Document:

Exhibit 4.1

 

RIGHTS
AGREEMENT

 

between

 

iBASIS,
INC.

 

and

 

COMPUTERSHARE
TRUST COMPANY, N.A.,

as Rights Agent

 

Dated
as of July 30, 2009

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.
  Certain Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2.
  Appointment of the Rights Agent

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 3.
  Issuance of Rights Certificates

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 4.
  Form of Rights Certificates

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 5.
  Countersignature and Registration

  	
   

  	
  8

  
	
   

  	
   

  	
   

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

  	
   

  	
  8

  
	
   

  	
   

  	
   

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

  	
   

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 8.
  Cancellation and Destruction of Rights Certificates

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 9.
  Reservation and Availability of Capital Stock

  	
   

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 10.
  Preferred Shares Record Date

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 11.
  Adjustment of Purchase Price, Number and Kind of Shares, or Number of Rights

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 12. Certificate of Adjusted
  Purchase Price or Number of Shares

  	
   

  	
  20

  
	
   

  	
   

  	
   

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

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 14.
  Fractional Rights and Fractional Shares

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 15.
  Rights of Action

  	
   

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 16.
  Agreement of Rights Holders

  	
   

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 17. Rights Certificate Holder
  Not Deemed a Stockholder

  	
   

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 18.
  Concerning the Rights Agent

  	
   

  	
  25

  
	
   

  	
   

  	
   

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

  	
   

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 20. Duties of the Rights
  Agent

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 21.
  Change of the Rights Agent

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 22. Issuance of New Rights Certificates

  	
   

  	
  28

  

 

i

 

Table
of Contents

(Continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 23.
  Redemption and Termination

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 24.
  Exchange of Rights

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 25.
  Notice of Certain Events

  	
   

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 26.
  Notices

  	
   

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 27.
  Supplements and Amendments

  	
   

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 28.
  Successors

  	
   

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 29.
  Determinations and Actions by the Board of Directors

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 30.
  Benefits of this Agreement

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 31.
  Severability

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 32.
  Governing Law

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 33.
  Counterparts; Facsimiles and PDFs

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 34.
  Descriptive Headings

  	
   

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 35. Force Majeure

  	
   

  	
  34

  

 

EXHIBITS

 

Exhibit A – Form of Certificate of Designation,
Preferences, and Rights

 

Exhibit B – Form of Rights Certificate

 

Exhibit C – Form of Summary of Rights to
Purchase Preferred Stock

 

ii

 

RIGHTS AGREEMENT

 

RIGHTS
AGREEMENT, dated as of July 30, 2009 (this “Agreement”), between
iBasis, Inc., a Delaware corporation (the “Company”), and
Computershare Trust Company, N.A. (the “Rights Agent”).

 

RECITALS

 

WHEREAS,
on July 30, 2009 (the “Rights Dividend Declaration Date”), the
Board of Directors of the Company authorized and declared a dividend
distribution of one right (each, a “Right”) for each Common Share (as
hereinafter defined) outstanding at the Close of Business on August 10, 2009
(the “Record Date”), and further authorized and directed the issuance of
one Right (as such number may hereinafter be adjusted pursuant hereto) with
respect to each Common Share issued between the Record Date (whether originally
issued or delivered from the Company’s treasury) and, except as otherwise
provided in Section 22, the earlier of the Distribution Date and
the Expiration Date (as such terms are hereinafter defined), each Right
initially representing the right to purchase one one-hundredth of a Preferred
Share (as hereinafter defined), upon the terms and subject to the conditions
hereinafter set forth.

 

AGREEMENT

 

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 Agreement, the following terms have the meanings indicated:

 

(a)                                  “Acquiring
Person” shall mean any Person who or which, together with all Affiliates
and Associates of such Person, shall be the Beneficial Owner of 15% or more of
the Common Shares then outstanding, but shall not include an Exempt
Person.  Notwithstanding the foregoing:

 

(i)            any Person who
becomes the Beneficial Owner of 15% or more of the Common Shares then
outstanding as a result of a reduction in the number of Common Shares
outstanding due to the repurchase of Common Shares by the Company shall not be
deemed an “Acquiring Person” unless and until such Person acquires Beneficial
Ownership of any additional Common Shares (other than as a result of a stock
dividend, stock split, or similar transaction effected by the Company in which
all registered holders of Common Shares are treated substantially equally)
while the Beneficial Owner of 15% or more of the Common Shares then
outstanding;

 

(ii)           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, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person is no longer the Beneficial Owner of 15% or more of the Common Shares
then 

 

 

outstanding,
then such Person shall not be deemed to be or ever to have been an “Acquiring
Person” for any purposes of this Agreement as a result of such inadvertent
acquisition; and

 

(iii)          if a Person would
otherwise be deemed an “Acquiring Person” upon the execution of this Agreement,
such Person (herein referred to as a “Grandfathered Stockholder”) shall
not be deemed an “Acquiring Person” for purposes of this Agreement unless and
until, subject to Section 1(a)(i) and Section 1(a)(ii) above,
such Grandfathered Stockholder acquires Beneficial Ownership of any additional
Common Shares (other than as a result of a stock dividend, stock split, or
similar transaction effected by the Company in which all registered holders of
Common Shares are treated substantially equally) after execution of this
Agreement and while the Beneficial Owner of 15% or more of the Common Shares
then outstanding, in which case such Person shall no longer be deemed a
Grandfathered Stockholder and shall be deemed an “Acquiring Person.”

 

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

 

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

 

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

 

(e)                                  “Agreement” shall have the meaning set forth in the preamble hereto.

 

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

 

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

 

(ii)           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) or upon the exercise of conversion
rights, exchange rights, rights, warrants, or options, or otherwise; provided,
however, that a Person shall not be deemed the “Beneficial Owner” of, to
have “Beneficial Ownership” of, or to “beneficially own,” (A) securities
tendered pursuant to a tender or exchange offer made by or on behalf of such
Person or any of such Person’s Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, (B) securities issuable
upon exercise of Rights at any time prior to the occurrence of a Triggering
Event (as hereinafter defined), or (C) securities issuable upon exercise
of Rights from and after the occurrence of a Triggering Event, which 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 (the “Original Rights”) or pursuant to Section 11(i) or
Section 11(p) hereof in connection with an adjustment made
with respect to any Original Rights;

 

2

 

(iii)          which such Person
or any of such Person’s Affiliates or Associates, directly
or indirectly, has the right to vote or dispose of, including pursuant to any
agreement, arrangement, or understanding (whether or not in writing); provided,
however, that a Person shall not be deemed the “Beneficial Owner” of, to
have “Beneficial Ownership” of, or to “beneficially own,” any security as a
result of an agreement, arrangement, or understanding (whether or not in
writing) to vote such security if such agreement, arrangement, or understanding:  (A) arises solely from a revocable proxy
(as such term is defined in Regulation 14A under the Exchange Act) given
in response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, including the disclosure requirements of
Schedule 14A thereunder, and (B) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or

 

(iv)          which are
beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of such Person’s
Affiliates or Associates) has any agreement, arrangement, or understanding
(whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the
proviso to Section 1(f)(iii)), or disposing of any voting
securities of the Company;

 

provided, however,
that nothing in this Section 1(f) shall cause a Person engaged
in business as an underwriter of securities to be the “Beneficial Owner” of, to have “Beneficial Ownership” of, or to “beneficially own,”
any securities acquired or which such Person has the right to acquire through
such Person’s participation in good faith in a firm commitment underwriting
until the expiration of 40 days after the date of such acquisition, and then
only if such securities continue to be owned by such Person at such expiration
of 40 days; and provided  further, however, that any
stockholder of the Company, with Affiliate(s), Associate(s), or other Person(s) who
may be deemed representatives of it serving as director(s) of the Company,
shall not be deemed to beneficially own securities
held by such Persons serving as director(s) of the Company to the extent
such securities were issued by the Company to such director(s) in the
ordinary course of business as compensation for their services as director(s) of
the Company.

 

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

 

(h)                                 “Certificate
of Incorporation” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

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

 

(j)                                     “Common
Shares” shall mean the shares of common stock, par value $0.001 per share, of the Company, except that “Common
Shares” when used with reference to any Person other than the Company shall
mean the capital stock of such Person with the greatest voting power, or the
equity securities or other equity interests having power to control or direct
the management of such Person.

 

3

 

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

 

(l)            “Company”
shall have the meaning set forth in the parties clause at the beginning of this
Agreement, except as otherwise provided in Section 13(a) hereof.

 

(m)          “Current Market
Price” shall have the meaning set forth in Section 11(d) hereof.

 

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

 

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

 

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

 

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

 

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

 

(s)           “Exempt Person”
shall mean (i) the Company, (ii) any Subsidiary of the Company, (iii) any
employee benefit plan of the Company or of any Subsidiary of the Company, or (iv) any
Person or entity organized, appointed, or established by the Company or any
Subsidiary of the Company for or pursuant to the terms of any such employee
benefit plan.

 

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

 

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

 

(v)           “Grandfathered
Stockholder” shall have the meaning set forth in Section 1(a)(iii) hereof.

 

(w)          “Original Rights”
shall have the meaning set forth in Section 1(f)(ii) hereof.

 

(x)            “Ownership
Statement” shall have the meaning set forth in Section 3(a) hereof.

 

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

 

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

 

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

 

4

 

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

 

(cc)         “Record Date”
shall have the meaning set forth in the recital to this Agreement.

 

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

 

(ee)         “Right” shall
have the meaning set forth in the recital to this Agreement.

 

(ff)           “Rights Agent”
shall have the meaning set forth in the parties clause at the beginning of this
Agreement, except as otherwise provided in Section 19 and Section 21
hereof.

 

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

 

(hh)         “Rights Dividend
Declaration Date” shall have the meaning set forth in the recital to this
Agreement.

 

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

 

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

 

(kk)         “Section 13
Event” shall mean any event described in Section 13(a)(i), Section 13(a)(ii),
or Section 13(a)(iii) hereof.

 

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

 

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

 

(nn)         “Subsidiary”
shall mean, with reference to any Person, any
corporation or other entity of which an amount of voting securities (or other
ownership interests having ordinary voting power) sufficient to elect or
appoint at least a majority of the directors (or other persons performing
similar functions) of such corporation or other entity is beneficially owned,
directly or indirectly, by such Person, or otherwise controlled by such Person.

 

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

 

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

 

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

 

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

 

(ss)         “Trust” shall
have the meaning set forth in Section 24(f) hereof.

 

(tt)           “Trust Agreement”
shall have the meaning set forth in Section 24(f) hereof.

 

5

 

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

 

Section 3.   Issuance of Rights Certificates.

 

(a)           Until the earliest
of (i) the Close of Business on the tenth day after the Shares Acquisition
Date (or, if the tenth day after the Shares Acquisition Date occurs before the
Record Date, the close of business on the Record Date), (ii) the
Close of Business on the tenth Business Day (or such later date as the Board of
Directors of the Company may determine prior to such time as any Person becomes
an Acquiring Person) after the date of commencement by or on behalf of any
Person (other than an Exempt Person) of a tender offer or exchange offer, if
such tender offer or exchange offer has not commenced as of the date hereof,
and upon consummation thereof, such Person would become an Acquiring Person and
(iii) immediately prior to the acceptance for payment of the Common Shares
tendered pursuant to any tender offer or exchange offer commenced by or on
behalf of any Person (other than an Exempt Person) prior to, and pending as of,
the date hereof, if upon consummation thereof, such Person would become an
Acquiring Person (the earliest of (i), (ii) and (iii) being herein
referred to as the “Distribution Date”), (A) the
Rights will be evidenced (subject to Section 3(b) and Section 3(c) hereof)
by the certificates for the Common Shares registered in the names of the
holders of the Common Shares (which certificates for Common Shares shall be
deemed also to be certificates for Rights) or by the current ownership
statement issued with respect to uncertificated Common Shares in lieu of such a
certificate (an “Ownership Statement”) (which Ownership Statement shall
be deemed to be also a certificate for Rights) and not by separate
certificates, and the registered holders of the Common Shares shall also be the
registered holders of the associated Rights, and (B) the Rights will be
transferable only in connection with the transfer of the underlying Common
Shares (including a transfer to the Company); provided, however,
that if a tender or exchange offer is terminated prior to the occurrence of a
Distribution Date, then no Distribution Date shall occur as a result of such
tender or exchange offer.  As soon as
practicable after the Distribution Date, the Rights Agent will send, in
accordance with Section 26 hereof, to each record holder of the
Common Shares as of the Close of Business on the Distribution Date (other than
an Acquiring Person or any Associate or Affiliate of an Acquiring Person), one
or more rights certificates, in substantially the form of Exhibit B hereto (the “Rights
Certificates”), evidencing one Right for each Common Share so held, subject
to adjustment as provided herein.  In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11(i) or Section 11(p) hereof,
at the time of distribution of the Rights Certificates, the Company shall not
be required to issue Rights Certificates evidencing fractional Rights but may,
in lieu thereof, make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights
Certificates evidencing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. 
As of and after the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates.

