Document:

Unassociated Document

    EXHIBIT
      4.1

     

    

      FORM
        OF
        RIGHT CERTIFICATE

       

      
        	
                Certificate
                  No. R-__________________

              	
                _________________
                  Rights

              
	 	 

      

      

       

      NOT
        EXERCISABLE AFTER [INSERT
        FINAL EXPIRATION DATE]
        OR
        EARLIER IF REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION,
        EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH
        IN
        THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS
        AGREEMENT, RIGHTS THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON
        OR
        AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
        IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF MAY BECOME NULL AND
        VOID.

       

      Right
        Certificate

       

      COSINE
        COMMUNICATIONS, INC.

       

      This
        certifies that ___________, or registered assigns, is the registered owner
        of
        the number of Rights set forth above, each of which entitles the owner thereof,
        subject to the terms, provisions, and conditions of the Rights Agreement,
        dated
        as of September 1, 2005 (the “Rights
        Agreement”),
        between Cosine Communications, Inc., a Delaware corporation (the”Company”),
        and
        Mellon Investor Services LLC (the “Rights
        Agent”),
        to
        purchase from the Company at any time after the Distribution Date (as such
        term
        is defined in the Rights Agreement) and prior to 5:00 p.m. (Eastern time)
        on the
        Expiration Date (as such term is defined in the Rights Agreement) at the
        principal office or offices of the Rights Agent designated for such purpose,
        one
        one-hundredth of a fully paid nonassessable share of Series A Junior
        Participating Preferred Stock, par value $0.0001 per share (the “Preferred
        Shares”),
        of
        the Company, at a purchase price of $3.00 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 and related Certificate duly executed. If this Right Certificate
        is
        exercised in part, the holder will be entitled to receive upon surrender
        hereof
        another Right Certificate or Right Certificates for the number of whole Rights
        not exercised. 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 thereof) set forth above, and the Purchase Price set forth above,
        are
        the number and Purchase Price as of the date of the Rights Agreement, based
        on
        the Preferred Shares as constituted at such date.

       

      As
        provided in the Rights Agreement, the Purchase Price and/or the number and/or
        kind of securities issuable upon the exercise of the Rights evidenced by
        this
        Right Certificate are subject to adjustment upon the occurrence 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 apart hereof and to which Rights
        Agreement reference is hereby made for a full description of the rights,
        limitations of rights, obligations, duties and immunities of the Rights Agent,
        the Company and the holders of the Right Certificates, which limitations
        of
        rights include the temporary suspension of the exercisability of the Rights
        under the circumstances specified in the Rights Agreement. Copies of the
        Rights
        Agreement are on file at the abovementioned office of the Rights Agent and
        can
        be obtained from the Company without charge upon written request therefor.
        Terms
        used herein with initial capital letters and not defined herein are used
        herein
        with the meanings ascribed thereto in the Rights Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Pursuant
        to the Rights Agreement, from and after the occurrence of a Flip-in Event,
        any
        Rights that are Beneficially Owned by (i) any Acquiring Person (or any Affiliate
        or Associate of any Acquiring Person), (ii) a transferee of any Acquiring
        Person
        (or any such Affiliate or Associate) who becomes a transferee after the
        occurrence of a Flip-in Event, or (iii) a transferee of any Acquiring Person
        (or
        any such Affiliate or Associate) who became a transferee prior to or
        concurrently with the Flip-in Event pursuant to either (a) a transfer from
        an
        Acquiring Person to holders of its equity securities or to any Person with
        whom
        it has any continuing agreement, arrangement or understanding regarding the
        transferred Rights or (b) a transfer which the Board of Directors of the
        Company
        has determined is part of a plan, arrangement or understanding which has
        the
        purpose or effect of avoiding certain provisions of the Rights Agreement,
        and
        subsequent transferees of any of such Persons, will be void without any further
        action and any holder of such Rights will thereafter have no rights whatsoever
        with respect to such Rights under any provision of the Rights Agreement.
        From
        and after the occurrence of a Flip-in Event, no Right Certificate will be
        issued
        that represents Rights that are or have become void pursuant to the provisions
        of the Rights Agreement, and any Right Certificate delivered to the Rights
        Agent
        that represents Rights that are or have become void pursuant to the provisions
        of the Rights Agreement will be canceled.

       

      This
        Right Certificate, with or without other Right Certificates, may be transferred,
        split up, combined or exchanged for another Right Certificate or Right
        Certificates entitling the holder to purchase a like number of one
        one-hundredths of a Preferred Share (or other securities, as the case may
        be) as
        the Right Certificate or Right Certificates surrendered entitled such holder
        (or
        former holder in the case of a transfer) to purchase, upon presentation and
        surrender hereof at the principal office of the Rights Agent designated for
        such
        purpose, with the Form of Assignment (if appropriate) and the related
        Certificate duly executed.

       

      Subject
        to the provisions of the Rights Agreement, the Rights evidenced by this
        Certificate may be redeemed by the Company at its option at a redemption
        price
        of $0.01 per Right or may be exchanged in whole or in part. The Rights Agreement
        may be supplemented and amended by the Company, as provided
        therein.

       

      The
        Company is not required to issue fractions of Preferred Shares (other than
        fractions which are integral multiples of one one-hundredth of a Preferred
        Share, which may, at the option of the Company, be evidenced by depositary
        receipts) or other securities issuable upon the exercise of any Right or
        Rights
        evidenced hereby. In lieu of issuing such fractional Preferred Shares or
        other
        securities, the Company may make a cash payment, as provided in the Rights
        Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      No
        holder
        of this Right Certificate, as such, will 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 upon
        the
        exercise of the Right or Rights represented hereby, nor will anything contained
        herein or in the Rights Agreement be construed to confer upon the holder
        hereof,
        as such, any of the rights of a stockholder of the Company or any right to
        vote
        for the election of directors or upon any ratter submitted to stockholders
        at
        any meeting thereof, or to give or withhold consent to any corporate action,
        or
        to receive notice of meetings or other actions affecting stockholders (except
        as
        provided in the Rights Agreement), or to receive dividends or subscription
        rights, or otherwise, until the Right or Rights evidenced by this Right
        Certificate have been exercised in accordance with the provisions of the
        Rights
        Agreement.

       

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

       

      WITNESS
        the facsimile signature of the proper officers of the Company and its corporate
        seal. Dated as of _______________, ______.

       

      
        	 	 	 
	 	COSINE
                COMMUNICATIONS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
                
Name:
                Terry Gibson
	 	Title:
                President

      

       

      Countersigned:

       

      MELLON
        INVESTOR SERVICES LLC

       

      By: ___________________________

      Authorized
        SignatureUnassociated Document

    EXHIBIT
      4.2

     

    

    RIGHTS
      AGREEMENT

     

    This
      RIGHTS AGREEMENT, dated as of September 1, 2005 (this “Agreement”),
      is
      made and entered into by and between Cosine Communications, Inc., a Delaware
      corporation (the “Company”),
      and
      Mellon Investor Services LLC, a New Jersey limited liability company, as Rights
      Agent (the “Rights
      Agent”).

     

    RECITALS

     

    WHEREAS,
      on September 1, 2005, the Board of Directors of the Company authorized and
      declared a dividend distribution of one right (a “Right”)
      for
      each share of Common Stock, par value $0.0001 per share, of the Company (a
      “Common
      Share”)
      outstanding as of the Close of Business (as hereinafter defined) on September
      12, 2005 (the “Record
      Date”),
      each
      Right initially representing the right to purchase one one-hundredth of a
      Preferred Share (as hereinafter defined), on the terms and subject to the
      conditions herein set forth, and further authorized and directed the issuance
      of
      one Right (subject to adjustment as provided herein) with respect to each Common
      Share issued or delivered by the Company (whether originally issued or delivered
      from the Company’s treasury) after the Record Date but prior to the earlier of
      the Distribution Date (as hereinafter defined) and the Expiration Date (as
      hereinafter defined) or as provided in Section 22.

     

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

     

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

     

    (a)  “Acquiring
      Person”
      means
      any Person (other than the Company, any Related Person or any Exempt Person)
      who
      or which, together with all Affiliates and Associates of such Person, is the
      Beneficial Owner of 5% or more of the then-outstanding Common Shares;
provided,
      however,
      that
      (i) any Person who would otherwise qualify as an Acquiring Person as of the
      Close of Business on September 1, 2005 will not be deemed to be an Acquiring
      Person for any purpose of this Agreement on and after such date unless and
      until
      such time as (A) such Person or any Affiliate or Associate of such Person
      thereafter becomes the Beneficial Owner of additional Common Shares representing
      1 % or more of the then-outstanding Common Shares, other than as a result of
      a
      stock dividend, stock split or similar transaction effected by the Company
      in
      which all holders of Common Shares are treated equally (such percentage increase
      subject to downward adjustment if the Company’s Board of Directors, in its sole
      discretion, determines that such percentage increase will jeopardize or endanger
      the availability to the Company of its NOLs), or (B) any other Person who is
      the
      Beneficial Owner of Common Shares representing 1 % or more of the
      then-outstanding Common Shares thereafter becomes an Affiliate or Associate
      of
      such Person (such percentage subject to downward adjustment if the Company’s
      Board of Directors, in its sole discretion, determines that such percentage
      increase will jeopardize or endanger the availability to the Company of its
      NOLs), provided
      that the
      foregoing exclusion shall cease to apply with respect to any Person at such
      time
      as such Person, together with all Affiliates and Associates of such Person,
      ceases to Beneficially Own 5% or more of the then-outstanding Common Shares,
      and
      (ii) a Person will not be deemed to have become an Acquiring Person solely
      as a
      result of a reduction in the number of Common Shares outstanding unless and
      until such time as (A) such Person or any Affiliate or Associate of such Person
      thereafter becomes the Beneficial Owner of additional Common Shares representing
      1 % or more of the then-outstanding Common Shares, other than as a result of
      a
      stock dividend, stock split or similar transaction effected by the Company
      in
      which all holders of Common Shares are treated equally (such percentage increase
      subject to downward adjustment if the Company’s Board of Directors, in its sole
      discretion, determines that such percentage increase will jeopardize or endanger
      the availability to the Company of its NOLs), or (B) any other Person who is
      the
      Beneficial Owner of Common Shares representing 1 % or more of the
      then-outstanding Common Shares thereafter becomes an Affiliate or Associate
      of
      such Person (such percentage subject to downward adjustment if the Company’s
      Board of Directors, in its sole discretion, determines that such percentage
      increase will jeopardize or endanger the availability to the Company of its
      NOLs). Notwithstanding the foregoing, if the Board 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 Section 1(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 Section 1(a),
      then such Person shall not be deemed to be an “Acquiring Person” for any
      purposes of this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b)  “Affiliate”
      and
“Associate”
      will
      have the respective meanings ascribed to such terms in Rule 12b-2 of the General
      Rules and Regulations under the Exchange Act, as in effect on the date of this
      Agreement, and to the extent not included within the foregoing clause of this
      Section 1(b), shall also include, with respect to any Person, any other Person
      (other than a Related Person or an Exempt Person) whose Common Shares would
      be
      deemed constructively owned by such first Person pursuant to the provisions
      of
      Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”),
      or
      any successor provision or replacement provision, provided,
      however,
      that a
      Person will not be deemed to be the Affiliate or Associate of another Person
      solely because either or both Persons are or were Directors of the
      Company.

     

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

     

    (i)  the
      beneficial ownership of which such Person or any of such Person’s Affiliates or
      Associates, directly or indirectly, has the right to acquire (whether such
      right
      is exercisable immediately or only after the passage of time) pursuant to any
      agreement, arrangement or understanding (whether or not in writing), or upon
      the
      exercise of conversion rights, exchange rights, warrants, options or other
      rights (in each case, other than upon exercise or exchange of the Rights);
      provided,
      however,
      that a
      Person will 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

     

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

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (iii)  of
      which
      any other Person is the Beneficial Owner, if such Person or any of such Person’s
      Affiliates or Associates has any agreement, arrangement or understanding
      (whether or not in writing) with such other Person (or any of such other
      Person’s Affiliates or Associates) with respect to acquiring, holding, voting or
      disposing of any securities of the Company; provided,
      however,
      that a
      Person will not be deemed the Beneficial Owner of, or to Beneficially Own,
      any
      security (A) if such Person has the right to vote such security pursuant to
      an
      agreement, arrangement or understanding (whether or not in writing) which (1)
      arises solely from a revocable proxy 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 (B) if such beneficial ownership arises solely as a result
      of such Person’s status as a “clearing agency,” as defined in Section 3(a)(23)
      of the Exchange Act; provided
      further,
      however,
      that
      nothing in this Section 1(c) will cause a Person engaged in business as an
      underwriter of securities to be the Beneficial Owner of, or to Beneficially
      Own,
      any securities acquired through such Person’s participation in good faith in an
      underwriting syndicate until the expiration of 40 calendar days after the date
      of such acquisition, or such later date as the Directors of the Company may
      determine in any specific case. Notwithstanding anything herein to the contrary,
      to the extent not within the foregoing provisions of this Section 1(c), a Person
      shall be deemed the “Beneficial Owner” of and shall be deemed to “beneficially
      own” or have “beneficial ownership” of, and securities which such Person would
      be deemed to constructively own pursuant to Section 382 of the Code, or any
      successor provision or replacement provision.

     

    (d)  “Business
      Day”
      means
      any day other than a Saturday, Sunday or a day on which banking institutions
      in
      the States of New York or New Jersey (or such other state in which the principal
      office of the Rights Agent may be located) are authorized or obligated by law
      or
      executive order to close.

     

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

     

    (f)  “Common
      Shares”
      when
      used with reference to the Company means the shares of Common Stock, par value
      $0.0001 per share, of the Company; provided,
      however,
      that if
      the Company is the continuing or surviving corporation in a transaction
      described in Section 1 3(a)(ii), “Common Shares” when used with reference to the
      Company means shares of the capital stock or units of the equity interests
      with
      the greatest aggregate voting power of the Company. “Common Shares” when used
      with reference to any corporation or other legal entity other than the Company,
      including an Issuer, means shares of the capital stock or units of the equity
      interests with the greatest aggregate voting power of such corporation or other
      legal entity.

     

    (g)  “Company”
      means
      Cosine Communications, Inc., a Delaware corporation.

     

    (h)  “Distribution
      Date”
      means
      the earlier of: (i) the Close of Business on the tenth calendar day following
      the Share Acquisition Date, or (ii) the Close of Business on the tenth Business
      Day (or, unless the Distribution Date shall have previously occurred, such
      later
      date as may be specified by the Board of Directors of the Company) after the
      commencement of a tender or exchange offer by any Person (other than the
      Company, any Related Person or any Exempt Person), if upon the consummation
      thereof such Person would be the Beneficial Owner of 5% or more of the
      then-outstanding Common Shares.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (i)  “Exchange
      Act”
      means
      the Securities Exchange Act of 1934, as amended.

     

    (j)  “Exempt
      Person”
      means a
      Person whose Beneficial Ownership (together with all Affiliates and Associates
      of such Person) of 5% or more of the then-outstanding Common Shares will not,
      as
      determined by the Company’s Board of Directors in its sole discretion,
      jeopardize or endanger the availability to the Company of its NOLs, provided,
      however,
      that
      such a Person will cease to be an “Exempt Person” if the Board makes a contrary
      determination with respect to the effect of such Person’s Beneficial Ownership
      (together with all Affiliates and Associates of such Person) upon the
      availability to the Company of its NOLs.

     

    (k)  “Expiration
      Date”
      means
      the earliest of (i) the Close of Business on the Final Expiration Date, (ii)
      the
      time at which the Rights are redeemed as provided in Section 23, and (iii)
      the
      time at which all exercisable Rights are exchanged as provided in Section
      24.

     

    (l)  “Final
      Expiration Date”
      means
      the second anniversary of the Record Date.

