Document:

Exhibit
10.43

SECOND AMENDED AND RESTATED REVOLVING CREDIT
NOTE

	
  $26,500,000.00

  	
  December 31, 2004

  
	
   

  	
  Amended and Restated as
  of September 5, 2006

  
	
   

  	
  Hartford, Connecticut

  

 

FOR VALUE RECEIVED, the
undersigned, IWT TESORO CORPORATION,
a Nevada corporation, INTERNATIONAL WHOLESALE
TILE, INC., a Florida corporation, THE TILE CLUB, INC., a Delaware
corporation, and TESORO DIRECT, INC., a Delaware
corporation (collectively “Borrower”),
jointly and severally, promises to pay to the order of BANK OF
AMERICA, N.A. (“Lender”), at
the office of the Lender, located at 200 Glastonbury Boulevard, Glastonbury,
Connecticut 06033, in lawful money of the United States of America and in
immediate available funds, the principal amount of TWENTY-SIX MILLION FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($26,500,000.00) or so much of such
principal amount as shall be outstanding and unpaid on December 10, 2006.

This Amended and
Restated Revolving Credit Note (the “Note”) is the
Revolving Credit Note referred to in,
and is issued pursuant to, that certain Amended and Restated Loan and Security
Agreement between Borrower and Lender dated December 31, 2004 (hereinafter, as
amended from time to time, the “Loan Agreement”),
and is entitled to all of the benefits and security of the Loan Agreement.  This Note has been issued by Borrower to
amend and restate that certain Amended and Restated Revolving Credit Note,
dated December 31, 2004 in the original principal amount of up to TWENTY-FIVE
MILLION AND NO/100 DOLLARS ($25,000,000.00) (the “Original Note”) in its
entirety and evidences the same indebtedness that has been evidenced by the
Original Note plus additional indebtedness in the original principal amount of ONE
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00).  The Original Note is hereby replaced and
superseded in its entirety by this Second Amended and Restated Revolving Credit
Note.  This Note is not a novation of the
Original Note.  Any reference to the Note
in any of the Loan Documents shall hereafter mean this Note as the same may be
modified, amended, supplemented, extended, or consolidated in writing, and any
note(s) issued in exchange therefore or in replacement thereof. All of the
terms, covenants and conditions of the Loan Agreement and the Security
Documents are hereby made a part of this Note and are deemed incorporated
herein in full.  All capitalized terms
used herein, unless otherwise specifically defined in this Note, shall have the
meanings ascribed to them in the Loan Agreement.

The rate of
interest in effect hereunder shall be calculated with reference to the Base
Rate or LIBOR, as applicable, as more specifically provided in the Loan
Agreement.  The interest due shall be
computed in the manner provided in the Loan Agreement.

Except
as otherwise expressly provided in the Loan Agreement, if any payment on this
Note becomes due and payable on a day other than a Business Day, the maturity
there of shall be extended to the next succeeding Business Day, and with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. 
Notwithstanding the foregoing, if any portion of the Revolving Credit
Loans evidenced by this promissory note

 

constitutes a
LIBOR Advance, and an extension of the maturity of any payment hereon would
cause the maturity thereof to occur during the next calendar month, then such
payment shall mature on the next preceding Business Day.

This Note shall be
subject to mandatory prepayment in accordance with the provisions of Section 3.3 of the Loan Agreement.  Borrower may also terminate the Loan
Agreement and, in connection with such termination, prepay this Note in the
manner provided in Section 4 of
the Loan Agreement.

Upon
the occurrence and continuation of any one or more of the Events of Default
specified in the Loan Agreement which have not been cured by Borrower or waived
by Lender, Lender may declare all Obligations evidenced hereby to be
immediately due and payable (except with respect to any Event of Default set forth
in subsection 10.1.10 of the Loan
Agreement, in which case all Obligations evidenced hereby shall automatically
become immediately due and payable without the necessity of any notice or other
demand) without presentment, demand, protest or any other action or obligation
of the Lender.

Time
is of the essence of this Note.  Borrower
hereby waives presentment, demand, protest and notice of any kind.  No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.

Wherever possible,
each provision of this Note shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Note
shall be prohibited or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note.  No delay or failure on the part of
Lender in the exercise of any right or remedy hereunder shall operate as a
waiver thereof, nor as an acquiescence in any default, nor shall any single or
partial exercise by Lender of any right or remedy preclude any other right or
remedy.  Lender, at its option, may
enforce its rights against any collateral securing this Note without enforcing
its rights against Borrower, any guarantor of the indebtedness evidenced hereby
or any other property or indebtedness due or to become due to Borrower.  Borrower agrees that, without releasing or
impairing Borrower’s liability hereunder, Lender may at any time release,
surrender, substitute or exchange any collateral securing this Note and may at
any time release any party primarily or secondarily liable for the indebtedness
evidenced by this Note.

The
validity, interpretation and enforcement of this promissory note shall be
governed by the internal laws of the state of Connecticut without giving effect
to the conflict of laws principles thereof.

 

[signature page
follows]

 

[signature page to
Second Amended and Restated Revolving Credit Note]

	
  

  	
  IWT TESORO CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Henry J.
  Boucher, Jr.

  
	
   

  	
   

  	
  Its President

  
	
   

  	
   

  	
  Duly Authorized

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTERNATIONAL
  WHOLESALE TILE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Paul F. Boucher

  
	
   

  	
   

  	
  Its President

  
	
   

  	
   

  	
  Duly Authorized

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE TILE CLUB,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Henry J.
  Boucher, Jr.

  
	
   

  	
   

  	
  Its President

  
	
   

  	
   

  	
  Duly Authorized

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TESORO DIRECT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Henry J.
  Boucher, Jr.

  
	
   

  	
   

  	
  Its President

  
	
   

  	
   

  	
  Duly AuthorizedExhibit
4.1

MERGE TECHNOLOGIES
INCORPORATED

and

AMERICAN STOCK TRANSFER & TRUST CO.

Rights Agent

RIGHTS
AGREEMENT

Dated as of September 6, 2006

 

 

TABLE OF CONTENTS

	
  Section 1.

  	
   

  	
  Certain Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  Appointment of Rights Agent

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  Issue of Right Certificates

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  Form of Right Certificates

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  Countersignature and Registration

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

  	
  Transfer, Split Up, Combination and Exchange of
  Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
   

  	
  Exercise of Rights; Purchase Price; Expiration Date
  of Rights

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  Cancellation and Destruction of Right Certificates

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.

  	
   

  	
  Reservation and Availability of Preferred Shares

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  Preferred Shares Record Date

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
   

  	
  Adjustment of Purchase Price, Number of Shares or
  Number of Rights

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  Certificate of Adjusted Purchase Price or Number of
  Shares

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
   

  	
  Consolidation, Merger, Share Exchange or Sale or
  Transfer of Assets or Earning Power

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 14.