 

(b)           As promptly as
practicable following the Record Date, the Company will send a copy of a
Summary of Rights, in substantially the form attached
hereto as Exhibit C (the 

 

6

 

“Summary of Rights”), by first class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company as the address at which such holder has consented to receive
notice.  With respect to Common Shares outstanding
as of the Record Date, until the Distribution Date, the Rights associated with
such shares will be evidenced by the certificate or Ownership Statement for
such Common Shares registered in the names of the holders thereof, in each case
together with the Summary of Rights. 
Until the Distribution Date (or, if earlier, the Expiration Date), the
surrender for transfer of any certificate or Ownership Statement for Common
Shares 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 Shares represented by such certificate or Ownership Statement.

 

(c)           Rights shall be
issued in respect of all Common Shares that are issued (whether originally
issued or from the Company’s treasury) after the Record Date but prior to the
earlier of the Distribution Date and the Expiration Date and, to the extent
provided in Section 22 hereof, in respect of Common Shares issued
after the Distribution Date. 
Certificates evidencing such Common Shares and Ownership Statements
issued after the Record Date but prior to the earlier of the Distribution Date
and the Expiration Date shall have printed or otherwise affixed to them the
following legend:

 

This [certificate/statement] also evidences and entitles the registered holder hereof to certain Rights as set forth in the
Rights Agreement between iBasis, Inc. (the “Company”) and the
Rights Agent thereunder dated as of July 30, 2009 (the “Rights Agreement”),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Company.  Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this [certificate/statement].  The Company
will mail to the registered holder of this [certificate/statement] a copy of the Rights Agreement, as in effect on the date of mailing,
without charge, promptly after receipt of a written request therefor.  Under certain circumstances set forth in the
Rights Agreement, Rights issued to, or beneficially owned by, any Person who
is, was, or becomes an Acquiring Person or any Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement), whether currently
beneficially owned by or on behalf of such Person or by any subsequent
beneficial owner, may become null and void.

 

In
the event the Company purchases or otherwise acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed cancelled and retired so that the Company
shall not be entitled to exercise any Rights associated with such Common Shares
that are no longer outstanding.

 

Section 4.   Form of Rights Certificates.  The Rights Certificates (and the forms of
election to purchase and of assignment and the certificates contained therein
to be printed on the reverse thereof) shall each be substantially in the form attached hereto as Exhibit B
and may have such marks of identification or designation and such legends,
summaries, or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with

 

7

 

any rule or regulation made pursuant thereto
or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage.  Subject to the provisions of Section 22
hereof, the Rights Certificates, whenever distributed, shall be dated as of the
Record Date and on their face shall entitle the registered holders thereof to purchase such number of one one-hundredths of a
Preferred Share as shall be set forth therein at the Purchase Price, but the
amount and type of securities purchasable upon
the exercise of each Right and the Purchase Price thereof shall
be subject to adjustment as provided herein.

 

Section 5.   Countersignature and Registration.

 

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

 

(b)                                 Following the
Distribution Date, the Rights Agent will keep, or cause to be kept, at its
principal office or offices designated as the appropriate place for surrender
of Rights Certificates upon exercise or transfer, books for registration and
transfer of the Rights Certificates issued hereunder.  Such books shall show the names and addresses
of the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates, and the date of each
of the Rights Certificates.

 

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

 

(a)                                  Subject to the
provisions of Section 7(e), and Section 14 hereof, at
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the Expiration Date, any Rights Certificate
or Certificates (other than Rights Certificates evidencing Rights that have
been redeemed or exchanged pursuant to Section 23 or Section 24
hereof) may be transferred, split-up, combined, or exchanged for another Rights
Certificate or Certificates, entitling the registered holder to purchase a like
number of one one-hundredths of a Preferred Share (or, following the occurrence
of a Triggering Event, Common Shares, other securities, cash, or other assets,
as the case may be) as the Rights Certificate or Certificates surrendered then
entitles such holder (or former holder in the case of a transfer) to
purchase.  Any registered holder desiring
to transfer, split-up, combine, or exchange any Rights Certificate or Certificates

 

8

 

shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Rights Certificate or Certificates to be transferred, split-up, combined,
or exchanged, with the form of assignment and certificate contained therein
duly executed, at the principal office or offices of the Rights Agent
designated for such purpose.  Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Rights Certificate and
shall have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.  Thereupon the Rights Agent shall, subject to Section 7(e),
Section 14, and Section 24 hereof, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested.  The Company may require payment from a
registered holder of a Rights Certificate of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split-up,
combination, or exchange of Rights Certificates.

 

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

 

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

 

(a)                                  Subject to Section 7(e) hereof,
at any time after the Distribution Date the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on exercisability
set forth in Section 9(c), Section 11(a)(iii), Section 23(a),
and Section 24(a) hereof) in whole or in part upon surrender
of the Rights Certificate, with the form of election to purchase and the
certificate contained therein duly executed, to the Rights Agent at the
principal office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of one one-hundredths of a Preferred Share (or, following the occurrence
of a Triggering Event, Common Shares, other securities, cash, or other assets,
as the case may be) as to which such surrendered Rights are then exercisable,
at or prior to the earliest of (i) the Close of Business on July 30,
2010 (the “Final Expiration Date”), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof, and (iii) the
time at which the Rights are exchanged in full as provided in Section 24
hereof (the earliest of (i), (ii), and (iii) being herein referred to as
the “Expiration Date”).

 

(b)                                 The purchase
price for each one one-hundredth of a Preferred Share pursuant to the exercise
of a Right initially shall be $10.00, shall be subject to
adjustment from time to time as provided in Section 11 and Section 13(a) hereof,
and shall be payable in accordance with Section 7(c) hereof
(such purchase price, as so adjusted, the “Purchase Price”).

 

9

 

(c)                                  Upon receipt of
a Rights Certificate evidencing exercisable Rights, with the form of election
to purchase and the certificate contained therein duly executed, accompanied by
payment, with respect to each Right so exercised, of the Purchase Price per one
one-hundredth of a Preferred Share (or, following the occurrence of a
Triggering Event, Common Shares, other securities, cash, or other assets, as
the case may be) to be purchased as set forth below and an amount equal to any
applicable transfer tax, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is the transfer agent
for such shares) certificates for the total number of one one-hundredths of a
Preferred Share to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company
shall have elected to deposit the total number of Preferred Shares issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts evidencing such number of one
one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares evidenced by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company will
direct the depositary agent to comply with such request, (ii) requisition
from the Company the amount of cash, if any, to be paid in lieu of fractional
shares in accordance with Section 14 hereof, (iii) after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or, upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate.  The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof)
shall be made in cash or by certified bank check or bank draft payable to the
order of the Company.  In the event that
the Company is obligated to issue other securities (including Common Shares) of
the Company, pay cash, or distribute other property pursuant to Section 11(a) hereof,
the Company will make all arrangements necessary so that such other securities,
cash, or other property are available for distribution by the Rights Agent, if
and when appropriate.  The Company
reserves the right to require prior to the occurrence of a Triggering Event
that, upon any exercise of Rights, a number of Rights be exercised so that only
whole Preferred Shares would be issued.

 

(d)                                 In case the
registered holder of any Rights Certificate shall exercise less than all the
Rights evidenced thereby, a new Rights Certificate evidencing the Rights
remaining unexercised shall be issued by the Rights Agent and delivered to, or
upon the order of, the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, subject to the
provisions of Section 14 hereof.

 

(e)                                  Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person (or any such
Associate of Affiliate) to holders of equity interests in such Acquiring Person
(or any such Associate or Affiliate) or to any Person with whom the Acquiring
Person (or any such Associate of Affiliate) has any continuing agreement,
arrangement, or understanding (whether or not in writing) regarding the
transferred Rights or 

 

10

 

(B) a
transfer that the Board of Directors of the Company, in its sole discretion,
has determined is part of a plan, arrangement, or understanding (whether or not
in writing) that has as a primary purpose or effect the avoidance of the
provisions of this Section 7(e), shall become null and void without
any further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise.  The Company
shall use all reasonable efforts to ensure that the provisions of this Section 7(e) are
complied with, but shall have no liability to any holder of Rights Certificates
or any other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or any of its Affiliates, Associates, or
transferees hereunder.

 

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

 

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

 

Section 9.   Reservation and Availability of Capital
Stock.

 

(a)                                  The Company
covenants and agrees that it will cause to be reserved and kept available out
of its authorized and unissued Preferred Shares, the number of Preferred
Shares that will be sufficient to permit the exercise in full of all
outstanding Rights in accordance with Section 7 hereof.

 

(b)                                 So long as the
Preferred Shares (and, following the occurrence of a Triggering Event, Common
Shares or other securities, as the case may be) issuable and deliverable upon
the exercise of the Rights may be listed on any national securities exchange or
quoted on a 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 on such exchange or quoted on such
quotation system, as the case may be, upon official notice of issuance upon
such exercise.

 

11

 

(c)                                  The Company
shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a Section 11(a)(ii) Event
on which the consideration to be delivered by the Company upon exercise of the
Rights has been determined in accordance with Section 11(a) hereof,
a registration statement on an appropriate form under the Act, with respect to
the securities purchasable upon exercise of the Rights, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
earlier of (A) the date as of which the Rights are no longer exercisable for
such securities, and (B) the date of the expiration of the Rights.  The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or “blue sky”
laws of the various states in connection with the exercisability of the
Rights.  The Company may temporarily
suspend, for a period of time not to exceed 90 days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement 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.  In
addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company similarly may temporarily
suspend the exercisability of the Rights until such time as a registration
statement has been declared effective. 
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained, or the
exercise thereof shall not be permitted under applicable law, or a registration
statement shall not 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 one one-hundredths of a Preferred Share (and, following the occurrence of a Triggering Event, Common Shares or
other securities, as the case may be) delivered upon exercise of the Rights
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable.

 

(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 that may be payable in respect of
the issuance or delivery of the Rights Certificates and of any certificates for
a number of one one-hundredths of a Preferred Share (or, following the
occurrence of a Triggering Event, Common Shares or other securities, as the
case may be) upon the exercise of Rights. 
The Company shall not, however, be required to pay any transfer tax that
may be payable in respect of any transfer or delivery of Rights Certificates to
a Person other than, or the issuance or delivery of a number of one
one-hundredths of a Preferred Share (or, following the occurrence of a
Triggering Event, Common Shares or other securities, as the case may
be) in a name other than that of the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of one one-hundredths of a Preferred Share (or, following the
occurrence of a Triggering Event, Common Shares or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the registered holder of such Rights Certificates at
the time of surrender) or until it has been established to the Company’s
satisfaction that no such tax is due.

 

12

 

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

 

Section 11.   Adjustment of Purchase Price, Number and
Kind of Shares, or Number of Rights. 
The Purchase Price, the number and kind of shares, or fractions thereof,
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 or pay a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide or split the outstanding Preferred Shares,
(C) combine or consolidate the outstanding Preferred Shares into a smaller
number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise provided in this Section 11(a) and
Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such subdivision, split,
combination, consolidation, or reclassification, and the number and kind of
Preferred Shares (or other capital stock, as the case may be),
issuable on such date, shall be proportionately adjusted so that the registered
holder of any Right exercised after such time shall be entitled to receive,
upon payment of the Purchase Price then in effect, the aggregate number and
kind of Preferred Shares (or other capital stock, as the case may be), which,
if such Right had been exercised immediately prior to such date (whether or not
such Right was then exercisable) and at a time when the Preferred Share (or
other capital stock, as the case may be) transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, split, combination,
consolidation, or reclassification.  If
an event occurs that would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) 

 

13

 

shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

 

(ii)                                  In the event
any Person shall become an Acquiring Person (a “Section 11(a)(ii) Event”),
then, promptly following the occurrence of such Section 11(a)(ii) Event,
proper provision shall be made so that each registered holder of a
Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, in lieu
of a number of one one-hundredths of a Preferred Share, such number of Common
Shares of the Company as shall equal the result obtained by (A) multiplying
the then current Purchase Price by the then number of one one-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and (B) dividing that
product (which, following such first occurrence, shall thereafter be referred
to as the “Purchase Price” for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price per Common Share on the date of
such first occurrence (such number of shares,
the “Adjustment Shares”).