     

    (m)  “Flip-in
      Event”
      means
      any event described in clauses (A), (B) or (C) of Section 11
      (a)(ii).

     

    (n)  “Flip-over
      Event”
      means
      any event described in clauses (i), (ii) or (iii) of Section 13(a).

     

    (o)  “Issuer”
      has the
      meaning set forth in Section 13(b).

     

    (p)  “Nasdaq”
      means
      The Nasdaq Stock Market.

     

    (q)  “NOLs”
      means
      the Company’s net operating loss carryforwards, to be used to offset its taxable
      income in the current year or future year.

     

    (r)  “Person”
      means
      any individual, firm, corporation or other legal entity, and includes any
      successor (by merger or otherwise) of such entity.

     

    (s)  “Preferred
      Shares”
      means
      shares of Series A Junior Participating Preferred Stock, par value $0.0001
      per
      share, of the Company having the rights and preferences set forth in the form
      of
      Certificate of Designation of Series A Junior Participating Preferred Stock
      attached as Exhibit
      A.

     

    (t)  “Purchase
      Price”
      means
      initially $3.00 per one one-hundredth of a Preferred Share, subject to
      adjustment from time to time as provided in this Agreement.

     

    (u)  “Record
      Date”
      has the
      meaning set forth in the Recitals to this Agreement.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (v)  “Redemption
      Price”
      means
      $0.01 per Right, subject to adjustment by resolution of the Board of Directors
      of the Company to reflect any stock split, stock dividend or similar transaction
      occurring after the Record Date.

     

    (w)  “Related
      Person”
      means
      (i) any Subsidiary of the Company or (ii) any employee benefit or stock
      ownership plan of the Company or of any Subsidiary of the Company or any entity
      holding Common Shares for or pursuant to the terms of any such
      plan.

     

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

     

    (y)  “Right
      Certificates”
      means
      certificates evidencing the Rights, in substantially the form attached as
Exhibit
      B.

     

    (z)  “Rights
      Agent”
      means
      Mellon Investor Services LLC, unless and until a successor Rights Agent has
      become such pursuant to the terms of this Agreement, and thereafter, “Rights
      Agent” means such successor Rights Agent.

     

    (aa)  “Securities
      Act”
      means
      the Securities Act of 1933, as amended.

     

    (bb)  “Share
      Acquisition Date”
      means
      the first date of public announcement by the Company (by press release, filing
      made with the Securities and Exchange Commission or otherwise) that an Acquiring
      Person has become such.

     

    (cc)  “Subsidiary”
      when
      used with reference to any Person means any corporation or other legal entity
      of
      which a majority of the voting power of the voting equity securities or equity
      interests is owned, directly or indirectly, by such Person; provided,
      however,
      that
      for purposes of Section 13(b), “Subsidiary” when used with reference to any
      Person means any corporation or other legal entity of which at least 20% of
      the
      voting power of the voting equity securities or equity interests is owned,
      directly or indirectly, by such Person.

     

    (dd)  “Trading
      Day”
      means
      any day on which the principal national securities exchange on which the Common
      Shares are listed or admitted to trading is open for the transaction of business
      or, if the Common Shares are not listed or admitted to trading on any national
      securities exchange, a Business Day.

     

    (ee)  “Triggering
      Event”
      means
      any Flip-in Event or Flip-over Event.

     

    2.  Appointment
      of Rights Agent.
      The
      Company hereby appoints the Rights Agent to act as agent for the Company in
      accordance with the terms and conditions hereof, and the Rights Agent hereby
      accepts such appointment and hereby certifies that it complies with the
      requirements of the New York Stock Exchange governing transfer agents and
      registrars. The Company may from time to time act as Co-Rights Agent or appoint
      such Co-Rights Agents as it may deem necessary or desirable. Prior to the
      appointment of a Co-Rights Agent, the specific duties and obligations of each
      such Co-Rights Agents shall be set forth in writing and delivered to
      the
      Rights Agent and the proposed Co-Rights Agent. Any actions which may be taken
      by
      the Rights Agent pursuant to the terms of this Agreement may be taken by any
      such Co-Rights Agent. To the extent that any Co-Rights Agent takes any action
      pursuant to this Agreement, such Co-Rights Agent will be entitled to all of
      the
      rights and protections of, and subject to all of the applicable duties and
      obligations imposed upon, the Rights Agent pursuant to the terms of this
      Agreement. The Rights Agent shall have no duty to supervise, and in no event
      shall be liable for, the acts or omissions of any such Co-Rights
      Agent.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    3.  Issue
      of Right Certificates.
      (a)  Until
      the Distribution Date, (i) the Rights will be evidenced by the certificates
      representing Common Shares registered in the names of the record holders thereof
      (which certificates representing Common Shares will also be deemed to be Right
      Certificates), (ii) the Rights will be transferable only in connection with
      the
      transfer of the underlying Common Shares, and (iii) the surrender for transfer
      of any certificates evidencing Common Shares in respect of which Rights have
      been issued will also constitute the transfer of the Rights associated with
      the
      Common Shares evidenced by such certificates. On or as promptly as practicable
      after the Record Date, the Company will send by first class, postage prepaid
      mail, to each record holder of Common Shares as of the Close of Business on
      the
      Record Date, at the address of such holder shown on the records of the Company
      as of such date, a copy of a Summary of Rights to Purchase Preferred Stock
      in
      substantially the form attached as Exhibit
      C.

     

    (b)  Rights
      will be issued by the Company in respect of all Common Shares (other than Common
      Shares issued upon the exercise or exchange of any Right) issued or delivered
      by
      the Company (whether originally issued or delivered from the Company’s treasury)
      after the Record Date but prior to the earlier of the Distribution Date and
      the
      Expiration Date. Certificates evidencing such Common Shares will have stamped
      on, impressed on, printed on, written on, or otherwise affixed to them the
      following legend or such similar legend as the Company may deem appropriate
      and
      as is not inconsistent with the provisions of this Agreement, or as may be
      required to comply with any applicable law or with any rule or regulation made
      pursuant thereto or with any rule or regulation of any stock exchange or
      transaction reporting system on which the Common Shares may from time to time
      be
      listed or quoted, or to conform to usage:

     

    This
      Certificate also evidences and entitles the holder hereof to certain Rights
      as
      set forth in a Rights Agreement between Cosine Communications, Inc. and Mellon
      Investor Services LLC, dated as of September 1, 2005 (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 Cosine Communications,
      Inc. The Rights are not exercisable prior to the occurrence of certain events
      specified in the Rights Agreement. Under certain circumstances, as set forth
      in
      the Rights Agreement, such Rights may be redeemed, may be exchanged, may expire,
      may be amended, or may be evidenced by separate certificates and no longer
      be
      evidenced by this Certificate. Cosine Communications, Inc. will mail to the
      holder of this Certificate a copy of the Rights Agreement, as in effect on
      the
      date of mailing, without charge promptly after receipt of a written request
      therefor. Under certain circumstances as set forth in the Rights Agreement,
      Rights that are or were beneficially owned by an Acquiring Person or any
      Affiliate or Associate of an Acquiring Person (as such terms are defined in
      the
      Rights Agreement) may become null and void.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (c)  Any
      Right
      Certificate issued pursuant to this Section 3 that represents Rights
      beneficially owned by an Acquiring Person or any Associate or Affiliate thereof
      and any Right Certificate issued at any time upon the transfer of any Rights
      to
      an Acquiring Person or any Associate or Affiliate thereof or to any nominee
      of
      such Acquiring Person, Associate or Affiliate and any Right Certificate issued
      pursuant to Section 6 or 11 hereof upon transfer, exchange, replacement or
      adjustment of any other Right Certificate referred to in this sentence, shall
      be
      subject to and contain the following legend or such similar legend as the
      Company may deem appropriate and as is 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:

     

    The
      Rights represented by this Right Certificate are or were beneficially owned
      by a
      Person who was an Acquiring Person or an Affiliate or an Associate of an
      Acquiring Person (as such terms are defined in the Rights Agreement). This
      Right
      Certificate and the Rights represented hereby may become null and void in the
      circumstances specified in Section 11 (a)(ii) or Section 13 of the Rights
      Agreement.

     

    (d)  As
      promptly 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 and if provided with
      all necessary information, send), by first class, insured, postage prepaid
      mail,
      to each record holder of Common Shares 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 evidencing one Right for each Common Share so
      held,
      subject to adjustment as provided herein. As of and after the Distribution
      Date,
      the Rights will be evidenced solely by such Right Certificates. The Company
      shall promptly notify the Rights Agent in writing upon the occurrence of the
      Distribution Date and, if such notification is given orally, the Company shall
      confirm same in writing on or prior to the Business Day next following. Until
      such notice is received by the Rights Agent, the Rights Agent may presume
      conclusively that the Distribution Date has not occurred.

     

    (e)  In
      the
      event that the Company purchases or otherwise acquires any Common Shares after
      the Record Date but prior to the Distribution Date, any Rights associated with
      such Common Shares will be deemed canceled and retired so that the Company
      will
      not be entitled to exercise any Rights associated with the Common Shares so
      purchased or acquired.

     

    4.  Form
      of Right Certificates.
      The
      Right Certificates (and the form of election to purchase and the form of
      assignment to be printed on the reverse thereof) will be substantially in the
      form attached as Exhibit
      B
      with
      such changes and marks of identification or designation, and such legends,
      summaries or endorsements printed thereon, as the Company may deem appropriate
      and as are not inconsistent with the provisions of this Agreement, or as may
      be
      required to comply with any applicable law or with any rule or regulation made
      pursuant thereto or with any rule or regulation of any stock exchange or
      transaction reporting system on which the Rights may from time to time be listed
      or quoted, or to conform to usage. Subject to the provisions of Section 22,
      the
      Right Certificates, whenever issued, on their face will entitle the holders
      thereof to purchase such number of one one-hundredths of a Preferred Share
      as
      are set forth therein at the Purchase Price set forth therein, but the Purchase
      Price, the number and kind of securities issuable upon exercise of each Right
      and the number of Rights outstanding will be subject to adjustment as provided
      herein.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

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

     

    (b)  Following
      the Distribution Date, receipt by the Rights Agent of notice to that effect
      and
      all other relevant information referred to in Section 3(d), the Rights Agent
      will keep or cause to be kept, at the office of the Rights Agent designated
      for
      such purpose and at such other offices as may be required to comply with any
      applicable law or with any rule or regulation made pursuant thereto or with
      any
      rule or regulation of any stock exchange or any transaction reporting system
      on
      which the Rights may from time to time be listed or quoted, books for
      registration and transfer of the Right Certificates issued hereunder. Such
      books
      will show the names and addresses of the respective holders of the Right
      Certificates, the number of Rights evidenced on its face by each of the Right
      Certificates and the date of each of the Right Certificates.

     

    6.  Transfer,
      Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed,
      Lost or Stolen Right Certificates.
      (a)
      Subject
      to the provisions of Sections 7(d) and 14, at any time after the Close of
      Business on the Distribution Date and prior to the Expiration Date, any Right
      Certificate or Right Certificates representing exercisable Rights may be
      transferred, split up, combined or exchanged for an other Right Certificate
      or
      Right Certificates, entitling the registered holder to purchase a like number
      of
      one one-hundredths of a Preferred Share (or other securities, as the case may
      be) as the Right Certificate or Right Certificates surrendered then entitled
      such holder (or former holder in the case of a transfer) to purchase. Any
      registered holder desiring to transfer, split up, combine or exchange any such
      Right Certificate or Rights Certificates must make such request in a writing
      delivered to the Rights Agent and must surrender the Right Certificate or Right
      Certificates to be transferred, split up, combined or exchanged at the office
      of
      the Rights Agent designated for such purpose. The Right Certificates are
      transferable only on the registry books of the Rights Agent. Neither the Rights
      Agent nor the Company shall be obligated to take any action whatsoever with
      respect to the transfer of any such surrendered Right Certificate or
      Certificates until the registered holder thereof shall have (i) completed and
      signed the certificate contained in the form of assignment set forth on the
      reverse side of each such Right Certificate, (ii) provided such additional
      evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
      thereof and of the Rights evidenced thereby and the Affiliates and Associates
      of
      such Beneficial Owner (or former Beneficial Owner) as the Company or the Rights
      Agent shall reasonably request, and (iii) paid a sum sufficient to cover any
      tax
      or charge that may be imposed in connection with any transfer, split up,
      combination or exchange of Right Certificates as required by Section 9(d)
      hereof. 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, registered in such name or names as may be designated by the
      surrendering registered holder. The Rights Agent shall promptly forward any
      such
      sum collected by it to the Company or to such Persons as the Company shall
      specify by written notice. The Rights Agent shall have no duty or obligation
      under this Section unless and until it is satisfied that all such taxes and/or
      governmental charges have been paid.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (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, if requested by the Company, 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 prepare, execute and deliver a new Right Certificate
      of like tenor to the Rights Agent and the Rights Agent will countersign and
      deliver such new Right Certificate to the registered holder in lieu of the
      Right
      Certificate so lost, stolen, destroyed or mutilated.

     

    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 and prior to the Expiration 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 office or offices of the
      Rights Agent designated for such purpose, together with payment in cash, in
      lawful money of the United States of America by certified check or bank draft
      payable to the order of the Company, equal to the sum of (i) the Purchase Price
      for the total number of securities as to which such surrendered Rights are
      exercised and (ii) an amount equal to any applicable tax or charge required
      to
      be paid by the holder of such Right Certificate in accordance with the
      provisions of Section 9 (d ).

     

    (b)  Upon
      receipt of a Right Certificate representing exercisable Rights with the form
      of
      election to purchase duly and properly executed, accompanied by payment of
      the
      Purchase Price for the shares to be purchased and an amount equal to any
      applicable tax or charge required to be paid under Section 9(d) hereof by
      certified check, cashier’s check, bank draft or money order payable to the order
      of the Company, the Rights Agent will promptly (i) (A) requisition from any
      transfer agent of the Preferred Shares certificates representing the number
      of
      one one-hundredths of a Preferred Share to be purchased (and the Company hereby
      irrevocably authorizes and directs its transfer agent to comply with all such
      requests), or (B), if the Company elects to deposit Preferred Shares issuable
      upon exercise of the Rights hereunder with a depositary agent, requisition
      from
      the depositary agent depositary receipts representing such number of one
      one-hundredths of a Preferred Share as are to be purchased (and the Company
      hereby irrevocably authorizes and directs such depositary agent to comply with
      all such requests), (ii) after receipt of such certificates (or depositary
      receipts, as the case may be), 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, (iii) when appropriate,
      requisition from the Company or any transfer agent therefor certificates
      representing the number of equivalent common shares to be issued in lieu of
      the
      issuance of Common Shares in accordance with the provisions of Section 11
      (a)(iii), (iv) when appropriate, after receipt of such certificates , 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, (v) when appropriate, requisition from the Company the amount of cash
      to
      be paid in lieu of the issuance of fractional shares in accordance with the
      provisions of Section 14 or in lieu of the issuance of Common Shares in
      accordance with the provisions of Section 11 (a)(iii), (vi) when appropriate,
      after receipt, deliver such cash to or upon the order of the registered holder
      of such Right Certificate, and (vii) when appropriate, deliver any due bill
      or
      other instrument provided to the Rights Agent by the Company for delivery to
      the
      registered holder of such Right Certificate as provided by Section
      11(1).

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (c)  In
      case
      the registered holder of any Right Certificate exercises less than all the
      Rights evidenced thereby, the Rights Agent will prepare, execute and deliver
      a
      new Right Certificate evidencing Rights equivalent to the Rights remaining
      unexercised to the registered holder of such Right Certificate or to his duly
      authorized assigns, subject to the provisions of Section 14 hereof.