  	
   

  	
  Fractional Rights and Fractional Shares

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 15.

  	
   

  	
  Rights of Action

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 16.

  	
   

  	
  Agreement of Right Holders

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 17.

  	
   

  	
  Right Certificate Holder Not Deemed a Shareholder

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 18.

  	
   

  	
  Concerning the Rights Agent.

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 19.

  	
   

  	
  Merger or Consolidation or Change of Name of Rights
  Agent

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 20.

  	
   

  	
  Duties of Rights Agent

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 21.

  	
   

  	
  Change of Rights Agent

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 22.

  	
   

  	
  Issuance of New Right Certificates

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 23.

  	
   

  	
  Redemption

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 24.

  	
   

  	
  Exchange

  	
   

  	
  22

  

 

 i
 

 

 

	
  Section 25.

  	
   

  	
  Notice of Certain Events

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 26.

  	
   

  	
  Notices

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 27.

  	
   

  	
  Supplements and Amendments

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 28.

  	
   

  	
  Successors

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 29.

  	
   

  	
  Benefits of this Agreement

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 30.

  	
   

  	
  Severability

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 31.

  	
   

  	
  Governing Law

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 32.

  	
   

  	
  Counterparts

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 33.

  	
   

  	
  Descriptive Headings

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 34.

  	
   

  	
  Determinations and Actions by the Board of Directors

  	
   

  	
  26

  

 

Exhibit A - Terms of Series B Junior
Participating Preferred Stock

Exhibit B - Form of Right Certificate

Exhibit C - Summary of Rights to Purchase Preferred
Shares

 ii

RIGHTS AGREEMENT

THIS AGREEMENT, dated as of September 6, 2006, between MERGE TECHNOLOGIES INCORPORATED, a
Wisconsin corporation (the “Company”), and AMERICAN
STOCK TRANSFER & TRUST CO., a New York banking corporation (the “Rights
Agent”).

WHEREAS, the Board of Directors of the Company has
authorized and declared a dividend of one preferred share purchase right (a “Right”)
for each for each outstanding share of common stock, par value $0.01 per share
(“Common Stock”), of the Company and each outstanding Exchangeable Share issued
by Merge Cedara ExchangeCo Limited, an indirect wholly-owned subsidiary of the
Company (together with the Common Stock, the “Common Shares”) outstanding upon
the close of business on September 25, 2006 (the “Record Date”) payable on
October 2, 2006 (the “Payment Date”), and has authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined), each Right representing the right to purchase one
one-hundredth of a Preferred Share (as hereinafter defined) of the Company upon
the terms and subject to the conditions hereinafter set forth.

WHEREAS, a distribution of one Right for each
outstanding Exchangeable Share has been authorized in accordance and consistent
with and the terms and conditions of the authorization and declaration of the
dividend of Rights by the Board of Directors of the Company.

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

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

(a)   “Acquiring
Person” shall mean any Person (as such term is hereinafter defined) who or
which, together with all Affiliates and Associates (as such terms are
hereinafter defined) of such Person, shall be the Beneficial Owner (as such
term is hereinafter defined) of 15% or more of the Common Shares of the Company
then outstanding, but shall not include the Company, any Subsidiary (as such
term is hereinafter defined) of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, any entity holding Common Shares for
or pursuant to the terms of any such plan, or any trustee, administrator or
fiduciary of such a plan. 
Notwithstanding the foregoing,

(i) no Person who, at the close of business on the
date hereof, shall be the Beneficial Owner of 15% or more of the Common Shares
of the Company then outstanding shall be deemed an “Acquiring Person”;
provided, however, that if a Person is, at the close of business on the date
hereof, the Beneficial Owner of 15% or more of the Common Shares of the Company
then outstanding and shall thereafter become the Beneficial Owner of additional
Common Shares of the Company at any time that the person is or thereby becomes
the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding
(other than Common Shares acquired solely as a result of corporate action of
the Company not caused, directly or indirectly, by such Person), then such
Person shall be deemed to be an “Acquiring Person”; and

(ii) no Person shall become an “Acquiring Person” as
a result of an acquisition of Common Shares 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 Common Shares of the
Company then outstanding; provided, however,
that if a Person would, but for the foregoing, become an Acquiring Person by
reason of share purchases by the Company and shall, after

 

such share purchases by the Company, become the Beneficial Owner of any
additional Common Shares of the Company at any time that the Person is or
thereby becomes the Beneficial Owner of 15% or more of the Common Shares of the
Company then outstanding (other than Common Shares acquired solely as a result
of corporate action of the Company not caused, directly or indirectly, by such
Person), then such Person shall be deemed to be an “Acquiring Person”.

Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an “Acquiring
Person”, as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of Common Shares so that such
Person would no longer be an “Acquiring Person,” as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be
deemed to be an “Acquiring Person” for any purposes of this Agreement.

(b)   “Affiliate”
and “Associate” shall have the respective meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), as in effect on the date
of this Agreement.

(c)   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;

(ii)           which such Person or any of such
Person’s Affiliates or Associates has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or options, or
otherwise (for the avoidance of doubt, any Person who holds Exchangeable Shares
(as such term is hereinafter defined) shall be deemed to be the Beneficial
Owner of the Common Shares of the Company to which such Exchangeable Shares
relate); provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person’s Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; or (B) the right to
vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not
be deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations 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 with which such Person or any of such Person’s
Affiliates or Associates has any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of, or with respect to, acquiring, holding, voting (except to the
extent contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of
any securities of the Company.

 2
 

 

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

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

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

(f)    “Common
Shares” when used with reference to the Company shall mean the shares of common
stock, par value $0.01 per share, of the Company (“Common Stock”), and shares
having equivalent rights, privileges and preferences to common stock, including
for purposes of this Agreement the Exchangeable Shares.  “Common Shares” when used with reference to
any Person other than the Company shall mean the capital stock (or equivalent
equity interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons that
ultimately control such first-mentioned Person.

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

(h)   “Exchangeable Shares” shall mean the
exchangeable shares issued by Merge Cedara ExchangeCo Limited, an indirect
wholly-owned subsidiary of the Company, in connection with the Company’s
acquisition of Cedara Software Corp.

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

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

(k)   “Preferred
Shares” shall mean shares of Series B Junior Participating Preferred Stock,
$.01 par value per share, of the Company having the preferences and rights set
forth in Exhibit A attached to this Agreement.

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

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

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

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

 3
 

 

Company) in accordance
with the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment.  The Company may from time
to time appoint such co-Rights Agents as it may deem necessary or
desirable.

Section
3.              Issue of Right Certificates.

