Document:

Exhibit 10.4

 

STOCKHOLDERS
RIGHTS AGREEMENT

 

This Stockholders Rights Agreement (this “Rights Agreement”) is
made and entered into as of September 18, 2006, by and between Danaos
Corporation, a Marshall Islands corporation (the “Company”), and
American Stock Transfer & Trust Company, as Rights Agent (the “Rights
Agent”).

 

WHEREAS, the Board of Directors of the Company (the “Board”) has
(a) authorized and declared a grant of one right (the “Right”) for each
share of the Company’s common stock, par value U.S.$.01 per share (the “Common
Stock”), held of record as of the Close of Business (as hereinafter
defined) on September 25, 2006 (the “Record Date”) and (b) has
further authorized the issuance of one Right in respect of each share of Common
Stock that shall become outstanding (i) at any time between the Record Date and
the earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date (as such terms are hereinafter defined) or (ii) upon the
exercise or conversion, prior to the earlier of the Redemption Date or the
Final Expiration Date, of any option or other security exercisable for or
convertible into shares of Common Stock, which option or other such security is
outstanding on the Distribution Date; and

 

WHEREAS, each Right represents the right of the holder thereof to
purchase one one-thousandth of a share of Series A Participating Preferred
Stock (as such number may hereafter be adjusted pursuant to the provisions
hereof), upon the terms and subject to the conditions set forth herein, having
the rights, preferences and privileges set forth in the Statement of
Designation of Series A Participating Preferred Stock, attached hereto as
Exhibit A.

 

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

 

1.             Certain
Definitions.

 

“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 shares of Common Stock then outstanding, but shall
not include (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
any entity holding shares of Common Stock for or pursuant to the terms of any
such plan or (iv) an Exempted Person. Notwithstanding the foregoing, no Person
shall be deemed to be an Acquiring Person as the result of an acquisition of
shares of Common Stock by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person to 15% or more of the shares of Common Stock of the Company then
outstanding; provided, however, that a Person who (i) becomes the Beneficial
Owner of 15% or more of the shares of Common Stock of the Company then
outstanding by reason of share purchases by the Company and (ii) then after
such share purchases by the Company, becomes the Beneficial Owner of any
additional shares of Common Stock of the Company (other than pursuant to a
dividend or distribution paid or made by the Company on the outstanding shares
of Common Stock in shares of Common Stock or pursuant to a split or subdivision
of the outstanding shares of Common Stock) representing one percent or more of
the Common Stock then outstanding, such Person shall be deemed to be an
Acquiring 

 

 

Person unless upon becoming the
Beneficial Owner of such additional shares of Common Stock of the Company such
Person does not beneficially own 15% or more of the shares of Common Stock of
the Company then outstanding. Notwithstanding the foregoing, (i) if the Company’s
Board of Directors determines in good faith that a Person who would otherwise
be an “Acquiring Person,” as defined herein, has become such inadvertently
(including, without limitation, because (A) such Person was unaware that it
beneficially owned a percentage of the shares of Common Stock that would
otherwise cause such Person to be an “Acquiring Person,” as defined herein, or
(B) such Person was aware of the extent of the shares of Common Stock it
beneficially owned but had no actual knowledge of the consequences of such
beneficial ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and if such Person divested or
divests as promptly as practicable a sufficient number of shares of Common
Stock so that such Person would no longer be an “Acquiring Person,” as defined
herein, then such Person shall not be deemed to be or to have become an “Acquiring
Person” for any purposes of this Agreement; and (ii) if, as of the date hereof,
any Person is the Beneficial Owner of 15% or more of the shares of Common Stock
outstanding, such Person shall not be or become an “Acquiring Person,” as
defined herein, unless and until such time as such Person shall become the
Beneficial Owner of additional shares of Common Stock (other than pursuant to a
dividend or distribution paid or made by the Company on the outstanding shares
of Common Stock in shares of Common Stock or pursuant to a split or subdivision
of the outstanding shares of Common Stock), unless, upon becoming the
Beneficial Owner of such additional shares of Common Stock, such Person is not
then the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding.

 

“Adjustment Fraction” shall have the meaning set forth in
Section 11(a)(i) hereof.

 

“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.

 

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

 

(i)            which
such Person or any of such Person’s Affiliates or Associates beneficially owns,
directly or indirectly, for purposes of Section 13(d) of the Exchange Act and
Rule 13d-3 thereunder (or any comparable or successor law or regulation);

 

(ii)           which
such Person or any of such Person’s Affiliates or Associates has (A) the right
to acquire (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall not
be deemed pursuant to this subsection (ii)(A) to be the Beneficial Owner of, or
to beneficially own, (1) 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

 

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Associates
until such tendered securities are accepted for purchase or exchange, or (2)
securities which a Person or any of such Person’s Affiliates or Associates may
be deemed to have the right to acquire pursuant to any merger or other
acquisition agreement between the Company and such Person (or one or more of
its Affiliates or Associates) if such agreement has been approved by the Board
of Directors of the Company prior to there being an Acquiring Person; or (B)
the right to vote pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security under this subsection (ii)(B) if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or

 

(iii)          which
are beneficially owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person or any of such Person’s
Affiliates or Associates has any agreement, arrangement or understanding,
whether or not in writing (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting (except
to the extent contemplated by the proviso to subsection (ii)(B) above) or
disposing of any securities of the Company; provided, however, that in no case
shall an officer or director of the Company be deemed (x) the Beneficial Owner
of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their
capacity as officers or directors of the Company or (y) the Beneficial Owner of
securities held of record by the trustee of any employee benefit plan of the
Company or any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director,
by reason of any influence that such officer or director may have over the
voting of the securities held in the plan.

 

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

 

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

 

“Common Stock” shall have the meaning set forth in the preamble.
Common Stock when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting
power of such other Person or, if such other Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such first-mentioned
Person.

 

3

 

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

 

“Company” shall have the meaning set forth in the preamble,
subject to the terms of Section 13(a)(iii)(c) hereof.

 

“Current Per Share Market Price” of any security (a “Security”
for purposes of this definition), for all computations other than those made
pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price
of any Security on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the ten (10) consecutive Trading
Days immediately prior to such date; provided, however, that in
the event that the Current Per Share Market Price of the Security is determined
during a period following the announcement by the issuer of such Security of
(i) a dividend or distribution on such Security payable in shares of such
Security or securities convertible into such shares or (ii) any subdivision, combination
or reclassification of such Security, and prior to the expiration of the
applicable thirty (30) Trading Day or ten (10) Trading Day period, after the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
Current Per Share Market Price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing price
for each day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last sale price or, if such
last sale price is not reported, the average of the high bid and low asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Company. If on any such date no market maker is
making a market in the Security, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company shall be used.
If the Preferred Shares are not publicly traded, the Current Per Share Market
Price of the Preferred Shares shall be conclusively deemed to be the Current
Per Share Market Price of the shares of Common Stock as determined pursuant to
this definition, as appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof, multiplied by
1000. If the Security is not publicly held or so listed or traded, Current Per
Share Market Price shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes.

 

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

 

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“Danaos Group” shall mean Danaos Shipping Company Limited,
Danaos Management Consultants, Dr. John Koustas, Protector Holdings Inc.,
Danaos Investments Limited as Trustee for the 883 Trust, any other trusts or
entities established for the benefit of Dr. John Koustas or members of his
family, any other entities wholly-owned by Dr. John Koustas and members of this
family, and each of their respective Affiliates and Associates.

 

“Distribution Date” shall mean the earlier 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) or (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of the Company’s
Board of Directors) after the date that a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan or an Exempted Person) is first published or sent or
given within the meaning of Rule 14d-2(a) of the General Rules and Regulations
under the Exchange Act, if, assuming the successful consummation thereof, such
Person would be an Acquiring Person.

 

“Equivalent Shares” shall mean Preferred Shares and any other
class or series of capital stock of the Company which is entitled to the same
rights, privileges and preferences as the Preferred Shares.

 

“Exchange Act” shall mean the U.S. Securities Exchange Act of
1934, as amended.

 

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

 

“Exempted Person” shall mean each member of the Danaos Group.

 

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

 

“Expiration Date” shall mean the earliest to occur of: (i) the
Close of Business on the Final Expiration Date, (ii) the Redemption Date, or
(iii) the time at which the Board of Directors orders the exchange of the
Rights as provided in Section 24 hereof.

 

“Final Expiration Date” shall mean September 18, 2016.

 

“Nasdaq” shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.

 

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

 

“Post-event Transferee” shall have the meaning set forth in
Section 7(e) hereof.

 

“Preferred Shares” shall mean shares of Series A Participating
Preferred Stock, U.S.$0.01 par value, of the Company.

 

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“Pre-event Transferee” shall have the meaning set forth in
Section 7(e) hereof.

 

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

 

“Record Date” shall have the meaning set forth in the recitals
at the beginning of this Rights Agreement.

 

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

 

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

 

“Rights Agent” shall mean American Stock Transfer &Trust
Company, or its successor or replacement as provided in Sections 19 and 21
hereof.

 

“Rights Certificate” shall mean a certificate substantially in
the form attached hereto as Exhibit B.

 

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

 

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

 

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

 

“Shares Acquisition Date” shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such;
provided that, if such Person is determined not to have become an Acquiring
Person as defined herein, then no Shares Acquisition Date shall be deemed to
have occurred.

 

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

 

“Subsidiary” of any Person shall mean any corporation or other
entity of which an amount of voting securities sufficient to elect a majority
of the directors or Persons having similar authority of such corporation or
other entity is beneficially owned, directly or indirectly, by such Person, or
any corporation or other entity otherwise controlled by such Person.

 

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

 

“Summary of Rights” shall mean a summary of this Agreement
substantially in the form attached hereto as

Exhibit C.

 

“Total Exercise Price” shall have the meaning set forth in
Section 4(a) hereof.