     

    (d)  Notwithstanding
      anything in this Agreement to the contrary, neither the Rights Agent nor the
      Company will be obligated to undertake any action with respect to any purported
      transfer, split up, combination or exchange of any Right Certificate pursuant
      to
      Section 6 or exercise of a Right Certificate as set forth in this Section 7
      unless the registered holder of such Right Certificate has (i) duly and properly
      completed and signed the certificate following the form of assignment or the
      form of election to purchase, as applicable, set forth on the reverse side
      of
      the Right Certificate surrendered for such transfer, split up, combination,
      exchange or exercise and (ii) provided such additional evidence of the identity
      of the Beneficial Owner (or former Beneficial Owner) thereof and of the Rights
      evidenced thereby and Affiliates and Associates thereof as the Company or the
      Rights Agent may reasonably request.

     

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

     

    9.  Company
      Covenants Concerning Securities and Rights.
      The
      Company covenants and agrees that:

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (a)  It
      will
      cause to be reserved and kept available out of its authorized and unissued
      Preferred Shares or any Preferred Shares held in its treasury, a 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 (and, following the occurrence of a Triggering Event,
      Common Shares and/or other securities) issuable upon the exercise of the Rights
      may be listed on a national securities exchange, or quoted on Nasdaq, it will
      endeavor to cause, from and after such time as the Rights become exercisable,
      all securities reserved for issuance upon the exercise of Rights to be listed
      on
      such exchange, or quoted on Nasdaq, upon official notice of issuance upon such
      exercise.

     

    (c)  It
      will
      take all such action as may be necessary to ensure that all Preferred Shares
      (and, following the occurrence of a Triggering Event, Common Shares and/or
      other
      securities) delivered upon exercise of Rights, at the time of delivery of the
      certificates for such securities, will be (subject to payment of the Purchase
      Price) duly authorized, validly issued, fully paid and nonassessable
      securities.

     

    (d)  It
      will
      pay when due and payable any and all federal and state taxes and charges that
      may be payable in respect of the issuance or delivery of the Right Certificates
      and of any certificates representing securities issued upon the exercise of
      Rights; provided,
      however,
      that
      the Company will not be required to pay any tax or charge which may be payable
      in respect of any transfer or delivery of Right Certificates to a person other
      than, or the issuance or delivery of certificates or depositary receipts
      representing securities issued upon the exercise of Rights in a name other
      than
      that of, the registered holder of the Right Certificate evidencing Rights
      surrendered for exercise, or to issue or deliver any certificates or depositary
      receipts representing securities issued upon the exercise of any Rights until
      any such tax or charge has been paid (any such tax or charge 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.

     

    (e)  If
      the
      Company determines that registration under the Securities Act is required,
      then
      the Company shall use its best efforts (i) to file, as soon as practicable
      following the later of the Share Acquisition Date and the Distribution Date,
      on
      an appropriate form, a registration statement under the Securities Act with
      respect to the securities issuable upon exercise of the Rights, (ii) to cause
      such registration statement to become effective as soon as practicable after
      such filing, and (iii) to cause such registration statement to remain effective
      (with a prospectus at all times meeting the requirements of the Securities
      Act)
      until the earlier of (A) the date as of which the Rights are no longer
      exercisable for such securities and (B) the Expiration Date. The Company will
      also take such action as may be appropriate under, or to ensure compliance
      with,
      the securities or “blue sky” laws of the various states in connection with the
      exercisability of the Rights. The Company may temporarily suspend, for a period
      of time after the date set forth in clause (i) of the first sentence of this
      Section 9(e), the exercisability of the Rights in order to prepare and file
      such
      registration statement and to permit it to become effective. Upon any such
      suspension, the Company will 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. The Company
      shall notify the Rights Agent in writing whenever it makes a public announcement
      pursuant to this Section 9(e) and give the Rights Agent a copy of such
      announcement. In addition, if the Company determines that a registration
      statement should be filed under the Securities Act or any state securities
      laws
      following the Distribution Date, the Company may temporarily suspend the
      exercisability of the Rights in each relevant jurisdiction until such time
      as a
      registration statement has been declared effective and, upon any such
      suspension, the Company will issue a public announcement stating that the
      exercisability of the Rights has been temporarily suspended, as well as a public
      announcement at such time as the suspension is no longer in effect.
      Notwithstanding anything in this Agreement to the contrary, the Rights will
      not
      be exercisable in any jurisdiction if the requisite registration or
      qualification in such jurisdiction has not been effected or the exercise of
      the
      Rights is not permitted under applicable law.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (f)  Notwithstanding
      anything in this Agreement to the contrary, after the later of the Share
      Acquisition Date and the Distribution Date it will not 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 eliminate or otherwise diminish
      the
      benefits intended to be afforded by the Rights.

     

    (g)  In
      the
      event that the Company is obligated to issue other securities of the Company
      and/or pay cash pursuant to Section 11, 13, 14 or 24 it will make all
      arrangements necessary so that such other securities and/or cash are available
      for distribution by the Rights Agent, if and when appropriate.

     

    10.  Record
      Date.
      Each
      Person in whose name any certificate representing Preferred Shares (or Common
      Shares and/or other securities, as the case may be) is issued upon the exercise
      of Rights will for all purposes be deemed to have become the holder of record
      of
      the Preferred Shares (or Common Shares and/or other securities, as the case
      may
      be) represented thereby on, and such certificate will be dated, the date upon
      which the Right Certificate evidencing such Rights was duly surrendered and
      payment of the Purchase Price (and all applicable transfer taxes) was made;
      provided, however, that if the date of such surrender and payment is a date
      upon
      which the transfer books of the Company for the Preferred Shares (or Common
      Shares and/or other securities, as the case may be) are closed, such Person
      will
      be deemed to have become the record holder of such securities on, and such
      certificate will be dated, the next succeeding Business Day on which the
      transfer books of the Company for the Preferred Shares (or Common Shares and/or
      other securities, as the case may be) are open. Prior to the exercise of the
      Rights evidenced thereby, the holder of a Right Certificate will not be entitled
      to any rights of a holder of any security for which the Rights are or may become
      exercisable, including, without limitation, the right to vote, to receive
      dividends or other distributions, or to exercise any preemptive rights, and
      will
      not be entitled to receive any notice of any proceedings of the Company, except
      as provided herein.

     

    11.  Adjustment
      of Purchase Price, Number and Kind of Securities or Number of
      Rights.
      The
      Purchase Price, the number and kind of securities issuable upon exercise of
      each
      Right and the number of Rights outstanding are subject to adjustment from time
      to time as provided in this Section 11.

     

    (a)  (i)  In
      the event that the Company at any time after the Record Date (A) declares a
      dividend on the Preferred Shares payable in Preferred Shares, (B) subdivides
      the
      outstanding Preferred Shares, (C) combines the outstanding Preferred Shares
      into
      a smaller number of Preferred Shares, or (D) issues 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 effective date of such subdivision,
      combination or reclassification and/or the number and/or kind of shares of
      capital stock issuable on such date upon exercise of a Right, will be
      proportionately adjusted so that the holder of any Right exercised after such
      time is entitled to receive upon payment of the Purchase Price then in effect
      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
      transfer books of the Company for the Preferred Shares were open, the holder
      of
      such Right would have owned upon such exercise (and, in the case of a
      reclassification, would have retained after giving effect to such
      reclassification ) and would have 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 issuable upon
      exercise of one Right. If an event occurs which would require an adjustment
      under both this Section 11 (a)(i )and Section 11(a)(ii) or Section 13, the
      adjustment provided for in this Section 11 (a)(i) will be in addition to, and
      will be made prior to, any adjustment required pursuant to Section 11 (a)(ii)
      or
      Section 13.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (ii)  Subject
      to the provisions of Section 24, if:

     

    (1)  any
      Person becomes an Acquiring Person; or

     

    (2)  any
      Acquiring Person or any Affiliate or Associate of any Acquiring Person, directly
      or indirectly, (1) merges into the Company or otherwise combines with the
      Company and the Company is the continuing or surviving corporation of such
      merger or combination (other than in a transaction subject to Section 13),
      (2)
      merges or otherwise combines with any Subsidiary of the Company, (3) in one
      or
      more transactions (otherwise than in connection with the exercise, exchange
      or
      conversion of securities exercisable or exchangeable for or convertible into
      shares of any class of capital stock of the Company or any of its Subsidiaries)
      transfers cash, securities or any other property to the Company or any of its
      Subsidiaries in exchange (in whole or in part) for shares of any class of
      capital stock of the Company or any of its Subsidiaries or for securities
      exercisable or exchangeable for or convertible into shares of any class of
      capital stock of the Company or any of its Subsidiaries, or otherwise obtains
      from the Company or any of its Subsidiaries, with or without consideration,
      any
      additional shares of any class of capital stock of the Company or any of its
      Subsidiaries or securities exercisable or exchangeable for or convertible into
      shares of any class of capital stock of the Company or any of its Subsidiaries
      (otherwise than as part of a pro rata distribution to all holders of shares
      of
      any class of capital stock of the Company, or any of its Subsidiaries), (4)
      sells, purchases, leases, exchanges, mortgages, pledges, transfers or otherwise
      disposes (in one or more transactions) to, from, with or of, as the case may
      be,
      the Company or any of its Subsidiaries (otherwise than in a transaction subject
      to Section 13), any property, including securities, on terms and conditions
      less
      favorable to the Company than the Company would be able to obtain in an
      arm’s-length transaction with an unaffiliated third party, (5) receives any
      compensation from the Company or any of its Subsidiaries other than compensation
      as a director or a regular full-time employee, in either case at rates
      consistent with the Company’s (or its Subsidiaries’) past practices, or (6)
      receives the benefit, directly or indirectly (except proportionately as a
      stockholder), of any loans, advances, guarantees, pledges or other financial
      assistance or any tax credits or other tax advantage provided by the Company
      or
      any of its Subsidiaries; or

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (3)  during
      such time as there is an Acquiring Person, there is any reclassification of
      securities of the Company (including any reverse stock split), or any
      recapitalization of the Company, or any merger or consolidation of the Company
      with any of its Subsidiaries, or any other transaction or series of transactions
      involving the Company or any of its Subsidiaries (whether or not with or into
      or
      otherwise involving an Acquiring Person), other than a transaction subject
      to
      Section 13, which has the effect, directly or indirectly, of increasing by
      more
      than 1 % the proportionate share of the outstanding shares of any class of
      equity securities of the Company or any of its Subsidiaries, or of securities
      exercisable or exchangeable for or convertible into equity securities of the
      Company or any of its Subsidiaries, of which an Acquiring Person, or any
      Affiliate or Associate of any Acquiring Person, is the Beneficial Owner equally
      (such percentage increase subject to downward adjustment if the Company’s Board
      of Directors, in its sole discretion, determines that such percentage increase
      will jeopardize or endanger the availability to the Company of its NOLs); then,
      and in each such case, from and after the latest of the Distribution Date,
      the
      Share Acquisition Date and the date of the occurrence of such Flip-in Event,
      proper provision will be made so that each holder of a Right, except as provided
      below, will thereafter have the right to receive, upon exercise thereof in
      accordance with the terms of this Agreement at an exercise price per Right
      equal
      to the product of the then-current Purchase Price multiplied by the number
      of
      one one-hundredths of a Preferred Share for which a Right was exercisable
      immediately prior to the date of the occurrence of such Flip-in Event (or,
      if
      any other Flip-in Event shall have previously occurred, the product of the
      then-current Purchase Price multiplied by the number of one one-hundredths
      of a
      Preferred Share for which a Right was exercisable immediately prior to the
      date
      of the first occurrence of a Flip-in Event), in lieu of Preferred Shares, such
      number of Common Shares as equals 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 was exercisable immediately prior to the date of the
      occurrence of such Flip-in Event (or, if any other Flip-in Event shall have
      previously occurred, multiplying the then-current Purchase Price by the number
      of one one-hundredths of a Preferred Share for which a Right was exercisable
      immediately prior to the date of the first occurrence of a Flip-in Event),
      and
      dividing that product by (y) 50% of the current per share market price of the
      Common Shares (determined pursuant to Section 11(d)) on the date of the
      occurrence of such Flip-in Event. Notwithstanding anything in this Agreement
      to
      the contrary, from and after the first occurrence of a Flip-in Event, any Rights
      that are Beneficially Owned by (A) any Acquiring Person (or any Affiliate or
      Associate of any Acquiring Person), (B) a transferee of any Acquiring Person
      (or
      any such Affiliate or Associate) who becomes a transferee after the occurrence
      of a Flip -in Event, or (C) a transferee of any Acquiring Person (or any such
      Affiliate or Associate) who became a transferee prior to or concurrently with
      the occurrence of a Flip-in Event pursuant to either (1) a transfer from an
      Acquiring Person to holders of its equity securities or to any Person with
      whom
      it has any continuing agreement, arrangement or understanding regarding the
      transferred Rights or (2) a transfer which the Directors of the Company have
      determined is part of a plan, arrangement or understanding which has the purpose
      or effect of avoiding the provisions of this Section 11 (a)(ii), and subsequent
      transferees of any of such Persons, will be void without any further action
      and
      any holder of such Rights will thereafter have no rights whatsoever with respect
      to such Rights under any provision of this Agreement. The Company will use
      all
      reasonable efforts to ensure that the provisions of this Section 11 (a)(ii)
      are
      complied with, but will have no liability to any holder of Right Certificates
      or
      any 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. Upon the occurrence of a Flip-in Event, no Right Certificate that
      represents Rights that are or have become void pursuant to the provisions of
      this Section 11 (a)(ii) will thereafter be issued pursuant to Section 3 or
      Section 6, and any Right Certificate delivered to the Rights Agent that
      represents Rights that are or have become void pursuant to the provisions of
      this Section 11 (a)(ii) will be canceled. Upon the occurrence of a Flip-over
      Event, any Rights that shall not have been previously exercised pursuant to
      this
      Section 11 (a)(ii) shall thereafter be exercisable only pursuant to Section
      13
      and not pursuant to this Section 11(a)(ii).

     

    
      
         

      

      
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    (iii)  Upon
      the
      occurrence of a Flip-in Event, if there are not sufficient Common Shares
      authorized but unissued or issued but not outstanding to permit the issuance
      of
      all the Common Shares issuable in accordance with Section 11(a)(ii) upon the
      exercise of a Right, the Board of Directors of the Company will use its best
      efforts promptly to authorize and, subject to the provisions of Section 9(e),
      make available for issuance additional Common Shares or other equity securities
      of the Company having equivalent voting rights and an equivalent value (as
      determined in good faith by the Board of Directors of the Company) to the Common
      Shares (for purposes of this Section 11 (a)(iii), “equivalent common shares”).
      In the event that equivalent common shares are so authorized, upon the exercise
      of a Right in accordance with the provisions of Section 7, the registered holder
      will be entitled to receive (A) Common Shares, to the extent any are available,
      and (B) a number of equivalent common shares, which the Board of Directors
      of
      the Company has determined in good faith to have a value equivalent to the
      excess of (x) the aggregate current per share market value on the date of the
      occurrence of the most recent Flip-in Event of all the Common Shares issuable
      in
      accordance with Section 11 (a)(ii) upon the exercise of a Right (the “Exercise
      Value”) over (y) the aggregate current per share market value on the date of the
      occurrence of the most recent Flip-in Event of any Common Shares available
      for
      issuance upon the exercise of such Right; provided,
      however,
      that if
      at any time after 90 calendar days after the latest of the Share Acquisition
      Date, the Distribution Date and the date of the occurrence of the most recent
      Flip-in Event, there are not sufficient Common Shares and/or equivalent common
      shares available for issuance upon the exercise of a Right, then the Company
      will be obligated to deliver, upon the surrender of such Right and without
      requiring payment of the Purchase Price, Common Shares (to the extent
      available), equivalent common shares (to the extent available) and then cash
      (to
      the extent permitted by applicable law and any agreements or instruments to
      which the Company is a party in effect immediately prior to the Share
      Acquisition Date), which securities and cash have an aggregate value equal
      to
      the excess of (1) the Exercise Value over (2) the product of the then-current
      Purchase Price multiplied by the number of one one-hundredths of a Preferred
      Share for which a Right was exercisable immediately prior to the date of the
      occurrence of the most recent Flip-in Event (or, if any other Flip-in Event
      shall have previously occurred, the product of the then-current Purchase Price
      multiplied by the number of one one-hundredths of a Preferred Share for which
      a
      Right would have been exercisable immediately prior to the date of the
      occurrence of such Flip-in Event if no other Flip-in Event had previously
      occurred). To the extent that any legal or contractual restrictions prevent
      the
      Company from paying the full amount of cash payable in accordance with the
      foregoing sentence, the Company will pay to holders of the Rights as to which
      such payments are being made all amounts which are not then restricted on a
      pro
      rata basis and will continue to make payments on a pro rata basis as promptly
      as
      funds become available until the full amount due to each such Rights holder
      has
      been paid.