(a)   Until
the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the
tenth Business Day (or such later date as may be determined by action of the
Company’s Board of Directors prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement of, or of the first public
announcement of the intention of any Person to commence, a tender or exchange
offer the consummation of which would result in 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, any entity holding Common Shares for
or pursuant to the terms of any such plan, or any trustee, administrator, or
fiduciary of such a plan becoming the Beneficial Owner of Common Shares of the
Company aggregating 15% or more of the then outstanding Common Shares
(including in either case any such date which is after the date of this
Agreement and prior to the Payment Date; the earlier of such dates being herein
referred to as the “Distribution Date”; provided, however,
that if the tenth day or Business Day, as the case may be, after the pertinent
date occurs before the Record Date, “Distribution Date” shall mean the Record
Date), (x) the Rights will be evidenced (subject to the provisions of
Section 3(b) hereof) by the certificates for Common Shares of the Company
registered in the names of the holders thereof (which certificates shall also
be deemed to be Right Certificates) and not by separate Right Certificates, and
(y) the right to receive Right Certificates will be transferable only in
connection with the transfer of Common Shares of the Company. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be
sent (and the Rights Agent will, if requested, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common Shares of
the Company as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B hereto (a “Right
Certificate”), evidencing one Right for each Common Share of the Company so
held.  As of the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.

(b)   The
Company has prepared a Summary of Rights to Purchase Preferred Shares, attached
as Exhibit C hereto (the “Summary of Rights”), a copy of which is available
free of charge from the Company.  With
respect to certificates for Common Shares of the Company outstanding as of the
Record Date, until the Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof.  Until the Distribution Date (or the earlier
of the Redemption Date or Final Expiration Date), the surrender for transfer of
any certificate for Common Shares of the Company outstanding on the Record
Date, with or without a copy of the Summary of Rights attached thereto, shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby.

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

This certificate also evidences and entitles the
holder hereof to certain rights as set forth in a Rights Agreement between
Merge Technologies Incorporated and American Stock Transfer & Trust Co.,
dated as of September 6,
2006, and as such agreement may be amended
(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

 4
 

 

Merge Technologies Incorporated.  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.  Merge Technologies Incorporated 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, an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether held by
such person or any subsequent holder, shall become null and void.

With respect to such certificates containing the
foregoing legend, until the Distribution Date, the Rights associated with the
Common Shares 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 Common
Shares represented thereby.  In the event
that the Company purchases or acquires any Common Shares after the Record Date
but prior to the Distribution Date, any Rights associated with such Common
Shares shall be deemed cancelled and retired so that the Company shall not be
entitled to exercise any Rights associated with the Common Shares which are no
longer outstanding.

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

Section
5.              Countersignature and
Registration.

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

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

 5
 

 

Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.

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

(a)   Subject
to the provisions of Section 14 hereof, at any time after the close of
business on the Distribution Date, and at or prior to the close of business on
the earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that
have been exchanged pursuant to Section 24 hereof) may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of one
one-hundredths of a Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Right Certificate or
Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent.  Thereupon the Rights Agent
shall countersign and deliver to the person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested.  The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.

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

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

(a)   The
registered holder of any Right Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date upon surrender of the Right Certificate, with the
form of election to purchase on the reverse side thereof duly executed, to the
Rights Agent at the principal office of the Rights Agent, together with payment
of the Purchase Price for each one one-hundredth of a Preferred Share as to
which the Rights are exercised, at or prior to the earliest of (i) the close of
business on October 2, 2016, subject to extension (the “Final Expiration Date”),
(ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the “Redemption Date”), and (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.

(b)   The
Purchase Price for each one one-hundredth of a Preferred Share pursuant to the
exercise of a Right shall initially be $50.00, 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 or in Common Shares of
the Company in accordance with paragraph (c) below.

(c)   Upon
receipt of a Right Certificate representing exercisable Rights, with the form
of election to purchase duly executed, accompanied by payment of the Purchase
Price for the shares to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Right Certificate in
accordance with Section 9 hereof, as set forth below, the Rights Agent
shall thereupon

 6
 

 

promptly (i) (A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred Share as are to
be purchased (in which case certificates for the Preferred Shares represented
by such receipts shall be deposited by the transfer agent with the depositary
agent), (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 Right Certificate, registered in such name or names as may be
designated by such holder and (iv) when appropriate, after receipt, deliver
such cash to or upon the order of the registered holder of such Right
Certificate.  The payment of the Purchase
Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) shall be made by certified check, cashier’s check, bank draft or money
order payable to the order of the Company, except that, if so provided by the
Board of Directors of the Company, the payment of the Purchase Price following
the occurrence of a Section 11(a)(ii) Event (as hereinafter defined) and
until the first occurrence of a Section 13 Event (as hereinafter defined)
may be made wholly or in part by delivery of a certificate or certificates
(with appropriate stock powers executed in blank attached thereto) evidencing a
number of Common Shares of the Company equal to the then Purchase Price divided
by the closing price (as determined pursuant to Section 11(d) hereof) per
Common Share on the Trading Day (as such term is hereinafter defined)
immediately preceding the date of such exercise.  If the Company is obligated to issue other
securities of the Company, 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 Right Certificate shall exercise less than
all the Rights evidenced thereby, a new Right Certificate evidencing Rights
equivalent to the Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.

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

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

 7
 

 

Section
9.              Reservation and Availability
of Preferred Shares.

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

(b)   So
long as the Preferred Shares issuable upon the exercise of Rights may be listed
on any national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all Preferred
Shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.

(c)   The
Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares (except as otherwise provided by any
corporation law applicable to the Company).

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

Section
10.            Preferred Shares Record
Date.  Each Person
in whose name any certificate for Preferred Shares is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Preferred Shares represented thereby on, and such certificate shall be
dated, the date upon which the Right Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Shares transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Shares
transfer books of the Company are open.

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

(a)           (i)            In
the event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares into a smaller number of Preferred Shares or (D) issue any
shares of its capital stock in a reclassification of the Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the

 8
 

 

effective
date of such subdivision, combination or reclassification, and the number and
kind of shares of capital stock issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised after such time shall be
entitled to receive the aggregate number and kind of shares of capital stock
which, if such Right had been exercised immediately prior to such date and at a
time when the Preferred Shares transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one
Right.  If an event occurs which would
require an adjustment under both Section 11(a)(i) and
Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).

(ii) Subject
to Section 24 of this Agreement, in the event any Person shall become an
Acquiring Person, other than pursuant to any transaction set forth in
Section 13(a), each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of shares of Common
Stock of the Company as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable and dividing that product by (y)
50% of the then current per share market price of the Common Stock of the
Company (determined pursuant to Section 11(d)) on the date the Person
became an Acquiring Person (such number of shares, the “Adjustment Shares”).