 

(iii)                               In the event
that (A) the number of Common Shares authorized
by the Company’s First Amended and Restated Certificate of
Incorporation (as such may be amended, modified or restated from time to time,
the “Certificate of Incorporation”), but
which are not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights, are not sufficient to permit the exercise in full of
the Rights in accordance with Section 11(a)(ii) hereof
or (B) the Board of Directors of the Company otherwise shall determine to
do so in its sole discretion, the Company, acting by resolution of the Board of
Directors of the Company, shall (1) determine the value of the Adjustment
Shares issuable upon the exercise of a Right (the “Current Value”), and (2) with
respect to each Right (subject to Section 7(e) hereof), make
adequate provision to substitute for the Adjustment Shares, upon the exercise
of such Right and payment of the applicable Purchase Price, (i) cash, (ii) a
reduction in the Purchase Price, (iii) Common Shares or other equity
securities of the Company (including, without limitation, shares, or units of
shares, of preferred stock, such as the Preferred Shares, which the Board of
Directors of the Company has deemed to have essentially the same value or
economic rights as Common Shares (such shares of preferred stock being referred
to as “Common Stock Equivalents”)), (iv) debt securities of the
Company, (v) other assets, or (vi) any combination of the foregoing,
having an aggregate value equal to the Current Value, where such aggregate
value has been determined by the Board of Directors of the Company based upon
the advice of a nationally recognized investment banking firm selected by the
Board of Directors of the Company; provided, however, that if,
under the circumstances set forth in clause (A) above, the Company
shall not have made adequate provision to deliver value pursuant to clause (2) above within 30 days following the later of (x) the
first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) hereof
expires (the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger
Date”), then the Company shall be obligated to deliver, upon the surrender
for exercise of a Right and without requiring payment of the Purchase Price,
Common Shares (to the extent available) and then, if necessary, cash, which
shares and cash have an aggregate value equal to the Spread.  For purposes of the preceding sentence, the
term “Spread” shall mean the excess of the Current Value over the Purchase
Price.  If the Board of Directors of the
Company determines in good faith that it is likely that sufficient additional
Common Shares could be authorized for issuance 

 

14

 

upon
exercise in full of the Rights, the 30-day period set forth above may be
extended to the extent necessary, but not more
than 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 30-day period, as it may be
extended, is herein called the “Substitution Period”).  To the extent that action is to be taken
pursuant to the first or third sentences of this Section 11(a)(iii), the Company (I) shall provide,
subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (II) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such stockholder
approval for such authorization of additional shares or to decide the
appropriate form of distribution to be made pursuant to such first 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 each Adjustment Share shall be the Current Market Price per Common
Share on the Section 11(a)(ii) Trigger Date and the per share or per
unit value of any Common Stock Equivalent shall be deemed to equal the Current
Market Price per Common Share on such date.

 

(b)                                 In case the
Company shall fix a record date for the issuance of rights, options, or warrants to all registered holders of Preferred Shares entitling them to
subscribe for or purchase (for a period expiring within 45 calendar
days after such record date) Preferred Shares (or shares having the same
rights, privileges, and preferences as the
Preferred Shares (“Equivalent Preferred Shares”)) or securities
convertible into Preferred Shares or Equivalent Preferred Shares at a price per
Preferred Share or Equivalent Preferred Share (or having a conversion price per
share, if a security convertible into Preferred Shares or Equivalent Preferred
Shares) less than the Current
Market Price per Preferred Share on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of Preferred Shares outstanding on
such record date plus the number of Preferred Shares that the aggregate
subscription or offering price of the total number of Preferred Shares or
Equivalent Preferred Shares so to be offered (or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares or Equivalent Preferred Shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible).  In
case such subscription price may be paid by delivery of consideration, part or all of which may be in a form other than cash, the value of
such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.  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 adjustments 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 that would then be in effect if such
record date had not been fixed.

 

(c)                                  In case the
Company shall fix a record date for a distribution to all registered holders of
Preferred Shares (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation) of 

 

15

 

cash
(other than a regular periodic cash dividend out of the earnings or retained
earnings of the Company), assets (other than a dividend payable in Preferred
Shares, but including any dividend payable in stock other than Preferred
Shares) or evidences of indebtedness, or of 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 Current Market Price per
Preferred Share 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
conclusive for all purposes) of the portion of the cash, assets or evidences of
indebtedness so to be distributed, or of such subscription rights or warrants
applicable to a Preferred Share, and the denominator of which  shall be such Current Market Price per
Preferred Share.  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 be adjusted to
be the Purchase Price that would then be in effect if such record date had not
been fixed.

 

(d)                                 (i)  For
the purpose of any computation hereunder, other than computations made pursuant
to Section 11(a)(iii) hereof, the “Current Market Price”
per Common Share on any date shall be deemed to be the average of the daily closing
prices per Common Share for the 30 consecutive Trading Days immediately prior
to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof,
the “Current Market Price” per Common Share on any date shall be deemed
to be the average of the daily closing prices per Common Share for the 10
consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per Common Share is
determined during a period following the announcement by the issuer of such
Common Share of (A) a dividend or distribution on such Common Shares
payable in Common Shares or securities convertible into such Common Shares
(other than the Rights), or (B) any subdivision, combination, or
reclassification of such Common Shares, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination,
or reclassification shall not have occurred prior to the commencement of the
requisite 30-Trading Day or 10-Trading Day period, as set forth above, then,
and in each such case, the Current Market Price shall be properly adjusted to
take into account ex-dividend trading. 
The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NASDAQ Global Market or, if the Common Shares are not listed or admitted to trading on the NASDAQ Global
Market, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Shares are listed or admitted
to trading or, if the Common Shares are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported on a quotation system then in use, or, if on any such
date the Common Shares are not so quoted, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Common Shares selected by the Board of Directors of the Company.  If on any such date the Common Shares are not
publicly held and are not so listed, admitted to trading, or quoted, and no
market maker is making a market in the Common Shares, the “Current Market
Price” per Common Share shall mean the fair value per share on such date as
determined in good faith by the Board of Directors of the 

 

16

 

Company, which determination shall be
described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.  The term “Trading
Day” shall mean a day on which the principal national securities exchange
on which the Common Shares are listed or admitted to trading is open for the
transaction of business or, if the Common Shares are not listed or admitted to
trading on any national securities exchange, a
Business Day.

 

(ii)                                  For the purpose
of any computation hereunder, the “Current Market Price” per Preferred
Share shall be determined in the same manner as set
forth above for the Common Shares in Section 11(d)(i) hereof
(other than the penultimate sentence thereof). 
If the Current Market Price per Preferred Share cannot be determined in
the manner provided above or if the Preferred Shares are not publicly held or listed,
admitted to trading, or quoted in a manner described in Section 11(d)(i) hereof,
the Current Market Price per Preferred Share shall be conclusively deemed to be
an amount equal to 100 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends, and recapitalizations with respect to
the Common Shares occurring after the date of this Agreement) multiplied by the
Current Market Price per Common Share.  If neither the Common Shares nor the
Preferred Shares are publicly held or listed, admitted to trading, or quoted, the “Current
Market Price” per Preferred Share shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. 
For all purposes of this Agreement, the Current Market Price of one
one-hundredth of a Preferred Share shall be equal to the Current Market Price of
one Preferred Share divided by 100.

 

(e)                                  Anything herein
to the contrary notwithstanding, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% in the Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a Common
Share or other share or one-millionth of a Preferred Share, 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 that mandates such adjustment and (ii) the Expiration
Date.

 

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

 

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

 

17

 

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

 

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

 

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

 

(k)           Before taking
any action that would cause an adjustment reducing the Purchase Price below the
then stated value, if any, of the number of one one-hundredths of a Preferred
Share issuable upon exercise of the Rights, the Company shall take any
corporate action that may, in the opinion of its counsel, be necessary in order that the Company may validly and

 

18

 

legally
issue, fully paid and nonassessable, such number of one one-hundredths of a
Preferred Share 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 issuance to the registered holder of any Right exercised after such record date of the number of one one-hundredths of a
Preferred Share and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the number of one one-hundredths of
a Preferred Share and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder’s right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.

 

(m)          Anything in this Section 11
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that
in its good faith judgment the Board of Directors of the Company shall
determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Shares, (ii) issuance wholly for cash of any
Preferred Shares at less than the Current Market Price, (iii) issuance
wholly for cash of Preferred Shares or securities that by their terms are
convertible into or exchangeable for Preferred Shares, (iv) stock
dividends, or (v) issuance of rights, options, or warrants referred to in
this Section 11, hereafter made by the Company to registered holders of its
Preferred Shares shall not be taxable to such stockholders.

 

(n)           The Company
covenants and agrees that it shall not, at any time after the Distribution
Date, (i) consolidate with any other Person, (ii) merge with or into
any other Person, or (iii) sell or transfer (or permit any Subsidiary
to sell or transfer), in one transaction, or a series of related transactions,
assets or earning power aggregating 50% or more of the assets
or earning power of the Company and its Subsidiaries (taken as a whole and
calculated on the basis of the Company’s most recent regularly prepared
financial statements) to any other Person or Persons, if (A) at the time
of or immediately after such consolidation, merger, sale, or transfer there are
any charter or bylaw provisions, rights, warrants, or other instruments or
securities outstanding or agreements in effect that would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (B) prior to, simultaneously with,
or immediately after such consolidation, merger, sale, or transfer, the
stockholders of the Person who constitutes, or would constitute, the “Principal
Party” for purposes of Section 13(a) hereof shall have
received a distribution of Rights previously owned by such Person or any of its
Affiliates and Associates.

 

(o)           The Company
covenants and agrees that, after the earlier of the Distribution Date or the
Shares Acquisition Date, it will not, except as permitted by Section 23
or Section 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 otherwise eliminate the benefits
intended to be afforded by the Rights.

 

19

 

(p)           Anything in this
Agreement to the contrary notwithstanding, in the event that the Company shall
at any time after the Rights Dividend Declaration Date and prior to
the Distribution Date (i) declare or pay a dividend on the outstanding
Common Shares payable in Common Shares, (ii) subdivide or split the
outstanding Common Shares, or (iii) combine or consolidate the outstanding
Common Shares into a smaller number of shares, the number of Rights associated
with each Common Share then outstanding, or issued or delivered thereafter but
prior to the Distribution Date (or issued or delivered on or after the
Distribution Date pursuant to Section 22 hereof), shall be
proportionately adjusted so that the number of Rights thereafter associated
with each Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction, the numerator of which shall be the total
number of Common Shares outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of Common Shares outstanding immediately following the occurrence
of such event.

 

Section 12.   Certificate of
Adjusted Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in
Section 11 or Section 13 hereof, the Company shall (a) promptly
prepare a certificate setting forth such adjustment and a brief statement of
the facts accounting for such adjustment, (b) promptly file with the
Rights Agent, and with each transfer agent for the Preferred Shares and the
Common Shares, a copy of such certificate, and (c) if a Distribution Date
has occurred, mail a brief summary thereof to each
registered holder of a Rights Certificate in accordance with Section 26
hereof.  The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained.