     

    
      
         

      

      
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    (b)  In
      the
      event that the Company fixes 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 securities having equivalent rights, privileges
      and preferences as the Preferred Shares (for purposes of this Section 11(b),
      “equivalent
      preferred shares”))
      or
      securities convertible into Preferred Shares or equivalent preferred shares
      at a
      price per Preferred Share or equivalent preferred share (or having a conversion
      price per share, if a security convertible into Preferred Shares or equivalent
      preferred shares) less than the current per share market price of the Preferred
      Shares (determined pursuant to Section 11(d))on such record date, the Purchase
      Price to be in effect after such record date will be determined by multiplying
      the Purchase Price in effect immediately prior to such record date by a
      fraction, the numerator of which is 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
      per share market price and the denominator of which is 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 issuable upon
      exercise of one Right. In case such subscription price may be paid in a
      consideration part or all of which is in a form other than cash, the value
      of
      such consideration will be as determined in good faith by the Board of Directors
      of the Company, whose determination will be described in a statement filed
      with
      the Rights Agent. Preferred Shares owned by or held for the account of the
      Company will not be deemed outstanding for the purpose of any such computation.
      Such adjustment will 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 will be adjusted to be the Purchase Price which would then be
      in
      effect if such record date had not been fixed.

     

    (c)  In
      the
      event that the Company fixes a record date for the making of a distribution
      to
      all holders of Preferred Shares (including any such distribution made in
      connection with a consolidation or merger in which the Company is the continuing
      or surviving corporation) of evidences of indebtedness, cash (other than a
      regular periodic cash dividend), assets, stock (other than a dividend payable
      in
      Preferred Shares) or subscription rights, options or warrants (excluding those
      referred to in Section 11(b)), the Purchase Price to be in effect after such
      record date will be determined by multiplying the Purchase Price in effect
      immediately prior to such record date by a fraction, the numerator of which
      is
      the current per share market price of the Preferred Shares (as determined
      pursuant to Section 11(d)) on such record date or, if earlier, the date on
      which
      Preferred Shares begin to trade on an ex-dividend or when issued basis for
      such
      distribution, less the fair market value (as determined in good faith by the
      Board of Directors of the Company, whose determination will be described in
      a
      statement filed with the Rights Agent) of the portion of the evidences of
      indebtedness, cash, assets or stock so to be distributed or of such subscription
      rights, options or warrants applicable to one Preferred Share, and the
      denominator of which is 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 issuable upon
      exercise of one Right. Such adjustments will be made successively whenever
      such
      a record date is fixed; and in the event that such distribution is not so made,
      the Purchase Price will again be adjusted to be the Purchase Price which would
      then be in effect if such record date had not been fixed.

     

    
      
         

      

      
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    (d)  (i)For
      the
      purpose of any computation hereunder, the “current
      per share market price”
      of
      Common Shares on any date will be deemed to be the average of the daily closing
      prices per share of such Common Shares for the 30 consecutive Trading Days
      immediately prior to such date; provided,
      however,
      that in
      the event that the current per share market price of the Common Shares is
      determined during a period following the announcement by the issuer of such
      Common Shares of (A) a dividend or distribution on such Common Shares payable
      in
      such Common Shares or securities convertible into such Common Shares (other
      than
      the Rights) or (B) any subdivision, combination or reclassification of such
      Common Shares, and 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 will be appropriately adjusted to take into
      account ex-dividend trading or to reflect the current per share market price
      per
      Common Share equivalent. The closing price for each day will 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 Common Shares 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 Common Shares are listed or admitted to trading or, if the Common
      Shares are not listed or admitted to trading on any national securities
      exchange, the last quoted price or, if not so quoted, the average of the high
      bid and low asked prices in the over-the-counter market, as reported by Nasdaq
      or such other system then in use, or, if on any such date the Common Shares
      are
      not quoted by any such organization, the average of the closing bid and asked
      prices as furnished by a professional market maker making a market in the Common
      Shares selected by the Board of Directors of the Company. If the Common Shares
      are not publicly held or not so listed or traded, or are not the subject of
      available bid and asked quotes, “current per share market price” will mean the
      fair value per share as determined in good faith by the Board of Directors
      of
      the Company, whose determination will be described in a statement filed with
      the
      Rights Agent.

     

    (ii)  For
      the
      purpose of any computation hereunder, the “current
      per share market price”
      of the
      Preferred Shares will be determined in the same manner as set forth above for
      Common Shares in Section 11(d)(i), other than the last sentence thereof. If
      the
      current per share market price of the Preferred Shares cannot be determined
      in
      the manner provided above, the “current per share market price” of the Preferred
      Shares will be conclusively deemed to be an amount equal to the current per
      share market price of the Common Shares multiplied by one hundred (as such
      number may be appropriately adjusted to reflect events such as stock splits,
      stock dividends, recapitalization s or similar transactions relating to the
      Common Shares occurring after the date of this Agreement). If neither the Common
      Shares nor the Preferred Shares are publicly held or so listed or traded, or
      the
      subject of available bid and asked quotes, “current per share market price” of
      the Preferred Shares will mean the fair value per share as determined in good
      faith by the Board of Directors of the Company, whose determination will be
      described in a statement filed with the Rights Agent. For all purposes of this
      Agreement, the current per share market price of one one-hundredth of a
      Preferred Share will be equal to the current per share market price of one
      Preferred Share divided by one hundred.

     

    
      
         

      

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

     

    (f)  If
      as a
      result of an adjustment made pursuant to Section 11(a), the holder of any Right
      thereafter exercised becomes entitled to receive any securities of the Company
      other than Preferred Shares, thereafter the number and/or kind of such other
      securities so receivable upon exercise of any Right (and/or the Purchase Price
      in respect thereof) will 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 (and the Purchase Price in respect thereof) contained
      in
      this Section 11, and the provisions of Sections 7, 9, 10, 13 and 14 with respect
      to the Preferred Shares (and the Purchase Price in respect thereof) will apply
      on like terms to any such other securities (and the Purchase Price in respect
      thereof).

     

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

     

    (h)  Unless
      the Company has exercised its election as provided in Section 11(i), upon each
      adjustment of the Purchase Price pursuant to Section 11(b) or Section 11(c),
      each Right outstanding immediately prior to the making of such adjustment will
      thereafter evidence the right to purchase, at the adjusted Purchase Price,
      that
      number of one one-hundredths of a Preferred Share (calculated to the nearest
      one
      one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number
      of one one-hundredths of a Preferred Share issuable upon exercise of a Right
      immediately prior to such adjustment of the Purchase Price 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 immediate/
      y after such adjustment of the Purchase Price.

     

    (i)  The
      Company may elect, on or after the date of any adjustment of the Purchase Price,
      to adjust the number of Rights in substitution for any adjustment in the number
      of one one-hundredths of a Preferred Share issuable upon the exercise of a
      Right. Each of the Rights outstanding after such adjustment of the number of
      Rights will 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
      will
      become that number of Rights (calculated to the nearest one ten-thousandth)
      obtained by dividing the Purchase Price in effect immediately prior to
      adjustment of the Purchase Price by the Purchase Price in effect immediately
      after adjustment of the Purchase Price. The Company will 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. The Company will also notify the Rights Agent in writing
      of same pursuant to Section 9(e) hereof and give the Rights Agent a copy of
      such
      announcement. Such 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,
      will be at least 10 calendar 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 will, as
      promptly as practicable, cause to be distributed to holders of record of Right
      Certificates on such record date Right Certificates evidencing, subject to
      the
      provisions of Section 14, the additional Rights to which such holders are
      entitled as a result of such adjustment, or, at the option of the Company,
      will
      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 are entitled after
      such adjustment. Right Certificates so to be distributed will be issued,
      executed, and countersigned in the manner provided for herein (and may bear,
      at
      the option of the Company, the adjusted Purchase Price) and will be registered
      in the names of the holders of record of Right Certificates on the record date
      specified in the public announcement.

     

    
      
         

      

      
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    (j)  Without
      respect to any adjustment or change in the Purchase Price and/or the number
      and/or kind of securities issuable upon the exercise of the Rights, the Right
      Certificates theretofore and thereafter issued may continue to express the
      Purchase Price and the number and kind of securities which were expressed in
      the
      initial Right Certificate issued hereunder.

     

    (k)  Before
      taking any action that would cause an adjustment reducing the Purchase Price
      below one one-hundredth of the then par value, if any, of the Preferred Shares
      or below the then par value, if any, of any other securities of the Company
      issuable upon exercise of the Rights, the Company will 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 Preferred Shares
      or
      such other securities, as the case may be, at such adjusted Purchase
      Price.

     

    (l)  In
      any
      case in which this Section 11 otherwise requires that an adjustment in the
      Purchase Price be made effective as of a record date for a specified event,
      the
      Company may elect to defer until the occurrence of such event the issuance
      to
      the holder of any Right exercised after such record date the number of Preferred
      Shares or other securities of the Company, if any, issuable upon such exercise
      over and above the number of Preferred Shares or other 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 delivers to such holder a due bill or other appropriate instrument
      evidencing such holder’s right to receive such additional Preferred Shares or
      other securities upon the occurrence of the event requiring such
      adjustment.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    (m)  Notwithstanding
      anything in this Agreement to the contrary, the Company will be entitled to
      make
      such reductions in the Purchase Price, in addition to those adjustments
      expressly required by this Section 11, as and to the extent that in its good
      faith judgment the Board of Directors of the Company determines to be advisable
      in order that any (i) consolidation or subdivision of the Preferred Shares,
      (ii)
      issuance wholly for cash of Preferred Shares at less than the current per share
      market price therefor, (iii) issuance wholly for cash of Preferred Shares or
      securities which by their terms are convertible into or exchangeable for
      Preferred Shares, (iv) stock dividends, or (v) issuance of rights, options
      or
      warrants referred to in this Section 11, hereafter made by the Company to
      holders of its Preferred Shares is not taxable to such
      stockholders.

     

    (n)  Notwithstanding
      anything in this Agreement to the contrary, in the event that the Company at
      any
      time after the Record Date prior to the Distribution Date (i) pays a dividend
      on
      the outstanding Common Shares payable in Common Shares, (ii) subdivides the
      outstanding Common Shares, (iii) combines the outstanding Common Shares into
      a
      smaller number of shares, or (iv) issues any shares of its capital stock in
      a
      reclassification of the outstanding Common Shares (including any such
      reclassification in connection with a consolidation or merger in which the
      Company is the continuing or surviving corporation), the number of Rights
      associated with each Common Share then outstanding, or issued or delivered
      thereafter but prior to the Distribution Date, will be proportionately adjusted
      so that the number of Rights thereafter associated with each Common Share
      following any such event equals the result obtained by multiplying the number
      of
      Rights associated with each Common Share immediately prior to such event by
      a
      fraction the numerator of which is the total number of Common Shares outstanding
      immediately prior to the occurrence of the event and the denominator of which
      is
      the total number of Common Shares outstanding immediately following the
      occurrence of such event. The adjustments provided for in this Section 11(n)
      will be made successively whenever such a dividend is paid or such a
      subdivision, combination or reclassification is effected.

     

    12.  Certificate
      of Adjusted Purchase Price or Number of Securities.
      Whenever an adjustment is made or any event affecting the Rights or their
      exercisability (including without limitation an event which causes Rights to
      become null and void) occurs as provided in Section 11 or Section 13 hereof,
      the
      Company will promptly (a) prepare a certificate setting forth such adjustment
      and a brief, reasonably detailed statement of the facts, computations and
      methodology accounting for such adjustment, (b) file with the Rights Agent
      and
      with each transfer agent for the Preferred Shares and the Common Shares a copy
      of such certificate, and (c) mail a brief summary of such adjustment to each
      holder of a Right Certificate in accordance with Section 25 and Section 26
      hereof.

     

    13.  Consolidation,
      Merger or Sale or Transfer of Assets or Fanning Power.
      (a)
      In the
      event that:

     

    (i)  at
      any
      time after a Person has become an Acquiring Person, the Company consolidates
      with, or merges with or into, any other Person and the Company is not the
      continuing or surviving corporation of such consolidation or merger;
      or

     

    
      
         

      

      
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    (ii)  at
      any
      time after a Person has become an Acquiring Person, any Person consolidates
      with
      the Company, or merges with or into the Company, and the Company is the
      continuing or surviving corporation of such merger or consolidation and, in
      connection with such merger or consolidation, all or part of the Common Shares
      is changed into or exchanged for stock or other securities of any other Person
      or cash or any other property; or

     

    (iii)  at
      any
      time after a Person has become an Acquiring Person, the Company, directly or
      indirectly, sells or otherwise transfers (or one or more of its Subsidiaries
      sells or otherwise transfers), in one or more transactions, assets or earning
      power (including without limitation securities creating any obligation on the
      part of the Company and/or any of its Subsidiaries) representing in the
      aggregate 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 one or more of its wholly owned Subsidiaries; then, and in each such case,
      proper provision will be made so that from and after the latest of the Share
      Acquisition Date, the Distribution Date and the date of the occurrence of such
      Flip-over Event (A) each holder of a Right thereafter has the right to receive,
      upon the exercise thereof in accordance with the terms of this Agreement at
      an
      exercise price per Right equal to the product of the then-current Purchase
      Price
      multiplied by the number of one one-hundredths of a Preferred Share for which
      a
      Right was exercisable immediately prior to the Share Acquisition Date, such
      number of duly authorized, validly issued, fully paid, non assessable and freely
      tradeable Common Shares of the Issuer, free and clear of any liens, encumbrances
      and other adverse claims and not subject to any rights of call or first refusal,
      as equals 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
      exercisable immediately prior to the Share Acquisition Date and dividing that
      product by (y) 50% of the current per share market price of the Common Shares
      of
      the Issuer (determined pursuant to Section 11(d)), on the date of the occurrence
      of such Flip-over Event; (B) the Issuer will thereafter be liable for, and
      will
      assume, by virtue of the occurrence of such Flip-over Event, all the obligations
      and duties of the Company pursuant to this Agreement; (C) the term “Company”
      will
      thereafter be deemed to refer to the Issuer; and (D) the Issuer will take such
      steps (including without limitation the reservation of a sufficient number
      of
      its Common Shares to permit the exercise of all outstanding Rights) in
      connection with such consummation as may be necessary to assure that the
      provisions hereof are thereafter applicable, as nearly as reasonably may be
      possible, in relation to its Common Shares thereafter deliverable upon the
      exercise of the Rights.