From and after such time as a Person becomes an
Acquiring Person (a “Section 11(a)(ii) Event”), any Rights that are or
were acquired or beneficially owned by such Acquiring Person (or any Associate
or Affiliate of such Acquiring Person) shall be void and any holder of such
Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement.  No Right
Certificate shall be issued pursuant to Section 3 that represents Rights
beneficially owned by an Acquiring Person whose Rights would be void pursuant
to the preceding sentence or any Associate or Affiliate thereof; no Right
Certificate shall be issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate; and any Right Certificate delivered to the
Rights Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence shall be cancelled.  The Company shall use all reasonable efforts
to ensure that the provisions of this paragraph are complied with, but shall
have no liability to any holder of Right Certificates or other Person as a result
of its failure to make any determinations with respect to an Acquiring Person
or its Affiliates, Associates or transferees hereunder.

(iii)                In
the event that there shall not be sufficient shares of Common Stock of the
Company issued but not outstanding or authorized but unissued (and not reserved
for issuance for purposes other than upon exercise of the Rights) to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Company shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the “Current Value”)
over (2) the Purchase Price (such excess, the “Spread”), and (B) with respect
to each Right, make adequate provision to substitute for

 9
 

 

the Adjustment Shares, upon payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3) equity
securities of the Company (including, without limitation, one one-hundredth of
a Preferred Share or shares, or units of shares, of preferred stock which the
Board of Directors of the Company has deemed to have the same value as Common
Stock of the Company (such one one-hundredth of a Preferred Share or shares of
preferred stock, hereinafter referred to as “common stock equivalents”)), (4)
debt securities of the Company, (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 Board of Directors of the Company
based upon the advice of a nationally recognized investment banking firm selected
by the Board of Directors of the Company; provided,
however, if the Company shall not have made adequate provision to
substitute for the Adjustment Shares pursuant to clause (B) above within thirty
(30) days following the occurrence of a Section 11(a)(ii) Event (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 any portion
of the Purchase Price, shares of Common Stock of the Company (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread.  If
the Board of Directors of the Company shall determine in good faith that it is
likely that sufficient additional shares of Common Stock of the Company might
be authorized for issuance for exercise in full of the Rights, 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 shareholder approval for the authorization of such
additional shares (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 the
last paragraph of Section 11(a)(ii) 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 to seek any
authorization of additional shares 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
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 of the Company shall be the current per share
market price (as determined pursuant to Section 11(d) hereof) of the
Common Stock of the Company 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 of the Company on such date.

(b)   In
case the Company shall fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Shares entitling them (for a period
expiring within 45 calendar days after such record date) to subscribe for or
purchase Preferred Shares (or shares having the same rights, privileges and
preferences as the Preferred Shares (“equivalent preferred shares”)) or
securities convertible into Preferred Shares at a price per Preferred Share or
equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less
than the then current per share market price of the Preferred Shares (as
defined in Section 11(d)) on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the numerator
of which shall be the number of Preferred Shares outstanding on such record
date plus the number of Preferred Shares which the aggregate offering price of
the total number of Preferred Shares and/or equivalent preferred shares so to
be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price and
the denominator

 10
 

 

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

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

(d)   (i)  For the purpose of any computation hereunder,
the “current per share market price” of any security (a “Security” for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the 30
consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided,
however, that in the event
that the current per share market price of the Security is determined during a
period following the announcement by the issuer of such Security of (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 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the current per share market price shall be appropriately
adjusted to reflect the current market price per share equivalent of such
Security.  The closing price for each
Trading Day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Securities are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System

 11
 

 

(“Nasdaq”) or such other system then in use, or, if on any such date
the Security is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in the Security selected by the Board of Directors of the Company.  The term “Trading Day” shall mean a day on
which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or, if
the Security is not listed or admitted to trading on any national securities
exchange, a Business Day.

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

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

(f)    If,
as a result of an adjustment made pursuant to Section 11(a), the holder of
any Right thereafter exercised shall become entitled to receive any shares of
capital stock of the Company other than Preferred Shares, thereafter the number
of such other shares so receivable upon exercise of any Right shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Preferred Shares contained
in Section 11(a) through (c), inclusive, and the provisions of
Sections 7, 9, 10 and 13 with respect to the Preferred Shares shall apply
on like terms to any such other shares.

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

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

 12
 

 

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

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

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

(l)    In
any case in which this Section 11 shall require that an adjustment in the
Purchase Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuing to
the holder of any Right exercised after such record date of the one
one-hundredths of a Preferred Share and other capital stock or securities of
the Company, if any, issuable upon such exercise over and above the number of
one one-hundredths of a Preferred Share and other capital stock or securities
of the Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder’s
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.

(m)  Anything
in this Section 11 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the extent
that it in its sole discretion shall determine to be advisable in order that
any consolidation or subdivision of the Preferred Shares, issuance wholly for
cash of any Preferred Shares at less than the current market price, issuance
wholly for cash of Preferred Shares or securities which by their terms are
convertible into or exchangeable for Preferred Shares, dividends on Preferred

 13
 

 

Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to in Section 11(b) hereof, hereafter made by the
Company to holders of its Common Shares shall not be taxable to such
shareholders.

(n)   The
Company covenants and agrees that it shall not, at any time after the earlier
of the Distribution Date or the Shares Acquisition Date, (i) consolidate with
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), (ii) merge with or into any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50% 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 and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o)
hereof) or (iv) consummate a share exchange with any other Person, if at the
time of or immediately after such consolidation, merger, sale or share exchange
(A) 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, (B)
prior to, simultaneously with or immediately after such consolidation, merger,
sale or share exchange the shareholders of the Person who constitute, or would
constitute, the “Principal Party” for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates or (C) the form or nature of organization
of the Principal Party would preclude or limit the exercisability of the
Rights.

(o)   The
Company covenants and agrees that, after the Distribution Date, it will not,
except as permitted by Section 23, Section 24 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights.

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

Section
12.            Certificate of Adjusted
Purchase Price or Number of Shares.  Whenever an adjustment is made as provided in
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 Common Shares of the Company a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof.