 

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

 

(a)           In the event that,
at any time after a Person has become an Acquiring Person, directly or
indirectly,

 

(i)            the Company shall
consolidate with, or merge with and into, any other Person, and the Company
shall not be the continuing or surviving corporation or other entity of such
consolidation or merger;

 

(ii)           any Person shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
Common Shares shall be changed into or exchanged for stock or other securities
of any other Person (or the Company) or cash or any other property; or

 

(iii)          the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating 50% or
more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole and calculated on the basis of the Company’s most recent
regularly prepared financial statements) to any Person or Persons;

 

then,
and in each such case, proper provision shall be made so that:  (A) each registered holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter
have the right to receive, upon

 

20

 

the
exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, such number of validly authorized and issued, fully
paid, non-assessable and freely tradeable Common Shares of the Principal Party,
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 number of one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event
by the Purchase Price in effect immediately prior to such first occurrence of a
Section 11(a)(ii) Event, and (2) dividing that product (which,
following the first occurrence of a Section 13 Event, shall be referred to
as the “Purchase Price” for each Right and for all purposes of this Agreement)
by 50% of the Current Market Price per Common Share of such Principal Party on
the date of consummation of such Section 13 Event; (B) such Principal
Party shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this
Agreement; (C) the term “Company” shall thereafter be deemed to
refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal
Party following the first occurrence of a Section 13 Event; (D) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of Common Shares) in connection with the
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 its Common Shares thereafter deliverable upon the exercise
of the Rights; and (E) the provisions of Section 11(a)(ii) hereof
shall be of no effect with respect to events occurring at any time following
the first occurrence of any Section 13 Event.

 

(b)           “Principal Party”
shall mean:

 

(i)            in the case of any
transaction described in Section 13(a)(i) or Section 13(a)(ii) hereof,
the Person that is the issuer of any securities into which Common Shares of the
Company are converted, changed, or exchanged in such merger or consolidation,
or if no securities are so issued, the Person that is the other party to such
merger or consolidation; and

 

(ii)           in the case of any
transaction described in Section 13(a)(iii) 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 transferred pursuant to such transaction or
transactions or if the Person receiving the largest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate value of shares outstanding; provided,
however, that in any such case, (A) if the Common Shares
of such Person are not at such time and have not been continuously over the
preceding 12-month period registered under Section 12 of the Exchange Act,
and such Person is a direct or indirect Subsidiary of another Person the Common
Shares of which are and have been so registered, “Principal Party” shall refer
to such other Person; and (B) in case such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common Shares of two or
more of which are and have been so registered, “Principal Party” shall refer to
whichever of such Persons is the issuer of the Common Shares having the
greatest aggregate market value.

 

(c)           The Company shall
not consummate a Section 13 Event unless the Principal Party shall have a
sufficient number of authorized Common Shares that
have not been issued or

 

21

 

reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement confirming that the requirements
of Section 13(a) and Section 13(b) hereof
shall promptly be performed in accordance with their terms and further
providing that, as soon as practicable after the date of any such Section 13
Event, the Principal Party will:

 

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

 

(ii)           take all such
other action as may be necessary to enable the Principal Party to issue the
securities purchasable upon exercise of the Rights, including but not limited to the registration or qualification of such securities under all
requisite securities laws of jurisdictions of the various states and the
listing of such securities on such exchanges and trading markets as may be
necessary or appropriate; and

 

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

 

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

 

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 as provided in Section 11(p) hereof, or to distribute
Rights Certificates that evidence fractional Rights.  In lieu of such fractional
Rights, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right.  For 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 of the Rights for any
Trading Day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to
securities listed or admitted to trading on the NASDAQ Global Market or, if the Rights are not listed or admitted to trading on the NASDAQ Global
Market, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading, or if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported
by a

 

22

 

quotation system then in use or, if on any such date the
Rights are not so quoted, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Rights,
selected by the Board of Directors of the Company.  If on any such date the Rights are not
publicly held and are not so listed, admitted to trading, or quoted, and no
market maker is making a market in the Rights, the current market value of a
Right shall mean the fair value of a Right on such date as determined in good
faith by the Board of Directors of the Company, which determination shall be
described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.

 

(b)           The Company
shall not be required to issue fractions of Preferred Shares (other than
fractions that are integral multiples of one one-hundredth of a Preferred
Share) upon exercise of the Rights or to
distribute certificates that evidence fractional Preferred Shares (other than
fractions that are integral multiples of one one-hundredth of a Preferred
Share).  In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one one-hundredth of a
Preferred Share.  For purposes of this Section 14(b),
the current market value of one one-hundredth of a Preferred Share shall be one
one-hundredth of the closing price of a Preferred Share or, if unavailable, the
appropriate alternative price (in each case, as determined pursuant to Section 11(d)(ii) hereof)
for the Trading Day immediately prior to the date of such exercise.

 

(c)           Following the
occurrence of a Triggering Event, the Company shall
not be required to issue fractions of Common Shares upon exercise of the Rights
or to distribute certificates that evidence fractional Common Shares.  In lieu of fractional Common Shares, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one Common Share.  For purposes of this Section 14(c),
the current market value of one Common Share shall be the closing price of one
Common Share or, if unavailable, the appropriate alternative price (in each
case, as determined pursuant to Section 11(d)(i) hereof) on
the Trading Day immediately prior to the date of such exercise.

 

(d)           The registered
holder of a Right by the acceptance
of that Right expressly waives such holder’s right to receive any fractional
Rights or any fractional shares upon exercise of a Right, except as permitted
by this Section 14.

 

Section 15.   Rights of Action.  All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under Section 18
hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, of the Common Shares); and
any registered holder of any Rights Certificate (and, prior to the Distribution
Date, of the Common Shares), without the consent of the Rights Agent or
of the registered holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, on such first holder’s own
behalf and for such first holder’s own benefit, enforce, and may institute and
maintain any suit, action, or proceeding against the Company to enforce, or
otherwise act in respect of, such first holder’s right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. 
Without limiting the foregoing or any remedies available to the registered holders of

 

23

 

Rights, it is specifically acknowledged that the registered holders of
Rights would not have an adequate remedy at law for any breach of this
Agreement and shall be entitled to specific performance of the obligations
hereunder and injunctive relief against actual or threatened violations of the
obligations hereunder of any Person subject to this Agreement.

 

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

 

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

 

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

 

(c)           subject to Section 6(a) and
Section 7(f) hereof, the Company and the Rights Agent may deem
and treat the Person in whose name a Rights Certificate (or, prior to the
Distribution Date, a Common Share certificate or Ownership Statement) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the Common Share certificate or Ownership Statement 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 the last sentence of Section 7(e) hereof,
shall be required to be affected by any notice to the contrary; and

 

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

 

Section 17.   Rights
Certificate Holder Not Deemed a Stockholder.  No registered holder, as such, of any Rights
Certificate shall be entitled to vote, receive dividends, or be deemed for any
purpose the registered holder of the number of one one-hundredths of a Preferred
Share or any other securities of the Company that may at any time be issuable
on the exercise of the Rights evidenced thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the registered
holder of any Rights Certificate, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25
hereof), or to receive dividends or subscription rights, or otherwise,

 

24

 

until the Right or Rights evidenced by such Rights
Certificate shall have been exercised 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,
reimbursement for its reasonable expenses and counsel fees and disbursements
and other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder.  The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without 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 Agreement, including the costs and expenses of defending against any
claim of liability in the premises.

 

(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
Agreement in reliance upon any Rights Certificate or certificate for Common
Shares or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to
be genuine and to have been signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.

 

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

 

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

 

(b)           In case at any time
the name of the Rights Agent shall be changed and at such time any of the
Rights Certificates shall have been countersigned but not delivered, the Rights
Agent may adopt the countersignature of an authorized signatory under the
Rights Agent’s prior name and deliver Rights Certificates so countersigned; and
in case at that time any of the Rights

 

25

 

Certificates
shall not have been countersigned, an authorized signatory of the Rights Agent
may countersign such Rights Certificates either in the prior name of the Rights
Agent or in the changed name of the Rights Agent; and in all such cases such
Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.

 

Section 20.   Duties of the
Rights Agent.  The Rights
Agent undertakes the duties and obligations imposed
by this Agreement upon the following terms and conditions, by all of which the
Company and the registered holders
of Rights 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 Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter (including,
without limitation, the identity of any Acquiring Person and the determination
of Current Market Price) be proved or established by the Company prior to
taking 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
the Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Secretary, any Assistant Secretary, the Treasurer, or any
Assistant Treasurer of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.

 

(c)           The Rights Agent
shall be liable hereunder 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
recital contained in this Agreement or in the Rights Certificates and it shall
not be required to verify the same (except as to a countersignature by one of
its authorized signatories on such Rights Certificates), but all such
statements and recital are and shall be deemed to have been made by the Company
only.

 

(e)           The Rights Agent
shall not be under any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except the due
execution and delivery hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except a countersignature by
one of its authorized signatories on any such Rights Certificate); nor shall it
be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any adjustment required under the provisions of Section 11,
Section 13, or Section 24 hereof or responsible for the
manner, method, or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates after actual notice
of any such adjustment); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization

 

26

 

or
reservation of any Common Shares or Preferred Shares to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Common Shares or
Preferred Shares will, when so issued, be validly authorized and issued, fully
paid, and nonassessable.

 

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

 

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

 

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

 

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

 

(k)           If, with respect to
any Rights Certificate surrendered to the Rights Agent for exercise or
transfer, the certificate contained in the form of assignment or form of
election to purchase, as the case may be, has either not been completed or
indicates an affirmative response to clause 1 or 2 thereof, the Rights Agent
shall not take any further action with respect to such requested exercise or
transfer without first consulting with the Company.

 

Section 21.   Change of the Rights Agent.  The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
days’ notice given to the Company in accordance with Section 26
hereof, and to each transfer agent of the Common Shares and Preferred
Shares by registered or certified mail in the event that the Rights Agent or
one of its Affiliates is not also the transfer agent for the Company.  In the event the

 

27

 

transfer agency relationship in effect between the Company and the
Rights Agent terminates, the Rights Agent will be deemed to have resigned
automatically and be discharged from its duties under this Agreement as of the
effective date of such termination, and the Company shall be responsible for
sending any required notice.  The Company
may remove the Rights Agent or any successor Rights Agent upon 30 days’ notice
given to the Rights Agent or successor Rights Agent, as the case may be, in accordance
with Section 26 hereof, and to each transfer agent
of the Common Shares and Preferred Shares by registered or certified mail, and,
if such removal occurs after the Distribution Date, to the registered holders of the
Rights Certificates in accordance with Section 26 hereof.  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 proper notice of such removal or after it has been properly
notified of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the registered holder of a
Rights Certificate (who shall, with such notice, submit such holder’s Rights
Certificate for inspection by the Company), then any registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent.  Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a legal business entity organized and doing business under
the laws of the United States or of any state of the United States, in good
standing, which is authorized under such laws to exercise corporate trust,
stock transfer, or shareholder services powers 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 legal business entity 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 that purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares and the
Preferred Shares, and, if such appointment occurs after the Distribution Date,
give notice thereof to the registered holders of the Rights Certificates in accordance
with Section 26 hereof.  Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal of the Rights Agent or
the appointment of the successor Rights Agent, as the case may be.

 

Section 22.   Issuance of New
Rights Certificates.  Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by the Board of Directors of the Company to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this
Agreement.  In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the Expiration Date, the Company (a) shall,
with respect to Common Shares so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement, granted or awarded as
of the Distribution Date, or upon the exercise, conversion, or exchange of
securities hereinafter issued by the Company, and (b) may, in any other
case, if deemed necessary or appropriate by the Board of Directors of the Company, issue
Rights Certificates evidencing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no
such

 

28

 

Rights Certificate shall be issued if, and to the extent that, the
Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.

 

Section 23.   Redemption and Termination.

 

(a)           The Board of
Directors of the Company may, at its option, at any time prior to the earlier
of (i) the time immediately prior to such time as any Person first becomes
an Acquiring Person and (ii) the Final Expiration Date, direct the
Company to, and if directed the Company shall, redeem all but not less than all
of the then outstanding Rights at a redemption price of $0.01 per Right, as
such amount may be appropriately adjusted to reflect any stock split, stock
dividend, or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the “Redemption Price”).  The Company may, at its option, pay the
Redemption Price in cash, Common Shares (based on the Current Market Price of
the Common Shares at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors of the Company.

 

(b)           Immediately
upon the action of the Board of Directors of the Company directing the Company
to redeem the Rights, evidence of which shall have been filed with the Rights
Agent and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of
the registered holders of Rights shall be to receive the Redemption
Price for each Right so held.  Promptly
after the action of the Board of Directors of the Company directing the Company
to make the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the registered holders of the
then outstanding Rights in accordance with Section 26 hereof.  Any notice given in accordance with Section 26
hereof shall be deemed given whether or not the holder receives the
notice.  Each such notice of redemption will state the method by which the payment of the Redemption Price
will be made.