     

    (b)  For
      purposes of this Section 13, “Issuer”
      means
      (i) in the case of any Flip-over Event described in Sections 13(a)(i) or (ii)
      above, the Person that is the continuing, surviving, resulting or acquiring
      Person (including the Company as the continuing or surviving corporation of
      a
      transaction described in Section 13(a)(ii) above), and (ii) in the case of
      any
      Flip-over Event described in Section 13(a)(iii) above, the Person that is the
      party receiving the greatest portion of the assets or earning power (including
      without limitation securities creating any obligation on the part of the Company
      and/or any of its Subsidiaries) transferred pursuant to such transaction or
      transactions; provided,
      however,
      that,
      in any such case, (A) if (1) no class of equity security of such Person is,
      at
      the time of such merger, consolidation or transaction and has been continuously
      over the preceding 12-month period, registered pursuant to Section 12 of the
      Exchange Act, and (2) such Person is a Subsidiary, directly or indirectly,
      of
      another Person, a class of equity security of which is and has been so
      registered, the term “Issuer” means such other Person; and (B) in case such
      Person is a Subsidiary, directly or indirectly, of more than one Person, a
      class
      of equity security of two or more of which are and have been so registered,
      the
      term “Issuer” means whichever of such Persons is the issuer of the equity
      security having the greatest aggregate market value. Notwithstanding the
      foregoing, if the Issuer in any of the Flip over Events listed above is not
      a
      corporation or other legal entity having outstanding equity securities, then,
      and in each such case, (x) if the Issuer is directly or indirectly wholly owned
      by a corporation or other legal entity having outstanding equity securities,
      then all references to Common Shares of the Issuer will be deemed to be
      references to the Common Shares of the corporation or other legal entity having
      outstanding equity securities which ultimately controls the Issuer, and (y)
      if
      there is no such corporation or other legal entity having outstanding equity
      securities, (1) proper provision will be made so that the Issuer creates or
      otherwise makes available for purposes of the exercise of the Rights in
      accordance with the terms of this Agreement, a kind or kinds of security or
      securities having a fair market value at least equal to the economic value
      of
      the Common Shares which each holder of a Right would have been entitled to
      receive if the Issuer had been a corporation or other legal entity having
      outstanding equity securities; and (2) all other provisions of this Agreement
      will apply to the issuer of such securities as if such securities were Common
      Shares.

     

    
      
         

      

      
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    (c)  The
      Company will not consummate any Flip-over Event if, (i) at the time of or
      immediately after such Flip-over Event, there are or would be any rights,
      warrants, instruments or securities outstanding or any agreements or
      arrangements in effect which would eliminate or substantially diminish the
      benefits intended to be afforded by the Rights, (ii) prior to, simultaneously
      with or immediately after such Flip-over Event, the stockholders of the Person
      who constitutes, or would constitute, the Issuer for purposes of Section 13(a)
      shall have received a distribution of Rights previously owned by such Person
      or
      any of its Affiliates or Associates, or (iii) the form or nature of the
      organization of the Issuer would preclude or limit the exercisability of the
      Rights. In addition, the Company will not consummate any Flip-over Event unless
      the Issuer has a sufficient number of authorized Common Shares (or other
      securities as contemplated in Section 13(b) above) 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 to such consummation the Company and
      the
      Issuer have executed and delivered to the Rights Agent a supplemental agreement
      providing for the terms set forth in subsections (a) and (b) of this Section
      13
      and further providing that as promptly as practicable after the consummation
      of
      any Flip-over Event, the Issuer will:

     

    (i)  prepare
      and file a registration statement under the Securities Act with respect to
      the
      Rights and the securities issuable upon exercise of the Rights on an appropriate
      form, and use its best efforts to cause such registration statement to (1)
      become effective as soon as practicable after such filing and (2) remain
      effective (with a prospectus at all times meeting the requirements of the
      Securities Act) until the Expiration Date;

     

    (ii)  take
      all
      such action as may be appropriate under, or to ensure compliance with, the
      securities or “blue sky” laws of the various states in connection with the
      exercisability of the Rights; and

     

    
      
         

      

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

     

    (d)  The
      provisions of this Section 13 will similarly apply to successive mergers or
      consolidations or sales or other transfers. In the event that a Flip-over Event
      occurs at any time after the occurrence of a Flip-in Event, except for Rights
      that have become void pursuant to Section 11 (a)(ii), Rights that shall not
      have
      been previously exercised will cease to be exercisable in the manner provided
      in
      Section 11 (a)(ii) and will thereafter be exercisable in the manner provided
      in
      Section 13(a).

     

    14.  Fractional
      Rights and Fractional Securities.
      (a)
      The
      Company will not be required to issue fractions of Rights or to distribute
      Right
      Certificates which evidence fractional Rights. In lieu of such fractional
      Rights, the Company will pay as promptly as practicable to the registered
      holders of the Right Certificates with regard to which such fractional Rights
      otherwise would be issuable, an amount in cash equal to the same fraction of
      the
      current market value of one Right. For the purposes of this Section 14(a),
      the
      current market value of one Right is the closing price of the Rights for the
      Trading Day immediately prior to the date on which such fractional Rights
      otherwise would have been issuable. The closing price for any day is 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 the Rights are not publicly held or are
      not so listed or traded, or are not the subject of available bid and asked
      quotes, the current market value of one Right will mean the fair value thereof
      as determined in good faith by the Board of Directors of the Company, whose
      determination will be described in a statement filed with the Rights
      Agent.

     

    (b)  The
      Company will 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 provides that the holders of such depositary
      receipts 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 may
      pay to any Person to whom or which such fractional Preferred Shares would
      otherwise be issuable 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 one Preferred Share is the closing price of the
      Preferred Shares (as determined in the same manner as set forth for Common
      Shares in the second sentence of Section 11 (d)(i)) for the Trading Day
      immediately prior to the date of such exercise; provided,
      however
      that if
      the closing price of the Preferred Shares cannot be so determined, the closing
      price of the Preferred Shares for such Trading Day will be conclusively deemed
      to be an amount equal to the closing price of the Common Shares (determined
      pursuant to the second sentence of Section 11 (d)(i)) for such Trading Day
      multiplied by one hundred (as such number may be appropriately adjusted to
      reflect events such as stock splits, stock dividends, recapitalization s or
      similar transactions relating to the Common Shares occurring after the date
      of
      this Agreement); provided
      further, however,
      that if
      neither the Common Shares nor the Preferred Shares are publicly held or listed
      or admitted to trading on any national securities exchange, or the subject
      of
      available bid and asked quotes, the current market value of one Preferred Share
      will mean the fair value thereof as determined in good faith by the Board of
      Directors of the Company, whose determination will be described in a statement
      filed with the Rights Agent.

     

    
      
         

      

      
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    (c)  Following
      the occurrence of a Triggering Event, the Company will not be required to issue
      fractions of Common Shares or other securities issuable upon exercise or
      exchange of the Rights or to distribute certificates which evidence any such
      fractional securities. In lieu of issuing any such fractional securities, the
      Company may pay to any Person to whom or which such fractional securities would
      otherwise be issuable an amount in cash equal to the same fraction of the
      current market value of one such security. For purposes of this Section 14(c),
      the current market value of one Common Share or other security issuable upon
      the
      exercise or exchange of Rights is the closing price thereof (as determined
      in
      the same manner as set forth for Common Shares in the second sentence of Section
      11 (d)(i)) for the Trading Day immediately prior to the date of such exercise
      or
      exchange; provided,
      however,
      that if
      neither the Common Shares nor any such other securities are publicly held or
      listed or admitted to trading on any national securities exchange, or the
      subject of available bid and asked quotes, the current market value of one
      Common Share or such other security will mean the fair value thereof as
      determined in good faith by the Board of Directors of the Company, whose
      determination will mean the fair value thereof as will be described in a
      statement filed with the Rights Agent.

     

    15.  Rights
      of Action.
      (a)
      All
      rights of action in respect of this Agreement, excepting the rights of action
      given to the Rights Agent under Section 18 and Section 20 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
      holder of any 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 this Agreement, and injunctive relief against actual or
      threatened violations of the obligations of any Person subject to this
      Agreement.

     

    
      
         

      

      
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    (b)  Notwithstanding
      anything in this Agreement to the contrary, neither the Company nor the Rights
      Agent will 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 of competent jurisdiction or by a governmental,
      regulatory, self-regulatory or administrative agency or commission, or any
      statute, rule, regulation or executive order promulgated or enacted by any
      governmental authority, prohibiting or otherwise restraining performance of
      such
      obligation; provided,
      however
      that the
      Company will use its best efforts to have any such order, decree or ruling
      lifted or otherwise overturned as soon as possible.

     

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

     

    (a)  Prior
      to
      the Distribution Date, the Rights are 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 office of the Rights Agent
      designated for such purpose, 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
      Share certificate) is registered as the absolute owner thereof and of the Rights
      evidenced thereby (notwithstanding any notations of ownership or writing on
      the
      Right Certificate or the associated Common Share certificate made by anyone
      other than the Company or the Rights Agent) for all purposes whatsoever, and
      neither the Company nor the Rights Agent will be affected by any notice to
      the
      contrary; and

     

    (d)  Such
      holder expressly waives any right to receive any fractional Rights and any
      fractional securities upon exercise or exchange of a Right, except as otherwise
      provided in Section 14.

     

    17.  Right
      Certificate Holder Not Deemed a Stockholder.
      No
      holder, as such, of any Right Certificate will be entitled to vote, receive
      dividends, or be deemed for any purpose the holder of Preferred Shares or any
      other securities of the Company which may at any time be issuable upon the
      exercise of the Rights represented thereby, nor will anything contained herein
      or in any Right Certificate be construed to confer upon the holder of any Right
      Certificate, as such, any of the rights of a stockholder of the Company or
      any
      right to vote for the election of Directors or upon any matter submitted to
      stockholders at any meeting thereof, or to give or withhold consent to any
      corporate action, or to receive notice of meetings or other actions affecting
      stockholders (except as provided in Section 25), 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
      of
      this Agreement or exchanged pursuant to the provisions of Section
      24.

     

    
      
         

      

      
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    18.  Concerning
      the Rights Agent.
      (a)
      The
      Company will 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
      preparation, delivery, amendment, administration and execution of this Agreement
      and the exercise and performance of its duties hereunder. The Company will
      also
      indemnify the Rights Agent for, and hold it harmless against, any loss,
      liability, damage, judgment, fine, penalty, claim, demand, settlement suit,
      action, proceeding or expense, incurred without gross negligence, bad faith,
      or
      willful misconduct on the part of the Rights Agent (which gross negligence,
      bad
      faith or willful misconduct must be determined by a final, non-appealable order,
      judgment decree or ruling of a court of competent jurisdiction), for anything
      done or omitted to be done by the Rights Agent in connection with the
      acceptance, administration, exercise and performance of its duties under this
      Agreement. The costs and expenses of defending against any claim of liability
      arising therefrom, directly or indirectly, shall be paid by the Company. The
      provisions of this Section 18 and Section 20 below shall survive the termination
      of this Agreement, the exercise or expiration of the Rights and the resignation,
      replacement or removal of the Rights Agent.

     

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

     

    19.  Merger
      or Consolidation or Change of Name of Rights Agent.
      (a)
      Any
      Person into which the Rights Agent or any successor Rights Agent may be merged
      or with which it may be consolidated, or any Person resulting from any merger
      or
      consolidation to which the Rights Agent or any successor Rights Agent is a
      party, will be the successor to the Rights Agent under this Agreement without
      the execution or filing of any paper or any further act on the part of any
      of
      the parties hereto, provided that such Person would be eligible for appointment
      as a successor Rights Agent under the provisions of Section 21 . If at the
      time
      such successor Rights Agent succeeds 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 if
      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 will have the full force
      provided in the Right Certificates and in this Agreement.

     

    (b)  If
      at any
      time the name of the Rights Agent changes and at such time any of the Right
      Certificates have been countersigned but not delivered, the Rights Agent may
      adopt the countersignature under its prior name and deliver Right Certificates
      so countersigned; and if at that time any of the Right Certificates have not
      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 will have the full force provided in the Right Certificates
      and in this Agreement.

     

    
      
         

      

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

     

    (a)  The
      Rights Agent may consult with legal counsel (who may be legal counsel for the
      Company or an employee of the Rights Agent), and the advice or opinion of such
      counsel will be full and complete authorization and protection to the Rights
      Agent and the Rights Agent shall incur no liability for or in respect of any
      action taken or omitted in accordance with such opinion.

     

    (b)  Whenever
      in the performance of its duties under this Agreement the Rights Agent deems
      it
      necessary or desirable that any fact or matter (including, without limitation,
      the identity of an Acquiring Person and the determination of the current per
      share market price of any security) be proved or established by the Company
      prior to taking, omitting or suffering any action hereunder, such fact or matter
      (unless other evidence in respect thereof be herein specifically prescribed)
      may
      be deemed to be conclusively proved and established by a certificate signed
      by
      any one of the Chairman of the Board, the President, any Vice President, the
      Secretary or the Treasurer of the Company and delivered to the Rights Agent,
      and
      such certificate will be full and complete authorization to the Rights Agent
      for
      any action taken, omitted or suffered by it under the provisions of this
      Agreement in reliance upon such certificate.

     

    (c)  The
      Rights Agent will be liable hereunder only for its own gross negligence, bad
      faith or willful misconduct (which gross negligence, bad faith or willful
      misconduct must be determined by a final, non-appealable order, judgment, decree
      or ruling of a court of competent jurisdiction). Anything to the contrary
      notwithstanding, in no event shall the Rights Agent be liable for special,
      punitive, indirect, consequential or incidental loss or damage of any kind
      whatsoever (including but not limited to lost profits), even if the Rights
      Agent
      has been advised of the likelihood of such loss or damage. Any liability of
      the
      Rights Agent under this Agreement will be limited to the amount of annual fees
      paid by the Company to the Rights Agent.

     

    (d)  The
      Rights Agent will 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 will be deemed to have been made by the
      Company only.

     

    (e)  The
      Rights Agent will not have any liability for or be under any responsibility
      in
      respect of the validity of this Agreement or the execution and delivery hereof
      (except the due execution and delivery hereof by the Rights Agent) or in respect
      of the validity or execution of any Right Certificate (except its
      countersignature thereof); nor will it be responsible for any breach by the
      Company of any covenant contained in this Agreement or in any Right Certificate;
      nor will it be responsible for any adjustment required under the provisions
      of
      Sections 11 or 13 (including any adjustment which results in Rights becoming
      void) or responsible for the manner, method or amount of any such adjustment
      or
      the ascertaining of the existence of facts that would require any such
      adjustment (except with respect to the exercise of Rights evidenced by Right
      Certificates after receipt of the Certificate described in Section 12 hereof,
      upon which the Rights Agent may rely); nor will it by any act hereunder be
      deemed to make any representation or warranty as to the authorization or
      reservation of any shares of stock or other securities to be issued pursuant
      to
      this Agreement or any Right Certificate or as to whether any shares of stock
      or
      other securities will, when issued, be duly authorized, validly issued, fully
      paid and nonassessable.

     

    
      
         

      

      
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    (f)  The
      Company 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 President, any Vice President, the Secretary or the Treasurer
      of the Company, and to apply to such officers for advice or instructions in
      connection with its duties, and such instructions shall be full authorization
      and protection to the Rights Agent, and it will not be liable for any action
      taken or suffered to be taken by it in accordance with instructions of any
      such
      officer or for any delay in acting while waiting for those instructions. The
      Rights Agent shall be fully authorized and protected in relying upon the most
      recent instructions received by any such officer. Any application by the Rights
      Agent for written instructions from the Company may, at the option of the Rights
      Agent, set forth in writing any action proposed to be taken, suffered or omitted
      by the Rights Agent under this Agreement and the date on and/or after which
      such
      action shall be taken or suffered or such omission shall be effective. The
      Rights Agent shall not be liable for any action taken or suffered by, or
      omission of, the Rights Agent in accordance with a proposal included in any
      such
      application on or after the date specified in such application (which date
      shall
      not be less than five Business Days after the date any officer of the Company
      actually receives such application, unless any such officer shall have consented
      in writing to an earlier date) unless, prior to taking any such action (or
      the
      effective date in the case of an omission), the Rights Agent shall have received
      written instructions in response to such application specifying the action
      to be
      taken, suffered or omitted..