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

(a)   In
the event that, following the Shares Acquisition Date, directly or indirectly,
(x) the Company shall consolidate with, or merge with and into, any other
Person (other than a Subsidiary of the

 14
 

 

Company in a transaction which complies with Section 11(o)
hereof), and the Company shall not be the continuing or surviving corporation
of such consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger, or any
Person or Persons (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof) shall consummate a share exchange with
the Company, and, in connection with such consolidation, merger or share
exchange, all or part of the outstanding Common Shares of the Company shall be
changed into or exchanged for stock or other securities of any other Person (or
the Company) or cash or any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any Subsidiary of the Company in one or more transactions
each of which complies with Section 11(o) hereof), then, and in each such
case, proper provision shall be made so that: (i) each holder of a Right
(except as otherwise provided herein) shall thereafter have the right to
receive, upon the exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of any of the events described
in clauses (x), (y) or (z) above (a “Section 13 Event”), the Purchase
Price in effect immediately prior to the first occurrence of a
Section 11(a)(ii) Event multiplied by the number of one one-hundredths of
a Preferred Share for which a Right was exercisable immediately prior to such
first occurrence), in accordance with the terms of this Agreement, such number
of validly authorized and issued, fully paid, nonassessable (except as
otherwise required by any corporation law applicable to the Principal Party (as
such term is hereinafter defined)) and freely tradeable Common Shares of the
Principal Party, not subject to any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right is exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of such shares for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event by
the Purchase Price in effect immediately prior to such first occurrence), and
dividing that product (which, following the first occurrence of a
Section 13 Event, shall be referred to as the “Purchase Price” for each
Right and for all purposes of this Agreement) by (2) 50% of the current market
price (determined pursuant to Section 11(d) hereof) per Common Share of
such Principal Party on the date of consummation of such Section 13 Event;
(ii) 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; (iii) the term “Company” shall thereafter
be deemed to refer to such Principal Party, it being specifically intended that
the provisions of Section 11 hereof shall apply only to such Principal
Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise
of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be
of no effect following the first occurrence of any Section 13 Event.

(b)   “Principal
Party” shall mean

(i)            in the case of any transaction
described in clause (x) or (y) of the first sentence of Section 13(a), the
Person that is the issuer of any securities into which Common Shares of the
Company are converted in such merger, consolidation or share exchange, and if
no securities are so issued, (A) the Person that is the other party to the
merger, consolidation or share exchange and that survives such merger or
consolidation,

 15
 

 

or, if there is more than
one such Person, the Person the Common Shares of which have the greatest
aggregate market value of shares outstanding or (B) if the Person that is the
other party to the merger or consolidation does not survive the merger or
consolidation, the Person that does survive the merger or consolidation
(including the Company if it survives); and

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

provided, however, that in any such case,
(1) if the Common Shares of such Person are not at such time and have not been
continuously over the preceding twelve (12) month-period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, “Principal Party” shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of two or more of which are and have been so registered, “Principal
Party” shall refer to whichever of such Persons is the issuer of the Common
Shares having the greatest aggregate market value.

(c)   The
Company shall not consummate any such consolidation, merger, share exchange,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized Common Shares which 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 Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the
date of any consolidation, merger, share exchange or sale of assets mentioned
in paragraph (a) of this Section 13, the Principal Party will:

(i)            prepare and file a registration
statement under the Securities Act of 1933, as amended (the “Act”), with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times meeting
the requirements of the Act) until the Final Expiration Date; and

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

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

Section
14.            Fractional Rights and
Fractional Shares.

(a)   The
Company shall not be required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights.  In lieu of such fractional Rights, there
shall be paid to the registered holders of the Right Certificates with regard
to which such fractional Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of a whole Right.  For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would

 16
 

 

have been otherwise issuable. 
The closing price for any day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by Nasdaq or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Rights selected by the Board of Directors of the
Company.  If on any such date no such
market maker is making a market in the Rights the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.

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

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

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

 17

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

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

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

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

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

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

Section
18.            Concerning the Rights Agent.

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

 18
 

 

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

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

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

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

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

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

(b)   Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the President or any Vice President and by the Treasurer or any Assistant
Treasurer or 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.

 19
 

 

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

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

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

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

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

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

Section
21.            Change of Rights Agent.  The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
days’ notice in writing mailed to the Company and to each transfer agent of the
Common Shares by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. 
The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days’ notice in writing, mailed to the Rights Agent or

 20
 

 

successor Rights Agent,
as the case may be, and to each transfer agent of the Common Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail.  If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by
the Company), then the registered holder of any Right Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights
Agent.  Any successor Rights Agent,
whether appointed by the Company or by such a court, shall be (a) a
corporation organized and doing business under the laws of the United States or
of the State of New York or the State of Wisconsin (or of any other state of
the United States so long as such corporation is authorized to do business as a
banking institution in the State of New York or the State of Wisconsin), in
good standing, having an office or agency in the State of New York or the State
of Wisconsin, which is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50 million, or
(b) an Affiliate of a corporation described in clause (a) of this
sentence.  After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose.  Not
later than the effective date of any such appointment the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares, and mail a notice thereof in writing to the
registered holders of the Right Certificates. 
Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.

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

Section
23.            Redemption.

(a)   The
Rights may be redeemed by action of the Board of Directors pursuant to
subsection (b) of this Section 23 and shall not be redeemed in any
other manner.

(b)   The
Board of Directors of the Company may, at its option, at any time prior to such
time as any Person becomes an Acquiring Person, redeem all but not less than
all the then outstanding Rights at a redemption price of $.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the “Redemption Price”).  The redemption of the Rights by the Board of
Directors may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.  Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event until such time as the Company’s
right of redemption hereunder has expired.

(c)   Immediately
upon the effectiveness of the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to subsection (b) of this
Section 23, and without

 21
 

 

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

(d)           It is understood
that the TIDE Committee (as described below) of the Board of Directors of the
Company shall review and evaluate this Agreement in order to consider whether
the maintenance of this Agreement continues to be in the best interests of the
Company, its shareholders and other relevant constituencies of the Company at
least once every three years, or sooner than that if any Person shall have made
a proposal to the Company or its shareholders, or taken any other action that,
if effective, could cause such Person to become an Acquiring Person hereunder,
if a majority of the members of the TIDE Committee shall deem such review and
evaluation appropriate after giving due regard to all relevant circumstances.  Following each such review, the TIDE
Committee will communicate its conclusions to the full Board of Directors of
the Company, including any recommendation in light thereof as to whether this
Agreement should be modified or the Rights should be redeemed.  The TIDE Committee shall be comprised of
members of the Board of Directors of the Company who are not officers,
employees or Affiliates of the Company and shall be the Audit Committee of the
Company as long as the members of the Audit Committee meet such requirements.

(e)           The TIDE Committee, and the Board of
Directors of the Company, when considering the redemption of, or any supplement
or amendment to, the Rights, shall have the power to set their own agenda and
to retain at the expense of the Company their choice of legal counsel,
investment bankers and other advisors. 
The TIDE Committee, and the Board of Directors of the Company when
considering redemption of, or any supplement or amendment to, the Rights, shall
have the authority to review all information of the Company and to consider any
and all factors they deem relevant to an evaluation of whether to maintain or
modify the Agreement or terminate the Rights.