 

“Trading Day” shall mean a day on which the principal national
securities exchange on which a referenced security is listed or admitted to
trading is open for the

 

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

 

A “Triggering Event” shall be deemed to have occurred upon any
Person, becoming an Acquiring Person.

 

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

 

3.             Issuance
of Rights Certificates.

 

(a)           Until
the Distribution Date, (i) the Rights will be evidenced (subject to the
provisions of Sections 3(b) and 3(c) hereof) by the certificates for shares of
Common Stock registered in the names of the holders thereof (which certificates
shall also be deemed to be Rights Certificates) and not by separate Rights
Certificates and (ii) the right to receive Rights Certificates will be
transferable only in connection with the transfer of shares of Common Stock. Until
the earlier of the Distribution Date or the Expiration Date, the surrender for
transfer of certificates for shares of Common Stock shall also constitute the
surrender for transfer of the Rights associated with the shares of Common Stock
represented thereby. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send) by first-class, postage-prepaid mail, to each record holder of shares of
Common Stock as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Rights
Certificate evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in
the number of Rights per share of Common Stock has been made pursuant to
Section 11 hereof, then at the time of distribution of the Rights Certificates,
the Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates and may be transferred by the transfer of
the Rights Certificates as permitted hereby, separately and apart from any
transfer of shares of Common Stock, and the holders of such Rights Certificates
as listed in the records of the Company or any transfer agent or registrar for
the Rights shall be the record holders thereof.

 

(b)           On
the Record Date or as soon as practicable thereafter, the Company will send a
copy of the Summary of Rights by first-class, postage-prepaid mail, to each
record holder of shares of Common Stock as of the Close of Business on the
Record Date that requests a Summary of the Rights, at the address of such
holder shown on the records of the Company’s transfer agent and registrar. With
respect to certificates for shares of Common Stock outstanding as of the Record
Date, until the Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof together with the
Summary of Rights. Until the Distribution Date (or, if earlier, the Expiration
Date), the surrender for transfer of any

 

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certificate for shares of
Common Stock outstanding on the Record Date, with or without a copy of the
Summary of Rights, shall also constitute the transfer of the Rights associated
with the shares of Common Stock represented thereby.

 

(c)           Unless
the Board of Directors by resolution adopted at or before the time of the
issuance of any shares of Common Stock specifies to the contrary, Rights shall
be issued in respect of all shares of Common Stock that are issued after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date. Certificates representing such shares of Common Stock shall
also be deemed to be certificates for Rights, and shall bear the following
legend:

 

THIS
CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS
SET FORTH IN A STOCKHOLDERS RIGHTS AGREEMENT BETWEEN DANAOS CORPORATION AND
AMERICAN STOCK TRANSFER & TRUST COMPANY, AS THE RIGHTS AGENT, DATED AS OF SEPTEMBER 18,
2006, (THE “RIGHTS AGREEMENT”), THE TERMS OF WHICH ARE HEREBY INCORPORATED
HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICES OF DANAOS CORPORATION 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. DANAOS CORPORATION WILL MAIL
TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE
AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET
FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD 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 HELD BY OR
ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.

 

With respect to such certificates containing the foregoing legend,
until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the
Rights associated with the shares of Common Stock represented by such
certificates shall be evidenced by such certificates alone, and the surrender
for transfer of any such certificate shall also constitute the transfer of the
Rights associated with the shares of Common Stock represented thereby.

 

(d)           In
the event that the Company purchases or acquires any shares of Common Stock
after the Record Date but prior to the Distribution Date, any Rights associated
with such shares of Common Stock shall be deemed canceled and retired so that
the Company shall not be entitled to exercise any Rights associated with the
shares of Common Stock which are no longer outstanding.

 

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4.             Form
of Rights Certificates.

 

(a)           The
Rights Certificates (and the forms of election to purchase shares of Common
Stock and of assignment to be printed on the reverse thereof) shall be
substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or a national market system, on which
the Rights may from time to time be listed or included, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date (or in
the case of Rights issued with respect to shares of Common Stock issued by the
Company after the Record Date, as of the date of issuance of such shares of
Common Stock) and on their face shall entitle the holders thereof to purchase
such number of one-thousandths of a Preferred Share as shall be set forth
therein at the price set forth therein (such exercise price per one
one-thousandth of a Preferred Share being hereinafter referred to as the “Exercise
Price” and the aggregate Exercise Price of all Preferred Shares issuable upon
exercise of one Right being hereinafter referred to as the “Total Exercise
Price”), but the number and type of securities purchasable upon the
exercise of each Right and the Exercise Price shall be subject to adjustment as
provided herein.

 

(b)           Any
Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that
represents Rights beneficially owned by: (i) an Acquiring Person or any
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 to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Company’s Board of Directors has determined is part of a
plan, arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:

 

THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.

 

5.             Countersignature
and Registration.

 

(a)           The
Rights Certificates shall be executed on behalf of the Company by its Chief
Executive Officer, its Chief Operating Officer, its Chief Financial Officer,
its President or

 

9

 

any Vice President, either
manually or by facsimile signature, and by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature, and shall
have affixed thereto the Company’s seal (if any) or a facsimile thereof. The
Rights Certificates shall be manually countersigned by the Rights Agent and shall
not be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the
Company with the same force and effect as though the person who signed such
Rights Certificates on behalf of the Company had not ceased to be such officer
of the Company; and any Rights Certificate 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 Rights Agreement any such person
was not such an officer.

 

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

 

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

 

(a)           Subject
to the provisions of Sections 7(e), 14 and 24 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 Rights Certificates
may be transferred, split up, combined or exchanged for another Rights
Certificate or Rights Certificates, entitling the registered holder to purchase
a like number of one-thousandths of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets, as the case may be)
as the Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Rights Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Rights Certificates to be transferred, split up, combined
or exchanged at the office of the Rights Agent designated for such purpose. 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 Sections 7(e), 14 and 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 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,

 

10

 

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

 

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

 

(a)           Subject
to Sections 7(e), 23(b) and 24(b) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
and prior to the Close of Business on the Expiration Date by surrender of the
Rights Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the Exercise Price for
each one-thousandth of a Preferred Share (or, following a Triggering Event,
other securities, cash or other assets as the case may be) as to which the
Rights are exercised.

 

(b)           The
Exercise Price for each one-thousandth of a Preferred Share issuable pursuant
to the exercise of a Right shall initially be twenty-five U.S. Dollars (U.S.$25.00), shall be subject to adjustment from
time to time as provided in Sections 11 and 13 hereof and shall be payable in
lawful money of the United States of America in accordance with paragraph (c)
below.

 

(c)           Upon
receipt of a Rights Certificate representing exercisable Rights, with the form
of election to purchase duly executed, accompanied by payment of the Exercise
Price for the number of one-thousandths of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be) to
be purchased and an amount equal to any applicable transfer tax required to be
paid by the holder of such Rights Certificate in accordance with Section 9(e)
hereof, 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 the Preferred
Shares) a certificate or certificates for the number of one-thousandths of a
Preferred Share (or, following a Triggering Event, other securities, cash or
other assets as the case may be) 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
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one-thousandths of a
Preferred Share (or, following a Triggering Event, other securities, cash or
other assets as the case may be) as are to be purchased (in which case
certificates for the Preferred Shares (or, following a Triggering Event, other
securities, cash or other assets as the case may be) represented by such
receipts shall be deposited by the transfer agent with the depositary agent)
and the Company hereby directs the depositary agent to comply with such request,
(ii) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional shares in accordance with Section 14
hereof, (iii) 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,

 

11

 

registered in such name or
names as may be designated by such holder and (iv) when appropriate, after
receipt thereof, deliver such cash to or upon the order of the registered
holder of such Rights Certificate. The payment of the Exercise Price (as such
amount may be reduced (including to zero) pursuant to Section 11(a)(iii)
hereof) and an amount equal to any applicable transfer tax required to be paid
by the holder of such Rights Certificate in accordance with Section 9(e)
hereof, may be made in cash or by certified bank check, cashier’s check or bank
draft payable to the order of the Company. In the event that the Company is obligated
to issue securities of the Company other than Preferred Shares, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
appropriate.

 

(d)           In
case the registered holder of any Rights Certificate shall exercise less than
all the Rights evidenced thereby, a new Rights Certificate evidencing Rights
equivalent to the Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Rights Certificate or to his or her duly
authorized assigns, 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 Triggering 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 (a “Post-Event Transferee”),
(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 to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Company’s Board of
Directors has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect the avoidance of this Section 7(e) (a “Pre-Event
Transferee”) or (iv) any subsequent transferee receiving transferred Rights
from a Post-Event Transferee or a Pre-Event Transferee, either directly or
through one or more intermediate transferees, 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) and Section 4(b) hereof are complied
with, but shall have no liability to any holder of Rights Certificates or to
any other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or any of such Acquiring Person’s Affiliates,
Associates or transferees hereunder.

 

(f)            Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth in this
Section 7 unless such registered holder shall, in addition to having complied
with the requirements of Section 7(a), 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

 

12

 

(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.

 

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

 

9.             Reservation
and Availability of Preferred Shares.

 

(a)           The
Company covenants and agrees that it will use its best efforts to cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
not reserved for another purpose (and, following the occurrence of a Triggering
Event, out of its authorized and unissued shares of Common Stock and/or other
securities), the number of Preferred Shares (and, following the occurrence of
the Triggering Event, Common Stock and/or other securities) that will be
sufficient to permit the exercise in full of all outstanding Rights.

 

(b)           If
the Company shall hereafter list any of its Preferred Shares on a national
securities exchange, then so long as the Preferred Shares (and, following the
occurrence of a Triggering Event, shares of Common Stock and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on such exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (but only to the extent that
it is reasonably likely that the Rights will be exercised), all shares reserved
for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.