     

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

     

    (i)  The
      Rights Agent may execute and exercise any of the rights or powers hereby vested
      in it or perform any duty hereunder either itself (through its directors,
      officers and employees) or by or through its attorneys or agents, and the Rights
      Agent will 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 absent gross
      negligence, bad faith or willful misconduct in the selection and continued
      employment thereof (which gross negligence, bad faith or willful misconduct
      must
      be determined by a final, non-appealable order, judgment, decree or ruling
      of an
      court of competent jurisdiction). The Rights Agent will not be under any duty
      or
      responsibility to ensure compliance with any applicable federal or state
      securities laws in connection with the issuance, transfer or exchange of Right
      Certificates.

     

    
      
         

      

      
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    (j)  If,
      with
      respect to any Right Certificate surrendered to the Rights Agent for exercise,
      transfer, split up, combination or exchange, either (i) the certificate attached
      to the form of assignment or form of election to purchase, as the case may
      be,
      has either not been completed or indicates an affirmative response to clause
      1
      or 2 thereof, or (ii) any other actual or suspected irregularity exists, the
      Rights Agent will not take any further action with respect to such requested
      exercise, transfer, split up, combination or exchange without first consulting
      with the Company, and will thereafter take further action with respect thereto
      only in accordance with the Company’s written instructions.

     

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

     

    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 calendar days’ notice in writing mailed to
      the Company and to each transfer agent of the Preferred Shares or the Common
      Shares known to the Rights Agent 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 calendar days’ notice in
      writing, mailed to the Rights Agent or successor Rights Agent, as the case
      may
      be, and to each transfer agent of the Preferred Shares and the Common Shares
      by
      registered or certified mail, and to the holders of the Right Certificates
      by
      first class mail. If the Rights Agent resigns or is removed or otherwise becomes
      incapable of acting, the Company will appoint a successor to the Rights Agent.
      If the Company fails to make such appointment within a period of 30 calendar
      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 will, 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, will be a Person
      organized and doing business under the laws of the United States or of the
      State
      of New York (or of any other state of the United States so long as such Person
      is authorized to do business as a banking institution in the State of New York),
      in good standing, having a principal office in the State of New York, 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. After appointment, the successor Rights Agent
      will 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 will 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 will file notice
      thereof in writing with the predecessor Rights Agent and each transfer agent
      of
      the Preferred Shares or 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, will 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.

     

    
      
         

      

      
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    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 per share and the number
      or kind of securities issuable upon exercise of the Rights made in accordance
      with the provisions of this Agreement. In addition, in connection with the
      issuance or sale by the Company of Common Shares following the Distribution
      Date
      and prior to the Expiration Date, the Company (a) will, with respect to Common
      Shares so issued or sold pursuant to the exercise, exchange or conversion of
      securities (other than Rights) issued prior to the Distribution Date which
      are
      exercisable or exchangeable for, or convertible into Common Shares, and (b)
      may,
      in any other case, if deemed necessary, appropriate or desirable by the Board
      of
      Directors of the Company, issue Right Certificates representing an equivalent
      number of Rights as would have been issued in respect of such Common Shares
      if
      they had been issued or sold prior to the Distribution Date, as appropriately
      adjusted as provided herein as if they had been so issued or sold; provided,
      however,
      that
      (i) no such Right Certificate will be issued if, and to the extent that, in
      its
      good faith judgment the Board of Directors of the Company determines that the
      issuance of such Right Certificate could have a material adverse tax consequence
      to the Company or to the Person to whom or which such Right Certificate
      otherwise would be issued and (ii) no such Right Certificate will be issued
      if,
      and to the extent that, appropriate adjustment otherwise has been made in lieu
      of the issuance thereof.

     

    23.  Redemption.
      (a)
      Prior to
      the Expiration Date, the Board of Directors of the Company may, at its option,
      redeem all but not less than all of the then-outstanding Rights at the
      Redemption Price at any time prior to the Close of Business on the later of
      (i)
      the Distribution Date and (ii) Share Acquisition Date. Any such redemption
      will
      be effective immediately upon the action of the Board of Directors of the
      Company ordering the same, unless such action of the Board of Directors of
      the
      Company expressly provides that such redemption will be effective at a
      subsequent time or upon the occurrence or nonoccurrence of one or more specified
      events (in which case such redemption will be effective in accordance with
      the
      provisions of such action of the Board of Directors of the
      Company).

     

    (b)  Immediately
      upon the effectiveness of the redemption of the Rights as provided in Section
      23(a), and without any further action and without any notice, the right to
      exercise the Rights will terminate and the only right thereafter of the holders
      of Rights will be to receive the Redemption Price, without interest thereon.
      Promptly after the effectiveness of the redemption of the Rights as provided
      in
      Section 23(a), the Company will publicly announce such redemption (with prompt
      written notice thereof to the Rights Agent) and, within 10 calendar days
      thereafter, will give notice of such redemption to the holders of the
      then-outstanding Rights by mailing such notice to all such holders at their
      last
      addresses as they appear upon the registry books of the Company; provided,
      however, that the failure to give, or any defect in, any such notice will not
      affect the validity of the redemption of the Rights. Any notice that is mailed
      in the manner herein provided will be deemed given, whether or not the holder
      receives the notice. The notice of redemption mailed to the holders of Rights
      will state the method by which the payment of the Redemption Price will be
      made.
      The Company may, at its option, pay the Redemption Price in cash, Common Shares
      (based upon the current per share market price of the Common Shares (determined
      pursuant to Section 11(d)) at the time of redemption), or any other form of
      consideration deemed appropriate by the Board of Directors of the Company (based
      upon the fair market value of such other consideration, determined by the Board
      of Directors of the Company in good faith) or any combination thereof. The
      Company may, at its option, combine the payment of the Redemption Price with
      any
      other payment being made concurrently to holders of Common Shares and, to the
      extent that any such other payment is discretionary, may reduce the amount
      thereof on account of the concurrent payment of the Redemption Price. If legal
      or contractual restrictions prevent the Company from paying the Redemption
      Price
      (in the form of consideration deemed appropriate by the Board of Directors)
      at
      the time of redemption, the Company will pay the Redemption Price, without
      interest, promptly after such time as the Company ceases to be so prevented
      from
      paying the Redemption Price.

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    24.  Exchange.
      (a)
      The
      Board of Directors of the Company may, at its option, at any time after the
      later of the Share Acquisition Date and the Distribution Date, exchange all
      or
      part of the then-outstanding and exercisable Rights (which will not include
      Rights that have become void pursuant to the provisions of Section 11 (a)(ii))
      for Common Shares at an exchange ratio of one Common Share per Right,
      appropriately adjusted to reflect any stock split, stock dividend or similar
      transaction occurring after the Record Date (such exchange ratio being
      hereinafter referred to as the “Exchange
      Ratio”).
      Any
      such exchange will be effective immediately upon the action of the Board of
      Directors of the Company ordering the same, unless such action of the Board
      of
      Directors of the Company expressly provides that such exchange will be effective
      at a subsequent time or upon the occurrence or nonoccurrence of one or more
      specified events (in which case such exchange will be effective in accordance
      with the provisions of such action of the Board of Directors of the Company).
      Notwithstanding the foregoing, the Board of Directors of the Company will not
      be
      empowered to effect such exchange at any time after any Person (other than
      the
      Company, any Related Person or any Exempt Person), who or which, together with
      all Affiliates and Associates of such Person, becomes the Beneficial Owner
      of
      50% or more of the then-outstanding Common Shares.

     

    (b)  Immediately
      upon the effectiveness of the exchange of any Rights as provided in Section
      24(a), and without any further action and without any notice, the right to
      exercise such Rights will terminate and the only right with respect to such
      Rights thereafter of the holder of such Rights will be to receive that number
      of
      Common Shares equal to the number of such Rights held by such holder multiplied
      by the Exchange Ratio. Promptly after the effectiveness of the exchange of
      any
      Rights as provided in Section 24(a), the Company will publicly announce such
      exchange (with prompt written notice thereof to the Rights Agent) and, within
      10
      calendar days thereafter, will give notice of 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; provided,
      however,
      that
      the failure to give, or any defect in, such notice will not affect the validity
      of such exchange. Any notice that is mailed in the manner herein provided will
      be deemed given, whether or not the holder receives the notice. Each such notice
      of exchange will state the method by which the exchange of the Common Shares
      for
      Rights will be effected and, in the event of any partial exchange, the number
      of
      Rights which will be exchanged. Any partial exchange will 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)) held by each holder of
      Rights.

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    (c)  In
      any
      exchange pursuant to this Section 24, the Company, at its option, may substitute
      for any Common Share exchangeable for a Right (i) equivalent common shares
      (as
      such term is used in Section 11(a)(iii)), (ii) cash, (iii) debt securities
      of
      the Company, (iv) other assets, or (v) any combination of the foregoing, in
      any
      event having an aggregate value, as determined in good faith by the Board of
      Directors of the Company (whose determination will be described in a statement
      filed with the Rights Agent), equal to the current market value of one Common
      Share (determined pursuant to Section 11(d))on the Trading Day immediately
      preceding the date of the effectiveness of the exchange pursuant to this Section
      24.

     

    25.  Notice
      of Certain Events.
      (a)
      If the
      Company proposes (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 periodic cash dividend), (ii) to offer
      to
      the holders of Preferred Shares rights, options 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
      its Preferred Shares (other than a reclassification involving only the
      subdivision of outstanding Preferred Shares), (iv) to effect any consolidation
      or merger into or with, or to effect any sale or other transfer (or to permit
      one or more of its Subsidiaries to effect any sale or other transfer), in one
      or
      more transactions, of assets or earning power (including, without limitation,
      securities creating any obligation on the part of the Company and/or any of
      its
      Subsidiaries) representing more than 50% of the assets and earning power of
      the
      Company and its Subsidiaries, taken as a whole, to any other Person or Persons
      other than the Company or one or more of its wholly owned Subsidiaries, (v)
      to
      effect the liquidation, dissolution or winding up of the Company, or (vi) to
      declare or pay any dividend on the Common Shares payable in Common Shares or
      to
      effect a subdivision, combination or reclassification of the Common Shares
      then,
      in each such case, the Company will give to the Rights Agent and, to the extent
      feasible, to each holder of a Right Certificate, in accordance with Section
      26,
      a notice of such proposed action, which specifies the record date for the
      purposes of such stock dividend, distribution or offering of rights, options
      or
      warrants, or the date on which such reclassification , consolidation, merger,
      sale, transfer, liquidation, dissolution or winding up is to take place and
      the
      date of participation therein by the holders of the Common Shares and/or
      Preferred Shares, if any such date is to be fixed, and such notice will be
      so
      given, in the case of any action covered by clause (i) or (ii) above, at least
      10 calendar days prior to the record date for determining holders of the
      Preferred Shares for purposes of such action, and, in the case of any such
      other
      action, at least 10 calendar days prior to the date of the taking of such
      proposed action or the date of participation therein by the holders of the
      Common Shares and/or Preferred Shares, whichever is the earlier.

     

    (b)  In
      case
      any Triggering Event occurs, then, in any such case, the Company will as soon
      as
      practicable thereafter give to the Rights Agent and each holder of a Right
      Certificate, in accordance with Section 26 hereof, a notice of the occurrence
      of
      such event, which specifies the event and the consequences of the event to
      holders of Rights.

     

    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 will 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:

     

    Cosine
      Communications, Inc.

    560
      South
      Winchester Blvd., Ste 500

    San
      Jose,
      CA 95128

    Attention:
      President

     

    (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 will 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:

     

    Mellon
      Investor Services LLC

    85
      Challenger Road

    Ridgefield
      Park, New Jersey 07660-2108

    Attention:
      General Counsel

     

    (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 (or, if prior the
      Distribution Date, to the holder of any certificate evidencing Common Shares)
      will 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.

     

    27.  Supplements
      and Amendments.
      Subject
      to this Section 27, the Company may in its sole and absolute discretion, and
      the
      Rights Agent will if the Company so directs, supplement or amend any provision
      of this Agreement in any respect without the approval of any holders of Rights
      or Common Shares, any such supplement or amendment to be evidenced by a writing
      signed by the Company and the Rights Agent. From and after the time at which
      the
      Rights cease to be redeemable pursuant to Section 23, and subject to the last
      sentence of this Section 27, the Company may, and the Rights Agent will if
      the
      Company so directs, supplement or amend this Agreement without the approval
      of
      any holders of Rights or Common Shares in order (i) to cure any ambiguity,
      (ii)
      to correct or supplement any provision contained herein which may be defective
      or inconsistent with any other provisions herein, (iii) to shorten or lengthen
      any time period hereunder, or (iv) to supplement or amend the provisions
      hereunder in any manner which the Company may deem desirable; provided, however,
      that no such supplement or amendment shall adversely affect the interests of
      the
      holders of Rights as such (other than an Acquiring Person or an Affiliate or
      Associate of an Acquiring Person), and no such supplement or amendment shall
      cause the Rights again to become redeemable or cause this Agreement again to
      become supplementable or amendable otherwise than in accordance with the
      provisions of this sentence. Without limiting the generality or effect of the
      foregoing, this Agreement may be supplemented or amended to provide for such
      voting powers for the Rights and such procedures for the exercise thereof,
      if
      any, as the Board of Directors of the Company may determine to be appropriate.
      Upon the delivery of a certificate from an officer of the Company and, if
      requested by the Rights Agent, an opinion of counsel, which states that the
      proposed supplement or amendment is in compliance with the terms of this Section
      27, the Rights Agent will execute such supplement or amendment. Notwithstanding
      anything in this Agreement to the contrary, (a) no supplement or amendment
      may
      be made which decreases the stated Redemption Price to an amount less than
      $0.01
      per Right; and (b) the Rights Agent may, and shall not be obligated to, enter
      into any supplement or amendment that affects the Rights Agent’s own rights,
      duties, obligations or immunities under this Agreement.

     

    
      
         

      

      
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    28.  Successors:
      Certain Covenants.
      All the
      covenants and provisions of this Agreement by or for the benefit of the Company
      or the Rights Agent will be binding on and inure to the benefit of their
      respective successors and assigns hereunder.

     

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

     

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

     

    31.  Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction or other authority to be invalid, void or unenforceable,
      the remainder of the terms, provisions, covenants and restrictions of this
      Agreement will remain in full force and effect and will in no way be affected,
      impaired or invalidated; provided, however, that nothing contained in this
      Section 31 will affect the ability of the Company under the provisions of
      Section 27 to supplement or amend this Agreement to replace such invalid, void
      or unenforceable term, provision, covenant or restriction with a legal, valid
      and enforceable term, provision, covenant or restriction.

     

    32.  Descriptive
      Headings, Etc.
      Descriptive headings of the several Sections of this Agreement are inserted
      for
      convenience only and will not control or affect the meaning or construction
      of
      any of the provisions hereof. Unless otherwise expressly provided, references
      herein to Articles, Sections and Exhibits are to Articles, Sections and Exhibits
      of or to this Agreement.