 

Section 24.   Exchange of Rights.

 

(a)           The Board of
Directors of the Company may, at its option, at any time after any Person
becomes an Acquiring Person, direct the Company to, and if directed the Company
shall, 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 7(e) hereof) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately adjusted to reflect
any stock split, stock dividend, or similar transaction occurring after the
date hereof (such exchange ratio being hereinafter referred to as the “Exchange
Ratio”).  The exchange of the Rights
by the Board of Directors of the Company may be made effective at such time, on
such basis and with such conditions as the Board of Directors of the Company in
its sole discretion may establish.

 

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

 

29

 

thereafter
of a registered holder of such Rights shall be to receive that number of Common
Shares equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio.  The Company shall
promptly give public notice of any such exchange; provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange.  The Company
promptly shall give notice of any such exchange to all of the registered
holders of such Rights in accordance with Section 26 hereof.  Any notice given in accordance with Section 26
hereof shall be deemed given whether or not the holder receives the
notice.  Each such notice of exchange
will state the method by which the exchange of the Common Shares for Rights
will be effected and, in the event of any partial exchange, the number of
Rights that will be exchanged.  Any
partial exchange shall be effected pro rata based on the number of Rights
(other than Rights that have become void pursuant to the provisions of Section 7(e) hereof)
held by each registered holder of Rights.

 

(c)           In any exchange
pursuant to this Section 24, the Company, at its option, may
substitute Preferred Shares (or Equivalent Preferred Shares, as such term is
defined in Section 11(b) hereof) for Common Shares
exchangeable for Rights, at the initial rate of one one-hundredth of a
Preferred Share (or Equivalent Preferred Shares) for each Common
Share, as appropriately adjusted to reflect stock splits, stock dividends, and
other similar transactions after the date hereof.

 

(d)           In the event
the number of Common Shares authorized by the Company’s Certificate of
Incorporation, but which are not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights, is not sufficient to permit
any exchange of Rights as contemplated in accordance with this Section 24, the Company
may take all such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights.

 

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

 

(f)            Prior to effecting
an exchange pursuant to this Section 24, the Board of Directors of
the Company may direct the Company to enter into a trust agreement in such form
and with such terms as the Board of Directors of the Company shall then approve
(the “Trust Agreement”).  If the
Board of Directors of the Company 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 Common Shares, fractional Preferred Shares or other securities, if
any, issuable pursuant to the exchange, and all Persons entitled to receive
such shares or other securities (and any dividends or distributions made
thereon after the date on which such shares or other securities are deposited
in the Trust) shall be entitled to receive such only from the Trust and solely
upon compliance with the relevant terms and provisions of the Trust Agreement.

 

30

 

Section 25.   Notice of Certain Events.

 

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

 

(b)           In case a Section 11(a)(ii) Event
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each registered
holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26  hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to registered holders of
Rights under Section 11(a)(ii) hereof, and (ii) all
references in Section 25(a) to Preferred Shares shall be
deemed thereafter to refer to Common Shares or, if appropriate, other
securities.

 

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

 

iBasis, Inc.

20 Second Avenue

Burlington, MA 01803

Attention:  Corporate Secretary

Telephone:  (781) 505-7500

 

31

 

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

 

Computershare Trust Company, N.A.

250 Royall Street

Canton, MA 02021

Attention:  Client Services

Telephone:  (781) 575-2000

 

Notices
or demands authorized by this Agreement to be given or made by the Company or
the Rights Agent to the registered holder of any Rights Certificate (or, if
prior to the Distribution Date, of the Common Shares) 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 Rights Agent (or, if prior to the Distribution Date, of the
transfer agent for the Common Shares).

 

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 provisions of this 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
Agreement without the approval of any holders of Rights in order to (i) cure
any ambiguity, (ii) correct or supplement any provisions 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 or certain of their transferees), and no such amendment may cause the
Rights again to become redeemable or cause this Agreement again to become
amendable other than in accordance with this sentence.  Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
decreases 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 does not
adversely affect the rights, duties or obligations of the Rights Agent under
this Agreement.

 

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

 

32

 

Section 29.   Determinations and Actions by the Board
of Directors.  For all purposes of
this Agreement, any calculation of the number of Common Shares or any other
class of capital stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding Common
Shares of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act as in effect on the
date hereof.  The Board of Directors of
the Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors of the Company or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (a) interpret the provisions of this
Agreement and (b) make all determinations deemed necessary or advisable
for the administration of this Agreement (including a determination to redeem
or not redeem the Rights or to amend this Agreement).  All such actions, calculations,
interpretations, and determinations 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 registered
holders of the Rights, and all other parties.

 

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

 

Section 31.   Severability.  If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, or unenforceable, the remainder
of the terms, provisions, covenants, and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired, or
invalidated; 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 Agreement would
adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the Close of Business on the tenth day following the
date of such determination by the Board of Directors of the Company.

 

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

 

Section 33.   Counterparts; Facsimiles and PDFs.  This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.  A facsimile or
..pdf signature delivered electronically shall constitute an original signature
for all purposes.

 

33

 

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

 

(Signature Page Follows.)

 

34

 

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

 

	
   

  	
  iBASIS,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ofer Gneezy

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Ofer
  Gneezy

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COMPUTERSHARE
  TRUST COMPANY, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Katherine Anderson

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Katherine
  Anderson

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Manager

  

 

 

Exhibit A

 

FORM OF

CERTIFICATE OF DESIGNATION, PREFERENCES, AND

RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

 

of

 

iBASIS,
INC.

 

Pursuant
to Section 151 of the General Corporation Law of the State of Delaware,
iBasis, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the “Corporation”), in
accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:

 

That
pursuant to the authority conferred upon the Board of Directors by the First
Amended and Restated Certificate of Incorporation of the Corporation (as such
may be amended, modified or restated from time to time, the “Certificate of
Incorporation”), the said Board of Directors on July 30,
2009, adopted the following resolution creating a series of Preferred Stock
designated as Series A Junior Participating Preferred Stock (as
hereinafter defined):

 

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

 

Section 1.                                            Designation and
Amount.  The shares of such series
shall be designated as “Series A Junior Participating Preferred Stock”
and the number of shares constituting such series shall be 1,000,000.

 

Section 2.                                            Dividends and
Distributions.

 

(A)                              Subject to the
prior and superior rights of the holders of any shares of any series of
Preferred Stock ranking prior and superior to the shares of Series A
Junior Participating Preferred Stock with respect to dividends, the holders of
shares of Series A Junior Participating Preferred Stock, in preference to
the holders of shares of Common Stock, par value $0.001 per share, of the
Corporation (the “Common Stock”), and of any other junior stock, shall
be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the last  day of March, June,
September, and December in each year (each such date being referred to
herein as a “Quarterly Dividend Payment Date”), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Junior Participating Preferred Stock, 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, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash 

 

A-1

 

dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior
Participating Preferred Stock.  In the
event the Corporation shall at any time after July 30,
2009 (the “Rights Dividend Declaration Date”) (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount to which
holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

(B)           The Corporation shall declare a
dividend or distribution on the Series A Junior Participating Preferred
Stock as provided in Paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Junior
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

 

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

 

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

 

(A)          Subject to the provision for
adjustment hereinafter set forth, each share of Series A Junior
Participating Preferred Stock shall entitle the holder thereof to 100 votes on
all

 

A-2

 

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

 

(B)           Except as otherwise provided
herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.

 

(C)           (i)            If at any time dividends on
any Series A Junior Participating Preferred Stock shall be in arrears in
an amount equal to six quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein
called a “default period”) that shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. 
During each default period, all holders of Preferred Stock (including
holders of the Series A Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six quarterly
dividends thereon, voting as a class, irrespective of series, shall have the
right to elect two directors.

 

(ii)           During any default period,
such voting right of the holders of Series A Junior Participating
Preferred Stock may be exercised initially at a special meeting called pursuant
to subparagraph (iii) of this Section 3(C) or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders, provided that such voting right shall not be exercised unless
the holders of 10% in number of shares of Preferred Stock
outstanding shall be present in person or by proxy.  The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of Preferred Stock of
such voting right. 
At any meeting at which the holders of Preferred Stock shall exercise
such voting right initially during an existing default period, they shall have
the right, voting as a class, to elect directors to fill such vacancies, if
any, in the Board of Directors as may then exist up to two directors or, if
such right is exercised at an annual meeting, to elect two directors.  If the number that may be so elected at
any special meeting does not amount to the required number, the holders of
Preferred Stock shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by them of the required
number.  After the holders of Preferred
Stock shall have exercised their right to elect directors in any default period
and during the continuance of such period, the number of directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities ranking senior to or pari  passu with the Series A
Junior Participating Preferred Stock.

 

A-3

 

(iii)          Unless the holders of Preferred Stock shall, during an existing default period, have previously
exercised their right to elect directors, the Board of Directors may order, or
any stockholder or stockholders owning in the aggregate not less than 10% of
the total number of shares of Preferred Stock outstanding, irrespective of series, may
request, the calling of a special meeting of the holders of Preferred Stock,
which meeting shall thereupon be called by the President, a Vice-President, or
the Secretary of the Corporation.  Notice
of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Paragraph (C)(iii) shall
be given to each holder of record of Preferred Stock by mailing a copy of such
notice to such holder at such holder’s last address as the same appears on the
books of the Corporation.  Such meeting
shall be called for a time not earlier than 20 days and not later than 60 days
after such order or request or in default of the calling of such meeting within
60 days after such order or request, such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not less than
10% of the total number of shares of Preferred Stock outstanding.  Notwithstanding the provisions of this Paragraph
(C)(iii), no such special meeting
shall be called during the period within 60 days immediately preceding the
date fixed for the next annual meeting of the stockholders.

 

(iv)          In any default
period, the holders of Common Stock, and other classes of stock of the
Corporation if applicable, shall continue to be entitled to elect the whole number
of directors until the holders of Preferred
Stock shall have exercised their right to elect two directors voting as a
class, after the exercise of which right (x) the directors so elected by
the holders of Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may (except as
provided in Paragraph (C)(ii) of this Section 3) be
filled by vote of a majority of the remaining directors theretofore elected by the holders of the class of stock that elected the director
whose office shall have become vacant. 
References in this Paragraph (C) to directors elected by the
holders of a particular class of stock shall include directors elected by such
directors to fill vacancies as provided in clause (y) of the
foregoing sentence.

 

(v)           Immediately upon the
expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect directors shall cease, (y) the
term of any directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of directors shall be such number as
may be provided for in the Certificate of Incorporation or Bylaws irrespective
of any increase made pursuant to the provisions of Paragraph (C)(ii) of
this Section 3 (such number being subject, however, to change thereafter
in any manner provided by law or in the Certificate of Incorporation or
Bylaws).  Any vacancies in the Board of
Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining directors.

 

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

 

A-4

 

Section 4.               Certain Restrictions.

 

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

 

(i)            declare or pay dividends on,
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 Junior Participating Preferred
Stock;

 

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

 

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

 

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

 

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

 

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

 

A-5

 

of Incorporation, or in any other Certificate of Designation creating a
series of Preferred Stock or any similar stock, or as otherwise required by
law.

 

Section 6.               Liquidation, Dissolution, or
Winding Up.

 

(A)          Upon any liquidation
(voluntary or otherwise), dissolution, or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution, or winding up) to the
Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred
Stock shall have received an amount equal to $100 per share of Series A
Participating Preferred Stock, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the “Series A Liquidation
Preference”).  Following the payment
of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of
Series A Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the “Common
Adjustment”) equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth
in subparagraph (C) below to reflect such events as stock splits, stock
dividends, and recapitalizations with respect to the Common Stock) (such number
in clause (ii), the “Adjustment Number”).  Following the payment of the full amount of
the Series A Liquidation Preference and the Common Adjustment in respect
of all outstanding shares of Series A Junior Participating Preferred Stock
and Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in
the ratio of the Adjustment Number to one with respect to such Preferred Stock
and Common Stock, on a per share basis, respectively.