 

(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 Triggering Event in
which the consideration to be delivered by the Company upon exercise of the
Rights is described in Section 11(a)(ii) or Section 11(a)(iii) hereof, or as
soon as is required by law following the Distribution Date, as the case may be,
a registration statement under the Securities Act with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the
Securities 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 expiration of the
Rights. The Company may temporarily suspend, for a period not to exceed ninety
(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 and notify the Rights
Agent that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement

 

13

 

and notification to the Rights
Agent at such time as the suspension is no longer in effect. 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. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction, unless the requisite qualification in such jurisdiction shall
have been obtained, or an exemption therefrom shall be available, and until a
registration statement has been declared effective.

 

(d)           The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares (or other securities of the
Company) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such securities (subject to payment of the Exercise
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.

 

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

 

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

 

11.           Adjustment
of Exercise Price, Number of Shares or Number of Rights. The Exercise
Price, the number and kind of shares or other property covered by each Right
and the

 

14

 

number of Rights outstanding
are subject to adjustment from time to time as provided in this Section 11.

 

(a)           (i)            Notwithstanding
anything in this Agreement to the contrary, in the event the Company shall at
any time after the date of this Agreement (A) declare a dividend on the
Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding
Preferred Shares, (C) combine the outstanding Preferred Shares (by reverse
stock split or otherwise) into a smaller number of Preferred Shares, or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
then, in each such event, except as otherwise provided in this Section 11 and
Section 7(e) hereof:  (1) the Exercise
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by dividing the Exercise Price in effect immediately prior to such time by a
fraction (the “Adjustment Fraction”), the numerator of which shall be
the total number of Preferred Shares (or shares of capital stock issued in such
reclassification of the Preferred Shares) outstanding immediately following
such time and the denominator of which shall be the total number of Preferred
Shares outstanding immediately prior to such time; provided, however, that in
no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of such Right; and (2) the number of one-thousandths of
a Preferred Share (or share of such other capital stock) issuable upon the
exercise of each Right shall equal the number of one-thousandths of a Preferred
Share (or share of such other capital stock) as was issuable upon exercise of a
Right immediately prior to the occurrence of the event described in clauses
(A)-(D) of this Section 11(a)(i), multiplied by the Adjustment Fraction; provided,
however, that, no such adjustment shall be made pursuant to this Section
11(a)(i) to the extent that there shall have simultaneously occurred an event
described in clause (A), (B), (C) or (D) of Section 11(n) with a proportionate
adjustment being made thereunder. Each share of Common Stock that shall become
outstanding after an adjustment has been made pursuant to this Section 11(a)(i)
shall have associated with it the number of Rights, exercisable at the Exercise
Price and for the number of one-thousandths of a Preferred Share (or shares of
such other capital stock) as one share of Common Stock has associated with it
immediately following the adjustment made pursuant to this Section 11(a)(i).

 

(ii)           Subject
to Section 24 of this Agreement, in the event a Triggering Event shall have
occurred, then promptly following such Triggering Event each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have the right to
receive for each Right, upon exercise thereof in accordance with the terms of
this Agreement and payment of the Exercise Price in effect immediately prior to
the occurrence of the Triggering Event, in lieu of a number of one-thousandths
of a Preferred Share, such number of shares of Common Stock of the Company as
shall equal the result obtained by multiplying the Exercise Price in effect
immediately prior to the occurrence of the Triggering Event by the number of
one-thousandths of a Preferred Share for which a Right was exercisable (or
would have been exercisable if the Distribution Date had occurred) immediately
prior to the first occurrence of a Triggering Event, and dividing that product
by 50% of the Current Per Share Market Price for shares of Common Stock on the
date of occurrence of the Triggering Event; provided, however,
that the Exercise Price and the number of shares of Common Stock of the Company
so receivable upon exercise of a Right shall be subject to further adjustment
as appropriate in

 

15

 

accordance with Section 11(e)
hereof to reflect any events occurring in respect of the shares of Common Stock
of the Company after the occurrence of the Triggering Event.

 

(iii)          In
lieu of issuing shares of Common Stock in accordance with Section 11(a)(ii) hereof,
the Company may, if the Company’s Board of Directors determines that such
action is necessary or appropriate and not contrary to the interest of holders
of Rights and, in the event that the number of shares of Common Stock which are
authorized by the Company’s Certificate of Incorporation but 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, or if any
necessary regulatory approval for such issuance has not been obtained by the
Company, the Company shall: (A) determine the excess of (1) the value of the
shares of Common Stock issuable upon the exercise of a Right (the “Current
Value”) over (2) the Exercise Price (such excess, the “Spread”) and
(B) with respect to each Right, make adequate provision to substitute for such
shares of Common Stock, upon exercise of the Rights, (1) cash, (2) a reduction
in the Exercise Price, (3) other equity securities of the Company (including,
without limitation, shares or units of shares of any series of preferred stock
which the Company’s Board of Directors has deemed to have the same value as
Common Stock (such shares or units of shares of preferred stock are herein
called “Common Stock Equivalents”)), except to the extent that the
Company has not obtained any necessary stockholder or regulatory approval for
such issuance, (4) debt securities of the Company, except to the extent that
the Company has not obtained any necessary stockholder or regulatory approval for
such issuance, (5) other assets or (6) any combination of the foregoing, having
an aggregate value equal to the Current Value, where such aggregate value has
been determined by the Company’s Board of Directors based upon the advice of a
nationally recognized investment banking firm selected by the Company’s Board
of Directors; provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the later of (x) the first occurrence of a Triggering Event and (y)
the date on which the Company’s right of redemption pursuant to Section 23(a)
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
Exercise Price, Common Stock (to the extent available), except to the extent
that the Company has not obtained any necessary stockholder or regulatory
approval for such issuance, and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Company’s Board of
Directors shall determine in good faith that it is likely that sufficient
additional Common Stock could be authorized for issuance upon exercise in full
of the Rights or that any necessary regulatory approval for such issuance will
be obtained, the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval
for the authorization of such additional shares or take action to obtain such
regulatory approval (such period, as it may be extended, the “Substitution
Period”). To the extent that the Company determines that some action need
be taken pursuant to the first and/or second sentences of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all outstanding Rights and (y) may suspend
the exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares, to take any
action to obtain any required regulatory approval and/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

 

16

 

exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time
as the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Stock shall be the Current Per Share Market
Price of the Common Stock on the Section 11(a)(ii) Trigger Date and the value
of any Common Stock Equivalent shall be deemed to have the same value as the
Common Stock on such date.

 

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

 

(c)           In
case the Company shall, at any time after the date of this Agreement, fix a
record date for the making of a distribution to all holders of the Preferred
Shares or of any class or series of Equivalent Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend, if any,
or a dividend payable in Preferred Shares) or subscription rights, options or
warrants (excluding those referred to in Section 11(b)), then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the Current Per
Share Market Price of a Preferred Share or an Equivalent Share on such record
date, less the fair market value

 

17

 

per Preferred Share or
Equivalent 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) 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 or Equivalent Share, as the case may be, and the denominator of
which shall be such Current Per Share Market Price of a Preferred Share or
Equivalent Share on such record date; provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Exercise Price shall be adjusted to be the Exercise Price which would
have been in effect if such record date had not been fixed.

 

(d)           Notwithstanding
anything to the contrary, no adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Exercise Price; provided, however, that any adjustments which by reason of
this Section 11(d) 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 share of Common Stock or other share or one hundred-thousandth of a
Preferred Share, as the case may be. Notwithstanding the first sentence of this
Section 11(d), any adjustment required by this Section 11 shall be made no
later than the earlier of (i) three (3) years from the date of the transaction
which requires such adjustment or (ii) the Expiration Date.

 

(e)           If
as a result of an adjustment made pursuant to Section 11(a) or 13(a) hereof,
the 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, if required,
the Exercise 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), 11(b), 11(c),
11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and 11(l), and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply
on like terms to any such other shares.

 

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

 

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

 

18

 

(h)           The
Company may elect on or after the date of any adjustment of the Exercise Price
as a result of the calculations made in Section 11(b) or (c) to adjust the
number of Rights, in substitution for any adjustment in the number of Preferred
Shares purchasable upon the exercise of a Right. Each of the Rights outstanding
after such adjustment of the number of Rights shall be exercisable for the number
of one-thousandths 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 hundred-thousandth) obtained by dividing the
Exercise Price in effect immediately prior to adjustment of the Exercise Price
by the Exercise Price in effect immediately after adjustment of the Exercise
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 Exercise Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement. If Rights Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(h), 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
Exercise 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.

 

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

 

(j)            Before
taking any action that would cause an adjustment reducing the Exercise Price
below the par or stated value, if any, of the number of one-thousandths of a
Preferred Share issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue as fully paid and
nonassessable shares such number of one-thousandths of a Preferred Share at
such adjusted Exercise Price.

 

(k)           In
any case in which this Section 11 shall require that an adjustment in the
Exercise Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuing to
the holder of any Right exercised after such record date of the number of
one-thousandths 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-thousandths of a Preferred Share and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the Exercise
Price in effect prior to

 

19

 

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) upon the occurrence of the event
requiring such adjustment.

 

(l)            Notwithstanding
anything in this Section 11 to the contrary, prior to the Distribution Date,
the Company shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (i) consolidation or subdivision of the Preferred Shares or
Common Stock, (ii) issuance wholly for cash of any Preferred Shares or Common
Stock at less than the current market price, (iii) issuance wholly for cash of
Preferred Shares or Common Stock or securities which by their terms are
convertible into or exchangeable for Preferred or Common Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Shares or
Common Stock shall not be taxable to such stockholders.

 

(m)          The
Company covenants and agrees that, after the Distribution Date, it will not,
except as permitted by Sections 23, 24 or 27 hereof, take (or permit to be
taken) 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.