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    33.  Determinations
      and Actions by the Board.
      For all
      purposes of this Agreement, any calculation of the number of Common Shares
      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, will be made in accordance with, as applicable, the last
      sentence of Rule 1 3d-3(d)(1 )(i) of the General Rules and Regulations under
      the
      Exchange Act or the provisions of Section 382 of the Code, or any successor
      provision or replacement provision. The Board of Directors of the Company will
      have the exclusive power and authority to administer this Agreement and to
      exercise all rights and powers specifically granted to the Board of Directors
      of
      the Company or to the Company, or as may be necessary or advisable in the
      administration of this Agreement, including without limitation the right and
      power to (i) interpret the provisions of this Agreement and (ii) make all
      determinations deemed necessary or advisable for the administration of this
      Agreement (including without limitation any determination contemplated by
      Section 1(a) or any determination as to whether particular Rights shall have
      become void). All such actions, calculations, interpretations and determinations
      (including, for purposes of clause (y) below, any omission with respect to
      any
      of the foregoing) which are done or made by the Board of Directors of the
      Company in good faith will (x) be final, conclusive and binding on the Company,
      the Rights Agent, the holders of the Rights and all other parties and (y) not
      subject the Board of Directors of the Company to any liability to any Person,
      including without limitation the Rights Agent and the holders of the Rights.
      The
      Rights Agent shall always be entitled to assume that the Board of Directors
      acted in good faith and shall be fully protected and incur no liability in
      reliance thereon.

     

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

     

    [Signatures
      on Following Page]

     

    

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    

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

     

    COSINE
      COMMUNICATIONS, INC.

    

    

    By: ____________________________

    Name:
      Terry Gibson

    Title:
      President

    

    

    MELLON
      INVESTOR SERVICES LLC

    

    

    By: ____________________________

    Name:

    Title:

    

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    

    EXHIBIT
      A

    

    CERTIFICATE
      OF DESIGNATION

    of

    SERIES
      A
      JUNIOR PARTICIPATING

    PREFERRED
      STOCK

    of

    COSINE
      COMMUNICATIONS, INC.

    

     

    (Pursuant
      to Section 151 of the

    General
      Corporation Law of the State of Delaware)

     

    Cosine
      Communications, Inc., a corporation organized and existing under the General
      Corporation Law of the State of Delaware (the “Company”),
      DOES
      HEREBY CERTIFY:

     

    That,
      pursuant to authority vested in the Board of Directors of the Company by its
      Certificate of Incorporation, and pursuant to the provisions of Section 151
      of
      the General Corporation Law, the Board of Directors of the Company has adopted
      the following resolution providing for the issuance of a series of Preferred
      Stock:

     

    RESOLVED,
      that pursuant to the authority expressly granted to and vested in the Board
      of
      Directors of the Company (the “Board
      of Directors”
      or the
“Board”)
      by the
      Certificate of Incorporation of the Company, a series of Preferred Stock, par
      value $0.0001 per share (the “Preferred
      Stock”),
      of
      the Company be, and it hereby is, created, and that the designation and amount
      thereof and the powers, designations, preferences and relative, participating,
      optional and other special rights of the shares of such series, and the
      qualifications, limitations or restrictions thereof are as follows:

     

    I.
        Designation
      and Amount

     

    The
      shares of such series will be designated as Series A Junior Participating
      Preferred Stock (the “Series
      A Preferred”)
      and
      the number of shares constituting the Series A Preferred is 220,000. Such number
      of shares may be increased or decreased by resolution of the Board; provided,
      however, that no decrease will reduce the number of shares of Series A Preferred
      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
      Company any convertible into Series A Preferred.

     

    II.
        Dividends
      and Distributions

     

    (a)  Subject
      to the rights of the holders of any shares of any series of Preferred Stock
      ranking prior to the Series A Preferred with respect to dividends, the holders
      of shares of Series A Preferred, in preference to the holders of Common Stock,
      par value $0.0001 per share (the “Common
      Stock”),
      of
      the Company, and of any other junior stock, will be entitled to receive, when,
      as and if declared by the Board out of funds legally available for the purpose,
      dividends payable in cash (except as otherwise provided below) on such dates
      as
      are from time to time established for the payment of dividends on the Common
      Stock (each such date being referred to herein as a “Dividend
      Payment Date”),
      commencing on the first Dividend Payment Date after the first issuance of a
      share or fraction of a share of Series A Preferred (the “First
      Dividend Payment Date”),
      in an
      amount per share (rounded to the nearest cent) equal to, subject to the
      provision for adjustment hereinafter set forth, one hundred times the aggregate
      per share amount of all cash dividends, and one hundred times the aggregate
      per
      share amount (payable in kind) of all non-cash dividends, other than a dividend
      payable in shares of Common Stock or a subdivision of the outstanding shares
      of
      Common Stock (by reclassification or otherwise), declared on the Common Stock
      since the immediately preceding Dividend Payment Date or, with respect to the
      First Dividend Payment Date, since the first issuance of any share or fraction
      of a share of Series A Preferred. In the event that the Company at any time
      (i)
      declares a dividend on the outstanding shares of Common Stock payable in shares
      of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii)
      combines the outstanding shares of Common Stock into a smaller number of shares,
      or (iv) issues any shares of its capital stock in a reclassification of the
      outstanding shares of Common Stock (including any such reclassification in
      connection with a consolidation or merger in which the Company is the continuing
      or surviving corporation), then, in each such case and regardless of whether
      any
      shares of Series A Preferred are then issued or outstanding, the amount to
      which
      holders of shares of Series A Preferred would otherwise be entitled immediately
      prior to such event under clause (ii) of the preceding sentence will 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.

     

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    (b)  The
      Company will declare a dividend on the Series A Preferred as provided in the
      immediately preceding paragraph immediately after it declares a dividend on
      the
      Common Stock (other than a dividend payable in shares of Common Stock). Each
      such dividend on the Series A Preferred will be payable immediately prior to
      the
      time at which the related dividend on the Common Stock is payable.

     

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

     

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

    III.
        Voting
      Rights

     

    The
      holders of shares of Series A Preferred will have the following voting
      rights:

     

    (a)  Subject
      to the provision for adjustment hereinafter set forth, each share of Series
      A
      Preferred will entitle the holder thereof to one hundred votes on all matters
      submitted to a vote of the stockholders of the Company. In the event the Company
      at any time (i) declares a dividend on the outstanding shares of Common Stock
      payable in shares of Common Stock, (ii) subdivides the outstanding shares of
      Common Stock, (iii) combines the outstanding shares of Common Stock into a
      smaller number of shares, or (iv) issues any shares of its capital stock in
      a
      reclassification of the outstanding shares of Common Stock (including any such
      reclassification in connection with a consolidation or merger in which the
      Company is the continuing or surviving corporation), then, in each such case
      and
      regardless of whether any shares of Series A Preferred are then issued or
      outstanding, the number of votes per share to which holders of shares of Series
      A Preferred would otherwise be entitled immediately prior to such event will
      be
      adjusted by multiplying such number by a fraction, the numerator of which is
      the
      number of shares of Common Stock outstanding immediately after such event and
      the denominator of which is the number of shares of Common Stock that were
      outstanding immediately prior to such event.

     

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

     

    (c)  Except
      as
      set forth in the Amended and Restated Certificate of Incorporation or herein,
      or
      as otherwise provided by law, holders of shares of Series A Preferred will
      have
      no voting rights.

     

    IV.
        Certain
      Restrictions

     

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

     

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

     

    (ii)  Declare
      or pay dividends, or make any other distributions, on any shares of stock
      ranking on a parity (either as to dividends or upon liquidation, dissolution
      or
      winding up) with the shares of Series A Preferred, except dividends paid ratably
      on the shares of Series A Preferred 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;

     

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

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

     

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

     

    (b)  The
      Company will not permit any majority-owned subsidiary of the Company to purchase
      or otherwise acquire for consideration any shares of stock of the Company unless
      the Company could, under paragraph (a) of this Article IV, purchase or otherwise
      acquire such shares at such time and in such manner.

     

    V.
        Reacquired
      Shares

     

    Any
      shares of Series A Preferred purchased or otherwise acquired by the Company
      in
      any manner whatsoever will be retired and canceled promptly after the
      acquisition thereof. All such shares will upon their cancellation become
      authorized but unissued shares of Preferred Stock and may be reissued as part
      of
      a new series of Preferred Stock subject to the conditions and restrictions
      on
      issuance set forth herein, in the Amended and Restated Certificate of
      Incorporation of the Company, or in any other Preferred Stock Designation
      creating a series of Preferred Stock or any similar stock or as otherwise
      required bylaw.

     

    VI.
        Liquidation,
      Dissolution or Winding Up

     

    Upon
      any
      liquidation, dissolution or winding up of the Company, no distribution will
      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 shares of
      Series A Preferred unless, prior thereto, the holders of shares of Series A
      Preferred 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,
      however,
      that
      the holders of shares of Series A Preferred will be entitled to receive an
      aggregate amount per share, subject to the provision for adjustment hereinafter
      set forth, equal to one hundred 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 liquidation,
      dissolution or winding up) with the shares of Series A Preferred, except
      distributions made ratably on the shares of Series A Preferred and all such
      parity stock in proportion to the total amounts to which the holders of all
      such
      shares are entitled upon such liquidation, dissolution or winding up. In the
      event the Company at any time (i) declares a dividend on the outstanding shares
      of Common Stock payable in shares of Common Stock, (ii) subdivides the
      outstanding shares of Common Stock, (iii) combines the outstanding shares of
      Common Stock into a smaller number of shares, or (iv) issues any shares of
      its
      capital stock in a reclassification of the outstanding shares of Common Stock
      (including any such reclassification in connection with a consolidation or
      merger in which the Company is the continuing or surviving corporation), then,
      in each such case and regardless of whether any shares of Series A Preferred
      are
      then issued or outstanding, the aggregate amount to which each holder of shares
      of Series A Preferred would otherwise be entitled immediately prior to such
      event under the proviso in clause (a) of the preceding sentence will 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.

     

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

    VII.
        Consolidation,
      Merger, Etc.

     

    In
      the
      event that the Company enters into any consolidation, merger, combination or
      other transaction in which the shares of Common Stock are exchanged for or
      changed into other stock or securities, cash and/or any other property, then,
      in
      each such case, each share of Series A Preferred will at the same time be
      similarly exchanged for or changed into an amount per share, subject to the
      provision for adjustment hereinafter set forth, equal to one hundred 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 Company at any time (a) declares
      a
      dividend on the outstanding shares of Common Stock payable in shares of Common
      Stock, (b) subdivides the outstanding shares of Common Stock, (c) combines
      the
      outstanding shares of Common Stock in a smaller number of shares, or (d) issues
      any shares of its capital stock in a reclassification of the outstanding shares
      of Common Stock (including any such reclassification in connection with a
      consolidation or merger in which the Company is the continuing or surviving
      corporation), then, in each such case and regardless of whether any shares
      of
      Series A Preferred are then issued or outstanding, the amount set forth in
      the
      preceding sentence with respect to the exchange or change of shares of Series
      A
      Preferred will 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.

     

    VIII.
        Redemption

     

    The
      shares of Series A Preferred are not redeemable.

     

    IX.
        Rank

     

    The
      Series A Preferred rank, with respect to the payment of dividends and the
      distribution of assets, junior to all other series of the Company’s Preferred
      Stock.

     

    X.
        Amendment

     

    Notwithstanding
      anything contained in the Certificate of Incorporation of the Company to the
      contrary and in addition to any other vote required by applicable law, the
      Certificate of Incorporation of the Company may not be amended in any manner
      that would materially alter or change the powers, preferences or special rights
      of the Series A Preferred so as to affect them adversely without the affirmative
      vote of the holders of at least 80% of the outstanding shares of Series A
      Preferred, voting together as a single series.

     

    
      
         

      

      
        40

        
          

        

      

      
         

      

       

    

    IN
      WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the
      Company by its President and Secretary this 1st day of September
      2005.

     

    COSINE
      COMMUNICATIONS INC.

    

    

    By: ___________________________

    Name:
      Terry Gibson

    Title:
      President and Secretary

    

    

    

    
      
         

      

      
        41

        
          

        

      

      
         

      

    

    

    EXHIBIT
      B

     

    FORM
      OF
      RIGHT CERTIFICATE

     

    
      	
              Certificate
                No. R-__________________

            	
              _________________
                Rights

            
	 	 

    

    

     

    NOT
      EXERCISABLE AFTER [INSERT
      FINAL EXPIRATION DATE]
      OR
      EARLIER IF REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION,
      EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH
      IN
      THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS
      AGREEMENT, RIGHTS THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON
      OR
      AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
      IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF MAY BECOME NULL AND
      VOID.

     

    Right
      Certificate

     

    COSINE
      COMMUNICATIONS, INC.

     

    This
      certifies that ___________, or registered assigns, is the registered owner
      of
      the number of Rights set forth above, each of which entitles the owner thereof,
      subject to the terms, provisions, and conditions of the Rights Agreement, dated
      as of September 1, 2005 (the “Rights
      Agreement”),
      between Cosine Communications, Inc., a Delaware corporation (the”Company”),
      and
      Mellon Investor Services LLC (the “Rights
      Agent”),
      to
      purchase from the Company at any time after the Distribution Date (as such
      term
      is defined in the Rights Agreement) and prior to 5:00 p.m. (Eastern time) on
      the
      Expiration Date (as such term is defined in the Rights Agreement) at the
      principal office or offices of the Rights Agent designated for such purpose,
      one
      one-hundredth of a fully paid nonassessable share of Series A Junior
      Participating Preferred Stock, par value $0.0001 per share (the “Preferred
      Shares”),
      of
      the Company, at a purchase price of $3.00 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 and related Certificate duly executed. If this Right Certificate
      is
      exercised in part, the holder will be entitled to receive upon surrender hereof
      another Right Certificate or Right Certificates for the number of whole Rights
      not exercised. 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 thereof) set forth above, and the Purchase Price set forth above,
      are
      the number and Purchase Price as of the date of the Rights Agreement, based
      on
      the Preferred Shares as constituted at such date.

     

    As
      provided in the Rights Agreement, the Purchase Price and/or the number and/or
      kind of securities issuable upon the exercise of the Rights evidenced by this
      Right Certificate are subject to adjustment upon the occurrence 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 apart hereof and to which Rights
      Agreement reference is hereby made for a full description of the rights,
      limitations of rights, obligations, duties and immunities of the Rights Agent,
      the Company and the holders of the Right Certificates, which limitations of
      rights include the temporary suspension of the exercisability of the Rights
      under the circumstances specified in the Rights Agreement. Copies of the Rights
      Agreement are on file at the abovementioned office of the Rights Agent and
      can
      be obtained from the Company without charge upon written request therefor.
      Terms
      used herein with initial capital letters and not defined herein are used herein
      with the meanings ascribed thereto in the Rights Agreement.

     

    Pursuant
      to the Rights Agreement, from and after the occurrence of a Flip-in Event,
      any
      Rights that are Beneficially Owned by (i) any Acquiring Person (or any Affiliate
      or Associate of any Acquiring Person), (ii) a transferee of any Acquiring Person
      (or any such Affiliate or Associate) who becomes a transferee after the
      occurrence of a Flip-in Event, or (iii) a transferee of any Acquiring Person
      (or
      any such Affiliate or Associate) who became a transferee prior to or
      concurrently with the Flip-in Event pursuant to either (a) a transfer from
      an
      Acquiring Person to holders of its equity securities or to any Person with
      whom
      it has any continuing agreement, arrangement or understanding regarding the
      transferred Rights or (b) a transfer which the Board of Directors of the Company
      has determined is part of a plan, arrangement or understanding which has the
      purpose or effect of avoiding certain provisions of the Rights Agreement, and
      subsequent transferees of any of such Persons, will be void without any further
      action and any holder of such Rights will thereafter have no rights whatsoever
      with respect to such Rights under any provision of the Rights Agreement. From
      and after the occurrence of a Flip-in Event, no Right Certificate will be issued
      that represents Rights that are or have become void pursuant to the provisions
      of the Rights Agreement, and any Right Certificate delivered to the Rights
      Agent
      that represents Rights that are or have become void pursuant to the provisions
      of the Rights Agreement will be canceled.