 

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

 

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

 

Section 7.               Consolidation, Merger, etc.  In case the Corporation shall enter into any
consolidation, merger, combination, or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash,
or any other property, then in any such case the
shares of Series A Junior Participating Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share (subject
to the provision for 

 

A-6

 

adjustment hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash, or any other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is changed
or exchanged.  In the event the
Corporation shall at any time after the Rights Dividend Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of
shares of Series A Junior Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

 

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

 

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

 

Section 10.             Amendment.  At any time when any shares of Series A
Junior Participating Preferred Stock are outstanding, neither the Certificate
of Incorporation of the Corporation nor this Certificate of Designation shall
be amended in any manner that would materially alter or change the powers,
preferences, or special rights of the Series A Junior Participating
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of two-thirds or more of the outstanding shares of Series A
Junior Participating Preferred Stock, voting separately as a class.

 

Section 11.             Fractional Shares.  The Series A Junior Participating
Preferred Stock may be issued in fractions of a share 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
Junior Participating Preferred Stock.

 

(Signature Page Follows.)

 

A-7

 

IN
WITNESS WHEREOF, iBasis, Inc. has caused this Certificate of Designation
to be signed by the undersigned this 30th day of July, 2009.

 

	
   

  	
  iBASIS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

A-8

 

Exhibit B

 

FORM OF
RIGHTS CERTIFICATE

 

	
  Certificate
  No. R-

  	
   

  	
              Rights

  

 

NOT
EXERCISABLE AFTER JULY 30, 2010 OR EARLIER IF REDEEMED OR
EXCHANGED BY THE COMPANY.  THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY ANY PERSON WHO IS, WAS, OR BECOMES AN ACQUIRING
PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT), WHETHER CURRENTLY BENEFICIALLY OWNED BY OR ON BEHALF OF SUCH
PERSON OR BY ANY SUBSEQUENT BENEFICIAL OWNER MAY BECOME NULL AND VOID.

 

Rights
Certificate

 

iBASIS,
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 30,
2009 (the “Rights Agreement”), between iBasis, Inc., a Delaware
corporation (the “Company”), and Computershare Trust Company, N.A. (the “Rights
Agent”), to purchase from the Company at any time prior to 5:00 P.M.,
New York City time, on July 30, 2010 at the
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-hundredth of a fully paid, non-assessable
share of Series A Junior Participating Preferred Stock of the Company (a “Preferred
Share”), at a purchase price of $10.00
per one one-hundredth of a share (such purchase price, as may be
adjusted, the “Purchase Price”), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed.  The number of
Rights evidenced by this Rights Certificate (and the number of shares that may
be purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of July 30,
2009, based on the Preferred Shares as constituted at such date.  The Company reserves the right to require
prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that a number of Rights be exercised so that only whole
Preferred Shares will be issued.

 

Upon
the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate
are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate, or Affiliate,
or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of a person who, after such transfer, became an Acquiring Person, or
an Affiliate or Associate of an 

 

B-1

 

Acquiring Person, such Rights shall become null and void and no holder
hereof shall have any right with respect to such Rights from and after the
occurrence of such Section 11(a)(ii) Event.

 

As
provided in the Rights Agreement, the Purchase Price, the number and kind of
Preferred Shares or other securities issuable upon exercise of a Right, and the
number of Rights outstanding are subject to modification and adjustment upon
the happening of certain events, including Triggering
Events.

 

This
Rights Certificate is subject to all of the terms, provisions, and conditions
of the Rights Agreement, which terms, provisions,
and conditions are hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties, and
immunities hereunder of the Rights Agent, the Company, and the holders of the
Rights Certificates, which limitations of rights include the temporary
suspension of the exercisability of such Rights under the specific
circumstances set forth in the Rights Agreement.  Copies of the Rights Agreement are on file at
the above-mentioned office of the Rights Agent and are also available upon
written request to the Rights Agent.

 

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

 

Subject
to the provisions of the Rights Agreement, the Rights evidenced by this Rights
Certificate may be redeemed by the Company at its option at a redemption price
of $0.01 per Right at any time prior to the earlier of (i) the time
immediately prior to such time as any person first becomes an Acquiring Person,
and (ii) the Final Expiration Date (as such term is defined in the Rights
Agreement).  In addition, under certain
circumstances following the time any person becomes an Acquiring Person, the
Rights may be exchanged, in whole or in part, for Common Shares, Preferred
Shares, or shares of other preferred stock of the Company having essentially the same value or economic rights as such shares.  Immediately upon the action of the Board of
Directors of the Company authorizing any such exchange, and without any further
action or any notice, the Rights (other than Rights that are not subject to
such exchange) will terminate and the Rights will only enable holders to
receive the shares issuable upon such exchange.

 

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

 

No
holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of Preferred Shares or of any
other securities of the Company that may at any time be issuable on the
exercise hereof, nor shall anything contained in the 

 

B-2

 

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 consent to or withhold consent
from any corporate action, or, to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement),
or to receive dividends or subscription rights, or otherwise, until the Right
or Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.

 

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

 

B-3

 

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

 

	
  Dated
  as of
                      
            ,
  20      .

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:  

  	
   

  	
  iBASIS,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:
  

  	
   

  	
   

  	
  By:
  

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  COMPUTERSHARE
  TRUST COMPANY, N.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Authorized Signature

  	
   

  	
   

  
						

 

B-4

 

[Form of
Reverse Side of Rights Certificate]

 

FORM OF ASSIGNMENT

 

(To
be executed by the registered holder if such

holder desires to transfer the Rights Certificate.)

 

	
  FOR
  VALUE RECEIVED 

  	
   

  	
   hereby sells, assigns and transfers unto

  
	
   

  
	
   

  
	
  (Please
  print name and address of transferee)

  

 

	
   

  
	
   

  
	
  (Please
  spell out and include in numerals the

  
	
  number
  of Rights being transferred by this Assignment)

  

 

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

 

Dated: 
                                    ,          

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

Medallion Signature Guaranteed:

 

B-5

 

Certificate

 

The
undersigned hereby certifies by checking the appropriate boxes that:

 

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

 

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

 

	
  Dated:
                                        ,               

  	
   

  
	
   

  	
  Signature

  

 

Medallion
Signature Guaranteed:

 

NOTICE

 

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

 

B-6

 

[Form of
Reverse Side of Rights Certificate — continued]

 

FORM OF ELECTION TO PURCHASE

 

(To
be executed by the registered holder if such holder desires to

exercise
any or all Rights evidenced by the Rights Certificate.)

 

To:
iBasis, Inc.:

 

The
undersigned hereby irrevocably elects to exercise
                                                        
(                              )
Rights evidenced by this Rights Certificate to purchase the Preferred Shares
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to or that such shares be credited to the book-entry account of:

 

	
   

  
	
  (Please
  print social security or other identifying number)

  
	
   

  
	
   

  
	
   

  
	
  (Please
  print name and address)

  
	
   

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

  
	
   

  
	
   

  
	
  (Please
  print social security or other identifying number)

  
	
   

  
	
   

  
	
   

  
	
  (Please
  print name and address)

  

 

 

Dated:
                                        ,

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

Medallion
Signature Guaranteed:

 

B-7

 

Certificate

 

The
undersigned hereby certifies by checking the appropriate boxes that:

 

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

 

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

 

 

	
  Dated:                                       ,

  	
   

  
	
   

  	
  Signature

  

 

 

Medallion
Signature Guaranteed:

 

NOTICE

 

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

 

B-8

 

Exhibit C

 

UNDER CERTAIN CIRCUMSTANCES SET
FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR BENEFICIALLY OWNED BY ANY
PERSON WHO IS, WAS, OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR
ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER
CURRENTLY BENEFICIALLY OWNED BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT BENEFICIAL OWNER WILL BECOME NULL AND VOID.

 

SUMMARY OF RIGHTS

TO PURCHASE PREFERRED STOCK

 

On
July 30, 2009, the Board of Directors of iBasis, Inc., a Delaware
corporation (the “Company”), declared a dividend distribution of one
right (each, a “Right”) for each outstanding share of common stock, par
value $0.001, of the Company (the “Common Shares”).  The dividend is payable on August 10,
2009 to holders of record as of the close of business on August 10,
2009 (the “Record Date”).

 

The
following is a summary description of the Rights.  This summary is intended to provide a general
description only and is subject to the detailed terms and conditions of the
Rights Agreement (the “Rights Agreement”), dated as of July 30,
2009, by and between the Company and Computershare Trust Company, N.A., as
rights agent (the “Rights Agent”).

 

1.             Issuance of Rights

 

Each
holder of Common Shares as of the Record Date will receive a dividend of one
Right per Common Share.  One Right will
also be issued together with each Common Share issued by the Company after the
Record Date and prior to the Distribution Date (as defined in Section 2
below), and in certain circumstances, after the Distribution Date.  New certificates (or, if uncertificated,
ownership statements in lieu thereof) for Common Shares issued after the Record
Date will contain a notation incorporating the Rights Agreement by reference.

 

Until the Distribution Date:

 

·              the Rights will
not be exercisable;

 

·              the Rights will
be evidenced by the certificates for Common Shares (or by the ownership
statements issued with respect to uncertificated Common Shares) and not by
separate rights certificates; and

 

·              the Rights will
be transferable by, and only in connection with, the transfer of Common Shares.

 

C-1

 

2.             Distribution Date;
Beneficial Ownership

 

The
Rights are not exercisable until the Distribution Date.  As of and after the Distribution Date, the
Rights will separate from the Common Shares and each Right will become
exercisable to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $0.001 per share, of the Company (each
whole share, a “Preferred Share”) at a purchase price of $10.00 (such purchase
price, as may adjusted, the “Purchase Price”).  This portion of a Preferred Share would give
the holder thereof approximately the same dividend, voting, and liquidation
rights as would one Common Share.

 

The
“Distribution Date” is the earliest of:

 

·              10 days
following a public announcement that a person has become an “Acquiring Person”
by acquiring beneficial ownership of 15% or more of the outstanding Common
Shares then outstanding (or, in the case of a person that had beneficial
ownership of 15% or more of the outstanding Common Shares on the date the
Rights Agreement was executed, by obtaining beneficial ownership of any
additional Common Shares) other than as a result of repurchases of Common
Shares by the Company;

 

·              10 business
days (or such later date as the Board of Directors of the Company shall
determine prior to the time a person becomes an Acquiring Person) after the
commencement by or on behalf of any person (other than the Company or certain
related entities) of a tender or exchange offer, if (a) such tender
offer or exchange offer has not commenced as of the date of the Rights
Agreement, and (b) upon consummation thereof, such person would become an
Acquiring Person; and

 

·              immediately
prior to the acceptance for payment of the Common Shares tendered pursuant to
any tender offer or exchange offer commenced by or on behalf of any person
(other than the Company or certain related entities) prior to, and pending as
of, the date of the Rights Agreement, if upon consummation thereof such person
would become an Acquiring Person.

 

A
person will be deemed to “beneficially own” any Common Shares if such person or
any affiliated or associated person of such person:

 

·              is considered a
“beneficial owner” of the Common Shares under Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and as in
effect on the date of the Rights Agreement;

 

·              has the right
to acquire the Common Shares, either immediately or in the future, pursuant to
any agreement, arrangement, or understanding (other than a customary
underwriting agreement relating to a bona fide public offering of the Common
Shares) or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise, except that a person will not be deemed to
be a beneficial owner of (a) Common Shares tendered pursuant to a tender
or exchange offer by or on behalf of such person or any affiliated or
associated 

 

C-2

 

persons of such person until the tendered Common Shares are accepted
for purchase or exchange, (b) securities issuable upon exercise of a Right
before the occurrence of a Triggering Event (as defined in Section 5 below),
or (c) securities issuable upon exercise of a Right after the occurrence
of a Triggering Event if the Rights are originally issued Rights or were issued
in connection with an adjustment to originally issued Rights;

 

·              has the right
to vote or dispose of the Common Shares pursuant to any agreement, arrangement,
or understanding (other than a right to vote arising from the granting of a
revocable proxy or consent that is not also then reportable on a Schedule 13D);
or

 

·              has an
agreement, arrangement, or understanding with another person who beneficially
owns Common Shares and the agreement, arrangement, or understanding is for the
purpose of acquiring, holding, voting, or disposing of any securities of the
Company (other than customary underwriting agreements relating to a bona fide
public offering of Common Shares or a right to vote arising from the granting
of a revocable proxy or consent that is not also then reportable on a Schedule
13D).