 

(n)           In
the event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the Common Stock payable in shares of Common Stock, (B)
subdivide the outstanding shares of Common Stock, (C) combine the outstanding
Common Stock (by reverse stock split or otherwise) into a smaller number of
shares of Common Stock, or (D) issue any shares of its capital stock in a
reclassification of the shares of Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such event,
except as otherwise provided in Section 11(a) and Section 7(e) hereof: (1) each
share of Common Stock (or shares of capital stock issued in such
reclassification of the Common Stock) outstanding immediately following such
time shall have associated with it the number of Rights as were associated with
one share of Common Stock immediately prior to the occurrence of the event
described in clauses (A)-(D) above; (2) the Exercise Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that the
Exercise Price thereafter shall equal the result obtained by multiplying the
Exercise Price in effect immediately prior to such time by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the event described in clauses (A)-(D) above,
and the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such event; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of such Right; and (3) the number of
one-thousandths of a Preferred Share (or shares of such

 

20

 

other capital stock) issuable
upon the exercise of each Right outstanding after such event shall equal the
number of one- thousandths of a Preferred Share (or shares of such other
capital stock) as were issuable with respect to one Right immediately prior to
such event. Each share of Common Stock that shall become outstanding after an
adjustment has been made pursuant to this Section 11(n) shall have associated
with it the number of Rights, exercisable at the Exercise Price and for the
number of one-thousandths of a Preferred Share (or shares of such other capital
stock) as one share of Common Stock has associated with it immediately
following the adjustment made pursuant to this Section 11(n). If an event
occurs which would require an adjustment under both this Section 11(n) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(n)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii) hereof.

 

12.           Certificate
of Adjusted Exercise Price or Number of Shares. Whenever an adjustment is
made as provided in Sections 11 and 13 hereof, the Company shall promptly (a)
prepare a certificate setting forth such adjustment and a brief statement of
the facts accounting for such adjustment, (b) file with the Rights Agent and
with each transfer agent for the Preferred Shares a copy of such certificate
and (c) if a Distribution Date has occurred, mail a brief summary thereof to
each holder of a Rights Certificate in accordance with Section 26 hereof. Notwithstanding
the foregoing sentence, the failure of the Company to make such certification
or give such notice shall not affect the validity of such adjustment or the
force or effect of the requirement for such adjustment. The Rights Agent shall
be fully protected in relying on any such certificate and on any adjustment
contained therein and shall not be deemed to have knowledge of such adjustment
unless and until it shall have received such certificate.

 

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

 

(a)           In
the event that, following a Triggering Event, directly or indirectly:

 

(i)            the
Company shall consolidate with, or merge with and into, any other Person (other
than a wholly-owned Subsidiary of the Company in a transaction the principal
purpose of which is to change the state of incorporation of the Company and
which complies with Section 11(m) hereof);

 

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

 

(iii)          the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one or more transactions, assets or
earning power aggregating 50% or more of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company or one or more of its wholly owned Subsidiaries in one or more
transactions, each of which individually (and together) complies with Section
11(m) hereof),

 

then, concurrently with and in each such case:

 

(a)           each
holder of a Right (except as provided in Section 7(e) hereof) shall thereafter
have the right to receive, upon the exercise thereof, at a price equal to the
Total Exercise Price applicable immediately prior to the occurrence of the Section
13 Event in accordance with the terms of this Agreement, such number of

 

21

 

validly
authorized and issued, fully paid, nonassessable and freely tradeable shares of
Common Stock of the Principal Party (as hereinafter defined), free of any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by dividing such Total Exercise Price by 50% of
the Current Per Share Market Price of the shares of Common Stock of such
Principal Party on the date of consummation of such Section 13 Event, provided,
however, that the Exercise Price and the number of shares of Common Stock of
such Principal Party so receivable upon exercise of a Right shall be subject to
further adjustment as appropriate in accordance with Section 11(e) hereof;

 

(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 its Common Stock) in connection with the
consummation of any such transaction as may be necessary to ensure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and

 

(e)           upon
the subsequent occurrence of any consolidation, merger, sale or transfer of
assets or other extraordinary transaction in respect of such Principal Party,
each holder of a Right shall thereupon be entitled to receive, upon exercise of
a Right and payment of the Total Exercise Price as provided in this Section
13(a), such cash, shares, rights, warrants and other property which such holder
would have been entitled to receive had such holder, at the time of such
transaction, owned the shares of Common Stock of the Principal Party receivable
upon the exercise of such Right pursuant to this Section 13(a), and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.

 

(f)            For
purposes hereof, the “earning power” of the Company and its Subsidiaries shall
be determined in good faith by the Company’s Board of Directors on the basis of
the operating

 

22

 

earnings
of each business operated by the Company and its Subsidiaries during the three
fiscal years preceding the date of such determination (or, in the case of any
business not operated by the Company or any Subsidiary during three full fiscal
years preceding such date, during the period such business was operated by the
Company or any Subsidiary).

 

(b)           For
purposes of this Agreement, the term “Principal Party” shall mean:

 

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

 

(ii)           in
the case of any transaction described in clause (iii) of Section13(a) hereof,
the Person that is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or transactions, or, if
more than one Person that is a party to such transaction or transactions
receives the same portion of the assets or earning power so transferred and
each such portion would, were it not for the other equal portions, constitute
the greatest portion of the assets or earning power so transferred, or if the
Person receiving the greatest portion of the assets or earning power cannot be
determined, whichever of such Persons is the issuer of shares of Common Stock
having the greatest aggregate market value of shares outstanding; provided,
however, that in any such case described in the foregoing clause (b)(i)
or (b)(ii), if the shares of Common Stock of such Person are not at such time
or have not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, then (1) if such Person is a direct or
indirect Subsidiary of another Person the shares of Common Stock of which are
and have been so registered, the term “Principal Party” shall refer to such
other Person, or (2) if such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Stock of which are and have been so
registered, the term “Principal Party” shall refer to whichever of such Persons
is the issuer of shares of Common Stock having the greatest aggregate market
value of shares outstanding, or (3) if such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly by the same Person, the rules set forth in
clauses (1) and (2) above shall apply to each of the owners having an interest
in the venture as if the Person owned by the joint venture was a Subsidiary of
both or all of such joint venturers, and the Principal Party in each such case
shall bear the

 

23

 

obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.

 

(c)                                  The
Company shall not consummate any Section 13 Event unless the Principal
Party shall have a sufficient number of authorized shares of Common Stock that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance
with Sections 13(a) and 13(b) hereof, that all rights of first
refusal or preemptive rights in respect of the issuance of shares of Common
Stock of such Principal Party upon exercise of outstanding Rights have been
waived, that there are no rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights and that such transaction shall
not result in a default by such Principal Party under this Agreement, and
further providing that, as soon as practicable after the date of such Section 13
Event, such Principal Party will:

 

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

 

(ii)                                  use
its best efforts to list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on a national securities
exchange or to meet the eligibility requirements for quotation on Nasdaq and
list (or continue the listing of) the Rights and the securities purchasable
upon exercise of the Rights on Nasdaq; and

 

(iii)                               deliver to holders of
the Rights historical financial statements for such Principal Party which
comply in all respects with the requirements for registration on Form F-1
(or any successor form) under the Securities Act.

 

In the event that at any time after the
occurrence of a Triggering Event some or all of the Rights shall not have been
exercised at the time of a transaction described in this Section 13, the
Rights which have not theretofore been exercised shall thereafter be
exercisable in the manner described in Section 13(a) (without taking
into account any prior adjustment required by Section 11(a)(ii)).

 

(d)                                 In
case the “Principal Party” for purposes of Section 13(b) hereof has
provision in any of its authorized securities or in its certificate of
incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party
to issue (other than to holders of Rights pursuant to Section 13 hereof),
in connection with, or as a consequence of, the consummation of a Section 13
Event, shares of Common Stock or Equivalent Shares of such Principal Party at
less than the then

 

24

 

Current Per Share Market Price thereof or securities exercisable for,
or convertible into, shares of Common Stock or Equivalent Shares of such
Principal Party at less than such then Current Per Share Market Price, or (ii) providing
for any special payment, tax or similar provision in connection with the
issuance of the shares of Common Stock of such Principal Party pursuant to the
provisions of Section 13 hereof, then, in such event, the Company hereby
agrees with each holder of Rights that it shall not consummate any such
transaction unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing that the provision in question of such Principal Party shall have
been canceled, waived or amended, or that the authorized securities shall be
redeemed, so that the applicable provision will have no effect in connection
with or as a consequence of, the consummation of the proposed transaction.

 

(e)                                  The
Company covenants and agrees that it shall not, at any time after the
Distribution Date, effect or permit to occur any Section 13 Event, if (i) at
the time or immediately after such Section 13 Event there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights, (ii) prior to, simultaneously with or
immediately after such Section 13 Event, the stockholders of the Person
who constitutes, or would constitute, the “Principal Party” for purposes of Section 13(b) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates or (iii) the form or nature of
organization of the Principal Party would preclude or limit the exercisability
of the Rights.

 

(f)                                    The
provisions of this Section 13 shall similarly apply to successive mergers
or consolidations or sales or other transfers.

 

14.                                 Fractional
Rights and Fractional Shares.

 

(a)                                  The
Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 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, as determined pursuant to this Agreement.

 

(b)                                 The
Company shall not be required to issue fractions of Preferred Shares (other
than fractions that are integral multiples of one one-thousandth of a Preferred
Share) upon exercise of the Rights or to distribute certificates which evidence
fractional Preferred Shares (other than fractions that are integral multiples
of one one-thousandth of a Preferred Share). Interests in fractions of
Preferred Shares in integral multiples of one one-thousandth of a Preferred
Share may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred

 

25

 

Shares that are not integral multiples of one one-thousandth of a
Preferred Share, the Company shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a Preferred
Share. For purposes of this Section 14(b), the current market value of a
Preferred Share shall be one thousand times the closing price of a share of
Common Stock (as determined pursuant to the terms hereof) for the Trading Day
immediately prior to the date of such exercise.

 

(c)                                  The
Company shall not be required to issue fractions of shares of Common Stock or
to distribute certificates which evidence fractional shares of Common Stock
upon the exercise or exchange of Rights. In lieu of such fractional shares of
Common Stock, the Company shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a share of
Common Stock. For purposes of this Section 14(c), the current market value
of a share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the terms hereof) for the Trading Day
immediately prior to the date of such exercise.