     

    This
      Right Certificate, with or without other Right Certificates, may be transferred,
      split up, combined or exchanged for another Right Certificate or Right
      Certificates entitling the holder to purchase a like number of one
      one-hundredths of a Preferred Share (or other securities, as the case may be)
      as
      the Right Certificate or Right Certificates surrendered entitled such holder
      (or
      former holder in the case of a transfer) to purchase, upon presentation and
      surrender hereof at the principal office of the Rights Agent designated for
      such
      purpose, with the Form of Assignment (if appropriate) and the related
      Certificate duly executed.

     

    
      
         

      

      
        42

        
          

        

      

      
         

      

    

    Subject
      to the provisions of the Rights Agreement, the Rights evidenced by this
      Certificate may be redeemed by the Company at its option at a redemption price
      of $0.01 per Right or may be exchanged in whole or in part. The Rights Agreement
      may be supplemented and amended by the Company, as provided
      therein.

     

    The
      Company is not required to issue fractions of Preferred Shares (other than
      fractions which are integral multiples of one one-hundredth of a Preferred
      Share, which may, at the option of the Company, be evidenced by depositary
      receipts) or other securities issuable upon the exercise of any Right or Rights
      evidenced hereby. In lieu of issuing such fractional Preferred Shares or other
      securities, the Company may make a cash payment, as provided in the Rights
      Agreement.

     

    No
      holder
      of this Right Certificate, as such, will 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 upon
      the
      exercise of the Right or Rights represented hereby, nor will anything contained
      herein or in the Rights Agreement be construed to confer upon the holder hereof,
      as such, any of the rights of a stockholder of the Company or any right to
      vote
      for the election of directors or upon any ratter submitted to stockholders
      at
      any meeting thereof, or to give or withhold consent to any corporate action,
      or
      to receive notice of meetings or other actions affecting stockholders (except
      as
      provided in the Rights Agreement), or to receive dividends or subscription
      rights, or otherwise, until the Right or Rights evidenced by this Right
      Certificate have been exercised in accordance with the provisions of the Rights
      Agreement.

     

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

     

    WITNESS
      the facsimile signature of the proper officers of the Company and its corporate
      seal. Dated as of _______________, ______.

     

    
      	 	 	 
	 	COSINE
              COMMUNICATIONS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
              
Name:
              Terry Gibson
	 	Title:
              President

    

     

    Countersigned:

     

    MELLON
      INVESTOR SERVICES LLC

     

    
      By: ___________________________

       

      Authorized
        Signature

    

     

    

     

    

    
      
         

      

      
        43

        
          

        

      

      
         

      

    

    

    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:__________________________

     

    

    
      
         

      

      
        44

        
          

        

      

      
         

      

    

    

    CERTIFICATE

     

    The
      undersigned hereby certifies by checking the appropriate boxes
      that:

     

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

     

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

     

    Dated:
      _________, __________________

     

    ______________________

    Signature

    

    
      
         

      

      
        45

        
          

        

      

      
         

      

    

    

    FORM
      OF
      ELECTION TO PURCHASE

     

    (To
      be
      executed if holder desires to

    exercise
      the Right Certificate)

     

    To
      Cosine
      Communications, Inc.:

     

    The
      undersigned hereby irrevocably elects to exercise ___________ Rights represented
      by this Right Certificate to purchase the one one-hundredths of a Preferred
      Share or other securities issuable upon the exercise of such Rights and requests
      that certificates for such securities be issued in the name of and delivered
      to:

     

    Please
      insert social

    security
      or other identifying number:_______________________________________________
      

     

    ____________________________________________________________________________

    (Please
      print name and address)

     

    _____________________________________________________________________________

     

    If
      such
      number of Rights is not all the Rights evidenced by this Right Certificate,
      a
      new Right Certificate for the balance remaining of such Rights will 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: _____________________

     

    

    
      
         

      

      
        46

        
          

        

      

      
         

      

    

    

    CERTIFICATE

     

    The
      undersigned hereby certifies by checking the appropriate boxes
      that:

     

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

     

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

     

    Dated:
      ________________, ______________

     

    _______________________

    Signature

    

    

    NOTICE

     

    Signatures
      on the foregoing Form of Assignment and Form of Election to Purchase and in
      the
      related Certificates must correspond to the name as written upon the face of
      this Right Certificate in every particular, without alteration or enlargement
      or
      any change whatsoever.

     

    Signatures
      must be guaranteed by an eligible guarantor institution (banks, stockbrokers,
      savings and loan associations and credit unions with membership in an approved
      medallion signature program) pursuant to Rule 17Ad-15 under the Securities
      Exchange Act of 1934, as amended.

     

    

    

    
      
         

      

      
        47

        
          

        

      

      
         

      

    

    

    EXHIBIT
      C

     

    SUMMARY
      OF RIGHTS TO PURCHASE PREFERRED STOCK

     

    On
      September 1, 2005, the Board of Directors of Cosine Communications, Inc. adopted
      a rights plan and declared a dividend of one preferred share purchase right
      for
      each outstanding share of our common stock. The dividend is payable on September
      12, 2005 to our stockholders of record on that date. The terms of the rights
      and
      the rights plan are set forth in a Rights Agreement, dated as of September
      1,
      2005, by and between Cosine Communications, Inc. and Mellon Investor Services
      LLC, as rights agent.

     

    This
      summary of rights provides a general description of the rights plan. Because
      it
      is only a summary, this description should be read together with the entire
      rights plan, which we incorporate in this summary by reference. Upon written
      request, we will provide a copy of the rights plan free of charge to any
      stockholder.

     

    Our
      Board
      adopted the rights plan to protect stockholder value by protecting our
      stockholders from coercive takeover practices or takeover bids that are
      inconsistent with their best interests, and by protecting our ability to carry
      forward our net operating losses (“NOLs”). We have experienced substantial
      operating losses in previous years. Under the Internal Revenue Code and rules
      promulgated by the Internal Revenue Service, we may “carry forward” these losses
      in certain circumstances to offset current and future earnings and thus reduce
      our federal income tax liability, subject to certain requirement is and
      restrictions. We believe that we will be able to carry forward several million
      dollars of NOLs and that these NOLs constitute a substantial asset to us. If
      we
      experience an “Ownership Change,” as defined in Section 382 of the Internal
      Revenue Code, our ability to use the NOLs could be substantially limited or
      lost
      altogether.

     

    In
      general terms, the rights plan imposes a significant penalty upon any person
      or
      group that acquires 5% or more of our outstanding common stock without the
      prior
      approval of our Board. Stockholders that owned 5% or more of our outstanding
      common stock as of the close of business on September 1, 2005 may acquire up
      to
      an additional 1% of our outstanding common stock without penalty so long as
      they
      maintain their ownership above the 5% level (such increase subject to downward
      adjustment by our Board if it determines that such increase will endanger the
      availability of our NOLs). In addition, our Board may exempt any person or
      group
      that owns 5% or more if the Board determines that the person or group’s
      ownership will not endanger the availability of our NOLs. A person or group
      that
      acquires a percentage of our common stock in excess of the applicable threshold
      is called an “acquiring person.” Any rights held by an acquiring person are void
      and may not be exercised.

     

    The
      Rights.
      Our
      Board of Directors authorized the issuance of one right per each outstanding
      share of our common stock on September 1, 2005. If the rights become
      exercisable, each right would allow its holder to purchase from us one
      one-hundredth of a share of our Series A Junior Participating Preferred Stock
      for a purchase price of $3.00. Each fractional share of preferred stock would
      give the stockholder approximately the same dividend, voting and liquidation
      rights as does one share of our common stock. Prior to exercise, however, a
      right does not give its holder any dividend, voting or liquidation
      rights.

     

    
      
         

      

      
        48

        
          

        

      

      
         

      

    

    Exercisability.
      The
      rights will not be exercisable until the earlier of:

     

    
      	
              ·

            	
              10
                days after a public announcement by Cosine Communications, Inc. that
                a
                person or group has become an acquiring person;
                and

            

    

     

    
      	
              ·

            	
              10
                business days (or a later date determined by our Board) after a person
                or
                group begins a tender or exchange offer that, if completed, would
                result
                in that person or group becoming an acquiring
                person.

            

    

     

    We
      refer
      to the date that the rights become exercisable as the “distribution date.” Until
      the distribution date, our common stock certificates will also evidence the
      rights and will contain a notation to that effect. Any transfer of shares of
      common stock prior to the distribution date will constitute a transfer of the
      associated rights. After the distribution date, the rights will separate from
      the common stock and be evidenced by rights certificates, which we will mail
      to
      all holders of rights that have not become void.

     

    Flip-in
      Event.
      After
      the distribution date, if a person or group already is or becomes an acquiring
      person, all holders of rights, except the acquiring person, may exercise their
      rights upon payment of the purchase price to purchase shares of our common
      stock
      (or other securities or assets as determined by the Board) with a market value
      of two times the purchase price.

     

    Flip-over
      Event.
      After
      the distribution date, if a flip-in event has already occurred and Cosine
      Communications, Inc. is acquired in a merger or similar transaction, all holders
      of rights except the acquiring person may exercise their rights upon payment
      of
      the purchase price, to purchase shares of the acquiring corporation with a
      market value of two times the purchase price of the rights.

     

    Rights
      may be exercised to purchase our preferred shares only after the distribution
      date occurs and prior to the occurrence of a flip-in event as described above.
      A
      distribution date resulting from the commencement of a tender offer or exchange
      offer described in the second bullet point above could precede the occurrence
      of
      a flip-in event, in which case the rights could be exercised to purchase our
      preferred shares. A distribution date resulting from any occurrence described
      in
      the first bullet point above would necessarily follow the occurrence of a
      flip-in event, in which case the rights could be exercised to purchase shares
      of
      common stock or other securities as described above.

     

    Expiration.
      The
      rights will expire on September 1, 2007 unless earlier redeemed or
      exchanged.

     

    Redemption.
      Our
      Board may redeem all (but not less the an all) of the rights for a redemption
      price of $0.01 per right at any time before the later of the distribution date
      and the date of the first public announcement or disclosure by Cosine
      Communications, Inc. that a person or group has become an acquiring person.
      Once
      the rights are redeemed, the right to exercise rights will terminate, and the
      only right of the holders of rights will be to receive the redemption price.
      The
      redemption price will be adjusted if we declare a stock split or issue a stock
      dividend on our common stock.

     

    Exchange.
      After
      the later of the distribution date and the date of the first public announcement
      by Cosine Communications, Inc. that a person or group has become an acquiring
      person, but before an acquiring person owns 50% or more of our outstanding
      common stock, our Board may exchange each right (other than rights that have
      become void) for one share of common stock or an equivalent
      security.

     

    
      
         

      

      
        49

        
          

        

      

      
         

      

    

    Anti-Dilution
      Provisions.
      Our
      Board may adjust the purchase price of the preferred shares, the number of
      preferred shares issuable and the number of outstanding rights to prevent
      dilution that may occur as a result of certain events, including among others,
      a
      stock dividend, a stock split or a reclassification of the preferred shares
      or
      our common stock. No adjustments to the purchase price of less than 1 % will
      be
      made.

     

    Amendments.
      Before
      the time rights cease to be redeemable, our Board may amend or supplement the
      rights plan without the consent of the holders of the rights, except that no
      amendment may decrease the redemption price below $0.01 per right. At any time
      thereafter, our Board may amend or supplement the rights plan only to cure
      an
      ambiguity, to alter time period provisions, to correct inconsistent provisions
      or to make any additional changes to the rights plan, but only to the extent
      that those changes do not impair or adversely affect any rights holder and
      do
      not result in the rights again becoming redeemable.

     

    *
      *
      *

     

    
      
         

      

      
        50

        
          

        

      

      
         

      

    

    

    __________________________________________________________________________

     

    

    

     

    RIGHTS
      AGREEMENT

     

    DATED
      AS
      OF SEPTEMBER 1, 2005,

     

    BY
      AND
      BETWEEN

     

    COSINE
      COMMUNICATIONS, INC.

     

    AND

     

    MELLON
      INVESTOR SERVICES LLC,

    AS
      RIGHTS
      AGENT

     

    

    

     

    _____________________________________________________________________

     

    

    

    

    

    
      
         

      

      
        51

        
          

        

      

      
         

        
        

      

    

     

    

      TABLE
        OF CONTENTS

    

    

      
        	 	 	 

                Page

                 

              
	
                1.

              	
                CERTAIN
                  DEFINITIONS

              	
                1

              
	
                2.

              	
                APPOINTMENT
                  OF RIGHTS AGENT

              	
                5

              
	
                3.

              	
                ISSUE
                  OF RIGHT CERTIFICATES

              	
                6

              
	
                4.

              	
                FORM
                  OF RIGHT CERTIFICATES

              	
                7

              
	
                5.

              	
                COUNTERSIGNATURE
                  AND REGISTRATION

              	
                8

              
	
                6.

              	
                TRANSFER,
                  SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED,
                  DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES

              	
                8

              
	
                7.

              	
                EXERCISE
                  OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS

              	
                9

              
	
                8.

              	
                CANCELLATION
                  AND DESTRUCTION OF RIGHT CERTIFICATES

              	
                10

              
	
                9.

              	
                COMPANY
                  COVENANTS CONCERNING SECURITIES AND RIGHTS

              	
                10

              
	
                10.

              	
                RECORD
                  DATE

              	
                12

              
	
                11.

              	
                ADJUSTMENT
                  OF PURCHASE PRICE, NUMBER AND KIND OF SECURITIES OR NUMBER OF
                  RIGHTS

              	
                12

              
	
                12.

              	
                CERTIFICATE
                  OF ADJUSTED PURCHASE PRICE OR NUMBER OF SECURITIES

              	
                20

              
	
                13.

              	
                CONSOLIDATION,
                  MERGER OR SALE OR TRANSFER OF ASSETS OR FANNING POWER

              	
                20

              
	
                14.

              	
                FRACTIONAL
                  RIGHTS AND FRACTIONAL SECURITIES

              	
                23

              
	
                15.

              	
                RIGHTS
                  OF ACTION

              	
                24

              
	
                16.

              	
                AGREEMENT
                  OF RIGHTS HOLDERS

              	
                25

              
	
                17.

              	
                RIGHT
                  CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER

              	
                25

              
	
                18.

              	
                CONCERNING
                  THE RIGHTS AGENT

              	
                26

              
	
                19.

              	
                MERGER
                  OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT

              	
                26

              
	
                20.

              	
                DUTIES
                  OF RIGHTS AGENT

              	
                27

              
	
                21.

              	
                CHANGE
                  OF RIGHTS AGENT

              	
                29

              
	
                22.

              	
                ISSUANCE
                  OF NEW RIGHT CERTIFICATES

              	
                30

              
	
                23.

              	
                REDEMPTION

              	
                30

              
	
                24.

              	
                EXCHANGE

              	
                31

              
	
                25.

              	
                NOTICE
                  OF CERTAIN EVENTS

              	
                32

              
	
                26.

              	
                NOTICES

              	
                33

              
	
                27.

              	
                SUPPLEMENTS
                  AND AMENDMENTS

              	
                33

              
	
                28.

              	
                SUCCESSORS:
                  CERTAIN COVENANTS

              	
                34

              
	
                29.

              	
                BENEFITS
                  OF THIS AGREEMENT

              	
                34

              
	
                30.

              	
                GOVERNING
                  LAW

              	
                34

              
	
                31.

              	
                SEVERABILITY

              	
                34

              
	
                32.

              	
                DESCRIPTIVE
                  HEADINGS, ETC

              	
                34

              
	
                33.

              	
                DETERMINATIONS
                  AND ACTIONS BY THE BOARD

              	
                35

              
	
                34.

              	
                COUNTERPARTS

              	
                35

              
	
                EXHIBIT
                  A

              	
                37

              
	
                EXHIBIT
                  B

              	
                43

              
	
                EXHIBIT
                  C

              	
                50

              

      

      
 

      
        
           

        

        
          52

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]