 

3.             Issuance of Rights Certificates

 

As
soon as practicable after the Distribution Date, the Rights Agent will mail
rights certificates to holders of record of the Common Shares as of the close
of business on the Distribution Date and, thereafter, the separate rights
certificates alone will evidence the Rights.

 

4.             Expiration of Rights

 

The
Rights will expire on the earliest of (a) 5:00 P.M., New York City
time, on July 30, 2010, (b) the time at which the Rights are redeemed
(as described in Section 6 below), and (c) the time at which the
Rights are exchanged in full (as described in Section 7 below).

 

5.             Change of Exercise of Rights
Following Certain Events

 

The
following described events are referred to as “Triggering Events”:

 

(a)           Flip-In Event.  In the event that a person becomes an
Acquiring Person, each holder of a Right will
thereafter have the right to receive, upon exercise, Common Shares (or, in
certain circumstances, other securities, cash, or other assets of the Company)
having a value equal to two times the Purchase Price.  Notwithstanding any of the foregoing,
following the occurrence of a person becoming an Acquiring Person, all Rights
that are, or (under certain circumstances specified in the Rights Agreement)
were, beneficially owned by any Acquiring Person (or by certain related
parties) will be null and void.

 

(b)           Flip-Over Events.  In the event that, at any time after a person
has become an Acquiring Person, (i) the Company engages in a merger or
other business combination transaction in which the Company is not the continuing
or surviving corporation or other entity, (ii) the Company engages in a
merger or other business combination transaction in which the 

 

C-3

 

Company is the continuing or surviving corporation and the Common
Shares of the Company are changed or exchanged, or (iii) 50% or more of
the Company’s assets or earning power is sold or transferred, each holder of a
Right (except Rights that have previously been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the Purchase Price.

 

6.             Redemption

 

At
any time prior to such time as any person becomes an Acquiring Person, the
Board of Directors of the Company may direct the Company to redeem the Rights
in whole, but not in part, at a price of $0.01 per Right (payable in cash,
Common Shares, or other consideration
deemed appropriate by the Board of Directors of the Company).  Immediately upon the action
of the Board of Directors of the Company directing the Company to redeem the
Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $0.01 redemption price.

 

7.             Exchange of Rights

 

At
any time after a person becomes an Acquiring Person, the Board of Directors of
the Company may direct the Company to exchange the Rights (other than Rights
owned by such person or certain related parties, which will have become void),
in whole or in part, at an exchange ratio of one Common Share per Right
(subject to adjustment).  The Company may
substitute Preferred Shares (or shares of a class or series of the Company’s
preferred stock having equivalent rights, preferences, and privileges) for
Common Shares at an initial rate of one one-hundredth of a Preferred Share (or
of a share of a class or series of the Company’s preferred stock having
equivalent rights, preferences, and privileges) per Common Share.  Immediately upon the action
of the Board of Directors of the Company directing the Company to exchange the
Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the number of Common Shares (or one
one-hundredth of a Preferred Share or of a share of a class or series of the
Company’s preferred stock having equivalent rights, preferences, and
privileges) equal to the number of Rights held by such holder multiplied by the
exchange ratio.

 

8.             Adjustments to Prevent
Dilution; Fractional Shares

 

The
Board of Directors of the Company may adjust the Purchase Price, the number of
Preferred Shares or other securities or assets issuable upon exercise of a
Right, and the number of Rights outstanding to prevent dilution that may occur (a) in
the event of a stock dividend on, or a subdivision, combination, or reclassification
of, the Preferred Shares, (b) in the event of a stock dividend on, or a
subdivision or combination of, the Common Shares, (c) if holders of the
Preferred Shares are granted certain rights, options, or warrants to subscribe
for Preferred Shares or convertible securities at less than the current market
price of the Preferred Shares, or (d) upon the distribution to holders of
the Preferred Shares of evidences of indebtedness
or assets (excluding regular periodic cash dividends) or of
subscription rights or warrants (other than those referred to above).

 

With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments amount to at least 1% of
the Purchase Price.  No fractional
Preferred 

 

C-4

 

Shares will be issued (other than fractions that
are integral multiples of one one-hundredth of a Preferred Share), and in lieu thereof, an adjustment in cash may be made based on the
market price of the Preferred Shares on the last trading date prior to the date
of exercise.

 

9.             No Stockholder Rights Prior
to Exercise; Tax Considerations

 

Until
a Right is exercised, the holder thereof, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends.  While the
distribution of the Rights will not be taxable to stockholders or to the
Company, stockholders may, depending upon the circumstances,
recognize taxable income in the event that the Rights become exercisable for
Common Shares (or other consideration) of the Company or for common shares
of the acquiring company or in the event of the redemption of the Rights as set
forth in Section 6 above.

 

10.          Amendment
of Rights Agreement

 

As
long as the Rights are then redeemable, the Company may supplement or amend any
provisions of the Rights Agreement in any respect without the approval of any
holders of the Rights.  At any time when
the Rights are no longer redeemable the Company may supplement or amend the
Rights Agreement without the approval of any holders of Rights in order to (a) cure
any ambiguity, (b) correct or supplement any provisions contained therein
which may be defective or inconsistent with any other provisions therein, (c) shorten
or lengthen any time period thereunder, or (d) change or supplement the
provisions thereunder 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 certain of their transferees), and no such amendment may cause the
Rights again to become redeemable or cause the Rights Agreement again to become
amendable other than in accordance with this sentence.

 

A copy
of the Rights Agreement has been filed by the Company with the Securities and
Exchange Commission as an exhibit to a Form 8-K filed on July 30,
2009.  In addition, 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.

 

C-5Exhibit
10.a

 

CUMMINS INC.

2003 STOCK INCENTIVE PLAN

(As Amended October 14, 2003, February 20,
2007 and February 9, 2009)

 

1. 
Objectives.    The Cummins Inc. 2003
Stock Incentive Plan (the “Plan”) is designed to retain and motivate executives
and other selected employees, and to link the interests of these employees with
the interests of the Company’s shareholders. It is also intended to be a source
of equity-based annual fees payable to non-employee directors of the Company to
more closely link their financial interests with those of the Company’s
shareholders. These objectives are accomplished by making incentive and other
awards of the Company’s stock under the Plan thereby providing Participants
with a proprietary interest in the growth and performance of the Company.

 

2. 
Definitions.

 

(a) “Award”—The grant of any form of stock
option, stock appreciation right or stock award whether granted singly, in
combination or in tandem, to a Participant pursuant to such terms, conditions
and limitations as the Committee may establish in order to fulfill the
objectives of the Plan.

 

(b) “Award Agreement”—An agreement between the
Company and a Participant that sets forth the terms, conditions and limitations
applicable to an Award.

 

(c) “Board”—The Board of Directors of the
Company.

 

(d) “Change of Control”—The occurrence of any
of the following: (i) there shall be consummated (A) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Common Stock
would be converted in whole or in part into cash, other securities or other
property, other than a merger of the Company in which the holders of Common
Stock immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (B) any sale, lease, exchange or transfer (in one transaction
or a series of related transactions) of all or substantially all the assets of
the Company; or (ii) the stockholders of the Company shall approve any
plan or proposal for the liquidation or dissolution of the Company; or (iii) any
“person” (as such term is used in Sections 13(d)(3) and 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other
than the Company or a subsidiary thereof or any employee benefit plan sponsored
by the Company or a subsidiary thereof, shall become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of securities of
the Company representing 25% or more of the combined voting power of the
Company’s then outstanding securities ordinarily (and apart from rights
accruing in special circumstances) having the right to vote in the election of
directors, as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise; or (iv) at any time during a
period of two consecutive years, individuals who, at the beginning of such
period constituted the Board, shall cease for any reason to constitute at least
a majority thereof, unless the election or the nomination for election by the
Company’s stockholders of each new director during such two-year period was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such two-year period; or (v) any
other event shall occur that would be required to be reported in response to
Item 6(e) (or any successor provision) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act.

 

(e) “Common Stock”—Authorized and issued or
unissued Common Stock, par value $2.50 per share, of the Company.

 

(f) “Code”—The Internal Revenue Code of 1986,
as amended from time to time.

 

(g) “Committee”—The Compensation Committee of
the Board, or such other committee of the Board that is designated by the Board
to administer the Plan. The Committee shall be constituted so as to permit the
Plan to comply with Rule 16b-3 promulgated under the Exchange Act or any
successor rule and shall initially consist of not less than three members
of the Board, each of whom is ineligible to receive Awards (other than
automatic fee Awards to Outside Directors described in Section 6 below),
shall have been so ineligible for at least one year prior to serving on the
Committee and shall satisfy the requirements to be a disinterested person
contained in Rule 16-b-3(1)(2)(i).

 

(h) “Company”—Cummins Inc. and its
subsidiaries, including subsidiaries of subsidiaries.

 

(i) “Fair Market Value”—The average of the high
and low prices of the Common Stock as reported on the composite tape for
securities listed on the New York Stock Exchange for the date in question,
provided that if no sales of Common Stock were made on said Exchange on that
date, the average of the high and low prices of Common Stock as reported on
said composite tape for the preceding day on which sales of Common Stock were
made on said Exchange.

 

(j) “Outside
Director”—A non-employee member of the Board.

 

(k) “Participant”—Any employee or Outside
Director of the Company to whom an Award has been made under the Plan.

 

3. 
Eligibility.    Employees of the Company
eligible for an Award under the Plan are those who hold positions of
responsibility and whose performance, in the judgment of the Committee or the
management of the Company, can have a significant effect on the success of the
Company. All Outside Directors are also eligible.

 

4. Stock Available for Awards.    A
total of thirteen million five hundred thousand (13,500,000) shares of the
Company’s Common Stock shall be available for Awards granted wholly or partly
in stock under provisions of the Plan. From time to time, the Board and
appropriate officers of the Company shall take whatever actions are necessary
to file required documents with governmental

 

 

authorities
and stock exchanges to make shares of Common Stock available for issuance
pursuant to Awards. Common Stock related to Awards under this Plan or the 1992
Stock Incentive Plan that are forfeited, terminated or expired unexercised, or
related to options or stock appreciation rights settled in cash in lieu of
stock, shall again become available for Awards. Any Common Stock that so
becomes available shall be carried forward and be available for Awards.

 

5. Administration.    The
Plan shall be administered by the Committee, which shall have full and
exclusive power to interpret the Plan, to grant waivers of Plan restrictions
(other than restrictions related to automatic fee Awards described in Section 6
below), including waivers of restrictions on exercise of outstanding stock options
and appreciation rights, waivers of vesting requirements and acceleration of
Award payments, and to adopt such rules, regulations and guidelines for
carrying out the Plan as it may deem necessary or proper, all of which powers
shall be executed in the best interests of the Company and in keeping with the
objectives of the Plan. These powers include, but are not limited to, the
adoption of modifications, amendments, procedures, sub-plans and the like as
are necessary to comply with provisions of the laws of other countries in which
the Company may operate in order to assure the viability of Awards granted
under the Plan and to enable Participants employed in such other countries to
receive advantages and benefits under the Plan and such laws.

 

6. Director Automatic Formula
Awards.    Each Outside Director shall automatically
receive, on the date of each annual meeting of Shareholders, in lieu of cash
payment an annual award of Common stock, restricted as to transfer for a period
of six (6) months following the date of the award. The number of shares in
each such annual award shall be equal to one-half (1/2) of his or her Board
retainer fee, divided by the average of closing prices of Common Stock as
reported on the composite tape of the 
New York Stock Exchange for the twenty (20) consecutive trading
days immediately preceding the date of the award.

 

7. Employee Awards.    The
Committee shall determine the type or types of Award(s) to be made to each
employee Participant and shall set forth in the related Award Agreement the
terms, conditions and limitations applicable to each Award. Awards may include
but are not limited to those listed in this Section 7. Awards may be
granted singly, in combination or in tandem. Awards may also be made in
combination or in tandem with, in replacement of or as alternatives to grants
or rights under any other employee plan of the Company, including the plan of
any acquired entity. On such terms and conditions as shall be approved by the
Committee, the Company or any of its subsidiaries may directly or indirectly
lend money to any Participant or other person to accomplish the purposes of the
Plan, including to assist such person to acquire shares of Common Stock
acquired upon the exercise of options,
provided, however, such lending would not violate terms of the
Sarbanes-Oxley Act of 2002. No more than one-half of the total shares
authorized under this plan may be awarded as Stock Awards, as defined in (c) below,
that are subject only to the condition of continuous service with the Company.