 

(d)                                 The
holder of a Right by the acceptance of the Right expressly waives his or her
right to receive any fractional Rights or any fractional shares (other than
fractions that are integral multiples of one one-thousandth of a Preferred
Share) upon exercise of a Right.

 

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

 

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

 

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

 

(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

 

26

 

Rights Agent designated for such purposes, duly endorsed or accompanied
by a proper instrument of transfer and with the appropriate forms and
certificates fully executed; and

 

(c)                                  subject
to Sections 6(a) and 7(f) hereof, the Company and the Rights Agent may deem
and treat the person in whose name the Rights Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Rights Certificates or the
associated Common Stock certificate made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary.

 

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

 

18.                                 The
Rights Agent.

 

(a)                                  The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability or
expense, incurred without negligence, bad faith or willful misconduct on the part of
the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises. In no event will the Rights Agent be liable for special, indirect,
incidental or consequential loss or damage of any kind whatsoever, even if the
Rights Agent has been advised of the possibility of such loss or damage.

 

(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 the Preferred Shares or shares of Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document reasonably believed by it to
be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.

 

27

 

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

 

20.                                 Duties
of Rights Agent. The Rights Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of 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 written advice or 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 written
advice or opinion.

 

(b)                                 Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the determination of
Current Per Share 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 any one of the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.

 

(c)                                  The
Rights Agent shall be liable hereunder to the Company and any other Person only
for its own negligence, bad faith or willful misconduct.

 

28

 

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

 

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

 

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

 

(g)                                 The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any one of the Chairman
of the Board, the Chief Executive Officer, the President, any Vice President,
the Chief Financial Officer, the Secretary or any Assistant Secretary of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered by
it in good faith in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Company may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Rights Agreement and the date on and/or
after which such action shall be taken or such omission shall be effective. The
Rights Agent shall not be liable for any action taken by, or omission of, the
Rights Agent in accordance with a proposal included in any such application on
or after the date specified in such application (which date shall not be less
than five (5) Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.

 

(h)                                 The
Rights Agent and any stockholder, director, officer or employee of the Rights
Agent may buy, sell or deal in any of the Rights or other securities of
the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it

 

29

 

were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Company or
for any other legal entity.

 

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

 

21.                                 Change
of Rights Agent. The Rights Agent or any successor Rights Agent may resign
and be discharged from its duties under this Agreement upon thirty (30) days’
written notice mailed to the Company and to each transfer agent of the
Preferred Shares and the Common Stock by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon thirty (30) days’ written
notice, mailed to the Rights Agent or successor Rights Agent, as the case may be,
and to each transfer agent of the Preferred Shares and the Common Stock by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after
receiving written notice of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his or her Rights Certificate for inspection by the
Company), then the registered holder of any Rights Certificate may apply
to any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be a corporation 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 or stockholder
services powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least U.S.$100 million. After appointment,
the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for

 

30

 

the purpose. Not later than the effective date of any such appointment,
the Company shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Preferred Shares and the Common Stock, and
mail a written notice thereof to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.

 

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 its Board of Directors to reflect any adjustment or change in the
Exercise 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 shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a) shall,
with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement or upon the
exercise, conversion or exchange of other securities of the Company outstanding
at the date hereof 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 representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no
such Rights Certificate shall be issued and this sentence shall be null and
void ab initio if, and to the extent that, such issuance or this sentence would
create a significant risk of or result in material adverse tax consequences to
the Company or the Person to whom such Rights Certificate would be issued or
would create a significant risk of or result in such options’ or employee plans’
or arrangements’ failing to qualify for otherwise available special tax
treatment 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.

 

23.                                 Redemption.

 

(a)                                  The
Company may, at its option and with the approval of the Board of Directors, at
any time prior to the Close of Business on the earlier of (i) the close of
business on the tenth day following the Shares Acquisition Date and (ii) the
Final Expiration Date, redeem all but not less than all the then outstanding
Rights at a redemption price of U.S. $0.01 per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being herein referred to as the “Redemption
Price”) and the Company may, at its option, pay the Redemption Price either
in shares of Common Stock (based on the Current Per Share Market Price thereof
at the time of redemption) or cash. Such redemption of the Rights by the
Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
The date on which the Board of Directors elects to make the redemption
effective shall be referred to as the “Redemption Date”.

 

(b)                                 Immediately
upon the action of the Board of Directors of the Company ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights

 

31

 

Agent, and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however,
that the failure to give or any defect in, any such notice shall not affect the
validity of such redemption. Within ten (10) days after the action of the
Board of Directors ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the Redemption
Price will be made. Neither the Company nor any of its Affiliates or Associates
may redeem, acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in this Section 23 or in Section 24
hereof, and other than in connection with the purchase of shares of Common
Stock prior to the Distribution Date.

 

24.                                 Exchange.

 

(a)                                  Subject
to applicable laws, rules and regulations, and subject to subsection 24(c) below,
the Company may, at its option, by action of the Board of Directors, at any
time after the occurrence of a Triggering Event, 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 shares of Common Stock at an exchange ratio of one share of Common Stock
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the “Exchange Ratio”). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Stock for or pursuant to the terms of
any such plan or an Exempted Person), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Stock then outstanding.

 

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

 

32

 

(c)                                  In
the event that there shall not be sufficient shares of Common Stock issued but
not outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with Section 24(a), the Company shall either
take such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights or alternatively, at the
option of a majority of the Board of Directors, with respect to each Right (i) pay
cash in an amount equal to the Current Value (as hereinafter defined), in lieu
of issuing shares of Common Stock in exchange therefor, or (ii) issue debt
or equity securities or a combination thereof, having a value equal to the
Current Value, in lieu of issuing shares of Common Stock in exchange for each
such Right, where the value of such securities shall be determined by a
nationally recognized investment banking firm selected by majority vote of the
Board of Directors, or (iii) deliver any combination of cash, property,
shares of Common Stock and/or other securities having a value equal to the
Current Value in exchange for each Right. For purposes of this Section 24(c) only,
the Current Value shall mean the product of the Current Per Share Market Price
of shares of Common Stock on the date of the occurrence of the event described
above in subparagraph (a), multiplied by the number of shares of Common Stock
for which the Right otherwise would be exchangeable if there were sufficient
shares available. To the extent that the Company determines that some action
need be taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c),
the Board of Directors may temporarily suspend the exercisability of the
Rights for a period of up to sixty (60) days following the date on which the
event described in Section 24(a) shall have occurred, in order to
seek any authorization of additional shares of Common Stock and/or to decide
the appropriate form of distribution to be made pursuant to the above
provision 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.

 

(d)                                 The
Company shall not be required to issue fractions of shares of Common Stock or
to distribute certificates which evidence fractional shares of Common Stock. In
lieu of such fractional shares of Common Stock, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock (as determined pursuant to the terms hereof).

 

(e)                                  The
Company may, at its option, by majority vote of the Board of Directors, at any
time before any Person has become an Acquiring Person, exchange all or part of
the then outstanding Rights for rights of substantially equivalent value, as
determined reasonably and with good faith by the Board of Directors, based upon
the advice of one or more nationally recognized investment banking firms.

 

(f)                                    Immediately
upon the action of the Board of Directors ordering the exchange of any Rights
pursuant to subsection 24(e) of this Section 24 and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of rights in exchange therefor as has been determined by
the Board of Directors in accordance with subsection 24(e) above. The
Company shall give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear
upon the registry books of the transfer agent for the shares of

 

33

 

Common Stock of the Company. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the
exchange of the Rights will be effected.

 

25.                                 Notice
of Certain Events.

 

(a)                                  In
case the Company shall propose to effect or permit to occur any Triggering
Event or Section 13 Event, the Company shall give notice thereof to each
holder of Rights in accordance with Section 26 hereof at least twenty (20)
days prior to occurrence of such Triggering Event or such Section 13
Event.

 

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

 

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

 

Danaos Corporation

14 Akti Kondyli 

185 45

Piraeus, Greece

Attention:  Chief Executive Officer

 

with a copy to:

 

Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, New York 10178

Attention:  Stephen P. Farrell

 

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

 

American Stock Transfer & Trust
Company

59 Maiden Lane

New York, New York 10038

 

Notices or demands authorized by this
Agreement to be given or made by the Company or the Rights Agent to the holder
of any Rights Certificate shall be sufficiently given or made if sent by

 

34

 

first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.

 

27.                                 Supplements
and Amendments. Prior to the occurrence of a Distribution Date, the Company
may supplement or amend this Agreement in any respect without the approval
of any holders of Rights and the Rights Agent shall, if the Company so directs,
execute such supplement or amendment. From and after the occurrence of a
Distribution Date, the Company and the Rights Agent may from time to time
supplement or amend this Agreement without the approval of any holders of
Rights in order to (i) cure any ambiguity or omission, (ii) correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen
any time period hereunder or (iv) to change or supplement the provisions
hereunder in any manner that the Company may deem necessary or desirable
and that shall not adversely affect the interests of the holders of Rights
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the
Rights are not then redeemable or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the
delivery of a certificate from an appropriate officer of the Company that
states that the proposed supplement or amendment is in compliance with the
terms of this Section 27, the Rights Agent shall execute such supplement
or amendment. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of shares
of Common Stock.

 

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.

 

29.                                 Determinations
and Actions by the Board of Directors, etc. For all purposes of this
Agreement, any calculation of the number of shares of Common Stock outstanding
at any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock 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. 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, or the Company, or as may be necessary or advisable
in the administration of this Agreement, including, without limitation, the
right and power to (i) interpret the provisions of this Agreement and (ii) make
all determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent,
the holders of the Rights Certificates and all other parties and (y) not
subject the Board to any liability to the holders of the Rights.

 

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

 

35

 

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

 

31.                                 Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, 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.

 

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

 

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

 

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

 

REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

 

36

 

IN WITNESS WHEREOF, the parties have executed
this Stockholders Rights Agreement as of the date first written above.