Section
24.            Exchange.

(a)   The
Board of Directors of the Company may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii) hereof) for
Common Shares of the Company at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the “Exchange Ratio”).  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, any entity holding Common
Shares for or pursuant to the terms of any such plan, or any trustee,
administrator or fiduciary of such a plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares of the Company then outstanding.

 22
 

 

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

(c)   In
any exchange pursuant to this Section 24, the Company, at its option, may
substitute Preferred Shares (or equivalent preferred shares, as such term is
defined in Section 11(b) hereof) for some or all of the Common Shares of
the Company exchangeable for Rights, at the initial rate of one one-hundredth
of a Preferred Share (or equivalent preferred share) for each Common Share of
the Company, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Shares pursuant to the terms thereof, so that the
fraction of a Preferred Share delivered in lieu of each Common Share of the
Company shall have the same voting rights as one Common Share of the Company.

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

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

Section
25.            Notice of Certain Events.

(a)   In
case the Company shall propose, after the Distribution Date, (i) to pay any
dividend payable in stock of any class to the holders of Preferred Shares or to
make any other distribution to the holders of Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of Preferred Shares
(other than a reclassification involving only the subdivision of outstanding
Preferred Shares), (iv) to effect any consolidation or merger into or with
(other than a merger of a Subsidiary into or with the Company), to effect any
share exchange with or to effect any sale or other transfer (or to permit one
or more of its Subsidiaries to effect any sale or other transfer), in one or
more transactions, of 50% or more of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to, any other

 23
 

 

Person, or (v) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to each holder of
a Right Certificate, in accordance with Section 26 hereof, a notice of
such proposed action, which shall specify the record date for the purposes of
such stock dividend, or distribution of rights or warrants, or the date on
which such reclassification, consolidation, merger, share exchange, sale,
transfer, liquidation, dissolution, or winding up is to take place and the date
of participation therein by the holders of the Preferred Shares if any such
date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 10 days prior to the record
date for determining holders of Preferred Shares for purposes of such action,
and in the case of any such other action, at least 10 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of the Preferred Shares, whichever shall be the earlier.

(b)   In
case any of Section 11(a)(ii) Event or Section 13 Event shall occur,
then, in any such case, (i) the Company shall as soon as practicable thereafter
give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of the occurrence of such event, which notice shall include a
brief summary of the Section 11(a)(ii) Event or Section 13 Event, as
the case may be, and the consequences thereof to holders of Rights, and (ii)
all references in the preceding paragraph to Preferred Shares shall be deemed
thereafter to refer to Common Shares and/or, if appropriate, other securities.

Section
26.            Notices.

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

Merge Technologies Incorporated

6737 West Washington Street, Suite 2205

Milwaukee, WI 
53214

Attention:  Secretary

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

American Stock Transfer & Trust Co.

59 Maiden Lane

New York, NY 10038

Attention:  Isaac J. Kagan

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

Section
27.            Supplements and
Amendments.  Prior
to such time as any Person becomes an Acquiring Person and subject to the
penultimate sentence of this Section 27, the Company may and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement without the approval of any holders of certificates representing
Common Shares of the Company.  Without
limiting the foregoing, the Company may at any time prior to such time as any

 24
 

 

Person becomes an
Acquiring Person amend this Agreement to lower the thresholds set forth in
Sections 1(a) and 3(a) hereof from 15% to not less than 10%, with appropriate
exceptions for Persons then beneficially owning Common Shares of the Company
constituting a percentage of the number of Common Shares then outstanding equal
to or in excess of the new threshold. 
From and after such time as any Person becomes an Acquiring Person and
subject to the penultimate sentence of this Section 27, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Right Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of
the holders of Right Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person); provided, that from and after such time as any Person
becomes an Acquiring Person 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.  Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the
terms of this Section 27, the Rights Agent shall execute such supplement
or amendment.  Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall
be made that changes the Redemption Price or moves to an earlier date the then
effective Final Expiration Date.  Prior
to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Shares of the
Company.

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

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

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

Section
31.            Governing Law.  This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Wisconsin and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State and shall be subject to the exclusive
jurisdiction of the courts of, and United States Federal Courts sitting in,
such State.

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

 25
 

 

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

Section
34.            Determinations and
Actions by the Board of Directors.  For all purposes of this Agreement, any
calculation of the number of Common Shares of the Company outstanding at any
particular time, including for purposes of determining the particular
percentage of such outstanding Common Shares of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange
Act.  The Board of Directors of the
Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (a) interpret the provisions of this Agreement, and (b) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement and any determination as to whether actions or any Person
shall be such as to cause such Person to beneficially own shares held by another
Person).  All such actions, calculations,
interpretations and determinations (including, for purposes of clause (ii)
below, all omissions with respect to the foregoing) which are done or made by
the Board of Directors of the Company in good faith, shall (i) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (ii) not subject the Board of Directors of
the Company to any liability to the holders of the Rights.

 26
 

 

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

	
  

  	
   

  	
  MERGE TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
      /s/
  Julie Ann Schumitsch

  	
   

  	
   

  	
  By:

  	
      /s/ Michael D. Dunham

  	
   

  
	
  Title:

  	
  Assistant
  Secretary

  	
   

  	
   

  	
  Title:

  	
  Chairman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AMERICAN STOCK TRANSFER & TRUST CO.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
      /s/
  Isaac J. Kagan

  	
   

  	
   

  	
  By:

  	
      /s/ Herbert J. Lemmer

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
									

 

 27

EXHIBIT A

 

Terms
of the Series B Junior Participating Preferred Stock,

$.01
par value per share, of

Merge Technologies Incorporated

Series B Junior Participating Preferred Stock

1.             Designation
and Amount.  There is hereby created
a series of Preferred Stock that shall be designated as “Series B Junior
Participating Preferred Stock”, $.01 par value per share (the “Series B
Preferred Stock”), and the number of shares constituting such series shall be
1,000,000.  Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided that
no decrease shall reduce the number of shares of Series B Preferred Stock to a
number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights
or warrants or upon the conversion of any outstanding securities issued by the
Corporation into Series B Preferred Stock.

2.             Dividends
and Distributions.

(A)          The holders of shares of Series B
Preferred Stock, in preference to the holders of shares of Common Stock and of
any other junior stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first business days of January,
April, July and October 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 B Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (i) $1.00 or (ii) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all noncash dividends or other distributions, other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Payment Date, since the first
issuance of any share or fraction of a share of Series B Preferred Stock.  In the event the Corporation shall at any
time after the close of business on September 6, 2006 (the “Rights Declaration
Date”) (a) declare any dividend on Common Stock payable in shares of Common
Stock, (b) subdivide the outstanding Common Stock, or (c) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the amount
to which holders of shares of Series B Preferred Stock were entitled
immediately prior to such event under clause (ii) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock that are outstanding immediately
after such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.