 

(a)  Stock Option—A grant of the
right to purchase a specified number of shares of Common Stock at not less than
100% of Fair Market Value on the date of grant during a specified period as
determined by the Committee. A stock option may be in the form of an incentive
stock option (“ISO”) which, in addition to being subject to applicable terms,
conditions and limitations established by the Committee, complies with Section 422
of the Code which, among other limitations, provides that (i) to the extent
that the aggregate Fair Market Value (determined at the time the option is
granted) of Common Stock exercisable for the first time by a Participant during
any calendar year exceeds $100,000 (or such other limit as may be required by
the Code), such option shall not be treated as an ISO and (ii) the option
shall be exercisable for a period of not more than ten years from the date of
grant.

 

(b)   Stock Appreciation Right—A right to
receive a payment, in cash and/or Common Stock, equal to the excess of the Fair
Market Value or other specified valuation of a specified number of shares of
Common Stock on the date the stock appreciation right (“SAR”) is exercised over
the Fair Market Value or other specified valuation on the date of grant of the
SAR as set forth in the applicable Award Agreement, except that where the SAR
is granted in tandem with a stock option, the grant and exercise valuations
must be not less than Fair Market Value.

 

(c)  Stock Award—An Award made
in Common Stock or denominated in units of Common Stock. All or part of any
Common Stock award may be subject to conditions established by the Committee
and set forth in the Award Agreement, which may include, but are not limited
to, continuous service with the Company, achievement of specific business
objectives, increases in specified indices, attaining growth rates and other
comparable measurements of Company performance. Such Awards may be based on
Fair Market Value or other specified valuation.

 

The
minimum restriction period for Performance Shares (shares requiring certain
performance measures to be achieved in order to vest) will be one year from the
Grant Date. The minimum restriction period for Restricted Stock (shares
requiring only continued employment with the Company to vest) will be two years
if vesting occurs in annual increments, and three years if cliff vesting occurs
for the entire grant. The minimum restriction periods for Restricted Stock do
not apply to Restricted Stock that was originally granted as Performance Shares
and is converted to Restricted Stock after being earned by achieving
performance measures. The minimum restriction periods do not apply to any
grants made in lieu of cash compensation, as is the case for Outside Directors.

 

8. 
Payment of Awards.    Award payments made
in the form of Common Stock may include such restrictions, as the Committee
shall determine, including restrictions on transfer and forfeiture provisions.
When transfer of Common Stock is so restricted or subject to forfeiture
provisions it is  referred to as “Restricted
Stock”. Further, with Committee approval, payments may be deferred, either in
the form of installments or a future single payment. The Committee may permit
selected Participants to elect to defer payments of some or all types of Awards
in accordance with procedures established by the Committee to assure that such
deferrals comply with applicable requirements of the Code including, at the
choice of Participants, the capability to make further deferrals for payment
after retirement. Any deferred payment, whether elected by the Participant or
specified by the Award Agreement or by the Committee, may require the payment
be forfeited in accordance with the provisions of Section 11. Dividends or
dividend equivalent rights may be extended to and made part of any Award
denominated in Common Stock or units of Common Stock,

 

 

subject
to such terms, conditions and restrictions as the Committee may establish. The
Committee may also establish rules and procedures for the crediting of
dividend equivalents for deferred payments denominated in Common Stock or units
of Common Stock. At the discretion of the Committee, a participant may be
offered an election to substitute an Award for another Award or Awards of the
same or different type.

 

9. 
Stock Option Exercise.    The
price at which shares of Common Stock may be purchased under a stock option
shall be paid in full at the time of the exercise in cash or, if permitted by
the Committee, by means of tendering Common Stock or surrendering another
Award, including Restricted Stock, valued at Fair Market Value on the date of
exercise, or any combination thereof. The Committee shall determine acceptable
methods for tendering Common Stock or other Awards and may impose such
conditions on the use of Common Stock or other Awards to exercise a stock
option as it deems appropriate. In the event shares of Restricted Stock are
tendered as consideration for the exercise of a stock option, a number of the
shares issued upon the exercise of the stock option, equal to the number of
shares of Restricted Stock used as consideration therefor, shall be subject to
the same restrictions as the Restricted Stock so submitted plus any additional
restrictions that may be imposed by the Committee.

 

10. 
Tax Withholding.    The Company shall
have the right to deduct applicable taxes from any Award payment and to retain
at the time of delivery or vesting of shares under the Plan, an appropriate
number of shares of Common Stock in value sufficient to cover the payment of
any taxes required by law to be withheld or to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes; provided, however, that a Participant shall have the
option to provide the Company with the funds to enable it to pay such taxes.
Notwithstanding the preceding sentence, if the Participant is subject to Section 16
of the Exchange Act, the Participant must affirmatively elect whether he wishes
to (i) have the Company retain shares of Common Stock, (ii) provide
the Company with other funds or (iii) have the Company deduct an amount
from other compensation due him in order to satisfy the tax withholding
requirements arising under an Award.

 

11. 
Termination of Employment.    If
the employment of a Participant terminates, other than pursuant to
paragraphs (a) through (c) of this Section 11, all
unexercised, deferred and unpaid Awards shall be canceled immediately, unless
the Award Agreement provides otherwise.

 

(a)  Retirement Under a
Company Retirement Plan.    When a Participant’s
employment by the Company terminates as a result of retirement in accordance
with the terms of a Company retirement plan, the Committee may permit Awards to
continue in effect beyond the date of retirement in accordance with the
applicable Award Agreement and the exercisability and vesting of any Award may
be accelerated.

 

(b)  Resignation in the Best
Interests of the Company.    When a Participant
resigns from the Company and, in the judgment of the Committee, the acceleration
and/or continuation of outstanding Awards would be in the best interests of the
Company, the Committee may (i) authorize, where appropriate, the
acceleration and/or continuation of all or any part of Awards granted prior to
such termination and (ii) permit the exercise, vesting and payment of such
Awards for such period as may be set forth in the applicable Award Agreement,
subject to earlier cancellation pursuant to Section 12 or at such time as
the Committee shall deem the continuation of all or any part of the Participant’s
Awards are not in the Company’s best interests.

 

(c)  Death or Disability of a
Participant.

 

(i)  In the event of
a Participant’s death, the Participant’s estate or beneficiaries shall have the
period specified in the Award Agreement within which to receive or exercise any
outstanding Award held by the Participant under such terms as may be specified
in the applicable Award Agreement.

 

(ii)In the event a
Participant is deemed by the Company to be disabled and eligible for benefits pursuant
to the terms of the Company’s Long-Term Disability Plan, any successor plan, or
similar plan of another employer, Awards and rights to any Awards may be paid
to or exercised by the Participant, if legally competent, or a committee or
other legally designated guardian or representative if the Participant is
legally incompetent by virtue of such disability.

 

(iii) After the death
or disability of a Participant, the Committee may in its sole discretion at any
time (1) terminate restrictions in Award Agreements; (2) accelerate
any or all installments and rights; and (3) instruct the Company to pay
the total of any accelerated payments in a single sum to the Participant, the
Participant’s estate, beneficiaries or representative—notwithstanding that, in
the absence of such termination of restrictions or acceleration of payments,
any or all of the payments due under the Awards might ultimately have become
payable to other beneficiaries.

 

Restriction
periods for grants of Restricted Stock and Performance Shares will not be
accelerated except in the event of Retirement, Death, Disability, or Change of
Control of the Corporation.

 

12. 
Cancellation and Rescission of Awards.    Unless
the Award Agreement specifies otherwise, the Committee may cancel any unexpired,
unpaid or deferred Award at any time if the Participant is not in compliance
with all other applicable provisions of the Award Agreement and the Plan and
with the condition that the Participant (whether or not an employee of the
Company at the time) shall not render services for any organization or engage
directly or indirectly in any business which, in the judgment of the Committee,
is or becomes competitive with the Company, or which organization or business,
or the rendering of services to such organization or business, is or becomes
otherwise prejudicial to or in conflict with the interests of the Company.

 

13. 
Transferability.

 

(a)  Except pursuant
to paragraph (c) of Section 11 or paragraph (b) below,
no Award or any other benefit under the Plan shall be

 

 

assignable
or transferable, or payable to or exercisable by, anyone other than the
Participant to whom it was granted.

 

(b)  The Company may
expressly provide in an Award Agreement (or an amendment to an Award Agreement)
that a Participant may transfer a stock option Award (other than an ISO), in
whole or in part, to a spouse, domestic partner, or lineal descendant (a “Family
Member”), a trust for the exclusive benefit of Family Members, or a partnership
or other entity in which all the beneficial owners are Family Members.
Subsequent transfers of Awards shall be prohibited except in accordance with
this paragraph 13(b). All terms and conditions of the Award, including
provisions relating to the termination of the Participant’s employment or
service with the Company, shall continue to apply following a transfer made in
accordance with this paragraph 13(b).

 

14. 
Adjustments.    In the event of any change
in the Common Stock by reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, split-up, spin-off, dividend
other than a regular quarterly cash dividend, separation, reorganization,
liquidation, merger, consolidation or similar event, the Committee may adjust
proportionally (a) the number of shares of Common Stock (i) reserved
under the Plan, and (ii) covered by outstanding Awards; (b) the stock
prices related to outstanding Awards; and (c) the appropriate Fair Market
Value and other price determinations for such Awards. In the event of any other
change affecting the Common Stock or any distribution (other than normal cash
dividends) to holders of Common Stock, such adjustments as may be deemed
equitable by the Committee, including adjustments to avoid fractional shares,
shall be made to give proper effect to such event. In the event of any of the
changes described in the first sentence of this Section 14, the Committee
shall be authorized to issue or assume stock options, whether or not in a
transaction to which Section 424(a) of the Code applies, by means of
substitution of new options for previously issued options or an assumption of
previously issued options.

 

15. 
Change of Control.    In the event of a
Change of Control, any time period relating to the exercisability or
realization of an outstanding Award shall be immediately accelerated so that
any outstanding Award as of the date of the Change of Control may be exercised
or realized in full. In addition, in order to maintain the Participant’s rights
in the event of a Change of Control, the Committee, in its sole discretion,
may, either at the time an Award is made hereunder or at any time prior to, or
coincident with or after the time of, a Change of Control:

 

(a)  make such
adjustment to the Awards then outstanding as the Committee deems appropriate to
reflect such Change of Control; or

 

(b)  cause the Awards
then outstanding to be assumed, or new rights substituted therefor, by the
surviving corporation in such Change of Control.

 

The
Committee may, in its discretion, include such further provisions and
limitations in any agreement documenting such Awards, as it may deem equitable
and in the best interests of the Company with respect to changes in control.

 

16. 
Amendment, Modification, Suspension or Discontinuance of the Plan.    The
Board may amend, modify, suspend or terminate the Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other
purpose permitted by law. Subject to changes in law or other legal
requirements, which would permit otherwise, the Plan may not be amended without
the consent of the holders of a majority of the shares of Commons Stock then
outstanding to (i) increase the maximum number of shares of Common Stock
that may be awarded under the Plan (except for adjustments pursuant to Section 14
of the Plan), (ii) decrease the option price, (iii) materially modify
the requirements as to eligibility for participation in the Plan, (iv) withdraw
administration of the Plan from the Committee or (v) extend the period
during which Awards may be granted.

 

17. 
Governing Law.    The Plan and all
determinations made and actions taken pursuant hereto, to the extent not
otherwise governed by the Code or the securities laws of the United States,
shall be governed by the laws of the State of Indiana and construed accordingly.

 

18. 
Effective and Termination Dates.    The
Plan shall become effective on the date of its adoption by the Board and Awards
may be made immediately thereafter, but no Stock Award may be paid, Restricted
Stock issued (unless containing restrictions requiring cancellation of such
Restricted Stock if stockholder approval is not received) or Stock Option
exercised under the Plan until it is approved by the holders of a majority of
the shares of common Stock then outstanding. The Plan shall terminate on December 31,
2012, subject to earlier termination by the Board pursuant to Section 16.

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