 

	
   

  	
  DANAOS CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Koustas

  	
   

  
	
   

  	
   

  	
  Name: John Koustas

  	
   

  
	
   

  	
   

  	
  Title: 
  President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AMERICAN STOCK & TRUST

  COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Herbert J. Lemmer

  	
   

  
	
   

  	
   

  	
  Name: 
  Herbert J. Lemmer

  	
   

  
	
   

  	
   

  	
  Title:   
  Vice President

  	
   

  
					

 

 

[Signature Page to
Stockholders Rights Agreement]

 

 

Exhibit A

 

STATEMENT OF DESIGNATION OF
RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES A PARTICIPATING PREFERRED
STOCK OF DANAOS CORPORATION

 

The undersigned,                              
and                         
do hereby certify:

 

1.                                                                                       That
they are the duly elected and acting President and Secretary, respectively, of Danaos
Corporation, a Marshall Islands corporation (the “Company”).

 

2.                                                                                       That
pursuant to the authority conferred by the Company’s Amended and Restated
Articles of Incorporation, the Company’s Board of Directors on September    ,
2006 adopted the following resolution designating and prescribing the relative
rights, preferences and limitations of the Company’s Series A
Participating Preferred Stock:

 

RESOLVED, that pursuant to the authority
vested in the Board of Directors (the “Board”) of the Company by the
Articles of Incorporation, the Board hereby establishes a series of
preferred stock, par value U.S. $0.01 per share, and fixes the designation and
certain powers, preferences and other special rights of the shares of such
series, and certain qualifications, limitations and restrictions thereon, as
follows:

 

“Section 1.                                      Designation
and Amount. The shares of such series shall be designated as “Series A
Participating Preferred Stock”. The Series A Participating Preferred
Stock shall have a par value of U.S. $0.01 per share, and the number of shares
constituting such series shall initially be 1,000,000, which number the
Board may from time to time increase or decrease (but not below the number
then outstanding).

 

Section 2.                                            Proportional
Adjustment. In the event the Company shall at any time after the issuance
of any share or shares of Series A Participating Preferred Stock (i) declare
any dividend on the common stock of the Company, par value U.S. $0.01 per share
(the “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 Company shall
simultaneously effect a proportional adjustment to the number of outstanding
shares of Series A Participating Preferred Stock.

 

Section 3.                                            Dividends
and Distributions.

 

(a)                                  Subject to the prior
and superior right of the holders of any shares of any series of preferred
stock ranking prior and superior to the shares of Series A Participating
Preferred Stock with respect to dividends, the holders of shares of Series A
Participating Preferred Stock shall be entitled to receive when, as and if
declared by the Board 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
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares

 

A-1

 

of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A
Participating Preferred Stock.

 

(b)                                 The Company shall
declare a dividend or distribution on the Series A Participating Preferred
Stock as provided in paragraph (a) above immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock).

 

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

 

Section 4.                                            Voting
Rights. The holders of shares of Series A Participating Preferred
Stock shall have the following voting rights:

 

(d)                                 Each share of Series A
Participating Preferred Stock shall entitle the holder thereof to 1,000 votes
on all matters submitted to a vote of the stockholders of the Company.

 

(e)                                  Except as otherwise
provided herein or required by law, the holders of shares of Series A
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 Company.

 

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

 

A-2

 

Section 5.                                            Certain
Restrictions.

 

(a)                                  The Company shall not
declare any dividend on, make any distribution on, or redeem or purchase or
otherwise acquire for consideration any shares of Common Stock after the first
issuance of a share or fraction of a share of Series A Participating
Preferred Stock unless concurrently therewith it shall declare a dividend on,
make a distribution on, or redeem or purchase or otherwise acquire for
consideration the Series A Participating Preferred Stock as required by Section 3
hereof.

 

(b)                                 Whenever quarterly
dividends or other dividends or distributions payable on the Series A
Participating Preferred Stock as provided in Section 3 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Participating Preferred
Stock outstanding shall have been paid in full, the Company shall not (i) declare
or pay dividends on, make any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series A
Participating Preferred Stock; (ii) declare or pay dividends on, 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 Series A
Participating Preferred Stock, except dividends paid ratably on the Series A
Participating Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the holders
of all such shares are then entitled; (iii) redeem or purchase or
otherwise acquire for consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with
the Series A Participating Preferred Stock, provided that the Company may at
any time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Company ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A
Participating Preferred Stock; (iv) purchase or otherwise acquire for
consideration any shares of Series A Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Participating
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board) to all holders of such shares upon
such terms as the Board, 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.

 

(c)                                  The Company shall not
permit any subsidiary of the Company to purchase or otherwise acquire for
consideration any shares of stock of the Company unless the Company could,
under paragraph (a) of this Section 5, purchase or otherwise acquire
such shares at such time and in such manner.

 

Section 6.                                            Reacquired
Shares. Any shares of Series A Participating Preferred Stock purchased
or otherwise acquired by the Company in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of preferred stock and
may be reissued as part of a new series of preferred stock to be
created by resolution or resolutions of the Board, subject to the conditions
and restrictions on issuance set forth herein and, in the Articles of
Incorporation, as then amended.

 

A-3

 

Section 7.                                            Liquidation,
Dissolution or Winding Up. Upon any liquidation, dissolution or winding up
of the Company, the holders of shares of Series A Participating Preferred
Stock shall be entitled to receive an aggregate amount per share equal to 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock plus an amount equal to any accrued and unpaid dividends on such
shares of Series A Participating Preferred Stock.

 

Section 8.                                            Consolidation,
Merger, etc. In case the Company shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock
are exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case the shares of Series A Participating
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or exchanged.

 

Section 9.                                            No
Redemption. The shares of Series A Participating Preferred Stock shall
not be redeemable.

 

Section 10.                                      Ranking.
The Series A Participating Preferred Stock shall rank junior to all other series of
the Company’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 11.                                      Amendment.
The Articles of Incorporation of the Company shall not be further amended in
any manner which would materially alter or change the powers, preference or
special rights of the Series A Participating Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of a majority
of the outstanding shares of Series A Participating Preferred Stock,
voting separately as a class.

 

Section 12.                                      Fractional
Shares. Series A Participating Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder’s fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Participating Preferred Stock.”

 

RESOLVED FURTHER, that the Board hereby
authorizes and directs the President or any Vice President and the Secretary or
any Assistant Secretary of this Company to prepare and file a Statement of
Designation of Rights, Preferences and Privileges in accordance with the
foregoing resolution and the provisions of Marshall Islands law and to take
such actions as they may deem necessary or appropriate to carry out the
intent of the foregoing resolution.

 

REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

 

A-4

 

We further declare, under penalty of perjury,
that the foregoing Statement of Designation is the act and deed of the Company
and that the facts stated therein are true and correct.

 

Executed at                       on
 September           ,
2006.

 

	
   

  	
   

  	
   

  
	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Secretary

  

 

A-5

 

Exhibit B

 

[FORM OF RIGHTS
CERTIFICATE]

 

B-1

 

Exhibit C

 

SUMMARY OF RIGHTS

 

	
  Distribution and Transfer of
  Rights:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Distribution
  Date:

  	
   

  	
  The rights
  will separate from the common stock and become exercisable after (1) the
  tenth day after a person or group acquires ownership of 15% or more of the
  company’s common stock or (2) the 10th business day (or such later date
  as determined by the company’s board of directors) after a person or group
  announces a tender or exchange offer which would result in that person or
  group holding 15% or more of the company’s common stock

  
	
   

  	
   

  	
   

  
	
  Preferred
  Stock Purchaseable Upon 

  Exercise of Rights:

  	
   

  	
  On the
  Distribution Date, each holder of a right will be entitled to purchase for
  U.S.$[   ] (the “Exercise
  Price”) a fraction (1/1000th) of one share of the company’s preferred
  stock which has similar economic terms as one share of common stock.

  
	
   

  	
   

  	
   

  
	
  Flip-in:

  	
   

  	
  If an
  acquiring person (an “Acquiring Person”) acquires more than 15% of the
  company’s common stock then each holder of a right (except that acquiring
  person) will be entitled to buy at the Exercise Price, a number of shares of
  the company’s common stock which has a then current market value of twice the
  Exercise Price.

  
	
   

  	
   

  	
   

  
	
  Flip-over:

  	
   

  	
  If after an
  Acquiring Person acquires more than 15% of the company’s common stock, the
  company merges into another company (either as the surviving corporation or
  as the disappearing entity) or the company sells more than 50% of its assets
  or earning power, then each holder of a right (except for those owned by the
  Acquiring Person) will be entitled to purchase at the Exercise Price, a
  number of shares of common stock of the surviving entity which has a then
  current market value of twice the Exercise Price.

  
	
   

  	
   

  	
   

  
	
  Exchange
  Provision:

  	
   

  	
  Any time
  after the date an Acquiring Person obtains more than 15% of the company’s
  common stock and before that Acquiring Person acquires more than 50% of the
  company’s outstanding common stock, the company may exchange each right
  owned 

  

 

C-1

 

	
   

  	
   

  	
  by all other
  rights holders, in whole or in part, for one share of the company’s common
  stock.

  
	
   

  	
   

  	
   

  
	
  Redemption
  of Rights:

  	
   

  	
  The company
  can redeem the rights at any time prior to a public announcement that a
  person has acquired ownership of 15% or more of the company’s common stock.

  
	
   

  	
   

  	
   

  
	
  Expiration
  of Rights:

  	
   

  	
  The rights
  expire on the earliest of (1) September    , 2016 or
  (2) the exchange or redemption of the rights as described above.

  
	
   

  	
   

  	
   

  
	
  Amendment of
  Terms of Rights:

  	
   

  	
  The terms of
  the rights and the Stockholder Rights Plan may be amended without the
  consent of the rights holders at any time on or prior to the Distribution
  Date. After the Distribution Date, the terms of the rights and the Stockholder
  Rights Plan may be amended to make changes, which do not adversely
  affect the rights of the rights holders (other than the Acquiring Person).