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

 A-1
 

 

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

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

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

(B)           Except as otherwise provided herein,
in any other resolution of the Board of Directors creating a series of
Preferred Stock or any similar stock, or by law, the holders of shares of
Series B Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of shareholders of the
Corporation.

(C)           Except as set forth herein, holders
of Series B 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.

4.             Certain
Restrictions.

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

 A-2
 

 

(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 B Preferred Stock;

(ii)           declare or pay dividends on or make
any other distributions on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series B
Preferred Stock, except dividends paid ratably on the Series B 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 B
Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire shares of
any such parity stock in exchange for shares of any stock of the Corporation
ranking junior to or on a parity with (both as to dividends or upon
dissolution, liquidation or winding up) the Series B Preferred Stock; or

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

(B)           The Corporation shall not permit any
corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is beneficially owned,
directly or indirectly, by the Corporation or otherwise controlled by the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and
in such manner.

5.             Reacquired
Shares.  All shares of Series B
Preferred Stock that shall at any time have been reacquired by the Corporation
shall, after such reacquisition, have the status of authorized but unissued
shares of Preferred Stock of the Corporation, without designation as to series,
and may be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.

6.             Liquidation,
Dissolution or Winding Up.  Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (A) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred Stock unless, prior thereto, the holders of shares of Series B
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided
that the holders of shares of Series B Preferred Stock shall be entitled to
receive an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (B) to the
holders of shares of stock ranking on a parity (either as to dividends or upon

 A-3
 

 

liquidation, dissolution or winding up) with the Series B Preferred
Stock, except distributions made ratably on the Series B Preferred Stock and
all other such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up.  In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series B Preferred Stock were entitled
immediately prior to such event under the proviso in clause (A) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

7.             Consolidation,
Merger, etc.  In case the Corporation
shall enter into any consolidation, merger, combination, share exchange 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 B Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged.  In the event the Corporation
shall at any time after the Rights Declaration Date (A) declare any dividend on
Common Stock payable in shares of Common Stock, (B) subdivide the outstanding
Common Stock, or (C) combine the outstanding shares of Common Stock into a
smaller number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series B Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock that are outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

8.             No
Redemption.  The shares of Series B
Preferred Stock shall not be redeemable.

9.             Amendment.  To the fullest extent permitted by applicable
law, prior to such time as shares of Series B Preferred Stock are issued and
outstanding, the Board of Directors may modify, amend, alter or revoke any of
the number of shares of Series B Preferred Stock, the powers, preferences or special
rights of the Series B Preferred Stock or the other terms of the Series B
Preferred Stock.  From and after such
time as shares of Series B Preferred Stock are issued and outstanding, the
Restated Articles of Incorporation of the Corporation shall not be amended in
any manner that would materially alter or change the powers, preferences or
special rights of the Series B Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series B Preferred Stock, voting together as a single
class.

10.           Fractional
Shares.  Series B 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 B Preferred Stock.

 A-4

EXHIBIT B

 

[Form of Right Certificate]

	
  Certificate No. R-

  	
   

  	
   Rights

  

 

NOT EXERCISABLE AFTER OCTOBER 2, 2016
(SUBJECT TO EXTENSION) OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001
PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.

Right
Certificate

MERGE
TECHNOLOGIES INCORPORATED

This certifies that                            ,
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement, dated as of September 6,
2006, and as such agreement may be amended (the “Rights Agreement”), between
Merge Technologies Incorporated, a Wisconsin corporation (the “Company”), and
American Stock Transfer & Trust Co. (the “Rights Agent”), to purchase from
the Company at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M., Milwaukee, Wisconsin time,
on October 2, 2016, subject to extension, at
the principal office of the Rights Agent, or at the office of its successor as
Rights Agent, one one-hundredth of one fully paid nonassessable (except as
otherwise provided by any corporation law applicable to the Company) share of
Series B Junior Participating Preferred Stock, $.01 par value per share (“Preferred
Shares”), of the Company, at a purchase price of $50.00 per one one-hundredth
of a Preferred Share (the “Purchase Price”), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly
executed.  The number of Rights evidenced
by this Right Certificate (and the number of one one-hundredths of a Preferred
Share which may be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of
September 25, 2006, based on the Preferred Shares as constituted at such
date.  As provided in the Rights
Agreement, the Purchase Price and the number of one one-hundredths of a
Preferred Share which may be purchased upon the exercise of the Rights
evidenced by this Right Certificate are subject to modification and adjustment
upon the happening of certain events.

This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Right
Certificates.  Copies of the Rights
Agreement are on file at the principal executive offices of the Company and the
above-mentioned offices of the Rights Agent.

 B-1
 

 

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

Subject to the provisions of the Rights Agreement,
the Rights evidenced by this Certificate may be redeemed by the Company at a
redemption price of $.001 per Right.

The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person, but prior to
such Person’s acquisition of 50% or more of the outstanding shares of common
stock, par value $0.01 per share (“Common Stock”), of the Company, and any
securities exchangeable for or convertible into the Common Stock, exchange the
Rights evidenced by the certificates for Preferred Shares or shares of Common
Stock, at an exchange ratio of one one-hundredth of a Preferred Share or one
share of Common Stock, as the case may be, per Right, subject to adjustment, as
provided in the Rights Agreement.

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

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

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

 B-2
 

 

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

	
  ATTEST:

  	
   

  	
  MERGE TECHNOLOGIES INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signature

  	
   

  	
   

  	
   

  
							

 

 B-3
 

 

[Form
of Reverse Side of Right Certificate]

FORM OF ASSIGNMENT

(To be
executed by the registered holder if such

holder
desires to transfer the Right Certificate.)

	
  FOR VALUE RECEIVED

  	
   

  	
   hereby sells,
  assigns and transfers unto

  
	
   

  
	
  (Please print
  name and address of transferee)

  
	
   

  	
   this Right
  Certificate, together with all 

  
	
  right, title and interest therein, and does hereby
  irrevocably constitute and appoint

  	
   

  
	
  Attorney, to transfer the within Right Certificate
  on the books of the within-named Company, with full power of
  substitution.

  
					

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  

 

Signature Guaranteed:

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

	
  

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  

 

 B-4
 

 

FORM OF
ELECTION TO PURCHASE

(To be
executed if holder desires to

exercise
the Right Certificate.)

