
gives Lender written notice of the creditor or forfeiture proceeding and
deposits with Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion, as being
an adequate reserve or bond for the dispute.

      

      Events Affecting
Guarantor.  Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any guaranty of the indebtedness evidenced by this Note.

      

      Change in
Ownership.  Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.

      

      Adverse Change.  A
material adverse change occurs in Borrower’s financial condition, or Lender
believes the prospect of payment or performance of this Note is
impaired.

      

      Insecurity.  Lender
in good faith believes itself insecure.

      

      Cure Provisions.  If
any default, other than a default in payment is curable and if Borrower has not
been given a notice of a breach of the same provision of this Note within the
preceding twelve (12) months, it may be cured if Borrower, after receiving
written notice from Lender demanding cure of such default:  (1) cures
the default within twenty (20) days; or (2) if the cure requires more than
twenty (20) days, immediately initiates steps which Lender deems in Lender’s
sole discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

      

      LENDER’S
RIGHTS.  Upon default, Lender may declare the entire unpaid
principal balance under this Note and all accrued unpaid interest immediately
due, and then Borrower will pay that amount.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      
        
          	 
      	
                  PROMISSORY
      NOTE

                	 
      
	
                  Loan
      No: ____________

                	
                  (Continued)

                	
                  Page
      4

                

        

      

      
         

        
          

        

      ATTORNEYS’ FEES;
EXPENSES.  Lender may hire or pay someone else to help collect
this Note if Borrower does not pay.  Borrower will pay Lender that
amount.  This includes, subject to any limits under applicable law,
Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a
lawsuit, including without limitation all attorneys’ fees and legal expenses for
bankruptcy proceedings (Including efforts to modify or vacate any automatic stay
or injunction), and appeals.  If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all other sums provided
by law.

      

      GOVERNING
LAW.  This Note will be governed by federal law applicable to Lender
and, to the extent not preempted by federal law, the laws of the State of Iowa
without regard to its conflicts of law provisions.  This Note has been
accepted by Lender in the State of Iowa.

      

      CHOICE OF VENUE.  If
there is a lawsuit, Borrower agrees upon Lender’s request to submit to the
jurisdiction of the courts of POLK County, State of Iowa.

      

      RIGHT OF SETOFF.  To
the extent permitted by applicable law, Lender reserves a right of setoff in all
Borrower’s accounts with Lender (whether checking, savings, or some other
account).  This includes all accounts Borrower holds jointly with
someone else and all accounts Borrower may open in the
future.  However, this does not include any IRA or Keogh accounts, or
any trust accounts for which setoff would be prohibited by
law.  Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the indebtedness against
any and all such accounts, and, at Lender’s option, to administratively freeze
all such accounts to allow Lender to protect Lender’s charge and setoff rights
provided in this paragraph.

      

      COLLATERAL.  Borrower
acknowledges this Note is secured by REAL ESTATE MORTGAGE DATED 04/25/03;
SECURITY AGREEMENT DATED 04/25/03; UNLIMITED SECURED GUARANTEES OF ART’S-WAY
VESSELS, INC. AND ART’S-WAY SCIENTIFIC, INC.

      

      LINE OF
CREDIT.  This Note evidences a revolving line of
credit.  Advances under this Note, as well as directions for payment
from Borrower’s accounts, may be requested orally or in writing by Borrower or
by an authorized person.  Lender may, but need not, require that all
oral requests be confirmed in writing.  Borrower agrees to be liable
for all sums either:  (A) advanced in accordance with the instructions
of an authorized person or (B) credited to any of Borrower’s accounts with
Lender.  The unpaid principal balance owing on this Note at any time
may be evidenced by endorsements on this Note or by Lender’s internal records,
including daily computer print-outs.  Lender will have no obligation
to advance funds under this Note if:  (A) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (B) Borrower or any guarantor ceases
doing business or is insolvent, (C) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor’s guarantee of this
Note or any other loan with Lender, (D) Borrower has applied funds provided
pursuant to this Note for purposes other than those authorized by Lender; or (E)
Lender in good faith believes itself insecure.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      
        
          	 
      	
                  PROMISSORY
      NOTE

                	 
      
	
                  Loan
      No: ____________

                	
                  (Continued)

                	
                  Page
      5

                

        

      

      
         

        
          

        

      PURPOSE OF
LOAN.  The specific purpose of this loan is:  WORKING
CAPITAL.

      

      SUCCESSOR
INTERESTS.  The terms of this Note shall be binding upon
Borrower, and upon Borrower’s heirs, personal representatives, successors and
assigns, and shall inure to the benefit of Lender and its successors and
assigns.

      

      GENERAL
PROVISIONS.  If any part of this Note cannot be enforced, this
fact will not affect the rest of the Note.  Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing
them.  Borrower and any other person who signs, guarantees or endorses
this Note, to the extent allowed by law, waive presentment, demand for payment,
and notice of dishonor.  Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall be released
from liability.  All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect Lender’s
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone.  All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is
made.  The obligations under this Note are joint and
several.

      

      PRIOR
TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  BORROWER
AGREES TO THE TERMS OF THE NOTE.

      

      BORROWER
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE AND ALL OTHER
DOCUMENTS RELATING TO THIS DEBT.

      

      BORROWER:

      

      ART’S-WAY
MANUFACTURING COMPANY, INC.

      

      
        
          
            
              	
                      By:

                    	
                      /s/
      Carrie L. Majeski

                    
	 
      	
                      CARRIE L. MAJESKI, PRESIDENT of
  ART’S-WAY

                    
	 
      	
                      MANUFACTURING
      COMPANY, INC.

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