  
	
   

  	
   

  	
   

  
	
  Voting
  Rights:

  	
   

  	
  The rights
  will not have any voting rights.

  
	
   

  	
   

  	
   

  
	
  Anti-dilution
  Provisions:

  	
   

  	
  The rights
  will have the benefit of certain customary anti-dilution protection.

  

 

C-2Exhibit 10.5

 

DANAOS CORPORATION

 

2006 EQUITY COMPENSATION PLAN

 

1.                                       Purpose of the Plan

 

The purpose of this 2006 Equity Compensation
Plan (the “Plan”) is to advance the interests of the Company and its stockholders
by providing a means (a) to attract, retain, and reward directors,
officers, other employees and persons who provide services to the Company and
its Subsidiaries and directors, officers and employees of any Management
Company, (b) to link compensation to measures of the Company’s performance
in order to provide additional incentives, including stock-based incentives and
cash-based incentives, to such persons for the creation of stockholder value,
and (c) to enable such persons to acquire or increase a proprietary
interest in the Company in order to promote a closer identity of interests
between such persons and the Company’s stockholders.

 

2.                                       Definitions

 

Capitalized terms used in the Plan and not
defined elsewhere in the Plan shall have the meaning set forth in this Section.

 

2.1                                 “Award” means a compensatory
award made pursuant to the Plan pursuant to which a Participant receives, or
has the opportunity to receive Shares or cash.

 

2.2                                 “Award Agreement” means a
written document prescribed by the Committee and provided to a Participant
evidencing the grant of an Award under the Plan.

 

2.3                                 “Beneficiary” means the
person(s) or trust(s) entitled by will or the laws of descent and distribution
to receive any rights with respect to an Award that survive such Participant’s
death provided that if at the time of a Participant’s death, the Participant
had on file with the Committee a written designation of a person(s) or trust(s)
to receive such rights, then such person(s) (if still living at the time of the
Participant’s death) or trust(s) shall be the “Beneficiary” for purposes of the
Plan.

 

2.4                                 “Board” means the Board of
Directors of the Company.

 

2.5                                 “Change of Control” shall
mean the occurrence of any of the following:

 

(a) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or “group” (within the meaning of Section 13(d)(3) of the Exchange Act), other than (i) the Company, or (ii) John Koustas or entities which he directly or indirectly controls (as defined in Rule 12b-2 under the Exchange Act) or which are established for his benefit or the benefit of members of his family, acquiring “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than fifty percent (50%) of the Voting Stock of the Company;
 
(b) the sale of all or substantially all of the Company’s assets in one or more related transactions to a “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) other than such a
 
1

 
sale (x) to a subsidiary of the Company which does not involve a change in the equity holdings of the Company or (y) to John Koustas or entities which he directly or indirectly controls or which are established for his benefit or the benefit of members of his family;
 
(c) any merger, consolidation, reorganization or similar event of the Company, as a result of which the holders of the Voting Stock of the Company immediately prior to such merger, consolidation, reorganization or similar event do not directly or indirectly hold at least fifty-one percent (51%) of the Voting Stock of the surviving entity;
 
(d) a majority of the members of the Board of Directors are no longer Continuing Directors; as used herein, a “Continuing Director” means any member of the Board of Directors who was a member of such Board of Directors on the date hereof and any person who becomes a director subsequent to such date whose election or nomination for election was supported by a majority of  the directors who then comprised the Continuing Directors; or
 
(e) the Company adopts any plan of liquidation or dissolution providing for the distribution of all or substantially all of its assets.
 
For purposes of the Change of Control definition, the “Company” shall include any entity that succeeds to all or substantially all of the business of the Company and “Voting Stock” shall mean capital stock of any class or classes having general voting power, in the absence of specified contingencies, to elect the directors of a corporation.
 

2.6                                 “Committee” means the Compensation
Committee of the Board or such other committee appointed by the Board to
administer the Plan or the Board, where the Board is acting as the Committee or
performing the functions of the Committee, as set forth in Section 3.

 

2.7                                 “Company” means Danaos
Corporation, a corporation domiciled in the Republic of The Marshall Islands.

 

2.8                                 “Management Company” means
any company that is providing administrative, commercial, technical or maritime
services to, or for the benefit of, the Company, its subsidiaries and their
vessels.

 

2.9                                 “Participant” means any person
who has been granted an Award under the Plan.

 

2.10                           “Shares” means shares of
common stock of the Company and such other securities as may be substituted
or resubstituted for Shares pursuant to Section 6.

 

2.11                           “Subsidiary” means an entity
that is, either directly or through one or more intermediaries, controlled by
the Company.

 

3.                                       Administration

 

3.1                                 Committee. The Plan
shall be administered by the Committee. Other provisions of the Plan
notwithstanding, the Board may perform any function of the Committee
under the Plan, and that authority specifically reserved to the Board under the
terms of the Plan, the Company’s Articles of Incorporation, By-Laws, or
applicable law shall be exercised by the Board and not by the Committee. The
Board shall serve as the Committee in respect of any Awards made to any
director of the Company who is not otherwise employed by the Company.

 

2

 

3.2                                 Powers and Duties of Committee. In addition to
the powers and duties specified elsewhere in the Plan, the Committee shall have
full authority and discretion to:

 

(a)                                  adopt, amend, suspend, and
rescind such rules and regulations and appoint such agents as the
Committee may deem necessary or advisable to administer the Plan;

 

(b)                                 correct any defect or supply
any omission or reconcile any inconsistency in the Plan and to construe and
interpret the Plan and any Award, rules and regulations, Award Agreement,
or other instrument hereunder;

 

(c)                                  make determinations relating
to eligibility for and entitlements in respect of Awards, and to make all
factual findings related thereto; and

 

(d)                                 make all other decisions and
determinations as may be required under the terms of the Plan or as the
Committee may deem necessary or advisable for the administration of the
Plan. All determinations and decisions of the Committee shall be final and
binding upon a Participant or any person claiming any rights under the Plan
from or through any Participant, and the Participant or such other person may not
further pursue his or her claim in any court of law or equity or other arbitral
proceeding.

 

(e)                                  Delegation by Committee. Except to the
extent prohibited by applicable law or the applicable rules of a stock
exchange, the Committee may delegate, on such terms and conditions as it
determines in its sole and absolute discretion, to one or more senior
executives of the Company (i) the authority to make grants of Awards to
officers (other than executive officers), employees of the Company, employees
of any Subsidiary and employees of any Management Company and (ii) other
administrative responsibilities. Any such allocation or delegation may be
revoked by the Committee at any time.

 

3.3                                 Limitation of Liability. Each member
of the Committee shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him by any officer or other employee
of the Company or any Subsidiary, the Company’s independent registered public
accountants, or any executive compensation consultant, legal counsel, or other
professional retained by the Company to assist in the administration of the
Plan. No member of the Committee, nor any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to
the Plan, and all members of the Committee and any officer or employee of the
Company acting on behalf of the Committee or members thereof shall, to the
extent permitted by law, be fully indemnified and protected by the Company with
respect to any such action, determination, or interpretation.

 

4.                                       Limitations on Awards

 

4.1                                 Aggregate Number of Shares
Available for Awards. The aggregate number of Shares for which
Awards may be granted under this Plan shall not exceed 6% of the number of
Shares issued and outstanding at the time any Award is granted. Awards made
under this Plan which are forfeited (including a repurchase or cancellation of
Shares subject thereto by the Company in exchange for the price, if any, paid
to the Company for such Shares, or for their par or other nominal value),
cancelled or have expired, shall be disregarded for purposes of the preceding
sentence.

 

4.2                                 Type of Shares Deliverable. The Shares
delivered in connection with Awards may consist, in whole or in part, of
authorized and unissued Shares, or Shares acquired in the market for the
account of a Participant.

 

3

 

5.                                       Awards

 

5.1                                 Eligibility. The Committee
shall have the discretion to select Award recipients from among the following
categories of eligible recipients: (i) individuals who are employees
(including officers) of the Company, any Subsidiary or any Management Company, (ii) individuals
who are members of the Board and not otherwise employed by the Company, any
Subsidiary or any Management Company, (iii) any other individual who
provides substantial personal services to the Company or any Subsidiary, (iv) any
individual who has agreed to become an employee of the Company or a Subsidiary
or any Management Company, provided that no such person may receive any
payment or exercise any right relating to an Award until such person has
commenced employment, and (v) individuals formerly employed by the Company
or any Subsidiary as compensation in respect of their employment with the
Company or any Subsidiary.

 

5.2                                 Type of Awards. The Committee
shall have the discretion to determine the type of Awards to be granted under
the Plan. Such Awards may be in a form payable in either Shares or
cash, including, but not limited to, options to purchase Shares, restricted
Shares, bonus Shares, appreciation rights, share units, performance units and
dividend equivalents. The Committee is authorized to grant Awards as a bonus,
or to grant Awards in lieu of obligations of the Company or any Subsidiary to
pay cash or grant other awards under other plans or compensatory arrangements (including
under any employment agreement), to the extent permitted by such other plans or
arrangements. Shares issued pursuant to an Award in the nature of a purchase
right (e.g., options) shall be purchased for such consideration, paid for at
such times, by such methods, and in such forms, including cash, Shares, other
Awards, or other consideration, as the Committee shall determine.

 

5.3                                 Terms and Conditions of Awards. The Committee
shall determine the size of each Award to be granted (including, where
applicable, the number of Shares to which an Award will relate), and all other
terms and conditions of each such Award (including, but not limited to, any
exercise price, grant price, or purchase price, any restrictions or conditions
relating to transferability, forfeiture, exercisability, or settlement of an
Award, and any schedule or performance conditions for the lapse of such
restrictions or conditions, and accelerations or modifications thereof, based
in each case on such considerations as the Committee shall determine). The
Committee may determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of an Award may be
paid, in cash, Shares, other Awards, or other consideration, or an Award may be
canceled, forfeited, or surrendered.