To MERGE TECHNOLOGIES INCORPORATED:

	
  The undersigned hereby
  irrevocably elects to exercise

  	
   

  	
   Rights
  represented by this Right 

  
	
  Certificate to purchase the Preferred Shares
  issuable upon the exercise of such Rights and requests that certificates for
  such Preferred Shares be issued in the name of:

  

 

Please insert social security

or other identifying number

 

	
  

  
	
  (Please print
  name and address)

  
	
   

  
	
   

  

 

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

Please insert social security

or other identifying number

 

	
  

  
	
  (Please print
  name and address)

  
	
   

  
	
   

  

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  

 

Signature Guaranteed:

 B-5
 

 

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

 

 

	
  

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  

NOTICE

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

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

 B-6

EXHIBIT C

 

MERGE
TECHNOLOGIES INCORPORATED

SUMMARY OF RIGHTS TO
PURCHASE

PREFERRED
SHARES

On September 6, 2006, the Board of Directors of
Merge Technologies Incorporated (the “Company”) declared a dividend of one
preferred share purchase right (a “Right”) for each outstanding share of common
stock, par value $0.01 per share (“Common Stock”), of the Company and each
outstanding Exchangeable Share issued by Merge Cedara ExchangeCo Limited, an
indirect wholly-owned subsidiary of the Company (together with the Common
Stock, the “Common Shares”).  The
dividend is payable upon the close of business on October 2, 2006 to the
shareholders of record upon the close of business on September 25, 2006 (the “Record
Date”).  Each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Series B Junior Participating Preferred Stock, $.01 par value per share (“Preferred
Shares”), of the Company, at a price of $50.00 per one one-hundredth of a
Preferred Share, subject to adjustment (the “Purchase Price”).  The description and terms of the Rights are
set forth in a Rights Agreement (the “Rights Agreement”) between the Company
and American Stock Transfer & Trust Co., as Rights Agent (the “Rights Agent”).

Until the earlier to occur of (i) 10 days following
a public announcement that a person or group of affiliated or associated
persons (other than the Company, a subsidiary of the Company or an employee
benefit plan of the Company or a subsidiary) (an “Acquiring Person”) has
acquired beneficial ownership of 15% or more of the outstanding Common Shares
(the “Shares Acquisition Date”) or (ii) 10 business days (or such later date as
may be determined by action of the Company’s Board of Directors prior to such
time as any person becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group (other than the Company, a subsidiary of the Company or an employee
benefit plan of the Company or a subsidiary) of 15% or more of such outstanding
Common Shares (the earlier of such dates being called the “Distribution Date”),
the Rights will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate.

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

The Rights are not exercisable until the
Distribution Date.  The Rights will
expire on October 2, 2016 (the “Final Expiration Date”), subject to extension,
unless the Rights are earlier redeemed or exchanged by the Company, in each
case as described below.

The Purchase Price payable, and the number of
Preferred Shares or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) upon the grant to holders of
the Preferred Shares of certain rights or warrants to

 C-1
 

 

subscribe for or purchase Preferred Shares at a price, or securities
convertible into Preferred Shares with a conversion price, less than the then
current market price of the Preferred Shares or (iii) upon the distribution to
holders of the Preferred Shares of evidences of indebtedness or assets
(excluding regular quarterly cash dividends or dividends payable in Preferred
Shares) or of subscription rights or warrants (other than those referred to
above).

The number of outstanding Rights and the number of
one one-hundredths of a Preferred Share issuable upon exercise of each Right
are also subject to adjustment in the event of a stock split of the Common
Stock or a stock dividend on the Common Stock payable in Common Stock or
subdivisions, consolidations or combinations of the Common Stock occurring, in
any such case, prior to the Distribution Date.

Preferred Shares purchasable upon the exercise of
Rights will not be redeemable.  Each
Preferred Share will be entitled to a minimum preferential quarterly dividend
payment of $1.00 per share but will be entitled to an aggregate dividend of 100
times the dividend declared per Common Stock. 
In the event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100 per share but
will be entitled to an aggregate payment of 100 times the payment made per
share of Common Stock.  Each Preferred
Share will have 100 votes, voting together with the Common Stock.  Finally, in the event of any merger,
consolidation or other transaction in which Common Stock are exchanged, each
Preferred Share will be entitled to receive 100 times the amount received per
Common Stock.  These rights are protected
by customary antidilution provisions.

Because of the nature of the Preferred Shares’
dividend, voting and liquidation rights, the value of the one one-hundredth
interest in a Preferred Share purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.

In the event that any person becomes an Acquiring
Person (a “Flip-In Event”), each holder of a Right (except as otherwise
provided in the Rights Agreement) will thereafter have the right to receive
upon exercise that number of shares of Common Stock (or, in certain
circumstances cash, property or other securities of the Company or a reduction
in the Purchase Price) having a market value of two times the then current
Purchase Price.  Notwithstanding any of
the foregoing, following the occurrence of a Flip-In Event all Rights
that are, or (under certain circumstances specified in the Rights Agreement)
were, or subsequently become beneficially owned by an Acquiring Person, related
persons and transferees will be null and void.

In the event that, at any time following the Shares
Acquisition Date, (i) the Company is acquired in a merger or other business
combination transaction or (ii) 50% or more of its consolidated assets or
earning power are sold (the events described in clauses (i) and (ii) are herein
referred to as “Flip-Over Events”), proper provision will be made so that each
holder of a Right (except as otherwise provided in the Rights Agreement) will
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price, that number of shares of common stock of the acquiring
company which at the time of such transaction will have a market value of two
times the then current Purchase Price.

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

The Purchase Price is payable by certified check,
cashier’s check, bank draft or money order or, if so provided by the Company,
the Purchase Price following the occurrence of a Flip-In Event

 C-2
 

 

and until the first occurrence of a Flip-Over Event may be paid in
Common Shares having an equivalent value.

At any time after a person becomes an Acquiring
Person and prior to the acquisition by such Acquiring Person of 50% or more of
the outstanding Common Shares, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by any Acquiring Person which have
become void), in whole or in part, at an exchange ratio of one Common Share, or
one one-hundredth of a Preferred Share (or of a share of a class or series of
the Company’s preferred stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).

At any time prior to a person becoming an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.001 per Right (the “Redemption Price”).  The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. 
Immediately upon any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.

Other than amendments that would change the
Redemption Price or move to an earlier date the Final Expiration Date of the
Rights, the terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an
amendment to lower the threshold for exercisability of the Rights from 15% to
not less than 10%, with appropriate exceptions for any person then beneficially
owning a percentage of the number of Common Shares then outstanding equal to or
in excess of the new threshold, except that from and after such time as any
person becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.

Until a Right is exercised, the holder thereof, as
such, will have no rights as a shareholder of the Company, including, without
limitation, the right to vote or to receive dividends.

A
copy of the Rights Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to a Current Report on Form 8-K with respect to the
Rights.  A copy of the Rights Agreement
is also available free of charge from the Company.  This summary description of the Rights does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by reference.

 C-3

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