 

5.4                                 Option Repricing. As to any
Award granted as an option to purchase Shares or an appreciation right payable
in Shares, the Committee is authorized to subsequently reduce the applicable
exercise price relating to such Award, or take such other action as may be
considered a repricing of such Award under generally accepted accounting
principles.

 

5.5                                 Stand-Alone, Additional, Tandem,
and Substitute Awards. Awards granted under the Plan may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with, or in substitution or exchange for, any other Award or any award
granted under another plan of the Company, any Subsidiary, any Management
Company or any business entity to be acquired by the Company or a Subsidiary, or
any other right of a Participant to receive payment from the Company or any
Subsidiary, including under any employment agreement, and in granting a new
Award, the Committee may determine that the value of any surrendered Award
or award may be applied to reduce the exercise price of any option or
appreciation right or purchase price of any other Award.

 

5.6                                 Vesting Upon a Change of Control. Unless
otherwise set forth in an Award Agreement, Awards will vest upon a Change of
Control, and any time periods, conditions or contingencies relating to the
exercise or realization of, or lapse of restrictions under, any Award shall be
automatically accelerated or waived so that if no exercise of the Award is
required, the Award may be realized in full at the time of the occurrence
of the Change of Control or if exercise of the Award is required, the Award may be
exercised at the occurrence of the Change of Control.

 

4

 

6.                                       Adjustments

 

In the event of any change in
the outstanding Shares by reason of a stock dividend, stock split or reverse
stock split or by reason of a combination, reorganization, recapitalization,
merger, amalgamation, consolidation, spin-off or reclassification affecting the
outstanding Shares, (i) the maximum number of Shares available for Awards,
(ii) the maximum number of Shares that any individual participating in the
Plan may be granted in any year, (iii) the number of Shares covered
by outstanding awards, (iv) the kind of Shares issued under the Plan and
outstanding Awards, and (v) the price per share of outstanding Awards
shall be equitably adjusted by the Committee, as the Committee deems
appropriate, to reflect any increase or decrease in the number of, or change in
the kind or value of, issued Shares to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under Awards; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. In addition, the Committee shall have
discretion to make the foregoing equitable adjustments in any circumstances in
which an adjustment is not mandated by this Section 6 or applicable law,
including in the event of a Change of Control, and is authorized to make adjustments in the
terms and conditions of, and the criteria included in, Awards (including
cancellation of Awards in exchange for the intrinsic (i.e., in-the-money)
value, if any, of the vested portion thereof, substitution of Awards using
securities or other obligations of a successor or other entity, acceleration of
the expiration date for Awards, or adjustment to performance goals in respect
of Awards) in recognition of unusual or nonrecurring events affecting the
Company, any Subsidiary or any business unit, or the financial statements of the
Company or any Subsidiary, or in response to changes in applicable laws,
regulations, or accounting principles. Notwithstanding the foregoing, if any
such event will result in the acquisition of all or substantially all of the
Company’s outstanding Shares or assets, then if the document governing such
acquisition (e.g., merger agreement) specifies the treatment of
outstanding Awards, such treatment shall govern without the need for any action
by the Committee; provided,  however,
that if the treatment of outstanding Awards specified in such document
conflicts with the terms of an Award Agreement or any employment agreement of a
Participant relating to outstanding Awards, then the Committee shall make such
adjustment as it deems appropriate to preclude, to the extent
practicable, the enlargement or dilution of the economic rights and benefits
under such Awards. Any
adjustments determined by the Committee shall be final, binding and conclusive.

 

7.                                       General Provisions

 

7.1                                 Compliance with Laws and
Obligations. The Company shall not be obligated to issue or
deliver Shares in connection with any Award or take any other action under the
Plan in a transaction subject to the registration requirements of any
applicable securities law, any requirement under any listing agreement between
the Company and any securities exchange or automated quotation system, or any
other law, regulation, or contractual obligation of the Company, until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing Shares
issued under the Plan will be subject to such stop-transfer orders and other
restrictions as may be applicable under such laws, regulations, and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon.

 

7.2                                 Limitations on Transferability. Awards and
other rights under the Plan will not be transferable by a Participant except to
a Beneficiary in the event of the Participant’s death (to the extent any such
Award, by its terms, survives the Participant’s death), and, if exercisable,
shall be exercisable during the lifetime of a Participant only by such
Participant or his guardian or legal representative; provided, however,
that such Awards and other rights may be transferred during the lifetime
of the Participant, for purposes of the Participant’s estate planning or other
purposes consistent with the purposes of the Plan (as determined by the
Committee), and may be exercised by such transferees in accordance with
the terms of such Award, but only if and to the extent permitted by the
Committee. Awards and other rights under the Plan may not be pledged,
mortgaged, hypothecated, or otherwise encumbered, and shall not be subject to
the claims of creditors. A

 

5

 

Beneficiary, transferee, or other person claiming
any rights under the Plan from or through any Participant shall be subject to
all terms and conditions of the Plan and any Award Agreement applicable to such
Participant, except as otherwise determined by the Committee, and to any
additional terms and conditions deemed necessary or appropriate by the
Committee.

 

7.3                                 No Right to Continued Employment;
Leaves of Absence. Neither the Plan, the grant of any Award, nor any
other action taken hereunder shall be construed as giving any employee,
consultant, director, or other person the right to be retained in the employ or
service of the Company, any of its Subsidiaries or any Management Company (for
the vesting period or any other period of time), nor shall it interfere in any
way with the right of the Company or any of its Subsidiaries, or the right of
any Management Company, to terminate any person’s employment or service at any
time. Unless otherwise specified in the applicable Award Agreement, (i) an
approved leave of absence shall not be considered a termination of employment
or service for purposes of an Award under the Plan, (ii) any Participant
who is employed by or performs services for a Subsidiary shall be considered to
have terminated employment or service for purposes of an Award under the Plan
if such Subsidiary is sold or no longer qualifies as a Subsidiary of the
Company, unless such Participant remains employed by the Company or another
Subsidiary and (iii) any Participant who is employed by, or serves as a
director of, a Management Company shall be considered to have terminated
employment or service for purposes of an Award under the Plan if such
Management Company no longer provides services to the Company.

 

7.4                                 Taxes. The Company
and any Subsidiary is authorized to withhold from any delivery of Shares in
connection with an Award, any other payment relating to an Award, or any
payroll or other payment to a Participant, amounts of withholding and other
taxes due or potentially payable in connection with any transaction involving
an Award, and to take such other action as the Committee may deem
advisable to enable the Company, its Subsidiaries and Participants to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to any Award. This authority shall include authority to withhold
Shares or receive or accept Shares by way of repurchase, Participant services,
or other consideration and to make cash payments in respect thereof in
satisfaction of withholding tax obligations.

 

7.5                                 Changes to the Plan and Awards. The Board may amend,
suspend, discontinue, or terminate the Plan or the Committee’s authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any amendment shall be subject to the approval of the
Company’s stockholders at or before the next annual meeting of stockholders for
which the record date is after the date of such Board action if such
stockholders approval is required by any applicable law, regulation or stock
exchange rule, and the Board may otherwise, in its discretion, determine
to submit other such amendments to stockholders for approval; provided,
however, that, without the consent of an affected Participant, no such
action may materially impair the rights of such Participant under any
Award theretofore granted. The Committee may amend, suspend, discontinue,
or terminate any Award theretofore granted and any Award Agreement relating
thereto; provided, however, that, without the consent of an affected
Participant, no such action may materially impair the rights of such
Participant under such Award. Any action taken by the Committee pursuant to Section 6
shall not be treated as an action described in this Section 7.5.

 

7.6                                 No Right to Awards; No
Shareholder Rights. No Participant or other person shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Participants, employees, consultants, or directors. No
Award shall confer on any Participant any of the rights of a shareholder of the
Company unless and until Shares are duly issued or transferred and delivered to
the Participant in accordance with the terms of the Award.

 

7.7                                 Unfunded Status of Awards;
Creation of Trusts. The Plan is intended to constitute an “unfunded”
plan for incentive and deferred compensation. With respect to any payments not
yet made to a

 

6

 

Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided, however,
that the Committee may authorize the creation of trusts or make other
arrangements to meet the Company’s obligations under the Plan to deliver cash,
Shares, other Awards, or other consideration pursuant to any Award, which
trusts or other arrangements shall be consistent with the “unfunded” status of
the Plan unless the Committee otherwise determines.

 

7.8                                 Nonexclusivity of the Plan. Neither the
adoption of the Plan by the Board nor the submission of the Plan or of any
amendment to stockholders for approval shall be construed as creating any
limitations on the power of the Board to adopt such other compensatory
arrangements as it may deem desirable, including the granting of awards
otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.

 

7.9                                 Successors and Assigns. The Plan and
Award Agreements may be assigned by the Company to any successor to the
Company’s business. The Plan and any applicable Award Agreement shall be
binding on all successors and assigns of the Company and a Participant,
including any permitted transferee of a Participant, the Beneficiary or estate
of such Participant and the executor, administrator or trustee of such estate,
or any receiver or trustee in bankruptcy or representative of the Participant’s
creditors.

 

7.10                           Governing Law. The Plan and
all Award Agreements shall be governed by and construed in accordance with the
laws of the Republic of the Marshall Islands, without giving effect to any
choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the Republic of the
Marshall Islands.

 

7.11                           Severability of Provisions. If any
provision of the Plan shall be held invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provisions hereof, and the Plan
shall be construed and enforced as if such provisions had not been included.

 

7.12                           Plan Termination. Unless
earlier terminated by the Board, the Plan shall terminate on the day before the
tenth anniversary of the later of the date the Company’s stockholders
originally approved the Plan (September      ,
2006) or the date of any subsequent shareholder approval of the Plan. Upon any
such termination of the Plan, no new authorizations of grants of Awards may be
made, but then-outstanding Awards shall remain outstanding in accordance with
their terms, and the Committee otherwise shall retain its full powers under the
Plan with respect to such Awards.

 

7

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